Time for Latin America

Year II Number 5 Sep/Oct 2008 totum

After decades of stagnation, the region is now a booming Time for market for Brazilian companies Latin America To make the future is to value people and the place where they live.

Banco do Brasil is celebrating its 200th anniversary in 2008. Throughout all these years, we were always aware that taking care of the planet´s environment is the ﬁrst step for making a better future. No wonder Banco do Brasil was the ﬁrst Brazilian company to publish its own Business Agenda 21.

Banco do Brasil. 200 years making the future.

www.bb.com.br To make the future is to value people and the place where they live.

Banco do Brasil. 200 years making the future.

www.bb.com.br Content y ill O’Re v id

D a 46 review P ncia ê g / A el b Ue

cas Lu

ha n do u t 20 70

ANTENNA What’s the secret of Jacu Coffee?

/BM&F B o ves pa /BM&F 10 62 Liége Fuentes

H a n do u t ON THE ROAD 18 Magnesita buys LWB of Germany Clayton Netz

SPECIAL 20 The American reaction to InBev’s take over of Anheuser-Busch Tania Menai, in St. Louis

ADVERTISING 24 Brazilian professionals take international honors Arnaldo Comin, in Cannes

INTERVIEW 28 Miguel Jorge Nely Caixeta and Armando Mendes

OPINION 44 Highlights of PIB’s first year Maria Tereza Leme Fleury and Afonso Fleury

4 P I B COVER STORY Springtime in 32 Latin America The region shrugs off decades of stagnation to become a favored destination for Brazilian investment Armando Mendes, in Bogota ha n do u t

SPECIAL REPORT Technology 46 Brazilians outnumber locals in this little Irish village 65 Brazilian bovine genetic material Adriana Setti, in Gort goes international Vicente Vilardaga, in Uberaba Foreigners transform Brazil into 50 a center for global development SMALL BUSINESS Antonio Carlos Santomauro 68 sebrae prepares internationalization Flávio de Carvalho Serpa STRATEGY The political risks of internationalization transport 54 Randon sets its sights on the US and China Bruno K. Reis 70 Arlete Lorini, in Caxias do Sul

NEW MARKETS SERVICE 57 Aeromot takes its airplanes to China 74 How to beat French bureaucracy Arlete Lorini Andrea Flores, in Paris

IMAGE GLOBE-TROTTER 58 How to build a global reputation 76 Abu Dhabi looks to renewable energy Christine Puleo Andressa Rovani

LEGISLATION EXPRESS TOURISM 61 european sanitary barriers will be expensive 80 Asian exotica in the capital of Vietnam Andrea Flores, in Paris João de Mendonça Lima Neto, in Hanoi

FINANCE IN TRANSIT 62 The globalization of BM&F Bovespa 82 The curious customs of Honduras Juliana Garçon Marcelo Lins

P I B 5 Editorial

Totum Excelência Editorial Clayton Netz Nely Caixeta

PIB BRAZILIAN COMPANIES A Successful Year GO INTERNATIONAL A TWO-MONTHLY MAGAZINE FOCUSING ON INTERNATIONAL BUSINESS AND ECONOMICS, FROM TOTUM This edition of PIB has a very special significance for Editors Clayton Netz • [email protected] its editors and collaborators. Our fifth edition marks Nely Caixeta • [email protected] one year since we launched the magazine to provide a Executive Editor showcase for the new Brazilian economy, which João Paulo Nucci • [email protected] Contributors to this edition seems to become more and more international with every passing day. Afonso Fleury, Andressa Rovani, Antonio Carlos Santomauro, Armando Mendes, Arnaldo Comin, Bruno Over the last 12 months we have received countless messages from K. Reis, Christine Puleo, Flávio de Carvalho Serpa, Glaucy Vulcano, Juliana Garçon, Marcelo Lins, Maria Tereza Leme readers in Brazil and abroad, showing that we’re on the right track with Fleury and Vicente Vilardaga. Barcelona: Adriana Setti. Belo Horizonte: José Maria Furtado. Curitiba: Liége Fuentes. our decision to fill the need for a publication that reflects the dynamism Florianópolis: Maurício Oliveira. Hanói: João de Mendonça Lima Neto. Nova York: Tania Menai. Paris: Andréa Flores. of Brazil’s presence around the world. Pequim: Mariana Canedo. Porto Alegre: Arlete Lorini. Design To mark the first anniversary of PIB, which is published simultane- Maurício Fogaça and Karina Gentile • Página Mestra ously in Portuguese and English, we have prepared a special edition. Cover Paulo Caruso Our cover design is the work of top Brazilian car- ILlUSTRAtions toonist Paulo Caruso, inspired by one of Saul Stein- Enio Longo andMarcelo Calenda Photo Editor berg’s most famous covers for New Yorker. And our Glaucy Vulcano Copydesk and Preparation lead story focuses on the economic awakening of Márcia Melo Latin America, showing how it is attracting count- Translation Brian Nicholson, Christine Puleo and John Fitzpatrick less Brazilian companies as they take the plunge into internationalization. ADVERTISING Tutti Benvenuti • [email protected] For too long the ugly duckling of the world Advertising Sales Director economy, the region is now a new motor for global INTERNATIONAL AND BRAZIL (55-11) 3097.0849 growth. Last year regional GDP grew over 5%, mark- [email protected] Av. Brigadeiro Faria Lima, 1903 cj. 33 ing the sixth straight year of growth and the longest Jardim Paulistano - 01452-911 - São Paulo - SP PRINTING expansion cycle of the last 40 years. And never has PROL Editora Gráfica Brazil invested so much in its neighbors. Just in DISTRIBUTION IN BRAZIL The original New Support: Edicase - www.edicase.com.br Argentina, the stock of Brazilian FDI now stands at Exclusive distributor: Fernando Chinaglia Yorker cover: Mailing: Postal House US$7 billion, and the Brazilian government has ap- Rua Benta Pereira, 431 - São Paulo - SP inspiration 02451-000 - www.postalhouse.com.br proved a further US$6.5 billion of credit to finance Portugal Malta Distribuição highway construction and other infrastructure work to link the region’s Av. Paulista, 2001 cj. 815 - 01311-300 - countries more closely. You’ll find all the details in our eight-page special São Paulo (SP) - www.maltainternacional.com.br report and the interview with Miguel Jorge, Brazil’s Minister of Develop- Administrative Consultant Luiz Fernando Canoa de Oliveira ment, Industry and Foreign Trade, who was one of the participants in the [email protected] EDITORIAL SUPPORT Round Table that marked the launch of PIB a year ago. Cléia Gomes • [email protected] Three other highlights in this edition: collaborator Arnaldo Comin EDITORIAL CORRESPONDENCE Av. Brigadeiro Faria Lima, 1903, cj. 33 reports from Cannes on how Brazil’s new generation of advertising CEP 05426-100 - São Paulo - SP [email protected] whiz-kids are winning international acclaim; Tânia Menai, a Brazilian Signed articles do not necessarily represent the opinion of the editors. Totum reserves journalist living in New York, makes her PIB debut with a story from the right to edit or summarize letters. St. Louis, venturing inside the headquarters of Anheuser-Busch and Jornalista responsável: Nely Caixeta (MTb 11 409) describing the rage at the American company’s take-over by Belgian- PIB – Brazilian Companies go International Brazilian brewing giant InBev; and Barcelona resident Adriana Setti is published by Totum Excelência Editorial Av. Brigadeiro Faria Lima, 1903, cj. 33 flies to Ireland to investigate the phenomenon of the little village of Gort, CEP 05426-100 - São Paulo - SP (55-11) 3097.0849 - [email protected] where Brazilian immigrants are fast becoming a majority. Print run for this edition Portuguese – 17,000 • English – 8,000 Enjoy! Print run audited by PricewaterhouseCoopers

