Introduction
Fortaleza in northeast Brazil is a city famous for its small size, laid-back lifestyle and comfortable year-round sunny climate. Brazilians are flocking to the city for a better quality of life and the demand for superior housing from the country’s growing middle class is on the increase.
Although Fortaleza is one of the safest cities in Brazil our spacious 2-bed, 2-bath apartments are located within a large gated community packed with amenities and guarded by 24-hour security.
We have secured a massive off plan discount to market value of 37%, meaning that these great apartments are available from just €74,655. We have also negotiated a staged payment scheme allowing our investment property purchasers to spread their payments over the next two years, making this slice of paradise affordable to all.
Economic growth in Brazil
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Brazil is a giant in all senses of the word. It is the fifth largest country in the world and the ninth largest economy1, with a huge population of 183 million. It is also emerging as an economic giant. It has the biggest economy in South America and has been grouped together with Russia, China and India as one of the “BRIC” countries, predicted to show enormous economic growth in the near future.
The BRIC phenomenon was first defined in a report by global financial analysts, Goldman Sachs. It identified that given these countries’ huge workforce, abundant natural resources and improving economic strategy, they have the potential in the next 50 years to outstrip the current economic leaders on the world stage. The report predicted that: “The importance of the BRIC economies in global capital markets is also going to rise dramatically”
A recent article in the Financial Times reviewed the BRIC progress since the initial report: “Five years on, Mr O’Neill (Goldman Sachs) says that not only has the BRIC phenomenon exceeded his expectations, but that the dream is likely to continue in the years ahead.” Goldman Sachs estimates that the quartet have accounted for 30 per cent of global growth since 2000, with the BRIC share of global GDP rising, in dollar terms, from 7.8% to 11% over the same period.
Further, the BRIC states’ emerging clout has reverberated around the global economy, nowhere more so than in the commodity markets, where China and India’s seemingly insatiable thirst for metals and energy has propelled a multi-year bull run, boosting the economies of exporters such as Russia and Brazil”2.
The Goldman Sachs report is just one indicator of Brazil’s enormous potential. There are many reasons to be optimistic for Brazil’s economic future. It is self-sufficient in oil which has drastically reduced its dependence on expensive imported fuel. It is currently developing a deal with the US to export Brazil’s production of the bio-fuel ethanol, manufactured from sugar cane (currently in Brazil, eight out of 10 new cars run on this non-fossil fuel).
Brazil is famously home to a million millionaires, and while there is no denying that the country has a problem with poverty, the middle class is growing. “The middle class in the BRIC could grow fourfold in the next decade” (3)
Brazil’s economy grew by 5.1% in 2004, dropped to 2.3% in 2005 but increased sufficiently last year to reassure the IMF that its policies were succeeding.
Foreign direct investment (FDI) into Brazil in 2005 was a healthy US$30 billion and a record trade surplus of US$44.8 billion was beaten only by their BRIC colleagues in Russia and China.
The current government, headed by President Luiz Inacio Lula da Silva aims to be tough on the economy to encourage growth and in his inauguration speech in January 2007, he vowed to bring down inflation and foreign debt, and increase the minimum wage. He has been partially successful, bringing inflation down to a more manageable rate, currently at 5.7%, and is working to encourage foreign direct investment amongst other economic reforms.
The word is spreading about Brazil and the economic potential there is best summed up by comments in the Goldman Sachs report: “Fantastic opportunities… spectacular potential”
What does this mean for investors at Quintas das fontes?
Economic growth and improvement is great news for property investors in a country like Brazil.
It demonstrates stability, both economic and political. The creation of the conditions for economic growth enable capital growth to occur, thus pushing up the value of your investment there.
A growing economy means salaries are pushed up and domestic demand for property also grows as the population becomes more able to afford to buy. This demand in turn pushes up property prices making an investment increase in value. It creates a strong onward sales market for your property.
An improving economy means that a greater percentage of the population improves their circumstances and an increasingly wealthy middle class grows. This group will want to buy quality housing in gated communities.
1. siteresources.worldbank.org
2. search.ft.com/ftArticle?
3. goldmansachs.com