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FACT or FICTION? “Buying in Brazil Will Always be a Nightmare Due to the Bureaucracy of the Banks.”

An article compiled and written by Richard Way of ‘A Place in the Sun Magazine’ and Ruban Selvanayagam from the ‘Brazil Real Estate & Land Investment Guide’ focusing on:

• Brazil’s banking system and how it has become to be in its current form;
• the limitations of the highly regulated and currently ‘foreigner-unfriendly’ banking system that exists in the country;
• domestic mortgage lending in Brazil and its future growth prospects;
• foreign investors current inability to benefit from gearing Brazilian investment property and potential solutions;
• undertaking investment business in Brazil – opening a bank account / obtaining an investment visa.

For more information and other articles relating to overseas property investment please click here to head to the ‘Place in the Sun’ magazine website.

Established for over 60 years in Brazil, Odebrecht has grown to become one of the country’s largest conglomerates with large-scale interests in construction, engineering, chemicals and petro-chemicals (with a 2009 revenue of over R$ 19 billion and 129,000 employees).  The company has also has operations through- out Latin America as well as the USA, the Middle East, Africa and parts of Europe.  Please see below an interview with Paul Melo, regional director of Odebrecht Real Estate where we discuss the growth of the company in Brazil; future plans; environmental / social development issues and risk management amongst other subjects.

1) How does Odebrecht Real Estate operate in Brazil? Odebrecht Real Estate operates throughout Brazil in the development of residential (mid to high range) and commercial projects whilst also providing real estate related services for companies and investors.

2) Can you outline some previous projects undertaken in the country? Our real estate arm has well-known projects in many of the major Brazilian cities including within São Paulo, Rio de Janeiro, Bahia, Pernambuco, Minas Gerais and Distrito Federal.  Some prominent examples that your readers may be aware of include the ‘Dimension’ and the ‘Murano’ in Rio de Janeiro; the ‘Brisas do Lago’ in Distrito Federal; the ‘Hangar’ in Bahia; the ‘Vila dos Corais’ in Pernambuco as well as the ‘i-Tower’, ‘Evolution’, ‘Bonnaire’, ‘Garden’ and the ‘Alpha Square’ in São Paulo.  All of the projects have been successfully sold.

3) What are the major ongoing projects currently being undertaken by Odebrecht and can you describe them? The Odebrecht Real Estate projects are focused around multi-purpose complexes which consolidate residential accommodation combined with commercial units and malls in addition to leisure, commerce, services and transportation infrastructure – all of which serve the increased demand whilst offering convenience and safety for those that live within them.  Examples of this development concept can be seen at the ‘Alpha Square’ (São Paulo) as well as the ‘Mundo Plaza’ and ‘Boulevard’ (both in Salvador, Bahia).

One of major current real estate projects is the ‘Bairro Novo’ (New Neighborhood) low-cost housing developments which have between 1,000 to 10,000 units, grouped into condominiums with up to 500 houses and apartments. The neighbourhoods offer complete infrastructure from paved roads, street lighting and modern water / sewage systems to traffic control, schools and commercial centres (in larger complexes).  In 2010, we have launched new phases of this project in Forteleza and in Distrito Federal and, in addition, more than 5,000 units are under construction on projects for families of between zero and three times the national minimum wage.  The delivery time of such projects takes place within a maximum period of 12 months after the start of the construction work and we are able to guarantee efficiency through our strict standardisation and industrialisation processes.  As an example, the units are made from reinforced concrete using imported aluminium moulds and it is possible to build a floor for six houses in 24 hours.

One of our most ambitious real estate projects is the creation of completely new neighbourhoods which are conveniently located close to major cities centres and state capitals.  A good example of is the ‘Vale dos Cristais’ in the metropolitan region of Minas Gerais: an area of 6 million square metres, 70 percent of which is green space.  This project’s uniqueness relies on the fact that it is also in the fortunate position of being the meeting point of two of Brazil’s important eco-systems: the Cerrado and the Mata Atlântica.

4) What are Odebrecht’s expansion plans for the coming years and which areas of Brazil does the group see as particularly important? The forecast for net sales of Odebrecht Real Estate for 2010 is R$ 1.1 billion, with expected launch values of R $ 2,800 million in 2010.  The company also has a qualified and ready-to-construct land bank, which will make major releases in all capital cities where it operates in the coming years.  In term of our medium term growth, Odebrecht Real Estate want to remain competitive in the market place whilst maintaining our essential characteristic of having a diversified portfolio and following the country’s growth pattern.  In São Paulo, for example, is the strategic city of Santos where investments in the sector of oil and gas will attract people (the region has the second highest amount of reserves in the country).  This year, we launched our first residential project in the area and we still have plans for the creation of a commercial building and two other related corporate projects.  Brazil undoubtedly will continue an important tourist destination, so the projects in coastal areas will remain priorities. Our Bairro Novo projects will advance in the states of Bahia, Ceará, Rondônia and Distrito Federal.

5) Can you describe Odebrecht’s commitment to sustainable / social development and ongoing practices? The socio-environmental commitment is present in all fronts within the company from a short to long term basis.  Some examples include the rational use of Brazil’s abundant non-renewable natural resources; the employment of the most advanced technologies of engineering and construction as well as the ongoing promotion of human development, economic and cultural integration.

Odebrecht Real Estate takes pride in complying with the precepts of environmental preservation in all stages of its ventures, and is a founding member of the Green Building Council of Brazil.  The Odebrecht Foundation was also established in 1965 to serve those in need and, by the year 2000, its work had benefitted over 500,000 young people with its educational and self-development programmes.  One of its main focuses currently is in the north-east of Brazil where poverty levels are generally higher and need to be bought in line with the national dynamic.

6) The Brazil has attracted much attention worldwide because of its rapid recovery after the global recession. How do you fare the housing market’s growth for the medium-long term? The Brazilian real estate market should remain hot provided expected increase in total income of the population keeps pace with the market.  Other macro-economic factors should serve to support such growth such as our rising agricultural export industries, ever rising mortgage credit, housing programmes and energy growth as well as global events which will indirectly draw attention to the investment potential of the country, such as the World Cup 2014 and the Olympics 2016.

7)  From a general perspective, what do Odebrecht Real Estate view as the main risks they are confronting and how are they being limited? Whilst offering huge potential, the biggest challenge we view for the country will be to sustain its growth.  It is important to effectively plan to address the historical bottlenecks in infrastructure as well as within key areas such as education and research.  We employ a significant amount of time, effort and investment to ensure key risks are minimised in our day-to-day activities but several reforms need to be solidified on a macro level.

Whilst viewed by several commentators as a politically promotional statement, President Lula proudly claimed that he firmly expects Brazil’s long term interest rates to come in line with the developed world.  The majority of a Central Bank survey of 100 economists predicted for the SELIC interest rate to be held at 10.75 percent for the remainder of 2010 (as well as an average prediction of 7.1 percent GDP growth) – yet at the same time, Brazilian Central Bank President Henrique Meirelles warned analysts not to be too quick about jumping to conclusions about future interest rate movements due to the ongoing fragile state of the world economy stating: “it’s normal that the Central Bank is better informed than the rest of society, including the best analysts, and offers an opinion that isn’t necessarily the consensus.”

