Property Investing In Brazil

Fortunes Will Be Made Here Over The Coming Decade…But You Don’t Want To Try To Go It Alone

Sept. 12, 2011, Fortaleza, Brazil: The Ceara State of Brazil holds out tremendous property investment opportunity right now, specifically for productive agricultural land.

Dear Live and Invest Overseas Reader,

Blame it on the pre-dawn flights we've been racing to catch this week or maybe a little too much rum the night before, but please forgive my reference in yesterday's dispatch to Brazil's position as a place to do business.

I misspoke when I wrote that "Brazil is the 127th most challenging place in the world to do business."

That would suggest that 126 other countries are more challenging places than Brazil to try to conduct business. That's not the case.

What I meant to say is that, in the World Bank's 2011 Doing Business Survey, Brazil ranks 127 out of 183 countries considered, which is down three notches from the country's ranking in 2010.

It's not easy to do anything in Brazil, and it's not getting any easier. As our host for last week's visit explained, "The real problem is that Brazilians don't seem to see the problems as a problem. Their economy is booming. That's enough for them."

Meantime, the small foreign investor has his work cut out for him in this country. Language, logistics, bureaucracy, restrictions, taxes, and corruption...these are the hurdles the would-be small investor faces.

Corruption is an issue across Latin America, but, in Brazil, it seems to take on extraordinary proportions.

"Brazilians accept it," our new friend explained over the weekend. "It's just the way it is."

Lief and I had concerns about all these issues before this trip. Now we're convinced: Enter Brazil as a small investor on your own, and good luck to you.

On the other hand, travel around Brazil's Ceara State, as we did last week, with introductions by Portuguese-fluent businessmen well established in the region, and you can't help but want to get in on the action.

A lot of money is going to be made in this part of the world over the coming 10-plus years. And a lot of money is going to be lost...

Some fundamentals:

• Brazil is a big market that operates largely unto itself. It was barely touched by the crisis of 2008 and today is booming...

• Brazil's real estate market is driven largely by Brazilians, meaning, again, that it is not suffering as a result of what's going on in North America and Europe...

• Brazilians like real assets, including beach condos and productive land. That's where they continue to park their available cash...which is why prices for beachfront condos, for example, are higher than you might expect them to be (more than US$3,000 per square meter along the front line in Fortaleza, for example)...

What does all that translate to for the individual investor? Lief is processing data and impressions now and, as I mentioned yesterday, will have a full report on opportunity in this region for his Marketwatch members later this month.

The bottom line is that the opportunity on offer right now in this part of the world is enormous. I don't think it's an exaggeration to say that fortunes will be made here over the coming decade. But I wouldn't suggest you try doing anything here on your own. If you don't speak Portuguese, you'll be operating at a dangerous disadvantage. You need a guide and a plan. Again, Lief will have more soon.

Kathleen Peddicord

P.S. Brazil must operate according to its own, independent hotel rating system, and that rating system must extend to 10 stars or more. That's the only way to explain how the hotels where we stayed this past week could bill themselves as 4- and 5-star. If these were the 4- and 5-star choices, I'd hate to spend the night in a place with but 3 twinklers to its name.

As with everything in this country, you need firsthand recommendations for hotels. The place where we stayed on the beach outside Fortaleza, on the recommendation of a friend, was charming and memorable. The hotels we found on our own? Expensive and disappointing (even horrible).

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