"As someone interested in opening a long term investment position in Brazil, I noticed this recent commentary, "Distress Building Up In Brazil's Economy", on the respected Bank Credit Analyst website."

Eoin Treacy's view Thank you for the link to this note which may also be of interest to other subscribers. Brazil is one of the world's largest commodity exporters, possesses a thriving middle class, has a strong currency and until 2010 had one of the best performing stock markets in the world.

However, President Rousseff has yet to prove she has the anti-inflationary bias of her predecessor. The discovery of the Tupi oil field has resulted in massive capital raising efforts by Petrobras. VALE has pursued an expansionary policy which has also diluted its shares. The country's efforts to combat currency appreciation have been aimed primarily at stock market investors which has dented confidence. Considerable investment will be required to host both the Olympics and the soccer World Cup in the next decade but there has been much less of a focus on removing infrastructure bottlenecks that are an obstacle to additional growth. All of these obstacles could prove transitory, but evidence is required to convince investors that Brazil will remain on a disciplined fiscal path.

The Bovespa Index completed a Type-3 top earlier this month and found at least short-term support in the region of the psychological 50,000 on the 9th. It has posted a progression of lower rally highs since late last year and while currently overextended relative to the 200-day MA, it will need to sustain a move above 60,000 to confirm a return to medium-term demand dominance. In the short-term, the Index will have to find support above the August 8th lows to check scope for additional downside.