Cost of living in Brazil

by moveforward on July 25, 2010

If there is one area of the world which is growing in popularity with regards to expats it has to be South America with so many of the former troubled economies showing signs of relative strength. Brazil is one area of South America which is most definitely on the up and catching the eye of more and more expats looking to relocate and begin a new life. However, the living costs in Brazil can vary markedly from place to place and when you consider that the cost of living in Brazil will be a major factor when deciding where to move, it is vital that you do your homework.

Where is Brazil

Brazil is the largest country in South America and the fifth largest country in the world with a predominantly Portuguese speaking population and obvious links with Portugal. The country itself is bordered by the Atlantic Ocean on the east, Venezuela, Guyana, Suriname and the French Guiana on the north, Colombia on the Northwest and Bolivia, Peru, Argentina, Paraguay and Uruguay on the west. The country itself has a population approaching 200 million people and very close economic links with the US and other developed countries around the world.

Even though vast areas of Brazil are relatively uninhabited and often uninhabitable there have been massive changes in the makeup of the country over the last 20 years. So what does Brazil have to offer and what can you expect?

Economy

The economy of Brazil has a massive variation in business sectors and is indeed the largest economy in Latin America and the eighth largest in the world. This is an area of the world which has succumbed to significant infighting, corruption and economical mismanagement although in the last 20 years we have seen a significant improvement in the political scene and the economy. The introduction of a free-market economy has had a massive impact upon the wealth of Brazil as a whole and the performance of the Brazilian economy.

The export arena continues to boom in Brazil with areas such as aircraft, electrical equipment, automobiles, ethanol, textiles, footwear, iron ore, steel, coffee, orange juice, soybeans and corned beef very popular. As well as an ever-growing export sector, Brazil is very prominent in financial affairs, commodities and technology. The Brazil today is very different to the Brazil 20 years ago and more and more people are now beginning to wake up to this fact. However, with economic prosperity often comes an increase in the cost of living in Brazil, with various assets and various goods becoming more and more popular. So how does the cost of living Brazil compare to other areas of the world?

Property

The cost of property in Brazil has, as you would expect, increased dramatically in various places such as São Paulo and the more prominent cities in the country. However, the cost of property in Brazil does vary widely with various hotspots grabbing the attention of overseas investors and expats looking to move to the region. When you consider that Brazil has a population of nearly 200,000,000 people there will continue to be a massive variation in the cost of property and the potential returns for the future. However, many of the more rural areas of Brazil may take years to attract the attention of large-scale investors therefore many of the best returns are still available in and around the larger Brazilian cities.

As with any country in the world, the major employment sectors of Brazil will attract the lion’s share of workers and ultimately greater demand for property. To give an example of the performance of property in Brazil over the last 12 months, a two-bedroom apartment in Copacabana has increased by 47% and the same property by 18% in Ipanema. Many of the more popular areas of Brazil, which often offer the best employment markets, are starting to see demand increase yet again despite the fact that the worldwide economy is still struggling. Property in Brazil is a much sought-after asset, although the Government have made a number of changes over the last few weeks which could reduce the attractions for overseas investors.

As with any overseas property market, it is vital that you take professional legal advice from parties within the countries to ensure that you are getting the best deal and you are in fact investing in the best area.

Cost of food

Generally the cost of food in Brazil compares favourably to areas such as the US and the UK due in the main to the fact that much of the produce available in the country is found within the boundaries of Brazil. However, it is worthwhile noting that inflation has fallen back over the last couple of months but many experts believe it will pick up again and break through the 5% barrier as early as August 2010. Experts believe that the rate of inflation in Brazil will rise to around 5.42% at the end of 2010 which will obviously have an impact upon the cost of food, one of the major elements of the inflation figure, in the short, medium and long term.

Despite the fact that many countries in the world are struggling to maintain financial stability in the short-term, this is not a problem in Brazil and indeed there are fears that the property market is beginning to overheat and could cause problems in the short-term. It is worthwhile researching the cost of food in Brazil, as again, it can vary widely from place to place. As with any other country in the world, no matter what your budget there will be an area of Brazil which will allow you to maintain a lifestyle which you can afford.

Entertainment

Brazil is an area of the world which continues to attract the attention of partygoers across the globe with the Rio Carnival perhaps the highlight of the entertainment industry in Brazil. However, more traditional entertainment such as restaurants, bars and clubs are all very prominent in and around the major cities of Brazil and relatively inexpensive compared to the cost of overseas entertainment. The influx of foreigners and foreign investment into Brazil has had a major impact upon entertainment facilities in some of the more populated areas of the country, with more Europeans now visiting Brazil than ever before.