The Editors

6 P I B

Letters and e-mails

R$ 10,00 Year II Number 4 Jun/Jul 2008 Brazil will certainly play an important role in the global economy in a couple ¤ 3,50 of years. In this context, the market was lacking a reliable source of infor- totum mation about Brazilian products and services in the international market- place. PIB magazine has come to fill this gap. The well researched articles FRANCHISING are written with a simplicity that amazes me. The challenge ALBERT FISHLOW is to apply Congratulations to those who had the initiative to publish such a jewel. “Brazil needs an open Brazilian economy if it wants to experience in Chang Kuo I joint the technological foreign markets Sales Department vanguard ” Intercontinental Transportation Brazil LOOKING OUTWARD ROCK IN RIO Specialized São Paulo (SP) Festival takes services are winning root in Europe ; customers in the I work at ProChile and had the opportunity of reading the first editions of next step global arena China ? your magazine. I really enjoyed the subjects you covered and the way the articles were written. They encourage the reader to think and to make a critical analysis. Congratulations! Maria Ligia Saad São Paulo (SP) globais I read PIB magazine with enthusiasm and admiration. It was certainly a great José Carlos Grubisich, president of Braskem, with a toy car made initiative by Totum Excelência Editorial to publish a magazine with such a of recyclable ethanol- based green plastic modern and informative concept. PIB also stands apart from the others by virtue of the importance that it gives to exportation by the services sector. ON THE Ricardo Boucault Flores INNOVATION TRAIL Teresópolis (RJ)

Brazilian fl air for producing and developing technology sparks THIS IS AçAÍ! admiration and points to new paths for business Congratulations for PIB magazine. Such publications help keep us always up A reda fruit market from in the the Amazon United States fi nds to date about the global economy and make it easier to draw up new legislation that can help the business sector and, as a consequence, society as a whole. State Congresswoman Maria Lúcia Amaury Deputy Government Leader, São Paulo Legislative Assembly Last week, while waiting in the outer office of São Paulo (SP) Supreme Court Judge Celso de Mello in Brasilia, I am extremely patriotic and place great value on the country in which we I had the pleasure of reading PIB magazine. I live. Brazil’s presence abroad has grown substantially and it is of extreme was most impressed, particularly by the content importance that we have a magazine such as PIB. Allow me to offer my and quality. sincere congratulations for the excellent work you are doing. Salvador Fernando Salvia Olavo José Quadros de Linhares Martins & Salvia Lawyers Barueri (SP) São Paulo (SP) PIB is an exceptional magazine and has been essential for keeping up to I am an economics professor teaching students date all those who are working to develop the international market. You al- in the courses of Administration and Marketing ways deal with subjects that are being discussed in companies that operate Management at the Izabela Hendrix Methodist abroad. Congratulations for the innovative themes you deal with and the Institute in Belo Horizonte. I have used articles ample vision you bring to matters of the day. from PIB in specific studies and examinations. I Denis Maciel Alaunes Brotto think the magazine is very relevant for the sub- By e-mail jects I deal with at the university, and presents them in a way that is accessible to the students, Correction principally those in management technology In the story “Here, There and Everywhere – Brazilian Services Find their Niche” courses. I would like to congratulate all your published in our last edition, the total number of employees at IBM’s Hortolan- staff for the magazine. dia center is 8,000. The center is the second largest in the world, not the largest as Laila Feres stated. The number in the story, 1,100 employees, refers only to those working in Belo Horizonte (MG) the company’s Global Command Center.

