ON the Innovation Trail

Year II Number 4 Jun/Jul 2008 ¤ 3,50

totum

FRANCHISING ALBERT FISHLOW The challenge “Brazil needs an open is to apply economy if it wants to Brazilian joint the technological experience in vanguard” foreign markets

ROCK IN RIO looking outward Festival takes Specialized root in Europe; services are winning next step customers in the China? global arena

globais

José Carlos Grubisich, president of Braskem, with a toy car made of recyclable ethanol- On the based green plastic

í! a Innovation Trail tates Brazilian flair for producing and developing technology sparks admiration and points to new paths for business This is Aç

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o B itt encou rt Jul i o 10 22

INTERVIEW 10 Albert Fishlow 50 Bruno K. Reis and Armando Mendes

ANTENNA 16 Brazilian cinema conquers France Andréa Flores, in Paris

ON THE ROAD 21 Weg goes to India Clayton Netz

SPECIAL REPORT 22 Rock in Rio takes root in Europe Adriana Setti, in Madrid

REPORT 38 Brazilian services find their niche Flávio Carvalho Serpa p e a m p ol i n/Hy ulo P a ulo P

4 P I B COVER STORY On the 28Innovation Trail A select group of Brazilian companies is showing the world the Brazilian way of producing and developing technology By Armando Mendes /AFP Li m a o Ma u ri c i o

marisol in Milan OPINION 42 Mauricio Oliveira, in Jaraguá do Sul 64 Don’t blame ethanol José Carlos Hausknecht Winning the Workout War 45 YOUR CAREER 68 The important of thinking globally stefanini’s Second Great Leap Márcia Rocha 46 lucianne Carneiro, in London FINANCE America falls for Açaí 72 emerging markets make multinationals smile 48 Adriana Maximiliano, in Washington Adriana Wilner

new challenges for franchising gLOBE-TROTTER 50 75 Mônica named Ambassador for Tourism

NEW MARKETS EXPRESS TOURISM 54 south-South success silences the critics 80 The best of London, in a few hours Nara Vidal, in London What we learn from Chile 56 Nely Caixeta, in Santiago do Chile IN TRANSIT 82 my first time around the world BOOK REVIEW Pierre Schürmann 60 The revolution of the “new multinationals”, by Andrea Goldstein

P I B 5 Aviso Revista PIB tr.indd 4 17/6/08 15:40:02 Aviso Revista PIB tr.indd 5 17/6/08 15:40:05 Letters

MAuRICIO dE SOuSA soccer star ronaldinho is leading an international attack by Brazilian cartoon characters PIB is an innovative publication, one the market has THE SECRETS OF SABÓ Buying factories been waiting for. The excellent stories and stylish in europe was the design are a tribute to the competence and merit of internationalization: key to keep on growing in Brazil your editors and collaborators. Just a pity you didn’t REAL ESTATE start years ago. CAN YOU The promise Ruy Coutinho, President of LatinLink Consultoria of big profi ts is attracting Brasília (DF) AFFOrd TO European Miss OUT? investors vale to buy Anglo-swiss I would like to know if there’s a digital version of PIB The attempt by mining giant s t fi e n e b competitor xstrata sparks a debate about the No. 1 available? I saw the magazine when I was doing CAN YOU and risks of Brazilian companies investing abroad some temporary work at the Brazil Institute, in the AFFOrd TO Woodrow Wilson Center in Washington. Now I’m at Miss OUT? the Council on Competitiveness and would like to use globais some of the PIB stories in a small book I am publishing. Jonathan Karver, The Council on Competitiveness Washington, USA — Digital versions of PIB in English and Portuguese are available for download on our site

R$ 10,00 www.totumex.com.br Year 2 Number 3 Apr/May 2008 I am a graduate in International Relations at the GrEENinternational sTrATEGiEs success how sustainability can bring totum UNESP/Franca (SP) University. All through my course, the internationalization of companies in emerging economies was the focus of my studies and research, Increasing the global value including my final thesis in 2006. I collect information of the Brazilian brand, and about the subject and was very pleased when I international recognition of the discovered PIB magazine. Now I’m a loyal reader! Diego José Pessoa creative quality of our products, Franca (SP) depend more on things that we as a country can do, and less Recently I had the opportunity to read PIB, a magazine I hadn’t seen before. Just one comment – impressive. on anything else. Your precise I particularly noted the quality of the stories. and wide-ranging report on Carlos Ferreirinha, Director President of MCF Consultoria Mauricio de Sousa Produções São Paulo (SP) made me proud to be able to be a A great magazine, offering a new perspective. Very part of this process of spreading informative and varied, with fluent and pleasing text. the word. Congratulations to The layout is stylish and attractive. Congratulations – and may PIB flourish! PIB magazine for encouraging Rondes Machado Brazilian potential and for the Rio de Janeiro (RJ) space dedicated to my ‘kids’. I just received your magazine – it’s a really good Mauricio de Sousa product. Congratulations! President of Mauricio de Sousa Produções Mirian Guaraciaba, Presidential assistant, Petrobras São Paulo (SP) Rio de Janeiro (RJ)

Please address letters and e-mail to: The Editor, PIB – Avenida Brigadeiro Faria Lima, 1903, Conj. 33 – São Paulo, SP, 01452-911 – Brazil; [email protected]

8 P I B Editorial

Totum Excelência Editorial Clayton Netz Nely Caixeta

PIB BRAZILIAN COMPANIES GO INTERNATIONAL A TWO-MONTHLY MAGAZINE FOCUSING ON INTERNATIONAL BUSINESS AND ECONOMICS, FROM TOTUM Listening to Editors Clayton Netz • [email protected] Nely Caixeta • [email protected] Executive Editor Our Readers João Paulo Nucci • [email protected] Contributors to this edition Adriana Wilner, Armando Mendes, Arnaldo Comin, Bruno K. Reis, Flávio de Carvalho Serpa, José Carlos What does a publication need to interest its readers and Hausknecht, Márcia Rocha, Rebecca de Moraes, Pierre Schürmann e Vicente Vilardaga. Barcelona: Adriana keep them anxiously awaiting the next edition? That’s Setti. Florianópolis: Maurício Oliveira. Londres: Lucianne Carneiro e Nara Vidal. Nova York: Deborah Câmara the basic challenge facing the editors of every new Batista e Eduardo Graça. Paris: Andréa Flores. Porto Alegre: Arlete Lorini. Washington: Adriana Maximiliano. edition of every magazine, even the most traditional. Design Luckily, our task at PIB has been made much easier thanks to the en- Maurício Fogaça / Karina Gentile • Página Mestra Cover thusiastic reaction of our readers in Brazil and around the world. This Julio Bittencourt (photo) and Marcelo Calenda (post-processing) edition – our fourth, since PIB was launched last year – highlights the Photo Editor qualities that you, the reader, have told us makes PIB a unique publica- Mônica Maia / Carla Romero • Revelar Brasil Copydesk and Preparation tion, one that focuses on the internationalization of the Brazilian econ- Silvana Marli omy. This theme is examined from several differ- Translation Brian Nicholson ent angles in the following pages, but always taking care to combine rigorous reporting standards with ADVERTISING Arines Garbin • Consultant straightforward writing and an attractive layout. INTERNATIONAL AND BRAZIL (except Rio de Janeiro) Did you ever wonder why Brazil, home of avia- (55-11) 3097.0849 [email protected] tion pioneer Alberto Santos-Dumont, should have Av. Brigadeiro Faria Lima, 1903 cj 33 Jardim América - 01452-911 - São Paulo - SP made so little of the genius of its greatest inventor? Rio de Janeiro Paulo Avril • [email protected] It’s only now, long after that epic flight of the 14-Bis, (55-21) 2557.8580 Rua Silveira Martins 156/704 - Flamengo - that Brazilian innovations such as the conversion 22221-000 - Rio de Janeiro - RJ of sugarcane into renewable energy are sparking BrasIlia Iracema Ferreira Tamanaha • [email protected] admiration (and surprise) around the world. For the (55-61) 3245-2391 – cel. (55-61)9115-7196 SQS 311, bl.K apto.608 - 70364-110 - Brasília- DF first time, Brazil’s image is being associated with technology. That’s great for business, and our cover story PRINTING Editora Parma Ltda examines innovation as a factor of competitive advan- Av. Antônio Bardella, 280/310 - Guarulhos - SP - 07220-020 tage. The story is by reporter Armando Mendes, who DISTRIBUTION IN BRAZIL Adriana (above) Support: Edicase - www.edicase.com.br Exclusive distributor: Fernando Chinaglia also joined Bruno Reis for a fascinating interview with and Nara: Mailing: Postal House Rua Benta Pereira, 431 – São Paulo – SP US economist Albert Fishlow, of Columbia University. talent and local 02451-000 – www.postalhouse.com.br Additionally, this edition brings you the entrepre- knowledge Portugal Malta Distribuição neurial acumen of young businesswoman Roberta Av. Paulista, 2001 cj. 815 - 01311-300 - São Paulo (SP) - www.maltainternacional.com.br Medina, who’s taking the Rock in Rio brand to major cities around the world. The story is by talented reporter Adriana Setti, a resident of Bar- Administrative Consultant Luiz Fernando Canoa celona for the last eight years. Back in 1985 Setti was just a little girl EDITORIAL SUPPORT and mad about Blitz, a Brazilian band, when she watched the first edi- Izilda Peterle tion of the Rio festival on TV. And a new feature this month is the “Ex- EDITORIAL CORRESPONDENCE Av. Brigadeiro Faria Lima, 1903 cj. 33 - press Tourism” section, offering tips of things to do in cities around the CEP 05426-100 São Paulo SP [email protected] world for the traveler in a hurry, drawing on suggestions from Brazilians Signed articles do not necessarily represent the opinion of the editors. Totum reserves the right to edit or summarize letters. who live there. First off is London. Our guide is Nara Vidal, from Minas RESPONSIBLE JOURNALIST: Gerais State, who has lived in London for seven years and is a partner in Nely Caixeta (MTb 11 409) PIB – Brazilian Companies go International the Brazilian Gateway real estate consultancy. is published by Totum Excelência Editorial - Av. Brigadeiro Faria Lima, 1903, cj. 33 - CEP 05426-100 - São Paulo, SP (55-11) 3097.0849. [email protected] THE EDITORS Print run for this edition Portuguese – 17,000 • English – 8,000 Print run audited by PricewaterhouseCoopers P I B 9 Interview • Albert Fishlow

Open Economy is Shortest Path to Prosperity For this American economist, the internationalization of the Brazilian economy is fundamental for the country to grow and become part of the technological vanguard By BRUNO K. REIS and ARMANDO MENDES

n almost 50 years dedicated to studying who is currently working on a book covering Bra- Brazil, Professor Albert Fishlow has seen zilian history from the 1985 New Republic. and helped to interpret the most varied Today, crisis is more a concern for Americans kinds of crises in the country, including like Fishlow, who until last year was director of traumatic political changes, runaway in- the Center for Latin American Studies at the Uni- Iflation, the introduction of new currencies and versity of Columbia in New York and is now pro- all other manner of tropical torment. Today, al- fessor emeritus at the institution. To be honest, though he might harbor some reservations about though, Fishlow isn’t all that worried about the Brazilian economic policy and doesn’t place too prospects for the American economy. “The roots much store by the recent oil strikes, Fishlow is of the crisis have been resolved,” he said. In this looking at a very different scenario: “Brazil is exclusive interview, granted to PIB at the end of achieving its longest period of export growth May in the São Paulo headquarters of Unibanco since the end of the Second World War.” Inte- – now headed by Pedro Malan, as president of the gration into the world economy is something Administrative Council, and Pedro Moreira Sall- new in Brazilian experience, he says, and must es, as executive president, both of them among be stimulated if it is to continue. That’s the only Fishlow’s innumerable Brazilian students – he way that Brazil will be able to stand up to the praised the work of US Federal Reserve Presi- other BRICs, and especially dent Ben Bernanke in over- India and China. “With glo- The roots of the coming the worst moments balization Brazil can have ac- of the crisis. cess to the progress of other US crisis have been countries and remain in the resolved. Everyone now What’s your reading of the first echelon of technological understands that the US crisis? progress, but when the coun- Nobody speaks about the try closes its doors, it loses this Fed will not allow the US crisis any more, thanks possibility,” said the professor, financial system to fail to the rapid reaction of the

10 P I B Fishlow: 50 years of studying Brazil, and a new book about the country’s recent history o B itt encou rt Jul i o

P I B 11 Interview • Albert Fishlow

Federal Reserve. The critical point stay in their home. Things looked very was the Fed’s decision in March to grim to begin with, but that has been guarantee Bear Stearns’ loans, so changing. There’s a conservative ar- allowing JP Morgan to take over gument that says the crisis will return, the bank. This was unexpected, we because nobody has lost what they never had an intervention like this should have lost. But the other side before. Fed President Ben Bernanke of the question is the consequence of said at the time that he was ready the crisis for society as a whole. The to defend the financial system and indirect impacts, like leaving people after that, the market calmed down. without their own home, do not fig- Today there’s no real fear of failure ure in the conservative calculation. in the banking system, despite the The biggest problem for the United situation in the credit market. Ber- States today is the continued deficit nanke is a specialist in the Great De- in the current account. Even though pression of the Thirties, and he cer- the dollar has fallen by around 20% tainly took this decision to prevent a in value, the current account deficit repetition of that experience. is around 6% because of the increase in the price of oil and in spite of the Fishlow and Moreira Salles at Unibanco headquarters: professor and student So the crisis is over? fall in imports of consumer goods. Ac- There are rumors, and there will al- cording to conservative theory, this Washington has put pressure on Chi- ways be speculators seeking to take problem is resolved by currency de- na to devalue... advantage of possibilities in the mar- valuation which reduces the demand Right, and China is adjusting its ket. But the roots of the crisis have for consumption and increases exports. exchange rate more quickly than been resolved, for the simple reason But we are talking about a country that before. But what I’m saying is that that everyone now understands that is central to the world economy and is we need to look at this as an interna- the Fed will not allow the financial the world’s principal debtor. We need tional question, and not just one for system to fail. to think about the consequences of the United States. It’s going to take a devaluation of around 40% for the some time for the central banks of The Fed was criticized for saving the US domestic market and for coun- other countries to realize this. American banks, people said it only tries that hold US bonds. Japan and acted in the crisis and before that let China each have around US$1 trillion At the start of the crisis, people wor- the banks do as they pleased... in bonds. The world is a very differ- ried it would spread to other countries, Saving them was necessary. The Bear ent place from 25 years ago, and we but this hasn’t happened. Why not? Stearns shareholders did not lose as need to find other ways to deal with The Fed’s quick action in reducing much as they would have done if the the problem. Obviously the United interest rates avoided contagion. bank had failed, but the financial sys- States has to do something to limit Between September 2007 and April tem as a whole benefitted from the imports. One good thing would be of this year the discount rate fell decision. It was better than seeing currency appreciation in China and from 5.25% to 2.0%. It was a rapid people throw themselves out of the some other countries. fall that brought comfort to those window, like in the Crisis of 1929. who didn’t know what Bernanke could do. He had just substituted What needs to be done now that there I would doubt that Alan Greenspan. In fact, I think it is no more risk of the financial system Brazil will become was better having Bernanke at this collapsing? moment, because of his knowledge I’m optimistic, because in addition to a major petroleum of the Great Depression. the Fed acting, we have Congress deal- exporter. Nobody ing with the problem of people who knows yet what will Has the emergence of countries that can’t pay their mortgages. The idea have become major producers and con- is that the value of a person’s debt be be the real cost of sumers, like China and India, helped reduced to ensure that he or she can producing subsalt oil to soften the effects of the crisis?

12 P I B os /AFP r s Hond o B itt encou rt Jul i o Chri Fishlow and Moreira Salles at Unibanco headquarters: professor and student Bear Stearns: the Fed prevented a bank failure, avoiding a worse outcome

Yes, but that was already happening greater demand for ethanol and en- ral resources, but the future doesn’t before the crisis. Since 2005, 50% of courage the search for new petro- depend on them. annual world growth is generated leum sources, and both these trends by developing countries. Everyone can already be felt in Brazil. There’s You said that diversification of the remembers the 1980s and the time also the question of biotechnology economy is a necessary condition for it took to get out of the difficulties and cellulosic ethanol. This kind of lasting and continuous development. that started in 1982. But we forget fuel is already technically viable, the How do you rate the recent situation that the world economy recovered question is the price. With research of Brazil? rapidly from the crisis of the 1990s, and ongoing investment, I should Despite the rise in commodity pric- with the problems in Mexico, Asia, imagine that in five years the United es, Brazil remains a very diversified Russia, Brazil and Argentina. And we States will have stopped producing exporter. The country is exporting got out of that trouble quite quickly ethanol from maize. a greater quantity of products to a thanks to the capacity of the United greater number of trading partners. States to keep on growing through Brazil has announced some major oil Embraer is one of Brazil’s biggest that period. Today, even with both finds. What do you make of that? exporters and is managing to com- China and India still growing, we I would doubt that Brazil will become pete internationally by virtue of have a great increase in the price a major petroleum exporter. Nobody also being a major importer. It has of petroleum and commodities knows yet what will be the real cost been using the laws of comparative to complicate matters. The prob- of producing subsalt oil like the new advantage to get to where it is to- lem starts with petroleum. Asian discoveries. Canada has the potential day. The same is happening in the countries, including China, have a to produce a lot of oil from bitumen, automotive sector, which continues problem of inflation, which is also or tar sands, at a cost of around US$60 exporting even with the domestic occurring in Latin America and the per barrel, and that might be lower market growing strongly. The diver- Middle East. than Brazil’s cost. President Lula said sification of customers and exports that Brazil will be the world’s third sources represents a foundation that Do you see any solution to the prob- largest producer in the future, but will continue to be important for the lem of petroleum? being a major producer is not syn- country’s development. In some ways, the rise in the price onymous with development. To see of oil is a solution. First, because that we just need to look at Venezuela Brazil has just announced a new in- it reduces consumption. Second, and even Saudi Arabia, which have dustrial policy. What are its strengths because the high prices stimulate not diversified. It’s good having natu- and weaknesses?

P I B 13 Interview • Albert Fishlow

In my view, it’s good to designate exports as an essential element, although it might offer excessive sub- sidies for some products. I also see the investment goal of around 21% of GDP in 2010 as insufficient to achieve continued growth of 5% a year.

Why is the investment goal too small? Because the country needs major infrastructure investments. If you do the sums, Brazil needs an investment rate of around 25%. What’s more, the country is today working at about 83% or 85% of its productive o P i n h e ir o abi o capacity. There’s not much margin F to increase production, without new Oil prices: the problem could be a solution, with the search for alternatives investment. I also think the primary surplus could be raised, so that the There has been great progress, start- ready see Chinese manufactured government becomes a net saver. But ing with the return to democracy goods in Brazil and Brazil want- this idea faces a certain resistance (in 1985). When I arrived in Brazil ing to compete by exporting. The within the Brazilian government. for the first time in 1965 there was competition will soon be greater a military government. So that’s a because Chinese cars are starting The Asian export boom was due main- fundamental change. The main ad- to penetrate the US market. Soon, ly to internal saving in those countries, vances in the last 15 years have been the Chinese will be competing and some people argue that Brazil the control of inflation, privatiza- with Embraer. Even India, which should follow this model. What do tion and the growth of exports. Bra- has made great investments in ser- you think? zil exported very little. At the end vices, will start to produce cheap In 1959, Brazil’s savings rate was 19% of the 1980s, Brazilian exports as a cars. Brazil will have to compete of GDP. Half a century later, it still is. percentage of GDP were the same with the world and must focus on India and Chile are both above 25%, as those of Burundi, Rwanda and the sectors where it has dynamic and China is around 45%. Burma. Now the country is start- competitive advantages. ing to export continuously and is What lies behind Brazil’s inability to achieving its longest period of ex- Which sectors will these be? save? port growth since the end of the That will depend on technological Celso Furtado used to say that it’s the Second World War. Before, there progress. If there is investment to- fault of the Brazilian rich who want was always periods when exports day in Brazil in science and technol- to follow the US high-consumption grew one year, then fell again the ogy, it is nevertheless small in com- model. This could be resolved if following year. So this is a new expe- parison to that of China and India. we started to think in terms of the rience for Brazil. The critical point To have advanced technology it’s es- state as the central element of a new is education, which is something sential to have a well-educated labor strategy. But it must be central in the else that we can learn from Asian force and invest in science and tech- sense of saving resources, to permit countries, in addition to their high nology. You also need globalization, the expansion of investments, and savings and investment rates. because with globalization Brazil that’s not happening. Government can have access to the progress of consumption has grown a lot. How to you see Brazil with respect to other countries and remain in the the BRICs? first echelon of technological prog- What recent changes in Brazil do you Brazil, India and China will be- ress. When the country closes its see as most important? come competitors. You can al- doors, it loses this possibility. z

14 P I B www.maisbrasil.gov.br

All over Brazil you can observe initiatives that are reducing social inequalities and improving the quality of education. You can also see infrastructure works that are strengthening the economy and generating jobs as a result of the Federal Government’s work in partnership with the states, municipalities, and private enterprises.

Here are some examples:

• In 3,432 municipalities, sanitation and • 214 new federal technical schools have been urbanization projects funded with resources from established to provide quality vocational training the government’s growth acceleration program to over 500,000 students. are under way to improve the population’s • 46 million Brazilians now live with more dignity quality of life. thanks to the “Bolsa Família” program. • The oil and gas industry is growing through the • 2.5 million families now have electric power construction and modernization of refineries, to produce and to live better thanks to the gas pipelines, and the new Rio de Janeiro “Luz para Todos” program. Petrochemical Complex. • Over 1.5 million family farmers now enjoy • 40 million students benefit from financial credit, technical assistance, and security under the resources invested on improving the quality of family-farming assistance program “PRONAF”. basic and secondary education.

