Investors Buy up Brazil

Brazil has changed almost beyond recognition over the last decade. One of the biggest changes has been the huge level of foreign investment in Brazil, an aspect of the new Brazil that looks set to continue well into the next decades.

A country where many investment sectors remain relatively untapped, Brazil is also experiencing rapid consumer expansion. For the investor looking for high returns and relatively low risk, Brazil offers plenty of options. The variety and scope of investment in Brazil has led to an unprecedented surge of interest from foreigners, many of whom have never looked at Brazil in the past.

For James Sinclair, Managing Partner at CFS Partners in Sao Paulo, investment interest in Brazil is currently huge. Interviewed by the Financial Times (FT), Mr Sinclair explained that the main change to have taken place in Brazil from a business perspective over the last few years is the level of foreign investment. He says M&As are the main sector where new foreign companies are entering Brazil and talks about "the incredible level of foreign interest". This high level leads the FT to title the interview 'Investors Buy up Brazil'.

For Mr Sinclair, there are two main investor types looking for opportunities in Brazil - investors considering land and interested in agricultural commodities, and strategic investors in agriculture. The latter are mostly from the US and other Latin American countries and generally interested in buying land or management contracts.

Investment in agricultural land or in farm management is a relatively new investment option in Brazil, but this sector is expanding fast and successfully. The UK Trade & Investment agency highlights agriculture as one of the niche markets for investment in Brazil.

Brazil has ideal conditions for agriculture. Over 70% of its land mass is suitable for cultivation and its fertile soil and abundant rainfall make it a world leader in agricultural commodities. Foreigners are frequently surprised by the level of technology found on farms in Brazil, whose research and development (R&D) into agriculture and agricultural techniques is world-class.

According to Mr Sinclair, foreign investment in Brazilian agriculture is high-level, particularly from Argentineans. He says that some farm management companies are already managing "hundreds of thousands of hectares" and "talking of initial public offerings" in the near future.

Unsurprisingly, this interest in Brazilian land is pushing prices up. When asked if these high prices are sustainable, Mr Sinclair predicts that they will be over the long term. However, he points that infrastructure improvements are needed to improve productivity in some areas - for example, north Brazil where agricultural land is earmarked for soya bean crops - and if these improvements are not put in place, prices will be seen as too high.

The Obelisk market research team has noticed the recent surge of interest in investment in Brazil from foreigners. We also see that agricultural land is one of the main focal points as well as sectors such as construction and social housing, other booming industries for investment in Brazil.

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