巴西房地產行業
 

本文的目的是描述過去十年的巴西的經濟環境，其中考慮到影響經濟的政策，然后是這個經濟環境的優勢以及在巴西做生意的缺點。第一部分介紹了自2000年以來，巴西經濟最顯著的趨勢。第二部分分析了經濟政策對營商環境的影響。第三部分對公司在房地產行業討論了經濟的優勢和劣勢，。最后，第四部分考慮外國跨國公司應該用何種策略來進入巴西房地產市場。
 

第一部分
 

在巴西開展業務的經濟環境
 

1989年，巴西保持了進口替代工業化模式之間的長期斗爭之后，達到了一個民選政府的軍事和民主力量。在1994年在總統費爾南多的主持下，重大經濟改革在經濟大規模自由化實施。
 

Real Estate Industry In Brazil Economics Essay

 

The aim of this paper is to describe the Brazilian economic environment over the course of the last decade, taking into account the effects economic policy and then relate this economic environment to the advantages and disadvantages of doing business in Brazil. Section One presents the most striking trends of the Brazilian economy since 2000. Section two analyses the Impact of economic policy on the business environment. Section three discuses the economic advantages and disadvantages for companies in the Real Estate Industry. Finally, Section Four concludes by considering what strategy the Foreign MNE should use to enter the Brazilian real estate market.

 

Section 1

 

2. The economic environment of doing business in Brazil.

Brazil attained a democratically elected government in 1989 after a prolonged struggle between military and democratic forces where brazil maintained an import substitution industrialisation model. In 1994 under the presidency of President Fernando Cordoso major economic reforms were implemented in a large scale liberalisation of the economy. During this period Brazil underwent the world’s largest ever privatisation initiative, when over 100$ billion of state own assets were privatised. Now Brazil is often grouped along with Russia, India, and China as a region of rapid development and economic potential (see fig1). After decades of hard work Brazil has emerged as a major international power with the 8th largest economy in the world, (source IMF, 2009). Since its major trade policy overhaul in the 1990s, Brazil has undertaken ambitious changes related to economic reforms in its pursuit of sustained growth, which have led to a significantly more open trade and investment environment. These policies have faired Brazil well through the current economic crises, and the speed of economic recovery is a testament to the success of Brazilian economic policy. Under the current administration’s macro-economic growth policies, Brazil has changed the pattern of the previous 30 years, and now has strong GDP growth, low stable inflation and rising prosperity.#p#分頁標題#e#

 

Fig 1: GDP growth

 

Gross domestic product based on purchasing-power-parity per capita GDP.

 

Following Cordoso’s regime, Brazil has maintained strong focus on implementing trade and investment liberalisation, and heavily reduced tariff rates (see fig2), resulting in increase in GDP( fig 3) and a favourable environment for foreign investments(see fig 4)

 

Fig 2: Tariff Rates across all products from 1990-2009

 

Figure 3 : GDP Growth in Brazil 1994-2010

 

All though these policies were not across the board, this has allowed foreign investment in the real estate industry, and the resultant stabilisation of interest rates has made Brazil a more attractive investment location. An attractive feature of the Brazilian real estate market is the creation of free trade zones, which are centres of development by foreign investors.

 

Fig 4: FDI in Brazil

 

Section 2

 

Background

 

Brazil has undertaken a number of economic and fiscal policy changes. Two of the most important over previous two decades and therefore the ones we shall focus within this paper are Unilateral Trade Liberalisation, and Regional Integration Policy.

 

In Brazil, much of the second half of the 20th Century is characterised by an authoritarian modernisation. Here state operated enterprises (SOE), had monopolies which were secured via government subsidies. The policy was direct state intervention into industry through restrictive regulatory rules, which the government hoped would promote self-sufficiency within the large domestic market. This approach was seen as a success by observers within Brazil during this period, due to the high growth rate [figure]. However growth was largely due to the impact of Low interest loans from the developed world.

 

A critical turning point arose in the 1980 when super high inflation and a poor global climate led to a debate into the efficiency of the current import substitution model. As the ISI system failed policy makers within Brazil began to explore the benefits of a market economy. The ISI model had a number of failings but a major consideration was that it allowed the government to favour special interest groups, and powerful lobbies within the country, in a system of protectionism and mercantilism, which ultimately led to extreme balance of payment issues and lagging productivity.

 

Liberalization

 

During this period in Latin America the Washington consensus as at the forefront of political and economic discussion, where it promoted macro change in the form of stability through fiscal balancing, and real exchange adjustments, and in micro change in the form of trade openness, liberalisation, SOE privatisation, and economy de-regulation. The combination of the external and internal pressures to remove protectionism and the general consensus of the day led Brazil to remove protectionism and develop a trade liberalisation policy in the early 1990s. This was Brazil’s first major policy revision since 1957. In implementing these policies, policy makers imposed unilateral tariff cuts, and in doing so forced domestic industry to compete with external competitors. The goal of this was to bring down inflation, which had been running into three digit figures by the end of the 80s, and raise Brazil’s competitive standing on the international arena.#p#分頁標題#e#

 

Recent Policy Adjustments

 

