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The property market in Brazil has celebrated the news that a new record growth has been achieved, to show that the credit crisis has not reached the South American country. Housing credit has closed 2008 with 299.746 properties financed, the highest number ever and a rise of up to 53% over 2007.  According to ABECIP (Brazilian Association of Property Credit Institutions and Savings Accounts) , total amount of mortgages achieved over US$ 13 billion in 2008, a figure 64% higuer than the previous year. Only in december, total mortgage amount rose 36% in relation to november.

As The Move Channel has reported, as a consequence of the strong economy, prosperity levels are rising fast in Brazil, with sharp increases in housing demand. In just two years, 23 million people have risen to prosperity level C (middle class), which now counts 85 million people. This middle class has a monthly income between two and five times the official minimum wage.

With insufficient first home housing stock to satisfy local demand, Brazil currently has an estimated housing deficit of a minimum of eight million properties.

The middle classes are expected to purchase between 1,000,000 and 1,200,000 units per year until 2015. Fuelling demand further is the fact that for the first time in 25 years mortgages are available to Brazilians.

Mortgages account for only two per cent of GDP in Brazil, versus 65 per cent in the United States and 74 per cent in the UK, so consumers aren’t feeling the effects of credit squeeze. Massive growth in this sector means that domestic mortgages are predicted to increase by up to 600 per cent by 2014.

With this in mind it is clear that the first residence market within Brazil’s regional cities is a major investment opportunity and no region has seen faster growth that the North East.

In Natal for example, a local residential 100 square metre two bed room villa with a secure gated community can cost around 180,000 Reais (around £54,000) and deals can include optional rental guarantees of six per cent for four years and guaranteed buy back agreements from the developer.

As an investor, this means there is an opportunity to invest in well located local property that has a well defined target market and exit strategy, attracting middle class tenants and buyers.

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The global financial crisis is not expected to lead to a major economic downturn in Brazil, a new study has concluded. According to the Organisation for Economic Cooperation and Development (OECD), prospects for the South American country remain favourable in comparison with many other countries.

Indeed, the OECD’s composite leading indicators showed that the nation had experienced a decline of just 2.9 points in the last year. This compares with 7.6 points in the euro area and 8.7 points in the United States. The figures were based on various measures of economic activity, such as output in the industrial sector.

Meanwhile, the Brazilian central bank has polled 100 economists in an attempt to determine the likely rate of growth in 2009, Bloomberg reports. Respondents to the survey predicted on average that the economy would expand by two per cent this year.

oil-on-water1By ANDREW DOWNIE, The New York Times
Published: January 24, 2009

SÃO PAULO, Brazil — Brazil’s state-controlled oil company, Petrobras, announced a crisis-busting investment plan Friday to spend more than $174 billion over the next five years, much of it for prodigious deep-water oil and gas exploration.

The investment covers the 2009-2013 period and represents a rise of 55 percent over the $112.4 billion the company had vowed to spend on development between 2008 and 2012.

This investment is “very robust and very important for the continuity of Petrobras’s growth,” José Sergio Gabrielli, the company’s chief executive, told reporters Friday at a news conference in Rio de Janeiro.

Petrobras, whose full name is Petróleo Brasileiro, had promised to unveil its spending plans in September but delayed the announcement several times because of the world’s financial turmoil.

In 2007 and 2008, Petrobras and partners including Repsol YPF of Spain and the BG Group of Britain discovered vast deposits of oil under more than 4,000 meters of water, rock and salt.

Although the finds are at previously untapped depths and will be costly to extract, they hold an estimated 8 billion to 12 billion barrels of oil, according to Petrobras figures. Company officials and oil experts say that other reserves of that size could be nearby.

One of the finds alone, named the Tupi, holds the equivalent of 5 billion to 8 billion barrels of light crude oil and is the world’s biggest new field since a 12-billion-barrel find in Kazakhstan in 2000.

President Luiz Inácio Lula da Silva of Brazil has said repeatedly that developing these oil reserves is vital to the country’s future, and Petrobras has set aside $28 billion to that end.

In all, new drilling could produce 219,000 barrels a day by 2013, 582,000 barrels a day by 2015 and 1.82 million barrels a day by 2020, he predicted.

