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The following is a guest post by a fellow investor (mobile guru) whose interest lie within the mobile space, which is sure to be a big winner in the years ahead   Please make him feel welcomed as your feedback will most likely determine his future contributions:

Recently I spent a week in Sao Paulo, Brazil at an International Conference. Being my first trip to this part of the world I was filled with some interpretation given some of the news coming out of the region. In fact there was an attempt to kidnap a famous Formula 1 race car driver shortly before I arrived. Fortunately I received no such attention and I found the part of the city where I stayed to be very hospitable and had no issues. Now I am sure that there are other parts of the city that are not like this, but I have been in cities all around the world and the same can be said for them.
Brazil is the world’s fifth largest country, both by geographical area and by population. Their economy is the world’s eight largest by nominal GDP and the ninth largest by purchasing power. Brazil is one of the world’s fastest growing major economies.
What did I learn on my week long trip?

First for those who don’t know Brazil will be hosting the World Cup in 2014. They also will be hosting the Olympics in 2016. Two impressive venues coming to Brazil. In preparation they are already doing a lot of building. There was major construction going on all over the city and country. Buildings were either being redone or new buildings were going up. I also heard about some of the plans for stimulating their economy. Brazil electronics are very expensive as was seen on a pricing trip to Walmart. A 32” LCD TV was roughly $900 US dollars. About twice as high as the equivalent model at a Best Buy in the US. The Brazilians have already put in place agreements with a lot of the major LCD companies to set up manufacturing of LCD TVs in Brazil.

Now they are not going to build the LCD itself in Brazil, but all the rest of the components that make up the TV are. In this way they avoid the high tarrifs. This allows them to set up manufacturing of lower level items such as circuit boards and the TVs themselves without having to invest in LCD fabs. The real beauty of this strategy is by being able to cut the price of these TVs in half, it will stimulate a huge demand for LCD TVs within Brazil.

This sounds a lot like China’s “home appliances to the countryside,” program they started to keep their economy rolling. The key there China already had the plants in place to build the products they just needed more places to sell them. In Brazil they will need to build the infrastructure before they can start building products. It s is easy to see though how this is going to keep them among the fastest growing countries in the world.

What else did I learn?

Brazilian government controls everything. Does that also sound a lot like the Chinese government? If you are going to come set up a company here don’t bring your Discover card (which they won’t take) but bring a large bag of cash. It’s truly not what you know but who you know and how much you are willing to hand out. The numbers I heard to come set up a company in Brazil were in the neighborhood of $2M to get going.
One final note. The vast majority of people did not speak English but they were friendly and as helpful as they could be. It’s a great lesson on how we should all get along and how we should treat foreigners coming into our home country. In other words if you order goat (by accident), you eat goat and enjoy goat. Tastes a lot like beef, not chicken.

I am a long time investor with investment experience in the High Tech world, Biotechs and Precious metals. I blog on topics that are of interest to me and on ones that I hope will generate good discussion. I don’t consider myself an expert in any one area, but know a little about a lot of things. I believe as soon as we stop learning, we stop living. I can be found over on SeekingAlpha.

15 Responses to “Views From Brazil as an Investment”

  1. jeff pierce Says:

    I was recently talking with 2 brazillan students a good friend of mine was housing and I couldn’t believe the stories of crime. The were commenting on how “safe” Vancouver felt compared to their home city.

    It was common for them to travel in groups and when they were simply leaving a friends house at night they had to peek out and scan the area for any shady dealings before going to their car.

    They also said knife holdups were common. It was a bit of an eye opener for me.

  2. Jeremy Says:

    My wife is Brasilian (Carioca). I’ve visited Rio once a few years back, and plan on heading back down end of Feb. for Carnival.

    I never felt in danger at any time during my trip. Granted I had local knowledge of where to be and during what times of the day, but as you stick to where you belong and when I wouldn’t be overly concerned with the crime. I hear Sao Paulo is different with more violent crimes, but my experience in Rio was awesome. There are places in downtown Calgary where I fell much more afraid than I did in Brasil. In the news last year a Brasilian exchange student took a stray bullet in the head while wandering around Calgary – he is now permanently blind.

