This will be a very short write up, since additional research is available online at the company website (http://www.gafisa.com.br/ir/), and this is more a macro-call than a company specific recommendation.

Basically, the Brazilian stock market is down over 30% from its high. The reason: A sell-off in commodities (Brazil is the commodity king, so to speak), and a general reduced level of investment in emerging markets have led to a major correction in the Bovespa in the last two months. In addition, an increase in interest rates in Brazil to cool the economy has had a negative effect on the equity markets.

However, as I discovered last month on a trip to Brazil and via conversations with several businessmen there, the Brazilian economy is doing very well and there is significant optimism regarding the future. The stock market sell off really has little to do with the actual real economy in Brazil and is probably caused by selling by foreign hedge funds.

Furthermore, after two agency debt upgrades this past year, Brazil is looking to one more upgrade in 2009. A third upgrade for Brazil from the rating agencies would significantly increase investment in Brazil, benefiting all financial markets. For these reasons, I believe any significant dip (and 30% is a pretty large correction), in the Brazilian market is a buying opportunity, assuming you buy into the continued commodity boom and the growth of Brazil.

In any growing economy, one of the best investments is usually real estate. And Brazil is no exception to this rule. The housing market in Brazil is booming, as mortgages become more readily available and the income of the lower class grows (i.e. there is no real middle class in Brazil). On my recent trip to Brazil, I visited several new real estate developments and came away with the impression that the real estate boom is just getting started in Brazil.

As such, I think a good way to play a bounce in Brazil (without needing to buy shares locally), would be to invest in Gafisa (NYSE: GFA – Current Price: $28.15) ADR’s. Gafisa is one of the largest real estate developers in Brazil and Sam Zell is a big shareholder. Recently, Gafisa reported very solid financial results and I believe the company is well positioned to profit from the Brazilian real estate boom. Notably, GFA’s stock is down 44% from its high.

It is important to realize that investing in emerging markets, like Brazil, carries enormous risk. One of the main risks, is the currency risk. The Brazilian REAL has been quite strong for awhile already and should the dollar gain against the REAL, Brazilian ADR’s could drop significantly. However, I believe that the REAL will remain strong, particularly given Brazil’s higher real interest rates.