Brazilian automakers have been struggling recently and are facing the toughest period of time since 1999. The industry registered the sharpest slowdown since then.
“It looks like the market is in for a difficult time until 2016,” said Koji Kondo, Toyota Motor Corp’s CEO in Brazil. Labor costs, rising taxes and infrastructure are the crucial and persistent bottlenecks. “It’s hard for Brazil’s economic conditions to recover in the short term.” he added.
Only this year the sales of cars and light trucks have fallen 9% so far on a year to year basis. Demand slows down due to tighter credit and very weak consumer confidence. Local carmakers have created a glut of inventory.
The auto industry contributes a quarter of Brazil’s industrial production.
Investors can access the Brazilian stock market via the flagship iShares MSCI Brazil ETF (EWZ) which is more than $5bn in size. Other smaller, more niche ETFs, offer exposure to more specific themes like:
- Small Caps – Market Vectors Brazil Small-Cap ETF (BRF) or iShares MSCI Brazil Small Cap Index Fund (EWZS)
- Infrastructure – EGShares Brazil Infrastructure (BRXX)
- Consumer – Global X Brazil Consumer ETF (BRAQ)
Source: Reuters, ETF Database
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