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Posts Tagged ‘economy’

From Reuters (Tais Fuoco)

* Q4 net income jumps to 215.5 mln reais vs 26.2 mln

* 2008 profit 389.7 million reais vs loss 99.8 mln

* Sees Brazil’s wireless market continuing to expand

* Seen “a small growth” in January

Brazil’s largest mobile phone company Vivo Participacoes (VIVO4.SA)(VIV.N) said on Friday its fourth-quarter profit surged nearly ten-fold because of a sharp increase in new users and as it kept costs in check.

The company’s chief executive Roberto Lima said the profit surge in the fourth quarter was due to changes in its subscriber and pre-paid telephony offers and “very rigorous” cost controls, as it renegotiated contracts with suppliers.

Vivo, a joint venture of Portugal Telecom (PTC.LS) and Spain’s Telefonica (TEF.MC), said net income rose to 215.5 million reais ($94.1 million) from 26.2 million reais in the fourth-quarter of 2007.

For all of 2008, Vivo made a profit of 389.7 million reais, the best year since the company was formed in 2003, compared with losses of 99.8 million reais in 2007.

“Vivo had a few illnesses in its infancy but today it’s growth is healthy,” Lima said in an interview with Reuters.

Vivo added 2.668 million new mobile phone users in the fourth-quarter, bringing its total user base at the end of 2008 to 44.95 million people.

The jump in new wireless clients helped boost sales by 14 percent to 4.27 billion reais in the fourth quarter, Vivo said. Sales for all of 2008 totalled 15.8 billion reais.

Lima said the company’s growth could slow in 2009 but he believed Brazil’s wireless market would continue to expand.

“This is a sector that has been growing in the double digits since its creation. Even if it grows 10 percent, it’s still a fantastic rate,” he said, pointing out that any growth achieved was on the basis of an already large customer base.

He said the company had seen “a small growth” in January this year over the first month of 2008.

Earnings before interest, taxes, depreciation and amortization (EBITDA) rose 43 percent to 1.39 billion reais from 978.9 million in the final quarter of 2007.

EBITDA as a percentage of sales, a measure of profitability widely followed by analysts, jumped 6.6 percentage points to 32.7 percent in the fourth-quarter.

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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 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.”

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The flow of direct foreign investments in Brazil has already surpassed the figure foreseen by the Brazilian Central Bank for the whole of 2008. According to the Central Bank, the total value of foreign investments in the country were US$ 37,1 billion, well above the predicted figure of US$ 35 billion.

The value refers to direct investments done by foreign organizations buying Brazilian companies or investing into the expansion of production capabilities of firms already settled in the country. The Central Bank estimates that, in total, multinational corporations have up to US$ 370 billion already invested in the South American country.

The flow of investment occurred by now is also superior to the US$ 34,6 billion reported in 2007, until then, the highest result since the Central Bank began registering investments in 1947. Central Bank’s Economic Department Chief, Altamir Lopes, says that as oppose to stock market investors, direct investments have long-term objectives, which explains the positive results achieved even during a critical period in the world economy.

“Direct foreign investments are long term resources that keep flowing in a satisfactory way. This is a consequence of a overall perception that the Brazilian economy has solid foundations”, said Mr Lopes.

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