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The third consecutive raise of the SELIC interest rate continued to stem the effect of an overheating economy with a modest slowdown of growth in various sectors.  The construction industry has continued to grow albeit at a slower pace with Cyrela Brazil reporting first semester sales of R$ 2.605 billion and R$ 1.539 billion in the second.  The average cost of construction dropped by 1.77 percent although demand shows no sign of faltering with Votorantim announcing their need to import 300,000 tons of cement from Vietnam to meet strong demand in Ceará state (the company is also in the process of constructing eight new plants throughout the country).  The government also announced a further incentive of the Minha Casa, Minha Vida housing programme by reducing the levels of tax and contributions owed against for properties valued at up to R$ 75,000 to 1 percent.  As the most prominent housing lender in the country – Caixa Econômica Federal – reported a 95.1 percent rise in loan volumes in the first 6 months of 2010, the Brazilian Association of Real Estate Credit and Savings (Associação Brasileira das Entidades de Crédito Imobiliário e Poupança, ABECIP) estimated the total mortgage debt level to reach R$ 500 billion by 2014 (currently standing at R$ 265 billion).  The country’s prominent banks continued to report growth levels with Bradesco achieving its second highest historical profit levels (and also indicating that 2 million of its customers had moved up the demographic social scale from classes D and E to C); Santander Brasil reported a 9.5 percent growth rate between March and June and HSBC also stated their intentions to double their asset portfolio up to 2012.  Concerns, nevertheless, remain with regards to the over valuation of the Real, with Finance Minister Guido Mantega expecting the currency to weaken as a result of the current account deficit; the Central Bank was also seen purchasing dollars (for the first time in 14 months) with the aim of curbing the Real’s gain.

Download: July / August 2010 Brazil Real Estate and Land Investor Newsletter