Brazilians relish a new economic reality

Brazilians relish a new economic reality
With inflation low and the real strong, Brazil is enjoying its finest economic moment in a decade.
BY JACK CHANG
jchang@mcclatchydc.com

RIO DE JANEIRO -- In a fading neighborhood near this city's beachfront, a giant, 893-unit apartment complex still under construction is almost sold out, thanks to cheap financing that has helped hundreds of middle-class Brazilians buy in.
A few blocks away, stores are filled with shoppers snapping up imported televisions and household appliances, with many also buying on credit. Prices for such goods have dropped since the start of the year, thanks to Brazil's strengthening currency, the real.

With inflation low and the real strengthening against the dollar, this may be Brazil's finest economic moment in at least a decade. And people are taking advantage of it.

''Without a doubt, this is a new era for us,'' said Mauricio Costa, who manages two household appliance stores in the Rio de Janeiro area and has seen sales boom. ``Before, only people with a certain amount of wealth could afford to buy here. Now, everybody is coming in.''

According to some economists, Brazil, which is notorious for its booms and busts, has finally turned a corner. They predict a good, long spell of stable growth.

A NEW REALITY

Most Brazilians over the age of 30 can remember when that wasn't the case. The price of bread could double within days, and the local currency was on such a downward spiral that four times since World War II the government dropped three zeros and changed the currency's name.

Yet for more than a year now, Latin America's biggest economy has been on a roll.

Inflation and interest rates have hit record lows, which has spurred businesses to offer affordable credit for the first time in years and fuel a wave of consumer spending.

STOCKS SOARING

Foreign investors are also taking notice as Brazil's Bovespa stock index climbs to all-time highs, and the federal government runs huge primary budget surpluses on the strength of booming exports of iron, soy and other commodities.

Imports also have taken off as the real reaches its strongest levels against the dollar in six years, although some are concerned that the real may be overvalued.

Many Brazilians say they're making long-term economic plans for the first time in years.

Real estate agent Adhemar Costa, who has sold many of the units at the Rio de Janeiro apartment complex, said he remembers the days when hyperinflation, expensive credit and economic turmoil made his job a daily struggle.

With triple-digit interest rates, practically no one could afford financing, which meant people could buy property only by coughing up enormous down payments and paying off the principal within a few years.

DECENT INTEREST RATES

These days, many first-time home buyers are receiving financing of as little as -- by Brazilian standards -- 18 percent annually and paying it off in 20 years, Costa said. Inflation last year dipped to 3.1 percent, the lowest rate in nearly a decade.

''There's been a big change,'' he said. ``These new conditions have opened up the market.''

The Brazilian restaurant chain Spoleto, with 164 branches in Brazil, has taken advantage of cheaper financing to invest more than $3 million in foreign expansion and equipment, including U.S.-made ovens that are now more affordable due to the stronger real.

''We expect these conditions to continue, and we're investing for the long term,'' said Spoleto's financial director, Paulo Correa.

Others, however, aren't as optimistic and point out that Brazil still has a long way to go to compete globally.

Brazilians still pay the highest tax rate among developing countries, about 40 percent of salaries, and must deal with enormous government bureaucracies to do business. The International Finance Corp., a private-sector branch of the World Bank, recently ranked Brazil 121st out of 175 countries in the ease of d