If you haven't followed developments in Brazil's economy over the past decade, you've missed one of the great success stories of our time.
Brazil is one of the so-called BRIC economies (Brazil, Russia, India and China), which are now developing to the point of actually having achieved something.
Brazil is my favorite among these top developing economies for a number of reasons. But before I go further, I should reveal a prejudice.
A few years ago, I remarried to a stunning young woman who was a recent Miss Brazil. Through her good graces, I have come to know Brazil better than an outsider typically would after visiting sporadically. Luckily, my wife is not only beautiful but also her family is well connected at the highest levels of Brazilian commerce and politics.
My wife tweaked an interest in Brazil.
I can report from first-hand experience that Brazil is a country where you can live exceedingly well.
Not only is it a great country in which to be rich, it has also become a great country in which to become rich. Brazil has more millionaires than India or Russia. In 2007, a new millionaire was minted in Brazil on average every five minutes of every business day.
Brazil and the U.S. Trade Places?
Ironically, while most Americans were looking the other way, Brazil flourished with the sort of sound fiscal and monetary policies that helped the U.S. attain prosperity.
For example, Brazil ran a comfortable budget surplus of 4% to 5% of GDP for the past four years. Brazilian inflation is under control. The country also runs annual trade surpluses.
And as the world's leading producer of biofuels, Brazil is energy independent.
Meanwhile, the U.S. has run staggering trade and budget deficits of the kind that led to hyperinflation in Brazil in the last century.
As we enter 2009, the U.S. budget deficit has swollen to a multi-trillion-dollar improvisation of bailouts and rescues sure to debase the dollar and downgrade the living standards of those solely dependent on dollar income.
Just as it once would have been folly to trust your savings to the Brazilian government, I believe it is now folly to trust your savings to the U.S. government.
In fact, I would not be surprised if the U.S. dollar as we know it ceases to exist in the next five years.
That's because the pattern in every country that fouls its currency through hyperinflation is to scrap the tarnished brand and issue a new currency after hyperinflation has made the old one repugnant to the people it betrayed.
Germany had six currencies in the twentieth century. It scrapped all but the euro in the wake of runaway inflation or collapse.
In fact, I would not be surprised if the U.S. dollar as we know it ceases to exist in the next five years.
To say the dollar is heading for oblivion may seem exaggerated or unpatriotic. But it would be rather thick of us to miss the point when the leading U.S. monetary authorities have been at pains to explain that it's their conscious policy to devalue the dollar.
I am sure that the great damage the concerted policy of inflation by the U.S. government would cause is an argument for diversifying cash reserves and currencies outside the U.S. Hence the attractiveness of Brazilian government bonds, which you can buy for the time being at a discount courtesy of hedge funds that have dumped Brazilian assets in a scramble to raise cash.
Hyperinflation once plagued Brazil. The source of this was a relentless expansion of the money supply. The Brazilian government used to finance its operations and development projects not out of taxes or by borrowing funds but simply by creating money.
In other words, the cause of Brazil's hyperinflation is the very policy Washington is now adopting.
As a result, from 1980 through 1997 the price level in Brazil increased by a factor of one trillion. Per capita real income growth ceased during this period.
Almost every Brazilian adult - even my wife, who was born in 1980 - has unhappy memories of this period. And Brazilians have no wish to return to policies that destroyed their economy.
Remember, the Germans became the foremost foes of inflation in Europe in the twentieth century after suffering grievously with hyperinflation.
This is one reason why the Brazilian real is a better bet going forward than the dollar. No people who have been through hyperinflation want to repeat the experience.
Given these prospects, the crisis has handed us an opportunity. Buy Brazil... Sell the dollar.
Happy Investing,
James Dale Davidson
for The Daily Reckoning Australia
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Comment by Ross on 29 April 2009:
I have a Brazilian girlfriend but she was born in 1969 James Dale Davidson and so it seems that would give you some sort of bragging right.
