www.thebrazilbusiness.com

The Brazilian Ministry of Commerce recently announced that the country had a trade surplus of around 30 billion USD in 2011, an increase of 47.8% over 2010. Exports  increased by 26.8% to USD 256 billion, while imports rose 25.7% to USD 226 billion .
In 2011 Brazil became the sixth global economy in terms of GDP,  ahead of  United Kingdom, Italy, Canada and Spain

For more information on trade relations between the United States and Brazil
• The Brazil-U.S. Business Council
• 2011: US trade with Brazil on the Census Bureau’s Website
• The US-Brazil Economic Relationship on the White House Website
• A Brookings Institution report on US-Brazil trade relations

Business in Brazil:
• The Brazilian-American Chamber of Commerce
• The US Commercial Service in Brazil
• The Embassy of the United States in São Paulo
• ACEB – Brazilian Business Trade Association
• Trends of Doing Business in Brazil in 2011 – (Pocket Guide 2010/2011) on the South African Department of Communication and Information System’s Website
• SEBRAE – A Brazilian government agency that supports business development for small and “mirco” enterprises

The graph below shows how there is growing interest worldwide as an investment opportunity, We have compared a number of terms such as Brazil Property, Spain Property and Minha Casa

There is no doubt that Dilma will continue Lula’s programme of increasing home ownership, reducing social inequality and social problems such as slums, drugs and crime.

The Minha Casa Minha Vida programme is now beginning to take effect in Brazil as the scale of developing 1m+ houses per year over the next 4 years has boosted the construction sector.

Traditionally property construction was once small scale  with many homes being self build and usually limited to the largest cities. The shortage created a latent demand of 7 million as there was no mortgage market to finance purchases and development finance was expensive and retruns were low. For many Brazilians owing a house remained a dream as 5 years ago the average Brazilian family needed ten times the minimum wage in order to buy a property.

With Minha Casa Minha Vid to buy a home a Brazilian household needs just three times the minimum wage. Hundreds of thousands of families have signed on for and been approved for mortgages to buy their homes at cost effective interest rates which now means the it is almost as cheap for a Brazilian to buy as it is to rent.

As one would expect with such a large programme, (R$34 Billion) the Minha Casa Minha Vida had a slow start due to teething problems as the system could not cope approvals due to a lack of experience and did not hit the mark of 1 million homes in 2010.

Brazil’s new President Dilma Rousseff has shown her socialist credentials and  is totally committed to the Minha Casa Minha Vida and made the social housing programme a top priority for her government. The necessity to build quality housing for millions of Brazilians has been made even more apparent after the recent floods in the Rio de Janeiro district and the need to remove drugs from slums to address Brazil’s social problems.

Last month, the Brazilian government approved this year’s budget for Minha Casa Minha Vida. The amount for 2011 is R$30.6 billion and will go towards the building of many more Minha Casa Minha Vida units. The government has also indicated it will look to ease restrictions to allow more middle class Brazilians to enter the market.

For more information see Reuters

Brazil will hold elections on Oct. 3 2010 to choose the successor to President Luiz Inacio Lula da Silva, who is barred by law from seeking a third consecutive term. Parties will formally nominate their candidates by March 2010.

Here are some of the key people to watch in the race.

Dilma Rousseff, Lula’s chief of staff and his chosen candidate to represent the left-of-center Workers’ Party, or PT. Rousseff favors a free floating currency and a reduction of public debt but wants the central bank to consider economic and job growth when setting monetary policy instead of focusing exclusively on inflation. She trails in opinion polls but likely will be boosted when the popular Lula campaigns on her behalf. Doctors say she was successfully treated for lymphoma cancer earlier this year.

Sao Paulo state Governor Jose Serra of the centrist Brazilian Social Democracy Party, or PSDB. With a 20-percentage point lead over Rousseff in polls, he is likely to be her main challenger. Some investors favor him because of the PSDB’s market-friendly track record, although Serra has a record of advocating government intervention in the economy. He would likely distance Brazil from Lula’s left-wing allies in Latin America and cut the public sector payroll.

Ciro Gomes, former governor of the northeastern state of Ceara and member of Lula’s cabinet until 2006. Currently with the Brazilian Socialist Party, PSB, his bid would take left-wing votes from Rousseff. He ties Rousseff for second place in polls at 14 percent. In 2002 he had a poor showing after making sexist remarks and struggling to control his temper. He also proposed restructuring Brazil’s debt.

Marina Silva, environment minister in the Lula administration until May 2008 and an internationally renowned defender of the Amazon rain forest. She is considering running for the Green Party but is less well known at home. She has less than 7 percent support in opinion polls. [ID:nN30413218]

Heloisa Helena, former senator and founder of the Freedom and Socialism Party, or PSOL. She was expelled from Lula’s Workers’ Party in 2003 for criticizing its move to the center. She is the only potential candidate that could abandon current market-friendly economic policies.

He said “Brazil represents a very unique set of circumstances, it’s politically stable, it’s energy self-sufficient, it’s got a growing population, it’s an educated population and consequently, it’s now, for the first time beginning to kind of step out.” Zell’s property investments in South America’s largest economy include, the largest shopping center owner BR Malls and the largest homebuilder Gafisa. In the past month, Zell’s Equity Investments added to its Brazilian portfolio, by investing an 8.5% stake in Brazil Finance & Real Estate, a real estate finance company.

Zell’s focus right now is on homebuilders, as he says “they represent the first step up from lower to middle” and that “there’s a great desire among the governments (of emerging economies) to go in that direction.”

Buyers are lining up to buy properties, pent up demand is now being fueled by “low cost” (by historical standards in Brazil)

The BBC reports that

Off-plan Properties that are up for sale but will not being delivered for two years are being snapped by by eager buyers and competition for the best spots is intense.