In 1994 the Plano Real was instigated, to counteract the inflationary problem of the Brazilian economy. During the period of 1995 to 1998, there was a slight reversal in the Liberalisation process when Brazil overvalues their exchange rate and increased the current account deficits and their contagious risk. From 1999 up until 2001, during a worsening of global economic climate, Brazil adopted a flexible exchange rate, and as a result of this policy there was a return of trade surplus. Nevertheless due to the poor economic performance of the previous year, doubts into the benefits of Liberalisation are maintained within Brazil’s policy makers. Unilateral trade liberalisation is not without its drawbacks, particularly in developing countries operating with no guarantee of reciprocity. Nevertheless the most positive effect of the Liberalisation has been a sharp increase in foreign direct investment [fig 4] and sustained growth of industrial production led by capital and durable goods. Looking towards the future, Brazil has all the conditions necessary for maintaining strong sustainable growth. The external debt stocks as a percentage of GNI, which is the “sum of public, publicly guaranteed, and private nonguaranteed long-term debt, use of IMF credit, and short-term debt” Trading Economics, has fallen from 38.54 in 2000 to 16.21 in 2008. In the decade starting 1999, Brazil Gross Domestic Product has risen to 1572 billion dollars from 586 Billion. Its balance of trade which was negative uptil 2000’s is now a postitive 2000 million USD. In order to facilitate future growth, the policy makers of Brazil must continue the process of Internationalisation and Integration into the world’s economy; however it must be take into consideration how the policies of high real interest rates, real exchange overvaluation, and fiscal conservatism are resulting in semi-stagnation of reduced performance of the liberalisation measures they have previously undertaken.

 

Figure 5 : Brazil’s Balance of Trade from 1994 onwards

 

Section 3

 

Advantages:

 

One of the most developing sector and a presumably hot destination for foreign investments in Brazil is the real estate sector. The primary reasons for the growth of the real estate sector in brazil is the increase in the per capita income and supportive government credit policies as well as FDI laws. The primary needs of a real estate sector are stable demand, purchasing power amonst public, a developed mortagage market for consumers and availability of raw material and labour. All these factors

 

Infrastructure development is progressing in alignment with the economic growth of the country. Brazil has invested heavily in the development of roads, airports, energy projects and most importantly for the real estate sector, it has undertaken ambitious housing projects to counteract the massive housing deficit of over 7million homes.#p#分頁標題#e#

 

A major benefit of the Brazilian market for investors has been the decrease in import duties and elimination of non-tariff barriers on exports. Another law that has kept the foreign investors interested in the brazil’s real estate sector is that they have 100% ownership of land. Along with that Brazil has implemented various incentives for foreign investors like tax benefits and no charge on transfer of profits. These liberalisation policies have freed sectors from government control and opened them to investment by local and foreign private companies.

 

Recently, the Brazilian government also made a statement saying that to promote tourism and associated real estate sectors they will remove the lock-in period for foreign investors which gives them greater flexibility.

 

Currency fluctuations have a vital impact on many investment markets, especially in real estate industry. Real estate industry is very susceptible to such as changing international rate and economy. Therefore, the importance of stable currency is more obvious. The Brazil’s currency has been the Real (R$) in 1994. After that, inflation in Brazil has been kept a civilised level (at an all time low at 5.7%). Moreover, due to Brazil’s stability currency, it shows that Brazil has low debt, low exchange rate, low interest rate, high per capita purchasing power, and stable political system. The good currency rates make the investment cheap for foreign investors. That is to say, a stable currency make Brazil become one of the top investment destinations around the world.

 

The new legal reform which ensures foreclosure as well as securitization and low inflation in Brazil make it a favorable emerging mortgage market.

 

Brazils mortgage lending has been restricted to subsidized loan from private and public savings institutions therefore have a very low level of residential and commercial mortgage debt. They also mortgaged their finance due to the high cash reserve imposed on banks by the central bank which makes it difficult for banks to give mortgage therefore making real estate markets in Brazil lowly leveraged compare to that of the UK and USA which are highly leverage so it survived the financial crisis and recession in 2008 and 2009 respectively.   The introduction of macroeconomic policies which cause an increase in employment opportunity have enable more low class Brazilian to earn more and the introduction of new mortgage laws as well as property growth development in 2009 there has been an increase in demand for real estate in the past year.

 

Securitization is the key to create liquidity in the mortgage market and with passage of law 9514 this was achieved in brazil in Nov 1997. Prior to this the mortgage market was not feasible due to general economic instability, high interest rates and high inflation.

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Brazilian government implements a stable political system till now, with ‘no political enemies, no ethnic or cultural conflicts, and no threat of terrorism or civil unrest’ (Ball, 2009). Brazil’s democratic institutions have allowed the domestic and foreign markets to keep their confidence in Brazil’s political system. Since 2003, Brazil’s President Lula has improved and implemented effective prudent fiscal, economic policies and innovative social reforms which made Brazil become the 8th largest economy around the world (The World Bank, 2003). Thomas McDonald (chief strategic officer) pointed that ‘a 5% cut in Brazil's Selic interest rate this year to 8.75% and a $18 billion housing stimulus plan announced by the government in March have boosted demand for residential and commercial real estate investments’ (Property Wire, 2009). To some extent, the reform also fuels a surge of housing consumption. All in all, under President Lula’s successful economic reforms, Brazil tends to be safer and stable political environment in which to invest, compared to other BRIC countries.

