Brazil’s strong economy boosts business
Brazil's swift exit from recession and strong economic growth in recent months has provided it with a strong attraction to international businesses – and as firms release their financial results for the second quarter of 2010, this appears not to have been unfounded.
Despite the possible change of government in the upcoming general election, which will see the hugely popular president Luiz Ignacio Lula de Silva leave power, the Brazilian economy has contributed a significant amount to the bottom line of many companies. And, this is nothing but good news for Brazilian property owners.
International mining company Xstrata reported a 153 per cent increase during the second quarter of 2010. The company, which operates the Araguaia nickel mine project in Brazil, said that demand for commodities in the emerging economies was the main driver of its growth during the three-month period.
Mick Davis, Xstrata Plc chief executive officer, said that there is a "three speed" global recovery taking place, with the European Union sitting at the bottom.
"The US is likely to continue to provide an important base of demand for exports from developing countries and directly for commodities as its economic recovery continues. However, the developing economies, led by China, Brazil and India, are set to continue to provide the main driver of demand growth for our products," he explained.
Supermarket chain Walmart, which owns the Asda brand in the UK, also credited economic growth in Brazil in part for the strong growth witnessed in the international side of its business. Net sales for the company's operations outside the US increased by 11 per cent, which was helped along by "strong contributions from Mexico, Brazil and China".
Foreign telecommunications firms have also been looking to cash in on the growth taking place in the Brazilian economy, which could be good news for Brazilian property owners, AFP reports.
Telefonica recently took control of Brazil's biggest mobile phone operator Vivo, after buying out Portugal Telecom's stake. Portugal Telecom then bought into the 4th largest operator in the country Oi.
Manfred Back, a business administration professor at the University of Industrial Engineering, told the news provider: "This fight between big companies is affecting the market, it's a battle not over selling mobile telephones but over selling Internet packets for telephones and, in the future, television. The market is huge."
Looking at home-grown Brazilian companies, the results also appear to be promising. Brazil Fast Food Corp, which is the second largest restaurant chain in the country, reported that it experienced strong growth during the second quarter.
The company, which operates KFC and Pizza Hut in the country, said it had experienced a 15.1 per cent increase in sales compared with the same period of 2009. There was an increase in both the number of stores Brazil Fast Food Corp owned and the number of franchises operated.
Both the Fifa World Cup in 2014 and the Rio de Janeiro Olympic Games in 2016 are expected to provide a boost to the company, as well as the wider economy.
Brazilian aircraft manufacturer Embraer is also among the companies reporting good results and it recently raised its revenue guidance for 2010 from $5 billion (£3.2 billion) to $5.25 billion.
Growth in the Brazilian economy is expected to remain strong over the rest of year, according to the IPEA economic research institute, which predicts sustainable levels of growth of six per cent overall for 2010. Therefore, Brazilian property owners are likely to find that businesses will continue to announce strong performances in the country in the coming months.
