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International Investing: Look for Infrastructure Developments

08-25-2011 08:13 AM CET | Industry, Real Estate & Construction

Press release from: MDMY Investment

The port development at Pecém

The port development at Pecém

The recent and potentially ongoing drop in global stock markets has reminded international investors that the global economy is still on shaky footing. The nature of the decline, fast and with heavy trading volume, is reminiscent of the crisis period in 2008, leading many investors to consider alternatives to equities.

Following years of continued appreciation, emerging market currencies remained strong during the recent equity selloff. The Brazilian Real is still up 4% on the year against the dollar, and .5% last week. As Barron's notes, the resilience of the Real during a period of risk aversion is "one sign or the newfound respect being paid to emerging markets."

And looking back at the past several years, emerging economies sustained healthy growth despite the credit crisis. Turning our eyes to the future, emerging markets appear likely to outperform developed economies in Europe and North America for many years to come.

For one thing, countries like China and Brazil have the capacity to stimulate economic growth with public domestic spending, something lacking in Europe and the United States. Moreover, to maintain healthy GDP growth, these countries must continue to develop infrastructure at a rapid rate. Morgan Stanley estimates that Brazil should raise infrastructure spending from 2% to 4% of GDP to optimize growth.

For international investors, infrastructure and related investments provide the safest and most lucrative investment environments at a time when the global landscape appears questionable.

In Brazil and other developing economies, the energy, materials and commodity sectors remain promising. For instance, IBRAM, Brazil's mining institute, stated this week that iron ore output is likely to double by 2015. Copper output is expected to double during the same period. According to IBRAM, "Even with the slowing down of the economy, the (iron ore) supply is well below the demand that exists around the world. Developing countries like China and others have sustained this strong demand."

Meanwhile, recent offshore oil discoveries mean years of related infrastructure development, as exemplified by the Petrobras refinery currently under construction in Pecém, Ceará.

Under Brazil's Accelerated Growth Program (Programa de Aceleração de Crescimento, PAC), approximately US$800 billion will be spent on infrastructure between 2008 and 2013. While half will go to develop the country's energy sector, large-scale funding will be allocated to transportation and the Minha Casa Minha Vida social housing program as well.

Brazilian real estate promises to be a primary beneficiary of infrastructure spending, particularly in areas adjacent to large developments. Real estate is also accessible to those who want to invest in Brazil, providing an opportunity to diversify holdings as a hedge against potential currency devaluation in the United States and Europe.

In the northeastern state of Ceará in Brazil, the federal government is dedicating massive funds toward the port expansion at Pecém, with complimentary investments by Petrobras, Vale and numerous other large corporations in the energy and materials sectors. Ceará is also benefitting from tourism infrastructure development in advance of the 2014 World Cup and 2016 Olympics. The money is dedicated, and construction is underway. With tens of billions of dollars flowing into the port area during the next 5 years, the time for investors to enter the local market is now.

MDMY Investment, a real estate development company located in Fortaleza, sees tremendous opportunities in providing housing for the incoming workforce. According to Jamie MacDonald, Director at MDMY, the communities surrounding Pecém currently face a shortage of suitable housing, particularly in the middle income demographic. This shortage will only become more pronounced as the Pecém port expansion proceeds.

For international real estate investors, the area provides excellent potential for equity appreciation during the next decade. The rental market is already remarkably strong, with the promise of rising rental income in years to come.

MDMY Investment is a Brazil-based and operated Investment Company specializing in the Real Estate Development, Construction, Tourism, Security, and Environmental sectors. We offer overseas investors secure, high-yielding investment opportunities in several of Brazil’s fastest-growing business environments.

MDMY Investment S/A
1200 Av. Dom Luis
Sala 1106
Aldeota
Fortaleza, Ceará, Brazil
61.160-230

Scott Johnson
Investor Relations
scott@mdmy.com.br
http://www.mdmy.com.br

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