Foreign Portfolio Investment: Brazil

1606 Words Feb 7th, 2014 7 Pages
The purpose of this paper is to describe the benefits of foreign portfolio Investment, the advantages in investing internationally and lowering overall risk by diversifying in these markets. Secondly, we will take a look at the returns in investing in Brazilian securities and Brazil’s competitive and comparative advantages as the country of choice for our international venture. Finally, we will analyze Brazil’s cultural convergence and diversity.

The recent surge in international portfolio investments reflects the globalization of financial markets. Specifically, many countries have liberalized and deregulated their capital and foreign exchange markets in recent years. Security returns are found to be less correlated across countries
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New enterprises, for example, have a greater chance of receiving start-up financing. Savers have more opportunity to invest with the assurance that they will be able to manage their portfolio, or sell their financial securities quickly if they need access to their savings. In this way, liquid markets can also make longer-term investment more attractive.

In the second part of the paper we will take a look at the overall returns and some of the reasons in investing in Brazilian equities as well as analyze Brazil’s competitive and comparative advantages. Brazil has a young dynamic population, vast reserves of commodities and a thriving diverse economy. In the last years Brazilian companies have grown substantially and are leaders in steel productions, aircraft manufacturing and agricultural exports. Also Brazilian products and services are increasingly competitive and are acknowledged worldwide for their high level of innovation, design and sustainability, adding to an innovative, competitive and sustainable Brazil. As a result the MCSI Brazil Index shows returns of 150% for the last 10 years, almost 100% more than the Dow Jones Industrial Average index, which has returned overall only of 58% Brazil is a great example in terms of exposing your portfolio internationally because as a nation it has low entry barriers, great IT infrastructure and has many competitive advantages. Brazil’s principal competitive advantages are its abundant
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