... will only ever be unlocked if the country holds together ???
Did you really mean "ever" w/o intending to be grossly melodramatic? If so, I'll challenge you on that point. There are a multitude of reasons why Brazil, as Mexico before it, will hold together. Likewise, there are very sound reasons to distinguish (favorably) TBR/H with the absolute very best of Russian equities that are failing. The distinctions lie at all of the (1) hemispheric, (2) country, and (3) company-specific levels.
Substantial risk is discounted into the price at 75. There remains currency risk and, to some extent, political risk and, certainly, heavy emotional/sentiment/technical short term risk from here. But, don't discount the legitimate and irreversible institutional,structural, and fiscal policy reforms in Brazil and other Mercosur countries. Don't discount the U.S. interest in preserving and protecting the reforms and economies in this hemisphere either. Rubin and Camdessus will be meeting this week in DC with LA finance ministers. There will be public statements of support as well as strategic safety valves planned.
Given the truth of the preceding points, growth and social stability prospects in Brazil are extraordinary on a relative global market basis. If you are calling for a sustained global deflationary cycle that is one thing. But unless you subscribe to the view that what is happening presently in the global economy does amount to a paradigm shift away from equities as the preferred investment vehicle to fuel global economic development/growth, then it would be extremely difficult to argue that Brazilian equities do not promise superior relative strength among the global equity markets. And if that is true then the enterprises bundled within TBR/H will be both a power source for that growth potential at the same time they will be the key equity beneficiaries of the growth. If you want market and captains of industry confirmation of this thesis, look to the auction and look to the stream of releases dj and sf have linked to this thread regarding corporate confidence in the Brazilian marketplace for everything from financial services to desktop computers.
Is TBR a riskless investment here? Clearly it is not. Does it have a superior risk/return profile? Unless you line up with a significantly opposite view of the scenario described above, it does have superior return/risk prospects. I think it is an issue of When, not If. |
