Irish investors lured by Brazilian blue skies

SOUTH AMERICA:An Irish couple are planning to develop a large resort of holiday homes on the north-east coast and are looking for investors

BOUNCING OVER huge sand dunes in a beach buggy it is easy to see why Tom and Cathy McGahon are so enthusiastic about their new venture on Brazil's sunny north-east coast.

The empty beaches are fringed with palm trees, the turquoise waters are warm and land prices are low. After a career working as developers in Ireland and Spain, the Co Clare-based couple discovered the Brazilian state of Rio Grande do Norte three years ago and have been laying the groundwork for a move into Brazil's growing second-home market ever since.

"When we first came here it reminded us of the Algarve 40 years ago," says Cathy. "The potential here is huge and it is going to happen," says Tom, founder of McGahon Architects.

The attractions are obvious: 400 kilometres of stunning, largely undeveloped, coastline; over 300 days of sun guaranteed a year with temperatures that oscillate between 25 degrees and 33 degrees and a state government eager to encourage investment.

One of Brazil's safest states, Rio Grande do Norte is also a world away from the violence that plagues the country's biggest tourist magnet, the stunning but troubled city of Rio de Janeiro.

A qualified town planner, Tom says he can already foresee what one of the world's next tourist destinations will look like. He is not alone. In recent years there has been a land rush across Brazil's north-east as local and foreign developers have sought to build up land banks. The coast of Rio Grande do Norte is plastered with "for sale" signs as owners look to cash in on developers' faith in the region's prospects.

In fact, the coast north and south of Natal, Rio Grande do Norte's capital, has long been a tourist destination for Brazilians and internationally was first discovered by Scandinavians desperately seeking winter sun sometime during the 1980s.

But it has remained a relatively small market and most of the coast is still an undeveloped chain of small fishing villages. One major brake until now on more intensive development has been the lack of air-links with the outside world.

To reach Natal, visitors from Europe have had to find a place on one of the few direct flights a week that link the city's small airport with Europe or else take an 11-hour flight to either São Paulo or Rio de Janeiro and from there catch a three-hour flight back north to Natal.

But all that will change in 2010 when Natal's new airport opens.

Designed to be Brazil's main international cargo hub it will also be able to handle up 40 million passengers a year, making it one of Latin America's biggest airports and just a six-hour flight from Lisbon.

The state government is predicting that the number of weekly flights from Europe will jump from the current 20 to 200 and developers are rushing to build the resorts to cater to this huge influx of tourists.

Spanish, Scandinavian and Dutch developers have led the charge and have hired celebrities like David Beckham, Antonio Banderas and Pelé to help market resorts that are as yet in the planning stage. The region's largest marina is under construction in Natal and golf resorts are waiting to break land.

The state government is also busy laying the groundwork for the coming boom. Natal's new bridge spanning the Potengi river has opened up quick access to the state's less developed northern coastline and the government is working with the Inter-American Development Bank and developers to ensure the region has sufficient infrastructure to handle the expected numbers, with work on roads, water and sewage taking priority.

"Rio Grande do Norte has great natural beauty to offer," says state tourism secretary, Fernando Fernandes de Oliveira.

"But we want to learn the lessons from places like the Costa del Sol and avoid uncontrolled growth. We have an open market here and everyone is welcome but they must obey the rules. We are very attentive to the environmental impact. We do not want to kill the goose that is laying the golden eggs."

Rio Grande do Norte's government is also keen to avoid the mistakes made by the neighbouring state of Ceará. An unrestrained tourism boom there in the 1990s led to the growth of a large sex tourism trade centred on the beaches of the capital, Fortaleza.

Charter flights from Europe packed with sex tourists led to the growth of an under-aged sex industry that has alienated the local population and which the state government has struggled to bring under control.

But when the problem looked to be spilling over into Rio Grande do Norte the state government was quick to act, cracking down hard on paedophile sex tourists and working to limit the appeal of the state for other sex tourists in favour of developing the state as a family destination.

This means developers must get environmental licenses for projects from both the state and federal governments that impose height and density restrictions.

Though tall apartment blocks are springing up along Ponte Negra beach located within Natal's city limits, the planned resorts further along the coast will be low rise villa and apartment developments aimed towards families.

It is here the McGahons are planning their move. Through their partners in Spain they have spent three years building their network in Natal and now have their local legal, architectural and sales team in place "vital when moving into a country like Brazil for the first time".

Later this year they plan to launch a fund for small Irish investors to develop a resort of between 200 and 300 units on the state's northern coast at a site within an hour's drive from the new airport. With this in mind the McGahons are using this trip to line up a local builder and sites.

"The goal would be to provide a return on investment of between 20 to 25 per cent a year over the four years of the fund," says Tom. And with that he's back in the beach buggy and off to the next site.

THE COST OF LAND IN BRAZIL

LAND PRICES across Brazil's north-east vary dramatically depending on which state the land is in, proximity to airports and development potential but European developers have made some very large bets in the region.

In total Portuguese and Spanish developers have already spent €1.5 billion acquiring land in the north-east region. ADIT, the association representing the region's tourist property industry, estimates a further €7.5 billion in foreign investment will flow into the region's tourism industry in the next 10 years. In Ponte Negra, apartments in complexes that include pools and leisure areas overlooking the beach sell for as little as €70,000 with an average rental return of around 8 per cent available.

Prices on such properties have risen by 100 per cent since 2005 with real estate agents saying they expect a return to "normal growth" of between 15 and 20 per cent annually in the years ahead.

On Rio Grande do Norte's little developed north coast, apartments in planned upmarket family resorts - like the Jacumã Beach Resort - can be bought off the drawing board for €81,000. Flats in existing resorts on the state's more developed southern coast can be had for €75,000.