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Latin America funds

I'm starting to do some research on Latin American funds -- particularly interested in Brazil as the market has taken a substantial hit over the last 5 years. I'd greatly appreciate it if folks on the board could steer me to: 1) good funds in the category that I can read up on more. 2) Good research that I can read on the Latin American market as a whole. This will be for just a small portion of my funds and I understand that there is risk here. Would value your thoughts. thanks.


  • Hi MikeW
    I've been looking at them for a while also, and just too many problems south of the border for me....Brazil, most notably.....from politics to oil.....just not much there especially no QE (LOL).
    God bless.
    the Pudd
  • edited February 2015
    I own Cielo (CIOXY), which is the largest payment processor (it was Visa Brazil, now it is a processor across multiple cards) in Brazil/Latin America.

    In the last 6 months, the stock in Brazil is flat, the US ADR shares are -20% due to currency fluctuations (the Brazilian real has gotten wrecked.)

    I've traded it before, but recently decided to make it a long-term position.

    The only other Brazil investment that I've thought about is AmBev (ABEV) (aka Budweiser Latin America and the distributor for Pepsi in LatAm.)

    Both companies offer nice dividends, but are more than a little volatile. If the real stops going down and actually heads the other way from something like a 10-year low, the shares would seen some benefit from the currency move.

    Femsa in Mexico is also interesting with stakes in Coca-Cola Femsa and giant convenience store chain Oxxo (the largest and most profitable convenience store chain in Latin America) and a large stake in Heineken.

    I wouldn't own a fund, but the only fund I'd consider if I was would probably be T Rowe Latin America.
  • Thanks so much for the detailed comments Scott and Pudd. I really appreciate it. Can I ask your primary reasons for deciding to make Cielo a long term position? It sounds intriguing. Can you steer me towards any research on the stock? Finally, would you consider investing in EWZ?
  • TedTed
    edited February 2015
    @MikeW: The average returns for Latin American Funds are as follows,
    YTD -(3.34)%
    1yr. -(8.16)%
    3yr. -(11.08)
    5yr. -(3.89)%
    YTD: -(1.64)%
    1yr. -(6.19)%
    3yr. -(12.51)
    5yr. - (5.18)%
    YTD: -(4.16)%
    1yr. -(10.72)%
    3yr. - 17.59)%
    5yr. -(9.31)%
    YTD: + 2.06%
    1yr. + 16.87%
    3yr. +18.11%
    5yr; + 16.53%
    Wash these thoughts out of your head, just so no to Latin American Funds, PRLAX, EWZ at the present. Take any monies you were thinking of investing in Latin American and put them to work in the USA.
  • MikeW said:

    Thanks so much for the detailed comments Scott and Pudd. I really appreciate it. Can I ask your primary reasons for deciding to make Cielo a long term position? It sounds intriguing. Can you steer me towards any research on the stock? Finally, would you consider investing in EWZ?

    Cielo is a volatile stock and not a large position, but it's an emerging market play on the payments space that I have a number of investments in, with the largest being V/MA.
  • Thanks very much Scott. I see that Cielo is held by Virtus emerging markets and Touchstone Sands emerging too. I'm having a hard time finding much information on the company. Have you seen any good research on it that you recommend so I can get smarter on the company?
  • It's hard to predict the future, especially in markets, but I live in Brazil and write about the financial markets down here for a living, and FWIW, my favorite analyst down here expects the real (currency) to fall to 3.2 to the dollar by year's end, and that the economy won't pick up till 2017 or so -- and that's if the government manages to overcome its own ideology and popular opposition and really does implement the economic plan they've outlined. I actually think they will, but it's not a sure thing. Things could get much worse too.

    We all know analysts are often wrong, but I do think the odds are we're 10-20% and a year or so away from a bottom. Not a bad time to start buying, but I would dollar-cost-average in. Risks remain high. Other Latam countries (Peru, Colombia, Chile) are in better shape, but everyone knows that, so they're not as cheap.

    You've got to remember when you analyse the fair value of Brazilian stocks that money market funds pay 12% interest, and you can get inflation-protected government bonds with a real return of about 7%. (In reais, of course, not dollars, so you've got currency risk, which I wouldn't want right now.) But when bonds pay so much, stocks should be cheap. You cannot compare Brazilian p/e ratios to those in the developed world or China.

    My two centavos' worth.
  • edited February 2015
    Unfortunately, there's really not much on the company (no SeekingAlpha articles or anything of the sort. It's largely limited to presentations on the company website or brief articles on Bloomberg and elsewhere. Additionally, it was a Wintergreen (WGRNX) holding for a while, not sure if it still is (Winters discussed Cielo in a "Wealthtrack" video interview not that long ago part of his play on emerging market consumers.)

    The interview is here:

    The Cielo discussion starts at about 16 minutes in.

    I think my "issue" is that I'd like to invest a little bit in Brazil. My problem is that I like to do so in a way that I can get my head around. A fund can be volatile, too, but if I can have a thesis for something like Cielo (which goes along with the larger holdings that I have that are payment-related), it's easier for me to hold through the volatility than a fund that I don't have a real connection to/thesis for and may just dump if things get rocky (well, with how Brazil is now, rockier.)

