“My maid now eats yogurt,” a contact told me on a visit to Fortaleza, Brazil in 2009. It may seem like a strange thing to notice but it’s a sure mark of how Brazil is changing. Yogurt is a premium product in Brazil—and my contact’s maid was changing her consuming patterns in line with Brazil’s new middle class.
Last month on a conference call, another contact told me that his mechanic had just returned from a vacation in Europe. He went on to talk about how as a kid he had looked to the U.S. and Europe as lands of wealth and opportunity. Now the immigration office in his home-town of Fortaleza can’t keep up with visa applications. Many of today’s immigrants are coming from the developed world. These folks aren’t coming to sell coconuts on the beach. They are professionals, like engineers and chemists, being lured by opportunity and big bucks.
From military dictatorship to vibrant democracy…from IMF creditor to debtor…from poor to middle-class country…from lap dog to the big powers to a global player…so Brazil has transformed. Even her president, Dilma Rousseff, has had her own journey from Marxist revolutionary to pragmatist.
As real estate investors we care about changes like these because when people make the transition from poor to middle class they dramatically change their consumption patterns. They start to consume like we do in the west. And, because they are aspirational, these consumption trends can be accelerated. (In the case of Brazil, people consume and spend into the economy along North American lines. This is unlike other growing economies, like China, where the new middle class have a very high savings ratio.)
That means that they buy or rent shiny new condos…and homes in gated communities with pools, grill areas and walking trails. We want to own what they want to buy or rent. We want to buy it before they know about it. We want to make investments ahead of this new middle class.
Brazil didn’t become a middle-class country by chance. Long dubbed the country of the future, Brazil is finally showing that it can live up to its potential. Her young population produces or extracts what the world needs: energy, food, cheap manufacturing, like footwear and clothing, and high value manufacturing, like planes and automobiles.
Throughout the past 15 years, growth in the north-eastern province centered on the city of Fortaleza has outgrown the rest of Brazil. This area was historically poorer. It was ignored. All the money and power was in the south. That left more scope to grow—for real estate prices to rise.
As growth in the richer south has slowed over the past year it has continued here in the north-east. It has more capacity to grow. Something big is happening that’s set to grow capacity even further—something big that could mean 100,000 new jobs for the area. Many of these jobs will be highly skilled. We want to own the real estate these guys will want to live in. And, we can.
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