There is an obvious European influence in many areas of Brazil where large expat communities continue to grow and attract more and more foreigners. However, the influx of foreign investment and foreign spending has had a major impact upon the Brazilian economy which continues to boom. Overseas investment, overseas visitors and expats all play a major role in the stability of the Brazilian economy and the prospects for the future.

Transport

Thankfully the transport network in Brazil is very large and very diverse offering a very efficient and very cost effective way of travelling across the country. The Brazilian road system has nearly 2,000,000 km of roads, there are nearly 31,000 km of rail track and there are over 2500 airports throughout Brazil. While the quality and size of transport networks in and around the country will obviously vary there are very direct and very good quality transport links between the vast majority of Brazil’s major cities and towns. However, there is still much work to be done with regards to various rural areas which continue to struggle to attract the attention of overseas investment. The forward thinking investment of the Brazilian government with regard to the internal transport network, and indeed the external transport network, is certainly starting to pay dividends for Brazil as a whole.

Taxes

The Brazilian tax system is a progressive system with rates ranging from 7.5% to 27.5% on Brazilian Real income. The tax bands for individuals are as follows, BZL 1 to BZL 17,208, 0% tax, BZL 17,209 to BZL 25,800, 7.5% tax, BZL 25,801 to BZL 34,392, 15% tax, BZL 34,393 to BZL 42,984, 22.5% tax, over BZL 42,980 the tax rate is 27.5%. The basic rate for non-residents earning income in Brazil is 27.5% which is a flat rate.

Corporation tax is slightly different with 34% taxation on company profits split between basic tax, surtax and a 9% charge which is used to fund the company’s social contribution system. Capital gains tax in Brazil for companies is added to regular income and charged at the prevailing rate. The individual rate for capital gains tax in Brazil is 15% but all dividend income from local companies is exempt from taxation. When you consider the taxation systems in countries such as the UK and the US there is very little to be concerned about with regards to the tax regime in Brazil.

Expat communities

Over the years we have seen a major increase in the number of expats moving to Brazil with cities and areas of Brazil including São Paulo, Rio de Janeiro, Salvador and Brasilia to name but a few all proving very popular. This has created a number of expat communities within Brazil which offer great assistance and great advice to those moving from overseas. These expat communities have also had an impact upon local services and local communities very often creating micro-economies within larger economies.

While the cost of living in Brazil compares very favourably to that of many other areas of the world you may still need to take advice to find the best value for money and the best areas which to invest in. Even though Brazil itself has gone through something of a boom time over the last 20 years this has not been spread equally across the country and there are indeed many areas of Brazil still hampered by poverty.

Conclusion

While areas of Brazil such as São Paulo, Rio de Janeiro, Salvador and Brasilia obviously attract the lion’s share of overseas interest and overseas income they also lead to a larger than average cost-of-living compared to the rest of Brazil. However, as the Brazilian economy continues to grow with new businesses and new ventures created on a regular basis we have seen the emergence of new and fast-growing cities and areas around Brazil. This is a country which for many years depended upon its relationship with the USA to survive but now the country has ventured into the international arena on its own merits and is proving very successful.

Despite the fact that many other areas of the world continue to struggle in relation to the worldwide economic downturn this is not the situation in Brazil. The Brazilian Central Bank was recently forced to increase base rates to try and offset potential problems with inflation and overheating of the Brazilian property market. In times gone by a wobble in the worldwide economy would have seen many investors racing for the exit door from Brazil but the Brazilian economy we see today is very different to that of years gone by.

The property market in Brazil has rebounded extraordinary well since the initial credit crunch and worldwide economic downturn hit home. Indeed there are rumours of waiting lists for property in some of the more prosperous and prominent areas of Brazil which is a sight many other countries have not seen for many years. The influx of overseas investment continues into Brazil and indeed the number of visitors and expats visiting the region continues to grow. This is a country which is forecast to be one of the fastest growing economies in the world over the next four or five years and one which has dragged itself from the doldrums over the last 20 years.

The cost of living in Brazil varies enormously between the different areas of the country and indeed despite the massive increase in wealth in the country there are still major problems with poverty. Therefore the cost of living in Brazil can literally be anything you can afford although the lower your budget the less chance of finding accommodation and a new life on the fringes of some of the more prosperous and buoyant cities of Brazil.

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