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Three Bright Spots for International Investors

Why these countries are uniquely positioned to ride out the economic downturn.

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We think three countries are uniquely advantaged to ride out the current economic downturn. Operating with long-term double surpluses (both on its trade/current account and fiscal budget), and falling interest rates, Brazil, Russia, and Canada are bright spots in an otherwise dreary climate for international investing.

With the major instability we've seen recently in currency exchange rates, we believe a current account surplus offers investors an important source of protection. Countries without a surplus face the constant temptation to devalue their currency. A current account surplus also signals an inherent competitive advantage within a country; essentially, the world has more of a need for the country's products than vice versa. Although running at a short-term budget deficit can actually help rejuvenate an economy, countries that run at a long-term surplus tend to be better off because they can avoid carrying costly debt loads. Countries that are cutting interest rates are also actively trying to stimulate consumer spending, which should help revive economic growth. While cutting rates can lead to higher inflation and a weaker currency, the current account surplus again offers some protection relative to many countries around the world that find themselves cutting rates while also carrying large trade deficits.

Imari Love does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.