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

8 P I B The best of Brazil all over the world. The National Confederation of Industry is the voice of Brazilian industry, representing the productive sector to ensure a suitable environment for doing business. Visit the website www.brazil4export.com to find out more about the about the Brazilian Exporters Directory, a database listing opportunities for international partnerships and investment in Brazil.

www.cni.org.br/english Antenna go n o L io n E

The Secret n: tratio us ll of Jacu Coffee I

The jacu – also known as the the jacu have given Brazil its own List. In some countries, a single cup guan, or Penelope – is a large forest equivalent of Indonesia’s prized Kopi can cost US$40. bird with dark feathers that looks Luwak, or “Civet coffee”, which can The same “production process” something like a farmyard hen. In cost up to US$400 per kilo. takes place with the jacu and the addition to being rather ugly and Kopi Luwak originates in the ensuing coffee – sold as Brazil Jacu disturbingly large, the bird has a jungles of Indonesia but found Bird Coffee – can reach US$200 horrible grunting call and the habit global fame only after the secret a kilo, to the delight of producer of raiding coffee plantations for was revealed: the coffee beans are Henrique Sloper Araujo who owns food. The Camocim Farm in Espirito collected amongst the feces of the Camocim. Jacu and four other Santo State is infested with them, Civet, a wild feline. Passing through specialty brands produced in the but nobody bothers. On the contrary. the animal’s digestive system gives Pedra Azul region of Espirito Santo Because the dietary preferences of the undigested bean a flavor and are now handled by distributors texture that have in the United States, Europe and Indulgence: Jack Nicholson, in made it a winner Japan, reaching markets in 20 The Bucket List, samples Kopi both commercially countries. Araujo’s farm is on just Luwak coffee before dying and in the cinema its fifth harvest but already has a – drinking a cup of sophisticated and faithful customer Kopi Luwak was one base for its 100% organic product. of the treats which Camocim coffee is also sold by tock Jack Nicholson and London’s Fortnum & Mason, a

n / Keys Morgan Freeman, retailer with over 300 years of

ctio playing terminally ill tradition. “I sold my entire 2007 e

oll patients, promised production in 15 minutes,” said C tt

e themselves in the Araujo, apparently delighted his farm r ve

E movie The Bucket is infested with jacu. (Liége Fuentes)

Eastern e/ 123RF ab n

Aroma ata

Hard on the heels of Café do W Lyn Centro, which went to Japan in 2006, Café Tiradentes and the Guaxupé Coffee Producers’ Coop- erative (Cooxupé) are also trying their luck in Asia. The traditional Tiradentes coffee from São Ber- nardo do Campo (SP) has opened a shop in Seoul, South Korea. Coox- upé, from Minas Gerais State, has chosen Beijing for its international debut. (Andressa Rovani)

10 P I B Made in the Amazon The Eco Group, set up seven years ago to develop sustainable businesses, is now entering the United States with over 100 types of products made by craftsmen, Indian tribes and Amazon communities. The fiber and These will be launched in the US the plant: sisal under the Sustainable Amazon to replace brand. “We want to help improve petroleum the living conditions of local people and at the same time preserve the world’s largest tropical forest,” said Davis Tenório, president of Eco. “It’s possible to establish a pioneer Fiber Cars magem

business structure that encourages Sisal is native to Mex- I sustainable development.” (AR) ico, but it’s fully adapted to olha / F

Brazil’s dry Northeast region. es õ

Now sisal fiber will be a raw im S

material for Ford Motor Com- ari u

pany, one the US automobile and J giant hopes can go a long way to substituting components engineers in Brazil. Others made from petroleum. After include coconut, sugarcane four years of research at its and jute fibers, but without complex at Camaçari in Bahia the same success as sisal. – a state which just happens The natural fiber allows for to be large sisal producer – production of autoparts that Ford announced that by the are 100% recyclable while end of this year some models being 10% lighter and 8% will include parts made from cheaper than their tradition- sisal fiber, for example the al substitute. One drawback dashboard and some items to large-scale adoption of si-

ha n do u t of trim. sal fiber is the supply chain, Sisal was just one of var- still organized along tradi- / 123RF Smith ious fibers tested by Ford tional lines. ark M

Not as violent as you thought Sustainable Headline of Britis h m a g a z i n e Amazon: for t H e E c o n o m i s t , A u g u s t 2 1 s t , o n Americans a story about the fall in violence to buy in Brazil’s biggest cities

P I B 11

Antenna

Le Pinch (above) and Awika Windup: global successes for Chico Bicalho Second to the iPhone It’s easy to spot the Brazilian touch in the clockwork toys designed by 47-year-old Chico Bicalho. Although he studied in the United States, Bicalho’s biggest influences remain the crickets, moths and other small animals of his childhood in Rio de Janeiro, the city he has moved back to after a long spell in New York. Bicalho’s greatest success so far among both children and adults is Le Pinch, a stainless steel baby caterpillar that can climb up small objects. The toy received an honorable mention at the 2008 design contest run by ID magazine, the global bible for the sector. Top prize went, unanimously, to Apple’s iPhone. Le Pinch and Bicalho’s other creations are produced in quantity by Dutch firm Kikkerland Design and sold through leading art museum shops and sophisticated toy stores around the world. On average they cost US$10. Before he achieved industrial scale, production was carried out entirely by Bicalho himself. Today he t designs on a computer and then a team u do of engineers based in Hong Kong helps n ha bring the characters to life. Production s: hoto in China reaches 40,000 items a month. P (Adriana Maximiliano, in Washington) Bicalho and his wife Isabella: honorable mention in ID prize

