ADIT 2011: Brazil urged to eye more reform to boost international appeal

The country´s infrastructure and complex tax system are preventing Brazil from attracting even more international equity, according to panelists at the annual ADIT conference.

Brazil is one of the most important emerging market destination for international real estate capital, but changes to the country´s tax system and improvements in its infrastructure are needed if the asset class is to grow even more.
During the second day of the ADIT Invest conference in Fortaleza, Brazil, real estate professionals said institutitional investors and investment fund managers increasingly  are  eager to get exposure to the country´s commerical and residential real estate sectors, not least thanks to its demographics and raising affluence. However, in trying to attract international capital, Brazil needs to do more to improve its infrastructure, particularly its airports, and it also needs to reform a complicated tax system that discourages more foreign investment.
Hans Hahne, co-founder and partner of Orlando-based EuroVest Partners, which currently is targeting limited service hotels, fractional-ownership resort properties and mixed-use developments, said Brazil is a country with a vast amount of investment potential, but simple things such as the time it takes to get through immigration and the quality of the roads have had an impact on investor perceptions. Although Brazil is investing billions of dollars on infrastructure projects ahead of the World Cup and Olympics, “logistics are a problem”.
However, the lack of a double taxation treaty with countries such as the US and Germany is one of the biggest issues for international capital. “Brazil doesn´t have [tax treaties] with either of these countries, and therefore returns need to be much higher to compensate for the tax disadvantage,” Hahne noted.
Daniel Caulliraux, head of merchant banking at Prudential Real Estate Investors, said Brazil is “on top of the map of the world” in terms of the attractiveness of investment and that “everyone wants to have exposure to it”. But he agreed that the country needs to reduce the complexity of its tax system to foster international growth. “Brazil is harvesting all the efforts of stabilisation [and] the investment activity is really improving, [but the taxation system] is so complex,” he added.