Special Reprint of Three recent exame covers stories on the brazilian economy

It is certain that the real estate market is under expansion throughout Brazil, responding to the impetus of the currency's stabilization, followed by the economic growth and increase  of credit to the sector. Rio, however, has unique perspective of development. The growth of the oil and gas sector, due to the discovery of large fields in the pre-salt layer, and the necessary improvements to host the World Cup in 2014 and the Olympics in 2016 should greatly increase the volume of business in the state, especially in the capital. These expectations are based on firm plans of investments that have hardly started and should extend for several years. In 2011, the budget of the city government to prepare the city for the sport calendar totals 2.6 billion reais, to be invested in the improvement of various sectors of infrastructure. Among the works scheduled is the expansion of the subway line, which will reach Barra da Tijuca, region of the west zone still rich in lands for new constructions, urbanization of slums, revitalization of the port area and expansion of the city’s sanitation system.
The improvement, or arrival, of infrastructure beyond the south zone is a powerful element for real estate development in Rio, which has peculiarities that help choke the sector. The presence of hills and lagoons naturally limit the areas of real estate exploitation. In the west zone, there is room for growth, but the problem there is the precarious connection with other regions. The mere announcement of duplication in Américas avenue was enough to increase by 50%, in just one week, the price of an undertaking by the construction company Even, located in Recreio dos Bandeirantes, at the end of Barra da Tijuca. “This was a region that suffered rejection from customers because of the distance", says Cláudio Hermolin, director of Even in Rio. The possibility of solving the locomotion bottleneck quickly increased the search for commercial undertakings and high-standard properties in the region. According to Hermolin, several companies from the oil sector contacted Even in search for properties for executives who will be transferred to Rio de Janeiro.
Another region that should be recovered up to the time of the Olympics and is already boosting the real estate sector in the city is Porto Maravilha. The total area to be revitalized has 5 million square meters and covers six districts (Santo Cristo, Gamboa, Saúde, São Cristóvão, Centro and Cidade Nova), which had remained practically forgotten by the government and, consequently, by incorporators in recent decades. Among the projects, there is a subway station (inaugurated in November), re-urbanization of Morro da Providência and construction of the new headquarters of the Central Bank. Now, the companies setting up in the region will enjoy the tax benefits. Tishman Speyer, owner of the commercial buildings Rockefeller Center and Chrysler Building, in New York, recently confirmed the construction of a corporate tower that will consume 200 million reais in investments. The buoyancy of the commercial sector is also revealed by the number of malls designed: nine will be inaugurated in the state between 2010 and 2012, against five in the period from 2005 to 2009. The sum of investments in the new ventures is estimated at 2 billion reais.

PEACE AND VALUE
The violence – generated mainly by the dominion of Rio's slums by criminal factions, was also a factor that limited the construction of new undertakings in the city, in addition to felling the price of real estate in the surroundings. Who in his right mind would buy a property in the vicinity of an area under threat of constant gunshots? The successful installation, at least to date, of the Police Pacification Units (UPPs) in 13 slum complexes have given new impetus to the sector. The state government program starts with the police occupying the communities, with the aim of expelling the drug lords and collecting arms. In the areas where the UPPs were installed, there was obviously no elimination of criminality. However, they are free of conflicts between rival factions, episodes that reproduced war scenarios in the city. “The model of the UPPs is helping recover the interest in districts that had lost great value, like Botafogo and Tijuca", says Alexandre Fonseca, director of Brasil Brokers, group that controls 22 real estate brokerage firms and with operations in 16 states of the country. In Botafogo, after pacification of Morro Santa Marta, in the end of 2008, the price of the square meter rose by 65%. A survey conducted by Apsa, condominium and real estate service manager, revealed that only 16% of properties in Tijuca were rented 30 days before the five UPPs were set up in the region. Today, they are 40%.
The rebirth and the perspectives of Rio's market resulted in companies that were focused on the São Paulo market to redefine their strategies of operation in Rio de Janeiro. According to Rafael Cardoso, regional director of the incorporator Rossi, Rio is not just undergoing a movement of valuation but also a very strong increase in the volume of business. In relation to last year, Rossi recorded an increase of 50% in the number of launchings in the state. A few days ago, it was the turn of Lopes, biggest real estate brokerage firm headquartered in the São Paulo capital, to take over control of Patrimóvel, leader in sales in Rio, at the cost of 142 million reais. For such companies, the risk of a real estate bubble in the city is a remote possibility. “Of course, the valuation will not maintain the current pace indefinitely. This market, however, has remained repressed for decades. Our banks are still very conservative and do not finance values that exceed 30% of people's incomes", says André Rocha, analyst from Bradesco. “When there are signs that the growth will be supported, people and companies invest", says Ramon Vasquez, president of Mills, engineering services company. Mills raised 685 million reais in a stock bid in April. The sign of the market is clear – there is a lot of trust in the Rio market.