Is Brazil a contrarian buy?

Brazil is a wonderful country. It has the beaches of Copacabana. It has the statue of Christ the Redeemer. It is perhaps the most cosmopolitan country on Earth, and it also has a rather good soccer team. But what about investors? Is it worth buying into?

A story that has turned sour
In recent months, the emerging markets story seems to have turned rather sour. All the BRIC nations have suffered recently.

The Brazilian market in particular has fallen sharply: It is now down 23% from its 2012 high, and it is at levels last seen during the eurozone crises of last year.

What's more, the Brazilian real has also been falling, making the country's shares even cheaper.

Isn't it amazing how quickly things change? Not so long ago people couldn't wait to invest in the Latin American country. Now everyone seems to be steering clear of it.

The bear case
So what is the bear case? Well, in recent months commodity prices — on which so much of the Brazilian economy has been dependent — have been falling. It is more than coincidence that the country's shares have been falling at the same time.

What's more, Brazil's growth rate has been slowing. After an impressive decade, the nation's growth was less than 3% in 2011, and is likely to be scarcely more than 3% in 2012.

The past decade saw a consumer boom that was stoked by credit expansion, but now it is faltering. Tens of millions of Brazilians were lifted out of poverty in the past 10 years, but now they have built up too much debt and are cutting back.

In an effort to counter this slowdown, the government has been cutting taxes and lowering borrowing costs, but to little avail. A poor grain harvest and weak export growth also contributed to the slowdown.

The bull case
Despite all the negatives, I still think there is a strong bull case. Brazil still has compelling demographics, with a young and growing population. While the consumer boom may have become slightly frothy, there is still a burgeoning middle class.

What's more, I suspect that this is only a temporary lull in commodity prices. Eventually, I expect that they will resume their upward trend, and when they do so Brazil will stand to benefit. And as the world economy recovers, exports will also recover.

Plus, the World Cup and the Olympics will soon be arriving in Brazil. This will create a buzz in the country, and a feeling that its time really has come.

Finally, you could argue that this is the time of maximum pessimism — the time when contrarians start to wonder whether it is time to buy.

Foolish bottom line
So am I a bull or a bear? Well, I find myself somewhere near the middle. I suspect that the days of stunning growth in Brazil, both for the stock market and the currency, may be over. The country is now in a consolidation phase. But I still think there are opportunities aplenty, and that there is a strong likelihood that the country's shares will bounce back.

So I would say that Brazil is still worth a close look for investors, alongside other Latin American countries that are starting to emerge, such as Mexico and Argentina. But bide your time — the currency may get cheaper still.

If you think that Brazil is worth a punt, there are several routes in. You can purchase individual shares such as Petrobras and Vale — the latter is actually an ADR — but my favoured route is through an investment trust.

Two of my favourites are BlackRock Latin American (LSE: BRLA.L), which is currently trading at a whopping 10% discount to net asset value, and JPMorgan Brazil (LSE: JPB.L), which is trading at a discount to NAV of nearly 6%.