Booming Investment in Brazil’s North East

A combination of rising income, buoyant foreign investment and booming property sales make Brazil’s north east the region of the moment. And the state of Rio Grande do Norte is doing particularly well.

A favourite for investment, Brazil’s north east corner is enjoying record figures in several areas of its economy. Figures recently released by Brazil’s Statistical Office (IBGE) show that Rio Grande do Norte state saw the second highest levels of foreign investments in Brazil in the first half of this year.

Investment from individuals (as opposed to companies) in Rio Grande do Norte reached US$8.4 million by the end of June. Significantly, investment levels in this part of Brazil accounted for 15% of all investment by foreigners in Brazil and Rio Grande do Norte was second only to São Paulo, one of the country’s largest and most populated states.

Investments in Rio Grande do Norte were mainly in the tourist sector – infrastructure, hotels and restaurants and travel agents – and ophthalmology products. Foreigners most interested in investment in north east Brazil were Italians, Portuguese, Spanish and American.

Real estate is a top Brazilian investment and Rio Grande do Norte is once again a favourite destination. According to the Natal newspaper, Tribuna do Norte, this year has seen a record number of new builds and property launches. At least 8,000 properties with a value in excess of R$2 billion have entered the market in Rio Grande do Norte so far this year, more than doubling the value of new builds in 2008.

All property development companies in Rio Grande do Norte are experiencing record demand for properties. Tribuna do Norte quotes one developer who recently sold 150 apartments in a newly-launched development in just a week. For Sílvio Bezerra, President of the state construction union Sinduscon, “this is a market for the buyer”. The availability of finance is key to the booming market for Brazil real estate. Easy-to-obtain mortgages mean that nowadays at least eight out of ten properties are financed compared with just two out of ten a few years ago.

Mr Bezerra sees no sign of the market slowing as demand continues to be exceptionally strong. However, he points out that the shortage of labour and construction materials could be a potential problem and says that many developers are getting round the issue by making construction material investment a priority.

Behind the demand are Brazilian consumers whose steadily increasing purchasing power means they can now afford to spend. Average income in Rio Grande do Norte has grown by almost 78% over the last seven years to reach R$703 a month. As a result, north east Brazilians are buying more consumer goods – households with landlines and mobile phones have more than doubled since 2003.

And the Brazilians are also investing in property – the number of properties in Rio Grande do Norte increased from 59,000 in 2003 to 192,000 last year. And with the area’s ongoing property investment, this figure will continue to increase markedly.

From the very beginning, Obelisk International earmarked the state of Rio Grande do Norte as a focus for investment in Brazil. For us, the area brings together essential investment criteria to allow for high returns. The latest figures on foreign investment, consumer spending and property launches in this part of Brazil more than confirm this potential.

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

Consumer Market in Brazil is Investment Winner

As Brazil’s economy grows, so does the Brazilian consumer market. From toothpaste to real estate, Brazil’s middle classes offer a wealth of investment opportunities.

Brazil is fast becoming one of the world’s top markets for all kinds of consumer products. 2010 has been a particularly good year for consumer spending – Brazilians will have spent R$2.2 trillion by December, the equivalent of Spain’s GDP. As a result, more and more multinationals have earmarked Brazil as a top investment priority.

The latest edition of the business magazine, Negócios, reports that a number of big global names have experienced record sales in Brazil this year. Unilever has discovered that its Brazilian subsidiary has now overtaken the UK to become Unilever’s second largest market. Renault, LG and Pepsico report similar patterns. And unsurprisingly, all these companies have big plans for further investment in Brazil.

According to Negócios, the consumer profile in Brazil has changed radically over the last year. Not only are the Brazilians buying more, they are looking for better quality goods. Items once regarded as luxury are now part of the daily shopping list as more and more Brazilians see their purchasing power rise.

Brazilian tastes are now more discerning. Pepsico has seen sales of its healthy food range grow by 1000% this year. LG is currently selling 10,000 washer-driers a month compared to 2,000 a year ago. LG has also seen big sales in side-by-side fridges, home theater systems and flat-screen televisions. Consumer spending in Brazil is undoubtedly big business.

The same trend is also obvious in more expensive consumer goods. Car sales in Brazil overtook those in Germany this year and for both cars and motorbikes, Brazil is now the world’s fourth largest market. Many global car brands such as Fiat, Ford and Volkswagen have been making major investments in Brazil since 2009 to take advantage of this booming market.

