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The Balance of Power Has Shifted

Written By Brian Hicks

Posted November 17, 2008

It’s a great time to go long India and Brazil. 

Emerging market countries outnumbered “advanced” economies at the G20 summit in Washington over the weekend. And as India’s economist prime minister says, “The balance of power has shifted.”

A Cambridge graduate who has served as India’s finance minister, central bank chief, and UN envoy for financing, Dr. Manmohan Singh came into the Group of 20 summit in Washington with a better frame of reference than any of his head-of-state peers.

Indeed, this was the first time that national leaders have been invited to such a conclave. Normally, central bankers and treasury chiefs represent their countries. Singh is an exceptional complete package, both understanding the details of market events and being able to take action to help his country and economy quickly.

It was also notable that out of the 20 delegations sent to D.C., developing countries led by a 12-to-8 margin.

Those 12 are the vanguard of a new economic power structure that is already creating stock opportunities for investors. Across the world from India, in South America, Brazil is gladly stepping to the forefront.

The G8 is “no longer relevant”

President Lula da Silva of Brazil echoed Dr. Singh’s appraisal of the new financial landscape and the dwindling importance of the Group of Eight industrialized nations. “It’s no longer relevant,” Lula told the Brazilian press.

“We are talking about the G20 because the G8 doesn’t have any more reason to exist.”

Yet all this meeting did was confirm the redundancy of the old regime, without stamping the G20 as a real alternative.

President Bush offered his insight as well. “A meeting is not going to solve the world’s problems,” he said. He continued to say that more meetings would do the trick.

Forgive me for being unimpressed. The New York Times relegated the G20 summit to the third page of the business section. There was little to no coverage of the event on most television news channels, and judging from all the commentary by world leaders who attended, the same progress could have been accomplished with a conference call.

So, in such a vacuum, can the new world economic leadership give us a reason to invest?

Emerging Market Investments

It’s hard to find an excuse to be bullish on America right now. Uncle Sam and other historically strong economies seem to be staring blankly at their own shoes, or tripping over them.

Inaction is the rule, and when something like the $700 billion U.S. banking bailout actually gets done, it’s extremely sloppy in both planning and execution. A hodge-podge of rate cuts and nationalization schemes hasn’t soothed investors either.

So you can’t blame India and Brazil, among other top developing economies, for being unwilling to wait around while we do our best Keystone Kops impression.

In India, thousands of entrepreneurs and engineers with experience in the U.S. high-tech sector are heading home every year to expand a native IT hotbed. Ironically, India’s homegrown businesses are also helped by restrictive American visa policies.

Our bureaucracy makes it tough for skilled foreign nationals to stay in Silicon Valley and other places, so they repatriate their brainpower and launch startups back in Bangalore or Mumbai.

Infosys (NASDAQ:INFY) is one of these Indian IT firms now leading the world, serving multinational corporations from its base in the country’s south. Its management has won awards for excellent service and the way it has built an appreciative global clientele.

To tap Infosys and its local peers, check out the WisdomTree India Earnings Fund (NYSE:EPI). EPI launched last year, after a long wait for an Indian ETF. It holds a combination of emerging tech heavyweights and more traditional stock plays like India’s national oil company ONGC.

Over in Brazil, President Lula is the most popular president in Brazilian history. He worked his way up from selling peanuts as a little boy who came to the financial capital of Sao Paulo from the country’s impoverished north.

Lula’s story is shared by millions in his country and around emerging markets, who know prosperity comes from hard work… Like India, China, and other newly prosperous nations, Brazilians are exploding into the global middle class with a leader who gives them a role model for responsibility and change.

Brazil’s policies are also encouraging, and in sync with national needs.

When it comes to fuel, locally grown sugar cane ethanol is several times more efficient than the U.S. corn variety. Brazilian sugar cane refiner Cosan gives you a way to invest in Brazil’s biofuel industry, which has been around since the 70s. Cosan trades on the NYSE as CZZ. Plus, more recently, Brazil’s national oil company Petrobras has announced major finds off the country’s coast. So Brazil’s energy independence is all but insured. Petrobras is also available on the NYSE as ticker PBR, and other Brazil stocks are prospering as part of the iShares MCSI Brazil Index ETF (NYSE:EWZ).

The G20 meeting may have been a bust, but at least we got further validation of what I and other international bulls have been saying for years: the balance of economic power is shifting, and so is profit potential for investors.


Sam Hopkins

P.S. – Like Brazil’s Cosan, a slew of international green energy companies are popping up to offer regional fuel solutions, and globalized stock market returns. With our new Green Chip International service, we’ve stayed ahead of the curve and avoided the rush into corn ethanol and Detroit’s scattershot efforts to retool. We’re holding top wind energy companies, solar power players, and of course biofuel pioneers like Cosan. And it’s never been easier to go green, globally. Check out GCI today to learn more.