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Article - 10 Reasons to Invest in Brazil

by Nuno Sobral, Partner and Manager at Nobreza - Empreendimentos Imobiliários.

Brazil has become one of the most wanted countries for foreigners looking for investment opportunities, including through foreign direct investment in productive acticities, such as the agribusiness and the energy sector, through investment in the stock market, but also people looking to investing in real estate or just acquire a second home. As one of the BRIC counstries (Brazil, Russia, India and China), Brazil economy has been growing by 5-6 per cent a year and, until latelly, companies earnings growth was close to 20 per cent, and stock valuations remained supportive. So, what are the top 10 reasons why you should invest in Brazil? According to me, these are the top reason to invest in Brazil:

1. A growing economy - Brazil is one of the four largest developing economies in the world and according to Goldman Sachs, by 2050 Brazil will be the world’s 5th biggest economy;
2. A young and growing population - Brazil has an expanding workforce and developing middle classe, which will boost earning and spending power in Brazil, and this in turn will drive domestic growth;
3. Plentiful supply of fertile land and  huge amount of fresh water - these factors have combined to make Brazil the world’s largest supplier of a huge range of soft commodities from sugar and coffee to beef and chicken. Over the last decade Brazil’s agribusiness has increased 47%;
4. Huge reserves of hard commodities - Brazil is one of the world’s largest producers of iron ore and also has good deposits of uranium, nickel, gold and platinum. Better still, it appears to have a significant amount of oil. If the deposits are as big as they seem, Brazil could end up in the same oil-exporting league as the Gulf countries and Venezuela;
5. Largest exporter of ethanol - Brazil supplied 42% of the world’s ethanol that was used for fuel in 2006. Brazil’s ethanol is derived from the country’s vast sugar can supply and, in addition, ethanol from sugar cane produces 8.2x the amount of energy it takes to make (corn produces 1.5x). Internally, Brazil’s ethanol demand has surged due to government mandates that require ethanol to be used as fuel for its cars. In 2007, 71% of cars manufactured in Brazil used ethanol in either an all ethanol or flex fuel (blend of ethanol and gasoline) design;
6. Huge Federal Government Investment programs in infrastructure - although insufficient infrastructures are still a constraint on Brazil’s economic growth, the Federal Government is planning several infrastrutural investments which are set to both improve the actual situation and provide investment opportunities for private companies.
7. Underdeveloped real estate market - due to continuous years of recession and lack of purchase power during the 80’s and 90’s, Brazil’s property market is still in his early phase. Farmland and oceanfront property costs pennies on the dollar compared to those in developed countries.  Brazil’s almost 200 million citizens are also driving demand in real estate, and it’s getting easier for them to buy houses thanks to new government measures to make mortgages more accessible to all Brazilians. Moreover, if a US citizen used dollars to buy property in Brazil four years ago, his investment would have doubled due to currency appreciation alone. Back then, the Brazilian real was four-to-one with the dollar—today it is at around R$ 2.30 to $1;
8. Value for money - construction costs in Brazil are half the cost of building in the United States and Europe, suggesting that investors can afford a higher standard of living when in Brazil. Also, low cost of living and low labour costs guarantee cheaper production costs in Brazil than in developed countries;
9. Inflation under control and interest rates dropping - The Brazilian central bank has been recognized as doing a great job in keeping inflation at check (something unthinkable for Brazil, just a few years ago). Moreover, it has been done with dropping interest rates. The steadily fiscal reforms and economic stability should allow Brazilian interest rates to drop even more significantly;
10. Natural beauty and friendly population - Brazil is internationally known for its natural beauty, beaches, nice weather, carnival, music and culture. Brazil’s white sand beaches are pristine enough to convince even the most conservative property investor of the coastline’s value and man-untouched landscapes are still plentiful. Moreover, tourist arriving in the country soon become enchanted with the mixture of colors, races and cultures of the people as well as the way they are received by the friendly and happy population.

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