14 P I B Creative Cauldron The Media Factory is a Brazilian digital marketing company headed up by Leandro Kenski. Part of the Brazilian Ideiasnet holding company, the Media Factory is now commemorating the results of its recent international expansion. The first three months on foreign soil contributed 5% of company billings. The goal is to reach 15% by the end of the first half of 2009. The international arm of the Media Factory brings together Mexico, Argentina m and Spain. Now, the company e mag is getting ready to expand its I

participation in the US, Chilean olha Konski, of the / F lli

and Colombian markets. (AR) e

Media Factory: iz

fast international An ardo

expansion u Ed No Fear of the Arabian Sun Solarium Revestimentos, a Solarium was founded in Porto company from Rio Grande do Sul State, Alegre in 1997 and has production enjoyed a dose of luck to make its first units in São Paulo, Rio, Brasília and export sale to the Middle East. Company Recife, billing R$10 million – some owner Ana Cristina de Souza Gomes, an US$6 million – a year. There’s a rea- architect, was visiting Dubai in 2007 son for the geographic disper- and left some brochures of her sion: freight costs in Brazil are floor coverings with the owners of prohibitively high for small the hotel where she was staying. companies like Solarium. It’s That very same day they showed cheaper, Gomes said, to ship

the brochures to a friend from products to Kuwait than to t u

Point of Design, an English truck them around Bra- do n architectural office, which zil. For this reason the ha s: ended up choosing Solari- company has taken on a hoto um’s cement-based floor- representative in Dubai P ing for a swimming pool to prospect the Middle One detail makes the Arabian ad- area at the luxury Messila East market. “We’ve venture even more promising: Solari- Beach resort in Kuwait. acquired a taste for ex- um flooring is refractory, meaning that Gomes: refractory porting and we’re going it doesn’t get hot under the sun. That’s flooring (above) proves to expand in overseas a big plus when selling to a region of a winner in hot regions markets,” she said. scalding temperatures. (Arlete Lorini)

P I B 15 Antenna

Camila: Mathew McConaughey husband-power helps Muxo

embossed on the bags that Alves and the paparazzi helped spread With the sells at US$400 to US$1,400 on the word about Alves’ handbags Blessing of Oxum her site – www.mymuxo.com – – she was always photographed and in the trendiest shops in Los with one slung on her shoulder! Camila Alves, a 26-year- Angeles, where she lives. Handcrafted from Brazilian leather, old fashion model from Minas Actor Matthew McConaughey, the bags are personalized for Gerais State, is venturing into the the model’s boyfriend who was each client. Already the model is international handbag business voted world’s sexiest man by thinking of expanding her team – with a brand named for an Afro- People magazine, is Muxo’s currently just Alves, her mother Brazilian god, Oxum, but spelled greatest advertising asset. The and two helpers – to meet the backwards – Muxo. The name is couple had their first child in July growing demand. (AM)

ha n do u t

t u do n a /H A Global Harvest

No, the old downtown center of São Paulo hasn’t been taken over by

p u ro G E CM soy farmers, no matter how profitable it may be. Neither does Coama, the largest agricultural cooperative in the Americas, plan expanding beyond “I harvest opportunity from risk.” its native Paraná State. So what is Coama President José Aroldo Gallassini SINI JOSÉ AROLDO GALLAS President, doing with a hoe in his hand, tending a soy plantation in the center of South Coamo Agroindustrial Cooperative America’s biggest city? In fact it’s an advertisement for the CME Group which controls the Chicago Exchange, the world’s largest for commodities and futures contracts. The campaign invited Gallassini and the presidents of other large financial and capital management corporations from around the world to take part, seeking to present CME as the world’s biggest and most diversified business bourse, specialized in administering risk. Coama is

For José Aroldo Gallassini, turning risk into opportunity is second nature. As president of Brazil’s largest agricultural cooperative, he comes to CME Group headquartered in Campo Mourão (PR), with 21,000 members, and exports to mitigate price volatility and protect his organization’s position in the global soybean market. With complete price transparency, liquidity and central counterparty clearing, CME Group guarantees the soundness of every trade e and CME Group are , Chicago Mercantile Exchang and serves the needs of market users worldwide. The Globe logo, CME and Chicago Board of ercantile Exchange Inc. CBOT to 27 countries. (Liége Fuentes) trademarks of Chicago M ago. Copyright By improving the way markets work, CME Group is a vital force in the global rd of Trade of the City of Chic Trade are trademarks of the Boa economy, offering futures and options products on interest rates, equity indexes, ights reserved. © 2008 CME Group. All r foreign exchange, commodities and alternative investments. Learn how CME Group can change your world by visiting www.cmegroup.com/info.

