Editorial, by Stone Korshak
RIO DE JANEIRO, BRAZIL – The sky is falling! The Brazilian economy is in a tailspin, the entire political system seems to be on trial for galactic scale corruption tied to its once booming energy industry, and real estate investments are about to go belly-up on account of overextended debt and sinking values. Some would say things are finally getting back to normal around here.
About two years ago I was having a bacon, egg and cheese sandwich (it took me a few years to be able to custom order my “gringo sanduíche”) at my local luncheonette (which has since closed) on Visconde and Vinicius in Ipanema, talking with my friend Alex about how things have to crash and burn in Rio before they get back to a livable situation.
At the time the cost of living, fueled by raging real estate costs, had bloated so high that staying in Rio, especially in Zona Sul, was untenable. To start a business here, or rent a storefront, was becoming comically expensive… all on the back of the oil and mega-event hype.
It seems the time has come, the country’s fortunes have turned a corner and the stronger dollar, recession like economy and falling real estate prices makes it a much more appealing place for foreigners again. Granted most of the foreign oil industry has left and inflation is still burning hot, but it is still a better situation than it has been for most expats in Rio.
We have seen a drastic change in currency values over the last five years, when in 2010 the Brazilian real (BRL) had soared to an annual exchange rate of R$1.66 to US$1. In March 2015, the real continued a downward trend that started in April 2014, falling sharply against the U.S. dollar to hover around R$3.19 to US$1 today. A dollar is literally worth twice as much as five years ago in Brazil.
Of course for those expats that are only earning, or fully invested in, Brazilian reals – that is not much help. Yet most foreigners still have ties to back home, either in a network of friends and family or business, and there is opportunity in that. Others have businesses here that are linked to foreigners being in Rio, either for the Olympics next year or tourism in general, and the stronger dollar means more spending potential.
Even on a macro scale the government is reaching out to the U.S. at least trying to make it a more appealing place to invest. Whether or not that happens is another story, but for the expat small business owner or individual in Brazil, I’m not sure it matters.
Today is the middle of “winter” in Brazil, and it is sunny and 30 degrees Celsius (ºC) or 86 Fahrenheit (ºF) in Rio. The sky may be falling here, but that means it is returning to normal finally, and things are starting to look pretty good again for gringos.