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The Country of the Future

October 5, 2010Article by Ray Withers

It’s always good when the cynics are proved wrong. In the early 1990s, when I was studying Latin America, there was a joke circulating that ‘Brazil is the country of the future and always will be’. Many of the jokers were Americans, but now it could be said that the joke is on them. For last weekend’s presidential election in Brazil was fought between three rational, intelligent candidates: one man and two women, one moderate conservative and two centre-left progressives. All three could be counted on to act reasonably and govern their large and complex country with wisdom. There are no flaky ‘Tea Parties’ in Brazil. And in the politics of this highly aspirational country, it is a positive advantage to be well-educated and cultured.

In other words, Brazil is on the rise, whilst the US and much of Europe face economic and political uncertainty. Meanwhile, Brazil’s future has arrived – this year it is set for 7.5% growth. This is why the victory of a 62 year old former Marxist guerrilla, Dilma Rouseff, is regarded as a reassuring outcome rather than something to be dreaded. Ms Rouseff, who survived torture without cracking under the military regime of the early 1970s, is a woman of proven strength and courage. She will continue the broadly social democratic, pro-growth policies pursued by her predecessor, Lula (Luis Ignacio da Silva), referred to jokingly by President Obama as O Cara (‘The Man’) and more seriously as ‘the most popular politician in the world’.

At his height, Lula commanded more than 80% approval ratings. Along with a generation of centre-left politicians in this part of South America (the Kirchners in Argentina, Michele Bachelet in Chile, Vazquez and Mujica in Uruguay), Lula has shown that economic progress is fully compatible with pursuing social justice and greater equality. Through the recent experience of this region, we may relearn that helping to improve the lives and life chances of the poorest citizens is good for the economy.

However Ms Rouseff has not won the vote of confidence she expected – and occasionally appeared almost to take for granted. She has fallen 3.6% short of the 50% she needed to command a majority and so will be facing a second round against her conservative opponent, Jose Serra. The main reason for this political hiccup is unprecedented support for a third candidate, the Greens’ Marina Silva. Ms Silva is a former Environment Minister with Lula’s (and Rouseff’s) Workers’ Party (PT). Coming from Amazonia, she knew the urgency of the environmental crisis better than her urban colleagues and resigned because they put a mechanistic philosophy of ‘development’ before larger ecological concerns. Marina Silva received 19% of the popular vote.

Dilma Rouseff’s technocratic approach makes her often appear as an urban developmentalist par excellence. Voters for Ms Silva are questioning some aspects of the country’s present path, to which Ms Rouseff made a powerful contribution. For them, there should be a trade off between economic development and environmental conservation, just as there has been between capitalism and social justice. The Green candidate also embodies the aspirations of many voters: a former rubber-tapper, she made it to university through intelligence and sheer will-power. According to Andre Pereira Cesar, a political analyst for the CAC consultancy, Ms Silva’s votes will represent ‘pure gold’ the second round. She ‘holds all the cards and could force the insertion of a new [environmentalist] agenda into Brazilian politics’. The Daily Telegraph (4th October 2010) reports that many of Ms Silva’s 20 million supporters could vote for the centre-right Mr Serra, who would not previously have been a natural ally.

Whatever the outcome, this election will produce an interesting blend of continuity and change, the same broad policy focus, with a bit of conservationist – or maybe conservative – fine tuning. But we can only envy the Brazilians for the calibre of their candidates for high office and admire their subtlety and sophistication as voters.

What are the implications of all this for the international property market? During Lula’s term of office, the whole of Brazil has grown in confidence and once neglected regions such as the North-East have come into their own. Natal, Cidade do Sol (City of the Sun) is where two of Property Frontiers’ most successful ventures are located: Edificio Dr Geraldo Furtado and Natal Ocean Club (see our www.propertyfrontiers.com for details). Housing in the Brazilian market is massively under-supplied with and estimated 8 million new homes required.

Since 2002, when Lula first came to power, more than 20 million people have moved into the middle class and mortgage finance (in contrast to North America and Europe) is becoming rapidly more available. Many of the previously notorious favelas or slum areas are evolving into residential districts where middle-class ambitions and values prevail. The Brazilian government has injected 34 billion Reais (USD 15.1 billion) into the construction of residential property around the country. The ‘My House My Life’ plan was launched in Natal on 4th May 2009. This is a good place to choose, as it is Brazil’s gateway to North America, West Africa and Europe and an area that has made huge material strides forward over the past ten years.

Marina Silva’s emergence signals a shift towards green concerns, whether Rouseff or Serra wins the second round. A superficial analysis would see this as detrimental to the property market. Isn’t property ultimately about building, more than conservation, especially in a ‘developing’ economy like Brazil? Yet by any fair measure, Brazil already is a highly ‘developed’ economy – it is one of the rising economic powers of the twenty-first century. From this it follows that a growing number of Brazilians are thinking more deeply about what development should mean and involve – and might want to avoid some of our mistakes!

In the property-owning democracy that Brazil is becoming, conservation is a natural impulse. Environmental awareness is good for property ownership and the market, which is not about indiscriminate building, but achieving a balance between quantity and quality. Brazil’s social market has been good for property ownership and investment. It has proved that scorched-earth economics is not required to achieve stability and growth. And nor are scorched-earth development policies. The concerns of Marina Silva’s voters should be those of property investors, too.

Written by: Aidan Rankin

Author

Ray Withers

Ray has over 17 years’ experience in the international property market and bought his own first international property investment back in 2002. Aside from running Property Frontiers, Ray has been involved in residential, hotel, student and commercial property investment and development in both the UK and overseas and co-wrote "Where to Buy Property Abroad - An Investor's Guide". As Founder and Trustee of the Frontiers Foundation, Ray is directly involved with many of its projects to ensure they have a direct and tangible impact in individual communities across the globe. He is passionate about property, travelling, scouting out new opportunities and finding time to spend with his young family.
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