Shopping Brazilian Style
Good news for investment in Brazil comes in the recent rises in both retail spending and consumer confidence. Latest figures show a year-on-year increase of 10.4% in retail sales.
As Brazil's economy booms, purchasing power is rising, particularly among the new Brazilian middle classes. With salaries experiencing an increase of nearly 9% in the year to August, Brazilians are spending more. And this trend looks set to continue.
According to the National Confidence Index (Indice Nacional de Confianca), consumer confidence in Brazil is considerably higher than many other countries. In the US, just 10% of the population has plans to buy a home and only 12% will be buying a car over the next six months. Go south to Brazil, however, and this figure becomes three times higher with 36% of Brazilians intending to buy a house and car before March next year. Among the upper middle class (Class A/B and the fastest growing social class), even more people have plans to spend big money - 43% of Class A/B say they will be buying a car or a property in Brazil over the next six months.
As yet, Brazil issues no official statistics for property sales, but quarterly figures from the largest real estate developers in Brazil point to booming sales at all levels of house prices. Cyrela, the largest developer, saw an increase of 83% in sales in Q2 this year compared to the same quarter in 2009 and a 9% rise in the price per square metre. Sales of cars are also soaring - according to Brazilian Geographical and Statistical Institute (IBGE) statistics, year-on-year vehicle sales went up 19.3% in August this year.
On the shopping list for smaller items, food and beverages followed by furniture and appliances are top of the shopping list of the latest retail figures published by the IBGE. Spending in supermarkets and hypermarkets rose by 34.1% between August 2009 and August 2010 boosted by growing wages and the slower rate of inflation on food (2.3% compared to 4.5% inflation generally). Sales of furniture and appliances went up by a very healthy 25.6% and are now back to pre-recession levels.
Reflecting this big spending in supermarkets are Walmart's Q2 results in Brazil - sales for the consumer giant grew by 3.1% in Brazil and Walmart is keen to integrate its huge investments in Brazil into one entity. For Walmart executives, "the opportunity is huge in Brazil," particularly as demand soars on the back on the World Cup and Olympic Games.
For Obelisk International, the best opportunities for investment in Brazil are those that form part of the huge domestic consumer market, particularly niche opportunities catering for the booming upper middle classes. The growing demand among Class A/B for quality goods including high-end real estate and top-of-the-range cars means the potential for investment also grows.
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