This year marked a raucous end to one of the greatest economic booms in the last 100 years.
It happened in June, when more than 1 million protesters took to the streets in one of their country's largest cities.
At the time, they raised ire about steep increases in crime, inflation, and political corruption. They stomped the pavement over ill-gotten decisions to spend taxpayer money on posh football stadiums for the World Cup instead of schools, hospitals, and much-needed infrastructure.
This was the loudest uproar over the country's stumbling economy.
As consumption slows, consumer prices increase, and taxpayers continue to protest, we see an important lesson unfold from this country about how to invest in emerging markets.
In fact, it highlights the one simple strategy that can make you a lot of money…
Investing in Emerging Markets: Brazil's Rise and Fall
The protest I described took place in Brazil, which for nearly two decades enjoyed an economy that was nothing short of miraculous.
After an abrupt end to runaway inflation in 1994, a new currency, and liberalized trade laws, Brazil witnessed a massive influx of credit and consumption driven by a boom in commodity prices. It led to more than 25 million Brazilians rising from poverty.
The nation thrived under President Luiz Inácio Lula da Silva in the early 2000s, survived the recent global economic downturn with barely a scratch, and grew by 7.5% in 2010, the highest growth rate in 25 years.
Brazil shined as one of the most important emerging economies, coined in the BRIC acronym by a Goldman Sachs economist in 2001 with Russia, India, and China.
The nation's rise was so meteoric that the world united to award it the 2014 World Cup and the 2016 Olympics, the first South American nation to host the latter. The two events would showcase Brazil's arrival on the global economic stage.
But today, in just two short years, the economy is struggling. Brazil's stock market has fallen by 23% since Jan. 1, 2011. Investor capital is fleeing the country.
Slammed by rising inflation, a Byzantine tax code, and an inability to provide essential services to its people, Brazil became a victim of its own success and is now reeling from its boom years.
In 2012, the Brazilian economy grew at an anemic 0.9%. This year, its stock market is down more than 15%. Many have said that the boom years are dead, and now the country will suffer from its inability to reform the problems that plague its economy the most.
What's the problem – and what does it teach us about how to invest in emerging markets?
About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, and consultant with degrees from Northwestern, Johns Hopkins, Purdue, and Indiana University. He is a seasoned financial and political risk analyst, with a focus on stocks, hedge funds, private equity, blockchain, and housing policy. He has conducted risk assessment projects for clients in 27 countries, and consulted on policy and financial operations for some of the nation's largest financial institutions, including a $1.5 trillion credit fund, a $43 billion credit and auto loan giant, as well as two of the largest Wall Street banks by assets under management.
Garrett joined Money Map Press as an economist and researcher in 2011, specializing in alternative strategies with an emphasis on fundamental and technical analysis.