This is clear: Business in China is booming.

This gets complicated: Translating that growth into investment gains.

But that’s not to say it can’t be done. And with China giving every indication of becoming the world’s next economic giant, it’s time to consider whether and how to expose your investment portfolio to that country’s high-revving growth engine.

The statistics are startling. China’s gross domestic product is growing around 10% annually, compared to 3% or so in the United States. The consumer’s wide-open wallet is driving the U.S. economy, but consumer-spending growth in China clocked in at 13% last year, compared to 8% in the United States. China’s middle class, now estimated at 150 million to 200 million people, is expected to double in size in the next five years.

Investors who have taken the plunge in China in recent years have been well rewarded. The average mutual fund that invests in China and the nearby Asian Tiger nations has gained 17.5% over the past three years, far better than the S&P 500′s ($INX) 5.4%.

But this isn’t the first time China has seen rapid growth. The country experienced a major investment boom in the early 1990s. But China added too much manufacturing capacity, too fast, and the bubble burst in 1994-1995, sending the economy into a tailspin. The Hong Kong-based Hang Seng index lost 31% in 1994 alone.

Will stocks hit another (great) wall?
Is it too late to catch this phase of China’s growth? Some analysts say it’s different this time around, and thus this boom won’t go bust. “There’s much more to the Chinese economy than in the 1990s,” says Edmund Harriss, manager of the Guinness Atkinson China & Hong Kong Fund (ICHKX). Back then, the economy “was under the government’s thumb, and the emphasis was strictly on growth.” This time, “it’s about profits, too.”

In the 1990s, the government owned almost everything, while “much of the growth this time is coming from foreign investment and Chinese public corporations as well as privately-owned companies,” Harriss says.

Let the pros do the picking
China’s growth story is enticing, but profiting from that growth isn’t as simple as buying China’s version of Google (GOOG, news, msgs) or General Electric (GE, news, msgs.) Just like in the United States, fast-growing, high-profit sectors draw competition like flies. So, just like in the United States, yesterday’s highflier could be tomorrow’s busted stock. But unlike United States stocks, information on Chinese stocks is hard to come by. Most have no analyst coverage, and, depending on where they’re listed, the financial reports might be of dubious quality.

Bottom line: Unless you live there or have a staff of analysts that does, making consistent money buying individual Chinese stocks is a tough game.

Mutual funds and exchange-traded funds are the only practical way you can get unfiltered access to China’s boom. Since China is a hot item with U.S. investors, investment managers are rolling out new funds and ETFs to capitalize on the trend. So far, though, I know of only nine mutual funds and three ETFs that focus on the country.

Here’s a list of those options (one ETF is too new to include — more on that below) plus the additional information I consider most relevant for pinpointing the best prospects.

Data, as of 2/4/05, from MSN Money’s Mutual Fund Reports, except for the percentage of each portfolio in China and Hong Kong stocks. Those figures calculated from data found on Morningstar’s Web site.

Choosing your investment road to China
To start, let Morningstar do some work for you. Morningstar rates funds from one to five stars, with five being best. The star rating compares a fund’s past returns to its volatility. The scoring is done by fund category. For instance, the China funds are compared to other funds focusing on Asia (excluding funds specializing in Japan).

Within that category, funds with the highest ratios of returns versus volatility get the highest scores, and those with the lowest ratios get the lowest scores.

Morningstar’s star ratings aren’t perfect, but they work for a first look. If I don’t eliminate low-rated funds at the beginning, they usually flunk out anyway when I analyze them in detail. Normally I focus on four- and five-star funds. But China’s market and most of these funds’ returns were in the dumps from the late 1990s through 2002, and there are no China funds with five-star ratings. So I relaxed my standards and included three-star funds.

Use history as a guide
I’ve listed the one-year and three-year trailing returns for each fund, using Feb. 4 as the end date for each period. Usually, I look mostly at three- and five-year fund returns, which I’ve found to be a better predictor of future performance than the shorter-term numbers. But China is a special case, since so much has changed in recent years. Foreign investment is a bigger factor, independent companies are on the rise and government-controlled firms are less important.