Big spending has also reached property. Brazil’s second largest real estate company, Gafisa, has just posted record net income profits in Q3. In the third quarter, the property giant made R$116.6 million, an 83% rise on the same quarter last year.

Sophistication is also reaching real estate as Brazil’s upper middle classes demand larger and better-quality properties. Many experts believe this is a niche market and one of the best areas for investment in Brazil along with the market for social housing catered for by the government programme, Minha Casa Minha Vida.

Obelisk market research has noted the huge rise in consumer spending since Brazil left its brief recession behind in Q1 2009. We believe the new middle classes with their aspirations for more and better consumer items are a fundamental behind many investment opportunities in Brazil. And as middle class purchasing power continues to rise, Obelisk is convinced that these opportunities will only get better.

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

Continuity for Investment in Brazil

After the recent elections little has changed in Brazil. Continuity is the political and economic watchword and a guarantee that investment in Brazil will continue offering huge potential.

Brazil’s new President, Dilma Rousseff represents a continuation of Lula’s 8-year government. Under Lula, Brazil continued the orthodox economic policies introduced earlier and made social spending the trademark of the new Brazil. As a result, the economy has gone from strength to strength and Brazilian investments are at their highest level ever.

Dilma is anxious to reassure the financial markets and investors in Brazil that they can expect more of the same from her government. She has already pledged to continue Lula’s economic policies. These have brought steady growth to Brazil whose annual GDP growth is forecast to average between 4% and 5% between 2011 and 2013, record employment levels and above all, unprecedented social changes.

Conscious that Brazil’s booming middle classes are key to progress, Dilma has also promised to continue big social spending. This is excellent news for opportunities for investment in Brazil since the new upwardly aspiring middle classes represent a niche investment area.

One of Dilma’s priorities is increasing the Brazilian minimum wage and she says she plans to study ways of raising the minimum wage by 20% next year. This increase would boost still further the new middle class wealth and by extension, the associated investments.

Brazil’s next cabinet is still a mystery and Dilma has yet to unveil her ministers’ names. There’s pressure from the business community to keep Henrique Meirelles as head of Brazil’s Central Bank. The Central Bank has played a key role in marking Brazil’s economic path and is seen as a model of banking practice.

Dilma’s main challenge as new President is to continue transforming Brazil into a developed nation. Infrastructure investment in Brazil’s forthcoming sporting celebrations is a priority as is reining in public spending. Since her election, Dilma has proved to be determined to take Brazil to greater things. “I will be the one who guarantees the country’s economic stability,” she said.

Dilma faces the risk of being overshadowed by her predecessor and mentor, Lula – his future role in Brazil after handing over power in January is unclear – but her first steps show she already has a good idea of the path she would like Brazil to follow.

This path is one of continuity and, if her policies are successful, more improvements. For Obelisk, this message is good news for Brazil investment – not only can we expect more of the same excellent potential but we will see more opportunities for high returns.

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

Social Housing Investment in Brazil on Target

Brazil’s biggest property investment is on target for 1 million homes by the end of this year. The government programme, Minha Casa Minha Vida, is gradually taking shape and providing much-needed homes for Brazilians.

Figures released by the Ministry of Cities show that by the end of December, a total of 1 million homes within Minha Casa Minha Vida will be under approval, built or completed. This massive real estate project in Brazil has already seen 170,000 homes completed this year with another 110,000 expected to handed over to low-income families over the next two months.

The Minister of City, Marcio Fortes, highlighted the success of Minha Casa Minha Vida so far and stressed the flexibility shown by the main parties involved in the project. Between them, the ministry, developers and Caixa bank (the provider of finance and mortgages for these properties in Brazil) are pulling out all the stops to ensure the project is a success.

Hardly a week goes by without the completion of a new Minha Casa Minha Vida project somewhere in Brazil. President Lula was recently in one of the Rio de Janeiro suburbs where he officially inaugurated the latest social housing complex to be completed in the city. The 910-home development is for Lula “a clear demonstration of how you can change the lives of the Brazilian people for the better”.

Minha Casa Minha Vida is one of the Brazilian government’s flagship programmes to reduce poverty in Brazil and allow families to buy an affordable property.

Investment in the programme runs to R$105.7 billion for a total of 3 million homes to be built by the end of 2015. The size of the investment means the project has plenty of spin-offs. Solar energy installations in the properties throughout Brazil are just one of them. The government recently approved subsidies for solar energy in Minha Casa Minha Vida homes making this one of the latest Brazilian investment opportunities.

