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NatalNatal, Brazil, a growing economy,marketplace. Brazil is an incredibly fascinating and beautiful country as well as huge in size; it is in fact the fifth largest country in the world, it borders every single South American country apart from Ecuador and Chile and it has the 10th largest GDP in the world. Brazil is one of the four largest developing economies in the world (the three others being China, India and Russia) and according to Goldman Sachs, by 2050 Brazil will be the world’s 5th biggest economy. Since Brazil’s new administration took office in 2003 the government has succeeded in creating an economy ripe for foreign investor interest and promoting a fiscal and political environment conducive to growth. Local and international confidence in the Brazilian administration has grown rapidly the last years and this confidence has been based upon the government’s sustained and so far successful policies to create a far more resilient economy with reduced inflation, a stable currency and strong export performance. In 2004 and 2005 the Brazilian economy saw strong and sustainable increases in GDP while inflation (currently approx. 5,4%) was significantly reduced and expectations predict that inflation will further decline. Natal has been earmarked as one of Brazil’s centers for tourism and commerce due to its geographical location and already healthy tourism market. Natal is the closest point to Europe, being on the north east tip of Brazil allows Natal to be a six and a half hour flight from Europe. A few examples where Brazil stands at the moment: • Has the largest and most diversified industrial park in Latin America and the Caribbean • The world’s largest producer of coffee, oranges and sugarcane • Is one of the world’s leading producer of commercial jets • Has one of the most modern and cutting edge banking systems in the world • Is the eight largest producer of steel in the world • Has the seventh largest chemical industry in the world • Is the third largest shoe producer in the world and has a highly competitive leather industry • Has the fifth largest rubber industry in the world • Has 22 % of the world’s arable land • Has a modern and competitive textile industry which trades 21 billion $ per year • Compared to most developed countries, the Brazilian population is very young and hence offers the country a bright future
Growing Tourism When you think about what makes destinations interesting for tourism, such as sunshine, beaches, nature, vibrant culture and history, Brazil has it all. With its 8000 km of coastline, tropical white sand beaches lined by palm trees, most of them deserted, the Brazilian music and dance, the country has outstanding potential to be a major tourist destination. Until a few years ago, the tourism sector was jeopardized by the limited development of infrastructure and the lack of foreign promotion policy and constant planning for the development of different tourist destinations. However things have changed the last years and the authorities realizes the importance of tourism as a source of foreign currency and as a sector generating employment and income (last year 210 000 jobs very created due to increasing tourism). The tourism sector is now a top priority in the government’s agenda. When the new government took office in 2003, they created the Ministry of Tourism (which did not exist before) and they have already more than doubled the number of international events and fairs promoting tourism in Brazil. The last years investments in excess of 736 million $ have been made in improving the infrastructure; improvement works in several airports, the construction and improvement of road and draining systems, historical heritage recovery and environmental preservation. The efforts are now clearly starting to pay off while at the same time further infrastructure investments of hundreds of millions $ are being carried out. The number of international tourists visiting Brazil has increased the last years from 3,7 million in 2002, to 5,5 million in 2005 ( 48% increase). To put things in perspective, last year tiny Puerto Rico was visited by a little bit more than 3 million tourists. Brazil being the 5th biggest country in the world, it clearly shows that international tourism in Brazil has huge potential for further development. Under the Governments National Tourism Plan the specific objectives for the next years are to: • Attract over 9 million foreign tourists annually • Generate 1,200,000 new jobs • Receive 8 billion dollars in foreign currency • To diversify the tourism offer (develop at the least three quality products in each of the states of the federation) • To increase the average spending/tourist • Increase number of domestic travelers to 65 million annually
Studies carried out by Ministry of Tourism indicate that 75% of the tourists who seek Brazil as their vacation destination do so first of all because of the natural beauty. But once they arrive here, they find such hospitality that they soon become enchanted with the mixture of colors, races and cultures of the people as well. In a recent survey, 96% of the tourists visiting Brazil intend to come back again! That if anything, gives confidence in the growing tourism industry in this exciting country. The main tourist area in Brazil- the Northeast The Northeast of Brazil is the main “sun and beach” destination in the country and is also the area that is receiving most of the investments and attention on an international level. Main reasons are the near perfect climate and the numerous semi-virgin beaches along its beautiful coastline. The weather in the North East is the best in the entire country with a yearly average temperature of 27 degrees and is stable and sunny virtually all year around. In addition, the northeast is the closest point to Europe from Latin America and flying time is approx. 