MORE BRAZIL FOR MORE BRAZILIANS Antenna

Paris Entranced In less than 10 years, Brazilian cinema has been completely reinvented and is now a promising industry not just for domestic consumption, but also on the international circuit. Brazilian actress Sandra Corveloni took top honors at the Cannes Festival for her role as Cleuza in Linha de Passe (2008) by Brazilian co- directors Walter Salles and Daniela Thomas, while in Paris the 10th Brazilian Cinema Festival saw no less than 45 movies draw some 8,000 fans to three theaters during the three-week event, held May 7 through 27. The audience was 90% French, 10% Brazilian and the 150,000 Euros cost was covered by box office, partnerships and official French support. The event is staged by the Jangada association, created 1998 in Paris specifically for this purpose. “In the beginning, the Brazilian movie industry was still getting back on its feet, so production was low and there was not much variety,” said Brazilian moviemaker and event organizer Kátia Adler, who has lived in Paris for 24 years. “It was only after 2003, with the new boom in the Brazilian cinema, that we started to have more options.” Jangada currently has three full- time staff and hires four reinforcements two months before the festival. This year’s winners among the eight contenders were Deserto Feliz (Happy Desert, 2007) by Paulo Caldas and Mutum (2006) by Sandra Kogut. There was also a special screening of landmark movies and documentaries, for example Glauber Rocha’s 1967 epic Terra em Transe Prestige: Sandra Corveloni (aka Earth Entranced,

was voted best actress Land Entranced or Land E /A at the Cannes Festival, in Anguish). for Linha de Passe (Andréa Flores, in Paris) go Que ir o z T ia go

I note with a certain indignation that many of the fingers now pointed accusingly at the clean energy of biofuels are themselves dirty with oil and coal. President Luiz I n á c i o L u l a d a S i lva during the June meeting of the UN’s Food and Agriculture Organization, in Rome

16 P I B Milhazes is Worth a Million! Brazilian art is flying high on theUS gallery circuit. Rio de Janeiro painter Beatriz Milhazes’ canvas O Mágico was knocked down at Sotheby’s in New York to Argentine magnate Eduardo Constantini for a cool US$1 million, a new record for a work by a living Brazilian artist. Milhazes, hailed as part of the so-called 1980s Generation, in fact broke her own record of US$465,000, set last October for Laranjeiras. Behind the success of Milhazes lies a general resurgence of Latin American art in the United States in the second half of the 20th century. Mexican painter Ruffino Tamayo’s Trovador was sold for US$7.2 million at the end of May making Tamayo, who died 1991, the most expensive artist born south of the Rio Grande. The previous record was held by Frida Kahlo (1907-54), also Mexican, whose painting Raízes went for US$5.6 million two years ago. The New York Museum of Modern Art also got in on the trend with a retrospective dedicated to the work of artists from the region, something gem Im a gem it last did 40 years ago. For next year, MoMA is planning a retrospective for Mira Schendel (1919-1988), a Swiss artist who lived in Brazil. Another Brazilian artist currently receiving Beatriz Milhazes: ha Ga udé ri o/Fol massive publicity in the US is Hélio Oiticica (1937-1980), riding the Latin thanks to sponsorship by Petrobras. wave in the US o An t ôn i o (Eduardo Graça, in Nova York)

Pure Beauty Fifteen Brazilian cosmetics companies took their creams and scents to Beautyworld Middle East, held in May in Dubai, in the United Arab Emirates. The annual fair is generally seen as one of the industry’s most important, because it targets the red-hot Middle East market. Centerpiece of the Brazilian stand was the Brazilian Lifestyle Lounge, an area with typical clothes, handi- crafts and foods. The Brazilians Beautyworld notched up a respectable average of in Dubai: 15 US$680,000 of business per com- Brazilian firms pany, with participants including took part in the L’Acqua di Fiori and Skala.

cosmetics fair ha ndou t (Rebeca de Moraes)

P I B 17 Antenna

Natura’s Green Guide to Santiago Brazilian cosmetics company Natura sponsored the first Green Map of Santiago, a 200-page guide packed with information about natural resources in the Chilean capital and surrounding region, plus addresses for recycling, organic fairs and everything else that a citizen The São Paulo-Macau Connection concerned with sustainability needs to know. The initiative was inspired The São Paulo companies interested in by New York’s Green Apple Map, Commercial breaking into the Chinese launched in the 1980s. “This map Association (ACSP) market. Macau returned represents the collective dream of a announced plans to to Chinese control in better city,” said Guilherme Peirão open a representative 1999 and is enjoying Leal, co-president of Natura’s office in Macau in June. explosive growth thanks Administrative Council, during a The idea is to create a mainly to gambling, launching ceremony in June. It goes point of support in the which is legalized in the without saying that the guide is former Portuguese colony region. Macau casinos printed on recycled paper. for small and medium take in US$10 billion a (Nely Caixeta)

Dornelles, of Tecno Logys: focus on development of ideas New and Innovative

It’s not enough to be innovative. A company must have growth potential and be an example for its sector and for society. These were the criteria used by Endeavor, an

gem Im a gem international not-for-profit

ha /Fol institute focused on promoting entrepreneurship, to select Nonononon noonononononoonon nonon onnoon ononononon

ell i G u at two Brazilian companies

o Cai o among the 15 new members

18 P I B Macau: traces of Portuguese culture survive in the “Las Vegas of the Orient” ha ndou t Charlton: Brazilians wanted London With year, compared with US$7 with Brazil. Although billion in Las Vegas. The just 1% of the local Open Arms ACSP’s interest in China population still speaks started with two missions Portuguese, various Michael Charlton, chief in 2006 and 2007, Portuguese customs executive of Think London, a after which the Chinese have survived and this business attraction agency for government offered helps make the place the British capital, made his help with setting up an seem more familiar for fourth visit to Brazil in June office, and the Brazilian Brazilians. Also, the legal hoping to boost the rhythm of organization opted for system is very similar to Brazilian investments in the Macau based partly on that of Brazil. United Kingdom. To help with the the cultural proximity (RM and AC) contacts, the agency divides an

c Wo rr ell Mar c office with UK Trade & Investment in the same building as the British Consulate in São Paulo. Brazil was also included in the Touchdown London project which of its Empreender Institute. with ancillary components to encourages migration of small They are Ângelus and Tecno avoid the need for constant companies to the city. “People Logys, respectively a maker reworking. Company President think London is strong only in the of dentistry products and Valério Dornelles said that financial sector,” said Charlton, a company dedicated to within Endeavor, Tecno “but we want Brazilian companies solutions for civil construction. Logys would focus more on to discover the other sides of Ângelus has exported dental developing ideas, and not the capital.” Sectors such as IT, pins for 13 years to clients in on carrying out projects. The pharmaceuticals, biotechnology, 53 countries. With Endeavor’s two young companies will the creative industry, petroleum, help, it hopes to expand its receive full-time support gas and mining are among the exports. Tecno Logys’ main from Endeavor, including main targets for Think London, product is a range of wall advice about business, which is also preparing to give construction blocks that come communications and legal support to business opportunities ready prepared with spaces matters, always with the aim of that will arise as a result of the for piping and wiring, and growing internationally. (RM) 2012 Olympic Games in London. (Lucianne Carneiro, in London)

P I B 19 Antenna

Paulo Cury (left): his hats grace Indiana Jones since 1981 Indiana Jones: that Hat is Brazilian! Much has changed in the 27 model, some for filming, others for dis- years since the first of the classic In- tribution to film exhibitions around the diana Jones movies. The archeologist- world. The simple-looking hat, brown adventurer played by Harrison Ford is with a darker band and a little crushed still brave, living dangerously and us- at the front, has ended up being good ing the same Brazilian hat. From the business for Cury, which is run by busi- very first movie, in 1981, to the recent- nessman Paulo Cury. He favors the ly-launched fourth adventure in the same hard-man style as the film char- Is t o É series, Indiana Jones has worn hats acter and doesn’t like to boast of his created by Cury, a tradition factory in successes, so much so that he doesn’t Campinas, near São Paulo. It all started use this famous customer to promote when American producers visited Brazil the company in the media. Today Cury

ia n ti no/Agênc C ons ta to learn about the production process makes hats from felt, rabbit skin and and to spell out the necessary charac- sheep’s wool, plus caps, berets, top lo M u ri lo teristics for the star’s hat, today so fa- hats and others. In 2004 the company mous. Cury started production in the bought a clothing producer and today dark, without knowing his hats would sells Cury Jeans, a brand which includes be used in an international blockbust- jeans, jackets and shirts. Who knows, er movie. The movie company normal- Indiana Jones might one day appear ly orders up several copies of the same wearing Cury from head to toe. (RM)

Business is the Name of the Game Carmen: strategic It’s not in the meeting room that a company’s financial simulations, questions are resolved. For Vehuel, a specialist in developing now in Europe strategic simulation games, the playing board is the right place to resolve this kind of question. The company develops training games for major clients in Brazil, including Itaú, Riachuelo, Johnson & Johnson and Kaiser. And it has taken many of its creations to other t ndou

countries, including Mexico, El Salvador, Colombia, Venezuela, a os: H

Chile, Argentina and the United States. Now, says Carmem t o h

Manzano, a partner, the goal is to conquer the European market. P

20 P I B On the Road • Clayton Netz Recent moves by Brazilian companies overseas EG /W overseas investment. The

Building ha ndou t subsidiary of the Randon in BRICs group will build its first n WEG, one of foreign factory in the city the world’s larg- of Pinghu, 120 kilometers est electric mo- from Shanghai, one of the tor manufactur- leading industrial centers ers, is getting in China. ready to set foot in India via the Embraer in construction of a WEG’s factory in China: Florida new factory due just Russia is missing n The Brazilian plane- to cost an initial maker has chosen the US$50 million. Located in Jaraguá facilities in Argentina, Mexico, city of Melbourne, in Florida, for do Sul, Santa Catarina State, Portugal and China, in addition to its first airplane assembly plant in WEG aims to start operations in Brazil. It just needs a plant in the developed world, to produce China at the end of 2009. The Russia to have 100% coverage of Phenom 100 and Phenom 300 company already has production the BRICs. executive jets. The decision came some months after Embraer closed a deal to supply 100 of the Vale in Arabia of this year. The project has been Phenom 300 jets to Ohio-based n Brazil’s mining giant is carried forward under the strictest Flight Options, on a contract worth forging ahead in its strategy of secrecy, but it’s certain that the US$1.2 billion. expanding geographically and country to receive the investment diversifying activities. Vale has is not one of the company’s current Itaú Goes Shopping agreed a contract to build an iron markets. Based in Caxias do Sul, Rio n The Itaú group has agreed ore pelletization plant in Sohar, Grande do Sul State, the company to pay US$16 million for the in the northern region of Oman. has factories of its own, or joint entire capital of Unión Capital, The deal was confirmed by the ventures, in Brazil, Colombia, South a private pension company in Oman minister of commerce Africa, Portugal, Argentina, Russia Uruguay, a country where the and implies total investments of and India. In 2007, Marcopolo billed Brazilian banking group already US$1 billion, with production due US$1.2 billion. has 16 branches. The deal was to start in 2010. announced in April. The next step Randon Goes East is likely to be in the Arab world. Under Lock and Key n Unlike its Caxias do Sul neighbor Itaú plans opening a commercial n Marcopolo said it will announce Marcopolo, the Fras-le brakes and bank office in Abu Dhabi and a the location of its new overseas bus brake lining maker has already subsidiary of its broker in Dubai, factory at the start of the second half announced the location for an both in the United Arab Emirates.

In Brief... Flush with US$34 million from the Brazilian Development Bank, BRQ of Rio de Janeiro, an IT services company, has taken control of New York-based ThinkInternational • Vulcabrás has formed a joint venture with Adidas to make and distribute Reebok products in Argentina. Local production will be handled by Indular, a Vulcabrás subsidiary located in Buenos Aires • Probiótica, Latin America’s market leader in diet supplements, has just opened a subsidiary in Amsterdam, Holland. Goal of the company based in Embu das Artes (SP) is to strengthen its brand and increase sales in the European market • Aquamec, located in Itu, in São Paulo State, has taken over installation work at a sewage treatment plant being built by Odebrecht in Luanda, capital of Angola.

P I B 21 Special Report

Rock in Rio Lisbon: 90,000 people on the first night of

Ze r o the third edition of the festival Agênc ia Yo voy a Madrid The Rock in Rio razil was never quite the same showbiz stage. It also helped define a again, after the first trium- new generation, as artists and public music festival made phant Rock in Rio festival of alike celebrated the country’s return to history in Brazil and 1985. In Brasília, on the 15th democracy. Many dressed in the nation- migrated successfully of January that year, Tancre- al colors of green and yellow, or waved Bdo Neves was chosen by Congress to be Brazilian flags and chanted the name to Portugal. Now the first civilian president after 21 years of the new civilian president. The fes- events producer of military dictatorship, while in Rio tival’s investment of US$6 million might Roberta Medina is de Janeiro 1.3 million people from all sound modest by today’s standards, but over the country waded through mud then it was enough to bring the cream taking it to Spain to hear 30 different artists and bands. of international rock and roll to Rio for By Adriana Setti The 10-day festival in the Jacarepaguá the first time ever. Rod Stewart, James suburb put Brazil firmly on the world Taylor, AC/DC and Queen shared bill-

22 P I B Showbiz in the blood Roberta Medina runs the festival created by her father

Roberta Medina started work when she was just 17 – and all because of Mickey Mouse. Daughter of the president of the Artplan advertising agency, she met the agency’s marketing director by chance in a shopping center and started analyzing in detail one of the agency’s recent campaigns, which featured Mickey. So spot-on were her comments that a few days later, she received an invitation to work in the marketing department, and later gained experience in various other areas of the agency. When she was just 21and had recently graduated in Communication at Rio’s Catholic University, Medina was surprised when all of a sudden, in the middle of a meeting, without any previous warning, her father Roberto named her as production director for the 2001 Rock in Rio festival. “I was speechless, and I started arguing with him in front of every- body,” she recalled. “But later I caught the events bug, and I’m hooked for life.” Medina has her father’s communications skills. Always elo- quent, she doesn’t lose the thread even when constantly inter- rupted by her cell phone, which seems to happen every couple of minutes. She met with PIB in her office in the Palácio de los Deportes in central Madrid, on what happened to be the holiday for Saint Isidro, patron saint of the Spanish capital. Now 30, but looking at least five years younger, a c t o r y Medina has no immediate plans to return to Brazil. “I’ve m F Dr e a m adapted totally,” she said, proving the point by letting slip various Lusitanian expressions like os miúdos when refer-

ring to children. Her integration into ha ndou t Roberta: living Portuguese culture was speeded up with the help of a local boyfriend

on the Lisbon- To via ns k y/ Madrid air shuttle during her first two years in Lisbon. Da n i el a ings with the top Brazilian acts of is now part of the InBev group. The but no longer does the festival mu- the time: Blitz, Kid Abelha, Elba Ra- event was conceived, in marketing sic offer a background lullaby for a malho and Erasmo Carlos. It was a terminology, as a “mega taste-in”. At snooze. Now, as executive vice-pres- potpourri of styles that blended to that time there was no sound, lighting ident of Rock in Rio, the daughter generate a collective ecstasy. And or stage equipment of the necessary of the man who invented the mega- the most sought-after t-shirts and proportions in Brazil, so everything show is lucky to get five hours’ sleep sticker of that summer carried the had to be imported or invented. a night. Roberta is responsible for slogan of the festival: “I’m going!” While her father was making internationalizing the event. After The brains – and nerves – be- history, and while Freddy Mercury, three editions in Rio, in 1985, 1991 hind the first such mega-event in stripped to the waist and wearing and 2001, it was held for the third the Southern Hemisphere, with skin-tight black and white trousers, time in Lisbon at the end of May this three times the public of the legend- watched in awe as the largest crowd year and will take place for the first ary Woodstock festival of 1969, was of his career bellowed out “Love of time in Madrid at the end of June. advertising mogul Roberto Medina, My Life”, a six-year-old girl with Expectations were to bring together father of Roberta and president of the greased-down New Wave hair wan- 100,000 people at each event. Artplan agency. Originally, the event dered through the VIP boxes, oc- was conceived as a way to promote casionally catching a cat-nap. Now, Bad Girl Malt 90 beer to the younger genera- 23 years later, Roberta Medina still Roberto Medina, president of the tion. No longer on the market, Malt keeps her hair in the latest fashion, Artplan Group, moved to Madrid 90 was brewed by Brahma, which with streaks in contrasting colors, when he was 59. He’s still involved

P I B 23 Special Report E F Ivete Sangalo: the Brazilian star was A LME I D A/ DE acclaimed by the Portuguese public M A NUEL

in the event as the founder and cre- snowboard slope, dancing fountains, to Rio only in 2014, to coincide with ator, and acts as an ambassador, but an 8,000 m2 shopping plaza, a 6,000 the World Cup football competition. he’s no longer part of the day-to-day m2 food plaza, a children’s recre- In keeping with the Medinas’ taste organization. “He’s our guru,” said ation area and a venue for fashion for thinking big, the idea is that the the daughter, who for the last year shows. The t-shirt that symbolized next Brazilian festival will happen and a half has split her time be- the Rio events has been updated simultaneously in five continents. tween Lisbon and Madrid. “Lisbon with its slogan translated from the Cities are not yet defined, but talks was our gateway into Europe and Portuguese to the Spanish equiva- are under way with Rome, Milan, Madrid will be our gateway to the lent of “I’m going!”. Dozens of top- Sidney and even China. rest of the world.” Investment for line artists were signed up for the the Portuguese event this year ran two events, including Brazil’s Ivete Coca-Cola to 25 million Euros, while the Span- Sangalo, British singer Amy Wine- Although Rock in Rio is becoming ish event was budgeted at 30 mil- house and veterans Bob Dylan and more and more a global event, like lion Euros. The extra cost was due Neil Young. the British Creamfields and Spanish to construction of a “City of Rock”. Half of the investment comes Sónar festivals, there are no plans Planning for Madrid mimics Rio, from sponsors such as phone compa- to recast it as “Rock in Lisbon” or where the 1985 and 2001 events were nies Telefónica and Millenium BCP anything similar. The event has ex- staged in a specially in Spain and Portugal, ported its brand and an image that constructed “City of respectively. “Europe is associated with Rio de Janeiro, Rock”. In Spain, it will is more profitable however strange that might sound be erected permanent- Madrid will than Brazil,” said Ro- to some ears. “We are like Coca-Co- ly at Arganda del Rey, have its own berta, noting that the la, our brand is strong and it does close to the capital. An version of the difference in admis- not need to change,” said Roberta. area of 200,000 m2 sion prices was one Her confidence is perhaps based on (almost 50 acres) will legendary reason why the festi- a survey conducted by her father in house three stages, a City of Rock val will return home 2006, which showed that the festi-

24 P I B Amy Winehouse: top-line attraction in Lisbon Im a gem ha /Fol

Roots: in 1985, a l z on i Medina (left) F

brought Rod Stewart Ren ata (above), James Taylor (right) and dozens of other stars to Rio de Janeiro Im a gem o r Ze ha /Fol ia a l z on i F os: Agênc t o ph Ren ata val was still the most remembered said Roberta. For the 2001 event, time, brought the agency a brochure of such events by Rio residents. Rock in Rio adopted the slogan “For with a flier for a possible “Rock in In fact, Rock in Rio almost didn’t a Better World” and created a so- Lisbon”. From then on, he gave the survive past its second edition, cial project in association with the Medinas no peace. After much in- which brought together 700,000 Viva Rio NGO. Under this banner sistence, Roberto Medina agreed to in the Maracanã football stadium of political correctness, the event meet with the mayor of Lisbon in in 1991 for an investment of US$20 attracted the staggering sponsor- January 2003, and one month later million. Arguments with the then ship of US$20 million from internet the project was approved. In May State Governor Leonel Brizola de- company America On Line. With Roberta moved there to produce layed work and jeopardized the that, the event became a reality. the event scheduled for the follow- budget. After staging two monster From then on, between 2% and ing summer in the Bela Vista Park, events which together produced 5% of gate money has been set aside with an audience of 350,000. “At first only a very modest financial return, for social projects in the host coun- we thought of going international in Roberto Medina came to the con- try. Since the last Rock in Rio Lisbon terms of New York and Sidney, but clusion that the festival meant too 2004, the selected philanthropic at the end of the day Portugal was a much effort and risk. theme has been “climate change”. natural step because of the language However, in the ten years sepa- and for historical reasons,” she said. rating the second and third events “Rock in Lisbon” To get started in Portugal they he was constantly hounded by The first seeds of internationaliza- set up Better World, a company ini- friends, clients, relations, neigh- tion were planted shortly before the tially staffed mainly by “imported” bors and even complete strangers. event that packed out the City of Brazilians but now run by a mostly “The pressure was so great that he Rock with 1.2 million people in Rio local team. In Spain, however, the came to see that he had in his hands de Janeiro in 2001. One fine day, Por- strategy was to find a heavyweight a very strong communication tool, tuguese advertising executive Felipe local partner in the form of Gay Mer- and as an advertising professional Rasnikoff, who then lived in Brazil cader, the country’s largest events he simply couldn’t throw it away,” and visited Artplan from time to producer. “It was essential to have a

