REASONS TO INVEST IN BRAZIL? PDF  | Print |  E-mail
Written by Leslie Richards   
The role of the Lawyer and Notary 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... 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 country’s President Lula da Silva, who during his two terms of office has transformed the country’s 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. Brazil’s 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 growing middle classes and consequent increasing domestic consumption of the BRIC nations is creating greater demand for exports. While US consumers continue to tighten their purse strings, Brazil, Russia, India and China will be responsible for around 50% of worldwide export demand.

Since 1995 Brazil has invested heavily into tourism, taking foreign visitors numbers to 5.2 million in 2008 from just 1.9 the previous decade. In preparation for the 2014 football World Cup, which will take tourism levels to a new all-time high, the Government will spend over $250 million over 5 years on infrastructure.

With residential mortgages only accounting for 2.5% of Brazil’s GDP (figures supplied by the Banco Central do Brasil), the market has huge room for expansion. To give an example, residential mortgage levels in other countries are 11% in Mexico, 20% in Chile, 45% in Spain and as much as 68% in the US. Despite the current worldwide financial crisis, mortgage lending in Brazil has risen by 41% in the last year, twice as fast as consumer credit. Caixa Economica Federal, the state-owned bank, expects to lend R$26 billion for real estate purchases in 2009 compared to its average of R$5 billion four years ago. The bank has lent R$19 billion already this year.

Brazil’s economy is worth $1.5 trillion, yet exports only represent 12% of this. Its population of 190 million is seeing a boom in the middle classes, which now make up more than half its population. With their increased buying power, Brazilians are buying more food, more clothing and more household goods than ever before. Sales figures for Whirlpool, which has a 40% share of Brazil’s appliance market, were 20% higher in May and June 2009 compared to a year earlier. Though this has been partially fuelled by tax incentives, which are due to end in October, sales are expected to remain strong. "Over the next five years, we'll see a doubling of sales of durable goods in Brazil," says José Roberto Tambasco, vice-president for operations at Pão de Açúcar. In preparation to meet the increased demand for white goods, the supermarket giant recently paid $422 million for the appliance retailer Ponto Frio which has a network of 458 stores nationwide.