Investment in Brazil Warms up for World Cup

The 2014 World Cup means big business for Brazilian investments, employment and the economy generally. Latest figures point to economic growth in excess of US$70 billion.

As well as one of the world’s most important sporting festivals, the World Cup is a huge money-making machine. 2014 will be no exception for Brazil as can be seen from the expected earnings just announced by the Brazilian Ministry of Sport.

Big Numbers

Overall, the Brazilian economy is predicted to grow by US$70 billion. This growth will mostly come from public and private investment in Brazil, in areas such as infrastructure and services. Consumption by visitors to the World Cup is also expected to bring a major boost to Brazil’s already buoyant economy.

Employment will see huge growth over the next three years. Some 330,000 permanent jobs are expected to be created throughout Brazil where unemployment is currently at a record low of 6.2%. For Obelisk International, this job creation will inevitably lead to more middle class wealth and in turn, generate further income for other sectors of the economy.

Tourism will be one of the sectors most benefitted by the football tournament. Over 600,000 foreigners will travel to Brazil to watch the games, bolstering the fast-growing Brazilian tourist industry. Foreign visitors will generate US$2.5 billion in extra income for Brazil.

Along with earnings from foreign visitors, the Brazilians themselves will be adding to the country’s coffers when they travel around Brazil to see the games. The Ministry of Sport estimates that the World Cup will generate US$3.5 billion in earnings from the 3 million Brazilians who go along to watch.

Adding up the Investment

Brazil, along with preparations for the World Cup and Olympics, is also making huge investment in real estate and hydropower. The 2 million homes being built in the Minha Casa Minha Vida programme represent the biggest Brazilian property investment ever. These plus two of the world’s largest hydropower plants do not leave a lot of leeway for more construction financed by public investment in Brazil.

Costs for materials and labour have risen sharply since Brazil was awarded the World Cup and the budgets for several stadiums are now considerably higher. The Sports Minister believes the construction of Brazil’s new stadiums will come out at around US$7,000 a seat, 17% higher than originally expected.

Despite the additional costs – common to preparations for all major sporting events – the overall figures look hugely positive to Brazil, set to reap huge benefits from the 2014 World Cup. Obelisk International believes the next three years are full of opportunity for Brazil and Brazilian investment.

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Experts on Investment in Brazil Have Their Say

New York recently hosted the Bloomberg Link Brazil Conference. The event brought together Brazilian investment experts and their views on Brazil’s economy and future.

Hot topics among analysts on investment in Brazil were inflation, Brazilian currency and interest rates. Those present at the conference were also asked by Bloomberg on the possibility of Brazil suffering a credit bubble, a concern that has been aired by some media recently.

General opinion was upbeat and the Brazilian investment experts painted a positive picture for the Brazilian economy over the next few years. As one analyst said, “everyone is in love with Brazil”, a claim backed up by foreign ownership of 40% of Brazilian stock.

Inflation & Interest Rates

For Standard & Poor’s, inflation in Brazil is high, but their representative pointed out that when the rate is put “into the bigger picture, we don’t see it moving out of control”. Alexei Remizov from Global Capital Markets at HSBC said high inflation rates could affect Brazilian investments but that “it is very clear that the government is taking action to curb inflation”.

Consensus is that interest rates will continue to rise. Barclays Capital predicts two further rises this year. For Oppenheimer Funds, “the highest real interest rates in the world” plus the fact that Brazil is one of the few countries in the world with a primary surplus mean that “it’s hard not to have overweight in Brazil”.

Froth not Bubble

For the CEO of Equity International, Gary Garrabrant there is no evidence of a bubble in the Brazilian credit market. “We see growth opportunities driven by fundamental demand in Brazilian real estate sectors,” he said.

Obelisk International also sees this growth potential in property in Brazil, particularly among the middle classes, one of the engines behind this “fundamental demand”. The representative from ICAP, one of the largest brokers in Brazil, pointed out that the new middle class consumers are demand drivers and this, he said “shows it’s an event”.

The Chief Brazilian Economist at Barclays Capital also sees no sign of a bubble but rather “a little bit of froth”. Marcelo Salomon believes this will “be cleaned out” as the economy slows down. (After last year’s GDP growth of 7.9%, Brazil is looking at around 4% for this year.)

Bright Future for Brazilian Investment

Furthermore, Mr Salomon sees no problem of debt overhang with consumers. Barclays Capital believes that the Brazilian real should not be depreciated despite the recent high rises in Brazilian currency exchange rates. For Mr Salomon, the future looks good for Brazil – “things are going to continue as they are right now for a while,” he said.

Obelisk International coincides with this opinion. Our market research points to more of the same when it comes to investment potential, particularly in north east Brazil where lower foreign investment and domestic wealth levels give more room for manoeuvre.

