Brazil Is Hottest Investment Destination

Once again, Brazil comes out as one of the world’s top destinations for investment. With great achievements this year, investment in Brazil is looking ahead to even better opportunities.

Experts from politics and many walks of business life in Brazil got together last week in São Paulo to discuss Brazil’s immediate future. Meeting at the Reuters Brazil Investment Summit, speakers from investment banking, real estate, equity and Brazilian political life were unanimous that 2010 has been an excellent year for Brazilian investments and that there are still great things to come.

According to Reuters, Brazil combines three essential ingredients – its long list of natural resources, a sound banking system and high levels of consumer spending. This combination means that, for Reuters, “Brazil is shaping up as one of the world’s hottest investment destinations”.

Several speakers at the Brazil Investment Summit highlighted these three essentials with particular emphasis on how Brazil’s huge purchasing power is good news for investment. As Urban Larson from the London-based F&C Investments said, Brazil has “so many people moving out of poverty and into the middle class, and that’s a key driver for demand”.

This demand is behind increasing foreign interest in sovereign wealth fund investment in Brazil. The largest private sector bank, Itau Unibanco announced it had attracted high interest in its Brazil-focused funds and was “close to obtaining mandates from several sovereign wealth funds that want to invest in Brazil”.

Stock and shares are also buoyant and in demand in Brazil, home to one of the world’s best-performing stock markets. Speaking at the Summit, the Bovespa’s Chief Executive summed up many investors’ sentiments when he said “I’m just as happy as I can be with Brazil for the next few years”.

Brazilian investment does, of course, come with challenges such as a highly-complex tax system and lack of infrastructure. The Reuters Summit also addressed these by asking experts how they would like to see Brazil’s new President Dilma Rousseff deal with them.

Top of Dilma’s agenda is her pledge to eliminate poverty during her four-year mandate. Dilma is also keen to overhaul the tax system by bringing in reforms to facilitate doing business in Brazil. In addition, one of her priorities is to continue infrastructure projects to improve Brazil’s airports, roads and ports. All three of these objectives are welcomed by investors in Brazil and all three will continue to further opportunities for investment.

Brazil’s high public spending looks set to fall, which in turn will help bring down the double-figure interest rates. Speaking at the Summit, Finance Minister Guido Mantega said that “with the economy growing at over 7%, it was time to abandon fiscal stimulus”. Less spending from the public purse should gradually bring down interest rates, currently at 10.75%, among the highest in the world. Finance Minister under Lula, Mr Mantega is continuing in the post with Dilma, a continuity well received by investors in Brazil.

Over the next month, Dilma will continue to name her cabinet and define her policies ready for when she takes office in January. All the signs so far are good and lmarket forces believe that with Dilma conditions for investment in Brazil will be at least as good as they were with Lula, echoing the speakers at the Reuters Brazil Investment Summit in their confidence in Brazil’s progress towards becoming a fully developed nation.