P I B 25 Special Report

Social Fashion Committed Brazilian fashion on parade in Lisbon

Brazil’s socially committed fashion designers invaded the third edition of Rock in Rio Lisbon. The Fashion Space was sponsored by Embratur in partnership with Brasiliatur and Capital Fashion Week, an event held in the federal capital, and featured designs produced by social projects. On May 30th the Cia. do Lacre opened the catwalk showing designs from a team of mothers led by Chica Rosa of Ceará. She’s the force behind the Associação Artesanal Moda e Tradição, an organization in Riacho Fundo, a poor dormitory town near Brasília. The novelty was a technique of combining crochet with the ring-pulls from drinks cans to create a variety of items. The Cia. do Lacre shared the spotlight with Cocada, an initiative of Éden, the Instituto de Apoio ao Desenvolvimento Humano. Under the coordination of Haidée de Souza Neves, the project uses lace produced in remote rural areas of Paraíba and Pernambuco, in places without basic infrastructure. The next day saw a presentation by 100% Cerrado, an association of artisans, seamstresses and embroiderers from various poor towns near Brasília. Coordinated by designers Sandra Maria and Sônia Reis, they produce items using natural materials of the cerrado, or savannah. Also on show was the Talentos do Brasil brand which shows the work of communities in 11 Brazilian states, and the Federal District, organized by the Ministry of Agrarian Development. Rounding off the Cocada: the Brazilian participation was well-know designer Marzio Fiorini of Bar- Ze r o brand uses celona, who showed his creations in rubber that have earned him the A rede de óculos Chilli Beans chega a Dubai lace from the name of Rubber Man, with shows in the United States and Europe. Agênc ia Northeast

strong local partner who could add her, split their time between Madrid of each country. “For example, I strength and bring in contacts and and Lisbon. There are 10 full-time almost went crazy because of a market knowledge,” Roberta said. staff in each office, but this number Spanish rule about installation of “It was love at first sight between Ro- increases as the event draws closer, electric cables,” Roberta said. Most berto and Gay, and the two needed reaching around 300. That’s without important, perhaps, was the risk just one meeting to close the deal.” counting the almost 10,000 people of terrorist attacks. “Never before The Medinas have a 60% stake in who work in the City of Rock during had I heard of inhibitors,” she said, the Spanish Rock in Rio Madrid the festival. At the same time, Bet- referring to devices that prevent company. The other 40% belongs to ter World produces the Christmas bombs being set off remotely by cell Mercader’s Gamerco group, which Trees in Lisbon and Portugal. It was phones. These are essential in Spain, at the end of 2006 was purchased by also responsible for the Christmas which is still reeling from the March US giant Live Nation. According to decorations of Warsaw, Poland, in 11th 2004 attack in Madrid’s Atocha Gay, however, the American compa- 2005. It has a subsidiary in Romania station and lives under constant ny does not interfere in production and also operates in Spain produc- threat from ETA, the Basque sepa- of the event. “Part of the deal is that ing other events. ratist organization. “I was in a panic I have total independence.” Administering an international that this might stop the production Roberta administers duplicate structure was just one of the chal- team using radios,” Roberta said. structures in Portugal and Spain, lenges of adapting to the Old Con- For someone who plans to conquer with nine coordinators who oper- tinent. The Medinas also had to China, these cultural differences are ate in the two countries and, like adapt to the different regulations just the beginning. z

26 P I B

Cover story Innovation Makes the Difference

ome companies and coun- ture is changing. For a growing group of local tries are inventors. They companies innovation has ceased to be a strange give the world new technol- and sometimes frightening word, generally syn- ogies and products. Others onymous with heavy investments made by a com- start by imitating and end petitor with a greater appetite for risk. Proof up improving the original. of this comes with a recent survey by IDC, an And then there are those American consultancy, which shows that Brazil that merely copy, or repeat is likely to invest US$28 billion this year in tech- traditional formulas, maybe nology. That’s an amount similar to Spain, and adding quality but without a sliver of creativity. enough to guarantee Brazil a privileged position In Brazil, in the past, it would have been virtually with the BRICs (Brazil, Russia, India, China): it impossible to find companies in the first catego- has the group’s second highest investment in ry. A few might just fit into the second, but the technology, after China. truth is that the great majority would have been Despite the recent growth in investments, jammed together in the third grouping. there are still only a few companies that see in- Almost 20 years after the Brazilian economy novation as a daily process. According to a study was opened up to foreign competition, the pic- by the federal government’s Institute for Applied

28 P I B Investing in creative products and solutions has become part of the competitive strategy of an increasing number of Brazilian companies Armando Mendes

Braskem’s green plastic toy car: ethanol substitutes petroleum in the production of polyethylene

Economics (IPEA), some 1,200 Brazilian compa- zens of Paris with his 14-Bis and the Demoiselle. nies are capable of competing domestically and A century later Embraer passenger jets are ev- internationally in terms of innovation and prod- erywhere, Brazil has become a benchmark for uct differentiation, rather that competing just on deep-sea petroleum exploration and Brazil’s cre- cost and lower prices. This represents just 1.7% ation of a sugar-cane ethanol vehicle fuel mar- alenda of the 72,000 industrial companies analyzed in ket has become the most visible face of a vast C the study. Even so, these 1,200 companies are re- agribusiness and technology complex developed arcelo

sponsible for more than 25% of aggregate bill- over recent decades to produce energy and new : M ings of companies involved in the study. They materials from renewable raw materials. employ better educated staff, pay higher wages Brazil is an important generator of innova-

and make it daily more possible to talk about tion even in the latest cutting edge areas like bio- illustration genuine examples of home-grown new Brazil- technology applied to health. A recent study by — ian technologies. the Toronto-based McLaughlin-Rotman Centre

Some might even say that Brazilian inven- for Global Health (MRC) concluded that Bra- ittencourt B tions are now attracting more international in- zil has sufficient scientific capacity and market ulio terest than at any time since Brazilian aviation base to become a global player in the field (see : J

pioneer Alberto Santos Dumont wowed the citi- box page 34). photo

P I B 29 Cover story

Today it’s ethanol that’s fronting the Brazilian technology showcase around the world. “Energy is the country’s new brand,” wrote Roger Cohen, a columnist for the Paris-based International Herald Tribune. Politicians, en- vironmentalists and energy specialists have studied and discussed the Brazilian experience of large-scale substitution of fossil fuel with a renewable resource, a goal Petrobras that’s still quite distant for the rest of the world which platform in Rio is only just taking its first steps in this direction. This Grande do Norte: year should see the first ethanol/gasoline powered cars Brazil hopes to produce oil on sale in France and Sweden, under the Peugeot and under 3,000 Citroën marques. The motors will use a version of the meters of water flexfuel technology developed in Brazil since the 1990s, adapted to European conditions (see box page 33). The lure of the biomass economy is attracting companies from traditional sectors, for example Braskem, the petrochemicals arm of the Odebrecht group. The company is now preparing for large-scale production of a recyclable plastic it has developed from sugar cane ethanol. On a recent visit to Rome for a meeting of the UN’s Food and Agriculture Organization (FAO), an agency whose remit includes food supply and agriculture, Brazilian President Luiz Inácio Lula da Silva took along a plastic car made from the plastic ethanol produced by Braskem. The company’s president, José Carlos Grubisich, accepts that it was necessary to aim higher in order to be more competitive in international markets. “Our research was geared to applications, we were trying to meet clients’ short- and medium-term needs,” he said. “But we realized that we had to have breakthrough and impact projects, ones that would generate patents.” The Arbix, of USP: bet has paid off. Braskem invested US$5 million to re- “Brazil has the search the green plastic, and while it remains essentially capacity to create a petrochemicals company, it hopes that by 2010 up to more mature companies” 10% of its total polyethylene production might come from ethanol, with the potential to go much higher. The petroleum shocks of the 1970s led to the large- Petrobras met the challenge with a “capacity build- scale introduction of sugar-cane ethanol as an alterna- ing program” designed to boost its ability to drill for oil tive fuel, and also provided the stimulus for Petrobras in deep waters. Known as Procap, it combines in-house to start developing its own knowledge base in the area. research, support for universities and research centers Until then, the state-controlled company had apparent- and the development of suppliers for equipment and ly been happy to buy in technology, both for petroleum services. For example, it uses an ocean testing tank at refining and production in the company’s own oil fields. the post-graduate engineering department of the Rio But with crude prices rocketing, Petrobras decided to de Janeiro Federal University (Coppe/UFRJ) to evalu- bring into production the Albacora and Marlim fields ate designs for platforms and underwater equipment. it discovered in the mid-eighties off the Rio coast. The The program is now in its third edition, each baptized problem was the location: the fields lay under deep wa- with the target depths for underwater production – ter, as much as 2,000 meters, and up to then no company initially 1,000 meters, then 2,000 meters, and now had extracted petroleum commercially at that depth. 3,000 meters.

30 P I B Technological showcase The flexfuel engine is Brazil’s best-known innovation Petrobras had to develop technology for every step of offshore oil When anybody mentions technological in- production. It set records and won novation with Brazilian fingerprints, one thing that international prizes for installing certainly comes to mind for better-informed people Christmas trees – the equipment for the world over is the ethanol-powered automobile, well-head pressure and flow control and in particular the most recent version equipped – at ever greater depths. It also inno- with the flexfuel engine. Developed in Brazil by vated by inventing cheaper ways to Brazilian engineers working for European multina-

Pe tr o bra s lower heavy equipment to the seabed tional companies that make electronic fuel injection with a system of cables connected to systems, the flexfuel motor can operate with gaso-

ia /Agênc boats on the surface, so avoiding the line, ethanol or any mixture of the two products. It need for ultra-heavy cranes that had has come to be seen as an immediate alternative,

ha ndou t to be diverted at substantial cost from cleaner and cheaper, for engines that burn petro- other fields. leum derivatives. Technology developed under However, it wasn’t always this way. Development Procap 2000 is being used in the work for flexfuel technology dates from the begin- Roncador field, where water depths ning of the 1990s and involves – putting it simply – a approach 2,000 meters. Mean- set of sensors connected to software that is pro- while, Procap 3000 is working on grammed to adjust the electronic ignition system techniques that should be tested in according to the mixture of fuel in the tank. “We had Petrobras fields in the Gulf of Mex- a flexfuel car that worked well by 1994,” said Fábio ico, where water depths reach 2,800 Ferreira, product development manager at Robert meters. However, the greatest chal- Bosch, the Brazilian arm of Germany’s Bosch group. lenge will be the commercial devel- However, the novelty sat on the shelf for eight years opment of the newly discovered Tupi while the car makers gained the conviction that it offshore sub-salt fields that lie up to would be economically and technically viable. 7,000 meters down in the Santos Ba- The first flexfuel vehicle was Ca hevrolet Omega sin, off the coast of São Paulo, where in Bosch’s own fleet, which had a total of five flexfuel water depths can reach 3,000 meters prototypes with different makes and motors run- and the geology beneath the seabed ning as test and demonstration vehicles. However, includes a tricky band of salt up to the price of ethanol had to fall to make the flexfuel 2,000 meters thick. Today, the price vehicle attractive to the ordinary motorist. This

E /A of oil is higher than ever while known happened around 2001 and the car makers operat-

L I NS reserves are slumping. But now Petro- ing in Brazil decided to offer the flexfuel engine. In bras is more prepared, investing some the meantime the technology had been improved to

A MON A L I S US$1.1 billion in R&D in 2008, a slight increase efficiency and reduce costs. Two more years hike on 2007. The company calculates were to pass in tests and adjustment before large- that every dollar spent on technological research gener- scale production. Finally, in 2003, the first flexfuel ates a return of four dollars. vehicle rolled off the production lines, a Volkswagen The complex system of partnerships with major sup- Gol. The system of onboard fuel injection was made pliers that civil and military aircraft builder Embraer by another European company, Magneti Marelli of uses for the development and production of new planes Italy, whose Brazilian subsidiary had developed its is another example of innovation originating in Brazil own flexfuel technology in parallel. that might not have the same public appeal as ethanol The rest is history. The flexfuel motor swept the or petroleum, but that has provoked an impact in a high market, and the fear of global warming provoked by tech industry. “The aeronautics industry involves huge air pollution made the ethanol program an interna- intellectual resources, particularly in engineering,” said tional showcase for Brazilian technology. In the wake Satoshi Yokota, the company’s vice-president of Tech- of this success, Brazilian engineers in the automotive nological Development and Advanced Projects. To industry have passed on the flexfuel technology to avoid coordination problems and ensure total control, their head offices abroad.(AM)

P I B 31 Cover story

airplane builders always handled project and develop- horizons. However, another study coordinated by Arbix ment work themselves, using in-house teams. suggested that Brazil has a long way to go if it is to catch Embraer decentralized the process, dividing devel- up with the world’s most innovative economies. This opment with partner companies. This was only pos- study, sponsored by the Brazilian Industrial Develop- sible thanks to advances in digital project technology. ment Agency (ABDI) and conducted by the Brazilian “The digital project defines the product unequivocally, Center for Analysis and Planning (Cebrap), compared there’s no way it won’t all fit together,” said Yokota. the competitive strategies of seven rich nations that Located at São José dos Campos near São Paulo city, have made innovation a de facto cornerstone of their Embraer was a pioneer in the use of this technology. In industrial policy – the United States, Canada, France, the 1990s, the company managed to develop and bring the United Kingdom, Ireland, Finland and Japan. to production a new airplane in less time and for less The study called Brazilian Mobilization for Tech- cost than its competitors. nological Innovation (Mobit) concluded that to break Stories such as these point to the emergence of a new into the same league, Brazil needs to make innovation competitiveness within Brazilian industry. This was the a central pillar of its growth strategy. This is a task to be conclusion of São Paulo University sociologist Glauco shared between companies, universities and the govern- Arbix, who directed IPEA during the period when the ment, but with the prime focus being on private-sector institute conducted the study mentioned at the start of companies which are more capable of developing prod- this report. “Brazil is showing it can create companies ucts and services that are likely to be successful in the that are much more mature,” said Arbix, referring to market. Despite some excellent examples which make companies that are more willing to compete on the the headlines, Brazil still falls short in business innova- global market. It’s a break from the traditional model tion and coordination between companies, universities of Brazilian industry that was restricted to the domestic and the public sector. “The number of post-graduate market and geared to import substitution with short researchers working for private companies is still pretty

From imitation to innovation Canadian study: Brazil could become a global player in the field of biotechnology

Brazil is becoming an important source of innovation in health-related biotechnology.. The McLaughlin-Rotman Centre for Global Health (MRC), a research center in Toronto, Canada, analyzed 19 private companies and four public health institutes before concluding that Brazil has scientific capacity and an adequate market base to become a global leader in the sector. The study, published in Nature Biotechnology, mentioned various examples of innovative products created by Brazilian researchers. One such is Acheflan, made by the Laboratório Aché pharmaceutical company. This is an anti-inflammatory produced from an extract of the Cordia verbenacea, a popular herbal remedy. Another is the Biocure bandage, produced by Pele Nova Biotecnologia from latex from rubber trees. It helps promote regeneration of damaged skin. For João Batista Calixto, professor of pharmacology at the Federal University of Santa Catarina, who was involved in the development of Acheflan, Brazilian biotechnology needs to be backed by a strong government policy for 10 or 20 years to really take root. “Something like what was done with Petrobras and Embraer,” he said. It’s also necessary to rewrite the laws and regulations. The Canadian study underscores this diagnosis. Brazil does world class sci- Aché researcher: ence, said one author, but there’s a lack of invest- Acheflan medicine (left) was inspired ment capital and of better coordination between by a popular companies and institutions in the sector. (AM) herbal remedy

32 P I B small in Brazil, just 20% of all the coun- tween “traditional” rich countries and try’s scientists,” said Carlos Henrique the Asian giants: contrary to what some de Brito Cruz, scientific director of the Not since might imagine in Brazil, in this context São Paulo State Foundation for Sup- the 14-Bis innovation does not mean just cutting- port of Research (Fapesp). In the more edge technological research (although developed economies, this proportion has Brazilian that’s certainly part of it). Changes in exceeds 50%. innovation sparked productive processes, services, manage- For a long time Brazil suffered from such interest ment, logistics and ways of doing busi- a prevailing view that research should ness are also part of innovation, provided be done only in universities, Brito Cruz around the world adopters gain a competitive advantage. recalled. However, there are important Around 60% of innovative investments differences between research done in universities and in China and India relate to the application of mature companies. “A university conducts research to advance knowledge rather than cutting-edge technology, he said. human knowledge and to better educate its students,” What’s needed to speed up and disseminate a culture said Brito Cruz. Only part of this will be of interest to of innovation among Brazilian companies? Amongst companies, which have more immediate objectives. other things, more wide-ranging consultancy programs Arbix coordinates an initiative called the Observatory and “technological updating” for small and medium of Innovation and Competitiveness, within the Univer- companies, says Professor Mário Sergio Salerno, head sity of São Paulo’s Institute for Advanced Studies. Now of the Department of Engineering Production at São he’s seeking backing for a study of how China and India Paulo University’s Polytechnic School. “Small compa- stimulate innovation. Those two countries sit alongside nies are not always cutting edge, but without them there Brazil and Russia in the BRICs quartet of major emerg- is no industrial base,” said Salerno, who is a consultant ing economies. Arbix points to a common thread be- to Mobit. Even the best of existing programs don’t go far enough or reach the critical mass of companies that could make a difference. It’s a diagnosis that matches the recommendation of specialists from Finland who visited Brazil in May, during a visit by Prime Minister Matti Vanhanen. Finland, home of the Nokia cell phone company, en- joys international recognition as a “creative economy” driven by knowledge and constant innovation. Speaking to Brazilian businessmen, representatives of the Finn- ish commercial promotion agency Finpro said that one of the qualities prized in their country is the care and emphasis given to actually bringing programs and projects to fruition. One item in the presentation by Finpro President Jorma Turunen to the São Paulo Industry Federation was entitled “Implement it!”. The consensus of the Finnish visitors was that Bra- zil does some good public research, but that there are problems when it comes to transforming the results into economic benefits. They also pointed to inadequate fundamental education, another area where Finland leads international rankings. Finpro has an office in Brazil, not by chance avoiding Rio de Janeiro and São Paulo and opting for São José dos Campos, a center of technologi-

é cal excellence and home to Embraer and the Aerospace h

/Ac Technology Institute (ITA), the nursery for much of t Brazil’s high-tech industry. The Finns obviously rec- ndou

ha ognize a source of innovation when they see it. z

P I B 33 Cover story Im a gem ha /Fol

Embraer assembly: copied by Boeing lo de Alme i d a de La lo

ing gear and interior fittings. But Embraer went further, and shared Necessity, the with its partners (in this case, investors who put their own capital into the project) the development and Mother of Invention manufacture of structural items like the wings and fuselage sections. Embraer created its revolutionary system of Yokota, an engineer who has partnerships with suppliers to build airplanes for a been with Embraer since 1970, was very simple reason – it lacked the cash to go it alone director of the program to develop the 50-seat ERJ 145 regional jet in the early 1990s. That was when the razil’s Embraer builds passen- nized for the quality of its product, company started to apply more fully ger jets that are flying with the company is admired for the way the system of partnership in costs B regional airlines all around it designs and builds airplanes, shar- and risks. The success of the elegant, the world. While these planes might ing investments, risks and respon- arrow-thin 145 helped pull Embraer be smaller than the Boeings and Air- sibilities with some major partners out of the financial crisis that pre- buses built in America and Europe, who cease to be simply component dated its privatization in 1994. It the jets rolling off the line at São suppliers and become true partners was no coincidence that to get out of José dos Campos are nevertheless in the development of a new model. the red, the company had to prove modern and sophisticated, and have “Embraer innovated in the degree that necessity really is the mother carried Embraer to third place in to which it uses this process in the of invention. Yokota recalls that the the ranks of global commercial air- aeronautical industry,” said Satoshi company, cash-strapped and in- plane builders. Yokota, the company’s vice-presi- debted, needed the resources of its The general public’s concept of dent of Technological Development partners to develop the 145 project. Embraer probably doesn’t go much and Advanced Projects. “It we hadn’t done it that way, the further than that. But within the Airplane builders always buy plane wouldn’t have been built.” aeronautical and business world, components from outside suppliers. Embraer continues to use risk the company has another claim to In general, that means items like en- partnerships in its latest family of fame. In addition to being recog- gines, electronic equipment, land- 170/190 jets that can carry up to