Thus, investing styles that worked five years ago may not be the best for today’s market. Consequently, I’ve listed both the one- and three-year returns for each fund. Pay more attention to the three-year numbers, the better indicators of future performance.

Seek out the pure plays
Some funds intentionally diversify their holdings between China (including Hong Kong) and other countries in the region to reduce risk. That’s a good strategy, but the diversification dilutes your investment in China, which is the point of this exercise.

To play the Chinese opportunity, limit your selections to funds and ETFs with at least 80% of their portfolios in Hong Kong- or China-listed stocks, as shown in the table.

Size matters: For safety, think big
Next take a look at each fund’s average market capitalization, which measures the average size of company held by a fund. (A stock’s market cap is its recent share price multiplied by its outstanding shares.) In this group, there’s a considerable range of average market caps, from $2.5 billion to $12.8 billion.

Definitions vary, but firms with market caps below $1 billion or $2 billion are considered small-caps, and those with market caps above $8 billion or $10 billion are large-caps. Those in between are mid-caps.

Usually, risk-averse investors prefer large-cap stocks or funds, because the bigger companies are better able to withstand economic downturns. By contrast, because smaller firms are usually faster growers, aggressive players see better returns there. If you are averse to risk, avoid funds with average market caps below $6 billion.

Stay nimble with active managers
ETFs are portfolios of stocks that replicate the performance of a stock index. For our China ETFs, the iShares FTSE/Xinhua China 25 Index (FXI, news, msgs) tracks 25 of the largest Chinese companies. The iShares MSCI-Hong Kong Index (EWH, news, msgs) tracks the overall Hong Kong market. The new PowerShares Golden Dragon ETF (PGJ, news, msgs), which isn’t included in the above table because it was only launched in December, tracks an index of U.S. listed stocks that derive a majority of their revenue from China.

In an emerging economy like China’s, investing in an index-linked fund has some drawbacks. An active fund manager has the ability to adjust his or her portfolio as conditions warrant. By contrast, the composition of a major index usually changes only once a year, and not necessarily in a desirable direction.

Don’t make short-term bets
China’s fast growth, political structure and uneven disclosure make investing there a risky business. All sorts of things, from currency revaluations to economic overheating, could go wrong. Thus, successful investing in China requires a long-term view. Commit only two-year money to China. That will give you time to ride out the inevitable downdrafts. Also, don’t put too much money at risk. Most investment advisors recommend putting no more than 5% to 10% of your investment dollars in this sort of an emerging market.

Against the background of the economic crisis, and strengthening bonds between the two countries, Presidents Luiz Inacio Lula da Silva and Hu Jintao will have much to discuss.

China has been a “strategic partner” of Brazil for some years, but the high expectations surrounding this relationship have not always been fulfilled.

At a difficult time for economies everywhere, however, the last few months have brought some encouraging news for South America’s biggest economy.

Despite fears about the impact of the crisis, Brazilian exports to China have grown 64.7% in the first four months of 2009 when compared with the same period last year.

During March and April, for the first time, China became Brazil’s biggest trading partner, displacing the United States.

Strong trade

Amid the gloom of the crisis at the start of the year, there had been a prediction that trade with China would suffer a major reverse, specifically when it came to exports of iron, soya and oil. There was even talk of losses being incurred, in the region of $1.5bn (£970m).

They are building very strong economic and political connections with a lot of these leaders. I don’t think that is in our interests US Secretary of State Hilary Clinton

In the end, this pessimistic assessment turned out to be unfounded.

In the first four months in 2009, the volume of sales of soya and grain to China increased 70.1%, while iron went up by 51.3%, compared with the same period in 2008.

Even more striking was growth in oil and derivatives, which increased 251%.

“We were badly wrong in this projection,” says Rodrigo Maciel, executive secretary of the Brazil-China Business Council, speaking in an interview with BBC Brasil.

“The trade in those three products is increasing very strongly, but the factors responsible for this are very varied,” he says.

Chinese investment

A large part of the increased trade, in iron in particular, came about thanks to a stimulus package launched by the Chinese government to deal with the economic crisis.

