home page
Home |  Members Login |  eNews |  Members Directory |  FAQ     


December 18, 2012

Part 2: The Construction Industry in Brazil

By Janaina Gilsoul
BACC-SE Business Intelligence Specialist
in the Construction Industry

Part 1 gave you an overview of the Industry. In this article, I am focusing on the investment opportunities in the hosting cities for the Confederations Cup and FIFA World Cup.

The construction market is heating up across Brazil. Regions with higher demand include Rio de Janeiro (RJ), São Paulo (SP), Belo Horizonte (MG), Porto Alegre (RS), Brasília (DF), Cuiabá (MT), Curitiba (PR), Fortaleza (CE), Manaus (AM), Natal (RN), Recife (PE) and Salvador (BA), the twelve host cities of the 2014 FIFA World Cup. To give you a better understanding of the opportunities in the Brazilian construction sector I will be focusing on the following host cities of both the World Cup and the Confederations Cup: Rio de Janeiro, Belo Horizonte, Brasilia, Fortaleza, Salvador, and Recife.

Rio de Janeiro

The city of Rio de Janeiro is very mountainous and the weather is mostly hot all year round. The beautiful beaches and mega events such as the fireworks during New Year’s Eve, carnival, and soccer games incorporate a city that is blissful and alive, attracting tourists and investors from all over the world. Besides the World Cup, Rio will also be hosting the Olympic games in 2016. As the city attracts more and more investors, competition arises, minimizing available land for construction, while increasing the land value. Available land is priced above market value due to high demand.

On the other hand, there is a great demand for small apartments and hotels in Rio. If you are able to find a specific niche in the market the profits and benefits will outweigh the cost of investment. There is a high demand for hotels and mega events such as Rio +20 have shown that hotels run out of vacant rooms, and due to the high demand, the cost to rent a room went up. As a precautionary measure, the federal government has made agreements with hotel chains in order to reduce rates from 15% to 35%, as complaints were serious and there were talks of boycotting events.

In conclusion, Rio de Janeiro has great investment opportunities for those who have large amounts of capital available. As a host city for the Confederations Cup, the World Cup, and the Olympic games, the already high demand for hospitality services will only increase.

Belo Horizonte

The city invests its resources in improving mobility and accessibility throughout the metropolitan area. In June of this year (2012), the state government issued a procedure expression of interest to public transportation railways. New projects for development are being implemented but the government´s intention is to use the infrastructure of existing rail lines. The work should comprise three areas: the first corresponds to the reactivation of the railway line between Sete Lagoas and Divinópolis; the second between the capital and Brumadinho; and the third between Belo Horizonte and Conselheiro Lafaiete with a branch to Ouro Preto. The use of rail for transporting people will reach 21 cities in the metropolitan area.

For this region it could be interesting to export new construction technologies that are financially accessible to make time-reductions to each hour worked, as it was described on our first article. According to a research done by Sinduscon, a Construction Trade Union, and the Industry Federation from Minas Gerais, the lack of skilled manpower is a problem.


The Brazilian capital is now focusing on accommodating and welcoming tourists from all over the world. The National Civil Aviation Agency (ANAC) published in July 23 a document authorizing “Consórcio Inframérica,” winner of the auction of the International Airport of Brasilia, to commence the transfer phase of operations and expansion of the facility. Now, Infraero is monitoring the concessionaire services until the administration and operation comes under the responsibility of the concessionaire for the next 25 years. The airport is going to expand and also will be more cognizant of accessibility to achieve the exigencies from FIFA for the World Cup.

Fortaleza and Salvador

Ceará (Fortaleza) and Bahia (Salvador) are being sought after by the wind power industry, which will require large financial contributions to implement wind power farms. The wind potential in Brazil is estimated at 300 gigawatts and it is concentrated in the Brazilian northeastern for owning about 70% of the wind deposits, according to the World Wind Energy Association.

Between 2004 and 2011 the investment made by the wind power industry in all Brazilian auctions was R$ 25 billion. During 2009 the industry hired 6.7 GW of power at the price of R$ 100 per megawatt hour (MWh). In June this year, the wind industry added 2 GW of installed capacity, spread over 71 parks. We expect a growth of 40% per year until 2016, according to projections from the Global Wind Energy Council - GWEC. By the end of 2016, the goal is to achieve 8.4 GW of wind power for the national electric system, which means 5.4% stake in the Brazilian energy matrix, against the current 1.5%.

According to Elbia Melo from Abeeólica (Brazilian Wind Energy Association), if it continues to grow in the same way, in 2020 Brazil will have 15% of wind power. The estimate is to sell in auctions an order of 2 GW per year. However the National Bank for Economic and Social Development – BNDES – requires, for financial help on wind power farm, that the majority of materials used needs to be manufactured in Brazil.


The capital from Pernambuco State is, without doubt, another city that excels in attracting investment because it is located in a state that is growing faster than the country itself despite the severe drought that left many municipalities on alert affecting agriculture in the first half of this year as shown in Chart 1 released by the agency Condepe / Fidem and IBGE.

Chart 1 - Performance (%) of GDP quarterly Pernambuco and Brazil, at market prices - 1st quarter 2011 to 2nd quarter 2012

Source: Sistema de Contas Regionais – Agência CONDEPE/FIDEM e IBGE

Industry in Pernambuco exhibited growth of 3.4% in the second quarter of 2012 and 9% in the first, well above the national chart below as it was reported in the same survey.

Chart 2 - Performance (%) Value Added of Industry in Pernambuco and Brazil - 1st quarter 2011 to 2nd quarter 2012

Source: Sistema de Contas Regionais – Agências CONDEPE/FIDEM e IBGE

Again the construction industry played an important role in this scenario showing positive growth of 12.5% last quarter. Construction in Pernambuco grows faster due to the petroleum refinery located in Abreu e Lima and also to shipyard construction that is being located in Suape port.

A new cycle of construction industry is beginning because the Fiat plant industry is going to Pernambuco and many other partner industries will go after them. The pole pharmocochimic, installed in the north of the state, brings the first signals that it is working up.As you can see, Pernambuco has been a major attractor of huge industry investment.

Because of these many industries coming to the State, Recife Port is estimating a huge increase on their logistic plan to delivery from and to other cities in Brazil like Santos and also other countries. According to Sidnei Aires, operations and trade director from the Recife Port, they are estimating a 54% of increase in freight shipment this year. That means a jump from two million tons to almost 3.1 million tons. The port can already move 10 million tons per year.

Recife Port already had an increase from 8.6% to 16.5% transporting vehicles, machines and equipment for car industries between 2010 and 2011. From 2012 to 2014, it will receive investments over R$250 million in the port structure with public and also private resources, most part to improve the passenger terminal and to dredge channels for depth navigation.

The big challenge is how the urban mobility will work after so many necessary trucks to transport all these shipments. They are already transporting at night but it will not be enough. The solution that they are working on is to reactivate the railway to make connections to others states such as Paraíba, Ceará, Piauí, Maranhão, Alagoas e Sergipe. They are expecting to use them until this end of year.

It is not only Recife who needs to think about logistics and mobility plans. The Brazilian president, Dilma Rousseff, announced a National Logistic Plan on August 15th with investments in order of R$ 42 billion for the road sector. We are going to talk about this topic in the next article. Stay tuned!




What would you like to know more about?:

  Export to Brazil
  Import from Brazil
  Open a business in Brazil
  Business opportunities in Brazil

Members Tip
Network can serve as a valuable strategy for you or your business.
On Networking events: Bring business cards...


� Copyright 2011 Brazilian - American Chamber of Commerce | Privacy Policy