But you obviously don't know your way around the Brazilian elite because the word you will find being used continuously there is caution. Try asking those in Brazilian agriculture what the crop financing situation is and you will hear of impending disaster. Then think of the 200m mouths to feed and the no. of those living at subsistence levels. As for those you hang out with ... we can only guess.
And the currency that was the rock from which the Euro was built was the DM. Hardly a failure.
Comment by Pete on 29 April 2009:
Touche' Ross! Good calls there
Comment by Greg Atkinson on 29 April 2009:
"No people who have been through hyperinflation want to repeat the experience."...and you reckon people who haven't want to give it a try? Do you think people gather around the campfire at night and say.."hey, we haven't tried hyperinflation, so let's give it a whirl!"
Thanks for bragging about your wife...that was so interesting...not.
Comment by B.Money on 30 April 2009:
I can't speak on hyperinflation and we may not want to get involved with that (god, I hope not!) but as a collective culture, nothing stopped us from racking up massive debts of all kinds on all levels. As it was said once, "People get what they deserve." I hope hyperinflation is NOT one of those things.
Comment by Hoss on 30 April 2009:
This article reminds me of that joke where a guy goes to his doctor and tells him how he slept with blonde twins the night before. When the doctors asks "why are you telling me this?" the reply is "are you kidding!!? I'm telling everyone!!"
Comment by Tony Hansen on 30 April 2009:
B.Money,
If people do get what they want... then what will the over-extended consumers be getting?( and the over-extended governments)
Comment by Alex on 1 May 2009:
You have no idea, your opening paragraphs summarise exactly what is wrong with Brazil.
Sure, there are plenty of opportunities if you know the right people or are familiar with the use of Jeitinho. But there is a bigger picture to consider:
A small coterie of mates weilding an unfair influence over decision makers in a society where the poor are kept distracted by soapies, booze and beauty; i.e. the superficial.
Did you think to consider the real reasons why there are so many millionaires?
Because there are a lot of very poor people.
I guess you didn't walk around Alemão or Rocha,assuming you visited Rio.
FYI: ( From http://expatbrazil.wordpress.com/2008/05/15/weath-distribution-in-brazil/ )
"The Instituto de Pesquisa Econômica Aplicada (IPEA) of the Brazilian Government in a recent study stated that in São Paulo the wealthiest 10% had 73.4% of while in Rio they retained 62.9% and Salvador 67%.
Near the end of the 1800s, the richest 10% in Rio had 68% of the wealth. Not much progress"
Comment by Hasan Soyer on 1 May 2009:
I live in a country (Turkey) which had 200% inflation 10-12 years ago. Believe me, you can make a lot of money in a hyper inflation. Also you can make more more after this inflation. So no worry about inflation. More important is the political stability. In Turkey we have political stability now for 6-7 years. And this stability helps more people to get richer. I would say invest in Turkey, not in Brazil.
Pingback by Como ficar rico no Brasil « Talking Point on 1 May 2009:
[...] Vou traduzir a maioria do artigo (em azul) e para voce que prefere no original aqui vai o link. [...]
Comment by Reny on 3 May 2009:
I am Brazilian and I agree with Alex.
First, the booze and the obsession with beauty takes the attention off what what it is important: education and a more just social distribution.
Second: what is the point of telling you married the miss Brazil? Really it just points out the lack of depth of your article...
I dream of the day Brazilians have a better income distribution, focus on better education TO ALL and pay less attention to the external beauty, cause that goes with the time too... the wisdom stays...
Comment by Marcus on 4 May 2009:
So you have a hot wife but can you deliver in bed? How long before she strays? Surely the daily reckoning can do better than this sort of rubbish.
Comment by rodrigo on 13 November 2009:
Are you out of your mind? I am so sorry I just read it now, bc otherwise I could be laughing since april.
Braziliam taxes give 720 bilions of the local currency for the government. The health budget is 50 bilions. Every year 260 bilions just vanish from the government reserves, and nobody knows to where... should I continue?
