Betting on Brazil for the long term

"In spite of Brazil still feeling the hangover from the commodity boom and growth seemingly unlikely to pick up in the next 12-18 months, investors should still consider buying Brazilian equities because they're cheap," says Sophie Bosch de Hood, manager of JPMorgan Brazil Investment Trust (JPB). "While we do not view the World Cup and Olympic Games as important catalysts in terms of market timing, they certainly have longer-term positive implications for potential growth by raising investment and improving infrastructure. Companies we believe will benefit from increased sales to tourists and increased international awareness include: Alpargatas (Br: ALPA4), which produces Havaianas flip-flops; beverage company Ambev (Br: ABEV3); specialist engineer Mills (Br: MILS3) and Localiza Rent a Car (Br: RENT3)."

Fiona Manning, manager of Aberdeen Latin American Income (ALAI), sees the World Cup adding little to the Brazilian economy over the long term.

"The infrastructure spend on the tournament and the Olympic Games will only make up a fraction of the government's overall infrastructure investment programme," she says. "However, for us as stock-pickers, the state of the economy is of secondary importance: the most important thing is that businesses continue to be well run, generating strong cash flows that can be returned to shareholders. Brazil is home to some good-quality companies that have the potential to perform well over the long term."

Brian Dennehy, managing director of fund research site Dennehy Weller, says that Brazil is a young country with extraordinary resources, but the catalyst for share prices to explode upwards still seems some way off. He also highlights problems such as poor infrastructure, high inflation and the need for structural reforms, so he argues that you should only invest if you are a very patient monthly investor, building an exposure gradually over years until the long-term benefits of demographics and natural resources begin to be reflected in stock market prices.

If you are tempted to invest monthly, the investment trusts in the table below have the largest exposure to Brazil. Investment trusts on a discount can be a good way to get exposure to cheap assets, because you can benefit from both a re-rating of the underlying assets and the trust's share price.

Or for low-cost index exposure try IC Top 50 ETF HSBC MSCI Brazil ETF (HBRL).

Investment trusts with largest exposure to Brazil

Source: Association of Investment Companies, as at 30 April 2014, *Morningstar