16 P I B Exporting the National Sport In the land of football – soccer to some – a Canadian businessman is showing how it’s done. Four years ago and living in Brazil for nearly two decades, Darryl Kirsh created a theme park for the country’s most popular sport. He’s done so well that even before expanding within Brazil, Kick Bola Urbana or Urban Kick Ball is being readied for export. Early in 2009 Urban Kick Ball will open its first franchise in Bogota, Colombia. National idol Valderrama, a former midfielder with the Colombian national team who was famous for his extravagant hairstyle, will be their up-front promotion man. Valderrama and a group of investors will hold the national master franchise. Kirsh’s next international forays are scheduled

for Mexico and France. Unlike the ne

Brazilian unit which stresses visitor to entertainment, the foreign franchises Keys po u will place more emphasis on learning r Valderrama: a Kick ess/ G to play the game. “Brazilian football is r Bola Urbana franchise a brand known all over the world,” said n P in Colombia ctio the Canadian entrepreneur. (AR) A t At last... Corso Como in Brazil u do n ha

Although they’re made in Rio Grande do Sul State, until recently Corso Como shoes were s: virtually unknown in Brazil. But the booming domestic market and the strong real currency have led manufacturer Strada Shoe to start selling the brand on its home turf. Until the company photo opened its concept store in São Paulo early 2008, the handmade shoes which sell under the brand-name Corso Como were a rarity in the country, although they were available at some 900 points of sale in 18 countries. In addition to its own brand, Strada Shoe makes footwear for chains such as Gap, Banana Republic, Eddie Bauer and Abercrombie & Fitch. (AR)

Corso Como shoes: on sale in 18 countries

P I B 17 On the Road • Clayton Netz Recent moves by Brazilian companies overseas

All Fired Up Taurus currently exports 60% of its Vicunha in Ecuador n Acquiring LWB of Germany has production. The hope is that the new n Another company launching itself helped transform Magnesita into the factory will meet at least 10% of US on an international career is world’s third largest maker of demand. Currently Taurus has a Vicunha, controlled by the refractory products – materials used subsidiary in Miami, Taurus Holding, Steinbruch family which also owns in the iron and steel, cement and which acts as a distribution center the Companhia Siderúrgica glass industries. With annual billings and has a small manufacturing Nacional (CSN) steel giant. Using now exceeding US$750 million, the capacity. The reason for operating its Textilia holding company, company based in Minas Gerais is outside of Brazil is to reduce the Vicunha has bought 64% of the controlled by GP Investimentos negative impact of Brazil’s strong real stock in La Internacional, the which holds 40.2% of voting capital. currency on the company’s results. biggest textile factory in Ecuador. The acquisition operation totaled According to Ricardo Steinbruch, €657 million and marked the start of president of Vicunha, the Magnesita’s international career. In Pure Luxury! acquisition is the first effective step one fell swoop the company is taking n Via Uno, which specializes towards internationalizing the over LWB’s operations in the United in footwear and accessories group’s textile business which States, Belgium, Germany and China. fashions for the younger wom- already has commercial subsidiaries an, is opening a shop in el- in Europe, China, Argentina and Mouthwatering Portugal egant Rosny-Sous-Bois, some Colombia. In addition to meeting n Slowly but surely, Cutrale, Brazil’s 10 km east of Paris. With domestic demand in Ecuador, La biggest producer and exporter of headquarters in Novo Ham- Internacional production will be orange juice, is establishing a burgo (RS), Via Uno produces destined to Mexico and countries in foothold in Europe. The company and exports eight million pairs the Andean region. based in Araraquara (SP) has just of shoes a year, mainly to the announced the acquisition of Lara – 77 shops that it has outside of Ibope in Mexico Laranja do Algarve, a small company Brazil in countries such as Ger- n Ibope, the Brazil market research in Silves in the Algarve, Portugal’s many, Spain, Dubai and Hol- company, opened its first office in main citrus region. Acquiring this land, among others. Mexico at the end of August

Portuguese company is part of following a US$100,000 t

Cutrale’s strategy of strengthening u investment. But the idea is not to do

its position in Europe, its main export n research the popularity ratings of

ha / /

market for Brazilian orange juice. o soap operas shown on Mexican

un ia TV. Ibope will operate in Mexico Brazilian .38, v via its Ibope Inteligência branch Made in the USA which specializes in consumer n Forjas Taurus, a Porto Alegre (RS) and brand research. The company, wants to start producing company already has a pistols and revolvers next year in the subsidiary in Argentina, United States, the country to which Via Uno: feminine and the next target is Chile. z fashion in Paris In Brief... The total value might still be quite small, but the rate of growth of Brazil’s fashion exports is really impressive: according to Apex-Brasil, foreign sales have soared from US$300,000 to US$13 million. • Chinese clients of Arezzo, one of the most sought-after brands of Brazilian women’s footwear, are bigger spenders than the Brazilians. In Brazil the average sale is US$200, but in China it’s US$250. Arezzo owners Jefferson and Anderson Birman plan increasing their number of stores in China from four to 10 by the end of this year. • Bematech, a company which specializes in commercial automation, spent US$11 million to acquire US company Logic Controls which operates in the area of automation equipment for hotels, bars and restaurants.

