Things are spicy hot in Brazil. According to a recent HedgeWeek report, Eurekahedge’s research unit showed the Latin American hedge fund index was up nearly 14% through the third quarter of 2006. These numbers are slightly higher than the emerging markets sector as a whole, which was up 12.7%. But it towers over the North American hedge funds, which were up nearly 7%. Though the industry is prone to volatility, the Latin American index boasted an 18.9% increase in 2005. Constellation Asset Management’s founder co-partner, Florian Bartunek, told HedgeWeek that the interest in Brazilian funds is a recent development that stems from American and European investors searching for developing market funds from which to diversify their portfolios. “As one of the largest offshore hedge funds in Brazil investing the long/short equity, with a six-year track record and no down years, we are in a sweet spot,” he said. “In New York last week I was having six or seven meetings a day. When I was there 10 years ago, it was really tough to get anyone to see me.” Claritas Investments fund manager Enio Shinohara told HedgeWeek that some foreign investors have restrained from investing in certain markets because of tax issues, but Shinohara claims that the National Association of Investment Banks is working hard to compile “friendly regulations that would allow foreign investors and allocators to invest in offshore funds,” though Shinohara notes regulators would have to alter tax rules to lure investors. Though some still view BRIC markets as unpredictable, chief executive of the Miami-based Bulltick Capital Markets, Javier Guerra, told HedgeWeek that the current situation in Brazil parallels that of Mexico in the 1990s, when the authorities began to impose changes that would create a stable, lawful infrastructure. Given the climate, most agree Brazil is best viewed as a medium-term investment op.