34 P I B 120 passengers, and the system has spread throughout the aeronautics industry. Boeing’s most Natura’s recent project, the 787 Dreamliner, has 90% of its components coming from outside suppliers, including Millionaire Funnel major fuselage sections made by The cosmetics company always has 500 projects under partners in Japan and Italy. But how did Embraer manage to pio- way. Those that survive all stages of the development neer the system? process and get to market will generate 60% of billings Yokota says it was essential to keep a flexible mindset – the ca- or Natura, launching a con- numbs the mouth and tongue. In pacity to absorb new things, and stant flow of new products is the face cream, the substance has to change. “In this sense Brazil- Fessential. The overseas market the effect of relaxing and smooth- ians are culturally more mallea- is eager for novelties and the coming laughter lines. ble. This could be seen as a defect, pany’s sales revenue keeps pace with Natura also uses or is research- but it generates a greater than product launches. “If investment ing two natural Amazon oils andi- average willingness to incorpo- drops, revenue drops,” said Daniel roba and copaíba, cocoa, guaraná rate new ideas.” In practice, this Gonzaga, the company’s director for and priprioca, an aromatic root. The characteristic made it possible for research and technology. company has a 200-person research Embraer to take advantage of new Natura is one of the Brazilian team working on creating new prod- technologies faster than its com- companies that most invests in R&D ucts and technologies at Cajamar, a petitors, when digital design and – around 3% of net annual billings. town near São Paulo, and there is manufacture were just becoming Spending in 2007 reached 3.4%, the a suggestion and project selection available. “We always used the equivalent of some R$109 million, or mechanism that allows employees most advanced technology,” Yoko- roughly US$55 million. from any area of the ta said. One example is the tech- The result is the company to put for- nology of virtual reality, which al- launch of an average of ward ideas or offer lows a project to be visualized in 200 products per year, innovative concepts. three dimensions, so reducing the which generate rough- “An idea might time needed for tests with physi- ly 60% of the compa- come from the tech- cal mock-ups of aircraft systems. ny’s billings. Natura nology area, which “Digitalization allowed us to break is betting on the ap- develops extracts and the project into parts and then in- peal and the richness molecules, or from tegrate them afterwards,” he said. of Brazilian forests to marketing, which To understand the advance of- give it a differential identifies a new mar- fered by digital communication, over more traditional ha ndou t ket, or from contacts Jambu, from Pará: a it’s interesting to recall that the brands. To this end, it of the Natura sales research target for Natura project for the AMX, a military concentrates research consultants who lis- airplane that Embraer developed for new cosmetics on leaves, roots ten to the final consumer,” said in partnership with Italian com- and fruits from the Amazon and Gonzaga. Internal committees ana- panies, required the constant in- other regions of Brazil. lyze the suggestions and those that terchange of technical designs Some examples? Gonzaga men- appear to have potential enter the between Brazil and Italy, recorded tions a face cream that uses the company’s development “funnel”. on computer disks. Embraer cou- active ingredient of jambu, a herb Natura is always working on about riers carried the disks personally, used in cooking in the East Ama- 500 technology projects, new prod- in secret pouches to protect the zon state of Pará. Anyone who has ucts or concepts and marketing in- project’s confidential details. Now, tasted dishes such as tacacá or duck novations. Some of them will make it with the Internet, this sounds as in tucupi in Belém will know the through the funnel and become one outdated as the 14-Bis. (AM) z anesthetic power of jambu, which of the 200 annual new products. z

P I B 35 Cover story

like good business, Grubisich believes, because clients in sectors such as the The Only Toy automotive and electronics indus- tries are interested in the marketing dividends of using an environment- Here is the Car friendly material, and accept paying 20% to 30% more for the green plas- Braskem is betting on green plastic produced tic than for a standard product. The from ethanol as an alternative to plastics material is 100% recyclable, and the made from petroleum derivatives plants it comes from have helped take out of the atmosphere the carbon that is speeding up global warming. With lastic produced from sugar-cane researchers and in February signed an all this appeal, Grubisich managed to ethanol is the most dramatic agreement with the São Paulo State enlist a marketing symbol of the first Presult to date of investments Foundation for Support of Research order for the new product – no one in research and innovation made by (Fapesp) to investigate other biopo- less than Brazilian President Luiz Braskem, a petrochemicals company lymers – intermediary products and Inácio Lula da Silva, who took a toy controlled by the Odebrecht group. materials developed from renewable car made from the green plastic on his Plastics are generally made from pe- sources. Each side will invest US$15 trip to Europe in June. troleum derivatives, a non-renewable million over five years, and universi- What’s more, the green plastic is raw material that is becoming more ties and institutes in São Paulo will different in origin but equal in prop- and more expensive – the price of a participate. Braskem invests around erties to regular polyethylene. It does barrel of oil has broken record after 0.7% of billing in R&D, which is in line not require new machinery or chang- record. Polyethylene made from mol- with the world average for the petro- es to clients’ production processes. ecules that formerly helped shape a chemicals industry. Braskem is finalizing studies for con- sugar cane plant rather than an un- The company had previously ex- struction of a sugarcane polyethyl- derground oil deposit of fossil origin perimented with using sugar cane to ene factory with capacity to produce represents a revolution for the in- produce ethylene, the intermediate 200,000 tonnes per year, starting 2010. dustry. It becomes “ethanochemical”, product from which polyethylene is It will be built at Triunfo, where the rather than petrochemical. But why made. But now, the target is industrial technology was developed. The pro- go down this path in the first place? scale production, not just a technolog- duction line for the green plastic will The reason, says Braskem Presi- ical experiment. Right now this looks consume at least half of the US$588 dent José Carlos Grubi- million due to be invested in expan- sich, is that the world Grubisich: barriers sion of the entire complex. is changing. “We need and paradigms The company’s initial goal was to more products made overturned produce 100,000 tonnes a year, but

from renewable raw B itt encou rt Jul i o client response when the product materials, the consum- was presented at an international er is pressing for this, plastics fair in Germany last year principally in the more led Braskem to double the planned developed markets.” capacity. Expectations are that half Braskem developed of the initial production will be ex- the new plastic at its ported, and Grubisich estimates a Technology and Innova- market potential of 600,000 tonnes. tion Center at Triunfo in “We shall grow as our clients grow,” Rio Grande do Sul State, he said. “What we have seen so far where it has a major shows that the market exists, and stake in a petrochemi- with petroleum at US$130 a barrel, cals complex. The com- all barriers and paradigms have been pany has 200 in-house overturned.” (AM) z

36 P I B success is the result of a major effort in R&D. While eucalyptus takes seven years (or less, in some cases) to get to the point for cutting, pine trees in the northern hemisphere take six decades to reach maturity. And the gain in productivity is enormous. Over the last ten years, Brazil has doubled its production of pulp per hectare. At the end of the 1990s, the country became an active par- ticipant and one of the leaders in the global pulp and paper market. Today, Brazil accounts for 65% of world short-fiber production and ha ndou t Suzano shipments: is a champion of the global market, reshaping the with exports totaling US$1.65 bil- international market lion in 2007. “The tendency is for do Teles/ R i c ar do the volume of short fiber production to exceed that of long fiber production in the middle of the The Long Battle next decade,” said Rogério Ziviani, director of the pulp business unit at Suzano, which today exports half for Short Fiber of its production. Eucalyptus pulp is used mainly Thanks to Brazilian technology, pulp produced from to produce writing and printing paper, and demand is growing in Bra- eucalyptus has won a place in the world market zil and internationally. Estimates point to global production of eu- ucalyptus pulp, which is about could be mixed with raw material calyptus pulp rising from a current to take over the world paper then being imported from Scan- level of roughly 13 million tonnes E market, is an excellent case of dinavia and made from pine trees. a year to reach 20 million tonnes Brazilian innovation. The eucalyp- The first sheet of printing-quality in 2010. This growth is guaranteed tus tree is native to Australia and paper made 100% from eucalyptus by the various industrial projects arrived in Brazil just over 100 years arrived on the market at the end of now being implemented in South ago, where it adapted readily to the the 1960s. America, with investors including local climate and until the middle of That was the start of the revo- Scandinavian companies that have the 1950s was mainly planted along lution in short fiber – the techni- bowed to the strength of the euca- the railroads to serve as boiler fuel cal name for the pulp made from lyptus. Companies in the sector in for steam locomotives. The first eucalyptus – which was to lead to Brazil have plans for expansion of person to spot a more noble use for a gradual but total change in the production that will absorb invest- the raw material was businessman world market. “No other country ments of US$8.7 billion through Max Feffer of the family that con- has the same productivity and has 2012. All this is aimed at staking out trols Suzano Paper and Pulp, a São made such investments in forest a position in a short-fiber market Paulo company. technology as Brazil,” said Elizabeth that is growing between 6% and 7% The company’s first experiments Carvalhaes, the executive director a year, which is twice the growth took place between 1956 and 1959 of the Brazilian Paper and Pulp As- rate for the pulp market as a whole. with the aim of creating a pulp that sociation (Bracelpa). The country’s (Vicente Vilardaga) z

P I B 37 Report Here, There and Everywhere High quality specialized services offered in Brazil are finding customers all around the world By Flávio de Carvalho Serpa

hink fast – What is there Gerais that is now a Development is common between a Center within Google. tomography done in Por- Brazil still doesn’t figure very tugal, a digital advertise- prominently within the global market ment shown in Spain, the for offshore outsourcing. It lies way Tefficient performance of a multiple behind India with its super-cheap computer system in Canada and the labor and huge numbers of people sophisticated calculations that drive who grow up speaking English as a the best search engine on the Inter- native language. It’s estimated that net? Don’t feel too bad if you didn’t India mopped up 80% of the US$75 get the answer, because most people billion the world spent last year on wouldn’t, but these are all excellent offshore outsourcing, while Brazil examples of the remote supply of attracted just 1% of the total. Never- high quality services that have their theless, Brazil’s long-term prospects source in Brazil. are good, even with the strong cur- Companies of various sectors, rency harming the competitiveness sizes and origins are going global via of Brazilian companies. broadband, without The tendency is needing to physically that the development move beyond their of new suppliers will country’s borders. It’s Now lead contracting com- the case of the Fleury dominated panies to reduce their clinical analysis labo- by India, the excessive (and dan- ratory, now responsi- gerous) concentration ble for analyzing and market will in one market, India. returning in under 48 tend to open up Brazil’s great chance, hours exams sent from the experts think, is Portugal, and the São Paulo office of to open its borders to high value the French-Spanish Media Contacts added services and to better exploit agency that specializes in virtual ad- the advantages of being in Brazil, for vertising, and whose Center of Excel- example the geography and culture lence handles demands from all over which are more like those of the the world. Then there’s IBM – the IT United States and Europe, the time giant has a Global Command Center difference which is more compatible serving the world on-line 24/7 from with the working day in most devel- Hortolândia in São Paulo state, and oped countries, the political and eco- there’s Akwan, a company in Minas nomic stability, the lack of conflicts

38 P I B with neighbors (India has an ongoing squabble with Pakistan) and the loy- alty of Brazilian labor (in India, high turnover is the norm). Indian companies themselves have noticed the trend and have started to create alternatives for the inevitable reduction in concentration. Satyan, one of the giants in the field, has already staked out a presence in Brazil. A 30-year pioneer in the sector, Satyan today bills US$1 billion a year and has 23,000 employees, 150 of them at its São Paulo development center. “The strategy is to be close to the Latin American subsidiaries of our American clients,” said Ideval Munhoz, responsible for the company in Brazil. “In three years, we hope to have 5% of the local market.”

In the fray It’s shaping up to be a good fight, and one in which Brazil will certainly be a player. America’s EDS, recently acquired by HP, has a global center in the country with 10,000 employees while French-Dutch company Atos Origin, another recent arrival, plans to have 15,000 people working in Cu- ritiba by 2010. Another major IT services supplier in Brazil is Tivit, part of the Votorantim group, which won a global tender to administer all IT resources worldwide for the Rhodia company of France. Xavier Rambaud, then the CIO of Rhodia in Brazil, faced a tough battle with other Rho- dia subsidiaries around the world to corner the lion’s share of IT services. “We consider the competence of our internal processes to be of very great importance, and we decided to keep this service internal,” he said. Each in their own way, Brazilian companies Ci&T and ACS also have Fabri, of Tribal: faithful global clients. And that’s be- global culture fore we mention the veteran IBM,

in the digital p e a m p ol i n/Hy advertising agency present in Brazil since 1917. The ulo P a ulo P US giant opened an assembly line

P I B 39 Report

in 1971 at Hortolândia, in São Paulo state, to produce mainframes, the very large processing units still used for banking transactions. Today the IBM plant still shows some signs of its original purpose, for example the girders used to carry machinery are still fixed to the ceiling, but in these days of globalized services, the floor space has a very different function. Today, 1,100 Brazilian employees speaking several different languages provide 24/7 support for IBM clients Polyglot powerhouse in Hortolândia around the world (see box). IBM’s Global Command Center in the peaceful town of Hortolândia IBM’s Global Command Center near Campinas, in São Paulo State, is the company’s largest such facility is located in Hortolândia only thanks in the world, formed from four smaller units that were spread around the to the efforts of the Brazilian subsid- globe. Although the 1,100 staffers are all Brazilians, the place is a polyglot iary. “We had to fight four other IBM mixture of languages and accents. The professional who speaks French subsidiaries to win the Center,” said to Canadians, for example, is not the same person who attends French José Eduardo Ometto Alberto, respon- clients. The center is structured to link via video conference with up to sible for IBM’s IT Infrastructure out- 200 different points around the world, according to the executive in charge, sourcing operations in Hortolândia. José Eduardo Ometto Alberto (photo). In addition to the quality of the “Our project won because we offered services offered, the center has an unexpected advantage over Indian and greater added value.” A guaranteed Chinese competitors – it doesn’t suffer from earthquakes. Many companies constant energy supply was just the keep back-ups of their data in Hortolândia even when they handle their first step, to overcome the trauma of processing somewhere else. a nationwide energy shortage at the start of this decade, but what tipped the scales was the excellence of the labor. “Our professionals are more flexi- because of the economic crisis in the center of excellence six months ago. ble than Indians and Chinese, who are South American nation, Reis decided “We don’t compete with them, they excessively specialized,” said Ometto. to export services to other subsidiar- handle basic production while we “Moreover, our turnover is very low, ies within the group. “I used two con- work on products with greater added which provides stability of service crete arguments: Brazilian creativity value,” Reis said. and helps promote client confidence.” and Brazilian costs, which at the time Staff quality earned Brazil the greatest were favorable,” he said. International tenders internal prize possible within IBM: all The office grew rapidly and had Internet offers many examples of of the global corporation’s contracts to adapt to the needs of a globalized successful experiments in globaliza- are controlled in Hortolândia. structure: in addition to technical tion. Take the case of Tribal, a São Media Contacts, a network of qualifications, employees had to be Paulo agency that targets the niche virtual agencies launched originally fluent in English and Spanish and, in of high quality and enhanced cre- in Spain but now part of the French some case, work unusual hours to ativity. It’s a 100% Brazilian-owned Havas Digital group, has followed a match the local time of overseas cli- company with 10 years of existence similar path with the Brazilian sub- ents. The strengthening of the Brazil- and big plans. The company supplies sidiary supplying services to the head ian currency has put a bit of a brake services to the head office of Dutch office. Brazil has become a leader in on the offshore business, but the loss giant Philips and to the United Na- the group under the guidance of Ri- has been compensated by recovery of tions, in addition to local clients. “We cardo Reis, who runs operations in the local market and by duplication gain experience by competing in ten- Latin America. In 2002, faced with of the Brazilian experience in In- ders against agencies from all over the difficulties in finding local clients dia, which gained a Media Contacts world,” said Renato Fabri, a partner.

40 P I B it offers management of benefits, finance, human resources and health plans, plus IT processing. “We don’t have any national clients, they are all subsidiaries of multinationals,” said Eduardo Paiva Sá Freitas, responsible for the company. Call centers have now become somewhat of a commodity, where cost is the basic criterion, so ACS focuses on its principal resource, the quality of its labor. “We are not competitive with the most basic call-center services,” Freitas said. “But when you build in analytical processing, which adds value, then we are competitive.” Analytical processing is basically what the 160 professional staff do at Google’s development center in Belo Horizonte. Every day they handle al- e p gorithms and other tools in an effort n/Hy i to improve the searches and other ol p

m services offered by the California- a based Internet giant. The center is ulo P a one of five world wide, and it was os: P t

o opened even before Google’s São ph Paulo commercial office. The development center has its “Today Tribal is totally ing new national and origins in Akwan, a Belo Horizonte geared up to serve global international demands,” company started by search engine clients, it’s built into our In Fleury, said Tereza Sacchetta, specialists from the Federal Univer- culture.” director of corporate sity of Minas Gerais and bought by Fleury Medicina e medical affairs at Fleury. Google in July of 2005. “The culture Saúde, one of Brazil’s exams from and origin of Akwan are very simi- most respected clinical across the Straitjacket lar to those of Google,” said Félix analysis laboratories, is Finance is another area Ximenes, the company’s communi- following the same path. world where Brazil can com- cations director in Brazil. “It was a The São Paulo-based pete while escaping the deal between equals.” laboratory is now finalizing a new straitjacket of run-of-the-mill IT ser- Ximenes believes the Belo Hori- system for remote diagnosis, and first vices. After all, in Brazil checks are zonte center has enormous growth tests are running with an ultrasound cleared in one working day, compared potential. “We have carte-blanche and radiology service based in the with a week in the United States. to hire engineers here in Brazil,” he city of Porto, in Portugal. Exams re- This was the path chosen by ACS, a said. Just like at head office, famous ceived in São Paulo via Internet will service provider connected to the for its easy-going, unregulated work be examined by Fleury’s radiology Algar group, a company with 100% atmosphere, the Brazilian staff enjoy team, which prepares a written opin- Brazilian capital based in Uberlândia, the freedom to decide their focus and ion and sends this back to Portugal. in Minas Gerais State. Launched just work-hours. “With the advantage that “Our technological structure and in- 10 years ago, ACS now has 6,000 em- here we have the best cheese-bread tellectual capital are geared to meet- ployees. Besides call-center services, in the world,” said Ximenes. z

P I B 41 Report Aiming for the Top of the Pyramid

Rosa Chá With stores like Lilica Ripilica parade: in Milan and Rosa Chá in next stop, New York, Brazil’s Marisol New York is betting on high-income consumers around the world By M aur icio Oli veir a, in Jaraguá do Sul

ome September, as Spring ar- rives in the Southern Hemi- sphere, Brazil’s Marisol clothing company will be celebrat- ing the second anniversary of Cwhat was probably its most ambitious move since the company was founded in 1964: the opening of a children’s store under its Lilica Ripilica brand in the heart of Via della Spiga, one of the most sophisticated and sought-after locations in Milan. And Milan, of course, is a fashion center for the whole world. The 72-square-meter store and its six staff rub shoulders with brands such as Prada and Dolce & Gabbana. Marisol does not appear to be too concerned that the store has been losing money ever since it opened, after absorbing investments of around US$2 million. In fact, the company was expect- ing some red ink. “This store symbolizes our positioning in the international market,” said Giuliano Donini, the new president of Marisol, a company based in the southern Brazilian state of Santa Catarina. “It’s a marketing tool rather than a retail outlet.” Donini /AFP swears that the company is ready to un- Ca l fat derwrite the store through the 2018 life of the property lease, even if it continues to

Fe r n a nd lose money. “Our learning curve in this ex-

42 P I B periment is absolutely priceless,” he said. “We knew it wouldn’t be easy Marisol when we decided to start our interna- in Numbers tional expansion project in the most difficult place. And after Milan, noth- Billings in 2007 ing will seem impossible.” US$ 240 million The rise of this 33-year-old execu- Foreign billings tive to the top of the Jaraguá-do-Sul- US$ 8.5 million based company last March was directly connected with the priority the Employees company is placing on overseas mar- 5,500 kets. Son and heir of Vicente Donini, Factories who ran Marisol for the previous 12 Jaraguá do Sul (SC) and years, Giuliano Donini has for the Pacatuba (CE) last decade been the leading propo- nent of internationalization. During Foreign stores that time he held various positions 18 within the group, starting as a mar- Brands ket and products analyst. He moved Lilica Ripilica, Tigor T. to the nearby city of Novo Hamburgo Tigre, Pakalolo and as a director of Marisol Calçados, the Rosa Chá The Lilica Ripilica store in group’s footwear division which is lo- Milan’s Via della Spiga: cated in a major shoe-making region sophisticated address in Rio Grande do Sul State, and then ha ndou t returned to head office to run the wholly-owned operation within the company’s brands, Lilica Ripilica and commercial and later the marketing 18 Lilica Ripilica non-Brazilian out- Tigor T. Tigre, which sells clothing for departments. He holds degrees in ar- lets. All the rest are franchises, run boys. However, the internationaliza- chitecture and business administra- by local partners in the Americas, tion strategy was initially based just tion, and was the mastermind behind Europe and the Middle East. “Each on the girls’ brand, which was seen the decision to open a store in Milan, business has its own characteristics,” as a more promising niche. “There is a city where he took a post-graduate said Donini. “What’s essential is to a unisex trend in infant clothes in Eu- course in fashion and brand manage- find partners who share our vision rope, which in general follow a more ment at the Istituto Marangoni. of the future.” urban and casual style,” Donini said. It hasn’t all been easy. On the one The company’s expansion is the “We saw that there was room for more hand, Donini had to personally con- result of a mixture of planning and cir- colorful, feminine styles for girls.” The duct delicate negotiations with the cumstance. The Middle East, for ex- very fact of locating the anchor store merchants’ association in the famous ample, was not among the first targets on the Via della Spiga was a clear sign street, which is not very open to for- chosen for international expansion, that it was targeting upper-income eign brands. On the other, he spared but a businessman from the region customers who are willing and able to no effort to convince fellow Marisol made a proposal which the Brazilian pay more for clothes that also serve as directors of the importance of this company decided it could not refuse. life-style statements for children and investment for the future of the busi- As a result, clothes of the company’s their families. ness. In the long term, the main goal brand targeting girls up to 10 years old “Lilica Ripilica products imme- of internationalization is to signifi- can now be found in countries in the diately bring to mind Brazil, a coun- cantly increase the volume of Marisol Middle East, such as the Lebanon. try which is in fashion,” Donini said. revenue coming from international “People who are well informed want operations, which last year were just Brazil in fashion to consume products that suggest the 3.5% of the group’s total billings – In Brazil, where Marisol operates as Brazilian way of life.” US$ 8.5 million out of a total R$ 240 a franchising network of almost 150 Production remains centralized million. The Milan store is the only stores, the same outlets offer both the in Brazil, where the group has 5,500

