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The 2014 World Cup means big business for Brazilian investments, employment and the economy generally. Latest figures point to economic growth in excess of US$70 billion.

As well as one of the world’s most important sporting festivals, the World Cup is a huge money-making machine. 2014 Brazil will be no exception as can be seen from the expected earnings just announced by the Brazilian Ministry of Sport.

Big Numbers

Overall, the Brazilian economy is predicted to grow by US$70 billion. This growth will mostly come from public and private investment in Brazil in areas such as infrastructure and services. Consumption by visitors to the World Cup is also expected to bring a major boost to Brazil’s already buoyant economy.

Employment will see huge growth over the next three years as investment in Brazil builds infrastructure and stadiums for the matches. Some 330,000 permanent jobs are expected to be created throughout Brazil where unemployment is currently at a record low of 6.2%. This job creation will inevitably lead to more middle class wealth and in turn, generate further income for other sectors of the economy.

Tourism will be one of the sectors most benefitted by the football tournament. Over 600,000 foreigners will travel to Brazil to watch the games, bolstering the fast-growing Brazilian tourist industry. Foreign visitors will generate US$2.5 billion in extra income for Brazil.

Along with earnings from foreign visitors, the Brazilians themselves will be adding to the country’s coffers when they travel around Brazil to see the games. The Ministry of Sport estimates that the World Cup will generate US$3.5 billion in earnings from the 3 million Brazilians who go along to watch.

Adding up the Investment

Brazil, along with preparations for the World Cup and Olympics, is also making huge investment in real estate and hydropower. The 2 million homes being built in the Minha Casa Minha Vida programme represent the biggest Brazilian property investment ever. These plus two of the world’s largest hydropower plants do not leave a lot of leeway for more construction financed by public investment in Brazil.

Costs for materials and labour have risen sharply since Brazil was awarded the World Cup and the budgets for several stadiums are now considerably higher. The Sports Minister believes the construction of Brazil’s new stadiums will come out at around US$7,000 a seat, 17% higher than originally expected.

Despite the additional costs – common to preparations for all major sporting events – the overall figures look hugely positive to Brazil, set to reap huge benefits from the 2014 World Cup. Without a doubt, the next three years are full of opportunity for Brazil and Brazilian investment.

About Obelisk International: Obelisk International offers select investment opportunities in Brazil in a range of sectors such as residential real estate, construction and social housing. Obelisk gives investors security, profitability and diversity thanks to a combination of close attention to our clients’ investment requirements and high quality in-house research and analysis.

When investors think of emerging markets, they often think of the BRIC countries of Brazil, India, Russia, and China. The nation of Chile, however, has a lot more going towards it than the recent catastrophe of trapped miners. Chile is an under looked developing economy that has grown to become one of the most stable and prosperous economies in Latin America. With a stable free market friendly government, its position as one of the world’s top mining sectors, low inflation, and high economic growth, Chile is an emerging market that will outperform the indexes of the developed world and possibly the some of the BRIC countries

First the Chilean government structure is stable and very friendly to investors. According the Heritage Foundation index of economic freedom, Chile is most economically free country in South America. Chile is also noted for having the highest GDP per capita and lowest corruption rates in Latin America. For investors, stability and consumer purchasing power allows business to grow and consumers to add to the economy beyond living expenses. Unlike China and India which have instability due to autocratic regimes or inter-ethnic violence, Chile is a stable democracy with no strife. With a low debt to GDP ratio 6.1%, and a privatized social security system, neither government spending nor future entitlement liabilities will put an anchor to growth as seen in Western nations and Japan. Also, Chile has favorable investment law that does not distinguish foreign investors from Chilean citizens. Being a stable society with lack of government burden and openness to free trade and foreign investment are policy strengths that bolster Chile above some its emerging market competitors for investing opportunities.

Chile’s high growth and production and exporting of hard assets such as copper also make it an attractive investment. As the world’s largest producer of copper, Chile has a strong mining sector that provides real value to the nation’s economy. Also with BRIC countries and the West heavily reinvesting in infrastructure, the need for copper wiring should boost the demand and price for copper to the benefit of Chile. Other important exports to Chile include gold, wine, and forestry products. Chile also has the most developed financial system in Latin America spurred by private pension system capital that needs to be invested. Overall, Chile is a leading producer of minerals in the globe and has plenty of growth opportunity in exporting commodities while continuing to expand its rapidly growing financial industry.

