How to become a Millionaire in Brazil

A good friend in Brazil tells me all the time when we are on the phone: “Dude stuff here is  hot as hell, there are people becoming millionaires everyday”. I never took it too seriously until 1 month ago. When the French television channel Tf1 presented a report on the topic stating that since 2007 there are 19 new millionaires per day in Brazil, people in my office went nuts and it became the topic of the day.

From Rags to Riches in Brazil

To begin with lets clarify these 19 new millionaires per day and set the expectations right. As Forbes is apparently responsible for the Buzz let me summarize their main points in short:

  • 1 million Reais are around 550’000 U$D
  • Fast growing industries such as retail and healthcare are important contributors
  • Top executives and bankers earn often more than their peers in the US
  • Mergers and Acquisitions in many industries are leading to a concentration of wealth
  • Property values have doubled in recent years
  • There currently around 30 billionaires and 137’000 millionaires in Brazil
  • The millionaire statistic takes into account the accumulated wealth of people including savings, investments, property (In financial terms: Their whole portfolio)

We could argue, question and challenge the methodology but University is over and it’s time to focus on how to make money.

4 ways to become a Millionaire in Brazil

To keep it simple lets use the Rich Dad Poor Dad income model to go over the 4 main different ways of becoming a millionaire in Brazil:

In the book Rich Dad Poor Dad the left side is described as the poor majority which works for money while the right side is described as the rich minority which has money working for them. That’s to a big extent true, especially in western countries. Millionaires in Brazil belong however to all four categories.

Millionaire Employees in Brazil

Brazil has a great shortage on qualified professionals. This makes the market extremely attractive for strategically savvy people who want to become a millionaire the “safe route”. The key to earning a high salary is to work a job with high demand and strong shortage – basic economics. This doesn’t only inflate the salaries but also enables people to start lucrative bidding wars between companies to hire them.

Given the basic factor mentioned above, here the two fastest routes to money in Brazil as an employee:

  1. Acquiring a skill which can be learned fast and start accumulating wealth “tomorrow”. Sales, languages and technical skills such as welding can be learned within 3-6 months and start translate into cash pretty quickly.
  2. Enter a career and ensure to move-up the corporate ladder as fast as possible given the situation. Companies have no other choice but give young people a change to move up to middle and top management ( Brazilian executives are the highest paid in the world ).

The first one being the more “hustler approach” and the second one, the “traditional” career path. The first one allows faster returns while the second mostly higher returns in the long-term.

Millionaire Self Employed/Small Business Owner in Brazil

Being self employed or running a small business with a few employees only can actually be a pretty practical way of becoming a millionaire while minimizing headache. While many complain about the long and complex administrative procedures, taxes etc other people just focus on keeping their operations lean and making money.

Let’s compare Brazil’s ranking in two popular reports to stress my point here:

Ranking Ranks Publisher
World Competitiveness Report 2012 53 out of 142
(first 30%)
The competitiveness of countries, based on 12 criteria and is largely based on an expert survey. World Economic Forum
Doing
Business

Report 2012
126 out of 183
(last 30 %)
Business regulations applicable through the life cycle some SME’s. The report is mostly based on quantitative analysis. It ranks the ease of doing business in different countries. World Bank

Starting a small business often just takes good guts, drive and being street smart. Here a typical example of a woman who started her business with 100 Reais (around 50 Dollars) and made her first million within 2 years.

Focus on making money first, scale after – following the simplified logic, the bigger the more complex.

A currently very popular and strongly growing business model (20% last year) within that category is franchising. The main beauties of it are in my opinion:

  1. People are now starting to have disposable income and want to spend now.
  2. Available across various product and service categories (Fast food, cosmetics, tourism etc).
  3. Easier to sell than “unique” businesses as expectations are clearer.

Millionaire Business Owner in Brazil

While it is true that establishing a big business or corporation is quite complex in Brazil it is in various cases a must as demand is screaming for it, in short:

If you don’t grow it someone else will grow you out of business.

The three main challenges a person who is growing a business in a larger scale will face in general (as it changes from industry to industry) are:

  1. Financing
  2. Taxes and Regulations
  3. Restrictive labor regulations and shortage of talent

The poster child of that group is Eike Batista, Brazilians richest citizen and self-made billionaire. He is currently ranked the 7th richest man in the world and aspires taking over the Mexican Carlos Slim, currently the richest man in the world. His main businesses are in oil an mining but he also owns assets in different fields such as logistics or hospitality.

Everyone who even just thinks about growing a large business in Brazil should study Eike Batista! He is ranked by various sources as the second most influential person of the country, just behind the President Dilma Rousseff. There are plenty of articles, videos and interview around him available on the internet as he speaks fluent English.

Millionaire Investor in Brazil

That’s the hardest and most unpredictable way to become wealthy in the short term but the safest and most comfortable in the long term. Here the harsh reality that Wallstreet and Co hates to admit: On average 75% of financial institutions can’t beat the average market return.

When it comes to investing I would go with the advice of the world’s best, Warren Buffet:

“I believe that 98 or 99 percent, maybe more than 99 percent of people who invest should extensively diversify and not trade. That leads to an index fund with very low cost.”

Note: With extensively diversify is not only meant industries but also different markets.

For short term investments below 10 to 20 years, when you want to ensure a good and predictable return, you should opt for Fixed Income investments in Brazil such as government and corporate bonds and pension funds. Brazil has the highest interest rates in the world which makes fix income investments very attractive.

Tough the average market return of non fix income investments has beaten the one of fix income investments in the period of January 1998 to June 2011 with 16.2 % vs 15.2%, that’s still just an insignificant and isolated win over a middle time-span. Volatility was at 1.6% with fix income investments while with variable income 31.4% per year. You get the picture (Source in Portuguese: http://www.drmoney.com.br/investimentos/bolsa-x-renda-fixa-a-eterna-batalha/).

Currently the largest age group in Brazil is the one between 20 and 30 years old which is also the time span when most people become millionaires. This generation is called in Brazil therefore the golden generation. If you’re aspiring to become wealthy it might therefore be smarter to look for opportunities in Brazil and the other BRIC countries rather than in the West.

 

About Guilherme Italo Nunes Alves da Silva

Specialized in consumer goods marketing I also have work experience in the financial, tourism, entertainment and construction industry. I hold a Swiss degree in International Management with a Major in Marketing. Given my journey, I am fluent in Portuguese, German, French, English and Spanish and have learned the basics of Italian and Mandarin.

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