Saturday, February 26, 2011
In the US and Europe, each day seems to bring a stream of unwelcome news. Headline stories focus on job losses, economic uncertainty, and banks teetering on the edge of solvency. It's easy to forget that there are powerhouses out there...countries riding a wave of opportunity. And you can ride this wave too...diversifying outside the US, outside the dollar, and profiting from one country's extraordinary success. More on that in a moment...
Brazil is an economic powerhouse. This month, Brazil's Central Bank foreign exchange reserves surpassed 300 billion US dollars for the first time ever. Back in 2002, they stood at 40 billion dollars. The country ranks sixth worldwide for the accumulation of foreign reserves.
President Dilma Rousseff announced that the Brazilian economy had predicted growth of "only" 4.5% this year and next. This compares to growth of 7.6% in 2010. Brazil's middle classes fuelled this growth, aided by a combination of cheap credit, a strong currency, tax breaks, and low unemployment.
Those middle classes bought more cars than ever before, and Brazil passed Germany to become the world's fourth-largest auto market in 2010. Sales grew by 12% to top 3.45 million vehicles. Toyota, Hyundai, and Chinese manufacturer Chery plan on investing in new car manufacturing plants in the country to cater to this rising demand.
Brazil has an abundance of natural resources: Fresh water, arable land, natural gas, and oil. The biggest oil field discovered in the Americas in the last 30 years, named Lula (after the previous president) holds 6.5 billion barrels of recoverable oil alone. Proven reserves increased 10.65% in 2010, to 14.25 billion barrels. Total reserves soared by more than a third to 28.47 billion barrels.
The wealth of oil has created problems for Petrobras, Brazil's oil giant. Petrobras has reached the limits of its refining capacity. Petrobras' current production of 2 billion barrels a day exceeds its refining capacity of 1.9 billion barrels. The company plans to invest in new refineries to increase output.
Petrobras is a symbol of Brazil's success. Its share sale last September was the biggest in history, at $66.9 billion dollars.
So, how can you benefit from Brazil's boom story? One way is to buy real estate here, as Brazil's newly-rich middle classes are doing. The middle classes drive the property market in Brazil...but some savvy foreign buyers are profiting from the market's upward trend.
Members of Real Estate Trend Alert, for example, bought boardwalk units in Fortaleza in January 2009. They have seen the value of their units increase by 40%...yet they are only paying 1% of the purchase price per month. That's leverage for you...
Members of Real Estate Trend Alert are the first to hear about the best real estate deals we find, with special prices and/or terms. Right now, they're getting a 2% discount on units in Fortaleza with a start price of 188,000 reals ($112,726). You pay 40% down, with developer financing on the balance over 80 months. And these units aren't pre-construction...they are due for completion this week. You can rent out a unit here long-term to locals for $900 a month. That's a gross yield of 9.58%.