Brazil: Poised to Be a Contender on the World Stage
At a recent private equity summit in Sao Paulo, Brazilian-based alternative managers and investors were excited about the investment opportunities that are available and those that they feel will become available in the near future. One sector that is poised to offer significant opportunities is agriculture. Crops such as soybeans and cotton grow especially well in Brazil’s temperate climate. The country is a major agricultural exporter and is the second largest exporter of soybeans after the United States. According to Agriculture.com, in November 2009 the Brazilian government reported that in the North Center region of the country, over 20,000 hectares (49,000 acres) was undeveloped and available to be turned into functioning plantations.1
In addition to agriculture, Brazil’s thriving economy is driven by its large and well-developed mining, manufacturing, and service industries. Currently, of all Latin American countries, Brazil has the largest economy and is rapidly expanding its presence in world markets. This week, The Brazilian Census Bureau reported that consumer demand continued to lead a recovery in Latin America’s largest economy. Brazilian retail sales rose significantly last quarter, marking the sixth consecutive month of gains.2
The country has weathered the global financial meltdown fairly well; capital inflows are strengthening and the Real has resumed appreciating. A company that sources real estate investment opportunities in emerging markets around the world explains why Brazil was nearly unaffected by the global economic downtown: “Brazil’s excellent natural resources, which include an estimated 40-50 billion barrels of oil, make it one of the most self-sufficient countries in the world. Negative trade motions, caused by either falling currencies, which make exportation too expensive for other nations; or growing currencies, which result in importation being too expensive due to bad exchange rates, do not affect Brazil in a massive way. This is because Brazil’s economy is only 20% trade, so even a 20% drop in this foreign trade would only leave 4% of the country’s economy damaged. As a result, Brazil has been largely unaffec ted by the credit crunch.”3
Another reason Brazil was less affected by the financial crisis than other countries was because most if not all of its banks maintained very little leverage and had almost no exposure to exotic assets like derivatives—the chief catalyst of the financial crisis.
Many funds of funds, family offices, and university endowments said they were eager to explore and evaluate new opportunities within the region. These investors have determined that the most lucrative and attractive investments are no longer in developed regions but rather in developing and emerging economies that foster unique opportunities. They see Brazil as one of the fastest growing emerging markets in the world and believe it is poised to become a leading player in world markets.
1 http://www.agriculture.com…
2 http://bric-news.com/index.php?op=ViewArticle&articleId=4&blogId=1
3 http://bric-news.com/