In the case of soya exports, analysts say that China has been boosting the volume of its strategic stocks, which has boosted Brazilian sales to 4.2 million tonnes during the first four months of this year, compared with 2.5 million tonnes in the same period last year.

Brazil’s newly discovered oil fields also offer significant potential to satisfy the enormous Chinese appetite for resources.

As part of an agreement which is on the agenda for this trip, Brazil would supply 100,000 to 160,000 barrels of oil per day at market prices, in exchange for a $10bn loan from the China Development Bank to help develop its major oil reserves.

The oil and gas discovered off Brazil’s southern coast lies deep beneath water, rock and salt (the pre-salt area).

It will be extremely expensive to extract, so Chinese investment could prove extremely valuable.

Strengthening relationship

President Lula arrived in China from Saudi Arabia, as Brazil works on its objective to join the top tier of oil producing nations.

The United States just didn’t care so much for Latin America in recent years, and China is really looking to Latin America Economist Alessandra Ribeiro, Tendencias Consultancy

There have been reports in recent days in the Brazilian media that the visit to Beijing had been scaled back, with fewer ministers accompanying President Lula than when he first went to China in 2004.

Brazil’s foreign minister, Celso Amorim, was obliged to deny a claim that this happened because he was not received by President Hu in advance of the trip.

Overall, however, it seems the visit is a sign of a strengthening relationship, and certainly China’s role across Latin America is attracting interest elsewhere.

‘Disturbing gains’

In Washington, it appears to have generated a level of concern as well.

The region was not widely regarded as being a priority for the United States during the Bush years, but within the new administration there are some signs that attitudes are beginning to change.

Earlier this month, US Secretary of State Hilary Clinton said that that Iran and China had made what she called “quite disturbing gains” in Latin America.

“They are building very strong economic and political connections with a lot of these leaders. I don’t think that is in our interests,” she said.

“I have to say that I don’t think, in today’s World, where it’s a multi-polar world, where we are competing for attention and relationships with the Russians, the Chinese, the Iranians, that it’s in our interest to turn our backs on countries in our own hemisphere.”

Some analysts in the United States were puzzled that the secretary of state grouped her concerns about these countries together, given that the worries about Iran have more of a security focus, while with China the concern is economic.

Changing times

Whatever the motivation, it seems to have stirred the US into action.

There are reports that Hillary Clinton may visit Brazil at the end of May, a trip that, if it goes ahead, would perhaps signal renewed US efforts to beef up relations.

There has been a contrast between the two approaches, says economist Alessandra Ribeiro of Tendencias Consultancy in Sao Paulo.

“The United States just didn’t care so much for Latin America in recent years, and China is really looking to Latin America,” she says.

“Not just to Brazil, but also to Chile, to Argentina, because these countries have a lot to offer to China.”

Ms Ribeiro says there is “great potential for the relationship to grow”, as China could assist Brazil by investing in exploration projects in the pre-salt area, as well as in other areas of the economy. At the same time, China needs what Brazil has to offer.

“Brazil has a lot of commodities, especially iron [and] aluminium, that China uses for infrastructure projects like railroads, so Brazil is really important for China,” she says.

It seems that potential is being given renewed recognition in Beijing, where Presidents Lula and Hu will dine together for the second time in two days on Tuesday, as they celebrate the increasingly close ties between the two countries.

The Brazilian leader has even suggested the two countries should consider trading in their own currencies – instead of in the US dollar – a sign, perhaps, of changing times.

Exports for the last month of 2009 were $130.7 billion, data from the General Administration of Customs showed. That raised total 2009 exports to $1.2 trillion, ahead of the 816 billion euros ($1.17 trillion) for Germany forecast by its foreign trade organization, BGA.

China’s new status is largely symbolic but reflects the ability of its resilient, low-cost manufacturers to keep selling abroad despite a slump in global consumer demand due to the financial crisis.

December’s rebound was an “important turning point” for exporters, a customs agency economist, Huang Guohua, said on state television, CCTV.

“We can say that China’s export enterprises have completely emerged from their all-time low in exports,” Huang said.