P I B 43 Report

employees and installed capacity to produce 25 million items of clothing Change of direction and 3.2 million pairs of infant foot- Instead of price and volume, brand management and greater added value wear per year. However, some of the products sold abroad are developed Internationalization of the Marisol brands is part of a wider strat- specifically for each market. Italy is egy that has gradually changed the group’s identity over the last decade. After a classic example. The Lilica Rip- four decades during which it was basically a clothes maker known for a combi- ilica collections sold in that coun- nation of volume and price, Marisol has also started to develop the profile of try are the work of local designers, a brand and distribution channel manager, betting on products with greater who travel various times a year to added value. It started its franchising project, seeking to build a direct relation- the head office in Jaraguá do Sul, a ship with the consumer and depend less on commercial representatives who municipality of some 135,000 people, act as intermediaries with the major retail chains. “The result of these changes to discuss concepts for new collec- is that Marisol has become a much more complex company, because it now options and seek out the ideal balance erates with variables that previously did not exist,” said Donini. “This change between the company’s DNA and in mentality is now filtering through the whole organization.” the habits and preferences of Ital- One of the variables ian consumers. gem

a was launching products “We hired Italian designers be- Im such as footwear, socks cause their having lived in the coun- ha and knitted items, which try’s culture all their lives ensures a / Fol r

lo form part of the mix for final result that is much more authen- a /V r

e single-brand stores. tic than our trying to understand it in th

un Mapped out at the end of one, two or six months,” said Donini. G

el the nineties, the change One of the differences when com- afa R in strategy was based pared to Brazil, he explained, is that on a perception that Italians have a more sophisticated Brazilian consumers and demanding relationship to raw Giuliano and his were increasingly seek- materials. Lilica Ripilica’s Italian col- father Vicente: ing clothes that carry a lection even includes cashmere, sug- inspired by WEG fashion brand. One sign gesting a degree of perfection that of this phenomenon was would probably not be accepted by the creation in 1996 of the São Paulo Fashion Week. Based on this percep- the Brazilian market. tion, Marisol decided to develop its own brands, targeting market niches. The Internationalization lay behind process has been perfected over the years – three factories were closed, some Marisol’s 2006 decision to acquire brands were eliminated and others were added via acquisition, for example Rosa Chá, a Brazilian fashion beach- the youth-oriented Pakalolo and the beach-fashion oriented Rosa Chá. wear brand. The idea was to augment In a move to administer its international businesses more closely, the the group portfolio with a brand that company opened offices in Guadalajara, Mexico and in Gallarate, which encapsulates everything that Brazil is part of the Milan metropolitan region. In the Mexican city, the Brazilian represents around the world – beach- clothes maker found that “Marisol” already figured on countless birth certifi- es, sensuality, music and color. The cates as a given name for local women, which meant it could not be regis- brand’s overseas expansion project tered as an exclusive brand. The Italian office manages the group business in mirrors the formula used with Lilica Europe and the Middle East. Ripilica, and included the scheduled Donini makes no attempt to hide the fact that Marisol’s internationaliza- July opening of a dedicated store in tion strategy draws inspiration from the pioneer work of WEG, a major interna- New York’s sophisticated Soho dis- tional maker of electric motors and electrical equipment that also has its roots trict. The 170-square-meter shop will in Jaraguá do Sul. In fact, the companies are linked by more than just geogra- be wholly owned by Marisol and will phy - Donini is cousin to WEG board chairman Décio da Silva. “WEG showed be the brand’s fourth international that you have to have persistence and stick to your guns,” Donini said. “They outlet, after franchise stores in Miami, endured 10 years of losses to enjoy the international success they have today.” Lisbon and Istanbul. z

44 P I B Report

Winning the Workout War Two small Brazilian that both companies embody in falling value of the US dollar. “Our their products. international clients are an asset for sportswear companies Bia Brazil was started in 1994 the company, we can’t just chuck are taking on the by Beatriz Willhelm Dockhorn, a them away,” said BrasilSul director global giants – and former champion Brazilian Olym- Rafael Dias. pic gymnast, and today exports BrasilSul is now billing US$5.6 winning! arlete lorini around 90% of its monthly output of million a year, 30% of it from ex- 20,000 items. At US$2 million, the ports. In addition to supplying re- annual billings greatly exceed the tailers in 50 countries, the company ia Brazil e BrasilSul, two initial expectations of the has eight foreign franchise stores, small makers of gymnas- founder. “I never thought five in Mexico, two in Paraguay tics and aerobics cloth- we could compete with and one in Chile. Another eight ing from the South of such strong brands,” said are likely to open in the Unit- Brazil, have been work- Dockhorn, 42. ed States through the next Bing up a sweat to take on giants such Similarly, when Helo- five years. as Adidas and Nike in the global isa Segall created Brasil- Bia Brazil sells to 43 arena. It’s a huge challenge, and Sul 25 years ago, she countries and has just one made even bigger recently by never imagined that one store of its own, the unfavorable exchange rate, but her products would in Israel, but also that doesn’t lead to despondency. one day hang from plans to increase Both companies have been grow- the illustrious racks its internation- ing rapidly and brightening up the of US chain Victo- al retail pres- work-outs of women around the ria’s Secret. But in ence, partly as world. Customers in countries as fact, she also sells a way to offset far apart as the United States, Chi- to clients in Europe the negative ef- na, Mexico, Israel and the United and Asia, and plans fects of the exchange Arab Emirates are opting for the to keep on doing so rate. The company has bright and sunny image of Brazil despite the ever- already decided to open one outlet in Paris, in partnership with a lo- From the pampas to the world cal distributor, in the second half of this year. Bia Brazil To please customers Started business: 1994 in such different mar- Billings in 2007: US$2 million kets, Bia Brazil has a Exports: 90% catalogue of 300 designs Present in: 50 countries that can be adapted to International stores: Israel and Paris (planned) different countries. BrasilSul Mexicans and Chinese, Started business: 1983 for example, like more Billings in 2007: US$5.6 million colorful clothes, while Exports: 30% English women insist on more sober colors Present in: 43 countries Bia Brazil: International stores: Mexico (5), 300 designs ha ndou t even when dress- Paraguay (2), Chile (1), USA (8 planned) for the world ing for a workout at the gym. z

P I B 45 Information Technology

Stefanini’s Second Great Leap This IT company is betting on foreign acquisitions, rather than organic growth By Luci anne C arneiro, in London

t’s not much more than a de- counterparts were even thinking of branches outside of the Rio-São cade since Stefanini IT So- internationalization. Paulo axis. Internationalization was lutions took the plunge and Subsequent steps, however, were resumed four years later, in 2000, marched off into the global taken with care. At that moment the when offices were opened in Chile marketplace. Today, Brazil’s company’s top priority was building and Mexico. The following year saw Ifirst Information Technology (IT) up its presence in Brazil by opening Stefanini establishing beach-heads multinational has its sights set even higher – it aims to become a major Stefanini: international player. To this end the Going public, São Paulo-based company has put with growing in motion an ambitious program to overseas consolidate its foreign operations. income The goal is boost foreign billings from a current 20% of group total to 50% through 2011. In 2007, the group billed US$ 200 million. To achieve this goal, Stefanini plans investing US$300 million through the next four years to acquire mid-sized companies. Part of this, estimated at US$200 million, will come from opening the company’s capital and floating shares on the stock exchange. Speaking with PIB from his London office, company founder and president Marco Stefanini explained that prepara- tions were already under way and the float would happen some time this year: “The exact moment will be determined by the mood of the financial markets.” A self-styled workaholic who loves races and reading – preferably history and biography – the 46-year-old businessman is a ge- Im a gem

ology graduate who started the ha /Fol

business in his home in 1987. In- a lo r ternational adventures date from

1996, when the first office outside D ou ra do/V Brazil was established in Buenos

Aires. That was before most of his lym Davi

46 P I B in Peru, Colombia and the United when there’s a crisis,” he said. “And States, while the European campaign Stefanini in after all, how many crises have we began in Spain in 2003, followed by Numbers not weathered in Brazil?” Portugal (2004), Italy (2005) and As for the United Kingdom, it the United Kingdom (2006). Gross billing in 2007 is one of the world’s main IT cen- US$ 200 million ters and the most developed in Eu- Enemy territory rope. What’s more, the UK leads in Billings outside Brazil That was also the year when Stefa- finance, so thanks to the competi- US$ 40 million nini opened an office in India, a step tive financial sector in Brazil this is that could even be described as an Total employees one of Stefanini’s specialties. The “attack on enemy territory”, given 5,000 company opened its third Mexican that Indians are leaders in the IT office last year, and that country Employees outside Brazil sector, responsible for 80% of global is now the group’s largest market 450 exports in software and information outside of Brazil. The company is services. India’s IT exports totaled Offices outside Brazil present in Mexico City, Monterrey US$36 billion in 2007, a fabulous 18 and Querétaro. As for Argentina, it amount when compared to Brazil’s Countries gains the status of a priority mar- exports of a pitiful US$313 million. Argentina, United States, Spain, ket thanks to its proximity to Brazil The company’s representative office Mexico, the United Kingdom, and the strong local economy, now in Hyderabad, which is still getting India, Spain, Portugal, Colombia, growing for a sixth straight year. up to speed, is charged with servic- Chile, Peru and Venezuela ing Stefanini’s global clients in Asia Manpower and also operates as an extension Of the group’s 5,000 employees, 700 of the services offered by Stefanini file is the larger company, and that are dedicated to serving overseas cli- in the United States. “With a strong makes the challenge much tougher,” ents. Within this “international bri- base in Brazil, we now want to con- Stefanini said. Among the compa- gade”, at least 450 are located in the solidate our position abroad where ny’s global clients are groups such company’s 18 foreign offices, spread we have greater opportunities to as Johnson & Johnson, Santander, through 12 countries. For Stefanini, grow,” the founder said. HSBC and Dell, while Unilever and the strategy of internationalization The exclusively organic growth Alcoa are amongst clients served in goes beyond simply boosting hard seen so far inside and outside Bra- South America. currency earnings. He believes it zil will give way to a program of also produces gains back home in acquisitions of mid-sized IT ser- Priorities Brazil: “It’s difficult to quantify the vice companies, ones that attend Stefanini will prioritize four main impact, but the fact that we are a clients directly rather than sub- markets in this second drive onto global company certainly increases contracting to other IT companies. the international stage: the United our credibility and attracts more In a first phase, Stefanini will buy States, Mexico, the United King- clients in the domestic market.” In companies using its own resources, dom and Argentina, in that order. the same way, the internationaliza- but in a second phase the idea is Uncertainties about the growth of tion strategy not only helps prepare to use capital raised by offering the American economy may have better staff, but should generate an shares on the stock market. This caused consternation in global overall strengthening of the compa- would allow Stefanini to negotiate markets, but they have left Stefa- ny, making it better placed to with- with larger companies. nini largely unworried. He sees the stand the competition and fight off The buying spree will be restrict- world’s largest IT market as one potential purchasers. “If the com- ed to deals that can attract clients that offers his company enormous pany has global strength, it becomes located at what Stefanini calls the potential for international expan- better placed to defend itself back “top of the pyramid”. This includes sion. The group already has three home in the Brazilian market, given the 500 largest corporations in the US subsidiaries, in New York, At- that in many tenders, the names of United States and the 100 largest lanta and Fort Lauderdale. “The suppliers are decided outside of in South America. “Our client pro- American market looks good even Brazil,” he said. z

P I B 47 Report

Karen and Kathryn:

n t e F itta young fans enjoy açaí in Washington Li nd a

consumed far beyond the desert- scarred frontiers of California. “Our customers range from specialized This is Açaí! organic supermarkets through to Wal-Mart,” said Black. Sambazon Hailed as an elixir of youth, this typical Amazon also exports to 20 countries, and bill- fruit is gaining a foothold in the land of Coca Cola ings in 2007 were US$15 million. Today, Sambazon is riding high By Adriana Maximiliano, in Washington on the crest of the “red wave” that is growing in the United States. It alifornia surfers Ryan that California’s enormous popula- represents well-deserved success Black and Ed Nichols tion of post-hippy nature-lovers ever for a company that opened up the can’t even remember if dreamed of was right there, embod- market with aggressive communi- the waves were good on ied in a reddish-colored fruit. cations tactics, for example tast- the island of Fernando de Back in the United States, Black ing stands in supermarkets, fitness CNoronha, which they visited in 1999. and Nichols borrowed US$100,000 academies and events for young But what they do remember, and and launched Sambazon, the name people, as well as sponsorship for what changed their lives, was dis- standing for Saving and Adminis- surfers. The company had to find covering açaí, a typical Amazon fruit tering the Brazilian Amazon. What a way round the unpronounceable that is consumed in large quantities started as a simple operation to name, so all labels explain that açaí by Brazilians seeking a healthy life. import the Brazilian fruit in pulp is “pronounced ah-sigh-ee”. Served by itself or mixed with guar- form – produced under organic and Things got easier, however, thanks aná, açaí provides energy and has an- sustainable conditions, naturally – to a helping hand from Nicholas Per- ti-oxidant properties, all combined developed to the point where, two ricone, a well-known dermatologist with exotic appearance and flavor years ago, Sambazon opened its own who listed açaí among the world’s and an umbilical link to the world’s production unit in Amapá, Brazil’s healthiest foods in his 2004 bestseller largest tropical forest. Everything most northerly state. And açaí is now The Perricone Promise: Look Young-

48 P I B er, Live Longer in Three Easy Steps. Flamengo football Not by chance, that was the year Sam- club and Brazil’s na- bazon started to make a profit. Perri- tional team. He signs cone even prepared an açaí juice for off on the slogan popular presenter Oprah Winfrey, Black, of “This is the best açaí live on her TV show. Sambazon: in Brazil” while pos- From then on, the fruit has pioneering ing on the Rio beach

a market for Sa m baz om been gaining an ever-larger foot- / of Barra da Tijuca, hold in American gastronomic cul- the red fruit some 3,000 kilome- in the USA ture. Since 2005, more than 100 ha ndou t ters from the nearest açaí-related products have been açaí plantation. launched, including ice cream, en- in Brazil last year, but even so it’s Sucasa, a distribution company ergy drinks, yogurt, beauty creams, pretty good,” 21-year-old nutrition located in Castanhal, a city lying 68 lipstick, shampoo, diet supplements student Karen Mechner told PIB km from Belém, would seem to con- and others. In February of this year, while enjoying one of the year’s firm the assessment of the people Oprah’s show once again stimulated first warm days at a Robeks store in behind Açairoots. The distributor Americans’ interest with the pres- Washington DC. Mechner drinks is growing 30% a year and in 2007 ence of surgeon Mehmet Oz, cur- açaí twice a week, and had brought shipped 1,000 tonnes of açaí pulp to rently a national guru. “This little her 20-year-old friend Kathryn Ar- six countries. So far, however, the fruit really is a source of youth,” Oz cher along to try it. company does not have sufficient said on national TV. Although açaí is being marketed resources to follow the path taken mainly by American companies, by Sambazon and build its own Competition some Brazilians living in the United production unit. “We don’t have Sambazon used to be more or less States are also getting in on the action. the same facilities that they had to alone in the game, but recently it Igor Pereira, Marco Rega and Rafael raise capital,” said Sucasa founder has found itself surrounded by com- Magalhães, all of them originally Solange Matos. petitors, some of them pretty big fish. from Rio de Janeiro but now living in In the world of cosmetics, Rio de Companies such as Anheuser-Busch San Diego, decided to start Açairoots Janeiro-based Assessa is also making (owner of Budweiser beer), Procter & after sampling the açaí being sold in progress as a wholesaler. Originally Gamble and Häagen-Dazs, for exam- the US, and deciding specializing in the ple, are already distributing products it tasted strange.”It’s production of active based on açaí. Coca-Cola has closed lousy quality,” said ingredients derived a deal with Bossa Nova, a small fac- Pereira. “We saw that Over 100 açaí from seaweed, the tory in Los Angeles, to distribute bot- we could develop far products have company has grown tled açaí juice. And Bolthouse Farms, better products.” been launched in thanks to açaí. “Our a traditional manufacturer of juices The ecological sales are up ten-fold and salad dressings, has opened a and health-enhanc- the US in the last in three years,” said factory in Belém, capital of Pará ing posture of Samba- three years Daniel Weingart Bar- state at the mouth of the Amazon, zon which has found reto, general director to produce açaí-based juices for the such favor with Americans does not of Assessa. His company sells açaí in- US market, sold under the Bom Dia invoke the same reaction at Açai- gredients to Estée Lauder of the Unit- brand. It’s the first Bolthouse factory roots. “The Americans are exploit- ed States, La Prairie of Switzerland, outside of the United States. Luckily ing the Brazilian product and the the Body Shop (UK) and American for the pioneer surfers, most of these people of the Amazon,” said Pereira. newcomer Borba, amongst others. companies have opted to buy their “They sell us this story about saving The tendency will be to grow much raw açaí from Sambazon. the forest, but it’s a lie.” more. “Countries such as China are Major juice chains in the United Açairoots is pinning its market- right now evaluating açaí,” Barreto States are also including açaí among ing strategy on the Rio de Janeiro said, dreaming of the day when the their menu options. “It’s not exact- lifestyle. The company’s advertising 1.3 billion Chinese might all become ly like the açaí I tried when I was symbol is Junior, formerly with the fans of the exotic red fruit. z

P I B 49 Small and Medium Companies

Growing Fast Brazil now ranks fourth in the global franchising league, and the challenge is to use this experience to expand internationally Arnaldo Comin

ust about everyone involved number of franchises, with 1,197 in the battle to boost Brazil- chains operating. That puts it be- ian exports agrees that the hind China, the United States and country must push harder Canada. It also ranks sixth in the to widen the range of goods total number of franchise outlets, and services it sells to other coun- with a total of 65,500. tries, so reducing the current heavy With such fertile terrain to dependence on commodities. At- grow in, the majority of Brazilian tractive brands and quality services franchisers operate just in the do- are thus an excellent showcase for mestic market. Even so, the Brazil- Brazilian entrepreneurs, and help ian Franchising Association (ABF) pave the way for companies of all has already registered 52 Brazilian sizes in a wide range of activities. franchise brands operating interna- Franchising stands in the very front tionally. The United States, South line of this movement, it is one of the America and the closer European most dynamic sectors of the Brazil- countries such as Spain and Por- Ponci Neto, of Chilli ian economy and generally regarded tugal are the most popular choices Beans: focus on

as one of the most sophisticated in in this first phase of internation- p e a m p ol i n/Hy consolidating the the world in terms of legislation and alization. “Our biggest challenge brand overseas ulo P a ulo investment options. is to have more companies see the P Franchising is notable for its international market as a strate- Today more mature and pro- vibrant results. Annual growth has gic option,” said Maurício Borges, fessional, the franchising industry been in double digits through the business director at the Brazilian is preparing for a second phase of last five years and total billings Export and Investment Promotion expansion. This time, prime tar- were R$26 billion in 2007 – roughly Agency (Apex-Brasil), linked to the gets will be China, the Middle East equal to US$13 billion. Brazil ranks Ministry of Development, Industry and Africa. Top priority at this mo- fourth in the world in terms of the and Foreign Trade. ment is working together and learning about markets. In the last two years, a partnership between the Just starting ABF and Apex-Brasil has invested The five largest Brazilian franchise chains are still quite small internationally almost US$2 million in more than Total 20 overseas trade missions, an od- Rank Chain Sector Overseas outlets yssey that has included visits to 1st O Boticário Cosmetics 2,500 70 the United States, Greece, Portugal, Spain, Italy, Mexico, Panama and 2nd Wizard Language schools 1,220 31 China. Still planned for this year 3rd Hoken Natural products 1,107 112 are trips to South Africa, Ecuador, 4th Fisk Language schools 966 105 Colombia and Malaysia, plus Spain 5th L´Acqua Di Fiori Cosmetics 908 — for a second time. “We are at a crucial phase of the Sources: Brazilian Franchising Association (ABF), Brazilian Export and Investment Promotion Agency (Apex-Brasil) and companies. process, which is that of gathering

50 P I B The brand in first place The Chilli Beans franchise comes to Dubai Chilli Beans was created in 2000 as an importer of carefree, easily-priced sunglasses, and today it’s one of Brazil’s newest international franchise operations. The brand has 206 sales points including units in Portugal and Los Angeles. The goal is to reach the end of 2008 with 235 outlets, including three kiosks in Colombia, two in Panama and another two in Venezuela. However, the crown jewel in this strategy is the opening in September of two Chilli Beans outlets market intelligence,” said Ricardo in Dubai, the result of a partnership with Lebanese group ZSI which Camargo, executive director of the already has experience of distributing western fashion products in the ABF. The international visits have United Arab Emirates. generated important discoveries for Known in the trade for its aggressive marketing, Chilli Beans Brazilian franchising, for example preaches caution when it comes to internationalization. “Our main goal the importance of Macau as a step- is not just to peddle lots of glasses any way we can, but to build a brand ping stone into China. A former Por- in a consistent manner in each market, and that’s why we approach the tuguese protectorate, the city has a question of growth with great care,” said Mario Ponci Neto, the com- legal system similar to that of Brazil. pany’s director for expansion. The first international proposal came in Like Hong Kong, it does not require 2002, to start operations in England, but the company preferred not to that 51% of a business be controlled run the risk. “Our logistics infrastructure was not adequate to the chal- by Chinese capital. “Macau has the lenge,” said Ponci Neto. The decision to start international operations additional advantage of offering was put off for a year until another opportunity came along, this time for lower start-up costs,” said Lina Vol- Portugal. “Then we were more confident,” he said. pini of Global Track, a consultancy Even so, the chain invested more than would have been normal that provides services for the ABF- in Brazil to understand local tastes, and to adapt the items in the Apex partnership. collection and the communications strategy. Now the challenge will be to seduce the “cool” youth of Dubai without falling foul of the rigid Fine tuning moral codes of the Arab world. “We will be aggressive, because that Any company wanting to establish is in our DNA, but with respect,” said Ponci Neto. “We still have to a presence abroad is well advised learn from them.”

