Booming brazil ‘on top of the world’

Brazil is the world’s biggest emerging market, according to Morgan Stanley Capital International (MSCI) Global Emerging Markets index...

Brazil replaced China as the biggest market on the MSCI index, rising to a weighting of 14.95 per cent, compared with 14.15 per cent for China.

The MSCI Global Emerging Market index is designed to measure equity market performance in global emerging markets, and Brazil’s climb to the top of the index is yet more evidence of how the country is blazing a trail in Latin America and creating a prosperous and profitable environment for potential investors.

The confidence of international investors is best exemplified by the massive growth of foreign direct investments (FDI) flowing into Brazil in 2007. FDI doubled in 2007 to $37.4bn, exceeding FDI for Japan and India. Brazil was the third largest recipient - China was #1 and received $67.3bn. However, to put this into context, China's FDI is not even twice the FDI of Brazil although China has a seven times larger population.

The so-called “Bric” economies of Brazil, Russia, India and China are taking increasing proportions of global property transaction activity, while the US credit crunch is adding to pressure on property investment in several financial centres such as New York, London and Tokyo.

A soaring economy

Chris Allen, head of real estate fund management at HSBC Private Bank commented: ‘Latin America should be considered an area for investor interest – particularly Brazil, where falling interest and inflation rates have coincided with stability in the political system and a growth in the owner-occupier property sector’.

As well as having a booming property market, the Brazilian economy is firing on all cylinders, increasing the attractiveness of the country as an investment destination.

Urban Larson, Manager of F&C Latin America Fund, said: "Job creation was a record 1.9 million, inflation was 4.5% - a sixty year low – and bank lending grew at about 25% year on year.  Recently released January numbers show loan growth accelerating to a 28% annual rate”.

He noted: "With credit to GDP at only 35%, compared to 200% in the US, there is considerable room for increased consumer and corporate leverage in Brazil. This lending is being funded domestically so does not appear likely to be much affected by tighter liquidity in developed markets."