Is a Bridgewater Bottom in For EWZ?

The iShares MSCI Brazil Index Fund

, the largest ETF tracking Latin Amercia's largest economy, is trading modestly higher today after it was revealed Ray Dalio's Bridgewater Associates took a stake in the controversial ETF during the second quarter. Bridgewater bought just over 2 million shares of EWZ

during the quarter. In other words, EWZ, assuming Bridgewater still owns it, accounts for a scant percentage of the hedge fund's $120 billion in assets under management. Several things are curious are about Bridgewater's move into EWZ. For starters, Brazil's

and that the country is not always hospitable to Western business interests. Second, Bridgewater's EWZ investment is arguably an indirect endorsement of Petrobras

and, to a lesser extent, Vale

. Brazil's state-run oil company and Vale, one of the world's largest mining companies, loom large in EWZ

. The cold reality is Petrobras has been one of the worst-performing major oil stocks in the world for not just one year, but for two years. How bad has Petrobras been? Since the Gulf of Mexico oil spill in 2010, BP

has outpaced Petrobras. Petrobras securities account for about 16 percent of EWZ's weight. Third, EWZ is nowhere close to being the top-performing Latin America ETF this year. Comparable funds tracking Chile, Colombia, Mexico and Peru have all outperformed EWZ year-to-date. In fact, EWZ is the only one that is negative on the year. Not to mention,

. Fourth, Brazil is not where the momentum is in Latin America. At least not at the moment. Mexico is arguably the momentum play of the region. The performance of the iShares MSCI Mexico Investable Market Index Fund

indicates as much and it is possible

for the stop spot among LatAm economies in the coming years. Fifth, Dalio has acknowledged that a large part of the reason for the global economic slowdown is China's own slowdown. That makes sense as China is the world's second-largest economy. China is also a prime destination for Brazilian exports, indicating that if China's economy remains fragile, chances are Brazil's will as well. Finally, EWZ is not even the best of the Brazil ETF bunch regarding year-to-date performance. The smaller and thinly traded The First Trust Brazil AlphaDEX Fund

has outpaced EWZ by more than 300 basis points this year. Of course, arguing against Dalio's track record is foolhardy. Bridgewater did not accumulate $120 billion in AUM by making a lot of mistakes. Maybe it can be argued that news of the Bridgewater investment is a sign that the darkest clouds have already passed embattled EWZ. If nothing else, the headlines are probably the best EWZ has been on the receiving end of in 2012. For more on Latin America and ETFs, click

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