Business flight to gold-rush Brazil

PONDERING the financial storms lashing Europe and the United States, Seth Zalkin, a casually dressed American banker, seemed content with his decision to move here in March with his wife and son. “If the rest of the world is cratering, this is a good place to be,” he said.

For those with even the dimmest memories of Brazil’s own debt crisis in the 1980s, the global order has been turned on its head. The American economy may be crawling along, but Brazil’s grew at its fastest pace in more than two decades last year and unemployment is at historic lows, part of the nation’s transformation from inflationary basket case into one of America’s top creditors.

With compensation rivalling that on Wall Street, so many foreign bankers, hedge fund managers, oil executives, lawyers and engineers have moved to Rio that prices for prime office space surpassed those in New York this year, making Rio the costliest city in the Americas to lease it.

A gold rush mind-set is in full swing, with foreign work permits surging 144 per cent in the past five years and Americans leading the pack.

Businessmen have long been drawn to Brazil, along with get-rich-quick confidence men, dreamers of Amazonian grandeur and even criminals like Ronald Biggs, who absconded here after his Great Train Robbery in 1963.

Once here, newcomers find a country facing a very different challenge than the US and Europe: fears that the economy is getting too hot.

One particular shock is the strength of Brazil’s currency, the real. That may help Brazilians snapping up apartments in places like South Beach in Miami, where properties cost about a third of their equivalents in Rio’s exclusive districts. But it also hurts the country’s manufacturers and exporters.

So in a bid to prevent it from going even higher, Brazil, under the leadership of its economist president Dilma Roussef, is now one of the biggest buyers of US Treasury securities, becoming a larger stakeholder in the ailing American economy. That is a sharp break from the past, when Washington helped cobble together bailout packages for Brazil’s financial crises.

“Brazil is doing great, but honestly, every other week I ask myself, ‘When is this going to end?’ ” said Mark Bures, 42, an American executive who moved here in 1999.

A few veteran expatriates even remember Brazil’s last economic “miracle” in the early 1970s, when The Wall Street Journal quoted an ebullient banker who predicted: “In 10 years, Brazil will be one of the five great powers of the world.” Instead, the country ended up with daunting foreign debts.

The recent commodities boom and growth in domestic consumption, the result of an expanding middle class, helped turn Brazil into a rising power that bounced back from the 2008 global financial crisis. The economy grew 7.5 per cent last year and is expected to register about 4 per cent growth this year – slower, but still enviable.

Some economists consider the Brazilian real the world’s most overvalued currency and inflation has climbed, as evidenced by £3.90 Big Macs at and £22 martinis. Interest rates remain stubbornly high and analysts debate whether a credit bubble is forming as consumers continue a multi-year spree on everything from homes to cars.

Brazil is hardly immune to the turbulence in global markets. Rio’s property has been bustling as soccer’s World Cup in 2014 and the Olympic Games in 2016 approach, but its infrastructure is inadequate. Violent crime, though falling in some areas, plagues big parts of the country.

But this doesn’t deter the ambitious from making their fortunes in Brazil. “I had very basic Portuguese, but I could tell this place was booming,” said Michelle Noyes, 29, a New Yorker who made the leap to join a São Paulo asset management firm. “I moved from the periphery of the industry to the centre,” said Noyes.

Americans form the largest group moving here, followed by contingents of Britons and other Europeans.

David Neeleman, the American founder of JetBlue Airways, recently created Azul, a low-cost Brazilian airline. Corrado Varoli, an Italian who oversaw Goldman Sachs’ Latin American operations from New York, now runs his own São Paulo boutique investment bank.

Others foreigners take jobs at Brazilian companies thriving from a boom partly created by Brazil’s trade with China.

“I moved from Beijing a year ago and find the potential for professional development incredible,” said Cynthia Yuanxiu Zhang, 27, a Chinese manager at a technology company. “I’m already planning to extend my time here well into this decade.”