Whilst still following a generally growing trajectory, housing credit levels saw a marginal drop and CRECI (the Brazilian real estate brokerage association) agencies across the country reported drops in the sale of new homes (in the state of São Paulo, for example, there were 23.06 percent less sales when comparing May and June).  Such cooling down was largely mirrored in several Brazilian industries and viewed as a natural progression as a result of monetary policy changes in response to an overheating economy.  Despite this, the government has been actively encouraging the growth of the housing market with Finance Ministry announcing further research into new forms of viable mortgage credit; initial finance of $R 6 billion from the ‘Guaranteed Employment Fund’ (FGTS) being allocated to improve housing, sanitation and infrastructure in poorer neighbourhoods as well as a decree authorising capital increases for the Caixa Econômica Federal and the BNDES (Banco Nacional do Desenvolvimento, Brazilian Development Bank) – both funded by Petrobras share sales which have continued to grow despite global oil market difficulties as a result of the Mexican Gulf oil spill.  According to Ceres Lisboa, a bank analyst at Moody’s Investors Service in São Paulo: “the use of these shares is an alternative strategy to raise the capital of public banks without increasing debt whilst also enabling the government to take part in a healthy wave of credit increase in Brazil.”

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

Please see below a copy of an article we originally wrote for the ‘Buy Association’ Online Magazine.

In recent years, Brazil’s housing market has been in the unique position of being supported by a strongly excelled economic climate – particularly in comparison to several developed countries worst hit by the effects of the global recession. When its GDP briefly went into the red in 2008/09 (along with many economies of the world), the government swiftly altered monetary policy by bringing the national interest rate to a historical low as well as amending fiscal policy and making other reforms to encourage activity. What ensued resulted in a relatively rapid recovery as well as the international spotlight being cast further on the country as a future economic superpower.
The country’s leaders have been pointing to the housing industry as one of the prominent lynchpins in the demonstration of such growing importance of Latin America’s largest nation. However, some economists fear the emergence of a housing bubble which has subsequently triggered an ongoing public debate with regards to whether Brazil’s market is following the hyper-inflationary trajectory that stifled its growth in the 1970s and 80s. For example in Rio de Janeiro, upon the announcement of the Olympic Games arrival in 2016, some agencies reported a 50 percent increase in house price values in the space of just 9 months. According to Globo, property values have increased by 100 percent in São Paulo in the space of 5 years; 50 percent in Brasília over 2 years and as much as 60 percent in Recife (in the north east) between 2009 and 2010.

On the one hand, price rises are to be expected and viewed as a natural progression of the success of the economy – the housing market in Brazil is being well reinforced by a range of factors including lower unemployment levels (Ministry of Labour statistics have indicated that over 1 million new jobs will be created in 2010); rising wages (according to the registry of employment, average initial salaries have increased by 27 percent in the last seven years); a very lowly leveraged mortgage market which looks set to grow considerably in the coming years as well as the fact that many existing homeowners having a considerable amount of equity stored in property (a very different situation when compared to markets of many developed countries). However, despite these favourable factors, concerns nevertheless remain that house prices have become increasingly excessive within such a short space of time.

In response, a report was thus recently published by Brazilian macroeconomic consultants – MP Associates – on behalf of the Brazilian Association of Real Estate Credit and Savings (ABECIP) entitled: “Are Brazil Real Estate Valuations Reaching Bubble Like Proportions, as Seen in the USA?” According to José Roberto Mendonca de Barros, author of the report and former Secretary of Economic Policy for the Ministry of Finance: “there is a price rise in property values because there is increased demand and we therefore have no doubt in saying that there is no housing bubble in Brazil.”

Particularly in recent months, many professionals have been reporting a calming down of prices – largely as a result of the hikes in the national interest rate which began in May. Several have also attributed the price rise extremes as a result of restricted supply levels – especially in the country’s city centres. Construction levels have increased considerably with 1.2 million housing units expected to be created by the close of 2010 which is expected to bring the market into equilibrium. Unlike many countries in the world with so called ‘deficits’ – Brazil’s problem is very visible with entire towns consisting of poor housing, underlining the essential need for reform (many of these areas have been allocated infrastructural and urbanisation investment as result of social programmes such as the ‘My House, My Life’ and the ‘Growth Acceleration’ programmes). Others have also questioned the current indices of Brazilian house prices and state that such reports of rapid increases in house prices are a result of media hyperactivity without due regard to real economics.

It would therefore seem that, if a property bubble is emerging in Brazil, it is currently far too early to predict when it will happen. Investors should, however, be well aware of the fact that the country’s housing market should not always be viewed holistically and close attention is needed with local idiosyncrasies (such as supply /demand, rentals, taxes and legal jurisdictional variations amongst others).

An abridged version of this article was written for the ‘Global Property Guide’ and can be read by clicking here.

As the Brazil property market has witnessed significant gains in recent years, so has the amount of accompanying search and other property-related services that aim to serve the ever-growing buying public.  For the global investor, whilst such increased choice is always welcomed, making decisions amongst a myriad of so-called ‘trusted’ sources can often seem like a nightmare.

These days, whilst the marketplace is largely catered for Brazilian residents, overseas real estate buyers are noticing an increasing amount of professionals operating in the industry that are able to fully communicate in English (particularly in the south) – many of whom are keen to establish ties with the international investment community.  European investors (particularly Spanish, Italian and French speakers) will also find several linguistic overlaps which will help overcome what can be barrier to doing good business.

Our recommendation for the best place to start your online Brazilian property search would be the ‘Zap‘ website which serves most of the country and has daily updated listings of asking prices as well as descriptions, advanced searches, photography, map links, financial simulators and other useful features (please see an interview we did with André Molinari, CEO of ‘Zap’ by clicking here).  Other prominent sites worth viewing include Balcão, Imovel Web, Lopes and Web Casas.  However, it should be remembered that most town and cities would have independent organisations that do not necessarily need to advertise on these major sites due to having enough business in the local community.  It is well worth communicating with these smaller operations as well as to keep an eye out for private sales (where a decent price may be able to be obtained as a result of the vendor avoiding agency fees).

One of the main problems with respect to an investors ability to undertake due diligence, is the country’s current lack of a formal registry.  One methodology is to examine local government property tax records (Imposto Predial e Territorial Urbano, IPTU) where values are regularly updated – however some states do not allow for public access to this information.  The other is to simply keep your ear to the ground; do not rely on the opinion one agent and build relationships with other professionals so you can get a solid idea of real prices (which have not been inflated simply due to the fact that you are a foreign buyer).

Whilst buying ‘blind’ in Brazil is generally not recommended, it is not an unheard of practice in the country – particularly for investors who are buying ‘na planta’ or pre-construction property.  As this strategy of investment currently remains one of the most popular for foreigners, there are a number of points to take on board to ensure a safe purchase:

• It should be stressed that, as a foreign buyer in Brazil, you are awarded exactly the same property rights as a resident;
• Be aware of ‘hidden’ charges / obligations during the construction process such as capitalized interest and commanded clauses (your lawyer will be able to inform you of these);
• Understand your rights with regards to completion delays and correct adherence to construction standards / specifications (you are well within your rights to seek compensation and even punitive damages);
• Ensure that any complaints or issues with regards to the build are documented and filed – the Brazilian Code for Consumer Protection (Código de Defesa do Consumidor) allows that a buyer can request a complete termination of the contract (accompanied by a full refund of any monies deposited) or make a legally enforceable claim to receive a discount on the contractual purchase price;
• All contractual agreements are professionally translated into your own language – there are many international law firms who will be able to assist you with this.