When a customer decides to buy, the estate agent has to rush through all the relevant the documents before a competitor closes the deal.

“Last night I didn’t have any sleep because we spent all night closing deals,” says sales supervisor Thiago Davidian.

“My team sold more than 50 units yesterday and more are going as we speak.”

Emerging mortgage market

Estate agent Thiago Davian is doing all he can to cash in on Brazil’s property boom “It’s great to be working with real estate in Brazil at the moment,” he grins.

Cocktail parties, with dozens of real state agents pitching their best offers, have become frequent events in big Brazilian cities in recent months.

It has all come about because of a sharp drop in mortgage rates, which fell to single-digit figures last year.

Before then, the Brazilian mortgage market had been embryonic at best as interest rates in the country have historically been among the highest in the world.

In recent months, a particularly healthy mortgage market has emerged. Mortgage lending rose to a whopping 23.8bn reais ($13.6bn; £8.9bn) during the first half of this year, a 77% rise when compared with the same period a year ago.

 Embraesp, a real estate research company states that “The rise in demand has resulted in a doubling in the price per square meter in Sao Paulo”

The construction industry has  grown by 15% during the first half of 2010 when compared with the same period a year earlier, and thus outpacing the 9% overall economic growth rate (GDP).

Owning a house and a car is a dream for many Brazilians “We have carefully studied what happened in this international property bubble,” says Joao Crestana, president of Secovi-SP, Brazil’s real estate developers’ association.

“We must not make the same mistakes as the United States and Spain did.”

Developers in Brazil insist banking regulations here are much tighter than they were in the US and say the debt burden here is not as large.

“Here in Brazil, the average loan to value is 60%,” Mr Crestana

Commentors say that properties in Brazil are bought mainly as homes rather than as investments.

 ”In Brazil there are eight million families who do not have a house to live in,” says Mr Crestana.

“That means 30 million people, equivalent to the whole population of Argentina, who do not have a house. “So on the demand side we have nothing to worry about for the next 15 years at least,” he insists, pointing to how economic growth in Brazil has elevated some 30 million people into the country’s “lower middle class”. “And now they want their own homes,” he says.

Background

Over the last few years, there have been regular reports in the media about Brazil banning foreigners from owning land in Brazil.  Brazil law restricts foreigners from owning rural lands, maratime and land close to borders.  If a foreign does buy a farm for example he must emmigrate to Brazil within a finite period or the contract is null and void and he loses his money.

The only way foreigners can own land is to set up a Brazil company that owns the land.  Obviously many foreign companies own land ranging from mining companies, land development companies, land banking, developers, venture and private equity companies and companies involved in agriculture.

Current Situation

Foreign  investors  buying land in Brazil could face problems as the country seeks to restrick foreign ownership.  There may be a real issue related to food security or one used as a political issue as a run up to elections in October.

Foreign owned Brazilian companies with rural land could face title deeds being revoked under tough measures that are currently being drawn up, it has been confirmed.
 
Government officials have confirmed that official policy is that foreigners should not be allowed to buy agricultural land. The Agrian Development Ministry said the government wants to tighten restrictions on foreign ownership of farm lands.

Brazil offers a large opportunity. It is the world’s fifth largest (in size) and most populated (190m)country, It has  immense resources (agriculture, minerals, iron, oil)  and buoyant economy (projected to grow by 5%+ in 2010) give investment in Brazil enormous potential. And

Real estate represents one of the biggest opportunities.

Is Brazil’s property market is on the brink of an unprecedented boom.

Many view this because of a number of  major construction and development activities.

1.   the 2014 World Cup,

2.  the 2016 Olympics

3. The Minha Casa Minha Vida (My House My Life) Programme

4. Oil Exploration

5. Growth in investment in Energy and Infrastructure Projects

 
According to the Brazilian Association for the Construction Materials Industry (ABRAMAT), investment in infrastructure and services for the two sporting events will run to almost R$60 billion.

The World Cup needs R$30 billion for the construction of stadiums, upgrading of airports, transport systems and increasing Brazil’s network of hotels.

 The Olympics require a similar amount.

ABRAMAT also points to the residential housing sector as a major driver behind the forthcoming boom in civil construction in Brazil. In their Macro-economic Scenario 2009-2016 report, ABRAMAT describes the current housing shortfall and the forecast increase in population.
ABRAMAT reports that the current population of around 190 million is expected to increase to 209.3 million by 2016. The number of families in Brazil will grow by 2.5% to 74.1 million and the number of homes by 2.7% (from 57.7 million to 71.4 million).
Using what it describes as “conservative estimates”, ABRAMAT expects an annual growth of 2.7% in the number of homes built between 2009 and 2016. During this time, annual average investment in residential construction will run to R$227.2 billion – R$147.8 billion for the construction of new homes in Brazil and R$79.4 billion for refurbishing existing stock.
Over this 8-year period, Brazil is set to see an unprecedented real estate boom. ABRAMAT’s “conservative estimates” quote the construction of 13.7 million homes. In a country where, according to Reuters, 27 million homes are needed over the next 15 years, the chances are that many more will actually be built.  In the short term there is enough domestic funding to support the building of 1-2 million homes per annum for the next two years funded by the FGTS element alone.

 
This boom has already started with the government social housing programme, Minha Casa Minha Vida (My House My Life), leading the way. With a budget of R$34 billion, My House My Life has the ambitious goal of building 1 million homes this year. The programme plans to eventually reduce Brazil’s housing shortage by 14%. The President of the Brazilian Chamber of Construction Industry (Câmara Brasileria da Indústria da Construção), Paulo Simão, believes that much of 9% growth forecast for the civil construction industry this year will be due to the My House My Life programme.