I’m in Brazil with a group of readers. At least one has figured out what he thinks is the best investment idea of the trip so far.
In our meetings, we met an economist who got everyone’s attention when he started talking about Brazilian financial products and how he’s averaged 25% a year in the last few years without doing any work (I’m suspicious). Asked how to get into these products, he said they are open only to Brazilian residents. Initially, he made his investments through his wife, who is Brazilian.
This led the reader to say, “I’m going to invest in a Brazilian wife.”
While that may not be a bad investment for some, the opportunities in Brazilian agriculture are what inspire our trip.
We started in Campo Grande, which is in an interior state called Mato Grosso do Sul. It is a big producer of soybeans, sugar and more. Seasonally, we’re at the end of what passes for winter in these parts. Yet temperatures hit 100 degrees while we were out and about. It was dry and dusty with strong winds.
Water comes from nearby rivers and a huge underwater aquifer. There is also a healthy amount of rain for about half of the year. The land is also flat. Professionally managed, it becomes highly productive farmland.
Anyway, we endured the heat and some long bus rides to see farmland properties in the cerrado, the vast grasslands of Brazil and the soil bank of the world.
This is the land that will help feed the growing global population. Brazil is a great beneficiary of that need and has become an agricultural power. (One that’s fuelling more than a few small-cap stocks right now) It also has a lot of room to go, as it has more usable arable land than any other country in the world.
The New Middle Class of Brazil
This really gets to the heart of change in Brazil. There is a rapidly expanding middle class here. Over the last six years, Brazil’s added some 30 million middle-class consumers. They are only starting to enjoy products we take for granted, like yogurt. “Brazilians are eating yogurt for the first time,” Renato Roscoe told us.
Renato is a soil expert and former Embrapa hand. (The latter is a government agribusiness research institute). He holds a Ph.D. in soil science and knows these lands well. He gave our group a good presentation before we embarked for our farmland tours. In that presentation, he also made some interesting remarks on the politics of Brazil.
“We’re happy because we are getting richer,” Renato said. That happiness is reflected in voter patterns. Whereas the incumbents are in trouble in the U.S., in Brazil, they enjoy widespread support. Of the 26 states that will elect governors this year, 18 will re-elect their existing governors or vice-governors by wide margins. And Dilma Rousseff is way ahead nationally in part because she is seen as continuing the policies of President Lula.
Not only is the middle class expanding, but Brazil is also minting millionaires. Only nine countries have more millionaires than Brazil, according to one study cited by Larry Rohter in his new book Brazil on the Rise. “With about one-sixth the population of India, Brazil has more millionaires than India,” he writes.
Rohter goes on:
“In a matter of a few years, Brazil has seen a new surge in entrepreneurs who have built fortunes from activities as diverse as airlines, cosmetics, slaughterhouses, shoes, toys and computers… This phenomenon, particularly notable in sectors such as agriculture and ranching and oil and mining, was accompanies by a burst of spending on luxury items ranging from jewelry and designer clothing to private airplanes and yachts.”
Given that context, you can understand some of the success companies are having in Brazil. Whirlpool is one example. According to the company, one in six Brazilians already has at least one of its appliances. In agriculture, AGCO — a maker of farm equipment — saw sales in South America rise 71% in its second quarter, thanks mostly to Brazilian farmers.
Then there are the Brazilian companies. Vale, the giant mining firm, is looking to become one of the world’s largest fertilizer companies. It wants to boost potash output tenfold by 2017 and triple its output of phosphates. It will do this through acquisitions and investments in its own mines. Clearly, it sees the opportunity to serve farmers in its own backyard.
I’m looking at other opportunities to tap into Brazil’s growing markets and have much more to share with you. But for now, I have to sign off. The giant metropolis of Sao Paulo is up next…
Sincerely,
Chris Mayer
Penny Sleuth
Profit From Brazil’s New Middle Class Consumers was originally featured in the Penny Sleuth.
In our meetings, we met an economist who got everyone’s attention when he started talking about Brazilian financial products and how he’s averaged 25% a year in the last few years without doing any work (I’m suspicious). Asked how to get into these products, he said they are open only to Brazilian residents. Initially, he made his investments through his wife, who is Brazilian.
This led the reader to say, “I’m going to invest in a Brazilian wife.”
While that may not be a bad investment for some, the opportunities in Brazilian agriculture are what inspire our trip.
We started in Campo Grande, which is in an interior state called Mato Grosso do Sul. It is a big producer of soybeans, sugar and more. Seasonally, we’re at the end of what passes for winter in these parts. Yet temperatures hit 100 degrees while we were out and about. It was dry and dusty with strong winds.
Water comes from nearby rivers and a huge underwater aquifer. There is also a healthy amount of rain for about half of the year. The land is also flat. Professionally managed, it becomes highly productive farmland.
Anyway, we endured the heat and some long bus rides to see farmland properties in the cerrado, the vast grasslands of Brazil and the soil bank of the world.
This is the land that will help feed the growing global population. Brazil is a great beneficiary of that need and has become an agricultural power. (One that’s fuelling more than a few small-cap stocks right now) It also has a lot of room to go, as it has more usable arable land than any other country in the world.
The New Middle Class of Brazil
This really gets to the heart of change in Brazil. There is a rapidly expanding middle class here. Over the last six years, Brazil’s added some 30 million middle-class consumers. They are only starting to enjoy products we take for granted, like yogurt. “Brazilians are eating yogurt for the first time,” Renato Roscoe told us.
Renato is a soil expert and former Embrapa hand. (The latter is a government agribusiness research institute). He holds a Ph.D. in soil science and knows these lands well. He gave our group a good presentation before we embarked for our farmland tours. In that presentation, he also made some interesting remarks on the politics of Brazil.
“We’re happy because we are getting richer,” Renato said. That happiness is reflected in voter patterns. Whereas the incumbents are in trouble in the U.S., in Brazil, they enjoy widespread support. Of the 26 states that will elect governors this year, 18 will re-elect their existing governors or vice-governors by wide margins. And Dilma Rousseff is way ahead nationally in part because she is seen as continuing the policies of President Lula.
Not only is the middle class expanding, but Brazil is also minting millionaires. Only nine countries have more millionaires than Brazil, according to one study cited by Larry Rohter in his new book Brazil on the Rise. “With about one-sixth the population of India, Brazil has more millionaires than India,” he writes.
Rohter goes on:
“In a matter of a few years, Brazil has seen a new surge in entrepreneurs who have built fortunes from activities as diverse as airlines, cosmetics, slaughterhouses, shoes, toys and computers… This phenomenon, particularly notable in sectors such as agriculture and ranching and oil and mining, was accompanies by a burst of spending on luxury items ranging from jewelry and designer clothing to private airplanes and yachts.”
Given that context, you can understand some of the success companies are having in Brazil. Whirlpool is one example. According to the company, one in six Brazilians already has at least one of its appliances. In agriculture, AGCO — a maker of farm equipment — saw sales in South America rise 71% in its second quarter, thanks mostly to Brazilian farmers.
Then there are the Brazilian companies. Vale, the giant mining firm, is looking to become one of the world’s largest fertilizer companies. It wants to boost potash output tenfold by 2017 and triple its output of phosphates. It will do this through acquisitions and investments in its own mines. Clearly, it sees the opportunity to serve farmers in its own backyard.
I’m looking at other opportunities to tap into Brazil’s growing markets and have much more to share with you. But for now, I have to sign off. The giant metropolis of Sao Paulo is up next…
Sincerely,
Chris Mayer
Penny Sleuth
Profit From Brazil’s New Middle Class Consumers was originally featured in the Penny Sleuth.