7-8 hours. Further, compared to many tropical destinations, Brazil benefit from a complete lack of natural phenomena such as hurricanes and tropical storms nor is it affected by earthquakes. The major tour operators have now realized Brazil’s tourism potential and are fast adding Brazil to their offer. Thomson Holidays added Brazil to their offer at the beginning of this year and according to Thomson, it’s the amazing beaches and the vibrant culture of music, food and drinks that makes the Northeast of Brazil such an attractive tourist destination. International groups are investing billions in new hotels and resorts in the northeast of Brazil. The internationally well know resort, Club Med, has three resorts in South America, it is no coincidence that all three are located in Brazil. The scenery and beaches in the Northeast of Brazil are quite simply breathtaking, The cost of living is up to 20% lower than in the UK, property prices are incredibly cheap and the area is highly accessible with daily flight from most major European countries. Even though the Northeast of Brazil is considered an emerging tourist destination for foreigners, it does not mean that tourism is a something new in this part of the world. Brazil has a population of approx. 180 million people and when Brazilians plan their holidays, they don’t have to look any further than their own border and they usually head to the Northeast. As a result of this, Brazilian tourists have been coming to the Northeast for decades and there is a waste range of tourist attractions at hand. Activities range from beach buggy tours along the beautiful nearly deserted beaches, diving and snorkeling, visiting historical sites and a very wide range of water sports to be enjoyed. Natal - Government focus on Brazil beach destination. Natal, or as it is also called- The city of the Sun has established itself as the leading beach tourism destination in Brazil and benefits from the best climate in the country; the yearly average temperature is 27 degrees and the weather is stable and sunny virtually all year around. Located at the extreme northeast tip of Brazil, Natal is the closest point to Europe from Latin America and flying time is approx. 7-8 hours from central Europe. Thomson Holidays added Brazil to their offer at the beginning of this year, and to no surprise the chosen location was Natal. Natal is a peaceful city while at the same time being a modern one with shopping malls, bars and restaurants offering international level cuisine and facilities that put it on a par with any Brazilian state capital. Its main attraction is its coastline, with over 400km of beaches, dunes and small pieces of paradise. Natal is also the safest state capital in Brazil and in addition, according to the research done by NASA, Natal has the purest air on the continent and second purest in the world, loosing only to Antarctica!! The local government has been very active in promoting and supporting tourism and the area has seen massive investments in improving the infrastructure. In
6 the next five years, investments in new hotels, golf courses, resorts and condos should exceed R$ 4 billion (about US$ 1.8 billion) on the coastline of Natal, the equivalent to 8% of all foreigner investments that the entire Brazilian economy received last year. Due to the booming tourism and enormous potential for further growth, the government has decided to build a new airport in Natal which will be the biggest airport in South America (will be 8th biggest in the world) and is due to be ready by June 2009. This will further confirm Natal’s position as the number 1 tourist location in Brazil. As mentioned before, domestic tourism is also strong in the northeast of Brazil. In January 2005, Natal received, 197 domestic charter flights, more than six per day and for the whole year more than 1,7 million domestic tourists arrived in the state of Rio Grande do Norte. In 2002, the state of Rio Grande do Norte (Natal is the state capital) received 147.000 foreign tourists. In 2005 this number was 344.000, an increase of 134%. For the same time period, the increase of foreign tourism in Brazil was 48%, which clearly shows that Natal is the area leading the boom in tourism. The property market in Natal-Brazil Established real estate markets tend to show a slow yet stable growth trend, however capital growth is limited due to a higher initial valuation. Because of this, many professional international property investors are expanding their geographical horizons and expressing increased interest for more exotic emerging real estate products that offer potential for higher capital growth. Emerging markets offer a potentially high capital growth but comes with an associated higher risk. Emerging vs Established Real Estate As with all emerging markets, the earlier you invest, the greater your profit potential. Defining moments and timing are always the catalyst for any real estate opportunity and when investing in an emerging market, timing is of even greater importance. If one picks the right time to invest in an emerging market, there can be significant capital growth. Pick the wrong time, however, and you may be taking on all the risk in return for little of the reward. As an example of “wrong timing” would be to buy in an area that is not receiving investments nor is tourism increasing. Prices might be very low, but on the other hand the risk is very big and potential gains might never materialize or it might take a very long time. A good example of this would parts of Africa. Another example of “wrong timing” would be