patrick.net

So far, Rig has been a great winner for me :P While I'm not giving out kisses... lots of thanks are due!

So how would you guys play this one out. I'm eventually looking at getting property in Brazil. Probably for rental purposes right now. Their mortgages are so expensive that prices are kept semi-down. 12% a year keeps + inflation adjusted keeps mortgages down. They're starting to introduce new home buyer packages, which shot pricing way up for any homes within that category. I suspect over the next 10-15 years, things will stabilize and house appreciation will be significant as longer term more affordable mortgages become available to more people. That being said, I have some money in Brazil right now at 6.5% interest. On top of that, the last couple of years have seen 20+% increase in currency value. As stated below, I think the currency is ready to correct within a year or two.

http://www.brazzilmag.com/component/content/article/89-august-2010/12362-brazil-may-offer-tax-cuts-to-encourage-long-term-lending-by-banks.html

This isn't a well written article, but I've read a couple showing debt issues and growth issues that will likely lead to a currency correction. Brazil manufactures most of what it uses via 70% tariffs to protect it's locally produced goods. But with these massive jumps in the currency value, I've started to notice FAR more chinese goods showing up on the shelves. Obviously china is exploring other markets, but the currency had to get to a certain level before they could compete. Now they are. Now Brazilian companies are having a harder time exporting as well. Many products are getting too expensive to export now. So I figure something has to give.

What do you guys think are my best options to protect/invest in this case? For me, I have a couple things going for me. My wife is Brazilian, so we can push through the paper work on buying/investing pretty easily. Father-in-law is banker, we've got at least one real estate agent in the family, and a couple of lawyers in the family. So buying land should be decently easy. Renting out is easy. I rent to someone who has to provider a guarantor, the guarantor has to own 2 pieces of property, it's how they rent down there! Leases are roughly 3 years. If they don't pay, I let the guarantor know. If he doesn't pay me, I simply file a complain and *ALL* of their bank accounts are locked. No more access to their bank accounts, they can't even get a cell phone until this is resolved. It's extremely harsh. Rental units don't include a lot of what we provide. When we rent a place here, we expect a working refrigerator, stove, and perhaps a SINK, but those don't come with places down there. No Sink. wtf.

I can buy land, buy into the brazilian stock market (Maybe buy something solid like petrobras), get a loan at about 12%. I can also transfer down a decent amount of cash to pay off a loan at any time or buy property. End result is to own land down there, with hopefully a couple of rentals.

I'm going to assume the currency is going to go on a slightly wild ride, within 1-5 years. Knowing that, and what I have at my disposal, what tactics could I employee to best maximize a return down there?

If the currency starts tanking, I was thinking I could buy land + get a loan. When it starts to stabilize, shift money from the US down there to pay off the mortgage, hopefully at a far better rate.

I guess I could invest in the stock market down there, buying into something like petrobras, which should negate any currency fluctuations since it's selling product on a world market?

What other tactics might I want to look at?

Oh yeah my 6.5 is compounded every like 3 days. They deposit money into my savings account *all* the time. And it's tax free income down there.

pkennedy says

So how would you guys play this one out. I’m eventually looking at getting property in Brazil. Probably for rental purposes right now. Their mortgages are so expensive that prices are kept semi-down. 12% a year keeps + inflation adjusted keeps mortgages down.

Wow, no wonder there's such horrendous income distribution in Brazil. There's no way for the poor to climb up the social ladder, and there's virtually no way for the rich to fall off a cliff there. The economic system there is clearly rigged to maximize the profits of the cash-rich, and to oppress the poor with high interest rates, and nearly impossible to obtain mortgages for anyone except those with lawyers, bankers, and real estate agents in their family.

The only thing that would make it even better than your serfs(renters) having their cell phones cut off when they don't pay you the rent on time is if they actually still had a debtor's prison. How dare the lower classes become unemployed all of a sudden and choose to feed their children instead of honoring their 3 year indentured servant contract(lease) with their master (landlord). Hell no, cut off their cell phone immediately!!!

The serfs on the left pay rent to those on the right:

Uh no one is going in there to collect rent, to buy or rent anything out. I'm talking about the other side, that is where I would be buying, and renting out. That would be the side with the individual pools.

And the guarantor is the one who gets nailed. He has a minimum of 2 properties and gets everything denied as well. High interest rates are due to inflation, and actually slow the economy down right now.

Social ladder comes from staying in school, and unfortunately that doesn't always happen. They're paying parents to keep their kids in school now. The whole middle class is definitely growing! Florinopolis has an amazing economy, they've taken education seriously and you won't see beggars around. I was fairly surprised, my mother-in-law who is heavily vested in education was explaining all of the programs they've started and the effects they have had on the peoples lives.