54 | BRAZIL
ADIT BRAZIL REPORT Barriers to entry
One of the recurring themes of the conference, especially among the international speakers, was the diffi culty of doing business in Brazil ... and the barriers to entry in this potentially lucrative market. “In terms of business
regulations and the ease of doing business – Brazil is 127th in the rankings,” said Mark Jeffery. “It’s just a nightmare to do business here. So ... for Brazil to have that level of regulation and still be doing what it’s doing, just imagine what it could do if it were easier.” In his keynote speech, Gary
www.opp.org.uk | JUNE 2011
How does Brazil compare to other emerging markets?
The BRIC countries are the focus of much attention from all over the business world, and not just for their property opportunities. So, how does Brazil compare to India, China and Russia and its Latin American neighbours, in terms of safety and potential investment risk? “Brazil was probably the most encouraging case in 2010, and it is defi nitely
Mark Jeff ery | “Find the right crew”
Garrabrant, the CEO of Equity International, expressed his belief that the barriers to entry would go down, and that debt would arrive – something he sees as crucial to Brazil’s continued development. He said: “Debt here is generally short to medium term and fully amortizing.
That’s a problem ... its not normal. We have also seen constraints relating to the way property is owned – stratified title in office buildings doesn’t make sense. Buildings should be owned in their entirety by a professional company. This enables long term growth in the value of the asset but requires proper debt to accomplish.” Infrastructure is also a problem that needs to be addressed, and Garrabrant is hopeful that the major sporting events this decade will force Brazil to get its act together. He said: “All of the airports need to be replaced at a world-class level – this drives the real estate business, the hospitality business, and the resort business. Sao Paulo airport has one of the worst immigration areas in the world – we queued for two and a half hours observing people cancelling and changing their meetings. That’s bad for Brazil ... and it needs to be addressed.” “The question is, will the political forces have the fortitude to do the right thing and build airports that are world class, and not temporary or provisional? In our view this is important ... Brazil deserves that level of quality.” Many of the speakers recommended teaming up with a local company that
already has expertise in getting projects off the ground in Brazil. Jeff ery said: “The barriers to entry are still high. You need to spend a lot of time to fi nd the right opportunity, great people and great projects. It’s certainly a country that you need to come to ... to be here, to have roots, and to meet with the people. Its not something that you can run from a spreadsheet in London or New York.”
catching up with its BRIC counterparts,” said panellist Spencer Anderson, the deputy editor of FDi Intelligence. Anderson continued: “The last report we did on global foreign direct investment showed that it was down overall, but Brazil attracted a rise in total projects, in capital expenditure and in jobs created. I think that’s something that will continue in the years to come.” Mark Jeff ery, OPP executive panel co-chair and director of the Origen Group, said Brazil’s demographic situation also put it ahead of other emerging markets in the long term. He said: “Brazil is well positioned in the medium and long term. There are three mega-trends going on in the world in the next decade or more. One is demographic change – 98% of the growth in the world population will come from emerging countries. What Brazil has is a growing population, a young population, and an ever-increasing middle class ... and that will just drive its economic power and consumption rates. If you compare that with China – China has an ageing population which will put them at a massive competitive disadvantage in the future.” The other factors that will drive Brazil’s economic growth in the coming
years, according to Jeff ery, are “the increasing global shortage of natural resources – Brazil has a lot, and much of what the world doesn’t have,” and the “ever increasing attention to the environment and social welfare. Brazil is again perfectly positioned here.” Brazil is also edging ahead of other countries in South and Central America,
according to panellists. Jeff ery said: “The time zone is an advantage, and I think Brazil is more European. It has a codifi ed legal system, which works in its favour too. If it was able to create and build a major capital centre then it would be the champion of the Latin Americas. Financing is also a benefi t, compared to other emerging markets and Latin
American neighbours. Although the mortgage market is still underdeveloped, it is still streets ahead in Brazil when compared to other countries in the region. Summerfi eld said: “Developer fi nancing really isn’t on off er in a lot of other countries in the region, If you’re looking to buy a condo, or invest in a lot of other Latin American countries, you’ll have to pay cash. Our buyers like the availability of developer fi nancing as it means they can buy more units.”
ADIT Invest 2011 attracts investment for Brazil
ADIT Invest 2011 attracted more than 1700 par ticipants interested in the real estate and tourism markets in Brazil, including 130 national and international investors. The two-day event included a number of panels with speakers on all aspects of investing in Brazil, as well as innovative ‘business round’ and ‘speed networking’ events which allowed companies and individuals to quickly build their network of contacts during the event. ADIT is a not-for-profit organisation origi- nally founded by local businesses in the northeast to: attract tourism and real estate investment; promote second-home tourism; provide guidance and security to national and international investors; and co-ordinate development ideas. Speaking at the event ’s opening, ADIT president Luiz Lessa said: “The real estate sector is one of the most impor tant for investment attraction,” and according to the organisation over R$2.7 billion expected investments were generated through the business round event.
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