The construction industry is also benefitting hugely from the increase in property building under Minha Casa Minha Vida. The National Construction Index is registering regular monthly increases – the latest for October points to a national rise of 0.51% on September’s figure and an accumulative figure of 7.26% for the last 12 months. Last month, the north east of Brazil saw the highest regional rise in the cost of construction with Rio Grande do Norte leading the provinces with an increase of 5.03%. Construction materials have gone up by 7.53% in Rio Grande do Norte this year, reflecting the big investment in property and infrastructure in this part of Brazil.

Minha Casa Minha Vida forms part of Obelisk’s proposals for investment in Brazil. As this giant housing project moves forward, Obelisk believes we can expect to see plenty more opportunities coupled with high returns.

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

Brazil Best in BRICs

Credit rating is a vital factor in investment considerations. And when it comes to a country with a stable credit rating for investment, Brazil is reportedly the best bet among the four BRIC nations and other emerging markets.

In a recent report, Standard & Poor’s finds that the stable democracy and political climate in Brazil are hugely advantageous. So advantageous that they mark the difference between investment in Brazil and the other BRIC countries (Russia, India and China). For Standard & Poor’s, Brazil’s “well-developed and stable democratic system remains the most critical factor supporting the rating and differentiating Brazil from the other BRIC countries”.

On comparison, the BRIC nations all look fairly similar. The four countries are huge in size and population – over 2 million square kilometres and home to over 100 million people – and all four have a GDP of over US$600 billion. Among the rest of the world’s nations, only the US can also boast these characteristics.

But, according to Standard & Poor’s, the similarities stop here. China and India share rapidly growing economies and the need for massive imports of commodities because of their limited natural resources. On the other hand, Brazil and Russia have wealthy economies, abundant natural resources and slower economic growth.

These elements mean that Brazil is able to maintain GDP per capita levels that are considerably higher than those in China and India. A look at graphics for GDP growth for capita clearly illustrates this. While India’s per capita growth will barely top 1% this year when China will scrape 4%, Brazil’s is forecast to grow at over 10%. For 2011 and 2012, India is expected to see less than 2% growth, China around 5% and Brazil an average of around 11%.

This impressive growth in per capita wealth translates into important potential for Brazilian investments. As the economy expands, millions of Brazilians are benefitting from the booming economy and joining the rapidly-growing middle classes.

Increased purchasing power has led to buoyant consumer spending, which registers impressive rises quarter after quarter. Unsurprisingly, Standard & Poor’s points out that “Brazil’s economic growth strategy remains anchored on the development of its domestic market”. It’s clear that the main engine driving economic growth in Brazil are the middle classes and their newly-acquired purchasing power.

Standard & Poor’s find that in some aspects, Brazil does not score as highly as the other BRICs. Brazil’s government debt is high (India’s is higher) and taxes are high on some areas of doing business in Brazil. But the credit agency praises Brazil’s low fiscal deficit, which is consistently maintained at around 2% to 3% of Brazil’s GDP. For Standard & Poor’s, this low deficit is “key to our upgrades of the sovereign over the past several years”. Another very positive factor is the “increasing reliance by Brazil on foreign direct investment”.

However, for Standard & Poor’s and for anyone looking at investment in Brazil, the over-riding difference between Brazil and the other BRICs is political. Of the quartet, Brazil is the only country with a strong and stable political system, which is ultimately its biggest advantage.

This is one of Obelisk International’s vital criteria for investments in Brazil. We believe that, while all the BRICs present interesting investment potential, only Brazil has a stable democracy that can provide a solid background for business and investment. For Obelisk International, the only BRIC offering peace of mind in this respect for investment is Brazil.

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

Brazilians Vote for Continuity

The Brazilians have voted for their first female president, Dilma Rousseff. By voting for Lula’s successor, the nation has made a bid for continuity, which is good news for the middle classes and for investment in Brazil.

In the recent second round of presidential elections, Dilma took 55.5% of the votes against the 45.5% of her rival, Jose Serra. Although Dilma is more of a back-office politician, her management skills and reputation for hard work led Lula to choose her as his candidate to continue his legacy.

And this legacy is an extraordinary one. Brazil is currently enjoying a booming economy, jobs are being created at an unprecedented rate, and the gap between the poor and the rich has never been narrower. For Helen Joyce, The Economist’s correspondent in Brazil, “Brazilians are feeling really good right now so people are voting for continuity”.

