Biography

Produced by the Brazil Real Estate Partners, this website is your free resource to investing in one of the worlds fastest growing economies. We provide objectively written information e-books in line with market changes; up-to-date graphs via our factfiles; detailed state guides; regular interviews; articles on key issues and much more for anyone with an interest in Brazil real estate and land.

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Why Real Estate in Brazil?

With its excellent growth prospects and solid economic fundamentals, global property investors are focusing their attention on the largest Latin American country which has visibly gained the reputation of offering strong and stable returns. Below are some of the reasons why:

  • Brazil maintained a relatively healthy position throughout the global economic downturn and emerged out of recession much quicker than most developed countries. The country continues to achieve growth levels in-line with developed and emerging nations - as OECD statistics in the graph below demonstrate:

    OCED Graph

  • Brazil's property prices are viewed as attractive as the country has a floating exchange rate which has, for an extended period, been unpegged to the US dollar;
  • The majority of the Brazilian population has no or very little debt and the mortgage market is comparatively lowly leveraged (secured lending represents only 3% of the country's GDP; compared to 68% in the US, 11% in Mexico, 20% in Chile and 45% in Spain);
  • The country's banking system has was commended for its high regulatory standards at the 2009 'Financial Stability Forum' in Basel. The minimum Basel Ratio of the Brazilian banking system is 11 percent, 3 percent higher than what is suggested in the Basel Accord. Most banks, in reality, operate much higher than this level (at over 17.5%) with low leverage ratios (over six times their capital holdings);
  • The country has maintained consistently high levels of international reserves throughout the global economic downturn;
  • Brazil is a member of a diverse world organisations including Mercosul, the G8+5, the G20, SACN and the Cairns Group (and is also pursuing seats at the OECD, OPEC and the UN Security Council);
  • Government schemes such as the Bolsa Familia (a program of cash transfer to the poor) and the Minha Casa, Minha Vida housing initiative (grants and financing to alleviate the country's housing deficit of 7.9 million homes) are bolstering the country's economy whilst alleviating income inequality;
  • The government is actively encouraging Brazil's buy to let industry in the form of increasingly relaxed laws providing favourable rights to landlords;
  • With being awarded both the World Cup 2014 and the Olympics in 2016, Brazil looks set to benefit from permanent infrastructure investment, an influx of foreign visitors and job creation as a result of these events;
  • Large scale international investors, including American billionaire Sam Zell's Equity International are continuing to expand in commercial property, farms, industry warehouses, infrastructure and logistics in the coming years;
  • According to Business Monitor International statistics (Q3 2009), despite global financial uncertainty, tourism has actually increased. Brazil has the sixth largest number of world heritage sites of the 130 countries evaluated by the United Nations World Tourism Organization (UNWTO); it also has the same ranking for its human, cultural and natural resources;
  • Credit rating agencies have, in recent times, increased their ratings of the Brazilian economy (in September 2009, Moody's gave the country it's BAA3 rating citing Brazils 'strong economic and financial resilience' whilst, a year before, both Fitch and Standards & Poor increased their ratings). According to the World Economic Forum in 2009, Brazil was also the number one country in upward evolution of competitiveness for the year - gaining eight positions, higher than Russia and closing the gap between China and India;
  • The entry of hundreds and millions of people into the middle class across the globe has boosted Brazilian commodity and agricultural trade co-efficient with exports including soy (where Brazil has a 40% global market share), orange juice (80%), chicken (20%), coffee (30%), tobacco (20%), beef (20%). Despite global recession, the country's economy is significantly more open to trade and investment (trade now accounts for 25-30% of Brazil's national income, up from 15-20% over the previous forty years);
  • A legal system - once known as a 'labyrinth' of statutes, rules and regulations - that has been hugely simplified due to the enactment of decrees such as the 'Legislative Consolidation Programme' (passed in 2002 where some 10,000 laws of general character were compressed into approximately 120 statutes);
  • It is widely believed that the country is economically and politically stable and has enjoyed a sustained period of sound macro-economic management;
  • Policies on alternative energy, initiated in the 1960s and 70s, have bought unanticipated benefits to the country's economy. As post-Kyoto political pressure mounts on the need to protect the fragile global climate, it is highly likely that a premium will be placed on carbon-efficient energy sources and sequestration. Brazil remains in an excellent position to capitalize on this trend with its ever-expanding biofuels, wind and hydro-electric industries as well its vast reserves of freshwater and bio-diverse rainforests;
  • Officials believe that there may be up to 50 billion barrels of offshore reserves near the southern coast which is enough to turn Brazil into a gas and oil giant;

