Green Light for Investment in Brazil

The steady economy in Brazil and its stable long-term prospects mean that the excellent potential for investment in Brazil will hold steadfast whoever wins the next election. Whether Brazil’s next president is Dilma Rousseff or José Serra, analysts remain equally bullish.

According to Gabriel Gaspar, a Chilean political scientist quoted in the Financial Times (FT), there will be few surprises in store when Brazilians vote for their next president in the second round on 31 October. For Mr Gaspar, Brazil “has disciplined state finances, a growing internal market boosted by the graduation of millions of Brazilians out of poverty and into the middle class, plus growing ties with China”. And whoever leads the next government will build on this base and strengthen the potential for growth and investment in Brazil.

Other analysts, also quoted in the FT, agree with these criteria. For Will Landers, manager of BlackRock’s Latin American Investment trust, “Brazil offers the best combination of a strong top-down story and the most attractive valuations from a bottom-up perspective”.

The manager of JP Morgan’s Brazil investment trust is just as bullish. “Brazil’s economic potential, fiscal soundness of its banks and cheap-stock valuations have turned Brazil into the ‘poster child’ for emerging markets,” says Sebastian Luparia.

Experts are unanimous in that Brazil faces many challenges such as updating infrastructure and investment in human resources. The new government will have to bring these to the top of the political agenda over the next four-year presidential term. Mr Gaspar believes that while, facing the new challenges will not be easy, meeting them is more than possible.

Out-going President Lula leaves a strong legacy of international presence and his predecessor will be keen to continue this. Its importance within the continent is huge – for Mr Gaspar, “South America would have no meaning without Brazil”. On the global front, Brazil is well placed as a respected member of the G20. Few international analysts doubt that Brazil will become a member of the UN Security Council in the near future. And in terms of other emerging markets, Brazil has a far better democratic record than Russia and China, and gets on well with its neighbours unlike the other emerging BRIC giant, India.

For the majority of analysts including Mr Gaspar, Brazil’s “future path is already mapped out”. Brazil now ranks as the eighth largest economy and its tandem of a huge domestic consumer market and giant export trade should ensure this ranking rises steadily over the next decade. This inexorable rise in economy and international presence will also guarantee the potential for Brazilian investments.

Obelisk’s own market research reflects the bullishness shown by financial analysts. We too believe that Brazil is by far the best option in emerging markets and that this will remain so for the near future. For Obelisk, Brazil’s investment potential is best illustrated by Mr Gaspar’s closing affirmation that “Brazil has a dazzling green light ahead”.

Contact Obelisk International on 0034 952 820 319. Via email: info@obeliskinternational.com or visit our website: www.obeliskinternational.com.

Latin America Investment Leads the Way

The latest HSBC survey confirms recent Bloomberg findings and put investment in Brazil at the top of global rankings. Between them, Latin America and Brazil are world investment hotspots.

According to those polled by HSBC Holdings plc last week, Latin America represents the best prospects for growth in investment over the next six months. In the survey, 30% of businesses ranked Latin America in top position for investment opportunities in the next semester. Latin America came ahead of China (25%) and Canada (15%), two other major trading regions for importers and exporters.

Latin America is favoured for its high economic growth – the region is set to grow 4.8% this year. Leading the Latin American boom are Brazil and Peru with Colombia and Chile also experiencing strong economic growth, which emphasises the area’s potential as a whole.

Of all the Latin American nations, Chile and Brazil represent the best bets for investment. Brazil is enjoying strong growth, record employment figures and the prospect of becoming the 5th largest economic power in the world within the next decade. Contrast this with many developed countries, currently facing high unemployment, burgeoning deficits and fears of a double-dip recession.

The HSBC survey also highlights the changing dynamics in world economics as emerging markets dominate the top-performing positions. Not only have emerging markets generally experienced a short recession, they are also leading the rest of the world to economic recovery.

With emerging markets set to represent almost half the global economy over the next few years, many multinationals are convinced that investment in these markets makes real business sense. Large companies are moving into emerging markets as part of their global strategy. And Brazilian investments tops the list for many – in the HSBC survey, 74% of companies said they currently trade with Brazil and a similar figure (76%) does business with China.

A particularly strong sector in Brazil is private equity with two-thirds of private equity deals in Latin America taking place here. The latest arrival is Blackstone, who now has a 40% share in the Brazilian Pátria. For the company, the creation of the Brazilian middle classes “has got very substantial momentum” and as a result, presence in Brazil is a must. Other private equity firms such as Carlyle Group and Warburg Pincus have also expressed strong interest in Brazil, proving Pátria’s point that “the competition is coming to Brazil”.

For Obelisk, the Bloomberg and HSBC surveys underline the investment potential in Brazil. As more businesses come to appreciate this potential, more surveys will highlight the fact that Brazil is the place to be when it comes to investment. Over the next six months, Obelisk expects to be joined by many more companies in Brazil.

Contact Obelisk International on 0034 952 820 319. Via email: info@obeliskinternational.com or visit our website: www.obeliskinternational.com.

Brazil Goes to Second Round

Brazil’s next leader will be decided on 31 October in the second round of presidential elections. The run-off will be between Lula’s candidate, Dilma Rousseff and José Serra. But, whatever the income, Brazil will continue its highly-successful macroeconomic policies.