P I B 51 Small and Medium Companies

to look long and hard at the experi- wide range of vehicles, from some The heart of the business ence of those who have already gone equipped for snow in Patagonia to Cultural and language differences down this road. Some companies a fleet of four-wheel-drive pickups can be just the tip of the iceberg in have built up highly globalized op- serving mining areas in Argentina, the list of challenges for interna- erations – O Boticário, for example, Ecuador and Chile. At the same time, tional franchising chains. Special- is today Brazil’s largest franchising it has managed to implement uni- ists and businessmen alike warn chain with 2,500 outlets, of which form electronic fleet management that caution, planning, a large dose 70 are overseas. The first interna- systems, customer service know- of humility and above all flexibil- tional venture was in Portugal, in how and training, but adjusted as ity are essential inputs if the busi- 1986, and now the company is pres- necessary for each country. Another ness is to get off on the right foot. ent in more than 20 countries, from important point is to keep a long- The first step is to know where you Japan to New Zealand. term vision. “We believe that South stand. “It’s best to do a solid legal Building a successful business America will be a region without study of each country and, if pos- model also requires sensitivity. frontiers, even with a common cur- sible, register your brand at least “Larger chains often behave in an rency, and so we need to be strong in two years ahead of time to avoid any inadequate way by creating and each country,” Newton said. predatory competition,” said Luiz imposing franchising systems in a top-down manner,” said Mario Ponci Neto, director for expansion at the Chilli Beans sunglasses brand Seven Steps (see box). “Only the franchisee operating in the country is really able to Success to adjust the operation to the stan- What it takes to build a dards of that market.” successful franchise chain In the services sector, where local adaptation can be much more :: Plan and implement your complex, some companies take a international expansion long time to fine-tune their opera- in a sustainable way tion. This was the case of Localiza, a car rental firm based in Minas :: Identify the most attractive Gerais state, which since 1992 has overseas markets to been investing to spread its cover- launch your strategy age throughout all of South America – today it is absent only from Ven- :: Register and protect your ezuela and the Guyanas. “In these brand at least two years 15 years or more, it would be fair to before starting operations say that we have weathered every possible type of economic and insti- :: Study national tutional crisis, including differences legislation carefully of currency, culture and infrastructure, and for the last five years our :: Identify a suitable and operation can be considered fully trustworthy partner, preferably structured and profitable,” said one who knows the business Aristides Newton, franchising vice president at Localiza. :: Adapt the business model The company’s greatest lesson, to the local culture according to Newton, is to achieve Boticário store in Lisbon’s Vasco a balance in adapting to local con- Take part in commercial :: da Gama mall: in ditions without losing operational promotion activities Portugal since 1986 uniformity. The chain operates a

52 P I B Henrique do Amaral of the Dan- 15 years and has 180 mons who was born nemann Siemsen law firm. Anoth- stores in Brazil, with in Campinas, near São er key factor is to avoid getting too another 20 in Mexico, Flexibility is Paulo, but who went excited. “Many franchises go bust Spain, Portugal and An- essential for to the United States because they haven’t done proper gola. In the first two of to study English at fiscal planning,” he said. those countries, Nobel winning new Brigham Young Uni- It’s also essential for the would- formed partnerships markets versity in Utah. While be international franchiser to be with people in the there, he started giv- open to experimenting with new same line of business. This made ing Portuguese lessons to young ways of working. This means things much easier. In Mexico, the missionaries destined to work in that the strategic partner must be Brazilian chain chose to adopt the Brazil. Once back home, he brought chosen very carefully. The Nobel brand of the local franchiser, while with him all the know-how to set up bookstore chain is a good example in Spain the selected partner was a his own language school franchise. of what can go right – and wrong. major book distributor. In Portugal, Today Wizard has 1,120 schools, of Founded 1943, the company has however, the partner had a back- which 31 are outside Brazil. been in the franchise business for ground in engineering, and this The attack on the international led to difficulties in market started in 2003, with the getting the brand strategy of following the diaspo- launched and recog- ra of Brazilians seeking oppor- nized. Nobel grew tunities abroad. This made the to have five stores US market the top priority, with in Portugal, but had Wizard itself operating as mas- to close one of them. ter franchiser. There are now 26 “We are now trying to US schools. Other business units convince the master are in Japan, Ireland and Mexico, franchiser in Portugal and Portugal will be added shortly, to sell the business with the opening of the first school to his counterpart in in that country. Spain,” said Nobel di- The falling US dollar and the rector Sérgio Milano slowdown in the American econ- Benclowicz, grand- omy have sounded alarm bells for son of the founder. Wizard, which is now seeing a drop in the flow of Brazilians going to A question the US. Some are even returning. of language The solution has been to adapt the Any international business model to attract Spanish franchiser must adapt speakers. “In March, we launched to the requirements of our first course aimed at Spanish the local language, but speakers, adapting the methodol- never was this as im- ogy we have developed for Brazil- portant as in the case ians over 20 years,” Martins said. of the Wizard chain The logical spin-off now will be to of language schools, open a school in Spain. Faced with one of Brazil’s old- all the new opportunities, Wizard est franchisers that is already thinking about setting up a ol

r started operations in schools in Latin America and maybe e M

a 1987. Wizard is the even going further. “With the right es r brainchild of Carlos partners, we could think of major os: Te

t Wizard Martins, the consumer markets like China, India o

ph Brazilian son of Mor- and Russia,” he said. z

P I B 53 New Markets

2007; in the same period Colombia bought 66% more from Brazil; and South-South Focus in Chile, growth of Brazilian imports was 67% over four years. Looking further afield to Libya, is Paying Off Syria and Egypt – all of them visited by Lula and his entourage of minis- The controversial strategy of seeking trading ters and businessmen – Brazilian ex- partners in developing countries has been producing ports grew, respectively 354%, 194% good results. But is it enough? and 168% over five years. In Egypt, the growth was from US$496 million in 2004 to US$1.3 billion in 2007. It’s hen President eign Trade (MDIC), this latter body true that in many cases, the absolute Luiz Inácio Lula headed during the first Lula govern- numbers are smaller, and being realis- da Silva took of- ment by businessman Luiz Fernando tic countries such as Ghana, Namibia fice in January of Furlan, a major shareholder in Sadia, and Cape Verde – all of them visited 2003, it signaled a Brazilian multinational in the poul- by Lula – would by themselves have Wa significant change in Brazilian ex- try and cold meats sector. little chance of figuring high up on ternal relations. Nowhere was this Trade with the United States has the Brazilian foreign trade rankings. more evident than in foreign trade, grown constantly. In 2003, Brazil sold However, the business missions that where the priority shifted from rela- the US goods and services worth a have accompanied Lula’s 49 overseas tions with developed to developing total of US$16.7 billion. By 2007 this presidential visits between 2003 and nations, and in particular to opening was US$25 billion and there were no 2007 are seen as a key to Brazil’s renew markets. The strategy, informally signs that the crisis sparked by the cord exports. When Lula went to known as “South-South” to differenti- collapse of the US mortgage mar- China in 2004, for example, 450 busi- ate it from the more traditional links ket would trigger a slowdown. “The nessmen went along too. between developing nations and the volume of Brazilian exports to the Despite the unfavorable exchange rich countries of the Northern hemi- United States has increased, but Bra- rate, in 2007 Brazil notched up an all- sphere, was initially subject to all zil has also managed to diversify and time record of US$160.6 billion in kinds of criticism. Op- establish new trading annual export sales, compared with ponents warned about partners. This means US$137.8 billion in 2006. Moreover, the risk for Brazil of America’s relative various midsized markets turned in turning its back on the Despite the share has fallen,” said solid growth. Angola, for example, United States and Eu- Welber Barral, For- imported just US$500 million from rope, seeking business new foreign eign Trade Secretary Brazil in 2004, but by 2007 this had in regions plagued by policy, sales at MDIC. surpassed US$2 billion. “This is an conflict (like the Mid- to the United The share of Bra- organized and pragmatic policy,” said dle East) or marred zilian exports going Alessandro Teixeira, president of the by political and eco- States are to the US market has Brazilian Export and Investment Pro- nomic instability (like still growing fallen from 22.8% in motion Agency (Apex-Brasil), which Latin America), ones 2003 to 15.5% last organizes seminars on the Brazilian that are very poor (like Africa), or year. However, as Barral explained, economy and puts together groups of simply places that are culturally and this fall in the ranking was compen- businessmen to accompany official geographically very distant from Bra- sated around the globe. Wherever visits and participate in trade fairs. zil (like India and China). you look on the world map, Brazil- Five and a half years later, few ian trade is doing very well. A new era would criticize the new policies ad- Latin America was declared a pri- Presidential trips are nothing new, opted by the Brazilian Ministry for ority region for foreign policy. Some even though they have increased in External Relations and the Ministry results: Brazilian sales to Venezu- frequency since 2003 and have been for Development, Industry and For- ela were up 112% between 2005 and transformed by the Lula government

54 P I B Lula in Ghana: just one of 49 presidential trips

ian companies that no longer treat the international market erratically, paying attention to foreign customers only when domestic sales are slipping. Today, Brazilian companies are adopting long-term strategies to international expansion.

“Commercial springboards” This new interest in global markets is one reason why Brazil, so far at least, is riding out the crisis in the American economy without significant turbulence. The diversification of trading partners also reduces the risk that the Brazilian economy could be contaminated by localized tremors – even when the epicenter lies right at the heart of the richest nation on the planet. The downside of the equation is that the reduction in dependency could be interpreted as Brazil not taking maximum advantage of the potential of the US market. For Brazilian exporters, particularly those in the footwear and textile sectors, the lack of trade agreements between Brasília and E v es/A Washington is a matter for concern, because the South American coun-

Joedson Al Joedson try loses a margin of preference in the world’s largest market. into major commercial operations. East, prosperity is assured by the The textile sector, for example, is There were also several official trips high price of oil. And Latin America, dependent on the exchange rate and to a wide range of countries during despite its political instabilities, has import tariffs to be more competitive. the “lost decades” of the 1980s and also joined the party. To get round the situation, some 1990s, but Brazil’s foreign trade did For its part Brazil put its eco- companies are using “commercial not respond in the way it has done nomic house in order during the springboards” to gain access to the lately. What, then, lies behind the nineties and in 2008 finally won rec- richest markets. This, for example, current boom? In the first place, the ognition from the Standard & Poor’s is the case of Pettenati, a company world is going through a cycle of gen- and Fitch ratings agencies with the located in Caxias do Sul in the South eralized expansion. Countries that award of “investment grade” status of Brazil which makes sweat-shirts, have suffered long crises have now for government bonds. This consti- sportswear and other clothing. The established conditions for growth tutes formal acknowledgement that company opted for producing fabrics – and this is without mentioning Brazil can honor its international in El Salvador to take advantage of China and its gargantuan appetite. commitments and paves the way for CAFTA, the free trade agreement Venezuela, India, South Africa, An- local companies to gain easier access that links the United States with gola and Egypt are just a few of the to global financial markets. This pos- countries in Central America. The countries that have been growing at itive scenario is enhanced by the new investment planned for the factory more than 6% a year. In the Middle and more mature posture of Brazil- in El Salvador is US$40 million. z

P I B 55 New Markets

between Chile and Mercosul, Bra- zilian products like coffee, orange Hitch-Hiking juice and soy can be imported for processing in Chile, and then exported to countries paying zero import duties for all stages of the To the Pacific process. “If in the past Chile used to be considered a small country, with Chile is touting the advantages of the free trade a population of just over 16 million, today we have at our disposal a mar- deals it has signed with 57 countries, and wants to ket of 3.8 billion potential consum- offer Brazilian companies a springboard into Asia ers all around the world. We are a By Nely Caixeta, in Santiago do Chile platform for doing business with 85% of global GDP,” he said. Quite obviously, the main focus he contrast couldn’t be from this: “It’s an excellent oppor- for the Chilean government is the greater. The Bruna Palace tunity for Brazilian companies to fast-growing Asian economy that reeks of laid-back his- place their products in numerous beckons just across ocean. The goal tory, a beautiful French- world markets with zero import is to be a doorway into a region that inspired construction tariff.” Thanks to an agreement already takes 40% of Chile’s ex- Tdating from the second decade of the last century located near San- tiago’s elegant Parque Florestal district which was then home to the Ro b les Rene moneyed elite. But now the Chilean National Chamber of Commerce and Tourism, located in the building, is a focal point for Chile’s surg- ing globalization. It receives a steady stream of trade missions from all around the world, but in particular from across the Pacific because Asia is streaking ahead as Chile’s principal trading partner. In May alone there were business teams from India, Hong Kong and Japan, all seeking new opportunities in the country that in the space of three decades has become a case-study in how to reinvent an economy in the globalized world. Open markets and internationalization are the key. “Re- cently we finished negotiating a free trade agreement with Australia, the 57th country with which we have completed such a deal,” said Pedro Corona, president of the Chamber of Commerce and Tourism. Corona says that neighboring countries like Brazil can now profit

56 P I B How can Brazil take advantage of this bridge to Asia? “There’s a ha ndou t world of opportunities,” said Furche, who will be in Brazil in August for another round of talks with the São Paulo Industry Federation (Fiesp). “We have an ongoing project to identify what Brazil has to export that is demanded by Asian countries, and what advantages Chile can offer via its free trade agreements.” Among the various possibilities, he mentions partnerships in sectors like chemicals and engineering, specifically for the production of tires and autoparts. “Thanks to the advantages we can offer to exporters, Chile recently started producing gear boxes which are shipped directly to China,” Furche said. The government calls this strat- Expressway to the Orient: 40% egy of coordination with compa- of exports through Valparaíso nies in countries in the region “the (below) are heading to Asia; economy of networks”. It’s only just negotiator Carlos Furche (above) receives a Japanese businessman starting, but expectations are that it will figure prominently in discus- sions in the coming years. “Our free ports. Among all the countries of trade agreements pave the way for the Americas, Chile has the longest a group of networks among compa- Pacific coastline, almost 5,000 kilo- nies which supersedes the classic meters with ports like Valparaíso model of coordination between na- that handle not just Chilean prod- tion states,” writes Carlos Eduardo ucts but also cargo from neighbors Mena, executive vice president of such as Brazil, Argentina and Para- the country’s Foreign Investment guay. “This is a great opportunity Committee. Behind all this lies and a great competitive advantage a consensus that, even while the for Chile,” said Carlos Furche, the economy has grown at an average country’s chief of some 5% a year commercial negoti- since the country ator. Furche heads ended its military up the General Di- Using Chile as an government and rectorate for Inter- export platform returned to de- national Economic means gaining mocracy in 1990, Affairs, an agency Chile is too small linked to the Min- access to a to fight alone on istry of Foreign Af- market of 3.8 the world stage. fairs. “Chile’s link billion potential For a long, thin with the Pacific is strip of a country something that has consumers around that is squashed come to stay.” the world between the An-

P I B 57 New Markets

The second stage of the government strategy has been the internationalization of Chilean business. This is a more recent phenomenon, but today companies have around US$40 billion invested abroad. For a country whose GDP is just US$160 billion, that’s quite a lot. The two main destinations are Argentina with US$15 billion and Brazil with over US$7 billion, followed by Peru, Colombia and Mexico. Main sectors are retail chains and energy distribution companies. Everything suggests that Brazilian companies have only recently started to take notice of the opportunities ap- pearing in the Andean country. Last year, Brazil’s Itaú Bank acquired the local operations of BankBoston from Bank of America, and a few months ago Votorantim’s cement division shelled out US$100 million for a stake in Chile’s largest cement and concrete producer. In this way, Itaú Im a gem and Votorantim joined Brazilian com-

ha /Fol panies like Gerdau, Vale, Marcopolo, va

Si l Natura and the Banco do Brasil that

Joel Joel have been operating there for some Brazilian oranges: tariff exemption for processing in Chile time. Even so, Brazil’s presence in Chile is relatively small, according to des and the Pacific, and hampered plete. Back in the 1970s, Chile had data from the Santiago government. by a domestic market that is smaller import tariffs that reached 250%. From 1974 through 2007, Brazil’s par- than the population of the São Paulo Dictator Augusto Pinochet opened ticipation in total foreign investment Metropolitan Region, the best op- up the economy with an iron fist, flowing into Chile was just 0.55%. tion is to strengthen ties with the and tariffs fell rapidly to 10%. Now, One promising sector for Brazil- rest of the world. Even boasting they average 1.8% and almost 90% of ian investments is energy, not just Latin America’s highest GDP per Chilean exports go to markets with because Brazilian companies have capita, now around US$14,000, it’s which the country has negotiated much to offer in terms of technol- obvious that Chile’s ambitions are in some form of preference. In all there ogy and experience, but also because line with the ample horizons of its are 19 free trade agreements cover- the Chileans desperately need new development policy, which is rooted ing 57 countries on all continents, sources of energy to keep on grow- in internationalization. signed individually or in blocs like ing. This year, the Chilean economy Reinventing Chile as an export Mercosul, the European Union and is likely to expand more slowly. It’s platform represents the third step in the Pacific Four, a grouping which partly a reflection of the slowdown in the strategy of internationalization unites Chile with New Zealand, Sin- the world economy, but also because that has been pursued in recent de- gapore and Brunei. Thanks to these of energy supply problems. “Brazil is cades, said Furche. The first phase treaties, Chile’s exports have really an important new player in the en- of the policy was to open up the taken off, from US$21 billion in 2003 ergy sector,” said Furche. “There’s a economy, and is now virtually com- to almost US$70 billion in 2007. lot to do in Chile in this area.” z

58 P I B matter, then let PIB be your visiting card. visiting matter,your be PIB let then really who makers opinion and leaders political the to and communities, business local and multinational and English. If you want to speak to the cream of Brazil’s new magazine published internationally in Portuguese in Brazilian economy – you’ll find all this and much more the on globalization of impact the and business opportunities, and trends international of analysis The progress of Brazilian companies around the world, PIB - Brazilian Companies Go International Your visiting card for Brazil. for card Yourvisiting (55-11) 3097-0849 / 8558-8260 / 3097-0849 (55-11) [email protected] , a unique

JIMENEZ ASSOCIADOS Book Review New Kids On the Block A new book by Italian economist Andrea Goldstein highlights the growing impact on the world economy of multinational companies from emerging nations By Bruno Reis ultinational Compa- nies from Emerging Goldstein: “new Economies – Com- multinationals” are reshaping the position, Concep- global economy tualization and Di- Mrection in the Global Economy (ed. Palgrave MacMillan) by Italian economist Andrea Goldstein deals with one of the hottest topics in international political economy: the question of Foreign Direct Investment (FDI) by multinational companies that have their origin in developing countries. Or, as the author puts it, by the “new multinational companies”. Goldstein is a senior economist at the Organization for Econo- mic Cooperation and Development (OECD) and has dedicated himself to studying the private sector, with a special focus on trade and global investment flows. The book’s greatest virtue is to in- vert the analysis of the phenomenon of internationalization, historically treated from the point of view of developed countries. It’s rare to find studies that set out to examine the question from the point of view of emerging nations, as does Goldstein. The author shows that multinational companies which until recently came almost exclusively from developed

countries are now also flourishing in Cap o z ol i the developing nations. And he goes

further, to describe how these new E m i l ia no

60 P I B multinationals are reshaping the ges which are not necessarily linked The frenetic expansion of the Asia- world economic scenario. to technological advance. Goldstein tic companies in recent decades – in Developing countries are still also discusses the pertinence of exis- particular Chinese companies, whi- principally receivers of FDI, but via ting theories about internationaliza- ch today are the leading external in- internationalization they are follo- tion of companies and the need to vestors among emerging economies wing the same path established by adapt these to the internationaliza- – is examined in depth by the author. the developed nations during their tion of the “new multinationals”. He reminds us that during the gre- process of industrialization. Accor- When he analyzes the strategies ater part of the 20th century, Latin ding to the author, the trajectory that adopted by companies from diffe- America led the movement of global transforms regional players into glo- rent countries, Goldstein describes expansion among the emerging na- bal competitors of the first order is national peculiarities that influence tions, but it was overtaken not only due to certain competitive advanta- their implementation and results. because of the Asian appetite. Ac- cording to Goldstein, the successive economic crises of Latin countries hampered the process. Only in the Some 1990s, with the realization of structural reforms, did “multi-latinas” emerging recover their dynamism. Goldstein stresses the importan- economies ce of government policies and urges governments to implement policies have become that encourage competition as a way to increase companies’ pro- major players ductivity, thus helping them move towards the external market. But he warns against protectionist ten- in the world dencies that supposedly favor local companies, but end up damaging economy (...) the country’s competitiveness. In making a clear defense of the and some free market, the book offers a significant contribution to the argument multinational about the need to preserve free competition in international com- companies merce. Goldstein warns, in his book, that developed economies are shoo- from emerging ting themselves in the foot when they put up barriers to companies nations can from emerging markets, which have for many years welcomed foreign investments. In addition to being say they unfair, it doesn’t make sense from an economic point of view. have achieved Goldstein talked with PIB by the status phone from Paris. Excerpts follow: The importance of the of global “new multinationals” We can say that 15% of investment players flows are from developing coun-