Located in the north east of Brazil, the local government’s recent investment advertising campaign proudly claims Maranhão as the ‘state of opportunities’.

The region is well connected via highways to Piauí, Pará, Tocantins, Mato Grosso and Bahia; the Araguaia-Tocantins waterways as well as the Carajás and North-South railroads also pass through the state.  The state was first explored in the 16^th century initially by the Spanish and then by the Portuguese (captained by João de Barros).  It was not towards the end of this century that the French settled and formed a colony which was subsequently overthrown by the Portuguese in 1615 (the Dutch took brief control between 1641 and 1644 as did the British in the early 19^th century).

The state is the second largest in the north east (after Bahia) and its territory possesses a range of characteristics conducive to sustained development and growth – ranging from tropical rainforests, healthily flowing rivers, massive tracts of floodplains, scrubland, mangrove swamps, lagoons and deserts.  Maranhão is also one of the closest states in Brazil to the United States and Europe as well as the Panama Canal (with improving connections to various parts of Latin America).

Since the 1990s, the state has maintained a solid growth trajectory and, according to the IBGE (Instituto Brasileiro de Geografia e Estatística, Brazilian Institute of Geography and Statistics), witnessed a GDP advance of 60.2 percent between 1995 and 2007 (the highest in the north east).

Below is a list of the top 20 largest companies in the state as at 2010 (compiled from data from the IBGE and local government statistics):

1)      Equatorial Energia (Electrical Energy)

2)      Schincariol Norte-Nordeste (Beverages and Tabacco)

3)      Viena Siderúrgica (Metallurgy and Steel)

4)      Cia. de Navegaçao Norsul (Logistics and Transportation)

5)      Gusa Nordeste (Metallurgy and Steel)

6)      Norsegel (Specialised Services)

7)      Cia. Maranhense de Refrigerantes (Beverages and Tabacco)

8)      Frigorífico Eldorado (Food)

9)      Caema Água e Saneamento (Water and Sanitation)

10)   Ceagro Agronegócios (Agriculture)

11)   Magazine Liliani (Retail Commerce)

12)   Margusa – Maranhão Gusa (Metallurgy and Steel)

13)   Frigotil – Frigorífico de Timon (Food)

14)   Supermercados Maciel (Retail Commerce)

15)   Emap (Transport and Logistics)

16)   Ferrovia Norte Sul (Transport and Logistics)

17)   Fazenda Parnaíba (Agriculture)

18)   Unimed de São Luis (Medical Services)

19)   Maity Bioenergia (Sugar and Alcohol)

20)   Oleama (Chemicals and Petrochemicals)

In terms of future prospects, over R$ 100 billion of investment has been earmarked prior to 2016 within both the private and the public sectors – which will be allocated mainly in the agribusiness region in the south (Ricachão and Balsas amongst others); the mineral-metallurgical region towards the west (Açailândia, Imperatriz and Santa Inês); the paper / cellulose industry (also located in Imperatriz) as well as the aluminium, iron and oil industries located around the capital (São Luís).  Additionally, Petrobras have plans to construct one the country’s major oil refineries with a budget of over R$ 20 billion which will have the ability to produce over 600,000 daily barrels.  In the Suzano municipality, the world’s largest pulp factory is currently under construction which will also have forest cultivation plans in place to support sustainable regeneration of the state.

Below are the most prominent investments occurring up until the year 2016, as supplied by the Maranhão Secretariat of Industry and Commerce (in order):

1)      Petrobras, Premium 1 Refinery – Bacabeira / Industrial District SLZ – 2010-2016 – with an investment total of R$ 35,000,000,000 and 131,500 employment positions;

2)      Vale (mining) expansion – Ilha do Maranhão – 2009-2013 – with an investment total of R$ 12,040,000,000 and 2,500 employment positions;

3)      Alumar (aluminium refining) expansion – Ilha do Maranhão –2008-2010 – with an investment total of R$ 4,900,000,000;

4)      Ceste (electricity / hydro-electricity) expansion – Estreito – 2007-2010 – with an investment total of R$ 3,600,000,000 and 7,500 employment positions;

5)      MPX (energy) expansion – Ilha do Maranhão – 2009-2012 – with an investment total of R$ 1,400,000,000 and 6,000 employment positions;

6)      Valec (transport construction) expansion on north-south railroad – Imperatriz, Porto Franco, Estreita and Balsas – 2009-2012 – with an investment total of R$ 844,000,000;

7)      Geranorte (electricity and gas distribution) expansion – Miranda do Norte – 2009-2010 – with an investment total of R$ 600,000,000 and 3,000 employment positions;

8)      Emap (state port authority) expansion of the Itaqui port – Ilha do Maranhão – 2009-2011 – with an investment total of R$ 439,000,000 and 200 employment positions;

9)      Ferroeste (iron) expansion and Gusa Nordeste Aciaria plant – Açailândia – 2009-2010 – with an investment total of R$ 300,000,000 and 2,000 employment positions;

10)   PAC (government sponsored Growth Acceleration Programme) investments in Camboa, Liberdade, Fé em Deus, Vila Sésamo, Vila Cristalina, Alemanha and Apeadour – with an investment total of R$ 263,000,000.

Several infrastructural investments are intended (and needed) to keep up with the state’s growth, particularly with regards to the transport system (railroads, highways and waterways) as well as in energy; telecommunications; the renewal of dated industrial districts and the creation of new ones.  Out of all the north-east states, Maranhão currently receives the fourth highest amount of BNDES (Brazilian Development Bank) loans – in 2009 two separate amounts of R$ 288 million and $433 million were allocated for such purposes.  Specifically for its ports, roads and oil refineries, the state currently possesses the largest proportion of BNDES funding in the north east – this is attributed to its prominent location which look set to firmly establish the region as an economic hub of the north east.  Once fully redeveloped, the port of Itaqui will have a total of 8 berths ranging between 9 and 19 metres in depth – enabling the receipt of over 1,000 ships annually of up to 155,000 tons each – as well as road and highway extensions to serve the expansion.  Steel company Vale have also announced further investment into a private port which will operate in conjunction to what already exists, with some US$ 7 billion earmarked.

Maranhão is also the fourth largest recipient of long-term credit from the Fundo Constitucional de Financiamento do Nordeste (North East Constitutional Funding Institution).  The Secretariat of Planning and Budgeting (Secretaria de Planejamento e Orçamento) indicates that there are 33 major private sector investments – by large groups including Vale, Aurizonia, Alumar, OGX, Suzano and CSN – either in the planning process or underway in need of a total of R$ 82 billion in credit.  International interest has also increased with an investment of US$ 8 million by the Japanese government into doubling the size of the port (located on the Mearim river).