Contact Obelisk International on 0034 952 820 319. Via email: info@obeliskinternational.com or visit our website: www.obeliskinternational.com.
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Phase Two of Minha Casa Minha Vida Investment Underway | Obelisk International News

Projects for the second phase of the largest investment in real estate in Brazil are set to start. With the publication of the rules and regulations for Minha Casa Minha Vida 2, pre-approval for development of 860,000 homes should soon be underway.

President Dilma confirmed the next stage of Brazilian investment in social housing in June. Last week, the ministry responsible for overseeing this huge project (Ministerio de Cidades) published the legal requirements behind the construction of 860,000 properties in Brazil. Developers of Brazilian real estate can now submit projects to the authorities for approval.

Regional Distribution

The main emphasis of the second stage of Minha Casa Minha Vida concentrates on units for families with monthly income up to R$1,600. The south east region of Brazil (its most populated area) will receive 357,005 properties. Brazil’s north east has an allocation of 258,683 homes and 89,780 units will be built in the south. The north and centre-west regions will receive 82,285 and 72,247 properties respectively.

Within the regions, government investment in Brazil social housing will be higher in Sao Paulo state where over 181,000 Minha Casa Minha Vida properties will be built. Minas Gerais state with 83,880 homes has the second largest allocation followed by Rio de Janeiro (77,565). At the other end of the scale is the state of Acre in the north western corner of Brazil with just 3,306 Minha Casa Minha Vida units.

Values of Minha Casa Properties

Brazil social housing has different maximum values depending on its location. For this next stage of Minha Casa Minha Vida, these values have been raised. Reflecting its population and biggest allocation of homes in the programme, Minha Casa Minha Vida properties in Sao Paulo have the highest values.

The highest price for a social housing unit for a family earning up to R$1,600 a month in Sao Paulo is now R$65,000 for an apartment and R$63,000 for a house. Similarly high prices are found in Rio de Janeiro and Minas Gerais. For Rio Grande do Norte state, where Obelisk International Minha Casa Minha Vida investments are located, the maximum buying price is R$53,000 for an apartment and R$52,000 for a house.

Social housing in the second phase of the programme will also incorporate changes in size and construction. Solar panels are now obligatory on all units, which must also include ceramic flooring throughout and tiled bathrooms and kitchens. Provision is also included for commercial premises in apartment blocks.

Obelisk International is confident that the next stage of Minha Casa Minha Vida will continue the success of the first. The alterations in value are important to allow developers to keep up their investment in Brazil social housing and run profit-making enterprises. Obelisk International has advanced plans to develop several more Minha Casa Minha Vida projects in north east Brazil and thereby continue to offer investors one of the best portfolio additions on the market.

Contact Obelisk International on 0034 952 820 319. Via email: info@obeliskinternational.com or visit our website: www.obeliskinternational.com.
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UK Push on Brazilian Investment | Obelisk International News

The recent visit by British Deputy Prime Minister Nick Clegg to Brazil underlines the growing importance of UK investments in Brazil. Mr Clegg wants British exports to Brazil to double by 2015.

In his first official visit to the country, Mr Clegg spoke of Brazil as a “natural partner” for the UK and emphasised the many Brazilian investment opportunities open to British companies. “As Brazil is set to become the fifth largest economy in the world, UK companies should seize on every opportunity to prosper in Brazil,” he said.

UK exports currently run to £2.1 billion a year and the government is keen for British investment in Brazil to reach £4 billion over the next four years. During the visit, deals worth £2.5 billion were announced and further Brazilian investment opportunities earmarked, moves that were welcomed by foreign companies already in Brazil such as Obelisk International, who have four Minha Casa Minha Vida projects in the Rio Grande do Norte region.

British Companies Waking Up to Brazil

Investments by British companies have up to now been slow and other European countries have made considerably more Brazilian investments. Former UK Consul General in Sao Paulo, Martin Raven claims that “British business has taken a long time to take Brazil seriously”.

In a BBC article, Mr Raven states that Germany, France and Italy are much further ahead and have established a solid presence in Brazil. Danone, Parmalat and Siemens, for example, are now household names and Sao Paulo has more German companies than any one city in Germany.

However, Mr Raven says this attitude is changing and he has noticed that “British companies are waking up to Brazil” and the massive investment opportunities available there. He believes British companies have numerous fields to explore when investing in Brazil and he calls for further efforts from the British government to promote these.

Windows of Opportunity

While he recognises that investing in Brazil is not easy, Mr Raven cites several successful Brazilian investment ventures by British companies including Lloyds of London in reinsurance and Experian in the field of credit. Credit has experienced huge expansion recently on the back of the rise in loans for retail goods and mortgages for Brazilian real estate.

Mr Raven believes that UK-Brazil cooperation should go beyond trade because the two countries have a great deal in common. He would like to see a British-Brazilian partnership on many issues including development and climate change. For his part, Mr Clegg also stressed the common ties of democracy and human rights between the UK and Brazil.

In common with many observers, Obelisk International believes that British interest in Brazilian investments has been slow to arrive given the potential for success. Like Mr Raven, Obelisk International is also aware of the pitfalls in Brazil for foreign investors without local knowledge but share his opinion that investment in Brazil “will pay off”.