 

With Brazil hosting 2014 FIFA World Cup and 2016 World Olympic Game, both international and domestic investors pay more attention to real estate industry in the country. This will lead to the construction of new and massive infrastructures and housing across the Brazil. Security and environment will be improved as well. Two international sporting events also can promote Brazil’s tourism, transport, and retail sectors. All these factors can boost the demand both foreign and domestic buyers.

 

Most Investors invest real estate industry in Brazil can obtain a great return on investment. Generally, Brazil has lower risk investment opportunities, compared to USA, UK, or other BRIC countries

 

The Brazilian government has taken major steps and reforms in the real estate sector to provide residential houses to the low and middle income families. Alongwith encouraging FII, tax benefits the government has also adopted Minha Casa, Minha Vida – My home, My Life which is a 34 billion project. It’s a program that will provide the low-income families with no ownership of residence with 1 Million new homes at cheaper rates. Under the new program, families earning as much as 4,200 reais a month will be able to buy a home at a near-zero interest rate, refinance it over 36 months in case of unemployment and be fully bailed out by the government in case of death.

 

This housing plan includes tax cuts for selected building materials was incorporated as a policy to counter the impact of the global financial crisis on Brazil’s economy

 

According to the World Tourism Organization, it shows that the number of international travelers increased at 170% in Brazil between 1995 and 2005. This has resulted in increase in real estate construction. But in today’s Brazil, the expansion in demand of middle residential and affordable housing are more obvious.#p#分頁標題#e#

 

Because it is an emerging country which means that has a higher demand for real estate than most developed countries like UK. There is deficit of houses in Brazil compare to the entire population of the country (more than 20% of the population lacks accommodation) so there is a high demand for real estate.

 

Figure 6:

 

Disadvantages:

 

Though being one of the world’s fastest growing economies, Brazil still has some issues to sort out. The recent recession has had an impact on Brazil’s economy but they seem to have recovered well with empowering domestic demand. The real estate sector in Brazil is one of the hottest destinations for foreign investors but they should take into consideration various other factors before deciding to enter the market.

 

Though there are many positives in the Brazilian real estate sector, it has its share of problems. The most critical factor that discourages foreign investors from entering Brazil is the bureaucracy. Bureaucracy further leads to corruption which increases the cost of doing business and the transaction costs. According to the doingbusiness.org Brazil has been ranked 112 in dealing with construction permits compared to UK or USA which ranks16 and 27 respectively.

 

Also, there are a lot of environment legislations and formalities that need to be in order as the environmental laws for construction are (Fig 7) quite strict in Brazil and the penalties are also quite high. The other issue is that Brazil still lacks the educations skills and technology that is required for high quality construction. Along with that, their efficiency in construction is pretty low compared to industry standards and they waste a lot of material and water (25%). The rate of corruption is also quite high in Brazil which adds to the problems in the real estate sector. One more major issue that has come up recently is that the Brazilian government has come out with a statement regarding the ownership of land in Brazil by foreign investors. Earlier, FII’s had the right to own the land 100%. But however, these bans are only concerned with the agricultural sector for producing food and there is still no clarity whether these apply for real estate sector too.

 

Section 4

 

Considering the growing real estate sector in Brazil, Government encouragement for foreign investments, favourable laws of 100 % ownership of land, cheap labour and stable political and mortgage system, MNE’s should enter the Brazilian real estate sector. The modes of entry they can opt for are Greenfield, Acqusition Or Joint Venture. Since its an MNE it is assumed that the have enough rescourses to fund their activities and the requirement for rasing more capital is not an issue.

 

The company can go for a Greenfield approach if they have knowledge about the Brazilian market and are currently operating in some other sector in Brazil and trying to diversify. If its a Real Estate MNE trying to enter the real estate sector they should rather opt for an acquisition or a joint venture as real estate sector requires good terms and relationships with government personnel and knowledge about laws and demand patterns in the market. MNE’s are served well by opting for a Joint venture with a medium or large scale real estate companies in Brazil as they have lesser risk. Joint Ventures are also better when it comes to the fact that Brazil government is buerocratic and corruption is quite prevalent in the country. This method is also good for companies who lack solid background in the real estate sector and are new to the business.#p#分頁標題#e#

 

The companies looking for short-term investments ( 2-3 years) should go in for the tourism related real estate sectors as government has no lock-in period for those investments and the returns are assumd to be around 20%. Howver, a long-term investor should look to enter into construction of real estate like residential and commercial projects which have a growing demand in Brazil. They should also try and bid for government related projects as the government structural reforms and planned to invest $18 billion for building 1 million homes. MNE’s with superior technology and know-how should opt for such projects as the quality of construction is considered poor in brazil.

 

Housing Finance Mechanisms in Brazil – United Nations Human Settlement Programme 2010 Nairobi Principal Author: Jo?o da Rocha Lima Jr.