A recent report indicated that Brazil's inflation rate will rise to 4.6% by the end of 2011, above the central bank's original target. Unlike China's export-dependent economy, Brazil can barely stave off surging domestic demand that's leading to an inevitable rise in inflation. However, a rise in consumer prices has done nothing to curb economic growth -- in 2009, the iShares MSCI Brazil Index has gained 111%, helped in large part by the tremendous success of stocks like Petrobras
According to Bloomberg:
"From the point of view of the balance of risks related to the inflation outlook, the major risk comes from the intensity of the domestic economic activity recovery, which will still be influenced by significant economic policy stimulus," the central bank report said. "The key factor sustaining economic activity will continue to be domestic demand."
It certainly doesn't seem like demand is likely to subside any time too soon. U.S. companies such as Wal-Mart Stores
What do Fools think: Is Brazil overheating or is it just getting started? Sound off in the comments box below.
Jordan DiPietro doesn't own any shares of companies mentioned above. Wal-Mart Stores is a Motley Fool Inside Value pick. Petroleo Brasileiro is an Income Investor selection. Try any of our Foolish newsletters today, free for 30 days. The Fool has a disclosure policy.