Investing in Brazil Guide
Introduction An increasing number of professionals of all nationalities have been moving and working abroad in the last decade. Whether you are a young executive or a high net worth individual with a diversified portfolio of global assets, you will have specific financial requirements and objectives. Offshore financial products and services can help you achieve financial security and provide you with the quality of life you require as an expatriate or international investor. Investing in international accounts is no longer the premise of the rich and famous; all expatriates living abroad may now enjoy flexibility, among other benefits, by investing their money overseas. The offshore financial industry has become more popular and financial institutions from around the world have entered the offshore market as a result of the high demand. There are now many providers that offer a broad range of services ranging from saving schemes to pension and retirement plans and wealth management accounts to lump sum investment products. Over the years, deVere has developed strong partnerships with some of the world’s leading investment houses and insurance companies, all of which offer some of the most competitive products in the marketplace and a high level of protection for the investor. In this guide, we aim to provide you with essential information on effective investing in Brazil as an international investor or expatriate.
An Emerging Giant Brazil is South America’s most influential country, an economic giant and one of the world’s biggest democracies. In recent years, corporations as well as astute private investors have been pouring their money into Brazil, keen to secure their investments before Brazil rises to its potential. Brazil offers an unbeatable climate, natural beauty and a colourful culture. Additionally its growing infrastructure, political stability and booming economy make it easy to understand why this country is increasingly considered an excellent destination for investment capital. As the world’s eighth largest economy at market exchange rates and ninth largest in purchasing power parity (Source: IMF and World Bank), the Brazilian economy has been predicted to become one of the five largest in the world in the decades to come.
Solid economic foundation Brazil is the fifth largest country in the world with 12% of the world’s fresh water and huge amounts of natural resources. It is a massive producer of agricultural crops and livestock and meets most of the population’s energy requirements using hydropower. In addition, the majority of the country’s cars run on locally produced ethanol which is derived from sugar cane. Today Brazil is the result of two decades of reform which has led to a stable and democratic government which has improved the financial system with a greater emphasis on tax and inflation rates. Even during the downturn Brazil did not endure the business and consumer distress that affected most of the world.
Inve s t ing I n Br a z il G u ide
The South American country has been propelled to success by exports of both agriculture and commodities to meet demand from Asian countries such as India and China. Recent discoveries of oil and gas have also propelled the country into global demand and the country is the largest producer of ethanol, sugar, beef and coffee. Commodities: the country holds a strong position in commodities including sugar, iron, orange juice, paper and oil. Structural reforms: Brazil introduced a number of policies in recent years aimed at:
• Lowering inflation
• Reducing net debt to 40% of GDP
• Paying off its International Monetary Fund loans
• Aggressively boosting its foreign reserves
• Achieving an investment grade rating for its debt
Stricter central bank: The country’s central bank has moved towards more conservative policies Increased energy dependence: Brazil recently became self-sufficient in oil; it discovered the world’s largest oil and gas reserves in decades. This will enable it to become one of the major oil exporters, given that it already derives much of its own electricity from hydro energy and powers many of its cars with ethanol. Brazil draws on economic strength from the fact that much of its growth comes from within. A mere 13% of its growth derives from foreign trade which largely consists of commodity exports to China.
Why Invest? Analysts expect that there will be a rebound of global economic activity in 2010 with developed economies predicted to show a GDP growth of 1.3% compared to the 5.5% growth forecast for the emerging economies. In terms of absolute GDP the emerging markets group is now larger than the US and is expected to keep growing in the coming years. Brazil plays a key role in the growth of GDP in emerging markets. Its central bank once seen as over-cautious is now a model for others with its tight regulations that force simplicity and caution on banks. The banking market has maintained high levels of real interest rates, which prevented the economy from overheating and creating an over-expansion of credit.
Inve s t ing I n Br a z il G u ide
Recent figures announced that the economy of Brazil is growing at a faster than expected rate of 9% a year. These figures reflect a very strong domestic demand with little reliance on other markets. Furthermore a few economic facts suggest that some very successful times lie ahead for Brazil:
• Self sufficient in oil
• Recent discoveries in offshore oil being brought to the market
• Three out of three of the main rating agencies classify Brazil as “investment grade”
• Brazil will begin lending money to the IMF (who only 10 years ago was reluctant to
lend money to Brazil)
• FDI (foreign direct investment) was up 30% in 2009 while the rest of the world
suffered a 14% loss in FDI
Investment Options The long-term future is certainly bright for this South American country and there are a number of ways for investors to participate in the Brazilian growth story. It may at times be difficult to be able to adequately compare the options open to you as an investor. It is a full time job monitoring the market and selecting the most suitable funds; that is where a diligent and thorough research team comes to the fore. Your adviser can help you navigate the alternative investment world to find the vehicle that will help you reach your intended destination. At the deVere Group, our consultants work with some of the leading investment houses and insurance providers. All our employees have been trained to provide the best advice and are familiar with the local knowledge and requirements of the region you live in/may relocate to. We can advise on the different options that may help you maximise your wealth in order for you to look forward to a more secure financial future. How much money you should invest in Brazil depends entirely on your investment objectives. If you would like more information on investing in Brazilian funds, please contact us at info@devere-group. com. The advice we provide is free and without obligation.
Inve s t ing I n Br a z il G u ide
The companies below are part of the deVere Group: deVere and Partners (UK) Ltd is authorised and regulated by the Financial Services Authority (469151). deVere Recruitment Ltd (503055) are an appointed representative of deVere and Partners (UK) Ltd. deVere and Partners Investment Services (Pty) Ltd is an Authorised Financial Services Provider in South Africa. deVere Hong Kong Ltd. is registered as an Investment Advisor in Japan (#874). deVere and Partners (Belgium) BVBA is authorised by the Banking Finance and Insurance Commission (CBFA) in Belgium and registered on the intermediaries register under number 61476, category insurance brokers. The following group of companies operates under the same license in Belgium: • deVere and Partners (Cyprus) • deVere and Partners (Belgium) Limited BVBA, succursale Luxembourg S.a.r.l. • deVere Germany GmbH • deVere Group Spain
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