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Brazil Investment Prizes

A major tussle between two European telecommunication giants for a slice of the Brazilian market is yet another sign of Brazil's huge investment potential. With its fully-recovered economy on target for at least 4.5% growth next year, opportunities for investment in Brazil (property, stocks and shares etc) have never been riper.

At a time when foreign direct investment is diminishing in most countries, Brazil has a different story to tell. If last week it was the turn of foreign banks when the Santander initial public offering made US$7 billion, this week Brazil investment potential comes in the form of telecommunications.

Brazil has a huge population where social inequalities are gradually disappearing. Over half Brazilians are now recognised as belonging to the lower-middle classes. Among these middle classes, purchasing power is steadily increasing. And along with more money, the new middle classes also have a huge appetite for consumption - Brazil has seen 23 consecutive months of increases in consumer consumption - and for credit. Unsurprisingly, for foreign investment, the telecommunications market in Brazil is a glittering prize.

Spanish Telefónica and French Vivendi are sparring partners for the control of a small Brazilian operator, GVT. The fact that Telefónica has just bid US$3.7 billion for the company (14% more than Vivendi's offer) shows that foreign investors have huge confidence in the future of the market in Brazil. The European giants are not the only interested parties in GVT and analysts believe that the Telefónica offer may well be out-bid by a rival.

Modern telecommunications are a sure sign of a modern economy. And the telecommunications market in Brazil is fast catching up with its economic performance. The number of landlines has more than doubled since 1998 from 17 million to 41 million. The increase in mobile phones is even more spectacular. With some 165 million mobiles, Brazil almost boasts a ratio of one mobile per person. Internet lags slightly behind, but government plans to lay over 31,000km of optical fibre should mean that millions of Brazilian have access to broadband technology.

The fight for control of GVT is a strong indication of just how high foreign investment interest is in Brazil. The Latin-American giant is riding a succession of very positive economic data and has just been awarded the continent's first Olympic Games. Interest in Brazil real estate is also reportedly high and many experts believe the country is about to experience a property investment boom. Brazil undoubtedly is a prized investment.

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