It’s time to develop a taste for caipirinhas, Brazil’s national cocktail, and to learn how to samba. Unless you are an Olympic athlete, that’s most of what you need to know to prepare for the 2016 Olympic Games, which on Friday were awarded to Rio de Janeiro.
For the first time, the International Olympic Committee has chosen a South American city to host the Olympics.
Rio’s victory over richer, more developed places -- Chicago, Tokyo and Madrid -- continues a welcome trend of acknowledging the growing importance of developing countries. The World Cup next year will be hosted by South Africa and in 2014 it will be held in Brazil.
The IOC’s choice sent an emotional jolt through the country. Luiz Inacio Lula da Silva, Brazil’s charismatic president who enjoys an 81 percent approval rating and who worked hard to support Rio’s bid, cried when the vote was announced. Some 30,000 people celebrated on Copacabana Beach.
The games present a tremendous opportunity for Brazil. The Olympics will give Brazilians a huge shot of self-confidence and boost the country’s tourism industry and Rio’s public transportation system. It’s also an opportunity to counter the violent imagery of drug lords, gang murders and grinding poverty realistically captured in films such as “City of God” (2002). Those scenes have replaced postcard images of beaches and mountains that used to seduce people around the world.
Military Maneuvers
It would be a mistake to skip a trip to the 2016 Games due to concerns about safety. Rio has hosted large international gatherings such as the 1992 Earth Summit and the 2007 Pan American Games. When the world’s attention is on them, Brazilians don’t take chances. During these types of events, law enforcement is shifted from the local police, who don’t exactly enjoy a reputation for moral rectitude.
Instead, Brazil’s military runs security, sporting assault weapons and tanks. If you think Rio’s drug kingpins are crazy enough to conduct business as usual under those conditions, think again.
It’s worth noting also that Rio hasn’t been subject to terrorist attacks like those that sadly hit Madrid and London, where the 2012 Olympics will be held.
Challenges Abound
The greatest challenge for Rio and Brazil probably isn’t the Olympics itself, but its aftermath. Is the country capable of doing anything to improve the life of millions of slum kids living in Rio’s favelas, which climb the mountainsides just blocks away from fashionable neighborhoods like Ipanema? Besides making a few extra bucks by juggling tennis balls at busy intersections, will their lives change dramatically because of this event? Probably not.
Regardless of which city hosts the Olympics, some things are certain.
The event will cost three times more than originally budgeted. The estimated cost of the 2016 games is 25.9 billion reais ($14.5 billion). Still, lack of money won’t be an issue. Brazil’s monetary authority can simply print more money if necessary. That’s no different from what the world’s developed nations are doing.
Architectural white elephants will dot the landscape. Stadiums, gymnasiums, cycling centers, athlete dorms and so much more infrastructure will be little-used eyesores as soon as the closing ceremony concludes.
Athletes may take home medals, but politicians and politically connected business people are the ones who really achieve success at any Olympics.
Collective Society
Finally, don’t expect Brazil to experience a home court advantage and win buckets of gold medals.
Brazilians aren’t a greedy bunch and they are always happy to please foreigners.
Medal counts tend to favor individual performances, like the ones U.S. swimmer Michael Phelps gave on his way to winning a record eight gold medals at the Beijing Olympics.
Brazil is too much of a collective society to cultivate stars who excel as lone performers in events like swimming and gymnastics. Brazil’s strengths are team sports like soccer, volleyball and basketball.
It is rare to see a Brazilian athlete turn to the camera, pound his chest and say he’s competing to win gold, such as swimmer Cesar Cielo Filho did before breaking the world record in the 100-meter freestyle last July in Rome. Perhaps Cielo will teach other Brazilian athletes, especially those who don’t have the opportunity to practice in the U.S. as he does, to do the same.
That might be the most important legacy of Rio’s 2016 party.
http://www.bloomberg.com/apps/news?pid=20601039&sid=aa0KLdK_V0Xg
To contact the writer of this column: Alexandre Marinis in Sao Paulo at amarinis1@bloomberg.net
Wednesday, October 14, 2009
Sunday, October 11, 2009
Sport spectaculars could also draw investors to Brazil
Emerging markets are not everyone's cup of tea. There's something to be said for staying at home and investing in companies that matter in our everyday lives. It's a safe and steady approach and investment managers have a hard time advising their clients otherwise.
