Since Brazil surpassed the UK and became the world’s sixth largest economy, Brazilian shares have performed poorly. UK-based Duncan Lawrie Private Bank believes that now is a good time for investors to take another look at the South American powerhouse.

“A tremendous amount of investment is being undertaken in order to get Brazil’s infrastructure up to date, and ready to host the FIFA World Cup in 2014 and the Olympics in 2016,” said Edward Bland, head of research at Duncan Lawrie.

“On the corporate side, things are equally healthy,” he said. “Add to this robust domestic consumption and growing real wages, and you have a recipe for strong economic growth.”

Bland suggests that one reason for the lackluster equity performance is the high resources weightings in the Latin American indices, which have almost 20 per cent exposure to mining and around 16 per cent to oil and gas. He believes that last year’s correction has created a lot of attractive valuations in the market.

According to Bland, Brazil has less exposure to the health of the global economy than many investors might think judging from the dominance of commodities in Bovespa, Brazil’s main equity index. On the contrary, the economy is driven by the domestic market and two thirds of GDP comes from services and retail.

“This makes the Brazilian economy more balanced...in the event of a liquidity crisis, many emerging market financial systems risk losing access to foreign capital, which they would normally lend out to consumers,” Bland said. “Not so in the case of Latin America, where only 2.7 per cent of banking assets are funded from outside the region.”

One of the headaches for investors in Brazil has often been the high rate of inflation, which currently stands at 6.5 per cent, 2 per cent above the central bank’s target.

“Brazil is another of the emerging economies where the specter of inflation has haunted politicians, though in this case it has been contained rather more successfully,” Bland said. “[The current rate] has given the government enough latitude to cut interest rates, which currently stand at 10.5 per cent and stimulate demand. Inflation remains elevated but it is moving in the right direction.”