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Reasons to Invest in Brazil? |
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Written by Leslie Richards
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Saturday, 29 August 2009 23:36 |
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Brazil will be one of the first economies to recover from the economic slump. The OECD predicts 4% economic growth for the emerging giant in 2010. The confidence of the countrys President Lula da Silva, who during his two terms of office has transformed the countrys economy, has barely taken a denting. Brazil is emerging from the crisis, and next year we are going to have surprising growth, he announced in July.
by LeslieRichards
Brazil will be one of the first economies to recover from the economic slump. The OECD predicts 4% economic growth for the emerging giant in 2010. The confidence of the countrys President Lula da Silva, who during his two terms of office has transformed the countrys economy, has barely taken a denting. Brazil is emerging from the crisis, and next year we are going to have surprising growth, he announced in July.
The oil industry is booming. Brazils target is to double production by 2012 to 3.5 million barrels a day, placing it high amongst many Middle Eastern rivals such as Kuwait and Saudi Arabia. Petrobras, the State-owned oil company, is developing its recently found deepwater reserves with a $174 billion investment program over 5 years and the US has agreed to provide up to $10 billion in finance to further development. Having diversified and industrialized its economy prior to many of its major finds, Brazil should avoid over-reliance on oil and increase domestic wealth significantly.
The BRICss of Brazil, Russia, India and China will be responsible for around 50% of worldwide demand for exports in the near future due to their mounting domestic consumption. With U.S. consumers expected refrain from purchasing goods in the near future, the recent Goldman Sachs report predicts that the BRIC demand for exports will be powered by a growth in their middle classes.
The 2014 World Cup has resulted in a Government programme of expenditure, in excess of $250 million on roads, airports, power generation and sanitation coupled with a huge spend on tourism that has resulted in international tourists increasing year on year from 1.9 million in 1995, to in excess of 5.2 million in 2008.
The Brazilian property market has huge room for growth. Residential mortgages only represent 2.5 percent of the Brazils GDP according to Banco Central do Brasil, the Central Bank. Comparisons with other countries reveal a huge growth potential for Brazil as Mexico is 11%, Chile 20%, Spain 45% and 68% in the US. Even with the worldwide economic crisis, mortgage lending in Brazil rose 41%, twice as fast as consumer credit. The state-owned Caixa Economica Federal has lent around 19 billion Reais so far in 2009, compared to an average of five billion Reais four years ago. It expects to lend 26 billion Reais worth of loans for Brazil real estate purchase in 2009.
Brazil has a huge export industry, yet this only accounts for 12% of its $1.5 trillion economy. With Brazils middle class now making up more than half its 190 million-strong population, the domestic consumer market is booming. Retail spending has increased heavily this year from 2008 with groups such as Whirlpool, which has a 40% share of the white goods market, recently announcing 20% increases in sales year on year. Other groups have been quick to jump on board the household goods train. Over the next five years, well see a doubling of sales of durable goods in Brazil, said Jos Roberto Tambasco recently. The vice-president for operations of Pao do Aucar, which turned over $8.9 billion in 2008, spoke in the wake of the supermarket giants strategic acquisition of appliance retailer Ponto Frio for $422, providing the group with a further 458 outlets countrywide to meet the burgeoning demand for household appliances.
About the Author:
Leslie Richards is a consultant to Brazil Land Invest and advises the company on property land and Affordable Housing projects in North East Brazil. |
