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Economic stability 'boosts investment in Brazil'

Date added: 1st June, 2010 at 14:54
(view all articles from June, 2010)

Categories: Economy

An era of economic stability and upward social mobility has boosted overseas investment in Brazil, while the potential of a consumer-led boom continues to attract speculators, it has been claimed.

Brazil could become the fifth-largest power in the globe in the next ten years, according to Fund Strategy, as a period of relative prosperity and strength following the election of Luiz Inacio Lula da Silva in October 2002 continues to raise the population's buying power.

The country's debt-to-gross domestic product (GDP) ratio fell by 18 per cent in 2008 compared with an average for Latin America of 27 per cent and between 2004 and 2008 GDP has grown between three and six per cent annually, the magazine said.

With little involvement in the toxic assets that saw more developed economies tumble in 2008 and a new-found resilience to external turbulence, Brazil suffered a relatively mild impact from the financial crisis - contracting 0.2 per cent in 2009 with International Monetary Fund predictions forecasting a return to GDP growth of 5.5 per cent this year, the information source reported.

In a position to introduce countercyclical measures such as tax breaks for the hardest-hit sectors like household appliance manufacturers and the automobile industry, support for companies in debt and an increase in minimum wage, the country was one of the first to exit the recession. In fact, recent reports show that it now boasts the fifth-largest sales volumes for vehicles in the world, following China, the US, Japan and Germany with carmakers expecting a continuation in growth.

Interest from foreign investors was attracted by the burgeoning wealth of Brazil's population with experts forecasting GDP growth of ten per cent in the next five years and a study by the Getulio Vargas Foundation estimating that the middle-class demographic grew by ten million between 2004 and 2008, the publication added.

Real estate, it commented, has been boosted by overseas funds, with the organisers of this year's Nordeste Invest conference - focused on the property market and tourism in North East Brazil - predicting an influx of new business to the tune of R$1.8 billion (£683.63 million).

Two British companies that already invest in property in Brazil include Charlemagne Capital and Salamanca Capital, having capitalised on the abundance of housing developments across cities like Natal in the North East of the country where the middle classes are seeking the security and additional parking space that apartment blocks offer.

Rupert Hayward, a director at Salamanca, told the news provider that cheap land and a lack of competition from larger construction firms has made the region attractive to foreign money.
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