October 22, 2014

Changes in Brazil: What Can Expats Expect?

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Changes in Brazil: What Can Expats Expect?

With the World Cup behind it and the 2016 Olympics ahead, Brazil is undergoing yet one more major event: one of the most tightly contested presidential elections in decades. The election is partly a choice for the future path for the country, and partly a referendum on how the current government has handled the World Cup and the requisite infrastructure investments.

The Brazilian government reports that in all, R$17.6 billion Brazilian Reais (about $8 billion USD) were spent on infrastructure, with about half of that amount spent on urban mobility and the rest divided among improvements to airports, security, ports, and telecommunication systems. Our updated Cartus Market Watch:Brazil provides insights on how areas of key importance to assignees and companies in Brazil have been impacted both by the past major sporting events and the upcoming Olympics.

Brazil’s congestion and inefficient public transportation have been among the biggest challenges to the country’s productivity. Although preparations for the sporting events provided an incentive to focus on addressing these challenges, the investments made in public transportation have been directed mostly toward the areas hosting the events.

In Rio de Janeiro, where subways might be the best form of transportation in many areas, the lines are being extended to Barra da Tijuca, a popular expat neighborhood and future home to the Olympic Park. However, it’s uncertain whether it will be completed before the Olympics begin, and some Brazilians are concerned whether just extending the subway without adding additional tracks is enough to help with congestion.

Air travelers will benefit from the opening of Terminal 3 at São Paulo’s Guarulhos International Airport (GRU), Latin America’s busiest airport. The new terminal will receive 80 percent of all international flights coming into São Paulo.

Counter to what many predicted, we haven’t seen significant increases in long-term rental prices. We have even observed, in a few instances, that landlords who are conscious of decreased demand from expats have shown flexibility and willingness to negotiate. This is typically unheard of in this landlord-driven market.

The cost of short-term housing, as widely predicted, increased during the World Cup, in particular in Rio, Salvador, and Recife. A number of newly refurbished units showed up on the market, however, and they should help with availability in the future.

The total cost of renting an apartment for the long term has increased because some municipalities have raised local taxes (i.e., IPTU—a tenant responsibility), partly as a way to pay for World Cup-related expenses. We’ll likely see that happen again before the Olympics.

Looking forward to the 2016 Games
The Olympic Games will present a host of new challenges compared with the World Cup because of their intense and compact nature: one host city (Rio de Janeiro) versus 12, two weeks’ duration versus a whole month, and about 10,500 athletes versus 736. The Rio Games, with events scattered around four venue clusters, could present transportation difficulties in a city that includes mountains, tunnels, and an absence of new roads.

About 60 percent of the events will be at Olympic Park in Barra da Tijuca, about 25 kilometers (15 miles) west of central Rio. Other events will be staged at Deodoro; the famous Maracana Stadium area in central Rio; Copacabana Beach; and the Guanabara Bay area.

Barra da Tijuca and the neighborhoods surrounding Copacabana are favored by expats, so they will be affected by increased activity during the event. But investments in such efforts as extending the subway should help expats in the long run.

Read our recent Market Watch for more information on these areas and for tips for relocation managers with assignments in—or being planned for—Brazil. Companies that are active in Brazil, particularly in the impacted areas, are well advised to consider planning househunting trips and assignment start dates with these events in mind.

Cartus will continue to post updates on the Olympics as the event draws near.

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