Comment by Lucas on 24 March 2010:
I'm Brazilian...o I live in US for about 6 years and all a gotta say is that just like me millions of Brazilians came here to get"Dollar" that is almost the double value of the Brazilian currency. Than we go back.
Brazil doesn't really give you many options about becoming rich...but if you want to live a "good life" its easy.
I don't agree with Alex because if you look at the poor places...US would be the same thing...I live in NJ and people say that here is really nice but if a walk 2 minutes i see gangs dealing drugs.
Just like here and anywhere in the world there is poor people.
even knowing that Brazil got more poor people than here...the people here is nothing compared to the people there.(not to all, but to most)
Comment by nv on 25 March 2010:
What an embarassing total bullshit article. Delete it DR.
Comment by Mateus on 4 November 2010:
Total lack of knowledge from everyone. Would be a good call to delete the post... too much unnecessary information.
Comment by Ned S on 4 November 2010:
I'd forgotten about this article!!!
- My missus face would make most pig dogs that look prettier than me howl in terror 'n run away? But she's a good girl regardless ... How about your's mate? 
Whanker! 
Comment by Biker on 4 November 2010:
Jeez, Ned... You accelerate where most immortals fear to navigate!~
Comment by Ned S on 4 November 2010:
I have a fundamental (albeit sometimes 'perverse'?) fondness for truth perhaps Biker? Not enough of it around these days for mine perhaps?
But shan't tell DRA readers what my ma in law looks like - Doubt some of the more sensitive souls could cope? But having said same, I'll be more than happy if my missus ages to be ever more like her mum - I've gambled on it a bit even in some ways I guess?
PS: Neither my missus nor her mum get to read my blogs!
Comment by Biker on 4 November 2010:
When it comes to cutting remarks, I value the family jewels far too much, mate! Mothers-in-Law? Mine is a doll.
"Neither my missus nor her mum get to read my blogs!
"
Nothing is sacred, Ned. I'd get some iron shorts, son!
Comment by Ned S on 4 November 2010:
Yes, short fat balding stupid old man found murdered and mutilated in his bed after his missus and mum in law read his blogs. Feminists worldwide unite to proclaim the righteousness and indeed, absolute necessity of the deed!
Jeez, I hope they really ARE both good girls?
Comment by Ned S on 4 November 2010:
Gideon Gono has indicated his country will start issuing it's own currency again I hear - As the USD is perceived internationally to be fundamentally untrustworthy?
Comment by Biker on 5 November 2010:
"...short fat balding stupid old man found murdered and mutilated in his bed after his missus and mum in law read his blogs..."
You've missed yer calling, with your gift of imagery, mate!
Ironic if Gono truly is reverting to the Zedbuck! What a blow to US prestige. As Bernanke's mentor, he probably wanted to see it Gono further down the gurgler. (PUNishment for upsetting feministas worldwide, Ned!~
)
Comment by Ned S on 5 November 2010:
Yes, given that I've never been much good at this investing stuff, but just could have a bit of the Blarney Stone in me blood Biker, I sometimes suspect that working as an FA could have been my calling - Until I recall that I only really enjoy BSing in a fun way; As opposed to a predatory one.
Grow up Ned - Kill, kill, kill - It is necessary son! Yeh, whatever ... Ho hum ...
Comment by Ned S on 5 November 2010:
I was kidding about Gono - But wouldn't blame him. Which on a somewhat more serious note, makes me wonder if the BRICs just might fight back against the US QE at some time? And even if they really can???
Comment by Biker on 5 November 2010:
Well, if the DRA scenario is even close to correct, we can expect to see two greenbacks for every Ozbuck, Ned!
It will be interesting to see if/whether the Republicans and Democrats can cease hostilities temporarily to save their dollar. A major simplification, given the circumstances, but a little akin to a bar brawl on a sinking Titanic.