Stronger foreign sales of Chinese goods could help to drive the country’s recovery after demand plunged in 2008, forcing thousands of factories to close and throwing millions of laborers out of work.

Boosted by a 4 trillion yuan ($586 billion) stimulus, China’s economic expansion accelerated to 8.9 percent for the third quarter of 2009 and the government says full-year growth should be 8.3 percent.

Economists and Germany’s national chamber of commerce said earlier the country was likely to lose its longtime crown as top exporter.

China is best known as a supplier of shoes, toys, furniture and other low-tech goods, while Germany exports machinery and other higher-value products. German commentators note that their country supplies the factory equipment used by top Chinese manufacturers.

China surpassed the United States as the biggest auto market in 2009 and is on track to replace Japan as the world’s second-largest economy soon. China passed Germany as the third-largest economy in 2007.

China’s trade surplus shrank by 34.2 percent in 2009 to $196.07 billion, the customs agency said. That reflected China’s stronger demand for imported raw materials and consumer goods while the United States and other economies are struggling and demand is weak.

The United States and other governments complain that part of China’s export success is based on currency controls and improper subsidies that give its exporters an unfair advantage against foreign rivals.

Washington has imposed anti-dumping duties on imports of Chinese-made steel pipes and some other goods, while the European Union has imposed curbs on Chinese shoes.

The U.S. and other governments also complain that Beijing keeps its currency, the yuan, undervalued. Beijing broke the yuan’s link to the dollar in 2005 and it rose gradually until late 2008, but has been frozen since then against the U.S. currency in what economists say is an effort by Beijing to keep its exporters competitive.

The dollar’s weakness against the euro and some other currencies pulls down the yuan in markets that use them and makes Chinese goods even more attractive there, adding to China’s trade surplus.

Even though China overtook Germany as top exporter, the customs agency said total 2009 Chinese trade fell 13.9 percent from 2008.

Commodities were among China’s key imports, the agency said, with the country bringing in 630 million tons of iron ore last year, up 41.6 percent from the previous year, and 200 million tons of crude oil, an increase of 13.9 percent, as prices for both commodities fell.

Economists say China has been rushing to build up stockpiles at bargain prices since crude oil and other commodity prices plunged in 2008. That motive, more than a revival in actual industrial demand, has driven its recent import boom of oil, copper and other metals.

Petrobras, Brazil’s national oil company, says it believes the offshore Tupi field has between 5bn and 8bn barrels of recoverable light oil.

A senior minister said Brazilian oil production had the potential to match that of Venezuela and Saudi Arabia.

Petrobras delivered its estimate after analysing test results.

‘New reality’

The state-controlled company says the results show high productivity for gas and light oil – the best quality oil – which is more valuable and cheaper to refine.

Petrobras says the find has the potential to move Brazil into a position where it is one of the top ten oil reserves in the world.

Brazil currently has proven oil reserves of 14 billion barrels, over half of which have been discovered in the past five years.

The news, which led to a sharp rise in company shares, was also given an enthusiastic welcome by the government.

The senior minister in charge of the cabinet, Dilma Rousseff, said if the deposits turned out to be as significant as first thought, it would place Brazil in the same league as Venezuela and countries in the Arab world.

With a reserve like this, the country could be transformed into an exporter of petroleum, she said.

“This has changed our reality,” she said.

Most of Brazil’s oil is heavy and found at great depth but even so its reserves have almost doubled in the last ten years, as has output.

Some analysts say this latest find raises the interesting scenario of offering a new source of supply to the United States, reducing its dependence on Venezuela, a country with which it has such a fraught relationship.

With the Tupi field potentially equal to 40% of all oil ever discovered here, it seems by any standards a significant moment for Brazil.

“If the best-case scenario happens, this discovery would make Petrobras’ reserves overcome those of Shell and Chevron,” said Felipe Cunha, an analyst with brokers Brascan.

Petrobras controls 65% of the firm which has the exclusive licence to explore and extract oil from the Tupi field in the Santos basin, about 180 miles south of Rio de Janeiro.

