Brazil’s time has come.

For decades investment professionals have joked that Brazil was “the next big thing… always has been and always will be.” The country is phenomenally rich in commodities and natural resources—it’s the world’s largest exporter of sugar, coffee, beef, poultry, soybeans, and other items.

However, until recently Brazil had yet to come anywhere near realizing its potential. From the 1980s until the early ‘90s the country trailed other emerging market economies due to its high inflation, international debts, and political corruption.

Brazil tamed the inflation problem with its re-introduction of the Brazilian real in 1994— inflation subsequently plunged from 2,300% to a more reasonable 4% today. The country began denominating its debt in the real soon after, thus avoiding the exchange fluctuations that typically cripple emerging market economies, e.g. if you owe $4 billion in a foreign currency and that currency rises 5% compared to your own currency, your debt just rose 5% as well.

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Global Investing: the Secure Path to Maximize Your Wealth

The US is no longer the best place for your money.

Between a volatile stock market, busted housing market, and crumbling dollar, the US’s reign as THE market of choice has ended. Consider the following:

Not once in the last 27 years has the U.S. been the top performer for world markets. From 2002 to 2006 alone, a time when the U.S. returned 60%, it finished 23rd out of 25 world markets.

If you’re not putting some of your portfolio in international markets, you’re missing out.

To read more, click here.

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The results speak for themselves. Since 2004, the Brazilian economy has grown at an average of 4.5%, its fastest pace in 20 years. What started out as a predominantly commodities focused economy is giving way to a domestic consumption story. Spending at Brazilian malls increased 16% in 2007 to $33 billion.

However, there is still a long way to go before Brazil has anything resembling a large middle class. In 2003, 64 million people had an income that was less than half of the minimum wage ($193 a month). This number has since fallen more than 7%… but today nearly one third of Brazilians still live in poverty.

However, while the economy is heating up, Brazil’s stock market— the Bovespa— is red hot. The Bovespa has tripled since 2004 alone. And new developments have paved the way for a wave of new capital to flow in.

Earlier this month, for the first time in history, Brazil’s debt was upgraded to investment grade by Standard & Poor’s. Then, yesterday, Fitch confirmed the rating, upgrading Brazil to investment grade as well.

These are truly historic developments. And they open the door for a wave of new capital to enter Brazil as institutional investors restricted to investment grade markets will now be able to invest there.

You see, many large fixed income investors like pension funds and institutions are only allowed to invest in markets that have received two investment grade ratings or more. Collectively these funds manage some $2.6 trillion. And with Brazilian government bonds yielding between 12% and 14% compared to US Treasuries 2%-4%, much of these funds will soon find their way to South America’s largest economy.

Last 5 posts by Graham Summers

• We're Soooooooo Close! - October 9th, 2009
• Kiss the “New Bull Market” Theory Good-bye - October 8th, 2009
• The One Investment That Might Be About to Bottom - September 30th, 2009
• What the Fed Doesn’t Want You To Know About US Debt - September 30th, 2009
• How to Prepare For China’s Coming Derivative Default - September 13th, 2009