P I B 61 Book Review /AFP en yu/AFP Sh en S TR DEL World class players: the “new multinationals” are companies like China’s Lenovo (left), which bought part of IBM; India’s Tata, now spreading its tentacles worldwide; and Brazil’s Gerdau (right), which is accumulating assets in North America

tries in the direction of emerging even global leaders, including Political context economies, although there is no Vale, Petrobras, Embraer, Gerdau, It’s difficult to generalize, but Latin firm data. The importance of this Votorantim, CSN and others. In America is more democratic, much flow depends on the origin and general, the leading companies more so than the Asian countries in destination of the investments. In are ones that were privatized and general. This is a point in favor of Asia, for example, multinationals in where the state continues to play companies that originated in Latin countries such as China, India and an important role, determining or America. On the other hand, there Singapore are increasingly domi- influencing their policies and hel- are governments that don’t adequa- nant. They act both as sources and ping their internationalization. tely support the internationalization destinations for FDI. of their country’s companies, some- Virgin market times because of a lack of talent in Latin American recovery It’s probable that multinationals the public sector. Company operations are in a from emerging nations are better certain manner predetermined prepared or adapted than deve- The image of the by the growth and prosperity of loped-world companies to supply “multi-latinas” their countries, and vice-versa. those markets that target the po- Mexican and Brazilian companies Since the middle of the 1970s, pulation at the base of the socio- are seen in a good light, especially Latin America has alternated economic pyramid. One example of in terms of corporate governance cycles of strong growth with long this is the South African telephone and corporate social responsibility. periods of recession or stagna- companies, which operate the pre- This does not mean that their origin tion. Obviously, the companies paid system, while their competi- might not sometimes be a problem. have suffered as a consequence. tors of European origin assessed It is very difficult for a company to However, things are changing all the market badly and were slow to disassociate itself from the image of over the continent. In Brazil, for adapt their products to local reali- its country of origin, either for the example, major companies have ty. Something similar happened in financial market or the general pu- started to emerge as regional or Latin America. blic. Very often a particular sector or

62 P I B G e r d a u / H a ndou t World class players: the “new multinationals” are companies like China’s Lenovo (left), which bought part of IBM; India’s Tata, now spreading its tentacles worldwide; and Brazil’s Gerdau (right), which is accumulating assets in North America

place of origin might be associated be less predictable than Asia, which private sector. The Latin American with certain negative characteris- can be bad for business. On the other countries have advanced a lot in this tics, even if they are false. Reactions hand, because it is more democratic sense in the last 15 or 20 years, but to certain governments also affect Latin America tends to correct bad it is still insufficient. On the other perceptions. In this sense, the fact decisions. The majority of countries hand, they have the advantage of that people like Brazil and Mexi- in the region, and in particular Bra- cultural proximity to Europe and co translates into an advantage for zil, are adopting more conservative the United States. In Asia, a large companies from those countries. macroeconomic policies. This is part of the FDI flow takes place crucial for companies which need within the continent itself. A Latin Sustainable development to invest thinking of the future. It American would perhaps take lon- The movement in favor of sustaina- is no longer necessary for them to ger than an Asian to gain the trust ble development could create oppor- survive thinking just of tomorrow. of partners in Asia. tunities for the “new multinationals”. Asia, however, has an advantage in As they are relatively young, these terms of the exchange of informa- Brazilian diversification companies manage to react more tion between the government and Emerging nations are managing to quickly to new events. This happens do more than simply specialize in even more in Brazil, which has a na- one sector or sub-sector. The large tural advantage with ethanol. In con- In general, the economies are diversifying, and se- tinental Europe, consumers are more leading companies eking new alternatives. There’s no aware of environmental questions. doubt that Brazil has a great advan- are ones that were tage in terms of biofuels, but it has The Asian model privatized and also gained prominence in steel and Asia and Latin America are very di- where the state aeronautics. Even its vehicle indus- fferent. This makes it difficult for try, which is not Brazilian-owned, the latter to adopt the Asian model. continues to play an surpasses rivals in India and China In general, Latin America tends to important role in terms of efficiency. z

P I B 63 Opinion

Sugarcane plantation in São Paulo: just E Sa n t os/A 7% of the total agricultural area c ia atri P

(EU), and these have led to a significant increase in production. Con- Count Me Out sequently, there has been a strong increase in demand for raw mate- Criticism of the Brazilian biofuels program is rials such as the cereals, edible oils unfounded. World food prices are being pushed up by and fats used in biofuel production (see graphs). other factors By José Carlos Hausknecht* However, the rise in the price of foodstuffs cannot be attributed he increase in world These programs were conceived exclusively to the demand caused food prices has caused as an answer to environmental by biofuels. The strong economic concern about rising in- worries about growing emission growth seen in recent years in devel- flation and the potential of greenhouse gases and, more im- oping countries such as China and impact for poorer popu- portantly, as a result of the increase India has led to higher income and Tlations, mainly in underdeveloped in the global price of energy (pe- faster urbanization, which has pro- countries in Africa and Asia. There troleum, coal, gas, etc). Developed voked increased food consumption. have already been reactions in these countries that are dependent on im- Additionally, as income rises, more regions, frequently with violence ports of traditional energy sources “noble” foodstuffs such as meats, that implies a threat to the mainte- started encouraging milk and vegetables nance of social and political stabil- the search for renew- increase their partici- ity. The situation has sparked a great able sources. pation in people’s diet. global debate about the production Policies that in- Despite the At the same time, the of biofuels, with suggestions that clude incentives for increase in growing demand for this is responsible for the current biofuels have been ad- grains and oil seeds problems. Various countries have opted in recent years demand, the to feed the larger ani- faced questions about their pro- in the developed na- supply of both mal population places grams to stimulate the development tions, principally for ethanol and yet more pressure on of alternative energy sources, and ethanol in the United agriculture. this includes Brazil with its prog- States and biodiesel in sugar has The effect of this ress in the production of ethanol. the European Union increased economic growth has

64 P I B Grains – world production and consumption

2100 700 been felt mainly in non-agricul- 1900 Stock 600 tural commodities like petroleum, 1700 Production Consumption 500 iron and other minerals. Initially 1500 400 the agricultural sector managed 1300 to meet the additional demand, in 300 1100 part because agricultural produc- 200 tion in these countries was also 900 stimulated and thus also grew. More 700 100 recently, however, the growth of 500 0 tonnes) million period, of (end Stock global agricultural production has 64/65 66/67 68/69 70/71 72/73 74/75 76/77 78/79 80/81 82/83 84/85 86/87 88/89 90/91 92/93 94/95 96/97 98/99 00/01 02/03 04/05 06/07 not been sufficient to keep step Production, consumption (million tonnes) with rising demand, leading to falling world grain stocks and rising Sugarcane – production in Brazil prices (see graphs). produção de cana-de-açúcar no brasil 600

Adverse factors 500 Cane for ethanol We could also cite other factors that Cane for sugar have hampered a rise in agricultural 400 output, thus contributing to the 300 current situation. One of them is the devaluation of the US dollar. 200 As commodities are quoted in Million tonnes 100 dollars, their prices end up being corrected upwards. Another factor 0 is the occurrence of adverse climatic 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 conditions in some grain producing regions such as the EU and Australia. Ethanol and maize – US production and consumption A third complicating factor has been the increasing cost of agricultural production. Difficulties for the adoption of new technologies such as Ethanol – production the use of genetically modified crops Maize – consumption reduce the dynamism of the sector. In response to this situation, many countries have adopted policies to try and hold down domestic food prices. Some of these policies are aimed at encouraging domestic production. Others, such as the 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007p elimination of import tariffs and the imposition of export barriers for agricultural produce, are de- gram, based on sugarcane ethanol. gasoline, while for sugarcane etha- monstrably counter-productive. By In comparison to other raw mate- nol the reduction is 80%. Another reducing prices, these policies end rials used to produce ethanol, such advantage is productivity. An area up discouraging investments in the as wheat, maize and other cereals, planted with sugarcane produces expansion of production – exactly sugarcane is more efficient from 70% more ethanol than the same the opposite of the initial intention. both the energy and environmental area planted with maize. Conse- In this scenario, Brazil stands points of view. Maize-based etha- quently, the environmental impact out as the only country with an es- nol reduces in roughly 30% the is reduced, diminishing the need for tablished and mature biofuels pro- emission of carbon, compared to areas destined to agriculture.

P I B 65 Opinion Maize ethanol in the US: the impact on the raw material price... Prices under control Another factor to consider is that, despite the strong growth in demand for ethanol, driven mainly by the increase in the fleet of flexfuel cars, the supply of both sugar and ethanol has grown (see graphs), thanks to the enormous investments made in the Brazilian sugar and ethanol industry. This es/AFP

r means that the prices of these

o Flo products have held pretty steady, i l i

m while world sugar stocks rose E J. from 60 million tonnes in 2005 to 74 million tonnes in 2007. This shows that there is an equilibrium between supply and demand, a fact that differentiates the Brazilian biofuels program from grain-based programs adopted in other countries. When all is said and done, the current situation gives rise to justi- fiable concerns and implies a need for the adoption of short-term solutions to minimize the difficulties faced by the neediest sectors ... drives up the price /AFP of the population. However, we of tortillas, part of Mexico’s staple diet L o p e z must also be very clear that his-

s L u i s torically, world agricultural production has grown enough to meet Another important point to re- almost one million hectares of new the growth of consumption. Also, member is that the area planted sugarcane substituted crops such as that despite the circumstantial to produce ethanol in Brazil is ex- maize and soy. difficulties mentioned above, the panding mainly in the regions of Unlike Europe or the United current momentary lack of equilib- cerrado or savannah located in the States, Brazil still has a vast amount rium can certainly be resolved by Center-South of the country, in of agricultural land available. This an increase in production. Given particular in the states of São Paulo, will allow for expansion of pro- this outlook, it is no exaggeration Goiás, Paraná, Mato Grosso do Sul duction even without including to say that Brazil is in a privileged and Minas Gerais. It’s also impor- any areas that are environmentally situation. The availability of poten- tant to stress that this has happened unfavorable, such as the Amazon tial agricultural land and technol- practically without substitution of forest. Currently, the area destined ogy, and the entrepreneurial ability crops. This can be seen in São Pau- exclusively to ethanol production of Brazilian agribusiness, suggest lo, where the area under sugarcane in Brazil is roughly 4.3 million hect- that Brazil is the country with the grew by 965,000 hectares from 2001 ares. This is relatively small, slightly greatest potential to contribute to through 2006. No less than 75% of more than 7% of total agricultural an increase in the global supply of this expansion came from areas land, bearing in mind that the coun- agricultural products. that were previously occupied by try has 60 million hectares under natural or cultivated pastures. In the plow and 200 million hectares *José Carlos Hausknecht is a director of other words, just a quarter of the of pasture. MB Agro Consultoria, in São Paulo

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© 2008 PricewaterhouseCoopers. PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers, each of which is a separate and independent legal entity. *connectedthinking is a trademark of PricewaterhouseCoopers. Your career Globalization Starts in the Head What defines whether an executive really is part of the international economy? Experts say it’s much more about outlook and attitude, and less about simply working in another country By Márcia Rocha

ne of the biggest challenges facing companies in emerging economies that want to go inter- ar c hiv e national is finding qualified professionals who

can act effectively on the global stage – and p e r son a l the dearth is greatest amongst leaders. This is Oone key finding in 2008 BCG 100 New Global Challengers: How Top Companies from Rapidly Developing Economies are Changing the World, the second edition of a study by the Boston Consulting Group, a consultancy that specializes in global strategy and management, with operations in 38 countries. Published at the end of last year, the 2008 edition of the study involved 100 companies in the BRICs (Brazil, Russia, India and China) plus another 10 countries that are gaining in prominence in the world economy. “Globaliza- tion has placed the management of national companies in check,” said Fernando Machado, a director of the Boston Consulting Group. In this sense, expatriation is just one of the instruments used by Brazilian organizations to try and give their management teams the skills needed to work globally. But it’s not the only one, because not all expatriates are globalized professionals, and vice versa. The students of OneMBA, an international MBA course at the Getúlio Vargas Foundation (FGV) business school in São Paulo, often seem puzzled when they hear Professor Renato Guimarães Ferreira speaking on the subject. “Many people think that the fact of working in another country guarantees that a professional will have a global outlook,” he said. Obviously, spending some time abroad can help a lot in acquiring a global mindset, but there are cases Vassoller, of where it does not represent such an Citibank (center): efficient contribution to the forma- six months in the tion of this competence. United States

68 P I B This might happen for example long into this and is isolated from pective and they have a work pat- when an executive is selected to everything else,” said professor and tern that constantly brings them run the most important factory in headhunter Luiz Carlos Cabrera, di- into contact with colleagues, clients, a small town in any country in the rector of Panelli Motta Cabrera, a suppliers and competitors from va- world. It’s likely that this profes- São Paulo-based consultancy, who rious parts of the world. “The defi- sional’s universe will be restricted to lecturers alongside Guimarães on nition of a globalized professional is that city and that company. Another the OneMBA program. more about his outlook and attitu- situation in which expatriation of- de, and less about where he works,” ten contributes very little to devel- Going global at home said Guimarães. Leni Hidalgo, gene- oping a global mindset is when the For both these experts, it’s not ral manager for development at Vo- executive has a mission to resolve a always necessary to cross frontiers torantim Industrial and co-author specific problem for his company in to acquire a global mentality. Fre- of the book Executive Expatriation a foreign operation. “His workload quently, professionals act in a highly (Publisher: Thomson) puts it ano- and the effort that he and his fam- multicultural environment in their ther way: “The person who cannot ily make to adapt to the new reality country of origin. Their business implement in a factory in Bahia the may be so great that he dives head- outlook is rooted in a global pers- same project that was adopted in Paraná could have problems if he tries something similar in two di- Much more than just geography fferent countries.” Working abroad doesn’t always give an executive an international What does this mean? Simply outlook. A person’s individual characteristics, the things that lead him that before thinking about an inter- or her to seek out information that goes beyond the immediate job on national career, an executive has to hand, could make all the difference during a spell of working overseas. Check out the key differences between an expatriate professional and learn to deal with diversity at home. one who has a real global mindset: This doesn’t refer to diversity in terms of minorities, but to a multi- Expatriate Globalized mindset plicity of ways of thinking. It’s for this reason that exposure to differ- Focus on the country he’s Understands the business ent points of view in the most varied working in, and in manag- environment from a situations is one of the pillars that ing relations between this global perspective guides training at the Votorantim country and head office Group, which has 60,000 employees and operates in 13 countries. Becomes an expert in Is interested in various cultures, “In our corporate university, for ex- the culture of the coun- perspectives, points of view, tech- ample, the classes are composed of try he’s working in nologies and ways of doing business managers drawn from various com- Interacts with foreign Treats foreign colleagues panies within the group,” said Leni. colleagues according to as equals “Around two years ago, we started a structural hierarchy in adopting a similar policy with the which there is a cultural trainees.” relationship of dominance Participating in projects and and subordination courses abroad is also a reality for the more than 20,000 local em- Has contact with foreigners Has everyday contact with ployees at Brazilian plane-maker mainly when he travels foreigners, even when he is Embraer. Professional staff at the internationally working in his home country head office at São José dos Campos near São Paulo are already used to Sees an international Sees an international posting working with people from other posting as a mission with as a process that is part of his countries, and the company now a set date for ending professional development has operations in eight countries Source: Adler and Bartholomew worldwide. Many of Embraer’s in-

P I B 69 Your career

ternational partners insist on teams by phone, e-mail of even in person, in the Americas, Africa and Eurasia, comprising professionals of various during trips. “The course was very based in Rio de Janeiro. nationalities, and it’s common to useful for giving me a general idea Training, training and more find foreigners lunching in the staff of how to do business with the Chi- training. That is one of the most canteen or circulating in the con- nese,” said Teixeira, who is fluent important recipes of Brazil’s glo- struction halls. “We also habitually in English, French and Spanish. “I balized companies to prepare their bring in international clients to talk learned for example that in China, staff for international experience. to our employees,” said Eunice Rice, signing a contract means that you The Gerdau Group, which has been director of human resources. “This are authorized to negotiate, and not internationally involved since 1980 kind of initiative is very important, that the negotiations have ended.” and today has 37,000 staff with op- because client focus is one of our Petrobras has developed various erations in 14 countries, is no excep- key competences.” programs for candidates for over- tion. The focus is on making people seas jobs and for other staff like able to learn and to deal with oth- Business diplomacy Teixeira whose job brings them er cultures. “In addition, we have Oil giant Petrobras started its inter- into contact with other countries. other training and development national activities in 1972 when it One is called Business Diplomacy programs for our leaders who will created Braspetro, its former sub- and Intercultural Flexibility. manage company businesses over- sidiary for overseas operations. In The company currently has 300 seas,” said Francisco Depperman 2000 the company restructured Brazilian technical-level and man- Fortes, human resources director with an International Business Area, agement-level employees working for the group. totally dedicated to the company’s abroad. Fifty-year-old São Paulo civil operations in the 27 engineer Homero Ven- countries of the world tura lived in the Unit- Pe tr o bra s where it does busi- ed States from 1999

ness. “Overseas trai- A greater through 2003 but con- ia /Agênc ning and courses are learning tact with other coun- aria the norm for us,” said tries was a constant José Carlos Moreira, capacity is part of his work even the company’s human fundamental before that. He joined F St é f e r son resources manager for for going Petrobras 27 years ago the international area. via Braspetro and this, Last year, Rio-born global he said, functioned as chemical engineer Re- a warm-up period that gina Maria Cunha Sant’Anna Teixei- was very helpful in reducing the im- ra, 53, spent a week divided between pact of expatriation. “At that time, Shanghai and Beijing on a course expatriate worker programs were called Inside China. The course is not as well structured as they are to- a partnership between IESE, the day,” he said. “It was no joke, but I’m Business School of the University sure it would have been much more of Navarra in Spain, and the Chi- difficult if I had not had this expe- na Europe International Business rience in Brazil.” He explained that School (CEIBS). The program cost the most difficult part was leaving 5,500 Euros, plus air fares, and was behind his career as an engineer to paid for by Petrobras. become involved in finance. Now, in Teixeira is a consultant for addition to his Petrobras’ downstream business in the com- other respon- Ventura: constant pany’s supply area, seeking out, sibilities, he is contact with structuring and planning new busi- general man- other countries ness. She deals daily with profes- ager for asset throughout a sionals from other countries, be it development 27-year career

70 P I B Global insertion is by definition Learning ability the third relates to the executive’s somewhat easier in a multinational Leni Hidalgo of Votorantim In- ability to establish professional re- like Citibank, and it tends to occur dustrial said that she sees three lationships with lasting bonds that in day-to-day activity. The bank’s essential skills for the professio- generate alliances and partnerships subsidiary in Brazil currently has nal who wants to operate globally, with mutual benefits. 75 Brazilian executives working in addition of course to having a Other attributes are also de- abroad. Last year, São Paulo public thorough knowledge of his or her sirable. Rodrigo Araújo, directing relations specialist Gabriela Vas- own area and of the market: an partner of KornFerry International, soller, 28, spent six months in New outward orientation; integrative one of Brazil’s biggest head hunters, York working on a project to create capacity and the ability to build says that a globalized professional global solutions. “I talk a lot with relationships. Hidalgo explains also needs to have a large dose of people in my area who work in the these as follows: the first relates what he calls learning ability. “This United States, Japan, England or to knowledge and experience and is related to a greater capacity than Germany, for example, to deal with their systematic use in processes other people to learn and to carry questions related to the services we of improvement and renewal; the out new tasks in new contexts,” he offer,” said Vassoller, nine years at second is the capacity to promote said. The ability to identify the pro- the bank. She also frequently re- and participate in team-work, res- cesses and to be able to visualize ceives groups of foreign staff who pecting and taking advantage of things as a whole is also important, comes to Brazil to see local opera- diversity to enrich dialogue and as are creativity, flexibility and a tional systems. the decision-making process; and command of English and at least one other foreign language. “I’m not talking about the English or Spanish that will get you through a vacation,” said professor Tharcisio Souza Santos, director of the MBA program at the Fundação Armando Álvares Penteado (FAAP) college. “You have to be fluent to be able to negotiate in another language.” Some people will find it easier to develop a global outlook, perhaps because they have a background that helps in this process. “It could be because they have parents of a different nationality, or have already studied in another country, or packed a rucksack and travelled the world while they were young,” said Cabrera of Panelli Motta Cabrera. According to the business professor and headhunter, the younger generation and in particular people born since the 1980s also find that internationalization comes more easily. “It’s a generation that has participated much more in international exchanges, that has grown up with the Internet and in a world where internationalization is a reality,” Cabrera said. z

P I B 71 Finance Bulwark Brazil Fat profits in emerging markets are shoring up the bottom line for many multinationals, as they struggle with the US downturn By Adriana Wilner

here was a time when operating in these sectors, where emerging markets got profits are strong as a result of eco- blamed for dragging nomic growth, are lending a helping down the profits of mul- hand to their head offices.” tinational companies. Barros, a leading Brazilian ex- TBut now things have changed. Today, pert in international economics fat profits in countries like Brazil are and capital flows, has compiled helping offset losses in the United data showing that emerging econ- Good-looking profits: Avon is States and other Northern Hemi- omies in general generated 70.2% growing more in Latin sphere markets. Companies like of global GDP growth in 2007. Ten America than in Asia Ford, General Motors, Fiat, Philips, years ago, when emerging econo- Avon, Basf, Dupont, Whirlpool and mies were mired in crises, they Santander readily admit that re- generated just 35.5%. Apparently, the bad times are sults in regions like Latin America The contrast is even more strik- a thing of the past. In 2005, for and Asia are helping improve their ing in the vehicle industry. The Bra- example, total automotive sector global bottom line. In the case of zilian market has been setting new remittances were just US$500 mil- Brazil, the bonanza translates into records month after month. In the lion. Now, the good results in Bra- an explosion of profit and dividend first quarter of this year, new ve- zil are helping prop up companies remittances which hit US$3.7 bil- hicle sales in Brazil were 648,000, like General Motors, which is go- lion in April of this up 31.4% on the same ing through a severe crisis in the year, against US$1.2 period last year, ac- United States. GM, now fighting billion in the same cording to data from with Toyota to defend its long-held month last year. For From January Anfavea, the national title of the world’s largest car maker, the year to date, re- vehicle builders’ as- suffered a global loss of US$3.25 bil- mittances stood at to April, sociation. Projec- lion in the first quarter of this year. US$12.4 billion, sig- multinationals tions are that the Meanwhile, in the region compris- naling a continued sent home sector will close out ing Latin America, Middle East and upward trend that this year with sales of Africa, GM turned in a profit of started in 2005. profits of three million vehicles, US$517 million, double that of the It’s no coincidence US$12.4 billion against 2.45 million same period last year. And Brazil that Brazil is taking in 2007. The result, leads the region, representing 40% center stage, because the econo- according to the Valor Econômico of the regional total. my is growing and the currency is newspaper, is that the value of profit It was by far the best result in the strong. “All sectors in the country and dividend remittances by Brazil- company. In the headline-grabbing are enjoying one of their best mo- ian subsidiaries in the automotive Asian region, profit was US$286 mil- ments for profitability,” said Octavio sector totaled US$1.8 billion be- lion, and in Europe, US$75 million. de Barros, director for economic tween January and April this year, Frederick “Fritz” Anderson, world research and studies at Bradesco, a up no less than 238% on the same president of operations for GM, major bank. “The Brazilian subsid- period last year and exceeding the was lavish with his praise when he iaries of multinational companies annual total for 2006. participated last May in commem-

72 P I B economy is showing signs of maturity and consequently the automobile industry is also enjoying this good moment.”