British firm BG and Portugal’s Galp Energia hold minority stakes in the business.

Reserves have also been found in the more northerly Campos and Espirito Santo basins.

WASHINGTON – President Barack Obama said Tuesday that U.S. ties with India will be “one of the defining relationships” of the 21st century as he welcomed India’s prime minister for the first state visit of his administration.

At the conclusion of about two hours of talks, Obama said he and Prime Minister Manmohan Singh had agreed to “work even closer” on sharing information between law enforcement and intelligence agencies. Singh promised increased cooperation with Washington to battle terrorism.

Obama was asked about the tense relationship between India and Pakistan and said it was not the role of the United States to intervene and solve such problems. He said, however, that America should do what it can to ensure that Pakistan and India both feel secure and able to focus on developing their own countries for their own people.

On security, Obama said the U.S and India are natural allies.

“We both recognize that our core goal is to achieve peace and security for all peoples in the region, not just one country or the other,” he said.

The two leaders glossed over a dispute about commitments to reduce greenhouse gases in advance of next month’s climate change summit in Copenhagen, but Obama said they had moved a “step closer” to a successful outcome.

Noting that the United States was India’s largest trading partner, Obama said broadening trade ties would help create much needed jobs in both countries as governments continue trying to stimulate recession-hit economies.

In an elaborate welcoming ceremony earlier Tuesday, Obama heaped praise on India and Singh, saying it was only fitting the Indian leader should be the first state visitor of his administration.

Obama said the United States and India share the “bold experiments” of becoming democracies after breaking from rule by a colonial power, and in modern times both have known the pain of international terrorism.

“Our nations are two global leaders, driven not to dominate other nations but to build a future of security and prosperity for all nations,” Obama said

Chilly, damp weather led the White House to move the ceremony indoors, where Singh and Obama stood before photographers and television cameras in the East Room as a Marine band played the national anthems of their countries.

Singh said that India and the U.S. are separated by distance but bound by common national values of “democracy, pluralism, rule of law and respect for fundamental human freedoms.”

The White House was eager to show that, despite what some Indians see as a lack of attention during Obama’s first 10 months, it values Singh’s country as a key partner in dealing with extremists in South Asia, in settling international trade and global warming pacts and in steering the world economy out of turmoil.

Indians were looking for Obama to reverse a perception that he neglected India during his recent trip to Asia and seemed to endorse a stronger role for China in India’s sensitive dealings with Pakistan.

Obama’s words sought to re-establish the strong feelings of goodwill the countries enjoyed during George W. Bush’s presidency. Bush is credited with transforming the relationship after decades of Cold War-era distrust.

The symbol of those new ties is a civilian nuclear cooperation accord signed into law last year after years of close communication and tough negotiation. Obama voiced his commitment to the accord, which has raised hackles in Pakistan, India’s bitter rival and a country the United States relies on in the fight against extremists along the Pakistan-Afghanistan border.

The two leaders were expected to have a memorandum intended to improve cooperation on energy security, clean energy and climate change, but there were no immediate details.

Developing and industrialized countries have bickered as they prepare to negotiate a new global climate change treaty in Copenhagen, meant to replace the 1997 Kyoto Protocol on carbon dioxide emissions.

Developing countries argue that rich countries produced most of the heat-trapping greenhouse gases on their march to development and should therefore bear the costs of fixing the problem. Wealthy nations say all countries — including large polluters India and China — have to agree to broad cuts in emissions.

India is willing to work on any climate solution that does not hurt developing countries’ efforts to lift their populations out of poverty, Singh said before meeting Obama.

* Investments to increase output as Brazil economy expands

* Ford has made 23 straight quarterly profits in Brazil (Recasts, adds details on car market, quotes)

By Peter Murphy

CAMACARI, Brazil, Nov 20 (Reuters) – Ford Motor Co (F.N) unveiled plans on Friday to invest 4 billion reais ($2.26 billion) to boost output in Brazil as record-low borrowing costs and a rapid economic recovery in Latin America’s largest country stoke demand for new cars.