18 P I B Embraer_LWYF_202x266mm.pdf 9/5/08 4:12:12 PM

CMY

K Special Do as I say... economic dependence and extends Ironically InBev´s purchase of Anheuser-Busch to a large number of philanthropic led to days of tension, fear and blatant deeds and support for institutions xenophobia in the very heart of the free market like the Red Cross and the local Boy Scouts. “Everybody in St. Louis has By Tania Menai, St. Louis, Missouri an opinion about this purchase,” said the business reporter Jeremiah he film Swing Vote which and employs more than 5,000 peo- McWilliams who covered the deal stars Kevin Costner ar- ple. This means that a sizable pro- for the St Louis-Dispatch. “I have rived in American cin- portion of the population of 350,000 never received so many e-mails from emas at the start of Au- earns its living directly from the readers. I can´t remember the exact gust. It tells the story of brewery. The company´s relation- number but this has certainly been Ta typical lower-class redneck from ship with the city goes beyond the the hottest topic in recent years.” any small town in the country. He is blond, has a goatee beard and wears a baseball cap and plaid shirt. He is divorced, unemployed and has a daughter. His vote for president will be the electoral tiebreaker and for this reason he is courted by both candidates. A character with this profile could easily have had a typical name like Joe Smith or Bill John- son. However, he goes further and, as a beer lover, calls himself Bud, the affectionate nickname which the Budweiser brand is best know. Bud is a national passion for Americans and has a grip on half of the vigor- ous domestic market. Therefore, the acquisition of Anheuser-Busch by the Belgian-Brazilian company InBev in July for US$ 52 billion was a kick in the stomach for the Buds, Joes and Bills. Despite the liters of beer they can drink, they have still not swallowed that fact that their greatest icon has been sold to Bel- gians from the small, medieval, bu- colic town of Leuven. Anheuser-Busch (or Anheuser- Busch-InBev as the new group will be known when the deal has been

finalized, probably at the end of this Men ai a n ia year) is based in St. Louis, Missouri T

20 P I B financial analyst: “InBev is managed by investment bankers who have run the business to the bone.” Despite the explicit exhibitions of xenophobia by the population and politicians who jumped on the bandwagon – rather ironic considering that the US is the very heart of the market economy which lauds the free flow of investments throughout the world – the Ameri- can brewer sent out a peace signal. “Anheuser-Busch has been part of the community of St. Louis for 156 years and this will not change,” said David Peacock, vice-president of marketing. “Our headquarters will remain here.” The company´s 12 plants spread throughout the United States will also continue to do business as usual, he added. Peacock´s optimistic view contrasts ha n do u t with the general feeling in the city. Budweiser plant in St. Louis: “This merger shows a great respect gates wide open to receive 3,600 visitors per day for our beers, our success and the American traditions our company maintains,” he said. He also said that McWilliams´s readers were in- 40% of the global revenues - US$ censed and wanted to know why 36 billion - from the new company Anheuser-Busch was giving in to to be formed from the acquisition InBev´s harassment and what the would be generated in the US, giving company would be like under foreign it a clear lead in the global beer mar- control. Some people even contact- ket. Peacock brandished as another ed the reporter to find out how they trump card the presence on the could prevent the deal Board of Directors of and relieve St. Louis the last representative from feared job cuts. of the Busch dynasty “There were so many 40% of InBev’s to be the CEO, Au- questions that we de- global billings gust A. Busch IV, the cided to hold live dis- will come from great great-grandson cussions on the news- of the founder, Au- paper site,” McWil- the United gust Busch. “This is liams said. A site called States a friendly agreement SaveAB.com set up by and represents great an unknown local person collected opportunities for Budweiser glob- signatures against the acquisition. ally.” However, this alleged friendly The transport workers union backed takeover did not stop InBev´s con- the campaign and mobilized its sub- trolling shareholders from threaten- stantial communications power. Its ing to force Busch IV from his posi- motto was taken from a phrase by a tion. A new, final offer which was

P I B 21 Special

US$ 7 billion above the initial one is one of the main tourist points and convinced the heir to the empire to attracts 3,600 visitors a day, were sign the surrender document and given no information about InBev. avoid a hostile takeover. When the university students who What makes the situation even work as guides were asked about it more unusual for the domestic pub- they simply lowered their heads and lic is that InBev was completely said they had felt no change. It was unknown to Americans until May best to change the subject and enjoy when rumors of the offer began cir- the chance to sample the (free) beer culating. The presence of Brazilians offered at the end of the tour. among the controlling sharehold- The almost embarrassed reaction ers and executive management has of the guides is a reflection of a kind made the situation even more con- of inferiority complex which St. Lou- fusing for local people (see below). is felt when of some of the symbols of its economic power passing into Tour of brewery brings free the hands of outside hands, albeit

beer but no information American. First was the plane maker ai

One Monday in July shortly after the McDonnell-Douglas which was swal- Men ia n

acquisition had been announced, a lowed up by Boeing from far-off Se- a group of 40 tourists who were visit- attle in 1997. This was followed by the s: T hoto ing the company´s premises, which AG Edwards finance house bought by P

Nationalism – for and against They said the acquisition of Ant- arctica would lead to the creation A trio of B razilian investors,Jorge Fernando Edmond, AmBev´s current of a genuine Brazilian multinational Paulo Lemann, Carlos Alberto Sicupira CEO in Latin America, will be officially company which was, in fact, what oc- and Marcel Telles, are minority share- named as the successor to August A. curred.Before the creation of AmBev, holders in InBev, with around 30% of Busch IV at the end of August. Brahma had been positioned in Latin the shares but that has not stopped Both Brito and Edmond began their America. The aim of the new company them running the company. The Chief careers with Brahma, the brewery based was to speed up the process of going Executive Officer, Carlos Brito, who will in Rio de Janeiro which Lemann, Sicupira international and turn the guaraná remain in charge of the new Anheuser- and Telles acquired in 1989. This acqui- soft drink and Brahma beer into global Busch-InBev, is also Brazilian. He played sition was to lead to the creation of what brands. However, neither of these two a crucial role in crafting the agreement is currently the world´s biggest brewer. products fulfilled the promise. In 2004, which resulted in the acquisition of Before they entered the brewing area, the nationalism of Lemann, Sicupira e the American brewer. Brito normally the threesome controlled Banco Garan- Telles suddenly disappeared and con- keeps the media at arm´s length but, tia and Lojas Americanas, a retail store trol of AmBev was handed over to the in this case, he gave many interviews network. Brahma grew rapidly, thanks Belgian group Interbrew in exchange and published articles in the US press to its tight structure, focus on produc- for 25% of the shares of the company to reinforce the peace tivity and the obsession for results of which would be formed after the deal message and overturn the new shareholders which was so dy- was finalized. the public resistance to namic that the company swallowed up The result was the creation of InBev the deal. The new boss its rival Antarctica and formed AmBev which would shortly rival Anheuser- of Anheuser-Busch´s in 1999. At that time, the trio played the Busch in size. The American crisis and operations will also nationalist card to justify the deal as it management problems surrounding be a Brazilian. Luiz was threatened by Brazilian anti-trust the beer which symbolized the United regulations due to fact that the new States have helped write the final chap- Brito: a key role company would have around 70% of ter of this story, for the time being at

