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Advantage Brazil - Ruban Selvanayagam, Brazil Real Estate

How Brazilian Investors and Business Owners are Taking Advantage of the Global Economic Crisis

While the countries worst affected by the global economic crisis remain concerned with regards to the strength of the Brazilian currency in comparison to their own – conversely, CEOs and investors from South America’s largest economy are taking advantage of the Real’s strength to increase their presence on the international stage.

PricewaterhouseCoopers recently stated that Brazilian investors and companies were involved in 52 major overseas acquisitions between January and August this year (almost double compared to 2009). Brazilian multinationals are also increasingly optimistic with regards to investment opportunities encouraged by rising business confidence, lower valuations in addition to the fortified nature of their currency which looks set to continue its growth trajectory for the medium-term future. According to a survey by the Society of Studies on Transnational Companies and Economic Globalisation (SOBEET) in conjunction with Valor Magazine, 48.8 percent of multinationals intend to increase their investments abroad from 2010 to 2011, compared to 38.8 percent in 2009-2010. For the remainder of 2010 and into 2011, only 4.8 percent plan to reduce their investments (compared to 26.5 percent last year).

Odebrecht (the largest construction firm in Latin America) leads the pack in terms of its international investment level. Today, the company’s interests are spread across 18 countries – representing 70.9 percent of its revenues, 60 percent of its jobs and 70 percent of its total assets. Examples of future expansion are the US$10 million investment destined for Peru focusing on its hydroelectric plants, roads and ports as well as continuing expansion plans in Africa. Operating in the food sector, JBS-Friboi is Brazil’s second most internationalised company having made over 30 acquisitions over the last 15 years. Such expansion looks set to continue, with the company recently announcing the raising of R$1.6 billion to enhance its distribution platforms The third most internationalised is the Gerdau steel group (currently present in over 14 countries) who are currently preparing for a new period of growth, largely focused on the increased demand by fellow emerging nations – some R$11 billion has been raised for this purpose.

Brazilian property buyers are also taking advantage of the lower house prices in countries such as the US and the UK as well as throughout Europe. Statistics from the Network of North American Real Estate, which has partnerships with over 75 countries, stated that 80 percent of sold properties in the Miami area were bought by foreigners in the last year – 50 percent of which were by Brazilians. Marco Fonseca, international relations president for the National Association of Realtors (NAR) in the US states that: “in prime areas of the US, the price has dropped so much that you can buy a house of good standard with three bedrooms, a pool and tennis court in a residential area at prices similar to those found in prime areas of Brazil at some 45 percent less than before the crisis.” In an interview with the Globo newspaper, Renan Cazarine Constantino of the North American company Piquet Realty, who have set up an office in São Paulo offering properties in the Miami and Florida areas, believes it makes perfect sense in the current climate to offset the contradicting housing markets.

Afonso Fleury of the University of São Paulo, in an interview with Valor, believes that such examples of international expansion and changing economic order are being led by Brazil and its BRIC counterparts (Russia, India and China). However, he also stressed the ever-increasing competition that Brazil faces and a need for effective guidelines and support mechanisms: “Chinese companies are united by a ‘go global’ strategy enjoying comprehensive financial, technical and diplomatic support from their government. Indian companies and investors have already established operations in countries like the UK and the US as well as a strong entrepreneurial culture.” At the same time, as recently stated in Newsweek’s analysis of the changing face of the global economy, Brazil has the advantageous position of being relatively democratic without any major border disputes as well as being more welcoming to diplomacy and foreign business models. Indeed, industry leaders have also been critical of the instilled heavy protectionist measures preventing Brazilian business leaders accessing places like China.

Ruban Selvanayagam

Ruban Selvanayagam is a Brazil Real Estate and Land Specialist providing free e-books, state guides, up-to-date statistics, strategies, interviews, articles, weekly broadcasts and more. Brazil Real Estate and Land Investment Guide

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