There are currently 11 major power plants in operation and, since 2004, energy consumption has witnessed a 6.6 percent average year-on-year growth rate which has resulted in a number of planned infrastructural developments being scheduled prior to 2012.  Such developments will triple the state’s energy generation capacity and additional plans are in place to install hydro-electric power plants including a major investment to be located on the Tocantins river (the Estreito, costing R$ 3.6 billion).  Wind, natural gas, coal and oil energy are also set to play important roles in the state’s energy matrix.  In May 2010, two thermoelectric plants powered by low sulphur fuel oil were completed at a cost of R$ 560 million and the EBX group (owned by Brazil’s richest man, Eike Batista) have also recently announced an investment of R$ 1.8 billion for the construction of a coal fired thermal power plant to be located in Itaquí in São Luís (scheduled for January 2012).

The government is also providing several incentives as a means of encouraging industrial activity including the ‘Pro-Maranhão’ Programme which provides a 75% ICMS tax (Imposto sobre Circulação de Mercadorias e Serviços, Goods & Services) exemption spread between 15 and 20 years (agro-industry companies would receive an extended period).  According to state Treasury Secretary Cláudio Trinchão: “we want to attract to Maranhão primarily innovative and pioneering production activities and businesses including shipyards; information technology equipment, industrial equipment and machinery factories; auto parts;  tractors; agricultural machinery and equipment as well as pharmaceutical, chemical and petrochemical products – our targets are high-tech industries committed to sustainability.”

Quoted as a future ‘superstar’ industry of the state, the oil and gas sector is currently witnessing significant investment not only by the government-owned Petrobras but also Engepet, Panergy, Gasmar and OGX.  The Premium 1 refinery – to be located in Bacabeira, 60 kilometres from the state capital of São Luis – will be the recipient of an initial investment of US$ 19.8 billion.  The first phase of its development is scheduled for completion in 2013 and will enable production to reach 300,000 barrels per day – with the second phase doubling this capacity to be expected in 2015.  The refinery will produce high quality petroleum derivatives such as low-sulphur diesel oil naphtha, jet fuel, petroleum gas, bunker fuel amongst others as well as complementing the crude oil from the Campos Basin and the light oil located in the pre-salt region in Brazil’s south-east.  According to Paulo Roberto Costa, Petrobras’ National Director of Supply: “The Premium 1 Refinery is one of the national company’s largest investments and will not only be one of the largest in Latin America but also the world as well as being an integral part of Petrobras’ strategy to be a strong derivatives exporter, aggregating value to the oil produced in Brazil.”  The EBX group have also furthered their expansion in this sector, with R$ 50 million being invested via OGX (the petroleum arm) in the Parnaíba Valley where seven wells will be drilled prior to 2012.  The state gas company Maranhense de Gás (Gasmar) Meio Norte R$ 2 billion pipeline will start in Caucaia in Ceará state and pass through 37 of the 217 municipalities in the state.

Several metal production expansion plans look to push the state as a prominent industry player including a pig iron plant in Margusa; a new iron and aluminium plant (at a cost of R$ 80 million) as well as the Alumar refinery in the São Luís’ industrial district (expected to enable aluminium oxide production levels to reach 3.5 million tonnes a year).

Another industry of growing importance is agri-business, with several ambitious growth plans particularly with regards with relationship building with foreign partners.  A prominent example is the Ceagro whose revenues have doubled in the last year as a resulted of increased Asian demand for its soy produce.  The Notaro group is currently investing over R$ 146 million in its soy-processing plant as well as in its incubation facilities and animal slaughter houses.  According to Afonso Ribeiro, State Secretary of Agriculture: “once seemed destined to only work with family farming at a subsistence level, Maranhão’s strategy is now to invest in the development of agribusiness on all levels.”  The Maranhão State Federation of Industry (FIEMA) has also pointed to the increasing role of research and development into new grain and agricultural production methodology – particularly in its partnership with the Brazilian Enterprise for Agricultural Research (Empresa Brasileira de Pesquisa Agropecuária, EMBRAPA).  The main expansion barrier attached to the agriculture industry that has been noted is the poor level of logistical and transportation infrastructure – according to Max Vinicius from Ceagro: “the port of Itaquí is the main bottleneck.  It is one of the world’s deepest, allowing the loading of large ships, but the terminal is unable to process all the products as they arrive.  We have to wait until Vale do Rio Doce, the iron extracted from the Carajás mine first, to then load other products.”

The well established ethanol industry looks set to continue its growth (moving outwards from the south of the country where it is most prominent).   Leading producer – Fazenda Agro Serra, based in the Balsas region – has announced an investment of R$ 200 million which will raise production from 102 to 150 million litres by 2020.  TG Agro Industrial, located in Aldeias Altas has over R$ 400 million earmarked to expand its sugarcane processing operations – increasing production from 300,000 to 2 million tons per year (the plant is in a fortunate position of being located close to the Trans Northeastern Railroad).  Vale has also announced a partnership with the Bunge ethanol producers in Tocantins which will facilitate in ameliorating the transportation issues between the states and other parts of Brazil.  On a general level, the state government has been allocating increasing the sugarcane planting area and encouraging industry growth via a 75% exemption of ICMS for up to 20 years.

With over 500 km of coastline and 550,000 of mangrove swamps, Maranhão’s fishing industry has long been viewed as one of huge potential but nevertheless held back by bureaucratic restrictions and cumbersome licence procedures (research demonstrated that to construct a fish farming structure it is necessary to complete over 50 official forms).  There are currently estimated to be over 100,000 fishermen – most of whom work informally due to such issues.  The state government have announced its firm intention to remove such barriers, which will remain to be seen.

Detailed geological studies have also indicated the state to have significant gold reserves.  According to José de Ribamar Barbosa Belo, President of Maranhão Federation of Industries: “we have become the latest hotspot for the industry – with all these new products, the state will become a major gold producer.  What’s more, hefty investments are improving the prospects for local communities that have low Human Development Indices.”  Some examples include the Canadian owned Mineração Aurizona and Jaguar Mining companies who will be constructing mining plants in the Godofredo Viana and Centro Novo do Maranhão municipalities respectively.  Both companies have announced a collective investment of R $380 million with the generation of over 3,000 employment positions.

The state has subsequently witnessed an increasing attractiveness of real estate development with some of Brazil largest companies – including Gafisa, Cyrela and Rossi – all establishing projects in the capital: a trend that commenced after many started to be publically traded on the Bovespa since 2007 and desired to expand their horizons beyond the south of the country.  Maranhão’s government states that the current housing deficit is at 38.1 percent (570,606 units) – making it the largest in the country in relative terms.  According to João Alberto Mota Filho, president of the Maranhão State Association of Civil Construction Industreies (Sinduscon-MA): “More developers are building here to meet the rising demand for real estate.  The São Luis city high-end market alone consists of apartments ranging from R$350,000 to $2 million and has witnessed a market growth of 30 percent since 2008 – primarily on the Ponta de Areia peninsula.”  He firmly believes for this trend to continue, although perhaps at a more steady pace as a result of stricter banking regimes and controlled lending policies.   Managing Director of Gafisa’s operations in the area stated in an interview with Valor Magazine: “when new construction firms first arrived in the state, we encountered pent up demand and were able to offer a long-term financing option which local companies were not able to offer at the time.  This, in turn, led residential construction firms to stir up the market and create a new demand from people interested in the new products.”  Added to this is the ‘Minha Casa, Minha Vida’ programme which has initially allocated 72,500 units to be constructed in the entire state (for those who earn up to 10 tens the national minimum wage).  According to Hélio Faria Júnior, state secretary for housing: “our long term aim is to completely eradicate sub-standard housing and we believe the first steps of doing so are well underway.”

