Why Brazil? - Brazil Overview
Often referred to as the giant of South America, Brazil is turning into a giant of the global economy. Already in the top eleven largest economies, it is predicted to join the top five by 2025 at current rates of growth. A key factor in Brazil’s rise is its abundance in natural resources.
The recent discovery of a 40-50 billion barrel-field, plus an existing 14.4bn barrel reserve and natural gas equivalent, makes Brazil the eighth biggest oil nation in the world - ahead of Russia. The Brazilian government’s decision to invest as much as $200bn - $300bn of oil revenue in a sovereign wealth fund underpins a country on the rise, with a strong and stable future.
Brazil’s land prices have been kept low by the limited availability of finance and credit. With only 2% of the population holding mortgages, the mortgage market is in its infancy. A few years ago, the longest mortgage available was ten years, but now 30-year mortgages are available at rate of 13%-14%.
A massive, fast-emerging middle class grew by 7m last year and is predicted to boost property prices enormously. It is hardly surprising that current research suggests a property market very much on the rise.
With a shortage of 8 million homes, Brazil’s housing market is seriously underdeveloped. It is estimated that in the next fifteen years, population increase and a strengthening economy could push that figure as high as 27 million. Fast-rising domestic wealth is coupled with a proactive government that’s making a serious investment in the country’s economic security, tourism and infrastructure.
Overall, the investment outlook in Brazil’s property market is regarded as highly promising.
“For much of the decade, slow-growing Brazil seemed out of its league lumped in with the dynamic emerging economies of Russia, India and China in the so called BRIC group. Sceptics said that RIC was more like it.
But slowly and without great fanfare, Brazil’s economy has turned a big corner. Already a global power in agriculture and natural resources, Brazil has added a key ingredient that had long eluded it: a currency with staying power. In turn’s that’s helping unleash the greatest burst of prosperity the country has witnessed in three decades, attracting foreign investors by the score and providing a growth engine for a flagging global economy.
For the second consecutive year, Brazil’s economy is growing at around 5%. That’s still a far cry from Chinese growth levels. But the expansion has enabled Brazil, which seemed on the verge of a massive debt default in 2002, to build up enough stockpiles of US dollars to outweigh its entire foreign debt and become a net creditor nation for the first time in its history.
Brazil has enough money lying around that it recently announced it would follow other booming countries like China and Persian Gulf oil states in setting up a sovereign-wealth fund, worth between $10 billion and $20 billion, to invest its excess cash. In addition to the fund, Finance Minister Guido Mantega unveiled a new $125 billion industrial policy plan to stimulate new export and high-tech industries at home through tax breaks, venture capital and other incentives.”
The above is an extract from an article which appeared in the Wall Street Journal on 13th May 2008.
Brazil’s new found stability has elevated millions of poor Brazilians into the middle class, making it the largest population bracket in a nation long known for having only haves and have-nots. Adding to the optimism, Brazil recently made some vast offshore oil discoveries that could catapult it into the ranks of major oil exporters.
Brazil represents 47% of the landmass of South America. It has a population of approximately 190 million people. It has 7500km of coastline.
Since 2005 around 20 million people have entered the middle class as the percentage of middle class families has grown to 46% from 34%.
