Investing in Brazil: an open and diversified economy with a wide array of opportunities

World’s Cup is over but it is impossibile to stop talking about Brazil. Why? Because Brazil is South America’s most influential country, an economic giant and one of the world’s biggest democracies with stable tax end legal environment.

At a time when global business is confronted with on going economic uncertainty, Brazil stands out as a stable economy underpinned by solid growth

Brazil is an open and diversified economy with a wide array of opportunities across multiple productive sectors. For many investors, considering growing a business in a market as vast and dynamic as Brazil is an exciting prospect. This is why the Government of Brazil is making a concerted effort to help support international investors who are developing business projects in Brazil. Brazil is open for business, and we are here to help.

At a time when global business is confronted with on going economic uncertainty, Brazil stands out as a stable economy underpinned by solid growth. In 2012, Brazil was the world’s third-largest recipient country for foreign direct investment. In the past two years alone, businesses and entrepreneurs from across the globe have invested a record US$132 billion in Brazil

Leading Regional Economy

Brazil is a global growth engine and the second-largest emerging market in the world after China, with a nominal GDP of $2.4 trillion in 2012 and a 3.8% average GDP growth rate over the last decade (2002-2012).

Brazil’s economy rests on solid foundations of macroeconomic stability and inclusive growth. This enabled Brazil to weather the global economic crisis well, with the economy rebounding from the 2009 global recession with 7.5% growth in 2010

Major Insfrastructure Projects

Brazil is making unprecedented investments in infrastructure under the Accelerated Growth Program and the Logistics Investment Program.

The pipeline of investment projects includes 10,000km of new railways, 7,500km of highways to be widened and extended, development of 270 regional airports, new urban mobility projects for Brazil’s medium and large cities, new, efficient and integrated ports, the development of 4 international airports, new electricity transmission lines and hydroelectric power plants.

The new projects will reduce costs for business and generate related business activities in the transportation and logistics segment

Buildings in Rio de Janeiro

Huge Domestic Market

Brazil has one of the largest consumer markets in the world, with over 201 million inhabitants, and it is growing fast. It is due to become the fourth-largest economy in the world by 2050 according to PwC. 40 million new consumers have joined a burgeoning middle class since 2003, driving growth across a variety of sectors.

Over the past seven years the real estate sector has undergone significant development and diversification in Brazil. During this period the most important domestic developers have conducted IPOs, a large number of new Real Estate Investment Trusts (REITs) and hospitality related funds have begun operating and sophisticated new instruments with strong returns have been introduced to the market. In the early 2000s there was almost no private equity activity in Brazil. Now some experts estimate that there is at least US$10 billion available in funds from the United States, United Kingdom, Canada and the Middle East, ready to invest in the country.

Anchored by a steady level of consumer demand, credit expansion and rising income since 2003, the Brazilian government and the private sector have jointly worked to improve housing supply for the population. According to the Brazilian Central Bank, secured lending represents only 6.3% of the country’s GDP, compared to 15% in Mexico and Chile, 60% in Spain and 70% in the USA. Risky markets that have experienced bubbles and crises reached rates higher than 50% of GDP for lending.

Moreover, Brazilian home lending mechanisms are very conservative by nature. For example, it’s not possible to finance more than 80% of the property’s value or to approve additional mortgages for the same property, which is different than certain other markets. In 2003 the SFH – Housing Financing System – lent R$2.21 billion to finance 36,480 properties; in 2012 R$82.76 billion was lent to finance 453,209 units, for an increase of 4,575%.

With housing deficit level estimates ranging between 5 and 7 million, there is still a huge market for real estate development– notably in the low-income segment. For this reason, the government is expected to boost “Minha Casa, Minha Vida” program in the coming years.

This has led Brazil to be considered, for the second consecutive year, the most attractive emerging market to invest in and the second-most effective in generating capital gains, second only to the USA, according to AFIRE – Association of Foreign Investors in Real Estate.

Despite the house price boom in the country, a recent survey by FGV – Fundação Getúlio Vargas – points out that, compared to countries in Europe and Asia, Brazilian prices are still quite cheap. For instance, the average price per square meter in London is US$21,460.00, US$15,122.00 in China and US$6,931.00 in Brazil.

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