Trading Stocks and Buying Bonds in Brazil

Last week I have made a project at my university regarding high yield corporate bonds and discovered that Brazil has the highest real interest rate of the world. Being curious I decided to look further into the Brazilian Stocks and Bonds Market.

When I heard about Brazil before I often thought of a devaluate currency, an economy in recession and an instable financial market. After rating company Moody’s downgraded the Brazilian economy to BB- in 1989 the consequences were far-reaching. However in the last decade the situation has dramatically changed and today Brazil is the continent’s strongest economy and is becoming one of the most important economies in the world. The Brazilian currency Real is the strongest currency compared to the dollar for three years in a row and the Brazilian Stock Market rallied in 2009 almost 90%.

On the biggest Brazilian Stock Exchange Bovespa investors can trade stocks, fonds and derivatives while the BM&F trades currency futures. The exchanges have been merged some months ago into BM&FBOVESPA.

The spectrum of investment products is manifold and very well and closely regulated by the CVM (Comissao de Valores Mobiliarios).

As a foreign investor I can basically do the same investments as a local investor, however I would have to appoint a Brazilian representative to be the responsible for my accounting. As far as taxation is concerned foreign investors are exempted from tax unless they are resident in an offshore jurisdiction.