The tourist town of Fortaleza, Brazil is set to receive billions in infrastructure improvements as it prepares to host the World Cup in 2014. Fortaleza, which is already Brazil’s largest domestic tourism destination, looks to expand their tourism market even further. For more on this, see the following article from Pathfinder International.
Last year Fortaleza was Brazil’s #1 domestic tourism destination. It hosted 3m Brazilian tourists and 250,000 foreign tourists. In fact, it has been #1 for three out of the last four years. There is a hotel and short-term rental shortage. There is limited developable land remaining in the area these visitors want to stay in. This is where Brazil’s wealthy come to relax on the beach. This is where Brazil’s new middle class want to come as soon as they can afford to. Every day that passes more can afford to come. Brazil is now a middle class country.
This, combined with the momentum event of foreign investment, would be enough for Fortaleza to make my list. But there are two other major driving forces that meant it had to go to the top of the list:
The World Cup Effect
The big buzz in Fortaleza (and surrounding areas) is the huge investment in tourism and infrastructure. The government is spending 9.8 billion reais ($5.62 billion) in Fortaleza in the lead up to the 2014 soccer world cup. 63.3% of this spend will be on infrastructure projects. In June this year, Fortaleza’s governor released a list of projects that will be delivered for the 2014 games.
850 million reais will be spent on tourism projects—gentrification of urban areas and installing attractions like the state aquarium. And big amounts will also go toward things you’d expect—improved internet access, better gadgets for the police, new equipment for the hospitals, and so on.
Transport infrastructure with a 6 billion reais spend is the big winner. The government is committed to delivering quality projects that will encourage and facilitate the economic development of the region.
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The Fortaleza area is going to see a major upgrade in road (there will be a new ring road), rail (Fortaleza is getting a metro system), bridge, port, and airport infrastructure. This will make certain areas more accessible and desirable. This will drive real estate prices in these areas higher.
Many of the projects on the governor’s list could create an opportunity for profit. Here are a few that have caught my eye:
- The south line of the metro will cost 1.8 billion reais. This will link downtown with middle-class areas and outlying industrial areas.
- 450 million reais is to be invested in the stadium. This area will also benefit from improved transport infrastructure.
- Fortim (to the east of Fortaleza) has been identified as an area to host visiting teams’ training camps. The government is already negotiating to host Spain. This project will involve a major upgrade in tourism infrastructure in addition to huge marketing exposure for Fortim.
- Road access is on its way to the village of Praia Bela from Aquiraz. This is a relatively small project (10.3 million reais) but will have a huge impact on Praia Bela. This area will also benefit from the completions of the bridge and new road from Praia du Futuro to the Beach Park area.
- Further funds have been allocated to upgrading the boardwalk area. And to the east of the boardwalk, the Port of Mucuripe is getting a 120 million reais passenger terminal.
- 9.7 million reais has been allocated to complete the bridge over the Coco River. Another 62 million has been allocated to link this bridge with Fortaleza’s ring road. This project will have a big impact on Praia du Futuro and the area that’s going to open up on the other side of the bridge.
My House My Life
While people from southern Brazil want to visit Fortaleza on vacation, Fortaleza’s new middle class want to move into a shiny new condo or house. They will want to be near infrastructure that will bring them to work and play.
There’s a government program called “Minha Casa, Minha Vida”. This translates to My House, My Life. This program has the mandate to make home ownership affordable to Brazil’s lower and middle classes. The My House, My Life program has 60 billion reais ($34.5 billion) in the kitty.
The program operates through a system of subsidies with Caixa Economica Federal, (Brazil’s government-owned savings and mortgage bank) at the heart.
Developers of qualifying projects receive a subsidy and a tax break. In return for this supply side incentive, they agree to offer units for sale at an agreed and competitive rate.
The government subsidy varies according to the applicant’s income.
Earn up to three times the minimum wage and you can own a home worth up to 50,000 reais, by making payments equal to just 10% of your income. The maximum price depends on where you live. In Rio and Sao Paulo, for example, it’s 130,000 reais; in cities with more than 500,000 inhabitants (like Fortaleza), it’s 100,000 reais, and the cap is 80,000 reais in smaller cities.
This is the bracket where I expect to see the most activity, growth and further upward mobility.
This article has been republished from Pathfinder International. You can also view this article from Pathfinder International, an international real estate analysis site.