The demand for commercial office space has also increased with construction group Sá Cavalcante recently announcing a R$ 35 million investment in a high-end building to be located near the tribunal courts of the São Luis city centre.  The group look to further expand their retail arm in the region with the Shopping Ilha Mall (due for completion in 2011, in addition to the now open Rio Anil Shopping).  Two new shopping malls are set for completion in the Imperatriz area by 2012: the Tocantins (which will house 107 stores, 1,000 car-parking spaces and 3 cinemas) and the Imperial (will have 161 stores, 1,000 parking spaces and 4 cinemas).  A major Carrefour and other large superstores also being installed in the capital and large retail chain, Mateus, which already has 19 enterprises employing over 7,000 staff in the state, will be expanding with an investment of over R$ 40 million in 2010 alone and its main competitor, Maciel, has earmarked over R$ 65 million for 2010/11.

With official tourism statistics demonstrating well over a doubling of figures between 2003 and 2009 (from 394 to 984 thousand visitors respectively), the state is keen to continue to capitalise on this important income stream.  The state is well recognised for its cultural diversity as well as the Lençóis Maranhenses National Park, the Chapa das Mesas and the bright festivals that occur throughout the state during the June period.  The capital is also growing as an important trade show destination and, according to Secretary of Tourism Tadeu Palácio, the state is building further relationships with the domestic airlines for expansion.

This strong expected economic growth has raised many concerns with regards to the state’s ability to be able to keep up.  Despite almost tripling in the last eight years, Maranhão holds the second lowest position in terms of per capita income in Brazil (Piauí is the lowest) and still has a very low level of literacy compared to other states (currently standing double the national average).  Basic sanitation is also lacking and the Maranhão has one of the highest infant mortality rates in the whole of Brazil.  As a result, the government has made social investment a priority to ensure the state can truly maximise the opportunities that are coming and has been encouraging companies to move beyond their legal obligations to initiate to the training and recruitment for Maranhão will finally be able to remove itself from the clutches of poverty that it has long been recognised by.  According to Haroldo Corrêa Cavalcanti Júnior, president of the Maranhão State Commercial Association: “we need to take advantage of the economic boom to invest in education; we can no longer accept a situation where 90 percent of the municipalities have no newspapers in circulation.”   There are 13 federal technical schools currently under construction and the arrival of Petrobras in the region has resulted in the launch of Promimp (Programa de Mobilização da Indústria Nacional de Petróleo e Gás Natural, Mobilisation Programme of the National Petroleum and Gas Industry) which will provide training programmes for over 26,000 state residents in a range of technical subjects. By 2014, the refinery will employ over 25,000 workers (phase one of construction requires 22,000 workers).  Vale, who have been established in Maranhão since 1978, have included the state in its Programa de Formação Profissional (Professional Training Programme).

The EBX group also received a commendation from the Inter-American Development Bank (IADB) for its work with relocating families (over R$ 14 million was invested) and has also agreed to invest over R$ 4 million in the Lençóis Maranhenses National Park.  Alumar has, since 2006, invested over R$ 25 million in social and environmental programmes including the creation of a water filtration system in the São Luis region and extensive tree planting close to its facilities.  Entrepreneurship and innovation are also being actively encouraged in the form of research grants particularly into the study of science and technological advancement – one good example of this is the ‘Demi’ institution (Department of Entrepreneurship and Innovation) which has worked directly with universities and the states junior companies.

Please click here to access the ‘Maranhão Real Estate and Land Investor State Guide’ with in-depth information on each of the 217 municipalities of this southern state (including an interactive map, area descriptions, industry backgrounds, population figures, a range of statistics related to GDP, local enterprise numbers, salary / per capita income levels, gini coefficients, human development index ratings and more).  Note you will have to be a subscriber to the Brazil Real Estate and Land Investor Guide, which can be done in under a minute by clicking here.

With an increasing amount of interest in foreign property ownership in Brazil, we are finding that there still remains questions and a lack of clear understanding as to the correct procedures with regards to the lettings business in the country.  Please see a recorded interview and presentation we recently did with Luis Vasconcelos, a Brazilian lawyer based in London with over 10 years experience (he has also worked in property management in the country).  You can also access a full English translation of the Law 8245 (as recently modified by Law 12112) –  the most relevant piece of legislation with regards to both the rights of Brazilians property owners as well as tenants (note you will have to be a free member of the site to access which can be done quickly and easily here).

Brazilian Landlord and Tenant Law with Luis Vasconcelos of Chambers International Lawyers

Luis Vasconcelos can be contacted during UK business working hours directly via the Chambers International Lawyers website – Email: luis@chamberintlawyers.com – Tel.: +44 (0) 207 299 4380

Please also feel free to leave your comments below…

As one of the country’s well-recognised industries, the future importance of Brazil’s biofuels sector cannot be understated particularly with regards to the ever-increasing need for global environmental protection; the depletion of fossil fuels as well as an increased need for business leaders and investors to make ethical and sustainable decisions.  Please see an interview below with José Clovis Lemes from the Candex organisation, a biochemist with over 30 years of global experience in various renewable energy sectors.  We discuss the history of the industry, production processes, its importance in relation to Brazil’s economic growth, future prospects and international trade amongst other topics…

1) Can you explain a little bit about your experience in the renewable energy sector in Brazil? I have been a qualified biological scientist and, over the years, have worked for various governments across the world including the USA, Canada and England as well as Brazil.  My current focus is on the international development / proliferation of the Brazilian biofuels industry and I am presently involved various private and public agencies / organisations throughout the country.

2) Today the specific focus is going to be on the biofuels sector in Brazil – can you give our listeners a short history into its development? Brazil’s biofuels industry’s main focus has always been around the one raw material of which the country has an incredible abundance of: sugarcane.  After World War 2, Brazil started implementing small programmes to create an ethanol burning process which was mainly used for the automobile industry – this was done, initially, as a research project throughout the most prominent universities.  In the 1970s, the automobile industry gradually picked up on this research and observed that it could genuinely be a fuel of the future.  At the time, there was also a severe petroleum crisis throughout the world and it was viewed that the potential problem that Brazil would have was the acquisition of fossil fuels (which therefore became an issue of national security).  The ethanol programme was therefore instilled by the military government of the time as a means of risk aversion as well as to develop the Petrobras organisation’s future role in the economy (which was and still is an entirely nationalised company).  The ‘Pro-alcohol’ programme was subsequently developed in the 1980s and 1990s as a means of further encouraging the biofuels sector – particularly in the face of growing global petroleum supply issues as well as a means to decrease the national carbon footprint.  The concept of flex-fuel automobiles was developed by GM and grew rapidly over the following decades.  Added to this was the fact that the cost of ethanol as a fuel is considerably less than that of petroleum which therefore generally led to its growth as a cost-effective alternative to petroleum.

Sugarcane was initially developed in the state of São Paulo and along the coast of the north east of Brazil – and the mills were often powered mechanically by animals.  It was the Italian sugarcane business leaders in Brazil that began to move to the interior of São Paulo to develop more advanced technological production (this is where the majority of the prominent private and public organisations remain today).  The interesting facet about the renewable energy sector in Brazil is that it has always included social inclusion as well as economic benefits – this is something that it will be of extreme importance and value for our future presence in the global energy sector.

