No country in Latin America looks better to invest than Brazil, now enjoying its best period of economic growth of all times. The most recent weekly analyst survey of the country´s Central Bank forecasts that the Brazilian economy is on track to grow more than 5% in 2010. Brazil was one of the first countries to recover of the 2008 internacional economic crisis. “After several decades of low growth and macroeconomic vulnerability, Brazil’s economy is now in its strongest macroeconomic position ever”, said recently the governor of the bank, Henrique Meirelles. All procedures for foreign investors establishing themselves in Brazil, and for the granting of work visas to foreigners are facilitaded by the Brazilian Ministry of Labour and Employment.

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The vote of confidence is the upgrade of Brazil’s credit rating to an investment grade rating of Baa3. Moody’s Investors Service was the third credit rating agency, after Standard and Poor’s and Fitch Ratings, to give Brazilian assets their thumbs up.

Among the G20 economies, Brazil is one of the few that emerged from recession in the second quarter. South America’s largest economy recorded GDP growth of 1.9% from the previous quarter. But unlike many countries, Brazil only experienced a short recession. President Lula is confident about his country’s prospects, saying he expects economic growth of 5% in 2010.

CNBC journalist Maria Bartiromo also interviewed Lula a couple of days ago. Check out their conversation, in which Lula discusses the country’s economic growth and the future of financial regulation.

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Brazil’s banks are preparing for a wave of consolidation following this week’s merger of Itaú and Unibanco to create the biggest bank in South America. Brazil has about 150 banks, many of them small players concentrating on a single line of business such as car loans or payroll-linked loans, areas that have grown quickly in line with rising employment and wages.

“Smaller banks have been seeing growth of 30 or 40 per cent a year,” says Ceres Lisboa, banking sector analyst in São Paulo at Moody’s, the international credit rating agency. “That’s over. They’ll have to reinvent themselves.”

Dozens of these smaller banks will be snapped up or forced to retreat into niche markets. Banco do Brasil, the federally-owned bank that was Brazil’s biggest before the latest merger, and Bradesco, formerly the biggest private-sector bank, are expected to scurry for acquisitions as they try to regain their dominance.

Consolidation will be helped by recent government measures to inject liquidity into the banking system as the global financial crisis has unfolded. The process should also be orderly as Brazil’s banking system remains solid, thanks to relatively low levels of lending and the fact little credit is sourced overseas.

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