    I definitely like the payments space (a lot) and Cielo has a very large share of the market in Brazil. Cielo also bought US company Merchant E-Solutions (

    Also, Cielo is an ADR where I can actually reinvest dividends. It varies by brokerage, but I've found that DRIP/reinvesting is usually no problem with US shares. When you get into ADRs or foreign ordinaries, then it becomes possible much less often and seems almost random as to what can/can't (possibly depends on which bank is the adr depositary?) Additionally, Cielo has also split twice in the last four years or so.

    Anyways, it's not something that I'd recommend for a conservative investor at all. It's my way of investing in Brazil in a manner that I can feel comfortable with longer-term. Most people COMPLETELY UNDERSTANDABLY (and again, they're certainly not wrong) feel more comfortable if they were to invest in something like Brazil investing in a fund. I'm weird though and feel more comfortable investing in one company whose business I can wrap my mind around and feel fairly strongly about long-term.

    For me, investing in the last few years or so has become, how can I structure my investments in a way that allows me to feel comfortable with a long-term view point and far less concerned about the day-to-day. The funny thing is, for most people, that would likely involve being less in single names and much more in funds. I feel more comfortable more in single names than funds because I feel strongly about various themes, sectors and companies. Plus, nearly everything I own pays a dividend.

    Again, I'm weird - most people would understandably feel more comfortable in funds and probably rightly so. Older and/or more conservative investors should go the fund route.

    Again, Ambev (ABEV) was the other name that I often thought about in terms of Brazil, but ultimately was more interested in the payments space. As I also noted above, Femsa (FMX) is something that I've thought about a lot, but I think the issue that I had with Femsa is its investment in Coca-Cola Femsa and the obesity problems in Mexico. There was a terrific hour-long presentation by a futurist in front of Femsa execs on Youtube and one of the major topics of discussion was in regards to health issues. (edited to add: found it)

    Mexico ultimately decided on a soda tax to combat one of the world's highest obesity rates ( and it's apparently been successful.

    While the conglomerate nature of Femsa is appealing, as is its reasonably solid track record, the problem that I have is: what's the future? The company's Oxxo stores are very compelling, but I have no interest in investing in Coca-cola in this country or any other (Asian conglomerate Swire is a Coke bottler, another company I want to like but can't.) Bill Gates was a large shareholder in Femsa for a while, but I believe he sold his shares not that long ago.

    Although, that said, there was an interesting article on "The Most Successful Company in the World" the other day, and it wasn't a company that makes things that are good for people. (

    I certainly don't own all things that are good for people. I own a liquor stock, although it's not a large holding. People do drink in good times and bad, but I think what's really kind of compelling is that you have this enormous industry where the big public names are now down to a few (and one less after Beam was recently bought.)

    Long, rambling story short,

    1. If I'm invested in a single name, the intent is a long-term holding with reinvesting dividends. It may have periods of under-performance, but I'm definitely diversified.

    2. Most people should go with a fund and if I were to go with a fund, I'd likely go with T Rowe Latin America.
  • edited February 2015
    I gave up on PRLAX a buncha years ago. Andrew Foster at SFGIX seems to think highly of Valid Solucoes eServicos de Seguranca em Meios de Pagamento e Identificacao. It's in Brasil, best I can figure. It may no longer be a value-play. Over the past year, it's come from 28 up to over 40. (Is that dollars? It's a M* chart.) In SFGIX, it's the 3rd-largest holding. Morningstar dates the SFGIX portfolio to 31st December, 2014. In SFGIX, Latin America = 16.3% of holdings. SFGIX is up over the past year by +10.24%.
    I don't have any money in Latin America at all. I've just "cleaned house." In my own portf. I'm now holding 7% cash, 29% USA equity, 25% foreign, 37% bonds. "OTHER:" 2%. Japan, hardly a thing. 29% is in Asia. In US/Canada, the number is 54.25%. No more Matthews at all. Asia is covered with PRASX.
  • "Valid Solucoes eServicos de Seguranca em Meios de Pagamento e Identificacao"

    I looked at that and really liked the look of it but there didn't (maybe there is now, I haven't looked) seem to be any way to invest in it in the US (ADR shares, etc.)
  • Look at page 18 of this company report. The page number is at the bottom-right. Don't use the .pdf reader's pagination scheme. There is a USA subsidiary. How to buy shares? Hmmmmmmm. Dunno.
  • Here's an email form from the USA subsidiary's own website. Someone might choose to ask them whether Americans living in the USA can directly buy shares FROM HERE.
  • edited February 2015
    The user and all related content has been deleted.

    EM debt picture (albeit, the hard currency kind) is not speaking favorably to the notion that now is a good time for hopping big into a Latin American theme. Maybe just give the idea a complete rest for now, and come back every 3-6 months and re-access.
  • I want to thank everyone for your very thoughtful comments on an investment in Latin America. This has been extremely helpful. I think you've convinced me to probably hold off for now and to also consider a broader themed emerging markets fund like Seafarer rather than investing specifically in a Latin America fund. Scott you've intrigued me with Cielo as a single stock investment in the payments space. I'm going to do some homework on this one. The stock has actually done quite well over the long term. I'm still probably going to go the fund route however and I know that alot of people on the board think quite highly of Andrew Foster. thanks so much again. I've learned alot from you.
  • Seafarer is a great choice. On another thread just posted, David mentions a possible conference call with Andrew Foster. If that happens it should spur a lot of discussion here.
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