3) How important is the industry in Brazil today?  How has it helped the economy? Very important – from a political point of view, in 2002, when President Lula was elected into power several of his policies were centred on environmental reform.  The Programa de Aceleração do Crescimento (‘Growth Acceleration Programme’, also known as ‘PAC’), for example, has directed US$ 980 billion solely around the energy sector in various forms (with a significant proportion to be allocated to the renewable sector).  This funding allocation will certainly mean that the expansion of the biofuels industry is looking very promising.  At the same time, however, lots of people have also began questioning the Brazilian government with regards to the major oil finding that have been found off the south-east coast and whether this will eventually out-do the well established industry.

4) Are these oil findings a major threat to the industry? The economics of sugarcane is very interesting.  Looking at the production of ethanol as it stands today, the industry is undergoing extensive and solid expansion and I believe it is fair to say that Brazil possesses the most technologically advanced processes in the world.  We have therefore, over the years, been able to benefit from streamlining, cost-saving and other related techniques which will put the industry in a comparatively solid global position moving forward.  In terms of the production of petroleum, the windfall that oil will bring to the country as a result of the massive finding off the south-east coast is undoubtedly to be welcomed but it should be remembered that the findings are deeply located in the Atlantic ocean; drilling will be a very expensive process and risk will need to be managed in detail – the recent events of the BP spill off the Mexican coast are a testament to this.  Previously, when oil was first discovered in the country, the government abandoned many of its ethanol related projects and some harsh lessons were learnt in terms of the realities of managing petroleum wealth and I would imagine that whichever government that comes into power in October will appreciate this.  Petrobras are also buying several large mills throughout the country as a means of continuing the government’s investment arm in the sector.  For these reasons, I believe that the biofuels industry in Brazil is at a significantly more advanced position than that of the petroleum and will never be a significant threat.

5) How has Brazilian industry (such as car and airplane manufacturers) capitalised economically and environmentally in the use of biofuels? There are several examples of this.  One is in the bio-chemical industry and the production of plastics using ethanol by-products.  Another increasingly important ethanol based product is ‘bagasse’: the stem of the sugarcane (fibres) that was formally used as waste until detailed research proved that it can be used in the generation of electricity (via burning).  Bagasse is also being used to produced what has come to be referred to as ‘second generation’ alcohol – where enzymes are added which essentially produces more sugar which is processed – essentially producing a very recyclable commodity in the industry.  Bagasse is also being used in some parts of the country for other products including furniture and briquettes for boilers in the industry.

It is worth mentioning the ‘spent’ (also known as “vinasse”) or residual water that is created via the milling of sugarcane and the fermentation of the juice – again, in the past, this was thrown as waste which was extremely aggressive to the environment but was simply viewed as an industry necessary.  This, again, became to be recognised as an excellent fertilizer and now goes back into the soil whilst also significantly reducing the consumption of water in the production process.  Another further development has been the generation of diesel from sugarcane (there are currently public buses in operation in Brazil that are using ethanol produced from sugarcane). It is also known the fact that aviation companies such as Jet Blue (in Brazil “Azul”), is experimenting with this new fuel, developed jointly by an American company and a Brazilian group.

6) Many Brazilian companies have been touting ‘Jatropha’ is an excellent alternative investment – can you explain what it is and why this could be true? Concerning biodiesel, soybean will continue to be the main raw material used for biodiesel production in the country for some time, if we do not have investments in Jatropha. The plant known as Jatropha curcas is a tropical plant that can be grown in low to high rainfall areas and can be used to reclaim land. It grows as a medium-sized tree and can be easily cultivated throughout the country.  Brazil does not use Jatropha extensively as other countries, like India, or ven Cape Verde, for example, however the potential in this Latin American country is considered excellent, particularly in the northeast part of the country, with dry areas, in which Jatropha grows well. Cultivation is much easier than other solutions and does not compete with the other seeds (such as soybean), which is used for food. The pie, resulting from the oil extracition, contains about 8% of oil, and it is re-extracted with organic solvents, then used as a fertilizer because of its high levels of nitrogen, phosphorus and potassium. This benefits the agriculture, and improves production of animals. It is a very viable fuel form, particularly when mixed with the diesel we have here and I would expect the industry to grow in the future.

7) On a general level – where do you see the future growth of the industry in the short, medium and long term? At the current time, there is a significant amount of effort going into the further exploration of utilisations of sugarcane.  For example, there are some American companies that are working with Brazilians to develop diesel fuel sources, and we are undoubtedly going to see several developments in this area.  Indeed, there are many such biofuels being tested by the aviation and other prominent industries.

Another prominent example is the growth of the production of sweet sorghum (a crop with high sugar content that thrives in warmer and dry conditions), which is widely expected to continue.  Indeed, the original pioneer of Brazilian sugarcane production, Professor Romeu Corsini himself proposed back in the 1970s that it would not be a good idea for Brazil to rely solely on sugarcane and developed a process for the proliferation of sweet sorghum, which he imported from Texas, USA.  However, its expansion did not grow as much as initially desired (largely due to the dominant military wanting the rapid expansion of the sugar cane industry at all costs).  Today, it is widely believed that the employment of sweet sorghum into the production of sugarcane will save a significant amount of energy and efficiency, and will contribute to the manufacturing second-generation ethanol. A technology that was rejected in the past rather for political reasons can now be employed with success in Brazil.

Although we frequently discuss the production of ethanol mostly with focus on using this as an automobile fuel, one cannot forget the huge potential of the “Alcohol-Chemical Industry”.  Although plastics production from ethanol is nothing new, there some modern technologies being developed to produce excellent polymers with this raw material. We will see much more of this in the coming future.

8)What do you envisage as the main challenges the industry faces? The only bottleneck we have is the cost per gallon of the ethanol produced – this was caused by the need of the military government in the past requiring the production of the commodity to be undertaken at any cost – in highly inefficient mills, a good number of them until recently struggling under massive debts.  At the moment, there is an ever-rising amount of international companies arriving into Brazil and taking these old, inefficient mills to entirely modernise them – so we can expect to see changes in the not-too-distant future.

A point of concern is the ever increasing number of “flex-fuel” cars, using either ethanol or gasoline. It is worth noting that in Brazil, gasoline is essentially “gasohol”, a mixture of dehydrated alcohol in gasoline  in the proportion of up to 25% alcohol in the mixture. Sales of this type of vehicle is on a constant upswing of 80% in Brazil. Brazilians still did not forget that in the past with the increase in sugar prices, mill owners decided to manufacture and export this commodity, and the Pro-alcohol programme was dead on the water for a number of years, to be reborn in the late 90’s.  Given the present technology, ethanol becomes economical at the pump, when its price is 70% of that of gasoline. If suddenly the price of ethanol rises, in comparison to gasoline, everybody will feel like jumping into the gasoline bandwagon.

Another issue that has always faced the country is that the academia of Brazil has long been divorced from the actual industry, when compared to other developed countries.  What we are now seeing more is academics having more of an integral role in business decisions, seeking funds, developing products with the industries. This is resulting in more patents being granted to Brazilian universities and researches in record numbers.  However, this is still a slow pace, given the lack of finance to research, which can be an opportunity for investors in Brazil.