Contact Obelisk International on 0034 952 820 319. Via email: info@obeliskinternational.com or visit our website: www.obeliskinternational.com.
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The Middle Way for Brazilian Investment | Obelisk International News

When it comes to distribution of income, Brazil has the recipe for success. As the economy and investment in Brazil grow, new wealth is shared and inequality reduced. As a result, the Brazilian middle classes are a force to be reckoned with.

The middle classes in Brazil have experienced massive growth over the last decade. They now include 105 million people, 133% more than in 1993. According to Marcelo Neri, sociologist and author of numerous studies on the Brazilian middle classes, Brazilian investments and economic activity should focus on this sector of the population.

In an interview published in the business magazine Istoe Dinheiro, Mr Neri says that Class C (earning between R$1,200 and R$5,300 a month) “represents a safe haven for Brazil”. He believes that this strong class base provides a guarantee of Brazil’s future economic strength.

New Investment Focus

Class C has greater purchasing power than Classes A and B, and accounts for 46.3% of total consumption in Brazil, making Class C the dominant class. According to Mr Neri, Brazilian and foreign companies are gradually waking up to this new social reality and adapting their Brazilian investment strategies accordingly.

The Brazilian middle classes are an important focus for investment in Brazil and businesses are fitting their products to middle class demands. These range from small items such as kitchen appliances and computers to big purchases such as vehicles and homes – the markets for Brazilian real estate and cars are among the world’s fastest growing.

Balance of Wealth

But for Mr Neri, the most important aspect of the rise in the Brazilian middle classes is that they prove inequality is being reduced. Massive government and private investment in Brazil has led to strong economic growth and the wealth from this growth is being distributed among Brazilians. As a result of this wealth distribution, Class C Brazilians are receiving better education and employment opportunities leading to a better quality of life.

Mr Neri believes that Brazil has achieved the right balance between a strong state and a strong market, a difficult feat. This “middle way” comes from public iniciatives such as the government investment in Minha Casa Minha Vida social housing and the Zero Hunger programmes. These in tandem with private investment in Brazil have achieved a spread of wealth throughout society.

As Brazil’s economic growth progresses – GDP growth of 5% is predicted for this year – the middle classes continue to grow. For Mr Neri, this growth is Brazil’s “life insurance” and what sets Brazil apart from most of the rest of the world. He claims there are few other countries where strong economic growth is matched by a marked reduction in inequality.

Obelisk International’s Brazilian investments have always focussed on the middle classes and our market research has clearly shown that Class C is a driving force behind many investment opportunities. This is particularly true of the social housing programme, Minha Casa Minha Vida, giving millions of Brazilians the chance to own a home.

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Minha Casa Minha Vida Enters Second Phase | Obelisk International News

The government has just announced the second phase of Minha Casa Minha Vida, currently the largest single investment in Brazilian real estate. This phase of the social housing programme will allow millions more Brazilians to realise their dream of owning a property in Brazil.

In a recent radio interview, Brazilian President Dilma Rousseff announced the start of Minha Casa Minha Vida 2. The second stage aims to build 2 million properties in Brazil for low-income families. Dilma claims that it will now be even easier for Brazilians to buy a property and realise their dream of owning their own home.

Part Two of the government Minha Casa Minha Vida investment brings changes to the characteristics of the properties. All social housing units will be larger, tiled throughout and incorporate solar heating. A significant proportion of properties in the new phase will be for families earning below R$1,600 a month in Brazil.

Real Estate Investment Drives Economy

Dilma’s predecessor Lula was the instigator of this much-needed social housing project. Unsurprisingly, given Minha Casa Minha Vida’s excellent uptake, Dilma is a keen advocate of this huge investment in property in Brazil. “The construction of millions of homes moves factories, business and employment,” she said in the interview. For Dilma, Minha Casa Minha Vida is “an engine driving the whole economy and benefitting everyone”.

The programme’s benefits have been felt nationwide and this in tandem with the massive construction for the forthcoming sporting events will continue to create employment and wealth. In turn, this will mean more Brazilians families become part of the middle classes, one of the main drivers behind Brazilian investments.

Caixa Bank Finance

Caixa bank, the provider of finance for Minha Casa Minha Vida, has announced the second stage of funds for the social housing investment. New loans for properties in Brazil from Caixa up to mid-June came to R$30.8 billion, 4% higher than the same period last year. Caixa mortgages generally are up 17% this year.

As well as the Minha Casa Minha Vida source of funds for developers and mortgages for buyers, Caixa is the largest provider of mortgages in Brazil. The market share for the government bank amounts to over 70% and Caixa expects to approve mortgages on Brazilian real estate worth R$81 billion this year.

Obelisk International welcomes the official launch of the second phase of Minha Casa Minha Vida programme and sees this huge investment in social housing as an excellent opportunity for millions of Brazilians to improve the quality of their lives. It also opens further windows for Obelisk International investment in Brazil.

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

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