ha n do u t in closing the deal all beer sales in the country. least. (João Paulo Nucci)

22 P I B Present everywhere: the Busch brand is on brewery buildings and the streets of St. Louis

Carlos Brito, on a flight in a low-cost airline. This gives a good impression particularly when you remember that the Busch bosses only travel by private jets.” Although the sale of Anheuser- Busch has caused popular con- sternation, it had been expected by those more alert analysts. “The company was the only one on the market which had not undergone some consolidation process,” said the manager of a fund which specializes in the beer market who did not want to be identified. “Miller and Mol- son-Coors had already gone down this road,” he said in a reference to the other large Ameri- can brewers. He did not believe there would be large scale cuts since the cost of labor is relatively un- important in the beer industry. What weighs most for the large companies are investments in marketing but, in this case, Anheuser-Busch another American company, Wacho- says Brazilian Olavo Dietzsch who and InBev make a perfect fit. Both via Securities, in 2007. At least Wa- works for a large agricultural com- are recognized for their size and chovia kept the headquarters in the pany in the city. “People with rela- their usually efficient advertising city. Now St. Louis has lost control of tives working for Anheuser-Busch efforts. Bud is one of the most tra- Anheuser-Busch. are feeling uncomfortable.” ditional and feted advertisers of the The fact is that fear of cost cuts Dietzsch said people were sure Super Bowl, the final of the Ameri- had existed before the Belgians and that there would be changes in the can football championship which Brazilians entered the story and the cost structure to help offset the high attracts the most hyped commer- company had plans to save US$ 1 bil- price InBev is felt to have paid for cials in the US. InBev has already lion by 2010. “One of the workers at the company. The heat has been warned that it wants to turn Bud the brewery came looking for a job turned down a little by the knowl- into a global brand and make it a as he was worried about his future,” edge that InBev´s controlling share- Coca-Cola of beers. So far, no-one said a driver from the Sheraton chain. holders and executives have spartan in St. Louis has complained about “This is the hot topic of the moment,” habits. “A friend met the InBev CEO, this ambitious goal. z

P I B 23 Advertising

Brazilians fly high in Cannes The new generation of advertising specialists forged in the digital era makes it mark on the global agencies Arnaldo Comin, Cannes

t has been a long time since eira is the son of Mauro Salles, the Portuguese was one of the founder of Salles, one of the biggest languages most spoken at agencies in Brazil, and began his the Cannes Advertising international career in 1994 when Festival held every year in it formed a partnership with Pub- Ithe last week of June in the south licis. Although Sales keeps a home of France. However, the lion tro- in São Paulo, he spends most of his phies are highly valued and hotly time abroad. disputed by advertising agencies Salles believes most Brazilian from Brazil, the only country in the advertising professionals pay far world which has raised advertising too much attention to the domestic agents into celebrities. The 2008 scene yet despite this their native harvest was good and Brazil won 41 talent and ability to adapt makes statuettes, putting it in fourth po- them attractive to foreigners. “Bra- sition in the world ranking behind zilians have an incredible ability to only the United States, Germany innovate, combined with a practical and the UK. view of business which makes them This was Brazil´s best perfor- very attractive in a global context,” mance since 2005 and in line with says Peter Minnium, Americas di- the standards of Brazilian victories rector of Lowe Worldwide, one of which began in the 1980s. However, the largest agencies in the world. what has attracted attention in re- Minnium was responsible for cent Festivals is the growing num- the reorganization of the network bers of Brazilian in Cannes who in a number of key countries carare representing companies from ried out over the last two years and other countries. “Of my generation, is one of the foreigners with the best only myself and Marcio Moreira knowledge of the Brazilian market. (currently deputy chairman of Mc- He met businesspeople and cre- Lowe´s operations in cities such as Cann Erickson) went ative professional Madrid and Moscow. abroad,” says Paulo from various coun- Lowe recently lost one of the Salles, who heads tries in Cannes, many Brazilian global stars, Fernanda Ro- the Latin American The talent and of them from Brazil. mano, to the JWT group. Romano operations of the adaptability During these conver- made her reputation at DM9DDB French group Pub- of the natives sations, he convinced in São Paulo and was creative direc- licis. “Nowadays the Brazilian advertising tor of Lowe in New York but at the flow is much more in- attract the specialists to occupy start of 2008 she moved to London tense.” Marcio Mor- foreigners leading positions in to work for JWT. “The Brazilian is

24 P I B PJ Pereira and Alencar, in San Francisco: profile

of global leaders Fe r es M ab e l amiable because he´s not afraid of tor of planning for the Nestlé brand This makes me wonder why the local being happy. We don´t have money in Paris, after a highly successful ex- agencies do not try their luck in mar- but we know how to go about get- perience with Publicis in Mexico. kets like New York or London. An ting it,” she said in the site Portal da Examples like these are likely to entrepreneur like Nizan Guanaes is Propaganda when she still worked become more common. “Every year perfectly capable of doing so,” says for Lowe. “We are not embarrassed that passes I see less of the festival and Minnium, referring to the founding to use the clients´ brand and prod- deal more with business at Cannes, partner of the ABC holding company ucts.” Another Brazilian heading to particularly in the human resources which controls a number of agencies Europe from the Americas is Rosa- area,” says Salles. “Nobody in this in- in Brazil, such as Africa, DM9DDB, lyn Hester, who will be world direc- dustry works as hard as the Brazilian. MPM and Loducca.

