Wholesale City in Caucaia to be Latin America's Largest

Diario do Nordeste reports that traders from the grocery industry have contracted to occupy the first portion of the Cidade do Atacado in Caucaia. The wholesale center, which aims to be the largest of its kind in Latin America, will allocate 60,000 square meters to approximately 130 separate businesses, most of which will relocate from the area surrounding Rua Governador Sampaio in central Fortaleza.

Antonio Vieira, Secretary for Economic Development, said that 400 thousand meters of warehouse space should be completed during 2012, with the final project reaching one million square meters in 2013. 

Alongside rising economic activity at the port of Pecém, the municipality of Caucaia is expecting annual revenues of R$1 billion (approximately US$500 million) derived exclusively from Cidade do Atacado, as well as 320,000 jobs. 

The Safe Way to Buy Property in Brazil

 Ruban Selvanayagam has written an informative piece on safely purchasing land in Brazil:

However, it should be noted that great care should be undertaken when buying land in Brazil to avoid what is ubiquitously referred to as a golpe (a false transaction created around corrupt/illegal business practices).  The prominent risk is via the purchase of an irregular plot of land – such as in areas which are environmentally protected and not permitted for residential and/or commercial construction.  The article illustrates the case of the Billings, Guarapiranga and Cantareira mountainous regions of São Paulo – when in the 1970s, the government decided to ban construction due to environmental protection obligations.  Although many owners have since been able to negotiate their legal positions of property and land rights, their battles have been long and arduous.

The recommended first step to buying Brazilian land is to request a matrícula individual do lote (individual registration of the lot) – which will show the origin of how the plot was formed; ensure that there are no encumbrances and will effectively guarantee that it is not irregular.  With this document, the buyer can avoid 95 percent of the problems that can often be discovered when purchasing Brazilian land.  It can be obtained at the local cartório (notary office) which has a legal obligation to furnish this information to those who are interested in purchasing.  Another suggestion is to contact the local prefecture (prefeiture) in order to verify any building restrictions which may be in place such as with height (such limitations may affect the future development value of the plot).  Providing this information is also a legal obligation on the part of the local authorities.  In addition to the necessary permits (alvarás) and licences (licenças), checks should be made to ensure that there are no issues related to surrounding infrastructure and utilities (water, gas, electricity, waste disposal, transport etc.). 

Brazil's 2011 Foreign Direct Investment Jumps 20%

FDI is increasing more than expected:

Brazil will likely see foreign direct investment jump to $70 billion this year after reaching $48.5 billion last year, the central bank's monetary-policy director, Aldo Mendes, said Tuesday.

This compares with a previous government estimate of $55 billion in foreign direct investment

Foreign investment in Brazil has jumped as overseas investors seek growing markets due to a global economic slump. 

According to the Instituto de Pesquisa Econômica Aplicada (IPEA), the flow of FDI is not likely to continue:

The IPEA reported last Wednesday that Brazil stands to be a major destination for foreign investment in 2012. The International Perception of Brazil Monitor study found that the likelihood of Brazil receiving foreign investment rose from 35 points in May to 43 points in August.

Further, the percent of interviewees worldwide who consider Brazil one of the top five destinations for foreign investment rose to 70 percent in August – a 14-percent increase from May.

Brazil a World Leader in Clean Energy

Brazil's abundant water, wind, and sun are providing remarkable opportunities for clean energy industries:

According to the Intergovernmental Panel on Climate Change, up to 77 percent of the world's energy needs could potentially be supplied from renewable sources by 2050, despite the current figure being a much more modest 13 percent.

Many heads of government around the world wondering how they can play their part in such a dramatic transformation could be forgiven for looking enviously at Brazil, where the figure already stood at 44.8 percent in 2010 and is forecast to rise to 46.3 percent in 2020.

While this increase may seem small in percentage terms, it fails to take into account the huge growth that will be seen in the country's raw energy demands — and the fact that the next decade could see the foundations laid for renewable energy to quickly become even more dominant in the years that follow. 

 The windy northeast region promises to become a center for the wind power industry:

...there are a variety of reasons to be optimistic. Given the substantial investment from both within Brazil and overseas, the nation's vast and almost entirely untapped wind potential is also beginning to attract attention to the fact that few other countries are as well-blessed in terms of solar power prospects.

Despite the installation of Belo Monte and various other hydroelectric plants, the proportion of Brazil's electricity supply coming from hydropower will be expected to actually fall from 75 percent of the total in 2010 to some 67 percent in 2020.

Meanwhile, other renewable sources, such as biomass, small-scale hydropower and, principally, wind will see the 9 GW they accounted for last year triple to 27 GW in 2020. This will take their contribution to the country's electricity supply from eight to 16 percent, keeping the overall contribution of renewables to electricity at 83 pecent.

