Environmental Impact of Real Estate Development in Northeast Brazil

Interview with George Frug Hochheimer from GreenMind

Can you give us an overview of Piauí? Which are the opportunities and potential of the State?

Piauí State has a huge unmet demand in the real state sector. Due to the crisis in 2008, many companies that were coming here ended up leaving, but the State never stopped growing, entering and discovering new markets, including commodities. Our State always had a demand, but the biggest companies were focused on most consolidated markets located in the Southeast region of the country, so they didn’t come here at that time. Today, we have a big space for real estate development. Piauí has grown, but there are only a few offers. This fact justifies the high prices. For instance, I myself had a hard time finding an office space here, because there were not so many options available.

In my opinion, Piauí is only getting started off. Until recently, many didn’t know about the potential of this State. Now, with mining and agrobusiness, we are headed for growth. It’s a perfect time to invest in Piaui because we have offers that are not met by the market.

Regarding sustainable development, people in other States such as São Paulo feel that Piauí region is not as developed as theirs. In your opinion, is there an increase when it comes to sustainable constructions here?

We were involved in the building of a shopping center in Parnaíba, a coastal city with about 170,000 inhabitants. The entire project is related to environmental issues and uses nature as a constructive element. It was something new, a different concept. The units were sold in a matter of hours. That goes on to show that this concept could be more developed here. It can meet the wishes of investors. But there’s a lack of information here.

In São Paulo and Rio de Janeiro, for example, you have a market already ready to consume these types of projects. There are companies that go there searching for that, because these same companies already operate in a sustainable-based way. This is still very new in Piauí, so our market does not offer that yet. We also have to take into account the costs involved in developing a sustainable building, following all the guidelines for certification. The investment is just not worthy here yet. From the very moment that you attach some sustainability-related elements to a new development, you have to raise the costs up higher and that is way beyond the local market figures. But there’s a huge potential because of our location: we are very close to the Equator line and it’s very hot here. So, if you can develop more sustainable projects, the maintenance costs tend to decrease a lot.

How to develop sustainable projects that are at the same profitable? Is that possible in Piauí?

As I mentioned before, the market here has still a few sustainable developments. Nowadays “Minha Casa, Minha Vida” (a social project) keeps the market growing in that direction. But, overall, the sustainable solutions we have here have not ‘migrated’ to the corporate market and are not a commodity yet.

What are your main projects?

Our office is a social, environmental business generator. There is so much potential in various sectors such as mining and agribusiness in Piauí. The local market is constantly evolving. We are looking at filling the market gaps. The potential of Piaui is limitless. We have real state projects in coastal areas and are always concerned about taking into account local communities and its environmental issues. For instance, we’ve been studying renewable energy resources, because of conditions related to solar insolation and wind. We’ve found out that we can obtain 50% average performance rate in aeolic energy here, whereas in Europe you can only obtain a 20% rate.

In Piauí there are degraded areas due to the lack of care. That creates opportunities for business. It’s part of our job to find out environmental areas that are at risk and also recover those, creating a new type of interaction, taking into account the local community and the market.

For instance, residues-related projects are not only new in Brazil, but also in the world. It’s been a recent concept, only known over the last five years. We have found in Piauí a place to develop residues-related operations. Piauí is open to new things coexisting with its traditional culture. This is an opportunity to bring new business and new paradigms here.

Another project is the marine, located in a degraded area, next to the Luis Correa Port. This governmental project aims to sell its production and bring fuel, not relying on railroads and on Pecém and Suape Ports, located outside the State, which end up bringing the costs higher.

Just to give you context about the marina location: four years ago the airport of Parnaiba was not approved to operate long distances. Since its approval, we found out that the airport is the closest gate to Europe, being only six hours away from Lisbon and six hours and a half from Madrid. Our marina is located in that same region, only 6 km apart. On top of that, because of the trade winds, we can have a navigation route that makes that region only half way between Europe and United States. Also, it’s an interesting place to store boats. If we were to buy the space in a French marina it would cost us a fortune. I have friends that are storing keeping their boats in Turkey, for example.

We are a navigation gateway for Brazil. Between Fortaleza and São Luis, there is no safe port, so we understood that there was a need and potential for that to happen, also knowing that it could create many job opportunities. We developed the project and obtained the environmental license. Currently, we are finalizing the regulation related to Heritage by the Union, which give the rights to use the space for that purpose. The government is participating and there’s synergy in a project that is well-integrated with the local needs. It also creates a tourism opportunity for a region that extends from Jericoacoara (in Ceará) to Lençóis (in Maranhão). Nowadays, this region is only reached by Fortaleza, or Teresina, or São Luis. Why can’t we reach the area through Paranaíba, which is located in the middle? The marina, along with the airport, can create a great gateway for Brazil.

How long would take to have this project operational?

It depends. Because we are dealing with the Federal government, there is a waiting list for new projects. Unfortunately, our project is not considered to be a top priority project. The wait can vary between 6 months to 3 years.

The marina could be operating in 1.5 years. Let’s suppose that we had the right to use it given by the Union today, we could be receiving boats coming from everywhere in one year and a half. But we have already established a partnership with the French Federation of Ports. Also, we are partnering in the area of nautical and environmental education with the Grael Foundation, which is made up of Brazilian navigators, former Olympic champions. This Foundation can serve as a nautical school for the entire region (from Fortaleza to São Luis).

In this region, the nautical life style is very strong. The people make their living out the water. It’s a secular, traditional culture developed without technique. The skills are passed on from parents to sons. And there is a disconnect between their local culture and the tourism demands. The marina will be a nautical education pole in the region as well.

Green Mind is also focused on real state development. We were contacted by a local entrepreneur who has a beach area of 1,000 m2, located in a sensitive area. We came up with an environmental review to understand the structural weaknesses and what was allowed in terms of occupation in the area. We got licenses for two hotels and one high-end townhouse condo by following these guidelines. It was the first large scale project to be licensed in that region.

When things are done in a correct way, it’s possible to reach all the ultimate goals. Lately, we have been looking for investors. Because of the market retraction, we wonder who would be interested in becoming buyers. The European market used to be our consumer four years ago and we hope they will be again within two years. The Brazilian market is focused on consolidated markets. We have to deal with these challenges in our region. At the end, you have a great potential and want to attract investors that can overcome any perception of risk.

There is a lot of development happening in Piauí right now. Is there any concern about the negative impact on the environment with unbridled developments underway?

Yes, we are concerned, especially when it comes to our coastline. There are still untouchable lands here and if we open opportunities to everybody, we’ll see developments that will not be in line with the natural capabilities of our State. But I think that the environmental rules are very rigid, so you cannot obtain licenses if you are acting inappropriately.

In Piauí we have a unique situation: we have yet a lot to do and the rules are becoming more and clearer regarding how to do things in a proper way. Our State is still in its beginnings, which gives us the chance to do what’s right and learn from experiences of other States. If the rules are followed, we have a chance to grow in a sustainable way.

Seven years ago we had no idea about our potentialities, in terms of mining, agribusiness etc. At the present, we have big companies coming here and acting in a correct way from the get go. In the past, an entrepreneur would come here and do things his own way. Nowadays, this is not possible anymore. There’s a lot of potential and no unfair competition.