Brazil property – Smart Investment for 2008/09 and beyond?
This article is looking at the current economic climate for property investors considering a variety of property for sale abroad in different emerging markets and then ultimately highlights Brazil as an attractive choice.
Currently twelve countries account for two-thirds of the world’s economic output, of which seven are the richest and most developed, and five are emerging. The latter are those that have provided the engine for global economic growth in 2007 ; a trend which will undoubtedly continue this year.
The potential exists for the lion’s share of growth to be contributed by four nations in particular in the coming years, as the Western and most developed economies follow a plateau pattern that does not allow for precipitous increases in asset valuations. Therefore, these four countries, referred to as BRICs (Brazil, Russia, India and China), represent the best opportunities for investors pursuing alternative tangible asset strategies, offering high potential returns in this area that cannot be realistically projected in traditional locations in the near future.
Of these four, Brazil offers to foreign investors the strongest combination of political stability and ease of participation in its economic success. Additionally, the general risks associated are far lower than in most other transitioning economies, making the balance of the risk/return ratio unusually weighted towards returns.
The region offering the lowest risks is the Northeast, where the socio-economic concerns of the greater urban areas in the south are virtually non-existent, and the demand for real estate by affluent Brazilians will be augmented by international tourism.
The Northeastern coastline benefits from similar climate and landscape characteristics to the Caribbean, a comparison which highlights distinct undervaluation in Brazilian waterfront resort properties. These combined factors point to a realistic projection that Northeastern coastal real estate prices of Brazil property will achieve greater and faster growth than will be seen in most other markets in the next 1-2 years.
Brazil’s GDP is the 10th highest in the world and the highest of Latin America, with large and developed natural resource, manufacturing, and service sectors. In the seminal Goldman Sachs analysis of 2003, known as the BRICS thesis, the bank asserted its view that Brazil, along with Russia, India and China, would be an economic superpower by the year 2035, potentially eclipsing both the US and the EU by 2050. In addition, of these 4 nations, Brazil can be qualified as the most politically stable democracy, having no regional disputes or potential fall out effects from major trading partners, such as might be the case in the Middle East. Another important consideration in assessing Brazil’s future growth is the commitment it has shown in eliminating its dependence on oil imports, currently a significant factor in any growth analysis. Brazil is one of the world’s largest producer of alternative energy sources, primarily hydro-electric and nuclear. Historically, the obstacles to Brazil’s growth have largely been associated with inflationary and currency instability, however, following inception of a floating currency exchange for the Real in 1999, Brazil received the largest IMF rescue package ever granted, a loan which was repaid, in full, by Brazil’s Central Bank nearly a year ahead of schedule.
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