Middle Classes Drive Investment in Brazil

Part of the success behind emerging markets such as India and Brazil are their burgeoning middle classes. Ever-increasing consumer spending on anything from cosmetics to real estate represents endless opportunities for investment.

Brazil’s growing middle classes are a particularly good example. Over the last 40 years, the number of consumers in Brazil has quadrupled and 46 million new customers – the equivalent of the population of Spain – have joined Brazil’s shoppers. And unsurprisingly, a whole legion of investment opportunities has sprung up to meet the shoppers’ demands.

The rapidly-expanding purchasing power among the new middle classes is a major factor behind the success of Brazil’s economy. So much so that Ernst & Young call the rise of the consumer “Brazil’s real story”. In their recent report on private equity in Brazil, the company publishes statistics on Brazil’s consumer market. At global level, Brazil is the second largest consumer market for wall and floor tiles, and cosmetics; the third largest for mobile phones; and the fifth largest for soft drinks, vehicles and computers.

For Ernst & Young, this booming consumerism is expected to last for decades as Brazil’s economy goes from strength to strength. “The trend is expected to gather steam as prosperity becomes a self-perpetuating cycle, giving more consumers more dollars for goods and services further up the value chain,” the report says.

With a consumer market currently worth over US$1 trillion a year, Brazil lies in eighth place in the top ten largest consumer markets in the world. But its fast-growing middle classes mean Brazil’s consumer market is projected to become the world’s fifth largest by 2030 when it will be worth over US$2.5 trillion, ahead of the UK, France and Germany.

Brazil’s middle classes have big economic aspirations and industries are springing up all over the country to meet them. According to Ernst & Young, “this upward socioeconomic migration is driving desire for a wide array of consumer goods and services.” Record numbers of cars and white goods have been sold in Brazil over the last year and companies providing insurance and education are enjoying big business.

At the high end of “the value chain” is real estate. Ernst & Young report that “homeownership rates are likewise increasing at a rapid pace” and that 35 million families will be buying their first home over the last two decades. This huge demand for property in Brazil will partly be met by the government-backed social housing programme, Minha Casa Minha Vida, building 3 million homes by the end of 2014. But the shortfall is massive and as a result, interest in property investment in Brazil is at its highest level ever. And the good news for investment is that this high interest is expected to remain.

Obelisk offers select investment opportunities in Brazil and gives investors security, profitability and diversity thanks to a combination of close attention to our clients’ investment requirements and high quality in-house research and analysis.

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