By far the biggest jump in contributions will come from wind power, which currently supplies around one percent of Brazil's electricity but would supply seven percent by 2020 under the current plans.

Institutional Investors Bullish on Brazil

JP Morgan recently released a survey that shows institutional investors to be bullish on Brazil's investment opportunities during the next three years:

A majority of these investors, who together hold approximately $57.3 billion of actively managed equity in Latin American companies, view Brazil as the country with the highest investor-relations standards.

Survey participants named Brazil and Colombia as the most promising countries for investment opportunities over the next three years; Brazil’s rapidly expanding middle class promises to yield tremendous growth, while Colombia’s pro-business government is attractive to investors.

Brazil Sees 18.8% Year-on-Year Growth in Tourism

According to the World Tourism Organization, Brazil has seen 18.8% increase in tourism during the past year, the largest increase in South America:

Thought to be a continent built for exploration, Brazil has fascinated travelers for at least 500 years with its offerings of powdery white sands, stunning natural beauty and some of the world's most colorful cities. Indeed, the data collected shows that the overall trend in tourism is positive, with Business Monitor International (BMI) forecasting a 21.5% increase in tourist arrivals to Brazil between now and 2015 helping generate around US$9bn in tourist revenue over the same period.

The 2014 World Cup and 2016 Olympics has Brazil urgently working to develop tourism infrastructure, including access, capacity, and quality of tourism centers. Brazil needs to build stadiums, improve transportation, and increase hotel capacity in and around major cities as well. 

With many projects behind schedule, the Brazilian government needs to act quickly, and invest significant funds. Through the next five years, tourist centers can expect steady flow of capital, new roads, improved sanitation, reformed common areas, and new major hotel investments. 

These improvements will provide additional momentum to a real estate market already in a strong bullish trend. Properties on and near beaches remain quite affordable as compared to the international market for similar real estate. 

Cumbuco, Ceará, Brazil

Thomas White comments on the housing shortage that is also driving new construction:

However, what Brazil has a severe shortage of is housing. In fact, the country has a housing deficit of 6 million to 8 million units, according to various estimates. On average, every year, the nation of 194 million people creates about 1.5 million households, while builders there construct only half that number of housing units. At the current rate of homebuilding, Brazil’s housing deficit is projected to last at least a decade.

Brazil as a Hedge on Inflation

CEO of Asset Management at HSBC Brazil, Pedro Bastos describes Brazil as a save haven in a difficult global economic climate:

The Brazilian market is a natural hedge for inflation on a global basis because of the heavy weight of commodity producers on equity itself. But again, Brazil is one of the few countries that offer a very appealing proposition of strong domestic consumption, infrastructure development, and also convergence of interest rates and commodities. So all four drivers playing at the same time.

He says the rapidly-growing middle class is a major driver of growth:

 As a result of personal income growth and low unemployment, there has been a huge migration of people - around 20 million over the past few years - from below the poverty line to the middle class.

Infrastructure is the second component of growth. Brazil is behind the curve with respect to national infrastructure. Fortunately, the government is in a financial position to spend. Along with the $600 billion Accelerated Growth Program (PAC2), Brazil has additional motive to build agressively in preparation for the 2014 World Cup and 2016 Olympics.

Bastos describes the interacting factors relating to commodities, energy, and trade:

Energy is also part of infrastructure and hence, I would like to talk about the oil sector. We have found pre-salt oil reserves along the coastline and that, in itself, will be a major driver for development and growth over the next few years. We will be producing 2.5 million barrels of oil by 2015 and the number will go up significantly by 2020.

Commodities: Though commodities contribute to only 6 per cent of Brazil’s GDP, it is the world leader in production of a number of hard and soft commodities - iron ore, sugar cane, coffee, to name a few.

Well-diversified export dependencies: Brazil is not dependent on the US or China alone for its exports. Hence, any impact on these economies does not impact Brazil significantly. Since 2009, China has replaced US as the largest buyer of Brazilian exports.

At CNNMoney, Penelope Wang discusses the importance of emerging markets to a well-diversified investment portfolio:

Developing nations are leading producers of raw materials and commodities, whose prices tend to keep pace with inflation. That makes emerging-markets stocks a good inflation hedge, says Pittsburgh investment adviser Lou Stanasolovich.

Developing markets can also provide diversification in the event of deflation, since fast-growing nations, such as China and India, are likely to keep expanding -- in part based on rising domestic demand -- even if the U.S. lags. Indeed, the Chinese economy is forecast to grow around 8% or more every year for the next decade, according to IHS Global Insight.

Currency trends also demonstrate the value of emerging market investments. With Europe and the United States burdened under heavy debt, and with stagnant economies, future trends will give advantage to countries like Brazil, with low debt levels, healthy growth, and an abundance of natural wealth. Further depreciation of the Dollar and Euro appear very likely. Brazil may find that one of its greatest challenges is managing the strength of the Real.