The Risks of Real Estate in Brazil

In the current economic climate, it is ever-important to balance both the risks with the rewards - particularly when it comes to investing overseas. Our aim is to provide our members with a support system with extensive information to enable them to make their own decisions based on fundamental investment principles and not speculation. Indeed, it is very easy to paint a rosy picture about Brazil's growth prospects and; whilst the country remains at the top of many investors destination lists; it should be noted there are several economic, social and political risks, namely:

  • The effects of the global economic crisis cannot be ignored and, as with most countries in the world, Brazil has had to deal with factors such as a slowdown of exports (as the dip in the graph above demonstrates), price falls of primary goods, decreases in money remittances, a reduction in FDI and a downfall of lending ability;
  • Housing finance is dominated by public controlled banks (who currently own 73% of outstanding loans) and there is a concern that the mortgage market's ability to grow in line with the economy will be impeded with the weight of government legislation and barriers to entry for private banks;
  • A common issue facing foreign investors is the lack of public access to concrete sold housing data meaning that reliance needs to be made on agents whose pricing estimates may be ambiguous and often speculative;
  • Despite rating increases of the major international credit agencies, Fitch recently reported that it was reluctant to further upgrade the country over concerns over public spending levels;
  • As the largest country in the world, it would come as no surprise that a number of microcosmic real estate markets exist within the country. Whilst it is ever-important to monitor Brazil's macro housing patterns, investors should be aware that some parts of the country are over-saturated and inflated (see our area guides for more information);
  • President Lula himself has been quoted as saying that the huge windfall that discovery of vast oil fields, if not managed effectively, could end up being a 'curse' as opposed to the country's passport to the future (although in late 2009, Brazil was seen reforming its oil laws with the intention of diverting a significant portion of the country's oil wealth towards improving education systems and combating poverty). There has also been logistical concern with regards to the huge depths of water and 'pre-salt' which will have to be drilled to access the petroleum;
  • Whilst tourism levels have increased, there is a concern that visitors travel from countries with low per capita budgets (for example, from the surrounding South American countries);
  • Due to its huge size, concern remains as to the country's ground transport network and ICT (information and communications technology) infrastructure - although a significant amount of investment is expected in the coming years;
  • At the present time it is very difficult for a foreign investor to leverage real estate through mortgage finance. However, there are a number of developer financing programs available for real estate investors as well as rumours of foreign investor mortgages being developed;
  • Despite several improvements across the board (due to a number of government sponsored programmes), crime and violence remains a problem in some Brazilian cities. Real estate and land buyers need to pay close attention so as to ensure they are not investing in undesirable areas.

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The Brazil Real Estate Investment Guide

We aim to provide detailed, indispensible and free guidance information for anyone looking for information on real estate investing in Brazil. Below are a handful of the benefits that you will receive as a member:

  • Access our regularly updated Brazil real estate and land buying information guides;
  • Monthly factfiles with the latest statistics relevant to Brazilian real estate and land investors;
  • Detailed state guides - developed to provide an in-depth insight into all municipalities of Brazil;
  • Regularly updated news, hints and tips on all aspects relating to Brazil Real Estate;
  • Explore the real estate investment strategies currently being offered to foreign investors and their relative pros and cons;
  • Network with other Brazilian real estate investors through our social media channels.

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