    As far as investing in Brasil – be careful the gov. changes the rules constantly adding foreign investors taxes at will. Also currency fluctuations need to be hedged for longer term holds.

    Gafisa is a current long term holder (homebuilder) as the gov. is promoting middle class home ownership.

    thanks for the post,

    Jeremy

    also, you couldn’t find a ticker I was asking about a while back – it’s Colossus Minerals CSI-T. Kind of topical, it’s an open pit gold mine in Basil – close to a old prolific mine from years gone buy

  3. jeff pierce Says:

    Jeremy,

    Forgive my ignorance…is it Brazil or Brasil?

    I’m sure crime just depends on the area and bad luck….

  4. jeff pierce Says:

    As far as CSI…great long term and would be a good buy near lower trendline. Even better around 7 imo.

    http://screencast.com/t/DP3h5k5Lmldh

  5. Jeremy Says:

    LOL – Brasilian’s spell it with an ‘s’, tho the English spelling is with a ‘z’ so you are correct.
    My wife is quite animate that we have it wrong so to please here I always use ‘s’ (even tho I’m wrong in proper English).
    If you look at a ‘Brazil’ Soccer jersey it is spelled ‘Brasil’

    To this day downtown Oakland is the scariest city I have ever been hands down!

  6. Jeremy Says:

    Thanks for the opinion on CSI.

    Sorry about the Vikings loss, but turfing Childress was the right thing to do. Maybe it’ll light a fire under them like it did for my Cowboys (even if a little too late for this year).

    J

  7. jeff pierce Says:

    I’ve already turned my attention towards next year…lol. Been a fan for 25yrs. I’ll watch, but I have no emotional attachment this year.

  8. Mobile Guru Says:

    Thanks for all the comments. I felt safe in the part of the city we were in but I can see other areas that might be rougher.

  9. Mobile Guru Says:

    Also a lifelong Bears fan. We can hate the Pack as a group.

  10. jeff pierce Says:

    For sure. I don’t mind the bears despite them being a rival, you have a great d-line. Just can’t stand Cutler….

  11. jeshudas Says:

    i think brazil is the right place to invest your money. sine the number of populations overthere is the best potency that must used to good destiny..great posting!

  12. Jeremy Says:

    Anyone but Philly is fine with me. Didn’t like Cutler with Denver, don’t mind him with Chicago. Now I can’t stand Orton – must be my anti Bronco bias.
    Go Bears it is, I guess.
    BBM just froze my BB WTF? You will have to tell me that funny RIMM story for sure.
    J

  13. Mobile Guru Says:

    Jeremy,

    Are you talking about these guys?

    http://finance.yahoo.com/q?s=CLSMF.PK&ql=0

    I have done several mine walk throughs and it is a little spooky a mile under the ground. Are they worth looking at? I will say I don’t pull too many punches when digging into miners. Bad pun intended.

  14. Jeremy Says:

    Yep that’s them, (I have no investment in the company as of yet)

    If you look through the corp presentation: http://www.colossusminerals.com/_resources/presentations/CSI_Corporate_Update_Oct_2010.pdf

    there are some wild pics of when the gold rush was on in Brasil (1980-1986). The massive open pit was mined by hand b/c of the cheap labor. There was no health or safety regs and lots of people died before a massive collapse and flooding which shut the mine down in 1986. B/N 1980 and 1998 Vale drilled over 200 holes in the area and it is know to hold some prolific concentrations of gold, platinum and palladium.

  15. Mobile Guru Says:

    Jeremy,

    It passes a lot of my preliminary tests for investment. The only downside is they still seem a few years from production and the $79M cash on hand is probably not going to get them there. Some of those grading were outrageous which if they get more drilling results like that someone may come buy them out.

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