Brazil

1

• Brazil
• A Safe Option for Real Estate Investment

Nelson Germanos
Secovi-SP Development and Real Estate
Association www.secovi.com.br November 2008
2
SECOVI-SP represents a broad spectrum of the real
estate industry since 1946

• SECOVI represents over 13,000 real estate
  companies and 37,000 condominiums in the State of
  São Paulo.
• Active member in most governmental committees in
  housing and urban development.
• Provides reliable market analysis and indexes to
  the industry.
• Maintains a broad real estate database for
  commercial purposes.
• SECOVI-SP is a solid and comprehensive gate to
  real estate developers.

2/28

3
Brazil as an option for foreign investment

• The country is a consolidated democracy.
• Stable institutions.
• Independent judiciary system.
• Free capital flow.
• Foreign capital is welcome. Financial benefits to
  some activities.
• 400 of the Fortune 500s biggest world companies
  have branches in Brazil.
• No risk of earthquakes, hurricanes or other
  natural disasters.

4
Brazil some figures

• Area ?
• Currency ?
• Population ?
• Population density ?
• Urban population ?
• Population growth rate ?
• Unemployment ?

8.5 M sq km (3.3 M sq mi) R - Real 188 M
(2008) 22 inhabitants/ sq km 81.3 1.2 (2006
07) 8.1 (July/2008)
5
Economic Outlook (2007)?

• Achieving self sufficiency in oil.
• Investment grade by Standard Poors and Fitch
  Ratings.
• US 200 bn in international reserves.
• One of the biggest producers of agricultural and
  mineral commodities.

5/28

6
Energetic Matrix

• BRAZIL
• Renewable sources 45.8
• Sugar cane 15.7 (became the second main source
  of energy in 2007)
• Hydroelectric 14.9
• Wood 12.0
• Oil 37.4
• Natural gas 9.3
• Others 7.5

Renewable
Not renewable
7
World GDP (PPP) (2003-2013)
Source IMF
8
Brazilian Foreign Debt 2000 - 2008
(est.)
US bn
SOURCE Banco Central do Brasil
9
Inflation rate
Plano REAL
(est.)
Source IBGE
10
Basic interest rate
May/05 19.75
Oct/08 13.75
Source Banco Central do Brasil
11
Unemployment Rate 2002 2009 (est.)
13
10
7
Source IBGE / Bradesco
12
International Reserves
US bn
Source Banco Central do Brasil
13
Gross Foreign Direct Investments
(est.)
(est.)
US bn
Source Banco Central do Brasil
14
Foreign Direct Investments Ranking 2003 2006
(US M)
Source UNCTAD / Bradesco
15
World Population Distribution
In bn persons
Source UN
16
Gini Coefficient 1993 2007
A low Gini coefficient indicates more equal
income or wealth distribution, while a high Gini
coefficient indicates more unequal distribution.
Ratio ranges from 1 to 0
Worse
Better
SOURCE Banco Central do Brasil/ IBGE
17
Real Estate Market
18
Regulation

• Brazilian real estate credit market was
  excessively regulated.
• Important regulatory changes were carried out by
  the government as from 2005.
• Private banks gained access to the real estate
  credit market, increasing competition.
• Nonetheless, strict requirements always applied
  (and currently applies) to personal credit
  assessments.
• Among others, risk analysis by financial
  institutions include frequent and thorough
  inspections of the project, worksite, proposed
  schedule, legal and environmental documentation.

19
Owned vs. Rented houses (2005)and Housing Deficit

• Owned 45.6 M (86)
• Rented 7.4 M (14)
• Total 53.0 M (100)
• Housing deficit 7.9 M

Source IBGE
20

• City of São Paulo

Area 1,530 sq km GDP
US 157 bn GDP (per capita) US
14,000 Population São Paulo City 11
M Metropolitan Area 19.8 M
21
São Paulo Metropolitan Area
Atlantic Ocean
22
Foreign investment in the Brazilian real estate
market
23
Foreign Investment in Real Estate

• For many years, real estate investment in Brazil
  and other emerging markets were only possible
  through direct investment in specific projects.
• In Brazil, recent financial deregulation and
  strong development of capital markets stimulated
  IPOs, as well as the institution of dedicated
  investment funds.
• Investment options include

• Capital markets (listed companies, investment
  funds)
• Direct investments in unlisted Brazilian
  companies
• Direct foreign ownership of real estate
  (restrictions to rural areas may apply).

24
IPOs in 2007by sector
1st Real Estate 28.1 2nd
Financial 21.9 3rd Food Beverage 7.8
4th Agribusiness 6.3 Total US 34.6
billion
Source ANBID Associação Nacional de Bancos de
Investimento
24/28

25
Who invested in the IPOs
1st Foreign investors 73.8 2nd Local
Investment Funds 19.6 3rd Private
investors 6.6 Origin USA 61.1
Europe 35.3 3.6 other
Source ANBID - Associação Nacional de Bancos de
Investimento
25/28

26
Corporate Office Space City of São Paulo (AAA
Buildings)

• Total stock (2007)
• New stock (2007)
• Estimated new stock (2008)
• Vacancy Rate (q2 - 2008)

2.2 M sq m 136,000 sq m 179,000 sq m 7
Source Jones Lang Lasalle
27
Brazil Shopping Malls
São Paulo State 123 (2008)
In USA 48,700 malls
Cidade Jardim Mall
Source ABRASCE / SONAE / ENPLANTA / National
Research Bureau
28
Second Home Purchases 2007
Property purchases by foreigners in Brazil
totaled US646M
U.S.A. US 102 M Europe US 450 M Spain
US 82 M Italy US 63 M
79 of foreign buyers have already visited the
country. For most foreigners (76), the main
attraction for investing in the country were
climate and natural beauties. Source Folha
online
29
SÃO PAULO
30
SÃO PAULO
31
SÃO PAULO
32
RIO DE JANEIRO
33
RIO DE JANEIRO
34
BELO HORIZONTE
35
BELO HORIZONTE
36
PANTANAL
37
AGRIBUSINESS IN MT SOY
38
VITÓRIA
39
SALVADOR
40
SALVADOR
41
RECIFE
42
PORTO DE GALINHAS
43
MACEIÓ
44
MACEIÓ
45
JERICOACOARA
46
PORTO ALEGRE
47
SANTA CATARINA
48
SÃO JOAQUIM
49
BLUMENAU
50
Thank you
Nelson Germanos nelsongermanos_at_secovi.com.br
50