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Will Landers, manager of BlackRock's £283.7m Latin American trust, said the recent rerating of Brazil's debt to investment-grade status by Standard and Poor's and Fitch "drew a line under its boom and bust economic history, reflecting the extent to which Brazil's economy has developed over the last five years".

Mr Landers observed the central bank had tightened its grip on inflation despite pressure to ease its interest rate policy. He said the upgrade should bring more capital to Brazil this year, assisting domestically orientated stocks.

But Bryan Collings, managing partner at Resolution Asset Management's emerging market joint venture Hexam Capital, said the rerating overvalued the country's growth potential.

Mr Collings said Brazil could grow as rapidly as 5 per cent a year by 2010. But he indicated investment would need to increase at an annual rate of 12 per cent for this to be achievable. He argued Brazil could only expand faster by pushing its current account into deficit, but warned a level higher than 2 per cent would be tough to finance.

"Moody's have been more cautious than S&P, particularly with respect to Brazil's fiscal outlook. We think the caution is warranted and have reduced our positions accordingly," he said.

"The continuation of a strong investment cycle cannot be assumed, and a slodown in demand might be necessary to reduce inflationary pressures. A shrinking trade surplus and a negative current account may result in a negative surprise for investors."