As both populations and economies continue to expand in the emerging world, improving infrastructure will remain a high priority. Overall, analysts expect trillions to be spent by both developed and developing market nations over the next decades, in order to do so. Brazil offers an interesting opportunity to play this infrastructure spending. Hosting both the 2014 World Cup and the 2016 Olympics, the nation has gone on a building binge. Upgrading its airports, roads, electrical grid and public facilities, the nation continues to pump major dollar amounts into the preparations. Despite this, there is still much work to be done and investors have plenty of prospects to profit.

Investopedia Markets: Explore the best one-stop source for financial news, quotes and insights.


A Huge Amount of Spending
As Brazil prepares for the two major world events, the nation is throwing major amounts at improving its economic backbone. Last year, South Africa spent about $4 billion on preparations for the World Cup. Brazil's official estimates already stand near $13 billion and include a variety of transportation projects, stadium construction and airport upgrades. However, officials in Rio de Janeiro estimate that as much as $90 billion in infrastructure investments will occur over the next three years and most private sector analysts expect the total bill for the two events to be closer to $60 billion.

The sporting events are just the beginning to Brazil's infrastructure build-out. Last year, outgoing president Luiz Inacio Lula da Silva, launched a $900 billion infrastructure plan which focused on improving transportation, electrical supply and the nation's ports. Similarly, current President Dilma Rousseff, has also pledged to improve infrastructure via massive public works plans.

Brazil is also seeing increased spending from an outside source: China. Beijing has boosted its investment in the country as a way to help move the natural resources it craves, quicker and easier through Brazil. China's biggest electrical utility paid $1.7 billion for seven Brazilian electricity transmission companies and is the major backer of an ambitious $19 billion "bullet" train line, between Sao Paulo and Rio de Janeiro.

The nation will certainly need those dollar amounts. France, which is one-thirteenth the size of Brazil, has a larger railroad network. Despite its huge size, Brazil only has around one million miles of roadways, but only 12% of them are paved. Overall, a survey conducted at the 2009/2010 World Economic Forum in Geneva, ranked Brazilian infrastructure at a 3.4 for its quality, which was below the world average of 4.1. The major take-away from the report was that "The quality of Brazil's infrastructure ranks among the worst in the world."

Buying in
For investors, the long term opportunities for Brazil are great. Funds like iShares MSCI Brazil (NYSE:EWZ) have become popular investments for those looking to cash in on that potential. While these broad-based funds will certainly see their prices rise as improvements to infrastructure take hold, investors looking to play the build-out directly, do have some choices.

For those looking for a one-stop-shop, the EGShares Brazil Infrastructure (NASDAQ:BRXX) ETF follows 30 different Brazilian firms across a variety of sectors, including metals and mining, utilities, and transportation. Top holdings include Ultrapar Holdings (NYSE:UGP) and telecom Vivo (NYSE:VIV). The fund is currently trading near its 52-week low and 0.85% in expenses.

Steel forms the backbone of modern infrastructure and producers in Brazil are poised to benefit from the build-out. Both Companhia Siderurgica Nacional (NYSE:SID) and Gerdau S.A. (NYSE:GGB), which make a variety of girders, rebar and other structural steel products, are choices in the sector. In addition, mega iron ore producer Vale (NASDAQ:VALE) offers a compelling buy.

Finally, improvements to the electrical grid are key. The dual utilities of CPFL Energia (NYSE:CPL) and CEMIG (NYSE:CIG) have been expanding their grid networks and offer investors juicy dividend yields of 5.7% and 7.3%, respectively.

The Bottom Line
With both the World Cup and the Olympics in Brazil's not so distant future, the nation is undergoing a major infrastructure revival. The country plans to spend billions on improvements to its electrical grid, transportation network and port systems. For investors, this spending represents a great opportunity and the previous stocks along with Centrais Electricas Brasileiras (NYSE:EBR) make ideal picks. (For additional reading, take a look at Investing In Brazil 101.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Mutual Funds & ETFs

    ETF Analysis: ProShares UltraPro Short S&P500

    Find out information about the ProShares UltraPro Short S&P 500 exchange-traded fund, and learn detailed analysis of its characteristics and suitability.
  2. Mutual Funds & ETFs

    ETF Analysis: SPDR Barclays Investment Grd Fl Rt

    Learn more about the SPDR Barclays Investment Grade Floating Rate Fund, which tracks an index of highly rated floating debt securities.
  3. Mutual Funds & ETFs

    ETF Analysis: ALPS Medical Breakthroughs

    Learn more about a unique and innovative exchange-traded fund (ETF) in the biotechnology industry: the ALPS Medical Breakthroughs Fund.
  4. Mutual Funds & ETFs

    ETF Analysis: iShares US Healthcare

    Learn about the iShares U.S. Healthcare exchange-traded fund, which invests in a wide range of health care providers, hospitals and home care facilities.
  5. Mutual Funds & ETFs

    Top 5 Japan Mutual Funds

    Discover five of the most popular and best-performing mutual funds offering investors direct exposure to equities of Japanese companies.
  6. Mutual Funds & ETFs

    ETF Analysis: BioShares Biotechnology Clinical Trials

    Learn more about the BioShares Biotechnology Clinical Trials Fund, a new and innovative fund focusing on breakthroughs in the health industry.
  7. Mutual Funds & ETFs

    ETF Analysis: First Trust NYSE Arca Biotech

    Learn more about the First Trust NYSE Arca Biotechnology Fund, a highly rated exchange-traded fund in the biotech space.
  8. Mutual Funds & ETFs

    ETF Analysis: PowerShares KBW Bank

    Consider an examination and analysis of the PowerShares KBW Bank Portfolio ETF, considered one of the primary financial sector ETFs.
  9. Chart Advisor

    3 Ways to Trade the Rising Volatility

    With volatility increasing in the markets, many are turning to these three volatility-capturing exchange-traded products.
  10. Mutual Funds & ETFs

    ETF Analysis: iShares US Basic Materials

    Learn about the iShares US Basic Materials exchange-traded fund, which invests in the equities of chemicals, metals and industrial gas companies.
RELATED TERMS
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets ...
  3. Exchange-Traded Mutual Funds (ETMF)

    Investopedia explains the definition of exchange-traded mutual ...
  4. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  5. Sucker Yield

    When an investor has essentially risked all of his capital for ...
  6. Lion economies

    A nickname given to Africa's growing economies.
RELATED FAQS
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>
  5. Does index trading increase market vulnerability?

    The rise of index trading may increase the overall vulnerability of the stock market due to increased correlations between ... Read Full Answer >>
  6. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!