• Home
•  » Property Investment News

Investors Descend on Brazilian Investment Opportunities

Brazil has become a magnet for foreign investors in search of investment opportunities. And the good news is that with its buoyant economy and booming consumer spending, Brazilian investments are here to stay.

In their latest report on Brazil, Ernst & Young take a look at Brazil's economy, politics and demographics. Based on these factors, ‘Viewpoint, Brazil in Focus' predicts that the current stellar growth is likely to continue at least until 2016, meaning potential for investment in the "global economic powerhouse" still has plenty of room for growth.

Finance Rushes to Brazil

According to Ernst & Young, asset managers are "rushing to take advantage of Brazil's infrastructure investment". Banks and hedge funds from locations globally "are descending on Brazil, all hoping to participate in the country's long-overdue success".

This dash to share a slice of Brazilian investment potential is reflected in record levels of foreign direct investment (FDI). In the 12 months to May this year, FDI in Brazil reached US$64 billion, the highest annual amount ever. FDI levels since May have continued to rise and financial experts are predicting 2011 will be the best year ever for Brazilian investment levels.

Economic Strength

A compelling reason for so much foreign interest in Brazil is its economy. With GDP growth of 6.9% last year, Brazil ascended to seventh place in the world economic power ranking. On the back of continued growth, many analysts believe Brazil will edge its way past the UK this year. And the government predicts that the Brazilian economy will see an average annual growth of 4.9% between now and 2015.

Part of this growth is fuelled by consumer spending, not least by the 20 million Brazilians who have joined the middle class since 2006. This trend has led to what Ernst & Young call "a remarkable consumer spending spree" and has affected goods across the spectrum from electronics and cars to property in Brazil.

The Growth Acceleration Plan (PAC) has had a major role in the new-found wealth. Under the PAC, millions have benefitted from better infrastructure, transportation and social improvements. The social housing programme, Minha Casa Minha Vida also forms part of the PAC and constitutes the largest investment in real estate in Brazil.

Challenges for Some Financial Sectors

Ernst & Young find that certain Brazilian investments face considerable challenges, particularly asset management and hedge funds. Obstacles include stringent regulations and the report notes that many foreign firms doing business in Brazil partner with established Brazilian companies.

Gary Hardacre, CEO of Obelisk International echoes this observation. "Brazil certainly represents a challenge for the outsider," he comments, "and the best way to succeed in an investment in Brazil is to associate with a Brazilian company."

Mr Hardacre also believes that it can pay to choose a Brazilian investment with less regulatory restrictions. "Brazilian real estate is a case in point," he says, "with plenty of investment opportunities and high returns, but without the endless red tape especially if you invest with an established company."

Ernst & Young report that, although asset management and hedge funds are very popular in Brazil, "investors are embracing exchange-traded funds and real estate funds". Interest in Brazilian real estate funds is coming not just from foreign investment but also from Brazilian investors themselves, keen to get in on this sector within Brazil's huge investment potential.

Contact Obelisk International on 0034 952 820 319. Via email: info@obeliskinternational.com or visit our website: http://www.obeliskinternational.com/.    

Follow us on Twitter, Facebook and LinkedIn.

« Back

Other Property Investment News