Comment by alex on 11 April 2011:
i am brazilian but i dont live there cos is unsafe and is not easy ,they say that brazil is growing but for rich people ,my history is this ,i was born poor and been working all my life , then i sow that there if you are poor u r fuck up . then i leaft to uk and i found job an good wages then now in brazil i am good high class ,then now is easy because i bought houses ,apart, there and it was cheap now that i've got some money is easy cos is huge the gap between rich and poor and is impossible to get rich in brazil just working legally ,the real is you r rich is easy otherwise is dificult and they dont know what is being midlle class ciao
Comment by Dan on 11 April 2011:
So as Alex points out, the importance of a middle class is it proves there is a possible pathway for the poor man to become rich.
Comment by Nicholas on 30 April 2011:
Facts.
Brazil is more stable than ever,politically and economically.
Brazil's poor is in decline.
Brazil's middle class is rising (and will continue to rise for a long time because it has a long way to go)
Brazil's millionairs and billionairs are rising, faster than ever.
Brazil is a net creditor, not a debtor (Like the US, largest debtor in the world and we all know they can't and won't pay it off)
Brazil (include China and Russia) are dumping their US treasury bills.
Brazil is now doing more business with other nations without using the dollar (At the BRIC summit, it was clear, dump the dollar)
Brazil has a long way to go, and is on the right path.
comments from blowhards above, (most of them are foreigners or Brazilians who live in the US or wherever in Europe) have no clue what they are talking about, only know how to bash with outdated information and have no idea how the so called west (whatever that is, because Brazil is a western nation with a western culture) is in DECLINE (Nial Ferguson)
People, do your homework before you submit nonsense here. Now, I do not claim that Brazil is ALICE in Wonderland, it isn't. But the fact is, it's doing much better, it has a long way to go and James Dale Davidson knows exactly what he's talking about. Brazilians know better how to deal with HYPERINFLATION. People in the so called developed nations, don't (because they are spoiled, lazy to learn history and plain dumb by playing facebook games that rippes them off).Hyperinflation isn't the end of the world, but if you don't know how to react, the FEAR will conquer your life and what will destroy you. Exactly what happened in an nation that doesn't exist anymore and witnessed extreme hyperinflation..(Former Yugoslavia).
Comment by Mazzini on 21 October 2011:
I think Brazil is becoming really developed and rich! I'm 26 years old and I move in to Brazil in 2010 and now I'm living in Goiania-Brazil. I'm doing bussines here, I have a "gelateria" actually two now
and next year I pretend to have another one. Nobody knews a really Italian Ice cream in that city and now everybody knows!!! I love it I'm making money so quikly and I couldn't do it in Italy because the country and the cities there is not like here,SO BIG!!! Brazil has a large economic potencial, because here they have a lot of people to buy and there is a lot of new good things to introduce in this market that they don't know... I know a lot of people that is coming to make money in this country... We are going to show to Brazilians how to make money in their country because they don't know!
I agree that there is a lot of problems there yet. But I think it won't be a problem in the future because the things is changing. I saw a lot of people buying your first home or apartment by government programs like "My Home is My Life" the country is under construction!!! I like here and I'm making money quikly I pretend to buy a big home with a large swimming pool in a condominium and enjoy the sun all year long travelling around this country that is really very beautiful!
Comment by Iohanan on 15 November 2011:
Hi,I'm brazilian too and I know how's living here.
Basicly 70% of brazilian people are very poor (earning less than 300 dollars a month),29% in the middle class (1.000 dollars a month, so so)
AND JUST about 2% are rich: polititions, soccer players and business winners.
You can't walk at night, sometimes it's also dangerous in some places 24h a day.
In july, 2h p.m., one guy tryied to kill me with a knife, in the downtown.
That's the country with the biggest percent of people killed!
Public health is bad, with people dying every day on hospital lines.
Kids can drink, the drinking age is 18, but nobody asks your I.D.
I've been to Los Angeles, CA, and it's like a paradise to me.
In Brazil, 14 years old are allowed to have sex with adults, if they agree.
Drug users don't be arrested.
Don't come here!