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TORONTO - Brookfield Asset Management Inc. (TSX:BAM) reported a sharp drop in second-quarter profits Friday, but said it sees big money-making opportunities in Brazil's need for power and housing.

"There's a lot of opportunities (to raise capital in Brazil) as we are set up in Brazil in a significant way to take funds in and not that many people are," Bruce Flatt, senior managing partner of Brookfield Asset Management, said during a conference call to discuss the earnings.

"Given the markets and where they have been heading, we also think our distressed areas, and in particular our restructuring funds, will be able to raise large amounts of capital."

Brookfield's profits were hit by non-cash charges that included depreciation on assets bought since the 2007 second quarter and were partially offset by an increase in cash flow from operations, which totalled $378 million compared to $340 million in the quarter last year.

The Canadian company, which reports in U.S. dollars, earned $110 million in the three months ended June 30, down from $153 million a year earlier on charges linked to previous acquisitions .

Earnings per share at the former Brascan conglomerate fell to 17 cents from 24 cents - in line with the 17 cents per share analysts were expecting

Revenue net of operating costs was $1.23 billion, up from $1.19 billion.

Brookfield, which manages $95 billion in assets in several countries, has a long history of involvement in Brazil and sees a lot of potential from a "rapidly growing middle class" whose spending power is increasing "dramatically."

The retail property fund Brascan Brazil Real Estate is among Brookfield's holdings, which include power generation, timber assets, residential property development and major office towers in Canada and the United States.

"We have taken advantage of this to grow our shopping centre presence in (Brazil)," said George Myhal, Brookfield's chief operating officer.

"We believe that this opportunity for us will continue and are very excited about our shopping centre operations in the country."

Dropping interest rates have also increased demand for residential homes in that country, while Brookfield's power segment is likely to benefit from Brazil's growing demand for electricity.

"The country has supported a number of strategies to increase generation to meet the growing power demand," said Myhal.

"There remain many transmission bottlenecks and other problems, but nonetheless, there is a very strong and growing market for power in Brazil today."

Operating cash flow per share increased by 13 per cent quarter-over-quarter, due to improved water levels and pricing in the company's renewable power business, as well as stable growth in the commercial property business.

However Brookfield's North American housing and timber operations, which have been hit by weaker consumer markets, reported lower cash flows.

Flatt declined to give a prediction about how long the current market troubles will continue, but said Brookfield is keeping an eye out for well-priced investments.

"There's lots of things that everyone is seeing today," he said. "We are cautious in this environment because usually the best opportunities come later in a cycle."

Brookfield's board of directors declared a dividend of 13 cents US per A share, payable in November.

Brookfield's stock closed up eight cents on the TSX at $33.82.