Most of the investments will go to Ford’s state-of-the-art plant in Camacari, a sprawling compound in the northeastern state of Bahia that churns out a vehicle every 80 seconds. The company, like rivals Fiat SpA and Volkswagen AG, has benefited from government tax incentives and a decline in interest rates that are fueling record Brazil sales in 2009.

“This is a very large investment for Ford,” Mark Fields, the company’s president for the Americas, told an audience of uniformed workers and local politicians that included Brazilian President Luiz Inacio Lula da Silva.

“For us this shows our confidence in the country, in the economy and the workers and consumers here in Brazil.”

Ford plans to spend 2.8 billion reais to increase output by 20 percent to 300,000 vehicles a year at the Camacari plant and to modernize its Troller unit in Ceara state that makes off-road vehicles, said Marcos de Oliveira, chief executive for Brazil and the Mercosur region.

Investments in Camacari, which produces the popular pint-sized sport utility vehicle EcoSport and the Fiesta subcompact, should create 1,000 jobs, he added.

The remaining 1.2 billion reais will go to Ford’s factories in Sao Paulo state, including its Sao Bernardo plant and a testing facility in Tatui.

“We decided to continue to invest in Brazil because it is our third-largest market and it is a country with a market that continues to grow,” Fields said.

Brazil has been a rare bright spot for global automakers, which are suffering much more in core markets like the United States and Europe. Car sales in the country are on track to hit another record in 2009, boosted by government tax incentives that helped lower car prices and lure consumers to showrooms.

The tax breaks are set to expire at the end of December, but Brazil’s automobile dealers’ association expects sales to grow another 9 percent in 2010, when the country is forecast to expand a hefty 5 percent.

As part of the investment plan, Brazil’s government will extend state and federal tax breaks to Ford until 2015.

“It is with great pride that I stand here in front of you to say that Brazil is going through a magical moment in its economic life, in its development,” said Lula, a lathe operator in the automobile industry in the 1970s who rose to become Brazil’s first working-class president.

Ford is the fourth-largest automaker by sales in Brazil and is the second U.S.-based company in the United States, behind General Motors Co [GM.UL]. The company, which considered pulling out of Brazil in the late 1990s, has racked up 23 consecutive quarterly profits in the country.

Brazil is a major market for global automakers such as Italy’s Fiat (FIA.MI), Germany’s Volkswagen (VOWG.DE), U.S.-based GM and Ford. Asian and French manufacturers are also relying increasingly on Brazil, a vast country where millions of people still don’t own cars, to offset slumping sales at home.

GM said in June it plans to go ahead with a $2.5 billion investment plan between 2007-2012 in the Mercosur region, which includes Brazil, Argentina, Uruguay and Paraguay. VW also plans to soon announce a large investment program in Brazil, according to local media. ($1=1.737 reais)

If current trends hold Brazil will be one of the Worlds five biggest economies by the middle of this century with China, America, India, Japan.

• Brazil is Self Sufficient in Oil
• Large New offshore discoveries of OIL
• Goverments papers is Invetsment Grade
• Foreign Direct INvest is up 30% this year
• Sao Paulo’s Futures and options Market is one of the five largest by volume traded
• Credit is growing steadily ( for consumer purchases : cars, homes,etc)
• New Laws to make lending easier and more secure for banks are being implemented

Brazil’s two biggest problems are : 1.) Credit is very expensive  2.) The Goverment will lend long term but only to select few

• Brazil in the last two year has one of the fatest growing car markets
• Brazil is the World’s largest exporter of coffee ( also export schickens, sugar, orange juice,beef)
• Exports metals and ores
• 3rd Largest Road network
• Home Mortagges only acocunts for 2% of GDP ( USA 85%, Mexico 10%)

There are many different invetsment opportunites available in Brazil,  and we will consult you on your options.

As South America’s largest economy, Brazil is leading the continent out of the global recession.

GDP growth this year should be flat to slightly positive, and in 2010 the country is expected to expand 3.5% according to the International Monetary Fund (IMF).

For a two-trillion dollar economy, that’s nothing to sneer at.

Especially since Brazil is an export-oriented economy with a healthy mix of both commodity production and manufacturing.