This continuity includes progression on the eradication of poverty, which Dilma has pledged as one of her priorities when she takes office as Brazil’s next president in the New Year. Dilma plans to build on measures already in place such as the social housing programme, Minha Casa Minha Vida and the countrywide education schemes.

Continuity also means more job creation and wage increases, the tandem behind the burgeoning middle classes in Brazil. The Brazilian middle classes are among the fastest growing in the world and their increased purchasing power offers huge potential for investment in real estate, education and insurance, for example.

Dilma will also continue Lula’s endeavour to reduce regional differences in Brazil. During the last eight years, Lula’s government has worked hard to develop the north of Brazil to bring prosperity to the region. Although there is still work to do to bring the northern half of Brazil to the same level as the southern half, the results of the large-scale investment in north Brazil are obvious.

To fulfil the nationwide wish for continuity, Dilma will maintain Lula’s highly-successful economic policies, which have led to the abundance of opportunities for investment in Brazil. In the key areas of economy and finance, Dilma is expected to choose cabinet ministers who will carry on Lula’s policies over the next four years.

It will not all be plain sailing for Dilma. The Brazilian economy has several structure problems such as excessively complex taxation rules and rigid employment legislation, and these problems need addressing. However, while Dilma is unlikely to enjoy the same level of popularity as Lula (83% currently), Brazil’s strong foundations will comfortably ensure she is able to continue along the route to further economic prosperity for all Brazilians.

At Obelisk International, we welcome the Brazilians’ vote for continuity. Never before have opportunities for investment in Brazil been so good and like the Brazilians, we are sure Dilma will keep it that way.

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

J.P. Morgan’s Big Investment in Brazil

Foreign investment in Brazil continues full steam ahead. The latest addition to the investor list is J.P. Morgan who has just bought Gávea, one of Brazil’s largest hedge funds.

This acquisition is one of many this year as the world’s banks and funds turn their attention from the jaded traditional markets to the bright lights of emerging markets. Brazil with its stable democracy, steady economy and huge potential is one of the biggest attractions for financial investment. And the fact that the banking system has rock solid foundations is seen as a huge advantage by foreign financiers looking to invest in Brazil.

Gávea, based in Rio de Janeiro, is one of the biggest hedge funds in Brazil with an extensive portfolio that encompasses US$2 billion in its global fund and US$2.5 billion in private equity business. Investments in the private equity portfolio include around 25 companies in Brazil.

Leading Gávea is one of Brazil’s financial gurus, Arminio Fraga. His curriculum vitae makes impressive reading. When he was governor of Brazil’s central bank, Mr Fraga was one of the engineers of the inflation-targeting system. The system, still used by Brazil today, has been hugely successful in keeping inflation in check and therefore ensuring the economy can grow steadily. Mr Fraga is currently chairman of Brazil’s stock exchange, Bovespa, one of the fastest growing in the world and consistent producer of high investment returns.

Mr Fraga will remain at the top of Gávea and oversee the company’s incorporation into J.P. Morgan’s asset management group, which has over US$20 billion under management. For J.P. Morgan, this major move into Brazil will ensure the company continues to strive for excellence. Chief Executive of J.P. Morgan Asset Management, Mary Callahan Erdoes said “It isn’t important to J.P. Morgan to be the world’s biggest asset management but to be the best”.

J.P. Morgan is busy expanding its Brazilian Investments. The global financial services giant has increased its staff in Brazil from 300 employees to 500 this year and according to sources quoted by the Financial Times, this figure is set to reach 1,500 over the next couple of years. J.P. Morgan is extremely bullish on Brazil – the manager of the company’s Brazil investment trust recently said that “Brazil’s economic potential, fiscal soundness of its banks and cheap-stock valuations have turned Brazil into the ‘poster child’ for emerging markets”.

This year has seen a sharp rise in foreign presence in the financial market in Brazil. UBS joined forces with Pactual, a Brazilian investment bank and Blackstone acquired 40% of Pátria, one of the largest wealth management funds in Brazil. Other private equity firms are also flocking to Latin America’s largest country to take advantage of the excellent investment opportunities in Brazil.

The market research team at Obelisk has noticed a definite surge in interest in Brazil this year as more investors recognise the huge potential available throughout this huge country. As this potential develops into solid returns – and Brazil offers some of the highest investment returns around – interest will undoubtedly grow even higher.

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