Brazil’s GDP (PPP) is the highest of Latin America, boosted by large and developed agricultural, mining, manufacturing, and service sectors, as well as a large labour pool. The country has been expanding its presence in international financial and commodities markets, and is part of the group of four emerging economies named BRIC. According to the International Monetary Fund and the World Bank, Brazil has the ninth largest economy in the world by purchasing power parity (PPP) and tenth largest at market exchange rates.

Brazil has a diversified middle income economy with wide variations in development levels. Most large industry is agglomerated in the Southern and South-eastern states. The Northeast Region is the poorest region of Brazil, but it has attracted new investments in infrastructure for the tourism sector and intensive agricultural schemes.

To see how and why Brazil is becoming one of the greatest opportunities for property investors, there are some key reasons which are briefly explained below. We have to highlight the capital growth, the low cost of living in the country, the booming property market, the favourable currency exchange, the low inflation and the economic expansion among others.

Capital growth

Transformations were particularly intense between 1950 and 1981, when the growth rates of the economy remained quite high and a diversified manufacturing base was established. Since the early 1980s the economy has experienced substantial changes and the capital growth has been significant. By the mid-1990s, it had a large and quite diversified economy, with considerable structural stability, as well as short-term, brightness.

Low cost of living - experience a luxury lifestyle at little expense

Cost of living can be as low as 20% or 30% of the cost in the UK/Europe. This is the reason why maintenance of a property in Brazil is so cheap. It also well known that Brazil is becoming one of the favourite retirement destinations for many Europeans and Northern-Americans. A luxury lifestyle can be achieved at a very low cost.

Booming property market

Brazil is quickly developing a prosperous property market, according to new economic results. With the largest economy in Latin America and the fifth largest country in the world, the region is benefiting from strong development in the real estate and tourism sectors. Goldman Sachs is predicting that Brazil could be a dominant force in the world economy by 2050. There has also been a 134 per cent increase in tourist numbers during the period from 2002 to 2005 and the government is working towards increasing annual visitor numbers – welcome news for those with holiday rentals in the region. Meanwhile property prices are steadily pushing upwards.

Currency exchange

Currency exchange is exceptionally favourable at the moment, making it cheap for foreigners to invest or buy a property, this way, investing in property instead of buying Brazilian Reais (plural for Real) will make you save huge amounts of money when it comes to changing a vast quantity of currency. Productivity and profits are highly increased for foreign companies to settle in the country due to this stability in the Brazilian currency exchange, increasing also the purchasing power for overseas investors in Brazil. The strength of the real has gained the confidence of investors, allowing the first bond issued in reals instead of dollars in 2004. Issuing bonds in local currency gives more protection against currency fluctuation and international economic instability.

Inflation

The market estimates that the Brazilian economy will grow 4.50% in 2007, and that the interest rate will end 2007 at 12%. The Brazilian government targeted the GDP growth as of 2007 by 4.5%, according to Guido Mantega. Central Bank’s inflation target for 2007 and 2008 stands at 4.5%, however Central Bank’s inflation projection for 2007 is now at 4.13%. The market predicts an inflation of 4.06% for 2007. Market projection for the exchange rate at the end 2007 is R$2.10 for US$1.00. The market also estimates that the foreign trade surplus for 2007 will be US$ 40 billion, and that foreign direct investment will total US$ 19,1 billion.

Economic expansion

Tourism is the world’s fastest-growing industry and a positive alternative for developing countries. This sector produced a turnover of US$ 3.5 trillion per year, 10% of the world’s GDP. By 2007, the Ministry for Tourism intends to create 1.2 million new jobs, which will, however, require a total investment of R$ 18 billion, of which R$ 14 billion should be financed by the banks, with the remaining R$ 4 billion coming from public funds. The generation of new jobs also depends on the promotion of tourism abroad. The challenge is to facilitate a cooperative development effort among regions, thus potentializing the advantages of cultural, natural and social diversity.

Housing shortage

There is a consistent lack of housing nowadays in Brazil. That is why new projects are arising everyday and investors should consider the property market. As the sector is growing so rapidly, the opportunity is great for those willing to put some money into this market.