SAO PAULO, BRAZIL — Just weeks ago, Brazil's housing market was one of the world's most dynamic. But now, the global credit crisis has set up housekeeping, and government efforts to stimulate buying are being trumped by consumers' fears for the future.
Through September, Brazil's housing sector was on fire.
January-September sales of new houses and condos were up 25% from the same period in 2007, ignited by a rising economy, decades of pent-up demand, job growth, an increase in affordable mortgage loans and legal changes that improved banks' powers to repossess property.
The sales slowdown, which isn't reflected yet in official statistics, has hit with sudden force. The nation's largest home builder, Cyrela Brazil Realty, laid off 300 workers last month and lowered its sales estimate for the year by 25%. Shares of Cyrela and the two dozen other publicly held home builders have plummeted in recent weeks.
"Whoever thinks Brazil has decoupled from the world economy is talking science fiction," Cyrela director Luis Largman said in an interview at the firm's Sao Paulo headquarters. "We are being affected collectively."
Housing is just one Brazilian economic sector feeling a chill. October auto sales fell 2% from the same month last year, after clocking 23% growth over the previous nine months. The federal and Sao Paulo state governments stepped in with $4 billion in emergency purchase financing to preserve the market -- and thousands of Brazilian automobile factory jobs.
Although automakers insist that they'll hit their 2008 sales target of 3 million vehicles and that billion-dollar investments in several plants are going forward, the 2009 market remains a question mark. Inventories are backing up and General Motors Corp., Volkswagen and Fiat Automobiles each plan to shut down assembly lines for an extra two weeks in December, in anticipation of softer demand ahead.
Consumer spending on appliances, furniture and electronics has also been affected, prompting the government-owned savings bank, Caixa Economica Federal, to make $1 billion in low-cost consumer financing available. One reason for the drop: the 30% decline in the value of the Brazilian currency against the dollar since mid-September, which makes imported goods more expensive.
But the real issue, as President Luiz Inacio Lula da Silva said in a speech last week, is ebbing consumer confidence.