Unlike some emerging markets, Brazil enjoys a stable democracy. And like so many things in Brazil, the latest elections were huge. The nearly 136 million voters were not only choosing their next president but 27 state governors, 513 deputies and 54 senators plus countless local representatives. However, despite the big numbers, there is little difference between party programmes, a sign that Brazil’s politicians are keen to continue what the Financial Times (FT) calls Lula’s “powerful mixture of tight monetary policy and generous social spending”.

Despite the polls and most expert opinions (including the FT and The Economist), Dilma failed to take a run-away victory in Sunday’s elections. Many analysts believed that, as Lula’s protégée, she would easily achieve more than half the votes and avoid a second round. However, Dilma has secured almost 47% of votes with her nearest rival, José Serra, coming second with nearly 33%. The biggest surprise came from Marina Silva, the green party candidate, whose 20% share of the vote was totally unexpected. Silva may now hold the key to presidential power.

So, Brazil voters must go to the polls for a second time. Results of the vote due in four weeks time are far from clear, although latest polls point to a Dilma victory.
Much will depend on Silva’s endorsement of Dilma or Serra (both candidates are busy courting the green candidate’s favour), although Dilma continues to enjoy unconditional support from Lula who has almost saintly status in Brazil. In the end, Lula’s statement that “a vote for Dilma is a vote for me” may tip the balance for Dilma in presidential victory. In any case, Dilma claims she’s happy to go for a second round stating that her party is “accustomed to challenges” and “does well in second rounds”. Lula himself is a veteran of second rounds after standing for three elections before he finally won in 2002.

Whatever the outcome at the end of October, the excellent conditions in Brazil for investment are unlikely to change. If anything, they will strengthen as both Dilma and Serra are firmly committed to maintaining Brazil’s current economic course.
Over the last 16 years, Brazil has followed a steady macroeconomic route, which has been upheld by parties from both ends of the political spectrum.

What the latest elections do illustrate is Brazil’s stable democratic system and the willingness from all politicians to maintain Brazil’s strong economic growth. This is excellent news for investment in Brazil, a clear winner in the Brazilian elections.

Contact Obelisk International on 0034 952 820 319. Via email: info@obeliskinternational.com or visit our website: www.obeliskinternational.com.

The Right Location for Brazil Property Investment

The Brazil real estate market is expanding fast to meet the demands of the up-and-coming middle classes. While getting on the first step of the property ladder is the most important factor for low-income Brazilians, for more affluent Brazilians, location takes priority.

The old adage that the three most important things about a home are location, location and location, is a global fundamental when it comes to successful property investment. And investment in Brazil is no exception. As the country moves forward and consolidates its economic strength and stability, Brazil’s middle classes are looking for homes in the very best locations.

This is particularly true of Brazil’s upper middle classes, denominated Class A/B and whose monthly earnings range from R$4,902 upwards (around €2,100). Although Brazil’s Class A/B runs to just 10% of the population, their purchasing power amounts to almost half the country’s total (44.1%) and represents big money in a country where consumer spending is expected to reach R$2.2 trillion this year.

Class A/B is Brazil’s fastest-growing class and as they move up the social ladder, they have increasingly higher aspirations. Owning a bigger and better home is one of them and a top priority is the home’s location.

When looking for the ideal location, upper middle class Brazilians want areas with good amenities. Shopping centres and supermarkets form an essential part of these amenities. Shopping centres have sprung up countrywide over the last few years as Brazil’s household expenditure booms. For the upper middle class, high-end shopping malls are popular and the Brazilian retail icon, Iguatemi, is a particular favourite. A synonym of luxury shopping, Iguatemi has numerous shopping centres throughout Brazil and several new projects in the pipeline.

Tired of stressful inner city life, upper middle class Brazilians are keen to move out to the suburbs. As a result, many outlying areas of large cities are undergoing expansion to meet this demand. These up-and-coming areas offer an escape from the busy city centres but are near enough to ensure easy commuting. And this isn’t just the case with Brazil’s biggest cities such as Rio de Janeiro and São Paulo; Obelisk market research has pinpointed suburbs outside Natal in north east Brazil as these up-and-coming areas.

Good transport links are obviously fundamental and conscious of this; the Brazilian authorities are making big investment in transport infrastructure. There’s also the investment in Brazil’s forthcoming sporting events so many cities will be home to new train and metro lines, and better road communications. For example, highways are being converted into dual-carriageways to allow quicker commutes – the BR-101 in Natal is a case in point.

Like their counterparts the world over, the Brazilian middle classes want to keep up with their neighbours. For Class A/B, this means quality properties with high-end facilities in the right locations. As a result, new developments are springing up outside Brazil’s large cities. And now you can tell a prestigious area by the number of large Brazil real estate companies building there. Sales figures are also a good indication and the best developments are selling out within months.

Like the Brazilian middle classes, the investor in property in Brazil is also interested in location. Obelisk believes that if you choose an investment in a location bringing together the right ingredients to make it undeniably attractive to the middle class Brazilian buyer, the investment will be a guaranteed success. As with buying property everywhere, an investment in Brazil has to tick all the location boxes.

Contact Obelisk International on 0034 952 820 319. Via email: info@obeliskinternational.com or visit our website: www.obeliskinternational.com.