While issues such as education, the legal system, and infrastructure still need improvement according to the World Economic Forum, Brazil is moving in the right direction. It jumped an impressive eight slots in 2008 alone to rank as the 56th most competitive economy in the world.

Plenty Of Oil, Natural Gas, Other Commodities

Brazil is rich in commodities the world needs right now.

It’s one of the most important sources of iron ore, being home to the world’s largest producer Vale.

Without Brazilian ore, the rapid development of countries like China would not be possible.

In terms of oil, the country has enough in the ground to be both self-sufficient and even an oil exporter.

While much of it lies off the coast and buried under layers of salt, estimated reserves could total 60 – 100 billion barrels of oil and natural gas equivalent.

For agriculture, the country’s excellent climate and fertile land gives it a huge cost advantage versus most nations in the world. Brazil will increasingly become the bread basket for the world, which is particularly powerful as millions rise out of poverty in countries like China and move to higher quality diets.

Payrolls Keep Growing

While much of the world debates whether or not smaller job losses indicate a recovery, Brazil been been creating job growth for eight months already.

In September, employment grew by the most this year, adding a quarter of a million jobs.

Encouragingly, both the industrial and services sectors are growing in unison.

There’s A Trade Surplus

Even with its strong currency, Brazil exports more than it imports.

As of mid-October, Brazil’s year-to-date trade surplus totaled $22.5 billion, up from $20.5 billion in the same period of 2008. According to Dow Jones, Brazil posted a trade surplus of $24.7 billion in 2008. Analysts expect the surplus to grow in 2009.

Biggest exports include transport equipment, iron ore, soybeans, shoes, coffee, and cars to the U.S., China, Argentina, Netherlands, and Germany, according to the CIA World Factbook. Oil could soon be added to the export list if its recently discovered reserve are exploited as expected.

More Banking Needed

Brazil’s relatively underdeveloped banking sector is another area ready for investment.

As Der Spiegel reports, there’s a big opportunity to expand savings and lending in the country.

Analysts say even an greater upside is still to come. According to Citigroup figures, the ratio of loans to GDP in Brazil — a key indicator of banking-sector maturity — now stands at just 40 percent, about half that of regional rival Chile. And Brazil’s ratio of retail deposits to GDP is comparable to that of Colombia, which is both smaller and poorer. Santander Chairman Emilio Botin thus clearly has a big opportunity to bring more of Brazil’s 190 million citizens into the banking sector.

The demand is already being demonstrated. For example, Banco Santander Brasil, a subsidiary of Spain’s Banco Santander, raised $8 billion in an IPO this year and plans to expand its in-country presence rapidly.

And, as Paul Harper notes on Seeking Alpha, “Brazil’s nascent credit sector has benefited from a wave of bank consolidation over the last 18 months, the strength of the real versus the US dollar and one of the strongest economies to exit the financial crisis.”

The Big Boys Are Jumping In

As proof investors like Brazil, Goldman Sachs (GS), JPMorgan Chase (JPM), and others, like options traders, have come out in favor of investment in Brazil as part of their overall bullish-ness on emerging markets.

Goldman says the Brazilian stock market could jump 30% by 2010 and says valuations and risks in Brazil remain relatively low in comparison to other markets:

GS via Seeking Alpha: Forward valuations suggest it is hazardous to be underweight Brazil. Brazilian sovereign risk and interest rates are at or near record lows, while prospects for sustainable economic growth are possibly better than at any period in the last few decades.

Brazil is part of Goldman’s overall bullish BRIC strategy

GS via Pragmatic Capitalist: We favor exposure to Brazil, Russia, India and China (BRICs) over developed markets given the significantly higher GDP growth outlook. We believe investors should use this basket to identify stocks with high exposure to emerging market growth. Long/short investors should consider buying this basket against the S&P 500 to gain exposure to higher growth in the BRICs countries versus slower growth in developed regions.

JPMorgan takes a similar position on Brazil and emerging markets generally.

