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Patrick
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2012 Jan 5, 1:07pm
I once made a little money by buying SID, the Brazilian steel maker. Currently pays a dividend of 7.5%, but that's largely because the stock price is down so much lately...
It's very hard to open bank account in other countries. I've tried in person in Canada and the Netherlands and they just don't want your money if you're a foreigner. Maybe it's different if you're a rich foreigner.
I think you're right. There is an investment opportunity. Read "The Age of Deleveraging" by Shilling. I think he would say that if you bought the Brazil equivalent of a 30 yr T-note today and sold it one year from now, then rebought, then waited a year, then sold and so on .... that your return would be very high (assuming you believe that interest rates in Brazil will not go higher).
This same strategy would have worked astoundingly well for you in the US between 1979 and today, but now rates are so low, it's hard to imagine they could go any lower. That's why the PIMCO CEO thinks the 30 year bond bull in the US is dead.
Its not that easy as it sounds. Technically based on how foreign currency markets work, the difference in interest rates should equal the difference in inflation numbers. The inflation numbers have an effect on foreign currency exchange rates as well so your $100 today could be worth $90 a year from now when you convert the Real back to USD (which could wipe out your gains). I don't think they are paying 11% for $ deposits.
MisdemeanorRebel
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2012 Jan 6, 12:34am
It's very hard to open bank account in other countries. I've tried in person in Canada and the Netherlands and they just don't want your money if you're a foreigner. Maybe it's different if you're a rich foreigner.
That's because of US pressure. Best move is to open a company in other countries, and then invest through the company.
Ironically, while US companies can move capital with ease, they don't make it easy for middle class US citizens.
B.A.C.A.H.
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2012 Jan 6, 3:33pm
Brazilian women are hot.
I think if I was going to invest in Brazil (and single), I'd invest in travel, and lotsa spending money while I am there.
TechGromit
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2012 Jan 8, 11:51pm
Its not that easy as it sounds. Technically based on how foreign currency markets work, the difference in interest rates should equal the difference in inflation numbers. The inflation numbers have an effect on foreign currency exchange rates as well so your $100 today could be worth $90 a year from now when you convert the Real back to USD (which could wipe out your gains). I don't think they are paying 11% for $ deposits.
Thank you, I didn't take inflation rates into account. A quick check gives Brazil a 6.5 inflation rate for December 2011, and 3.4 inflation rate for November 2011 for United States.
Inflation rates are roughly twice what they are in the United States, but there still money to be made even after taking inflation into account.
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The central bank's interest rate in the United States is .25%, the central bank interest rate in Brazil is 11.75%. There has to be a money making opportunity here. Just as currency brokers make money by buying and selling currency on a daily bases I would think you could deposit money into a Brazil bank and earn a far higher interested rate than in a United States Bank. The current interest rate for saving account for a Brazil bank is currently 10.75%, that's far higher than any United States bank, government bond or other investment. From what I read, it's difficult to open an account unless your a resident of Brazil. I would think it would be a great investment opportunity for someone in Brazil. Form a corporation and take in money from over seas investors, then deposit the money in a Brazil bank, you could give foreign investors a good 8 or 9% interest on there money and skim the remaining interest off the top for yourself. I guess the main issue is how risky is all this. Are Brazil Banks insured by a federal agency like the FDIC? (I see that banks are only insured to deposits to 80,000 Reals with is currently equivalent to $43,000). And is it easy to get your money back when you want to withdraw. I'm sure it's easy enough to sent them money, but if you have to fill out 50 forms to transfer the money back to you, it's really not worth it.
#investing