Emerging Trends in Real Estate 2012 - Urban Land Institute

chapter 6
Emerging Trends in
Latin America
“Brazil looks less like an emerging market;
Mexico struggles with drug violence.”
Led by Brazil, more Latin American countries rapidly
shed vestiges of Third World backwardness and banana
republic dictators, and transform into reliable economic
engines; middle classes expand and property markets score
gains. The investor world takes notice because the region managed
to circumvent most downsides from the global credit crisis;
GDP forecasts predict above-average growth for Latin America,
well ahead of that for the United States and Europe, and many
governments boast relatively healthy fiscal balance sheets from
disciplined monetary policies. Brimming with natural resources
and rich stores of commodities, some countries have become
major Chinese trading partners, feeding the Asian juggernaut’s
manufacturing sector with lucrative export deals. Major cities
like São Paulo, Rio De Janeiro, Mexico City, Buenos Aires, and
Exhibit 6-1
Latin America General Indicators
Unemployment (%) Inflation (%)
Argentina 9.0 10.2
Brazil 6.7 6.3
Chile 7.2 3.6
Colombia 11.5 3.6
Ecuador 7.3 3.5
Mexico 4.5 3.6
Peru 7.5 2.7
Uruguay 6.9 7.2
Venezuela 8.1 29.8
Sources: International Monetary Fund, World Economic Outlook database, April 2011;
Moody’s Economy.com.
Santiago evolve into more dynamic, diversified, and cosmopolitan
global gateways, and many secondary cities remain
ripe for development—especially housing and retail catering to
burgeoning consumer classes. Offshore players must navigate
a host of familiar emerging-market obstacles—heavy-handed
bureaucracies, graft, favoritism for connected local entrepreneurs,
and arcane laws. Brazil remains South America’s
lodestar, understandably concentrating investor attention. Drug
wars temporarily consume Mexico, but Colombia shows signs of
blossoming and Peru may be next.
Brazil Arrives
Just as most developed countries sputter in the global marketplace,
Brazil’s economy “fully emerges,” and its primary
real estate markets rapidly transform from opportunistic to
more core-oriented risk/return profiles. “You need to accept
more pedestrian performance.” A “self-sufficient” nation, Brazil
benefits from a wealth of natural resources and agricultural
commodities and a burgeoning manufacturing base, as well
as internal demand driven by an emerging middle class. “The
potential has been met.” The country is even a net creditor to
the International Monetary Fund. In light of significant benefits,
offshore players downplay acknowledged investment
downsides—corruption favoring locals, “a ton of bureaucratic
red tape,” social stratification issues, and education shortfalls.
Deficient infrastructure also could hamper growth: half the
nation’s roads remain unpaved, including sections of highways
between large cities, and mass transit is limited.
São Paulo and Rio de Janeiro register “insane” property
pricing. “Growth has already been factored” into real estate
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