Make Money in Latin America’s Powerhouse

Macio Mello is about as close to a “rock-star geologist” as you can get. In July 2009, his Brazilian oil- and gas-exploration company had a 277 million barrels of oil equivalent (BOE). In February of this year, thanks to Mellos’ expert geological mapping, it had a 6.6 billion BOE. Over the same period the market value of his company rose from roughly $80 million to $6 billion.

I spoke to Mello in his office suite overlooking Copacabana Beach in Rio de Janeiro, Brazil. Through the windows I could see locals jogging along the sand with their iPods. Body surfers darted through the waves. Sunbathers sat in deck chairs under red umbrellas.

Mello represents a new breed of Brazilian entrepreneur—a group that exudes confidence. A group not afraid to take on the world. Investors in his company’s IPO, Mello tells me, are already up 80% of their money. And there are even bigger gains to come.

Prior to setting up his own company, Mello spent 24 years working for Petrobras Brasileiro, the massive state-controlled oil company here in Brazil, which he recommends as a sound way to invest in the Brazilian offshore oil story. I’d agree.

Petrobras is listed on the New York Stock Exchange under the ticker PBR, as well as on the Brazilian exchange.

Petrobras is the world’s third-largest oil company by market capitalization. And it’s been the second-best performer in terms of its stock price over the last seven years.

I also met in Brazil with Luiz Galvao, Director of one of Brazil’s top investment banks.

It’s headquartered over 220 miles away from Rio in the heart of São Paulo’s business district. The view from the ninth-floor window here is of the city’s sprawling tower blocks, which stretch as far as the eye can see.

Galvao talked to me about another side of Brazil’s economy: Its consumer-growth story. More than 30 million Brazilians have left poverty and entered the middle class since former president Luiz Inácio Lula da Silva took office in 2003. That’s a lot of new customers for Brazil’s retail sector.

Galvao shared an important insight. Brazil is the emerging-market economy that’s easiest to understand for U.S. investors. It is a vast, resource-rich expanse—like America. Both countries have roughly the same sized populations.

And both economies share a mix of natural-resource wealth along with strong agriculture and consumer sectors.

One of the best ways to “buy Brazil” is to buy stocks in one of its banks. These will grow alongside Brazil’s consumers as more and more Brazilians deposit money with them and avail of their services.

I talk more about two well-run Brazilian banks (that are listed on the NYSE) on page 22 of the June issue of International Living magazine.

But there’s a better way to gain exposure to this sector…a dead easy way to buy into the big growth story here…that I also give full details on in the June issue.

You can subscribe to IL magazine and get instant access to the June issue and my Brazil article.

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