The other major challenge I view is the sheer size of the country – we still have several parts – such as the north-east that possess huge and unmatched reserves of natural resources which have a massive potential for a range of biomass-related projects.  One interesting fact about the north-east is that, back in the 1980s, Petrobras undertook some detailed satellite analysis of the hinterlands north east and it was discovered that there was more water in this area than in the entire Guanabara basin of Rio de Janeiro – which contradicted many people’s opinions of this vast region being a deserted “no man’s land”, and therefore very important in the future of the country, not only for the biofuels sector.  However, traditionally, the economies of the north east have been dominated by land barons – some of their farms, for example, are the size of countries in Europe.  Whilst it has recently viewed that an increasing amount of investor groups, particularly from the sSouth of Brazil, are pooling together to explore areas (such as Sergipe, Alagoas, Ceará and Pernambuco), unfortunately, it is difficult to say if and when this will change. The hope is that the current presidency will continue to invest in “sustainable agro-projects” in the northeast and north (Amazon), with very interesting programs, such as the Electricity for All (Luz para Todos), which presents opportunities in green technologies, including gasification, solar and wind power. Brazil signed recently an important agreement with the USA to joint develop green energy.

9) In terms of the growth of trade in ethanol in other countries – what should we be expected to see? It is important to remember that sugarcane really only grows well in sunnier climates and so I would like to demonstrated the map below of solar radiation:

As we can see, the bulk of sunlight travel across most of the underdeveloped or developing world where we find a group of about 40 poorer nations on Earth.  Yet, the reports on development of biofuel technologies seem to be restricted to those countries in the developed regions of the globe who are the biggest consumers of energy, mostly in terms of fossil fuels. It is also interesting to note that fossil fuels for the developed world have mostly come from areas of conflict in the Middle East. Therefore, looking for alternative sources of energy makes all sense in the world!

Whilst many have not agreed with several policies of President Lula, he has created some very important pathways in Brazil’s biofuel expansion in other parts of the world.  In Africa, for example, he has led delegation trips to explore the expansion in what would be a hugely valuable commodity in the continent.  As well as with the USA, trade with Japan and Scandinavia has also increased and looks highly likely to continue.  

10) With regards to the USA, there currently exists a 54-cent per gallon tariff on imported ethanol which is impeding matters somewhat.  What are the reasons behind this and is any progress being made on the removal of this tariff? In the United States, the production of ethanol is primarily from corn – the strange thing is that the to produce this petroleum based energy must be employed.  This, to the Brazilian industry, is crazy as the Americans are effectively using fossil fuels for the production of something that is renewable.  Upon the arrival of President Obama, it is only now that the country is realising that there are some serious flaws in the industry.  It was recently announced that the USA has been investing more in production of second-generation biofuels as a substitute to corn, which particularly in comparison to the Brazilian sugar cane-produced ethanol, has been long-proven to be more expensive.  At the same time, the USA desires very much less to rely on Middle Eastern oil exports for obvious reasons. Due to internal political reasons, I do not see this import tariff being lifted in the short term, if it will ever be. The strong lobby that we had with our “old and inefficient mill owners” at the beginning of Brazil’s “Proalcool Programme” is the biggest roadblock to a full-fledged ethanol programme development on the American side.

11) Do you think the motive of this tariff, therefore, is entirely political? Yes, very much so, for the reasons I mentioned before.  I previously worked for the US government up until the year 2000 and I still collaborate with the Air Force Research Laboratory and more recently with the Pentagon Biofuels Lab.   I have noticed that they want to change, but the political lobby behind those “sea of corn” (compared to Brazil’s “green sea of sugar cane”) makes this a tantamount task.  The corn planters and their defenders will not go down easily. I recently flew over the mid-west and saw the huge plantations of corn, which whilst formerly expected to be utilised for the production of corn biofuels, have come to be viewed as being unviable for such purposes.  Immense amounts of institutional investments have been made for these projects – particularly from the larger petroleum companies, who, therefore have a vested interest in not wanting to see global trade barriers being removed.

12) So, it would seem that there are several aspects of contradiction at play here – particularly with regards to the ongoing and hugely important debate over climate change.  Surely if Brazil has a well-established sector that is very open to trade, the removal of such a tariff would be sure to be a step in the right direction for global climate change? Yes, it’s true.  I find it amazing the way some prominent business leaders vehemently defend the oil industry even though its growth, in its current form, makes very little economic and indeed logical sense.  In defence of the USA, however, it is worth mentioning the extensive amount of research that is currently being undertaken into other forms of environmental protection – for example, I recently have been communicating with teams of researchers exploring electric cars and magnetic trains as well as various forms of hydrogen energies (this research is also increasingly growing in China).  When I look at Brazil’s energy matrix, whilst other alternative methodologies are being developed in our research institutions, the country needs to be careful that it does not put all its eggs in the ‘ethanol’ basket. President Lula recently had his wake up call on this, and recently I was told by the Brazilian Ministry of Mines and Energy officials that Brazil will be looking at all forms of energy, not only concentrating its efforts in either the “Pre-salt Oil Fields”, or the “green sea of sugar cane”. I hope we have learnt the lesson of the past here, and that other nations will also change, making ethanol a true international commodity.

13) Where are the main areas of Brazil where biofuels produced and are there any new areas that are coming to the forefront? The main states other than São Paulo and the north east which I mentioned earlier, are Minas Gerais (which is currently witnessing huge expansion), Goiás, Tocantins and some of the grasslands of the Pantanal (Matto Grosso do Sul), although in this latter area environmental concerns prohibit sugar cane expansion.  Investors are finding opportunities in the north increasingly attractive due to the lower cost of land (although the main point of the industry will always remain in the south of the country where it was born). The sugar cane industry in that region of the country is picking up the pace rapidly, as modern, genetically improved cane varieties are planted, and more capital from the south/southeast is poured into the region.  It should also be noted that the Amazon is not conducive to sugarcane growth largely due to its damp climate.

Please see an article we wrote for the Brazzil magazine below, the original can be read here.

From a general perspective, Brazil’s commitment to environmental sustainability is widely considered commendable compared to other countries witnessing rapid growth.  In contrast, the construction sector has continued to lag behind and has become under increased scrutiny for failure to adhere to the increasingly important global standards of environmental protection.

Brazil’s buildings themselves constitute 45 percent of national energy consumption and whilst some significant steps forward have been taken – such as the creation Brazilian Council for Sustainable Construction (Conselho Brasileiro de Construção Sustentável, CBCS) in 2007 – true sustainability remains a huge distance away.  The current consensus amongst thought leaders, researchers, academics and consultants is that the employment of increased sustainable practices could save the industry between 30 and 40 percent of the consumption of energy.

Below are some of the main issues facing the growth of Brazil’s environmentally efficient construction and building industry as well as the associated counter-reactive measures being implemented:

Timber: whilst it was recently reported that, as result of Brazil’s post-recessionary growth, the level of illegal deforestation has began to increase slightly, a number of measures have been instilled to ensure the certain parts of the country of high ecological value (such as the Amazon and the Pantanal) cannot be logged in any way, shape or form.  Other stipulations include the requirement that the origination of wood used in the construction process is officially certified.

