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Brazil Booms during Credit Crunch

Brazil may well be proof positive of the old adage, "Every cloud has a silver lining". While much of the world is feeling the repercussions of the worldwide "credit crunch", Brazil is not only resisting the trend but continues to thrive.

According to a study released at the recent "Nordeste Invest 2008" (a conference held in Recife that focussed upon increasing both tourism and foreign investment in the region), non-residents invested an incredible US$646 million in Brazilian property in 2007. Broken down by nationality, Americans invested US$102 million, Spaniards US$82 million and Italians US$63 million. In 4th place in investor rankings were UK buyers who spent US$54.7 million on Brazilian real estate. Most of the remaining investment came from various other EU countries.

In fact, investor interest is so high in Brazil that conference organisers believe that over US$1.28 billion of business including property purchases was done during the Nordeste Invest 2008 conference alone.

Felipe Cavalcante, president of the Association for Real Estate and Tourism Development in the Northeast of Brazil and organiser of the annual Nordeste Invest believes that the reasons for this incredible interest in Brazil are quite simple: "The attractive prices, the cost of living and the prospect of generating substantial returns..."

James Gonzalez, Obelisk's Market Analyst, is not surprised at the released findings. "We at Obelisk have been bullish on Brazil for some time now and the Nordeste Invest 2008 event findings confirm our predictions. Brazil is one of the few nations in the world which can offer this level of investment environment and with the explosion in the size of the middle class, quality properties will become even more in demand."

The credit crunch certainly seems to have bypassed Brazil and analysts believe there are several reasons behind this. Banks in emerging markets are in relatively solid financial form and more importantly, household finances are not over-stretched.

As Jonathan Garner, the head of emerging markets strategy at Morgan Stanley adds, "You also have households that are not overextended. The ratio of household debt to GDP in Brazil ranges from 5-10% compared to over 90% in the US and 100% in the UK."

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