Biography

The Brazil Real Estate & Land Investment Guide is your free and regularly updated resource to one of the world's fastest growing and promising markets. Please subscribe to our weekly newsletter by entering your name and e-mail to the right or by clicking here.

Why Real Estate in Brazil?

With its excellent growth prospects and solid economic fundamentals, in addition to healthy domestically driven market, an increasing number of global property investors are focusing their attention on the largest Latin American country. Below are some of the reasons why:

• Despite what has been rapid and debatably unnatural real estate price inflation in recent years, Brazil's market possesses a number of core fundamentals and differentials that look set to offer solid returns for the long term future;

  

• Brazil maintained a relatively healthy position throughout the global economic downturn and emerged out of recession much quicker than most developed countries. The International Monetary Fund (IMF) have predicted GDP to grow by 4.5 percent in 2011 (also expecting the economies of the U.S.A, the U.K, Germany, France and Japan to average at 2.5 percent);
• The majority of the Brazilian population has no or very little debt and the mortgage market is comparatively lowly leveraged (secured lending represents only 5% 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);
• In recent decades, the country has maintained consistently high levels of international reserves which has served the country well after years of economic turmoil;
• 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);
• According to the Global Entrepreneurship Research Association (GERA), Brazil has the second highest number of entrepreneurs among the G-20 nations;
• In 2010, Warren Buffett stated to FOX News: "Brazil has cleverly positioned itself to become one of the world's greatest investment opportunities in modern times" and Donald Trump to the LA Times: "Brazil is one of the few places in this troubled world I feel confident to make an investment";
• Government schemes such as the Bolsa Família (a program of cash transfer to the poor) and the 'Minha Casa, Minha Vida' ('My House, My Life') housing initiative (grants and financing to alleviate the country's low income housing deficit of a minimum 6.6 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 (Q4 2010) tourism is rapidly increasing, despite overall lowering global statistics. 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, by and large, been positive about Brazil in recent years with Moody's reporting a 'robust economic rebound, growth prospects as well as favorable earnings generation potential' (June 2010); Standards & Poor indicating 'Brazil's creditworthiness remains well anchored on a strong political institutional framework and a commitment to prudent macroeconomic policies' (December 2010) and Fitch indicating ' the consensus on responsible macroeconomic policies remains well-anchored.' (April 2011);
• The entry of hundreds of 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) whilst also being entirely self-sufficient, relying little on imports;
• 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;
• With reports of price rises reaching as much as 50% in the space of two years in the country's metropolitan regions, many have debated that a heated market and unaffordable prices could spell danger (although it is generally agreed that a massive property crash is unlikely);
• 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;
• The 'Minha Casa, Minha Vida' programme has been criticised in the face of inflationary pressures on construction material / land costs making projects financially unfeasible both from the perspective of the real estate developer as well as from that of the end buyer (in terms of affordability);
• 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;
• Related to the above, the International Monetary Fund (IMF) stated that Brazil's fiscal deterioration was 'particularly pronounced' (a point rejected by the Finance Minstry who have announced plans to make large scale budget cuts in order to decrease interest rates);
• 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;
• Former President Lula Da Silva 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;
• 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 noticeable improvements across the country, 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.

The Brazil Real Estate & Land 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:

• Monthly factfiles with the latest statistics relevant to Brazilian real estate and land investors;
• State guides - a map and statistical outline of all the states in 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 (click on the various options to the right of the page)
• Find out about a unique low income housing programme in association
  with EXITUS Construction Brazil.