Loving Brazil

At Obelisk, we're loving Brazil.

Understandably clients are asking us why we're so bullish about Brazil, why is it our top investment recommendation and in the words of Theo Paphitis, why should they invest their 'children's inheritance' in this country. Just take a look:

•Brazil is the 'B' in the Goldman Sachs BRIC acronym. Although all four BRICs (Brazil, Russia, India and China) are widely expected to rule the global economy by 2050, for The Economist, "Brazil outclasses the others".

•Brazil's economy is based on a strong export market dominated by numerous commodities (e.g. steel, food stuffs and biofuels) that is supported by an equally buoyant domestic market.

•Forecasts for GDP growth in 2010 range from 4.8% (OECD) to 5.3% (Bank of America Merrill Lynch). (The OECD expects a combined growth of 1.9% for all 30 OECD members in 2010.) A 4.5% increase is predicted for Brazil in 2011.

•Tourism is expected to reap massive benefits from the World Cup in 2014 (held at locations throughout Brazil) and the 2016 Olympic Games in Rio de Janeiro.

•Unlike many developed economies, Brazil is currently creating employment. In the first 11 months of 2009, 1.1 million jobs were created and the 7.5% unemployment rate is at pre-global recession levels.

•Brazil's mortgage market is relatively young. However, it is expanding rapidly as new products are introduced and interest rates fall. Interest rates currently stand at 8.75%, a historic low - rates were five points higher in November 2008.

•Between 2003 and 2008, extreme poverty was halved and Brazil's score of inequality (the Gini coefficient) is falling. A recent report in The Economist revealed that Brazil's Gini score is approaching that of the US.

For more information about investing in Brazil, click here to download Obelisk’s FREE Absolute Guide to investing in Brazil, which provides up to date and accurate information about investing in Brazil, including the buying process, investment costs and market risks.

Cementing Property Investment in Brazil

With the 2014 World Cup and 2016 Olympic Games just around the corner, construction in Brazil is poised for huge investment. Add the 13.7 million homes to be built by 2016 to the equation and it’s obvious that Brazil is about to enter a construction boom.

An indication of the proximity of the boom in Brazil is the ongoing battle to gain control of Cimpor. Cimpor is Portugal’s national cement company and has a major presence in Brazil. Three big players in Brazil’s construction industry are bidding for Cimpor – CSN, a Brazilian steel manufacturer, Camargo Correà and Votorantim, both Brazilian cement companies.

The huge expansion of the construction industry in Brazil is fired by the forthcoming world sporting events and an unprecedented demand for Brazil real estate. This demand comes mainly from Brazilians whose recent increase in purchasing power means they are buying new properties or refurbishing their current homes.

Matching the demand for construction is a demand for cement.
In developed countries where investment in property has slowed down significantly over the last few years, the demand for cement has also fallen. In Europe, home to four out of five global cement companies, demand has dropped nearly 30% since 2007. The European market is not likely to pick up before 2012. In the US, demand is down by 44%.

On the other hand, emerging markets with their thriving real estate sectors represent a booming market for cement. Brazil is a case in point. Sales of cement ran to 45 million tonnes in 2007. This figure is expected to rise to 55 million tonnes this year with further annual hikes until at least 2016.

After China and India, Brazil is the world’s most important market for cement. In this scenario, the cut-throat bidding for Cimpor is hardly surprising. Companies present in the Brazil construction industry will undoubtedly see huge expansion over the next decade. CSN has already started its growth with the construction of a cement factory near its steel mill in Rio de Janeiro.

Camargo and Votorantim are both big in Brazil and Votorantim also has a large global presence with assets in the US, Canada and four South American countries. Both cement companies are keen to expand still further by controlling Cimpor. At the moment, Camargo holds 32.5% of Cimpor shares and has Volorantim 30.8%.

Obelisk believes that this battle for control of a key player in the Brazil construction industry is a clear indication of the investment potential in Brazil. We expect this tendency to continue as the scope for investment in Brazil and Brazil’s construction industry becomes clear.

For more information on overseas property investment and to find out about Obelisk's latest projects, contact Obelisk on 0034 952 820 319.

Obelisk also produces its Absolute Guide Series which contains the most recent investment information on 30 of the world’s top emerging markets. They can be downloaded free of charge at www.absoluteguideseries.com.

Contact us via email: info@obeliskinternational.com or visit our website: www.obeliskinvestmentproperty.com.

Black Gold Investment in Brazil

Part of the attraction of investment in Brazil is its vast quantities of natural reserves. These include huge oil fields set to become a major investment draw in Brazil this year.

Brazil’s main oil company, Petrobras has just announced that it will be investing up to 26% more in Brazil’s oil fields over the next five years. Petrobras’ Brazil investment will run to between US$200 billion and US$220 billion from now until 2014. This investment will be the largest this year made by any oil company including oil giants such as Shell and Exxon Mobil.

Petrobras will be increasing its capital by issuing up to US$40 billion in new stock, most of which will go to the government of Brazil in return for oil rights. Petrobras will use the capital to focus on the development of Brazil’s massive oil fields, particularly those in the Tupi area.

The Tupi and Lara fields, situated 800km off the Brazilian coast, are home to America’s largest discovery of crude oil deposits since the Cantarell fields were found in Mexico in 1976. The fields in Brazil have huge potential and are estimated to hold up to 10 billion barrels of oil. The Financial Times refers to the reserves as “Brazil’s ticket to the world’s VIP energy club”.

Pre-salt exploration of the Tupi fields will be finished by 2016, allowing exploitation of the fields. Oil income will boost Brazil’s economy considerably over the next decades and will contribute substantially to the rise of Brazil as an international economic power. Analysts predict that between 2020 and 2025, Brazil will be the world’s fifth largest economy (it currently ranks in tenth place).

Petrobras expects to release new stock in the second quarter of this year. The seventh largest oil company in the world, Petrobras saw quarterly profits rise by 31% in Q4 last year. Over the last 12 months, the company’s market value has increased 72% on the Brazil stock exchange, the Bovespa index.

Investment in Brazil stocks saw huge hikes last year and 2010 also looks promising. BlackRock, an asset management firm, predicts a 22% rise on Brazil stocks this year. Investment in Brazil oil stocks should bring good returns, although BlackRock favours investment in Brazilian real estate companies such as Cyrela, the country’s largest.

For Obelisk, the Petrobras announcement further confirms the potential of investment in Brazil. This is a country of huge opportunity – whether you choose to invest in stocks and shares, energy, agriculture or real estate, Brazil has all the right ingredients to increase the wealth of your investment portfolio.

For more information on overseas property investment and to find out about Obelisk's latest projects, contact Obelisk on 0034 952 820 319.

Obelisk also produces its Absolute Guide Series which contains the most recent investment information on 30 of the world’s top emerging markets. They can be downloaded free of charge at www.absoluteguideseries.com.

Contact us via email: info@obeliskinternational.com or visit our website: www.obeliskinvestmentproperty.com.