Day 1 of our trip takes us to Sao Paulo, one of the most populous cities and the most populous metropolitan area in all of the Americas, with over 20 Million people. Sao Paulo is the business and commerce center of Brazil, and on a busy day it would be hard to distinguish it from New York or London. There are great museums, hipstery neighborhoods, cafes, malls, world renowned restaurants, and a modern subway. Sao Paulo represents the Brazil of the future- modern infrastructure, capitalism, technology, and fast food (in Brazil the Habibs or Bob’s fast food chains). It also represents Brazil of the past- income disparity, congestion, and corruption.

When you think of the highest property values in the western hemisphere, what areas come to mind? Perhaps a zip code like 90210 in Beverly Hills, or some high class area of the Upper East Side of Manhattan? You would be correct, and you can add Avenida Paulista in the Jardins section of Sao Paulo to that list. Comprising the adjoining neighborhoods of Jardim Paulista, Jardim América, Jardim Europa, and Jardim Paulistano, Jardins has the priciest real estate in all of Latin America. There are trendy cafes and restaurants, bookstores, supermarkets, and white washed high rise buildings that are dominated by the country’s elite.

In Sao Paulo, housing prices rose 13.9% in 2013, 15.8% in 2012, 27% in 2011, 24% in 2010, and 21.6% in 2009, according to government stats. This is great for real estate investors in Brazil, but terrible for the emerging Brazilian middle class. Prices in Jardins average about 12,000 Reais (the local Brazilian currency) per square meter, or $476 per square foot, and new apartments may go for more than $1,000 per square foot, according to a recent New York Times report. To put that into perspective, the median price per square foot in Miami Beach is $478, according to Zillow. Sao Paulo is a great cosmopolitan city, but it is no South Beach.

As will be noted in many of our posts, the lack of a true middle class hurts Brazil immensely. How else can you explain favelas like Paraisópolis sitting directly alongside a wealthy neighborhood called Morumbi. Could you imagine being able to throw a stone from South Central LA to Beverly Hills? More than likely you will find middle class neighborhoods. Real estate inflation causes price inflation, which causes a weakening currency, and more real estate inflation, and the cycle continues. The wedge created between the rich and poor leaves no room for upward mobility. We will discuss in future posts how education, better government, and sounder economic policies can potentially solve these problems.

You think traffic is bad in New York or Los Angeles? According to Brazilian reports, there is a total of 112 miles of traffic congestion on a typical working day in Sao Paulo. Take a minute to ponder that—- and Sao Paulo is the most modern and well planned city in Brazil. Decades of neglect of the country’s infrastructure and corruption from politicians has left the city bereft of enough roads to accommodate the sprawl. This has forced many of the country’s elite to travel to work via helicopter—- you can see them hovering over your head during the working hours. According to a recent Forbes report, graft and corruption is estimated to cost Brazil 2.3% of their overall GDP every year! That equates to over $53 Billion that should go to roads, schools, and other projects that we take for granted in the U.S.