By Doug Gray, Contributing Reporter
RIO DE JANEIRO – Whilst working for UBS in Sao Paulo as an investment banker back in 2003, Henry Madden and close friend Paul Irvine came to Brazil for the first time, and with the benefit of their investment experience decided within a matter of weeks that setting up a company in Brazil was where their future lay. The pair took the plunge, and Dehouche Land was born in a small office in Leblon.
As Henry puts it “We arrived in Rio the month of the new President’s inauguration and here was Lula, a die hard communist to many observers, taking power. But his priorities were right, focusing on reducing Brazil’s Achilles heel – inflation – and he installed the right men to instill confidence.”
Back then there was no mortgage society such as it is in the UK or USA, with prohibitively high interest rates well into double figures making it impossible for your average Brazilian to buy a home.
Whilst those numbers remain high, Henry went directly to his former employer UBS and began to strike a deal for better interest rates for foreign investors. That deal fell through, but its sound fundamentals were taken to HSBC who agreed to offer mortgages at 10.5% only through Dehouche Land, opening the floodgates for the company to broker the sale of 50 apartments in Sao Paulo and several in Rio to overseas investors.
Of course Dehouche Land was set up under a very different set of economic circumstances to those it finds itself in now, so how has the global slump affected the company?
“Brazil’s current economic problems are not a result of any underlying flaws in the country’s economy as is the case in much of the world” says Henry, “and the considerable dip in the stock exchange here was a result of overseas investors pulling out cash to cover the holes appearing in their domestic economies, not through fear of a Brazilian collapse.”
From this situation arose sister company Brazil Capital, less focused on property (though that is still a major aspect of its make up), and more an evolution of Henry and fellow UBS employee Peer Buergin’s take on the investment climate.
Offering their clients safety from a legal, operational and market risk point of view, so far the company has taken investors into resort development, mining, technology and retail areas which would otherwise have remained untapped, giving a uniquely personal touch to a traditionally impersonal business where the only language was numbers.
Coming from London in 2003, the exchange rate was around R$5.7 to the pound (approx R$3.5 to the dollar), a far more attractive proposition for investors surely than the current R$3.26-pound/R$2.25-dollar?
One might think, therefore, that working with a traditionally volatile currency like the Real causes headaches. “The Real is still undervalued in many ways” he responds, “and over time there is always a balancing out of these effects. Predicted changes from now will be towards a strengthening Real.”
So we arrive at the secret to Dehouche Land and Brazil Capital’s success and the reasons for their bullishness while many companies struggle. Brazil became a major economic player with the investment rating it received 12 months ago, and with ‘traditional’ investment techniques showing some major faults, property looks set to become an altogether more productive and tangible route in.
As Henry is quick to point out though, there are many who would still shy away from the perceived perils of buying real estate in a country like Brazil, expecting a cigar-smoking, cowboy hat-festooned shark ready to pull the rug out from an unsuspecting owner a year down the line.
Dehouche Land therefore offers the savvy, experienced and professional eyes and ears on the ground to aleve such fears. He continues, “It is crucial that people actually come here and see the place, they’re often incredibly surprised at what they find, expecting India and getting Italy”.