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Argentina, Brazil markets have surged, but one is an ‘ugly’ investment

Trash is burned in an area where garbage is dumped near the main highway linking Rio's international airport to the city in the Mare favela community complex on July 18, 2016 in Rio de Janeiro, Brazil.
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Trash is burned in an area where garbage is dumped near the main highway linking Rio's international airport to the city in the Mare favela community complex on July 18, 2016 in Rio de Janeiro, Brazil.

Brazil and Argentina may be seeing similar upswings in their respective stock markets this year, but Morgan Stanley Investment Management Head of Emerging Markets Ruchir Sharma says that Brazil represents an "ugly" investment.

"The 100-year history of Brazil is that Brazil goes up for one decade when commodity prices go up, and then Brazil relapses, and I just find it very difficult for Brazil to sustain any economic growth rate," Sharma told CNBC's "Power Lunch" Thursday while discussing his book "The Rise and Fall of Nations."

On the other hand, he said Argentina represents a "good" investment given recent "path breaking" reforms and the fact that it is coming from a lower base.

"Argentina is seeing a very meaningful turnaround take place under a new leadership," Sharma said.

Sharma was speaking specifically about a section of his book called "The Good, The Average, and The Ugly" about the best countries to invest in around the world. Countries like the U.S. and Germany were in the good category, while the ugly category included China and Russia.

However, Sharma did not fit every country neatly into a category. He said Japan ranked between average and ugly given its demographic troubles.

"Demographics is one of those very under-appreciated factors behind economic growth," Sharma said."Its working-age population is in fact contracting."