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Stock Strategist

Keeping a Cool Head in Brazil

How to profit from panic in Latin America's biggest economy.

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Brazil's president Lula could not have been further off base when he confidently declared earlier this year that "Bush's crisis" would not affect his country. In the months since, credit has dried up, commodity prices have collapsed, and the real (Brazil's currency) has tanked. After years of double-digit gains, the Bovespa stock index is down by nearly half from its peak. Panicked investors are dumping shares in even the best of businesses.

But is Brazil's future really so bleak? While the economic outlook has certainly dimmed, we remain cautiously optimistic. Buying stocks in today's environment takes courage--and doubly so in a volatile emerging market. Ultimately, though, we think Warren Buffett's advice to "be fearful when others are greedy, and greedy when others are fearful" will prove as rewarding in Brazil as anywhere.

Ryan McLean does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.