to invest in an area where prices are flattening out and the market will slowly turn into a more established market. An example of “good timing” would be to buy in an area where tourism has been growing for some time but the property market is still in its very early stages. For professional property investors who wants to maximize capital growth while minimizing risk, this is the best time to invest since property prices are extremely low in comparison to what they are expected to be and at the same time there are strong signs that the area will become even more popular. The property market in Natal is now in that stage and offers investors an unique chance to get early in and benefit from several years of growth. The property market in Natal is in its infancy stage. The coastline around Natal is development free and the last years most of the land has been sold to developers and is now ready to be built upon. Most of the infrastructure has yet to come into place. As such, prices are still extremely low. Once the developments start taking place and more infrastructure comes in, prices are expected to rise rapidly. The property market is tipped to grow at a phenomenal rate as international tourism is growing fast while at the same time the huge Brazilian domestic economy is fast improving. In the next five years, investments in new hotels, golf courses, resorts and condos should exceed R$ 4 billion (about US$ 1.8 billion) on the coastline of Natal, the equivalent to 8% of all foreigner investments that the entire Brazilian economy received last year. The area is set to become one of the most popular tropical destinations for Europeans, and recently the Americans have opened their eyes for this area as well. Due to the booming tourism and enormous potential for further growth, the government has decided to build a new airport in Natal which will be the biggest airport in South America (will be 8th biggest in the world) and is due to be ready by June 2009. This will further confirm Natal´s position as the number 1 tourist location in Brazil. In addition, a large bridge is being built for making quick and easy to access from the centre of Natal to the beaches on the Northern Coast. The coastline around Natal bares many similarities to how the Spanish Costa del Sol was 30 years ago. Once charter tourists started arriving in Spain and became aware of the lifestyle the area offered, the area started to change and consequently the price level as well. Today Costa del Sol is the leading tourist destination in Europe and the general price level reflects this as well. It stands to reason that buying early – at a time when the property market is still in its infancy and prices are as cheap as they will ever be – promises to yield the greatest possible capital growth. The property market in Natal is still in the very early stage, and that is exactly what makes it so profitable for investors who get early in on the act. Experienced overseas property investors know that the opening of a new airport is a sure-fire sign of success. It has a two-fold effect – it helps to handle the existing demand from people coming in and, of greater significance, it also has a trigger effect to bring more people into the area. The already existing international airport in Natal and the future airport which will be the biggest airport in South America and eight biggest in the world, are good signs of future success of the area. Investors in the Northeast of Brazil can acquire beautiful properties in stunning surroundings, at prices simply unobtainable in most other destinations. For investors buying for a pure investment, as well as for those who want to buy a dream property in a stunning location for an extremely attractive price, Natal offers an excellent opportunity to buy at extremely low prices that will never be seen again. Your Questions Answered
Investing in real estate in Brazil is as safe and easy as in any modern country like the USA or Europe. There are no restrictions for foreigners buying property and ownership is solid and secure; you own 100 % of land and property. All property sales are titled and foreign investors receive the same investment and possession rights as Brazilians.
For a foreign investor to buy real estate in Brazil the only requirement is that they have a CPF number - which is like a social security number. The number can be obtained within a couple of days (by a local Brazilian lawyer) and is a legal requirement, as it enables the investor to be uniquely identified for taxation and title purposes. The lawyer will assist you in obtaining this and the whole process can be done without visiting the country, providing that power of attorney is given to the lawyer. The Brazilian government has sophisticated and well developed real estate laws which protect the property owner whether they are a foreign or local owner and legal assistance should be sought for the entire purchase process to ensure the investor’s rights are properly looked after. Next, a sales contract is drawn up which details the full conditions of the sale and also acts as a receipt for the deposit paid. Assuming the purchaser already has the CPF number and notarized copies of their passport etc., the sales contract can be signed either in person by the buyer or by the lawyer acting for the purchaser if they have been given power of attorney. The final title transfers can take a couple of weeks to be recorded. Do I need a lawyer? We recommend that you use a lawyer. We will introduce you to a lawyer based in Natal. It is important that the lawyer is local, since the laws differ between the different municipalities. The lawyer we recommend, has a very good reputation locally and represent many of the big local companies.
