Investment Opportunities

The acceptance of the new role of the Brazilian State as inductor and co-participant of growth, as well as of priority allocation of public resources for the implementation of social policies, entails the design and development of funding mechanisms that coordinate this new reality with the infrastructure investment needs that are key to sustainable economic growth. In this context, developing and implementing innovative models that encourage the provision of public utilities by the private sector, in compliance with the concept and methodologies pertaining to public-private partnerships – PPP – is of ultimate importance. The public-private partnership is a contract modality by which public bodies and private organizations undertake the provision of services or public works, sharing risks and with funds obtained by the private sector. This procedure has quickly achieved great success in various countries, such as England, Ireland, Spain and South Africa, as a public sector contract system in face of scarce financial resources and benefiting from the management efficiency of the private sector.

Example (Ma-Noa Beach, Natal)

A one bed apartment is reserved for € 59,250 assuming the investor has purchased at pre-release prices.
The investor pays a 30% deposit of €17,775 upon signing the purchase contract, plus expected legal costs at this stage of approximately € 1,000. At this stage the investor will also be required to pay 3% ITIV (V.A.T.) and bank commissions which together amount to about € 750
After the first year of the investment, capital appreciation has been calculated at a very conservative 15% for the year, bringing the value of the property at the end of year one to € 68,137.
Short term strategy: If the investor’s exit strategy includes selling before completion, the property would be sold two years later. At this time, again with a capital appreciation of 15% per annum at the time of sale the property would be valued at € 90,111.
Assuming the property is sold before completion at the valued price, after deducting sales costs including agent’s fee’s in Brasil and estimated capital gains tax (total approx. € 9.000), the investor is left with € 20.000 net profit return on his € 19,498 initial investment. This represents a 103% return on the initial investment over a period of only two years.
Medium term strategy: If the investor’s exit strategy includes selling one year after completion, the property would be sold three years after the initial investment. At this time, again with a capital appreciation of 15% per annum, at the time of sale the property would be valued at € 103,628.
We will assume that the property is rented out for one year and that the rental income gives a return of only 5% (under the current market estimates)
Assuming the property is then sold and at the valued price, after deducting sales costs (total approx. € 13.600), the investor is left with € 30.250 net profit return on his € 62,712 investment. This represents a 48% return on the initial investment over a period of only three years.
Long term strategy: If the investor’s exit strategy includes selling five years after completion, the property would be sold eight years after the initial investment. At this time, again with a capital appreciation of 15% per annum, at the time of sale the property would be valued at € 181,247.
We will assume that the property is rented out for five years and that the rental income gives a return of 5% per annum (under the current market estimates)
Assuming the property is then sold and at the valued price, after deducting sales costs (total approx. € 26.750), the investor is left with € 94.750 net profit return on his € 74,500 investment (purchase costs plus tax on rental income over five years). This represents a 127% return on the investment over a period of eight years.

* This merely an example to alert the investor to potential returns and basic overview of costs of investing in overseas property. The figures quoted are for informative purposes only and may vary.

General Fact
Major export products include aircraft, coffee, automobiles, soybean, iron ore, orange juice, steel, ethanol, textiles, footwear, corned beef and electrical equipment. Brazil has a diverse and sophisticated services industry as well. During the early 1990s, the banking sector amounted to as much as 16% of GDP, and has attracted foreign financial institutions and firms by issuing and trading Brazilian Depositary Receipts (BDRs). One of the issues the Brazilian central bank is currently dealing with is the excess of speculative short-term capital inflows to the country in the past few months, which might explain in part the recent downfall of the U.S. dollar against the real in the period. Nonetheless, foreign direct investment (FDI), related to long-term, less speculative investment in production, is estimated to be USD 193.8bn for 2007. Inflation monitoring and control currently plays a major role in Brazil's Central Bank activity in setting out short-term interest rates as a monetary policy measure. The IPCA index, measured and calculated by the IBGE on a monthly basis, is the most commonly used index for inflation, although other indices such as the IPC-Fipe and IGP-M (FGV) are also widely used. There are no complications regarding property ownership in Brazil and investments can be purchased as 100% Freehold.

Economic Factors
Brazil's GDP (PPP) is the highest of Latin America, boosted by large and developed agricultural, mining, manufacturing, and service sectors, as well as a large labour pool. The country has been expanding its presence in international financial and commodities markets, and is part of the group of four emerging economies named BRIC. According to the International Monetary Fund and the World Bank, Brazil has the ninth largest economy in the world by purchasing power parity (PPP) and tenth largest at market exchange rates.

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