July 23, 2014

Wealth Management Sector Portrait

South of the Border

The European crisis has investors eyeing Latin America, including Brazil and Mexico.

South of the Border
The European crisis has investors eyeing Latin America.

While Europe stands out as a volatile investment market, Latin America has drawn the attention of investment strategists, who are particularly bullish on Brazil, with its growing middle class, low unemployment and large-scale projects in preparation for the 2014 World Cup and 2016 Olympic Games.

“We think Brazil will do very well because it’s a country that continues to reinvest in itself,” says Adam Carlin, director of wealth management with the Bermont/Carlin Group at Morgan Stanley Smith Barney in Coral Gables.

Already this year, Brazilian bank, oil and energy stocks are posting double-digit gains. Among the most favored stocks are Petrobras, a Brazil-based integrated energy company; Ultrapar, a Brazilian gas distributor; and Itaú Unibanco, Latin America’s largest non-government bank.

Francisco J. Cerezo, an international attorney with Foley & Lardner in Miami, also sees opportunity in Mexico.

“There’s still interesting work going on in Mexico across sectors. I think people haven’t been focusing on Mexico as much as they should.” Economists say Mexico’s domestic commerce, telecommunications, finance and real estate stand out in particular as high-growth sectors. They also point to the country’s advantage over Brazil and Chile — its geography and industrial mix make it less vulnerable to euro crisis shocks than other emerging markets. Also, because Mexico exports more manufactured goods than commodities, its trade is less vulnerable to sudden drops in commodity prices.

Most money managers in Florida say they prefer to gain broad exposure to Latin America through exchange-traded funds that spread their holdings across the region’s largest economies. Bill Stone, investment strategist with PNC Bank, says he likes both ETFs with broad exposure and those that track specific countries in Latin America such as Brazil and Mexico. Some examples are iShares MSCI Emerging Markets Latin America Index Fund or the country specific iShares MSCI Brazil Index Fund. Stone says top-ranked Latin America-focused mutual funds also are attractive as portfolio diversifiers. “We believe in the emerging market story,” he says.


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