- Advertisement -

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.

Stone Korshak, Editor and Publisher of The Rio Times.
Stone Korshak, Editor and Publisher of The Rio Times.

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.

Leblon and Ipanema, Rio de Janeiro, Brazil, Brazil News
Overlooking Leblon and Ipanema on a winter day in Rio de Janeiro.
- Advertisement -

9 COMMENTS

  1. You talk like the only expats and/or foreign investors are American. Short-sighted to say the least.

  2. I have no ties to dollar, nor to euro and the prices in here are killing me. I think it is way too early and too cynical, considering the country`s situation to announce that for some very small group of priviledged, the life in Rio is getting better…

  3. Do not go to other places, you will find out how lucky is Brazil. Do you want to visit me in Missouri?

  4. @ Danny – Thank you for your comment, but the US Dollar, Euro, British Pound, Canadian Dollar, Australian Dollar, Swedish Krona, Norwegian Krone and even the Chinese Yuan have all had massive gains against the Brazilian Real in the last five years, no?

    @ Galla – Thank you for the comment also, and I realize that our Brazilian readers and friends might not appreciate some foreigners happy to see their purchasing power increasing in Brazil, and apologize for any offense… but the currency fluctuations swing both ways in time.

  5. The whole reason expats come to Rio is for work and in a crap economy there is much less of it. And, the prospects in the medium term are quite dim for more international firms to send expats. So yes, the prices are adjusting but there are a lot fewer expats to take advantage of it.

  6. On a purely visceral plain, its about time that greed in Rio has been forced to take a step back. I lived in Rio from 2005 to 2012 and I rode that economic tiger when the dollar took a beating day by day. The price of everything always went in one direction, but not the quality of service or goods.

  7. Capitolist economies, Brazil is one, have many similarities to living organisms, like humans for example. It is normal, expected even, for capitolist economies to get sick, just like humans get sick. The important thing is to accurately diagnose the sickness, prescribe treatments, and then allow time for healing and an eventual return to prosperity. The economic issues of today notwithstanding, Brazil is well poised for economic recovery and a return to sustained annual economic growth. Most everything the government is doing now, making sensible budget cuts, negotiating to boost exports because of the relatively cheap value of the real, are exactly what they should be doing. Not to minimize the effect the current economy is having on anyone today, but would anyone want to trade places with Argentina, or Venezuela, or Greece? In contrast, let me point out that in the most recent recession to hit the USA economy, homeowners in general lost an average of FIFTY percent (yes, half) off the value of their homes. Does anybody think that will happen here? Brazil has very sound and solid macroeconomic pillars of agribusiness, metals and minerals, petroleum and gas, and tourism, that bode well for a return to solid and sustained economic growth, in the near future. Be optimistic people. Brazil – BETTER EVERY DAY! Brazil – BUILT TO LAST!

  8. Sadly, I feel you are all missing the mark – especially Carlos. I do not believe we are just getting back to normal. I have been in Brazil, on and off, since 1989 – and where Brazil is going now is nothing like where it ever was before.

    Brazil is poised for recovery in the same way that Greece is ready to dominate Europe. Brazil is a closed economy with no (or very, very few) internationally competitive industries. Its workforce is grossly undereducated and becoming massively expensive. Useless bureaucracy and corruption continue to dominate the Brazilian business model, and with an economy unable to add economic value in any meaningful way, it will always be dependent on the vagaries of the commodities markets, which so far show little sign of riding to the rescue. Meanwhile Brazil’s major systems remain substantially dysfunctional – education, health, tax, legal, political – and there is neither the ability nor the inclination amongst the ruling elite to resolve the issues, as they and their families are sustained precisely by the corruption, protectionism and bureaucracy the country so badly needs to eliminate. Meanwhile the country’s inadequate infrastructure is crumbling, and there is no money available to remedy the situation in the short to medium term, even were 50% of the investment not stolen, ‘diverted’ or just wasted on bureaucracy or misapplied through incompetence on a regular basis.

    I would certainly agree that this is part of an economic cycle, and that therefore there will inevitably be an upside at some stage. However, most economic pundits fail to recognise (simply because it is irrelevant to their decision making model) is that although economic cycles may come and economic cycles may go, these cycles do not repeat themselves in the same context. Brazil is not and cannot ever be in the same position as before. Brazil’s society is changing; its culture is changing. This is, in the long term, both inevitable and no doubt desirable; however it does mean that Brazil will have to confront issues of inequality and corruption head on if it is to avoid a future with increasing civil disobedience and unrest. The youth of today were promised a land of milk and honey by the PT, and they have seen the shutters close on this. They have seen what could be – should be – theirs, and no doubt many will be looking for ways to get it, by fair means or foul. As illegal goods, arms and drugs flood through porous borders, and criminal gangs continue to grow and to ingress from neighbouring countries, many will turn to them for the wealth the government has denied them. This genie cannot be put back in bottle. So yes, there are those who are beginning to “see value” in Brazil, but these people are not part of Brazil. They are speculating from their developed-world firesides, confidently insured or self-insured, and quite oblivious to and uncomprehending of the society on which they are speculating. Such are the joys of capitalism.

    Certainly there are positives, if one looks for them, but I would suggest that anyone expecting this to be just another simple downturn should get the pink film removed from their glasses. Brazil stands on a precipice, and it will be interesting, at least in the Chinese sense, to see what happens next. If you choose to stay, I suggest you buckle up.

LEAVE A REPLY

7 + one =