JPM via Seeking Alpha: The new EM trade: Emerging economies are exiting the crisis relatively unscathed and with improved economic, financial, and fiscal positions versus developed economies. This means medium-term out-performance of their equities, currencies, and credit. Near term, it means their local debt will likely under-perform, except for the highest-yielding markets, which should benefit from the search for yield. With much of the EM growth impetus emanating from commodity-hungry China, this should be bullish for commodities.

Stocks Are Soaring

The Brazilian stock market, the Bovespa, is the largest in Latin America.

It notably bottomed in October 2008, far earlier than most markets.

Since then it has doubled, catching the attention of global investors.

While past performance doesn’t necessarily have any bearing on the future, human nature is such that investors are chasing this performance.

The Real Is Blowing Away The Dollar

Brazil’s currency, the real, has blown away the dollar this year.

For investors in real assets, no pun intended, this has substantially enhanced dollar-based returns this year.

While the currency may have a lot further to rally against the U.S. dollar, just don’t forget that during the recent credit crisis the real was slammed just like many other currencies against the dollar.

World Cup 2014! Olympics 2016!

After a $14.4 billion bid, Rio beat out Tokyo, Madrid and Chicago to win the 2016 Olympics, becoming the first Latin American country to host the games and sending Brazil into pandemonium.

Hosting the event helps solidify Brazil’s new-found place among the global elite and will give Rio an infrastructure and tourism boost.

And, if winning the Olympics wasn’t good enough, Brazil already nabbed the right to host the 2014 World Cup. Brazil has won five times, but this will be the first time the the global showpiece finals have returned to the land of jogo bonito since 1950, according to FIFA.

An Excuse To Visit

But we know why people really love investing in Brazil: they want to visit.

Between Carnival, soccer, samba, and modestly tanned and toned beach-goers, Brazil’s legendary beauty and party culture means a business trip to Rio is nothing like one to, say, Omaha.

But… Many Dreams Could Be Shattered In The Process

There are risks of course.

Recently, there’s worry the Brazilian stock market is overvalued, much like in the U.S..

Some investors are also mindful of a new 2% tax on foreign portfolio investments into fixed-income and equities accounts.

Others aren’t too concerned about the tax. Standard Chartered Bank, in a brief research note, the tax move is “unlikely to have much effect beyond the knee-jerk reaction,” according to WSJ.

More generally, investors should be mindful of the fact that Brazil’s progress is only nine years removed from near economic collapse. Back in 2002 it had to borrow $30 billion from the International Monetary Fund to avoid default on its sovereign debt.

Brazil also remains a country of stark contrast between rich and poor. Thirty percent of Brazilians — or 57 million — live in poverty, an enherantly unstable economic, political, and social reality. This could be one reason why violence has long been problematic in the country. Brazil has one of the world’s highest murder rates.

In the end, Brazil will likely shatter the dreams of some investors along its jagged path to prosperity. So be careful and do your homework.

source: (businessinsider.com)

Goldman Sachs predicts that the BRIC nations could overtake the combined gross domestic product of the G7 nations in 20 years.

“BRIC markets have begun to outperform strongly again,” AmInvestment Bank chief investment officer.

He said that with a combined population exceeding 2.8 billion, which represents 42% of the world’s population, these countries were a major force within the emerging markets.

Wong said that BRICs would spend US$22 trillion on infrastructure in the next decade to sustain growth and modernise their electricity and power network.

“The US$12bil Beijing-Shanghai high speed railway is planned for 2010 while the Russian government plans to modernise the electricity and power network,” he said.

He also said Brazil had earmarked US$200bil for its 2007-2010 Growth Acceleration Project to modernise the road network, power plants and ports, among other projects.

Brazil also won the Bid for the Olympics in 2016 and they will also host the World Cup in 2014,

Wong said that as the developed countries faced a slow and difficult recovery, the world could look to the BRICs to increase their contribution to global domestic demand through higher consumption.

As the middle-income group expanded in these countries, their spending power would increase in tandem, he said.

He added there was trade between the four countries as each of the BRIC countries had its own economic strengths and advantages, which largely complemented each other.

“Synergies between BRIC countries could enhance their position in the global economy,” he said.