By Nicholas Storey
In the last five years, the value of several ‘leading’ world currencies has fallen against the Brazilian Real; importantly for some, the British pound has nearly halved in value. Add to this inflation in Brazil leading to a doubling of prices in the same period (occasioned by high interest rates and little price control), and Brazil is no longer a very cheap country in which to live.
Indeed, it is probably the most expensive in South America and in a real sense, some prices here have actually quadrupled because of the combined effects of devaluation of the pound and inflation. However, property prices (although fluctuating), in our area in the Region of the Lakes, remain comparatively low and recent trends (particularly because of the location in Brazil of the next football world cup competition and the next Olympics), suggest that house prices are doubling every three years.
The problem is: other prices are doing the same thing and investment and retirement income from outside Brazil is not keeping up with the cost of living. Those who were brave and far-sighted enough to move all their assets here five years ago will be unaffected but it is unlikely that the continuing situation here will as readily attract future, small, outside investors as resident immigrants. Having said all this, it does seem quite clear that investing, through one’s own Brazilian company (both in real property (realty) and in the banks), remains an excellent option, provided that one is prepared to live in another country with much less inflation, to be able to gain from the interest rates and avoid their adverse consequences.
The only real alternative is to find some way of generating earned income in Brazil and, apart from getting a job, there are one or two markets where (even with less than business Portuguese), this is possible; property dealing and development is an obvious example. But none of this is easy; for one thing, the property market is relatively slow at the moment, for the sake of producing regular income. This is why I suggest that potential small investors in Brazil do not dismiss it but seriously think of the possibilities suggested above, to avoid the effects of inflation.