Waste: according to the Brazilian Institute of Geography and Statistics (Instituto Brasileiro de Geografia e Estatística, IBGE), based on current practices, from the waste created as a result of the construction of three buildings, there would be enough to create an entirely new one.  In response to such alarming figures, President Lula recently sanctioned Law no 12.305/10 which establishes a national policy on waste disposal that materials either need to be effectively recycled or placed within proper storage facilities.  It is also worth pointing to the increased presence of organisations such as the Institute for the Development of Ecological Housing (Instituto para o Desenvolvimento da Habitação Ecológica,  IDHEA) who have developed a product range from recycled waste from previous building projects such as bricks, tiles and plastics – these have all been tested and manufactured using the identical methodology as with construction material in the mainstream marketplace.

Education: much of the low construction standards across the country are attributed to the lack of understanding of effective techniques and practices.  According to the department of engineering and architecture of the University of Campinas (São Paulo), the prominent and reputable training of professionals is mainly located in the Rio de Janeiro, São Paulo and Belo Horizonte states whose graduates, generally speaking, tend to remain in these areas to practice.  Despite this, there is a rising presence of established development companies – with teams of well-qualified professionals – relocating further afield than solely the south and central of the country (including Rossi, Gafisa and MRV who are taking advantage of the real estate growth opportunities that lie within such as the north of the country).  Organisations such as the CBCS and Pini also work to formulate industry-led literature, guidelines, software and other knowledge dissemination that is filtering through to act as a means of common conduct amongst industry professionals.

Water Use / Drainage: the wastage of water during the construction process is a common issue that is seen throughout projects throughout the country.  Brazilian constructors are being encouraged to employ the use of equipment which saves the consumption of water (such as storage tanks and controlled discharge valves).  In terms of the sustainable usage of fixtures and fittings in buildings themselves, there is also an increased presence of water efficient shower units, rain-water recycling facilities and other installations which encourage residents to conserve water (and therefore costs).

Informal Building: one of the main issues that confronts the sector on a broader scale is the construction of buildings based on extremely low standards, particularly in poorer neighbourhoods.  Although projects such as ‘Minha Casa, Minha Vida’ and other urbanisation plans of favela communities in Brazil’s larger cities look set to assist with the control of such practices, the goal of completely eliminating this practice remains far.

Solar: Brazil is in an excellent position to take advantage of this sustainable method of energy generation within its buildings.  However, the technology to truly make the use of such power still remains expensive and, whilst leading to cost savings in the long run, continues to remain financially unviable in construction plans.  The current practicality of solar energy reliant buildings has also been questioned, particularly in the commercial sector – for example, the installation of a solar collector pipe is a cumbersome process and it is widely viewed easier to have a long term electrical energy conservation infrastructure (which still adheres to national standards).  Nevertheless, there is a significant amount of research and development into the increasing importance of solar in the building industry (an example would include a detailed national feasibility study by the Society of the Sun NGO (Sociedade and the Institute of Energy and Nuclear Research (Instituto de Pesquisas Energéticas e Nucleares, CIETEC).

Wind: particularly in the north of the country, where wind speeds can reach some of the highest on the planet, the use of this source of energy has become increasingly important.  Whilst wind turbine sales have been reaching unprecedented levels, the industry itself has yet to benefit from economies of scale with largely wealthier self-home builders and eco-styled project constructors being the main end users at the present time.

Conclusions

Construction industry leaders have voiced their concern of being caught in a trade off between rising material prices whilst also needing to meet environmental standards which, it is argued, also come with an elevated price tag.  However, some academics and industry professionals have debated that this does not always have to be the case – John Vanderley of the Polytechnic School of the University of São Paulo, for example, states: “sustainability has three vectors: environmental, social and economic of which, in many cases, there tends to be an imbalance.  If all factors are considered in parallel, it is quite possible to have sustainable construction projects.”  He continues to refer to several products that have long existed in the Brazilian marketplace (such as fibrous cement tiles) that are low priced but are often not used due to not being considered as ‘industry standard’ materials – he believes that it is only through the education of the benefits of such products that their usage will become more common.  As the industry continues to grow in line with the enormous deficit that the housing industry faces (which looks set to increase in line with population growth) – as well as implementing standards and procedures on a policy level – an overall level of commitment by the nation’s constructors constitutes a critical part in its long term sustainability.

With hosting two of the largest sporting events of this decade – the World Cup 2014 and the Olympics 2016 – real estate and land investors’ interest in apartments for sale in Rio de Janeiro as well as other opportunities has continued to grow.  But where are the lucrative property deals to be found in Brazil’s second largest metropolitan area?

The main areas of interest for finding apartments for sale in Rio de Janeiro are as follows:

‘Zona Sul’ (South Zone) – the richest region of the city and home to some of the most expensive real estate and land in South America. The area is composed of several prominent districts including São Conrado, Leblon, Ipanema, Arpoador, Copacabana, Leme, Glória, Catete, Flamengo, Botafogo and Urca – all of which border the Guanabara Bay – as well as Santa Teresa, Cosme Velho, Laranjeiras, Humaitá, Lagoa, Jardim Botânico and Gávea.

‘Centro’ (Central) – downtown Rio serves as the city’s financial district and historic centre with an increasing amount of residential apartment opportunities, particularly in the Portuária regeneration area (Gamboa, Saúde and Santo Cristo).

‘Zona Ouest’ (West Zone) – areas of real estate and land interest include Jacarepaguá, Recreio dos Bandeirantes, Vargem Grande, Deodoro, Vargem Pequena, Realengo, Padre Miguel, Bangu, Campo Grande, Jardim Sulacap, Paciência and Santa Cruz. One area that has witnessed significant expansion in recent years (in terms of both residential and commercial development) is the flat expanse of Barra da Tijuca – the area’s central point is Latin America’s largest mall ‘New York, New York’ which aptly summarises the very American feel of the region. This area will be home to the ‘Olympic Village’ with its beaches being used for many of the sporting activities.

‘Zona Norte’ (North Zone) – the main areas are Tijuca (which shares the Tijuca Rainforest with the South Zone), Grajaú, Vila Isabel, Méier, São Cristovão, Madureira and Penha. The Maracanã stadium is also located in this area and has the capacity to hold 100,000 people (and is currently being refurbished in time for the World Cup 2014 upon which its capacity will reach 120,000) – as a result of its ever burgeoning presence, a large amount of infrastructure investment has been earmarked in the surrounding area. Other points of interest are the Antônio Carlos Jobim International Airport, the Quinta da Boa Vista (a large park where the historic imperial palace is located) as well as the Federal and State universities of Rio de Janeiro.

There has additionally been an increasing amount of real estate investment interest in the wider Rio de Janeiro state, particularly in the coastal regions which continue to offer lower prices complemented by strong investment yields.  Some notable examples include Cabo Frio (with its turquoise waters and white beaches, an increasingly popular national and international tourism destination); Búzios (a small town commonly referred to as the ‘French Riviera’ of Brazil); Macaé (an increasingly important economic city of Brazil due to being located by the main access point to the country’s huge petroleum discoveries) and Rio das Ostras (another area witnessing development due to its proximity to Macaé complemented by a high standard of living).