5 reasons to be bullish about Brazil in 2016
2015 was not a year that was kind to the Brazilian economy. Political concerns, low global commodity prices and high inflation caused GDP to take a knock however measures to encourage the economy to bounce back have either already been put in place or are being implemented early this year.
Due to these positive steps, according to the International Monetary Fund (IMF), the rate of economic contraction could reduce significantly (from 3.026% to 1.044%) over the course of 2016. Furthermore, Goldman Sachs has predicted that inflation will also reduce to 7%.
The longer-term picture is certainly rosy, with the IMF projecting GDP growth of more than 2% for every year from 2017 to 2020.
Paul Telfer, CFO of leading real estate developer Ritz-G5, which is developing a range of projects in the northeast of Brazil, comments on the country’s outlook,
“Brazil is undergoing a macroeconomic adjustment right now. It’s a necessary process but not one that needs to cause long-term distress. The rate of economic contraction should reduce substantially over the course of 2016 and in the medium to long term Brazil remains an excellent investment prospect.”
There are many reasons to be bullish about Brazil in the near future, here are just 5:
- Political turnaround
President Dilma Rousseff has been working diligently on plans for Brazil’s economic development, to bolster both her country’s economy and public faith in her leadership. She is seeking to get off to a strong start in 2016, with plans including new infrastructure projects and tax breaks for real estate purchases. Meanwhile the newly appointed Finance Minister Nelson Barbosa, is tipped to be bringing in amendments to labour laws, pensions and taxes in order to bring about the structural and fiscal change required to boost GDP growth once more.
- Rising property prices
House prices in Brazil rose by 2.4% in the year to Q3 2015, according to Knight Frank’s Global House Price Index. The real estate sector seems to have put up a robust resistance to 2015’s economic negativity and President Rousseff’s new real estate tax breaks should help the sector to continue flourishing in 2016. Certainly demand from investors is still strong, with Ritz-G5’s Costa Azul development proving an attractive prospect. Enjoying a stunning location with beach and ocean views in Petrópolis, the 168 apartments offer a luxurious lifestyle to residents looking for first class amenities – the building includes a swimming pool, gym, private bar and spa, all within easy commuting distance of the city centre.
- The Olympic effect
Another strong reason for positivity in 2016 is Brazil’s hosting of the Summer Olympics and Paralympics in Rio de Janiero. The city – and indeed the wider country – is expected to benefit hugely from increased visitor numbers over the summer months.
- Auto exports
Brazil’s vehicle manufacturing industry reported a 25% jump in export volume during 2015 and manufacturers’ association Anfavea has projected a further 8% rise over the course of 2016. Renault and Volkswagen are both key importers of Brazilian automotive parts, with high volumes of exports flowing into South America and Europe.
- Biofuel boost
Finally, Brazil’s biofuel sector looks set to enjoy a positive 2016. The Centre for Advanced Studies in Applied Economics (Cepea/Esalq) considers that the heightened consumption and price increases of 2015 may hail the dawning of a new era for the country’s biofuel industry. Certainly the industry seems to think so, with mills prioritising the production of ethanol over that of sugar for the 2016/17 harvest.
For those looking at Brazil’s 2016 prospects, there are plentiful ways in which the country is bringing positivity to its economic situation. This year should mark a significant turning point, with investors who choose the right developments getting in at just the right time, before the economy returns to growth next year.
For further details, contact the Ritz-G5 team on +44 207 183 7565 or visit www.ritz-g5.com.