Case Study Update: Brazil

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Paul Clarke, Company Director of Invest in Brazil Ltd, talks insightfully about his Brazilian start-up venture. The problems, solutions and successes!

PAUL CLARKE, Company Director of Invest in Brazil Ltd, talks insightfully about his Brazilian start-up venture.

Brazil is one of the most exciting countries in the world. This vast country covers half the continent of South-America. Its landmass is nearly as large as Europe and bigger than the United States without Alaska. Brazil has a fabulous variety in landscapes, climates and people. Thousands of immigrants from all over the world have chosen to live in Brazil, resulting in an exuberant cultural wealth.

Brazil has a lot to offer the traveller, varying from beautiful beaches to the enormous Amazon forest and from big, modern cities to old colonial towns.

In 2001 I set up my first overseas property company selling properties in Spain, Bulgaria was then added in 2005.

By 2006 Invest in Brazil Ltd was formed after a Brazilian friend had said it was worth investigating and doing some research including reading the report by Jim ONeil of Goldman Sachs which predicted Brazil as one of the leaders in emerging markets.

I discovered that Brazil had a substantial improvement in economy, ever increasing levels of tourism, low cost property and land and that the Brazilian government was actively encouraging foreign investment- definitely worth taking a further look.

My initial visit to Brazil was to Rio which is a fantastic city where prices were already increasing.  Despite the warmth of the city, friends and family were worried for my safety there, more than whether the investments were viable.   From my research it appeared that the best place for long term investment property was North East Brazil.

My second and subsequent visits to Brazil were to Natal and Joao Pessoa, the north east coast, where it was evident that the area was underpriced and compared to the south of the country the living costs were also lower.  (Natal is a 3 hour internal flight from Rio, similar to flying from London to Athens)

I contacted local Real estate agents and made several friends whilst enjoying holidays in Brazil and carrying out research before finally investing.

12 months later the first investment was made there through a UK/Brazilian company, the purchase of a piece of land of 400,000m. I was introduced to lawyers and other professionals at this time.

6 months later I realised I had been introduced to a spiders web of wrong doers.  The land was overpriced from what the owner wanted and I was left in a difficult position and with a bitter taste in my mouth.  With pressure from family, I considered giving up and returning to a more manageable business in the UK.

Being a determined and persistent person I decided to keep going and in the midst of these bad people I discovered some decent ones, in particular Sean Trafford who gave me great help in finding a genuine lawyer who is well respected and runs 4 universities in North East Brazil and an accountant friend of this lawyer.  I was also introduced to an Italian developer with over 20 years construction experience who had been living in Brazil for 7 years and was married to a Brazilian lady.

These people had been discussing business working on a fairly large country club resort, similar to a centre parks style resort and were looking for a European partner.

After several months due diligence with the new lawyers a deal was made and Tambaba Country Club Resort was formed.

The launch of the resort was November 2008 to a buoyant Brazil market as the credit crunch and economic slowdown has not affected the Brazilian economy.  Since then a steady stream of sales both from Brazil and the UK have been made.

The resort has attracted the attention of large investment groups who are looking to form a business relationship with us, these negotiations are under way as we speak.

The resort has a GDV when fully completed of around 271Million sterling, an achievement that would not be possible in Europe or other established markets.

Problems

When you say Brazil, some people get the negative image of crime and street children.  This is far from the case especially in North East Brazil and is one of the first hurdles to be overcome when talking to potential investors.

The movement of money into and out of Brazil is very closely regulated and there are very few Foreign exchange companies who deal in Reais.  I have been lucky since Moneycorp who we had dealings with whilst selling Spanish properties have just entered this field.   They have visited our offices and been very helpful in setting up an easy to follow system for our clients to send their money direct and ensure the safety of their funds.

Due to many horror stories of people buying abroad and not having anything to show for their money, we have to ensure our clients feel very secure in their purchase.  One way we have achieved this is create a 2 phase purchase process, selling the plots first and then clients have the option to build their dream villa later.  This means the clients can receive free hold title deeds to their plot of land within a few months of full payment for the plot or within 24 hours if the client visits our offices in Brazil, rather than waiting a few years as is normally the case when buying off plan.

Future

Our end goal is to complete Tambaba Country Club Resort within the timescales set out in the matricula, this is the passport of a Real Estate Property, besides uniquely identifying a property it contains detailed description and historical records of all legal, judicial and financial transactions pertaining to the property and full information, such as description of the property, its precise address and location, past and present owner information, mortgages etc.

We hope to then duplicate the concept in another location on the north east coast of Brazil.

Another area in which we can offer advice and support is in setting up businesses in Brazil from sourcing the buildings to legal and financial advice on the set up and day to day running.  We have knowledge of investment visas, taxation and Brazilian employment law which is worker friendly, including the 13th salary which is equivalent to an additional month's salary paid annually or proportionally to number of months worked in the year.

Whatever the level of investment be it import/export, relocation or company expansion we aim to be the company best able to help implement the clients wishes.

We also aim to assist other investors who wish to invest in Brazil by helping them avoid the pitfalls that we have encountered by offering the very best advice and support.