RIO DE JANEIRO – Pondering the financial storms lashing Europe and the U.S., Seth Zalkin, a casually dressed American banker, sipped a demitasse and seemed content with his decision to move here in March with his wife and son.
“If the rest of the world is cratering, this is a good place to be,” said Zalkin, 39.
For those with even the dimmest memories of Brazil’s own debt crisis in the 1980s, the global order has been turned on its head. The U.S. economy may be crawling along, but Brazil’s grew at its fastest clip in more than two decades last year and unemployment is at historic lows, part of the nation’s transformation from inflationary basket case into one of Washington’s top creditors.
With compensation rivalling that on Wall Street, so many foreign bankers, hedge fund managers, oil executives, lawyers and engineers have moved here that prices for prime office space surpassed those in New York this year, making Rio the costliest city in the Americas to lease it, according to the real estate company Cushman & Wakefield.
A gold rush mind-set is in full swing, with foreign work permits surging 144 percent in the past five years and Americans leading the pack of educated professionals putting down stakes.
Businessmen have long been drawn to Brazil, along with get-rich-quick confidence men, dreamers of Amazonian grandeur and even outlaws like Ronald Biggs, the Briton who absconded here after his 1963 Great Train Robbery.
But now schools catering to American and other English-speaking families have long waiting lists, apartments can cost $10,000 a month in coveted parts of Rio and many of the newcomers hold Ivy League degrees or job experience at the pillars of the global economy.
Once here, they find a country facing a very different challenge than do the U.S. and Europe: fears that the economy is getting too hot.
One particular shock for newcomers is the strength of Brazil’s currency, the real. That may help Brazilians snapping up apartments in places like South Beach in Miami, where properties cost about a third of their equivalents in Rio’s exclusive districts. But it also hurts the country’s manufacturers and exporters.
So in a bid to prevent it from going even higher, Brazil is now one of the biggest buyers of U.S. Treasury securities, becoming a larger stakeholder in the ailing U.S. economy. That is a sharp break from the past, when Washington helped cobble together bailout packages for Brazil’s financial crises.
“Brazil is doing great, but honestly, every other week I ask myself, ‘When is this going to end?”’ said Mark Bures, 42, an American executive who moved here in 1999, just in time to see an abrupt devaluation of the currency and other sharp swings in Brazil’s fortunes.
The recent commodities boom and growth in domestic consumption, the result of an expanding middle class, helped turn Brazil into a rising power that bounced back handily from the 2008 global financial crisis. The economy grew 7.5 percent last year and is expected to register about 4 percent growth this year – slower, but still enviable in the U.S.
Yet Brazil offers many challenges to give newcomers pause. Labour legislation favours hiring Brazilians over foreigners, and the lengthy process of obtaining a work visa can surprise those unaccustomed to Brazil’s gargantuan bureaucracy.
Some economists consider the Brazilian real the world’s most overvalued currency against the dollar and inflation has climbed (as evidenced by $6.16 Big Macs and $35 martinis). Interest rates remain stubbornly high and analysts debate whether a credit bubble is forming as consumers continue a multiyear spree on everything from homes to cars.
Brazil is hardly immune to the turbulence in global markets, and its currency had weakened a bit in August. Rio’s real estate has been bustling as soccer’s World Cup in 2014 and the Olympic Games in 2016 approach, but its infrastructure is inadequate. Violent crime, though falling in some areas, plagues big parts of the country and Rio, which suffered through a traumatic bus hijacking in August.
Still, foreigners are arriving, and work authorizations for them jumped more than 30 percent in 2010 alone, according to the Labor Ministry.
“I had very basic Portuguese, but I could tell this place was booming,” said Michelle Noyes, 29, a New Yorker who organized a hedge fund conference in Sao Paulo. Shortly after, she made the leap to Brazil for a job at a Sao Paulo asset management firm.
Americans form the largest group moving here, followed by contingents of Britons and other Europeans. Some are on temporary assignments. Others are starting ventures big and small.
“Our salaries here in Brazil are at least 50 percent more than salaries in the U.S. for strategic positions,” said Jacques Sarfatti, country manager for Russell Reynolds, a company that recruits business executives.