Brazil 4 Business

Construction

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The 5th most populous country in the world and with a recent history of increasing people's purchasing power, Brazil is a centre of opportunities in the construction sector. Besides the traditional construction work, there is a much more significant share of infrastructure investments planned in a short horizon. This means that the entire chain of resources involved are heated.

Graphic - Distribution of the housing deficit of 5.8 million families in Brazil   

The market has two distinct community profiles: the first consists of investors who buy property in the plant to resell them after delivery. The second represents families who focus on the use of these enterprises for residing. In Brazil, according to IBGE (Brazilian Institute of Geography and Statistics), there is a housing deficit of 5.8 million homes. Most families without housing, or housing considered inadequate, are concentrated in the South-eastern and North-eastern regions. 

Recent advances in the policies of access to real estate credit in Brazil demonstrate consumer interest in the market. Over the past seven years, the real estate credit has increased by almost 32% per year and much of this growth was conducted from 2009 with the announcement of Minha Casa, Minha Vida (My House, My Life) program from the Federal Government. It grants benefits like low interest rates, decreasing instalment payments and bureaucratic facilitation for family with low levels of income. According to figures from the Federal Government, until early 2014, more than 1.5 million families had been benefited.  

Graphic - Real state credit (R$ bi) INFRASTRUCTURE - Infrastructure-related activities are the most relevant fields in the construction industry. From 2015 to 2018, investments of R$ 500 billion on several fronts are planned. Especially in the transport sector, continuing the wave of investments of the World Cup and providing for the Olympics, the expansion and improvement of airports should persist. Currently, there are 130 airports with regular flights in Brazil.

In the last two years, approximately 5.000 km of roads have been tendered and the winners have committed investments for over R$ 30 billion over the next 30 years. In 2015, old stretches with concessions close to expiring and new locations will be tendered. They are spread over various regions, but they have a clear focus to improve the Brazilian logistics grid for the flow of production of commodities.

In the same direction, the rail network will have a major focus in the coming years, developing new stretches in the Central-West, North and Northeast regions, and ensuring the division of modal logistics for access to major ports, currently focused on the road. The business model is very particular: the winning company of the bid will be required to build and operate the network and in exchange, create the Valec state, which buys the entire transport capacity and distributes it in accordance with pre-negotiated criteria.

For 2015, the first privatizations of the terminals for the ports are planned aiming at modernizing and decentralizing them in the Southeast region. This way, it is expected that the same occurs in another 100 localities.
 
The government has developed a successful alternative to expand sanitation in the country: The Public-Private Partnerships (PPP). With it, a private agent becomes responsible for the construction and operation of public natured services for a certain period of time and is compensated in accordance with pre-signed agreements. There are several specific characteristics of the agreements. Currently, private initiative has 10% share of the sector. In 10 years, it is believed to exceed 30%. PPP’s do not only work in the sanitation sector and can be applied in the expansion of prison vacancies, hospital beds, electricity and others.

 

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