That's understandable. It takes a certain type to place their money abroad, someone a little adventurous, I suspect, who is looking for the big score, and is prepared to accept the risk that comes with an overseas market in a different time zone, on another continent, with an unfamiliar currency, where anything from an overnight military coup (think Honduras), political instability (think Romania), or a scam (think Bre-X) can wipe out their investment while they're asleep. Definitely not something you want to wake up to.
Most Canadian investors prefer to seek out multinational corporations closer to home in Manhattan. Over the long term, America's corporates have delivered the goods with the nastiest surprise occasionally coming from a surging Canadian dollar that bites into dividends.
When overseas interest has beckoned, it generally focuses on a diversified mutual fund, heavy with European or Japanese names. South America seldom gets a look.
That changed last week when Rio de Janeiro was awarded the 2016 Summer Olympic Games. Coming on the heels of Brazil being awarded the 2014 FIFA World Cup of soccer, investment managers were left furiously speculating how beneficial the world's two biggest sporting events two years apart could be for the country's economy.
For the longest time, Brazil, resource-rich, and a major exporter of metals, minerals and commodities, with vast offshore oil reserves in which it is investing $150 billion, has been viewed as the country of the future. With a population of 190 million, it is now a centrist-based consumer society that is being driven by higher income levels and easier access to credit.
Bank of America-Merrill Lynch chief economist Virgilio Castro Cunha offers a rosy outlook. He estimates corporate earnings growth will jump 26 per cent next year, driven by robust domestic activity and a soft recovery on commodity and volume prices. He has raised his 2010 growth forecast to 5.3 per cent from 4.5 per cent.
The Bovespa stock index, based in Sao Paulo, the Brazilian equivalent of the S&P/TSX composite index, has about 60 listed companies and is the largest capitalized stock market in Latin America.
The index is trading at a 15-month high and is the best performing index in the world this year with a return of 67 per cent.
Factor in the strength of the currency, the real, and the return for a Canadian investor is closer to 100 per cent, so investing in Brazil may not be such a nutty idea, after all.
Brazil is the "B" in the BRIC group with Russia, India and China, considered to be the fastest growing developing economies, and there are mutual funds, such as the Templeton BRIC Corporate Class Fund, that serve this market.
"When it comes to growth and investment value, Brazil has become the BRIC's ignored fourth wheel," says Danny Furman on the investment site SeekingAlpha. com.
"Russia has ridden the oil roller coaster and most studious emerging market investors have focused on China's huge stimulus package and increased consumption as well as India's political shift. Brazil is assumed to have garnered equal attention, given the country's acronym leading position, but volume and price simply don't agree.
"Brazil's economy, from all indications, might be the best poised in the world. Bank balance sheets are relatively clean and consumption is at an all- time high in what has traditionally been an export-reliant economy. Power and water usage are up and favourable trade terms with China are apparent."
In fact, China has supplanted the U.S. as Brazil's biggest trading partner.
For Canadians, American Depositary Receipts (ADRs) that trade on the New York Stock Exchange offer the most immediate hands-on investment. There are about 35 ADRs and most of them are internationally recognized names. They include steelmaker Gerdau S.A. (GGB), mining giant Companhia Vale do Rio Doce (VALE), state-controlled oil and gas company Petroleo Brasileiro S.A., better known as Petrobras (PBR), giant soft drink distributor Companhia de Bebidas das Americas, known as Ambev (ABV), Cosan, an independent ethanol producer (CZZ), Brasil Telecom (BTM) and Bombardier rival Embraer (ERJ).
The iShares Brazil Index ETF (EWZ) that tracks the Bovespa offers diversification. Units that last November dropped to a 52-week low of $26.64 US have surged to $69 US, an increase of 159 per cent.
That doesn't surprise Castro Cunha.
"Brazil is trading at a 14-per-cent discount to global equities on consensus industry-adjusted 12-month forward, price-earnings (P/E) multiples," he points out. "Higher perceived sustainable growth should encourage investors - it is trading at six-per-cent and three-per-cent discount to China and India, respectively, based on consensus-forward price-earnings (P/E) ratios."
What portion of one's portfolio should be placed outside Canada? Clearly this depends on an individual's risk tolerance, but investment firm Edward Jones recommends between 25 per cent and 35 per cent.
"In our view, global mutual funds with broad exposure to developed and emerging equity markets are a good choice since they have the flexibility to select investments that remain undervalued and to shift their holdings in response to changing opportunities," it says.
http://www.canada.com/Sport+spectaculars+could+also+draw+investors+Brazil/2086801/story.html
That's understandable. It takes a certain type to place their money abroad, someone a little adventurous, I suspect, who is looking for the big score, and is prepared to accept the risk that comes with an overseas market in a different time zone, on another continent, with an unfamiliar currency, where anything from an overnight military coup (think Honduras), political instability (think Romania), or a scam (think Bre-X) can wipe out their investment while they're asleep. Definitely not something you want to wake up to.
