Turbulent Times: Financial Planning for the Brazilians in China
Written by Trey Archer on May 23, 2016.
Brazil has always held a special place in my heart. In January 2007, as part of my university exchange program, I moved to Sao Paulo to attend classes at the Pontificia Universidade Catolica (PUC). I learned Portuguese, made friends for a lifetime, and fell in love with every aspect of the culture from feijoada and samba to the praia and Carnaval!
Sadly, Brazil in 2007 is very different from today’s Brazil…
The Wall Street Journal in March 2016 wrote: “Brazil’s economic crisis is as bad as its political one.” That pretty much sums it up: President Dilma Rousseff has been expelled from office while undergoing impeachment trials. The Real is hovering around a 10-year low against the dollar (at the time of research it’s 3.5:1). Petrobras is tangled in a massive corruption web. And while the country is currently experiencing one of its worse recessions ever, Goldman Sachs recently announced that Brazil may actually be sliding into a depression.
With China and Brazil both sailing through troubled waters, it may appear to be a dreaded scenario for Brazilians living in China. Luckily, believe it or not, there is opportunity in times of crisis. I’ve been working with many Brazilians expats in China since the onset of the crisis, and this is what I’ve had to say.
1. Currency exchange
As mentioned, the BRL:USD exchange rate is not favorable, but the same is true with the CNY:BRL ratio. For Brazilian expats living in China, it’s not the best time to convert your Yuan to Reals. Currently, 1 CNY buys 0.5 BRL, while five years ago you could buy twice as much with one Yuan buying 0.25 Reals.
Instead, diversify into different currencies. Dollars, Pounds and/or Euros are all recommended. This is especially true in China, since it’s a good idea to start moving your RMB out of the country and into a different currency due to the continuing devaluation of the Yuan.
Markets don’t like volatility. And with so much negative news in the press about Brazil and China, it’s definitely not recommended to make investments in either place at the moment. Instead, it’s better to look at global funds that spread risk across different industries and regions to protect against volatility. Actually, investing in these kinds of funds can kill two birds with one stone. Apart from making a smart investment, you can also diversify into different currencies to take care of point #1 mentioned above.
One alternative investment opportunity is to purchase property. While property prices in China are clearly at the peak of a bubble, and the bubble in Brazil bursting at the moment, you should stay away from property investments in these two countries. Instead, keep following my personal investment philosophy and diversify globally.
There is always a booming housing market somewhere in the world, and by using a reputable agency, you can find a great investment that will yield high returns. Plus, one thing I really like about property is that it’s tangible. If you ever needed a second home to fall back on outside of China or Brazil, you’ll have it.
Call me an optimist, but I truly think Brazil will recover from the current turmoil and the Brazilian people will turn things around. Every great nation goes through crises and growing pains. Take a look at the US with the Great Depression, Civil War, 9/11… the list goes on.
For Brazilians living in China, use this time to invest globally, diversify into other currencies, and purchase property abroad. Then, when the time comes and Brazil is on the rise again, you will be well prepared to take advantage of the pais do futuro!
If you’re interested in learning more, feel free to drop me a line at firstname.lastname@example.org, or call me at +86 138 1620 7274. I’d be more than happy to hear from you.