Brazil is going to have startling growth next year as it emerges from the crisis said President Lula da Silva last month. The OECD has predicted 4% economic growth for Brazil which shows evidence that Brazil is one of the first economies to recover from the economic slump in an resounding way.
The oil industry is booming. Brazils target is to double production by 2012 to 3.5 million barrels a day, placing it high amongst many Middle Eastern rivals such as Kuwait and Saudi Arabia. Petrobras, the State-owned oil company, is developing its recently found deepwater reserves with a $174 billion investment program over 5 years and the US has agreed to provide up to $10 billion in finance to further development. Having diversified and industrialized its economy prior to many of its major finds, Brazil should avoid over-reliance on oil and increase domestic wealth significantly.
The growing middle classes and consequent increasing domestic consumption of the BRIC nations is creating greater demand for exports. While US consumers continue to tighten their purse strings, Brazil, Russia, India and China will be responsible for around 50% of worldwide export demand.
Brazil has spent enormously on tourism since 1995, increasing international visitor numbers from 1.9 million to 5.2 million in 2008. The 2014 World Cup is expected to increase tourism and the Government is pledged to spend in excess of $250 million over the next 5 years on airports, roads, sanitation and hydroelectric power.
The Brazilian property market has huge room for growth. Residential mortgages only represent 2.5 percent of the Brazils GDP according to Banco Central do Brasil, the Central Bank. Comparisons with other countries reveal a huge growth potential for Brazil as Mexico is 11%, Chile 20%, Spain 45% and 68% in the US. Even with the worldwide economic crisis, mortgage lending in Brazil rose 41%, twice as fast as consumer credit. The state-owned Caixa Economica Federal has lent around 19 billion Reais so far in 2009, compared to an average of five billion Reais four years ago. It expects to lend 26 billion Reais worth of loans for Brazil real estate purchase in 2009.
Brazils economy is worth $1.5 trillion, yet exports only represent 12% of this. Its population of 190 million is seeing a boom in the middle classes, which now make up more than half its population. With their increased buying power, Brazilians are buying more food, more clothing and more household goods than ever before. Sales figures for Whirlpool, which has a 40% share of Brazils appliance market, were 20% higher in May and June 2009 compared to a year earlier. Though this has been partially fuelled by tax incentives, which are due to end in October, sales are expected to remain strong. “Over the next five years, we’ll see a doubling of sales of durable goods in Brazil,” says Jos Roberto Tambasco, vice-president for operations at Po de Acar. In preparation to meet the increased demand for white goods, the supermarket giant recently paid $422 million for the appliance retailer Ponto Frio which has a network of 458 stores nationwide.
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