Sao Paulo, Brazil, is the 10th richest city in the world and its potential for growth is unmatched by any other place on the list. It is energy independent, not involved in any territorial conflict, is politically stable and is self-sufficient in its resources. Perhaps more importantly for investors than all of these things, however, is that residents of Sao Paulo spend like Americans – buying based on short-term gratification and bad on saving. This has created a consumer market like no other and there are many ways in which to capitalize in this new, booming economy. For more on this continue reading the following article from International Living.
São Paulo – what a monster of a city!
This was my first impression when I touched down in Guarulhos International Airport in April. This place makes the likes of L.A., Chicago and Toronto look small.
And, boy, is it buzzing…
São Paulo in Brazil is the 10th richest city in the world (by metropolitan region), ahead of Buenos Aires, Moscow, Hong Kong, Shanghai and Mumbai.
And in just 15 years, PriceWaterhouseCoopers reckons it will be the sixth richest metropolitan region in the world – ahead of Paris, Osaka and Philadelphia.
I was in São Paulo to meet with one of the country’s top investment bankers. My goal was to find out as much as I could about Brazil’s biggest trend: the growth in its consumer economy.
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I’m a big believer in getting as much firsthand experience as possible before investing overseas. Nothing beats good old-fashioned boots on the ground.
You see, most Wall Street analysts lump Brazil in with the other BRIC economies of Russia, India and China. But this glosses over important factors that make Brazil a standout investment destination.
- Brazil is a politically stable economy.
- It is energy independent.
- It has an abundant supply of food and raw materials
- It has no ethnic and territorial conflicts.
- It has a growing social safety net.
- It is making rapid steps toward improved income equality.
The Secret of Brazil’s Shoppers
So what did I learn from my meeting in São Paulo…and the three weeks I spent crisscrossing Brazil?
As soon as you travel there one thing leaps out: Brazil’s consumers are very American in the habits.
They spend to enhance their short-term well being, just like Americans. And they tend not to save for a rainy day like, say, the Chinese.
Brazil is also in a sweet spot in terms of consumer growth, thanks to its young population. The median age here is 29. That’s a lot younger than in advanced economies such as Germany, Japan and Italy – where the median age is 43 – and even much younger than China, which has a median age of 34.
As Illan Goldfajn, chief economist at Brazilian bank Itaú put it, “If the world is looking for savers, Brazil is not much good… But if it’s looking for consumers, then we might be able to help.”
The bottom line: Brazil is the big emerging market that most resembles the United States. And its shoppers are the closest thing in the emerging world to America’s shoppers.
A Sweet Spot for Growth
The big difference between Brazil and the U.S. is that Brazil is in the sweet spot for growth because its consumer-spending boom is still in its infancy.
It hasn’t yet become saturated with credit, like the U.S. And there are still millions of Brazilians on their way to becoming consumers for the first time.
The buying power of the average São Paulo resident, for instance, is still half of the average Londoner or New Yorker.
This means the potential for Brazil’s consumer economy is comparable to that of America’s at the start of its post-World War II boom phase, when increased consumption and a population boom created a virtuous economic cycle that lead to a take-off in stock prices.
This article was republished with permission from International Living.
