Credit to Brazil For Investment Grade
Speculative investors in Brazil property should be feeling pleased with the news that Brazil’s credit rating has made the grade and been upgraded to triple-B-minus by the Standards and Poor’s rating service to investment grade. The move believed to be expected by those in the money markets may look fairly irrelevant on the surface but the new rating carries the potential to attract levels of FDI which can cause significant economic change to Brazil’s fortunes and that of its people and property market. The shift up from junk bond status to investment grade will encourage more investors into the Brazilian credit market and allow the government to raise finances on much more competitive terms. With greater economic prosperity comes an improved property market and the potential for capital growth.
The move follows recent changes in the credit rating for countries such as Mexico, Peru and Chile and is the next stage in the dramatic recovery in South America’s regional economic status. The 4th largest continent in the world has until recently, been something of a no-go area for many investors for some time and often viewed as North America’s poorer cousin. An improved credit rating opens new doors and reduces finance costs for the state Government with the side-effect of stimulating the wider economy.
Under world debt market regulations a company based in any country around the world cannot have a debt rating higher than that of the national government. Now that the government credit rating has been raised this opens the door for improved ratings for some of the country’s more profitable companies. This in turn will allow the companies access to new pools of credit and reduce interest charges on existing debt. In practice for property development in Brazil, this is a positive turn of events.
The impact on the Brazilian property market will be two fold with increased economic activity ensuring that demand for residential property in Brazil’s principal cities should continue to grow. The improved credit rating will also allow Brazilian property companies the opportunity to raise finance on better terms for both residential, infrastructure and resort projects, something which will have a material impact upon the overall cost (and sale price) of its properties. Lower costs of building and greater demand in the property market are the Holy Grail of property investment and is sure to be noted by local and overseas investors.