Soaring profits For Barros, the chief economist of the Bradesco Bank, it is important to note that foreign companies’ profits have been growing much faster than their sales or production. He points out that the automotive industry has changed its product mix to improve its mar- gins. Ford is a good example of this with billings of US$1.8 billion

E /A in the first quarter of 2008, com-

v e z pared with US$1.3 billion in the preceding same period. Produc- G onç a l tion was up 29.9%, while profit a lé ria

V more than doubled. “The improvement reflects price liquidity, with increased volume and mix that Positive trend were only partially affected by cost What lies behind the increase in remittances increases,” said Goldfarb. If Ford’s :: Multinational companies are increasing their investments in Brazilian operation was a star in Brazil, so generating more profit terms of financial results, it also improved its standing within Ford Results of multinational companies in Brazil are improving, :: worldwide. In 2007 Brazil was thanks to strong economic growth the company’s third largest mar- :: Brazilian subsidiaries of multinationals are taking advantage of the ket, with 256,000 units sold. That strong Brazilian currency, which allows them to remit more dollars and placed it behind the United States so gain points at head office in the dispute for new investments and Great Britain. The year before, Brazil ranked sixth worldwide. :: Multinationals need to use profits earned in Brazil to offset losses The same thing is happening incurred in countries like the United States with the Brazilian subsidiaries of the European car makers. Volkswa- orations to mark the one millionth state, doubling production and gen and Fiat have suffered less with vehicle produced at the company’s launching a new line of engines. the US crisis, and have announced Gravataí plant in Rio Grande do Sul While the head office was looking good results in Brazil. VW’s profit state, in Southern Brazil. “Right at losses of US$45 million in the was up 26% in the first quarter this now, it’s GM Brazil that’s paying the first quarter, Ford’s South Ameri- year, against Q1/2007, driven by dividend,” Andersen said, speaking can operations churned out a profit demand in emerging nations, par- in the Portuguese he learned during of US$257 million, up nicely on the ticularly Brazil and China. Fiat’s his time as president of the Brazil- US$113 million profit of 2006. “Our global results in Q1/2008 were up ian subsidiary. results in South America are con- 13% over the same period last year, Ford is in a similar situation. tributing to the overall recovery of thanks mainly to strong perfor- Recently the company announced the company,” said Rogelio Golfarb, mance in Brazil where sales grew investments of US$350 million for Ford’s director of corporate affairs 35%, compared with overall group its Taubaté factory in São Paulo for South America. “The Brazilian billings which were up 9.9%.

P I B 73 Finance hi l ip s /P ha ndou t

Brazil has also turned in stellar Brazil has contributed performance in the consumer goods significantly to the de- sector. US cosmetics maker Avon terioration in the coun- announced profits rose 23% in the try’s current account, first quarter this year, thanks to in- which was already tak- ternational sales. Billings in Latin ing a hit because of the America were up 32%, to US$864.3 shrinking trade surplus. million, while billings in North In principle, however, America were down 6% to US$593.6 this phenomenon is no million. Latin America even out- cause for alarm, for two paced China, where sales rose 29%. reasons. First, because Thanks mainly to fast-growing sales there are strong indica- in Brazil, now the company’s second tions that the American largest consumer market after the economy will start to re- United States, Avon’s global sales cover in the second half grew 14%. Kleisterlee, of of this year. And second, Philips: benefits because there is an offset 75% of total profit from geographic in the shape of increased Latin America was also the fastest- dispersion inflows of foreign direct growing region by far for Dutch investment (FDI), which multinational Philips in the first The importance of Latin Amer- set an April record of US$3.8 bil- quarter. Regional sales were up ica for the results of multination- lion. FDI for the first four months 15% to US$412 million with Bra- als headquartered in the industri- was US$12.6 billion, a record for zil leading the way. This excellent alized world varies from company the period. “It’s obvious that rein- performance was also reflected in to company. In few cases, however, vestment is just as significant as the other emerging markets like Rus- has it been so decisive as for the amount sent abroad, because Brazil sia, China and India, and helped the US giant Whirlpool, the world’s is going through a phase when it is company offset the impact of the largest maker of major home ap- very attractive and important for US recession on North pliances. Countries in companies to expand their busi- American results. the region contributed ness,” said Bradesco’s Barros. Philips has been no less than 75% of the He stressed that frequently, reaping the fruits of in- The downside group’s operating prof- profit and dividend remittances are vestments made in the of high its in the first quarter wrongly seen as harmful. “What region. Marketing, for remittances is of this year, despite people fail to see however is that example, was intensi- the region generating this trend of increasing remittanc- fied with its budget deterioration just 20% of net rev- es is consolidating Brazil’s posi- doubled in 2008, while in the current enue. Operating profit tion as an important player in the the company structure account in Brazil and regional world economy, and improving its became more dynamic neighbors summed prospects for sustainable economic thanks to a head-office decision to US$119 million, up 41% on the growth,” he said. Putting it more give regional managers more au- same period 2007. Whirlpool’s simply: money attracts money. To tonomy. Philips’ business in Latin global profit fell from US$226 mil- the extent that the head offices of America has doubled in the last lion to US$159 million on the back multinationals see that investing in five years, with Brazil leading the of poor US results. the Brazilian market is good busi- way. “Our excellent performance ness, which generates profits for in these markets underscores the Hero or villain? shareholders, they will be more benefits we enjoy from having a The exceptional increase seen in likely to choose the country as a widespread geographic presence,” the first part of 2008 in remit- destination for their investments, said Philips world president Ge- tance of profits and dividends by building new factories and expand- rard Kleisterlee. foreign companies operating in ing existing operations. z

74 P I B Globe-Trotter

Mônica Named Ambassador Mônica, one of Brazil’s all-time favorite children’s cartoon characters created in 1963 by artist Mauricio de Sousa, has been handed a major responsibility. Since June 3 the buck-toothed Mônica is officially an Ambassador for Brazilian Tourism. She was named to the position in a ceremony organized by the then Brazilian Tourism Minister Marta Suplicy at a school in Planaltina, in the Federal District. Suplicy, stepping down to run for mayor in São Paulo, told an actress dressed up as Mônica “you’ll be representing Brazil abroad, that’s a big responsibility,” adding sternly, to the delight of the youthful audience, “you can’t get up to any tricks, Mônica.” The character and her young friends will feature in leaflets to promote tourist destinations in different parts of the country. De Sousa – who said the choice of his character as an ambassador was “an honor” – based the toothy Mônica and her inseparable stuffed rabbit on his daughter of the same name. The character is already an ambassador for Unicef, the United Nations’ Children’s Fund. (Arnaldo Comin)

Fischer Growing in Argentina Total, a Brazilian holding company that owns the Fischer América advertising agency, is once again betting on the recovery of the Argentine economy. The company made its first acquisition in Brazil’s southern neighbor at the end of 2001, on the day President Fernando De la Rúa announced his resignation, and bought Smash, Argentina’s largest promotions agency a lo r that was still under local ownership. Advertising mogul Eduardo Fischer then launched the Fábrica Im a gem/V de Comunicação Total (Total Communications Factory) based on a strategic model geared to Fischer: Brazilian

act in all areas of marketing services. The idea ha L o r enção/Fol business model is to repeat the model used in Brazil, where the advances in Argentina group controls five specialized agencies.(AC) o G us tav

P I B 75 Globe-Trotter

The Ideas Salesman Nicola Minervini, an engineer, professor and consultant, came to Brazil 40 years ago to start a new life. He stayed until 1977, when he was hired by an Italian-based company to manage their exports to Latin America. He settled in Brazil once again in 1985 as a consultant. Six years later, he returned for good to his native city of Pedrengo, near Bergamo, but he never severed his ties with the region. In recent years, Minervini has worked on projects financed by the European Union to help small and medium-sized Latin American companies break into global commerce, in particular in Brazil and Mexico. Minervini is well known to students of foreign trade in Brazil and Italy. His book O Exportador is a best seller in the field, now in its fifth edition by publishers Pearson Brasil. He still finds time to give lectures in post-graduate courses in business administration and foreign trade. During his most recent visit to Brazil, in April, Minervini spoke with PIB:

Minervini: PIB | What are the main challenges out of his area. And I heard the same author of a best- facing an exporter? thing from other areas, like purchasing seller about NICOLA MINERVINI | The first step is a and marketing. So I went to the owner exporting thorough evaluation of the company’s and said he made a mistake hiring me, exporting potential. It’s essential to because exporting was not part of the H a ndou t understand and adapt to the demands company culture. of the international market, and not just look at the momentary state of the PIB | What was the solution? economy. Sometimes an executive might MINERVINI | We ended up forming read that the international market is the a working group, with fortnightly solution for a specific crisis, but the crisis meetings, to prepare the company for will end and he won’t have managed to the international market, and all the export. Even if he does, his exports will company’s working practices were end along with the crisis, because his discussed. So things started moving. short-term outlook will dictate that it’s The whole company got involved in the better to sell more here on the street process of exporting. corner that to export. PIB | Brazil’s exchange rate is currently PIB | How should a company hampering export plans. What’s your decide to export or not? comment? MINERVINI | Even in the MINERVINI | The exchange rate is just largest companies, the tip of the iceberg. Brazilians complain it can be difficult about the overvalued real. When I convincing people speak with Italians, they say they can’t that it’s important export because of the Euro, or the lack to export. Once of government support, or because it’s I was hired as an election year. But in addition to a foreign trade macroeconomic evaluation, it’s necessary director of a Brazilian to look inside the company and ask if it’s company, and we placed ready for the international market. Does fifth in our first international it have the necessary quality and design? tender. I went to the technical If the company moved to Switzerland director and suggested today and all the barriers disappeared, improvements to our would it be successful? In general, product. He told me to keep the answer is no. (João Paulo Nucci)

76 P I B Taking Care with Culture Petrobras has written a booklet to give employees hints on how to avoid gaffs when dealing with people from other countries. See how to avoid embarrassment in some common situations:

Business cards | immediately. The sole Arabs consider the of the foot is considered left hand impure. So, impure in that country. presenting a business card or greeting Colors | In Japan, anybody with the left avoid brown. It’s hand is offensive. When associated with in Japan, deliver the frustration. In card with both hands. Malaysia, golden yellow The person receiving it is only for the king’s will take this as a mark clothes, while white of consideration. indicates mourning.

Negotiating | In Presents | Chinese India, a “no” can mean associate watches with various things, just one death. Giving one to of which is “no”. Local somebody is like saying forms of expression can you wish them dead. be considered evasive by western standards. Gestures | Pointing Appealing to feelings with a finger is an and beliefs, rather than insult in India. Use facts and numbers, the extended hand, or might help. the chin. Also, never wave with the palm Feet | If you stand of the hand forward, on or even touch the or whistle or wink – foot of another person they’re all unacceptable in India, apologize acts for local people.

Circuit Check out some highlights for July-September 2008, International Trade Center, São Paulo, in Brazil and around the world: FoodTec China Brazil. Event hosted by September 3-5, Shanghai, the Brazilian Agribusiness China. Attracts the main Association. Five panels Damascus Fair Brazil-Germany suppliers of foodstuffs for the focusing on sustainability. August 15-22, Damascus, Syria. Economic Meeting Chinese market: Topics include certification, One of the largest business August 24-26, www.foodtecchina.com sustainability and events in the Middle East. Cologne, Germany. international relations, Information from the Arab-Brazil It’s the 26th edition 7th Brazilian and renewable sources Chamber of Commerce: of the event: Agribusiness Congress of energy. www.ccab.com.br www.ahkbrasil.com August 11-12, in the World www.abag.com.br

P I B 77 Globe-Trotter

Les Roches, in Switzerland: top- quality training H a ndou t Living Your Life very tiring,” said Fábio Carvalho, graduate of Les Roches and business development director now general director of Novotel in an Hotel for Hilton Europe in Portugal. So Varmar, also in Portugal, the what’s the secret to getting ahead difficulties of hotel work start For some people, an hotel in this profession, and seizing when young people come to is a place to laze away the hours. the innumerable opportunities realize that this world of travel For others, a place to work hard. that the global market can offer is not as glamorous as they For those who choose hotels as good professionals? “Study hard had imagined. “You can forget a career, it’s a highly competitive and love your job,” said Carvalho, weekends and holidays, and environment with long and rigid one of the many Brazilians people who start off imagining hours – all aimed at making the who have studied at the Les that they will immediately be guests’ lives more pleasant. Roches Senior School of Hotel a manager or a boss discover “The hotel business can be Management, in Switzerland. that the pay is not as high as essentially operational, and For Rogério Angeloni, another they thought,” he said. (RM)

p ex /A Apex More Global Alessandro Teixeira, president ha ndou t of the Brazilian Export and Investment Promotion Agency (Apex-Brasil), is the new president of the World Association of Investments Promotion Agencies, or Waipa, the organization that represents investment promotion agencies in 149 countries. With a Brazilian in command, the Teixeira: hope of Apex is that Brazil president will gain more visibility in of Waipa attraction of investments.

78 P I B Brazil to Follow India? Antônio Gil, president of the Brazilian Association of Software & Service Export Companies (Brasscom), is pretty excited these days. He reckons the government’s new industrial policy has a great chance of raising Brazil to the status of a world player in the IT industry: “The sector will be completely transformed in a short time, maybe one year.” The main step is the reduction of s t oc k x p e rt payroll charges for companies. Gil called this “a shot in the arm” for the sector, which sees India as a model of success. (NC)

Dom Cabral: Education for the World training for the world The Dom Cabral Foundation in Belo Horizonte is dedicated to training executives, and now it’s looking specifically at the situation of those who work for companies in the process of internationalization. The initiative is a result of pressure from the market, which is more and more demanding professionals with the right aptitudes to work in global companies.

DC /F The new training programs will include special components for professionals who will focus on

ha ndou t the BRICs. (RM)

Quirós is Back in the Market When businessman Juan Campinas, which brings togeth- Quirós became president of the er three companies from the ar- r Po zz e b om/AB abi o federal government’s Brazil- eas of air conditioning, electri- F ian Export and Investment Pro- cal engineering and integrated motion Agency (Apex-Brasil) maintenance. With a portfolio of in 2003, the country exported 700 projects already implement- US$60 billion a year. When he ed by the three companies for stepped down in mid 2007, he clients in sectors such as food- could point to a total two-and-a- stuffs, drinks, pharmaceutical, half times greater: “I helped sell hospitals and hotels, Advento everything from frozen chicken to now plans bringing to Brazil the airplanes.” Once he completes Spanish business model for the the obligatory quarantine period area of engineering. With 600 di- for former public officials, Quirós, rect and indirect employees, the 45, will be able to apply much of group predicts 2008 billings of what he’s learned. He’s formed a R$150 million – almost US$100 Quirós: running the Advento holding holding called Advento, based in million. (CN)

P I B 79 Globe-Trotter

Express Tourism Brazilian businesswoman Nara Vidal, seven years living in the British capital, offers a program for anyone who will spend a brief but unforgettable time in the world’s most cosmopolitan metropolis.

Westminster Bridge: surefire program iSt oc kph o t

If you have just National a few hours... Gallery: great place to start ...Tough choices! But one surefire program is walking over Westminster Bridge to drink in the magnificent view of the Houses of Parliament and Big Ben. Every hour on the hour you can hear the world’s most famous clock strike the time. The area reflects all the power of an empire on which the sun never set and which dominated the world for three centuries. Just be careful with pickpockets which infest the region! e tti Ga s par

* Nara Vidal is a partner in Brazilian

Gateway real estate F ra ncesco

80 P I B Tate Modern: Mecca for modern art

Nathan Williams And if you have a full weekend...... Skip the main tourist areas, stay in neighborhoods like Clapham, Battersea and Shepherds Bush. The hotels are half the price and are served by excellent public transport – you get to Trafalgar Square or Victoria Station by tube in 15 minutes. With a day to spend in the city, it’s worth facing the lines for a trip on the London Eye, the giant Ferris wheel inaugurated in 2000. If it’s cloudy, give it a miss and head for Southbank and Southwark, on the south If you have a full day... side of the Thames river. There you’ll find the rebuilt Globe Theater, where Shakespeare ... Start with breakfast in the luxurious Ritz Hotel in Gre- and his company staged plays like Romeo and en Park. From there, head to Fortnum & Mason, a shop selling Juliet. There’s also the 11th century Southwark tea in beautiful containers. Right in front you’ll find the Royal Cathedral and the Tate Modern, a gallery with Academy of Art. Another great option for art-lovers is heading some of the most controversial pieces of modern straight to the National Gallery. There, amongst thousands of art. Crossing over the Millennium Bridge visit St other paintings, you’ll see Van Gogh’s Sunflowers and Renoir’s Paul’s Cathedral, venue of famous marriages like Dancer. The museum is in front of Trafalgar Square, a public that of Prince Charles and Lady Diana. space which brings together just about every kind of person in London. There are 400-year-old pubs and bus-stops for U emu ra the famous double-deckers. If you want typical English pub

food, try the Rose and Crown. There’ll still be time to catch a D é b o ra bus and head for Buckingham Palace. It’s also worth passing by St James Park, one of the most beautiful royal gardens in London. At night, try the Mandarin Oriental Hotel, in Knights- bridge, where the chef is generally reckoned to be one of the best in Europe. The menu changes according to the season of the year to ensure that it is always using fresh produce. Well, if you still have money and time, a good way to finish off the night is at one of the musicals running in the city. St. James Park: worth a visit P I B 81 In Transit • Pierre Schürmann*

My First Trip Around the World When he was just 15, Pierre Schürmann set sail with his parents Vilfredo and Heloísa on the yacht Aysso to circumnavigate the Earth – a voyage that helped mold his personality and prepare him for the world of business

The journey that most marked my life try, I saw a way of being different – and in every city, a new ritual. was the first circumnavigation of the world I Travelling alone is a great exercise in reflection and self knowl- did on the yacht Aysso with my parents Vilfredo edge. But at certain times, having the company of my wife Maria and Heloísa, in 1984 and 1985. I came to this Fernanda, and of my family and friends, makes all the difference. unforgettable experience at the age of 15, and One inseparable companion on all my journeys is without doubt a it taught me to be responsible. The voyage was good book (and my iPod, of course). One thing I always bring back also an incredible source of knowledge and from my journeys is lots of photos. learning. The experience I accumulated after Today I do small journeys, for pleasure. For me, the ideal visiting dozens of cities is indescribable and thing is to travel every three months, but I can’t always manage makes me what I am today. that because of my busy professional agenda. The last time was In my travels around the world, I learned to the Caribbean for a week. My last business trip was to New that one of the most important things in life is York. In all these comings and goings, that first journey around to put yourself in the other person’s place. Some the world sticks in my mind as totally unforgettable. As I am al- things are universal, like ethics, compassion and ways looking ahead, I already have my next trip planned. It will spirituality, but what might seem right to a Poly- be to somewhere in Asia, a continent that is culturally and histor- nesian can be offensive to a Muslim, and so on. ically very rich and which, these days, is once again becoming the I’m sure that my travels have greatly influ- center of world attention. z enced my professional life, given the exposure I had to the most varied cultures. In every coun- *Pierre Schürmann is president of Experience Media E L I E B RT/A

ULO PA

82 P I B With Apex-Brasil, my product reaches the world.

In Apex-Brasil I have gained more than a partner: I have gained the world. A Trade intelligence work detected that the international jewelry market demanded other di erentials in addition to price and quality. Apex-Brasil projects the image of Brazilian jewelry abroad by focusing on design. In 2003 I began exporting my products, which have wide acceptance in the United States and in the Arab countries. Since then I have participated in events, international fairs, and business rounds that have placed me face-to-face with foreign buyers. Such a partnership is worth gold. Apex-Brasil, the exporter’s partner.

Maria Tereza Géo Rodrigues - Talento Jóias Apex-Brasil/IBGM Exporting Project

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