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Brazil Is Betting Civil Construction Will Get 9% Boost, in 2010, Well Above 5% GDP

Tourist project in Santa Catarina One of the Brazilian sectors to be in the center of attention in 2010 is civil construction. According to forecasts by the Getúlio Vargas Foundation (FGV), the sector Gross Domestic Product (GDP) should grow 8.8% this year, whereas the estimate of the Central Bank for growth of the GDP is around 5%.

Expansion of real estate credit, greater investment and the housing deficit in the country should boost the growth.

“In 2010, foreign direct investment should be very favorable to these factors,” said Luis Afonso Lima, president of the Brazilian Society of Studies on Transnational Corporations and Economic Globalization (Sobeet).

The forecast is for foreign investment to reach US$ 40 billion in 2010, against US$ 25 billion this year. “The building sector should receive a good share of this investment,” added Lima.

From January to October 2009, the building sector received US$ 1.2 billion in foreign investment, which represented 5.4% of the total flowing into the country. The most representative sector was that of high-rises, with investment of US$ 608 million.

In the second place came real estate activities, including purchases of real estate agencies by foreigners, as took place with construction company Abyara in early 2009, purchased by a Spanish businessman. The sector received investment of US$ 455 million.

Another two activities that received foreign investment within the building sector were infrastructure works, with US$ 106 million, and engineering and architecture services, with US$ 49 million. According to Lima, the main investors are groups from the United States and Europe.

“The aversion to investment in more advanced countries, like the United States and European nations, the expansion of real-estate credit and the housing deficit make Brazil a gigantic attraction to the sector,” said the president at Sobeet. The last FGV estimate points towards a country with a housing deficit of 5.5 million houses.

A concrete example that Brazil is already generating investor interest in the sector, including that by Arabs, is the case of housing and tourist project Termas de Tabuleiro, in Santo Amaro da Imperatriz, close to Florianópolis, the capital of Santa Catarina.

The resort, which belongs to company Baden Baden Turismo, from Santa Catarina, is the fruit of a partnership with an investor from Kuwait, and investment has already reached 90 million Brazilian reais (US$ 52 million).

According to the owner of the Brazilian company, Bassan Giorge Necola Hanna, the Arabs are showing great interest in the building sector in Brazil. A group of Saudi investors was recently in Santa Catarina to check the possible investment opportunities and showed interest in the tourism and infrastructure areas. According to Hanna, the Saudis plan to invest around US$ 2 billion in Brazil. In January, the group has meetings scheduled in the state.

Early this year, Brazil also received a group of representatives of the Jumeirah Group, the largest hotel chain in Dubai, in the United Arab Emirates. The group has not yet announced investment in the country, but is eyeing the Northeast.

Other factors also boosting foreign investment in the country are the 2014 World Cup and the 2016 Olympics. According to figures discloses by the Ministry of Tourism, around 600,000 foreigners should visit the country during the 30 days of the Cup. With the Olympics, the government estimates growth of 10% to 15% in the volume of tourists.

A study ordered by the Ministry of Sports shows that the Olympics should bring to the economy three times what is invested. This multiplying effect is due to forecasted public and private investment of 28.8 billion reais (US$ 16.6 billion).

According to the president at the Sinduscon-SP, Sergio Watanabe, in a press statement disclosed by the organization, the growth in the building sector in 2010 should be boosted by the greater public and private investment.

Total investment in the Brazilian economy is expected to reach around 20% of GDP. According to Watanabe, in the building sector alone, real-estate investment should rise from 170 billion reais (US$ 98 billion) in 2009 to 202 billion reais (US$ 116 billion) in 2010.

Among this investment is 34 billion reais (US$ 20 billion) by the Federal Government for the construction of one million houses. The construction of the housing units is part of program “Minha Casa, Minha Vida” (My House, My Life), established to reduce the housing deficit in Brazil. Families earning up to 10 minimum wages (equivalent to 4,650 reais or US$ 2,700) will have the right to financing.

With this forecasted boom in the building sector, Camargo Corrêa building group, for example, should invest funds in the purchase of plots of land for the development of future housing units, mainly in the low income and economy sectors, “where the demand is explosive, based on a backbone of favorable social and macro economical conditions due to the My House, My Life program,” informed the company by e-mail. In all, the release of approximately 11,000 units is forecasted in several projects.

According to the company, in 2009, 3,045 housing units were released, resulting in sales of 551 million reais (US$ 317 million). For 2010, apart from low-income housing, the group plans to invest in luxury commercial and residential enterprises.

Civil construction is the sector with the greatest expectation for job generation in Brazil in the first quarter of 2010. This statement is included in the Employment Expectation Research by Manpower, a human resources company.

According to the research, Brazil is the most optimistic American country regarding greater job generation. In civil construction, the net estimated job generation rose from 7% in the last quarter of 2009 to 46% in the first quarter of 2010.

According to the minister of Labor and Employment, Carlos Lupi, the service and civil construction sectors should be mostly responsible for job generation next year. The World Cup and the Olympics, according to the minister, are going to result in these sectors having great expansion.

In November 2009, civil construction generated 17,800 new work posts. In the accumulated result for the year, the sector generated over 228,000 new work posts. According to a study by the Brazilian Association of the Construction Material Industry (Abramat), elaborated by FGV, the building sector should hire another 180,000 workers in 2010, which should represent expansion of 8% in the offer of direct jobs.

With this boom in the sector and the expansion of labor, the challenge is now not to allow a lack of qualified employees to accompany the rhythm of construction.

Anba

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