Brazil’s populist government has given a financial boost to the country’s housing development sector, which will help increase sales of architectural paints, according to Dilson Ferreira, the executive director of the Associacao das Fabricantes de Tintas (Abrafati), Brazil’s national paint manufacturers association, in Sao Paulo. President Luis “Lula” da Silva announced in February plans to finance approximately $8.6 billion (18.7 billion reais) in home mortgages this year, up 36% from the 2005 financing level, in order to help alleviate the national housing shortage, estimated at more than seven million units. At the same time, the government reduced sales tax on paint and other key construction materials used in the housing industry from ten percent to five percent. “These measures certainly will bring results to civil construction, to the paint sector and to society as a whole,” Ferreira said in response to the planned launch.

The architectural segment represents about three-quarters of the country’s estimated one billion-liter paint market, which is now expected to grow more rapidly than the overall economy. This year, Brazil’s gross domestic product is projected to heat up by 3.9%, about a half a point faster than in 2005, according to the Latin American economic analysis team at UBS Warburg, led by Michael Gavin, in Stamford, CT. At the same time, inflation should slow this year to a predicted 4.5% level from 5.6% last year, Gavin indicated.

Retail sales of paint and other housing materials should increase even faster, according to Associacao Nacional dos Comerciantes de Material de Construcao (Anamaco), the national association of construction materials vendors. The president of Anamaco, Claudio Conz, predicted that sales for the country’s 110,000 materials vendors could increase this year by eight percent to ten percent, compared with a growth in sales in 2005 of about 3.5%, Abrafati reported.

Several major materials vendors, like C&C, one of the country’s largest chains, have further inspired retail sales of paint and other products by offering store financing of purchases over a one-year period. Credit card purchases of these materials have doubled over the past few years to about two-thirds of all purchases, according to Jorge Goncalves, the general director of C&C, Valor Economico’s Claudia Facchini reported.

Apart from new mortgages, Brazil’s national mortgage bank Caixa Economica, and other state mortgage financiers, like Sao Paulo’s Nossa Caixa, are offering home remodeling loans over three-year repayment periods, Facchini noted. Brazilian homebuilders are expected to take advantage of the new wave of financing to launch as much as $1 billion worth of IPOs on the Brazilian stock exchange this year, according to one market analyst.

Indeed, Brazil’s real estate market is about to boom, said Gary Garrabrant, CEO, Equity International, Chicago, IL. His company invested $50 million in residential developer Gafisa S.A., of Sao Paulo last year. “The surge in demand for affordable middle-income housing in Latin America has exciting implications in the region,” he said, on announcing the investment. Gafisa, which operates in several key cities in Brazil, launched an IPO in February raising $385 million.