Contact your local agent and transfer the reservation fee of 1000€ per property reserved.
What purchasing costs can I expect? You can expect to pay approx. 7-9% in purchasing expenses as follows: • ITIV (similar to VAT): approx. 3,5% • Title Deed(cost for the Notary office) : approx. 1,25% • Registration of the deeds: 0,75% • Legal fees: approx. 2% If you add up these costs, you’ll come close to 7%. The reason we mention 7-9% is that in Brazil an additional tax is charged for federal land (this tax is finally calculated on completion).
We estimate a monthly community fee between 50-100 euros depending on the size of the property. We have arrived at this number by researching other similar developments in Brazil and this number ought to be very close to the actual number. The annual real estate tax is 0,6%, but this tax is based on a value far inferior to the value of the property, i.e. the tax is minimal.
Income earned from property in Brazil is taxable whether the investor is resident or non-resident in Brazil. Non-residents are usually subject to a capital gains tax rate of 15% on any gains they make on properties in Brazil but both these taxation facts are subject to alteration depending on any double taxation treaties in place between Brazil and the investor’s country of residence.
The project has a bank guarantee in place (Banco de Rio de Janeiro), which means any money paid is fully insured and it is guaranteed by the bank that the construction will be finished. This bank guarantee eliminates any financial risk to the investor.
Can I get a mortgage on a Brazilian property? Currently foreigners can not get a Brazilian mortgage. If needed, it is better to organize finance from one’s home country.
Natal is one the fastest growing “long haul” holiday destination in the world. The area has a wide market appeal and is already attracting tourists from Spain, Portugal, Italy, France, Holland, Sweden, Norway, Denmark, Finland, Germany, USA, Japan, Switzerland, England (Thomson started January 2006), Argentina & recently Eastern European countries and last but not least, the large domestic tourism market of 180 million consumers. The rental market is almost all year round and with the massive investments in resorts and golf courses on the coastline of Natal (10 golf courses within 30 minutes of Maracajaú, one right behind the project) the quality of the tourism offer will greatly improve, and as a consequence the rental market (along with increased rental prices) will grow rapidly. The first project that was completed in Maracajaú, is already working with tour operators and generating annual rental returns around 10%. Due to the extremely affordable property prices today, the potential for high rental yields are very good in the long term. The opening of the new airport in June 2009 with an estimated 5 million tourists per year, with the project reachable in 25 minutes, gives us further confidence in the potential for high future rental incomes.
One of the urban myths that surround Brazil is the question of safety and security. In fact, Brazil is no more dangerous than the main cities in Europe or North America. Most of the bad press about violence in Brazil, relates to the gangs operating in the slums in Rio and Sao Paulo, which are both several hours away by plane. Even in these mega cities, most of the crime is between the gangs and crime against tourists is extremely rare. Being sensible and streetwise is the key to trouble free and enjoyable stay anywhere in the world, including Brazil. The northeast is well known for being a very safe and relaxed area and is 4 hours by plane from São Paulo. In addition, Natal is officially considered the safest state capital in Brazil and in Maracajaú, you find the crime rate drops to virtually zero in most parts. .
Brazilians are further known to be very friendly people and it is extremely rare to see aggressive behavior from the Brazilians. In fact, what you will see more than anywhere else in the world is a lot of smiling and dancing!!
Since Natal is only 5 degrees from the equator, the seasonal variations are very small. Most of the year the day temperature is around 30 degrees and the night temperature rarely falls below 24 degrees. The annual average temperature is approx 27 degrees (includes day & night temperatures). In Natal, April to June is considered “rainy season” and during this period it rains intensely for a few hours after which the sun comes out again. Even during this time, the temperature never drops below 24 degrees. The rest of the year is very sunny and the climate is dry and there is always a refreshing tropical breeze from the sea which makes the temperature feel even more pleasant. The sea water temperature is equally warm and is approx. 26 degrees all year. Further, Brazil does not suffer from any tropical storms, hurricanes or earthquakes. No wonder Brazilians say that the country was created by God!!!
A few examples: • Dinner for two in a good restaurant: approx. 8 euros • A beer (600 ml): 75 cents • Caipirinha (the famous Brazilian cocktail with lime, cachaça &crushed ice: 1 Euro • Chicken & prawn skewer on the beach: 40 cents
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