Most Canadian investors prefer to seek out multinational corporations closer to home in Manhattan. Over the long term, America's corporates have delivered the goods with the nastiest surprise occasionally coming from a surging Canadian dollar that bites into dividends.
When overseas interest has beckoned, it generally focuses on a diversified mutual fund, heavy with European or Japanese names. South America seldom gets a look.
That changed last week when Rio de Janeiro was awarded the 2016 Summer Olympic Games. Coming on the heels of Brazil being awarded the 2014 FIFA World Cup of soccer, investment managers were left furiously speculating how beneficial the world's two biggest sporting events two years apart could be for the country's economy.
For the longest time, Brazil, resource-rich, and a major exporter of metals, minerals and commodities, with vast offshore oil reserves in which it is investing $150 billion, has been viewed as the country of the future. With a population of 190 million, it is now a centrist-based consumer society that is being driven by higher income levels and easier access to credit.
Bank of America-Merrill Lynch chief economist Virgilio Castro Cunha offers a rosy outlook. He estimates corporate earnings growth will jump 26 per cent next year, driven by robust domestic activity and a soft recovery on commodity and volume prices. He has raised his 2010 growth forecast to 5.3 per cent from 4.5 per cent.
The Bovespa stock index, based in Sao Paulo, the Brazilian equivalent of the S&P/TSX composite index, has about 60 listed companies and is the largest capitalized stock market in Latin America.
The index is trading at a 15-month high and is the best performing index in the world this year with a return of 67 per cent.
Factor in the strength of the currency, the real, and the return for a Canadian investor is closer to 100 per cent, so investing in Brazil may not be such a nutty idea, after all.
Brazil is the "B" in the BRIC group with Russia, India and China, considered to be the fastest growing developing economies, and there are mutual funds, such as the Templeton BRIC Corporate Class Fund, that serve this market.
"When it comes to growth and investment value, Brazil has become the BRIC's ignored fourth wheel," says Danny Furman on the investment site SeekingAlpha. com.
"Russia has ridden the oil roller coaster and most studious emerging market investors have focused on China's huge stimulus package and increased consumption as well as India's political shift. Brazil is assumed to have garnered equal attention, given the country's acronym leading position, but volume and price simply don't agree.
"Brazil's economy, from all indications, might be the best poised in the world. Bank balance sheets are relatively clean and consumption is at an all- time high in what has traditionally been an export-reliant economy. Power and water usage are up and favourable trade terms with China are apparent."
In fact, China has supplanted the U.S. as Brazil's biggest trading partner.
For Canadians, American Depositary Receipts (ADRs) that trade on the New York Stock Exchange offer the most immediate hands-on investment. There are about 35 ADRs and most of them are internationally recognized names. They include steelmaker Gerdau S.A. (GGB), mining giant Companhia Vale do Rio Doce (VALE), state-controlled oil and gas company Petroleo Brasileiro S.A., better known as Petrobras (PBR), giant soft drink distributor Companhia de Bebidas das Americas, known as Ambev (ABV), Cosan, an independent ethanol producer (CZZ), Brasil Telecom (BTM) and Bombardier rival Embraer (ERJ).
The iShares Brazil Index ETF (EWZ) that tracks the Bovespa offers diversification. Units that last November dropped to a 52-week low of $26.64 US have surged to $69 US, an increase of 159 per cent.
That doesn't surprise Castro Cunha.
"Brazil is trading at a 14-per-cent discount to global equities on consensus industry-adjusted 12-month forward, price-earnings (P/E) multiples," he points out. "Higher perceived sustainable growth should encourage investors - it is trading at six-per-cent and three-per-cent discount to China and India, respectively, based on consensus-forward price-earnings (P/E) ratios."
What portion of one's portfolio should be placed outside Canada? Clearly this depends on an individual's risk tolerance, but investment firm Edward Jones recommends between 25 per cent and 35 per cent.
"In our view, global mutual funds with broad exposure to developed and emerging equity markets are a good choice since they have the flexibility to select investments that remain undervalued and to shift their holdings in response to changing opportunities," it says.
http://www.canada.com/Sport+spectaculars+could+also+draw+investors+Brazil/2086801/story.html
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