Brazil is emerging from the crisis, and next year we are going to have surprising growth President Lula da Silva said last month. A bold but not inaccurate statement. There is evidence to advocate that Brazil will be one of the first economies to recover from the economic slump in an emphatic manner. The OECD is predicting 4% economic growth for Brazil in 2010.
State oil company Petrobras discovered vast deepwater reserves that it is developing with a five-year, $174 billion investment program. The goal is to double Brazil’s production, to 3.5 million barrels a day, by 2012, making the country a top oil exporter, in line with many Middle Eastern countries such as Kuwait and Saudi Arabia, increasing the wealth in the country immensely. The United States has agreed to provide as much as $10 billion in financing to go towards the development of these oil fields. Brazil will reap tremendous benefits from this oil exploration and avoid over-reliance on oil because it made its discoveries after its economy had diversified and industrialised.
U.S. consumers are predicted to hold back on spending in the near future. A recent Goldman Sachs report predicts that Brazil, Russia, India and China will be responsible for around 50% of worldwide demand for exports due to their growing domestic consumption. This demand is powered by a growth in their middle classes.
Since 1995 Brazil has invested heavily into tourism, taking foreign visitors numbers to 5.2 million in 2008 from just 1.9 the previous decade. In preparation for the 2014 football World Cup, which will take tourism levels to a new all-time high, the Government will spend over $250 million over 5 years on infrastructure.
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.
Brazil has a huge export industry, yet this only accounts for 12% of its $1.5 trillion economy. With Brazils middle class now making up more than half its 190 million-strong population, the domestic consumer market is booming. Retail spending has increased heavily this year from 2008 with groups such as Whirlpool, which has a 40% share of the white goods market, recently announcing 20% increases in sales year on year. Other groups have been quick to jump on board the household goods train. Over the next five years, well see a doubling of sales of durable goods in Brazil, said Jos Roberto Tambasco recently. The vice-president for operations of Pao do Aucar, which turned over $8.9 billion in 2008, spoke in the wake of the supermarket giants strategic acquisition of appliance retailer Ponto Frio for $422, providing the group with a further 458 outlets countrywide to meet the burgeoning demand for household appliances.
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