The best way for investors to invest in the Chilean economy is to buy Chilean ETFs. For those who lack the time and resources to research the competitive balance of Chilean firms against each other and to translate Spanish financial statements, these ETFs provide the best way to capitalize on the growth of Chilean business as a whole. The top Chilean ETFs available are the Aberdeen Chilean Fund (CH) and the iShares Chile Index (ECH). I personally recommend the Aberdeen Fund because it pays a much higher dividend yield (6.3% vs. 0.95%) and even with its recent acceleration in price is still trading at a bargain with a P/E ratio if 7.5.

Overall, Chile is possibly the most neglected emerging market with tremendous opportunity to growth in the next day. Free market policies, the low probability of civil disorder, and increasing commodity prices should propel the Chilean economy along with its South American neighbor Brazil as the top two emerging markets on the globe.

If you look at the 10 year performance of Emerging Markets and compare that to the 10 year performance of the S&P you might think it would be crazy to be invested in the U.S. market. However, when you look a bit closer you will see that even though emerging markets out-perform on the upside they also get hit much harder on the down side when a crisis comes along.

Had you invested in the first Emerging Markets ETF (EEM) on the first day of trading in 2003 you would’ve experienced a 350% gain in the first 5 1/2 years but then you would’ve lost over 85% of that gain the following year during the credit crunch. So despite the fact that emerging markets tend to strongly out-perform developed markets during good times, you may not want to have all your eggs in that basket.

Why such volatility? It’s because there are two strong dynamics at work. First, emerging markets have a tremendous amount of growth potential and since their economies are small they can grow fast when the conditions are favorable. This is also true for small cap stocks, it’s much easier for a $10 Million company to double in size than a $100 Billion company to double. However, when times are challenging, such as during the world wide credit crunch, the odds of small emerging countries (& small companies) failing is much higher than a developed country. When you combine the enormous growth potential with a high degree of risk, result is a very volatile asset.

This is one reason why ETFs have become so popular. It allows you to invest in an entire country or basket of countries with a single stock purchase, diversifying your risk. When looking at the emerging markets you will want to look at the various ETF choices and see how their past performance compare to each other. Look at how they performed in 2008 as well as how they did in the good times. In the end, you will want to allocate a percentage of your portfolio to this area of investing but be careful not to take on too much risk. The goal is to make a good return over time while still being able to sleep well at night.

Emerging markets have presented a tremendous opportunity for investors, both small at the retail level and large at the institutional level. Both have huge populations and with a growing middle class, which will translate into demand at some point in the future. But until then, both offer great manufacturing costs, allowing developed nations to find great value in what these two countries have to offer. The result? Tremendous wealth is being pumped into these markets

But not all emerging markets are equal. In fact, India and China are extremely different from economic points of view and also offer different benefits to investors. Here are some of the key differences investors should consider before making a decision over which emerging market they want to invest in.

– Earning population base. When it comes to developing a nation for the long-term, the size of its income-earning population base is important, as an older population base will be more draining on that nation’s economy. In the case of India vs. China, the Indian economy will be better able to withstand an aging population. Over the next decade, China is expected to add 36 million workers to its economy whereas India is expected to add 136 million to its work force.

– Growth rates. One of the fundamental ways that an investor can determine how well a given economy has done is to look back at its GDP growth rates. Over the past 20 years, India’s Gross Domestic Product (GDP) growth rates have only exceed China’s a total 3 times, and even then they were by relatively narrow margins. In terms of historic GDP growth rates, China seems to have the upper hand. In addition to historic rates of growth, China’s economy is closely monitored by its Government, allowing applicable force and control to be applied to keep the economy in check. To some, this involvement could be seen as a pitfall, however China’s economic history speaks for itself and it considered a good thing.

– References. Like anything, it helps to see what others think about the economy in question. And what better reference to have in your corner than a billionaire investor like Warren Buffett. In this case, Warren Buffett has publicly made reference to opportunities in China. This certainly provides a bit of an advantage in China’s court.

These are just two of the things that investors should be looking at if they are wondering whether to invest in India or China. While both economies have a tremendous amount of value to offer investors over the long term, many investors may find that they should invest in one over the other. And if this is the case, the above provides a good starting point.