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22 | Focus on Brazil
Incorporating material kindly
provided by Property Frontiers
Introduction
The fifth-largest country in the world, Brazil
borders every country in South America except
for Ecuador and Chile and straddles four time
zones. Thirty-five times the size of the United
Kingdom, it boasts a huge variety of landscapes,
from the dense jungle of the Amazon rainforest,
to the beautiful white beaches of the 7,250-kilo-
metre coastline, to the mountains, valleys and
waterfalls of its interior. Such diversity, along
with the climate, the rich cultural life and the
hospitality and passion of the Brazilian people,
has made Brazil one of the biggest tourist desti- long-term foreign currency debt rating from BB therefore being increased and in line with these
nations in the world, with something for every- minus to BBB minus and awarded it an invest- developments, British Airways recently
one. ment grade rating for the first time, the country’s announced that it is upping its London/Buenos
Historically, Brazil’s economic fortunes have benchmark stock market index has shot to a Aires flight quota to a daily service. It has also
been mixed. However, it is now keen to assure record high, further confirming Brazil’s convinc- announced that it will now fly direct to Rio,
the world that it is a country on the way up. In ing economic maturation. This confidence was instead of via Sao Paulo, meaning almost two
2002, whilst America was focusing on security echoed by the Wall St Round Up who ranked hours will be cut off this flight time.
and a potential war against Iraq, Brazil became Brazil at the number 2 spot on NuWire Property can be purchased on a 100% free-
part of the BRIC alliance, signing a trade and Investor’s list of the Top 5 Latin American Real hold basis, and both property rights and title are
cooperation agreement with Russia, India and Estate Markets in 2007, whilst Morgan and secure. Taxes remain low and the purchase and
China and securing an agreement to supply Stanley’s Capital International Global Emerging selling processes are relatively straightforward for
these countries with raw materials and natural Markets pole named Brazil the world’s biggest urban investments with simple transfer of title.
resources. Since then, its annual GDP growth emerging market in 2007 The cost of living in Brazil is some 20% lower
has enjoyed healthy increases particularly in (www.knightfrank.com). than in the UK and the currency exchange rate is
2007 when it increased by 5.4%, the fastest rate This, coupled with the country’s soaring also favourable.
since 2004. tourism industry which is predicted to continue All of the above mean that demand for prop-
Since 2003, President Lula’s administration to rise by 5.3% per year until 2017, means Brazil erty in Brazil is on the increase. The most attrac-
has steadied exchange rates and aided social sta- is likely to develop not only into one of the tive areas for property ownership are currently in
bility and confidence meaning Brazil now ranks world’s hottest holiday destinations but also one the coastal north-east of the country, notably
as the 8th largest economy on the planet – of the globe’s more lucrative investment hubs. Natal, Ceara, and throughout Bahia. Here prices
jumping a huge 5 places from 2007’s ranking. Property and land prices, though rising, are still are still very affordable, but in areas where infra-
What is more, Goldman Sachs has predicted undervalued meaning entry costs are lower than structure improvements are underway they are
that it will become the fifth largest economy by in much of Europe and leave a lot of room for rising extremely quickly. Rio de Janeiro is still an
2050, making it one of the most compelling growth. In some areas, capital growth has been attractive area although the market here is much
equity investment cases among the world’s large as high as 20% in recent years and rental returns more developed meaning entry prices are higher
countries. of between 9 to 14% per annum are achievable and percentage returns lower.
on well placed units. Further, with the Aside from increased interest from foreign
Is This A Good Place To Buy? announcement that the 2014 Football World buyers it should also be noted that the lower end
GDP growth continued to grow by a healthy Cup will be held in Brazil it can be expected that of the market is set to experience significant
4.8% in 2008 and following a 100% increase in demand across the breadth of the country will be increases in demand over the next few months.
2007’s FDI, Brazil’s economy is clearly going bolstered. As the Brazilian economy expands, domestic
from strength to strength. As the largest exporter Aside from the tropical climate, spectacular wealth is also likely to increase, meaning local
of iron ore and soya, the 2nd largest exporter of and varied scenery, the culture of enjoyment and inhabitants will be able to enter the market seek-
frozen meat and grain, being self sufficient in oil the year-round sunshine (giving an annual ing medium grade accommodation. Foreign
and the world’s 2nd largest bio-fuel producer, potential occupancy rate of around 30 weeks), investors opting for these kinds of purchase then
Brazil does not rely on any one economy (partic- there are a number of practical reasons to buy have a secure exit strategy which should result in
ularly the US) and is thus protected from any property there. Brazil is considered low risk in high returns. Wherever you buy in Brazil, it is
global fluctuations. Moreover it doesn’t face the terms of war, terrorism and natural disasters, and important to ensure that your property is rela-
stark energy crises many of the world’s other the economy, as figures show, is stable. tively close to key amenities - there is always
countries are battling as 80% of its power is cur- Infrastructure improvements are being put in higher demand for properties within easy reach
rently supplied by hydroelectric dams. Further, place throughout the country, thanks to the gov- of an international airport and the beach.
the discovery of what is claimed to be the world’s ernment scheme PRODETUR which is dedicat- Something to be aware of is that due to
largest offshore oil field from the coast of Rio de ed to implementing tourist infrastructure with Brazil’s somewhat emergent status in property
Janeiro is expected to have a total value of funds of more than $670m. Following the suc- investment terms, buyers may face problems
US$25bn – US$ 60bn and to generate healthy cess of PRODETUR 1, a second phase is now in with inexperienced or unscrupulous developers.
industrial interest in the country. place which will channel an additional $400m Where possible it is advisable to purchase from a
Since Standard and Poor raised the country’s into the country’s infrastructure. Accessibility is developer with some kind of proven track record
November 2009 Investment International www.investmentinternational.com
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