Natural gas extraction would rise from 7 million cubic meters a day in 2013 to 40 million a day in 2020, the company added.

Petrobras produced a daily average of 2.18 million barrels of oil and gas last year.

Lula’s last lap


EPA

REPEATS are often disappointing. It is rare indeed to find a president in his second term with an approval rating of 80%, as Brazil’s Luiz Inácio Lula da Silva now enjoys. No American president since the second world war has managed it. In Latin America, only Colombia’s Álvaro Uribe at the height of his success last year against the FARC guerrillas has touched a similar level of adoration. So Lula, a pragmatic former trade-union leader, is entering his penultimate year in office in a position in which he ought to be able to do almost anything.

Yet this apparent omnipotence is illusory, not least because it will be brief: by early 2010 the president will start to be overshadowed by the campaign to elect his successor. He is also constrained by his own left-wing Workers’ Party (PT); by his political allies; by the economic troubles that only recently reached Brazil’s shores and have yet to be felt to their full extent; and by his temperamental compulsion to preserve his popularity. “I would not like to be called a populist,” he sometimes says, “but I do like to be popular.” (From The Economist)

Brazil’s Embraer, fourth largest aircraft manufacturer in the world, has announced it is doing really well in spite of the crisis. Associated Press has reported the company delivered 204 jet planes last year, a 21 percent increase over the 169 jets delivered to buyers a year earlier.

The jet maker also announced it has $20.9 billion in firm orders for its planes as of Dec. 31. In 2008, the company delivered 162 midsize jets used for regional routes, 36 executive jets and six jets for military and government customers.

Embraer was Brazil’s largest exporter from 1999 to 2001 and the second largest in 2002, 2003 and 2004. It currently employs more than 23,509 people, 87.7% based in Brazil.

jetblueJetBlue or Azul Linhas Aereas, one of the leading low-cost carriers in the world,  started its operations in Brazil this week to enter a underexplored and potential gold mine market in South America. The airline was founded by David Neeleman (right) with $150m from American and Brazilian investors  with orders of up to $1.4 bi for 36 jetliners from Embraer (Brazilian Aviation Company).

Below is an excerpt from an article published on the Wall Street Journal by Susan Carey.

David Neeleman, founder of JetBlue Airways Corp., launched his fourth low-cost airline — this time in Brazil — defying poor markets for aircraft financing. Azul Linhas Aéreas Brasileiras SA started service Monday with four jetliners and plans to acquire four more by next month. It had originally planned to start operations in January but moved up its debut to capitalize on the peak holiday season.

Mr. Neeleman said frozen credit markets make this “the worst time ever to finance a plane.” But he said Azul is leasing six aircraft, all directly or indirectly from JetBlue, another Embraer operator, and managed to get financing from the Brazilian Development Bank and a German bank for a few more aircraft. “We have five more to go,” he said in a telephone interview from Salvador de Bahia. “We’ll get it worked.”

The 49-year-old airline executive, who speaks fluent Portuguese and holds both U.S. and Brazilian citizenship, is Azul’s chairman and holds a 20% equity stake and 80% voting control in the venture. A Brazilian retailing executive was recruited as president.

One target market is Brazilians who don’t travel at all, as well as those who take about 250 million trips a year on long-distance buses. As a result, Azul’s cheapest fares, purchased 21 days in advance, are similar in price to bus tickets. Its lowest one-way fare from Campinas to Salvador de Bahia is 209 reals, or roughly $87, for a two-hour flight. The bus takes 33 hours.

The Brazilian govervenment has celebrated today as the country’s GDP has grown to 1.8 percent in the third quarter from the second. These are further signs that the South American country is resisting the global recession.

According to the official statistics agency, IBGE, the expansion of the gross domestic product was faster than the 1.6 percent expansion in the second quarter from the first.

The announcement comes against pessimistic forecasts that saw GDP growing 1.2 percent in the third quarter. Previous estimates were between 0.4 percent to 1.4 percent growth.

According to Forbes NY: “On an annual basis, GDP expanded a robust 6.8 percent in the third quarter compared with the same period in 2007 , after posting a revised year-on-year growth of 6.2 percent in the second quarter. The result was stronger than the the 5.6 percent year-on-year GDP median growth forecast in the Reuters poll. Estimates ranged from 4.2 percent to 6.0 percent.”