Why Invest in Brazilian Land?
Brazil will be one of the first economies to recover from the economic slump. The OECD predicts 4% economic growth for the emerging giant in 2010. The confidence of the countrys President Lula da Silva, who during his two terms of office has transformed the countrys economy, has barely taken a denting. Brazil is emerging from the crisis, and next year we are going to have surprising growth, he announced in July.
State oil company Petrobras discovered vast deepwater reserves that it is developing with a five-year, $174 billion investment program. The goal is to double Brazil’s production, to 3.5 million barrels a day, by 2012, making the country a top oil exporter, in line with many Middle Eastern countries such as Kuwait and Saudi Arabia, increasing the wealth in the country immensely. The United States has agreed to provide as much as $10 billion in financing to go towards the development of these oil fields. Brazil will reap tremendous benefits from this oil exploration and avoid over-reliance on oil because it made its discoveries after its economy had diversified and industrialised.
U.S. consumers are predicted to hold back on spending in the near future. A recent Goldman Sachs report predicts that Brazil, Russia, India and China will be responsible for around 50% of worldwide demand for exports due to their growing domestic consumption. This demand is powered by a growth in their middle classes.
The 2014 World Cup has resulted in a Government programme of expenditure, in excess of $250 million on roads, airports, power generation and sanitation coupled with a huge spend on tourism that has resulted in international tourists increasing year on year from 1.9 million in 1995, to in excess of 5.2 million in 2008.
The Brazilian property market has huge room for growth. Residential mortgages only represent 2.5 percent of the Brazils GDP according to Banco Central do Brasil, the Central Bank. Comparisons with other countries reveal a huge growth potential for Brazil as Mexico is 11%, Chile 20%, Spain 45% and 68% in the US. Even with the worldwide economic crisis, mortgage lending in Brazil rose 41%, twice as fast as consumer credit. The state-owned Caixa Economica Federal has lent around 19 billion Reais so far in 2009, compared to an average of five billion Reais four years ago. It expects to lend 26 billion Reais worth of loans for Brazil real estate purchase in 2009.
Brazils economy is worth $1.5 trillion, yet exports only represent 12% of this. Its population of 190 million is seeing a boom in the middle classes, which now make up more than half its population. With their increased buying power, Brazilians are buying more food, more clothing and more household goods than ever before. Sales figures for Whirlpool, which has a 40% share of Brazils appliance market, were 20% higher in May and June 2009 compared to a year earlier. Though this has been partially fuelled by tax incentives, which are due to end in October, sales are expected to remain strong. “Over the next five years, we’ll see a doubling of sales of durable goods in Brazil,” says Jos Roberto Tambasco, vice-president for operations at Po de Acar. In preparation to meet the increased demand for white goods, the supermarket giant recently paid $422 million for the appliance retailer Ponto Frio which has a network of 458 stores nationwide.