P I B 25 Advertising

Trailblazers In fact, not only is Guanaes in a po- Triumphing over adversity sition but is betting on concrete in- Professionals from the most specialized areas of communication vestments abroad. ABC has become are taking on the challenge of becoming entrepreneurs abroad with an eye a capital partner of the recently- on opportunities they would not have in Brazil. The chance of working on launched Pereira&O’Dell which is large-scale projects motivated Adriano Henriques, a specialist in business based in San Francisco, California, intelligence which is the most analytical part of marketing to leave Brazil. regarded as the Mecca for digital ad- “I was 32 and running the digital area and data base for Wunderman, the vertising. One of the partners after company which is most active in Brazil in this area,” said Henriques who is whom the partnership is named is from São Paulo. “I had nowhere else to go.” PJ Pereira from Bahia, the founder Henriques spent some time in the United States and Brussels working of AgênciaClick and regarded as one for the BBDO group. He has been based in Madrid since the end of 2005 of the greatest advocates of on-line where he is a partner in Opportunity, an arm of Shackleton, one of the advertising in the world. Profes- most premiered direct marketing agencies in Spain despite the fact that sionals from the most specialized it has only been on the market for four years. Based on his experience areas of marketing are also leav- abroad, Henriques believes that the great differential the Brazilian can ing Brazil to take on the challenge offer is flexibility. “We are used to working in adverse circumstances and, of setting up their own businesses for this reason, we have an incredible advantage over those used to a more abroad. (See box). structured working system,” he says. From the 2000s, the surprising This same daring spirit led planning specialist Marcello Magalhães success of Brazil in the Cyber Li- to move with his wife and five-year-old son to London where has been a ons category created in Cannes to partner since March of BrandThinkTank, which specializes in mark the good Internet campaigns brand management. The business was helped to his feet opened the market´s eyes to a new by its client Unilever which has given the company generation of professionals. Perei- the strategic management of the Sunsilk shampoo ra won the first Grand Prix of the brand, known in Brazil as Seda. category and has become a figure In fact, it was with Unilever that Magalhães´s who is in demand for speeches and international career began in 1998 when he workshops in Cannes. He switched started a three-year assignment in Buenos Aires. from AgênciaClick to the Califor- In 2002, when he was working for the Lowe nian company AKQA three years agency, he got to know Pierre-Emanuel Maire, a ago. He is now completely adapted French executive responsible for planning a successful to the United States and does not let campaign for Omo. Maire is the mentor of any nationalistic view get BrandThinkTank and offered Magalhães in the way in assessing a partnership. “We are still a very small the chances for Brazil- team of only five people but we have ians abroad. “There with a global spirit,” Magalhães says. is great demand on He believes this approach the market and, for allows the company to pursue this reason, agen- clients regardless of nationality. cies want Brazilians, BrandThinkTank has negotiated Swedes and Dutch deals with clients not only from and those who Europe but also from Mexico, are qualified,” he Thailand and Brazil itself. “That´s says. In any case, why we are in London. The city Magalhães: he stresses that is like an immense crossing “London is like advertising in point through which the whole São Paulo’s Sé Brazil has spe- world passes,” he adds. subway station” cific advantages. “People in the US

26 P I B and Europe enter the job the profile to become a Paulo Salles: market at a very late age global talent global leader of the in- when they are around hunter dustry. He believes that 25. By that age, the Bra- if others are to reach zilians have around sev- this level they need to en years experience of get rid of some of their working in agencies.” native ways of looking at things. “After a while Question of price you see that in advertis- The economic factor also ing 80% of things are the explains why so many same in any part of the people want to leave Bra- world. Nowadays, it is zil while others prefer to only the psychological focus on the domestic barrier which prevents market. Pereira recalls more people from fol- that under the Brazilian lowing an international payment system in which career,” he added t agencies gain a fixed per- u do n

centage of what they ne- ha Moving eastwards gotiate from the media s: The market has proven hoto sales media truly cre- P to be highly receptive ative professionals end to the interchange of up earning salaries which are simi- ciaClick and is now his neighbor in professionals and there is no lack lar to those of football stars. However, the small town of San Rafael, near of opportunities in the least likely this is not the case with advertising San Francisco. Alencar left Brazil places. This is the view of Pedro made through the Internet which for Canada five years ago where he Pahl from Rio de Janeiro. He is 28 still attracts little interest in Brazil. looked after the Nike account for the and was in Cannes representing Ro- “There´s little room for a good Inter- basketball player Michael Jordan at mania where he works for Tempo, net creator in Brazil,” he says sadly. the Blast Radius agency. “I had the one of the largest independent local Anyone who ventures abroad to privilege of accompanying advertis- agencies. He arrived there due to a work in advertising has the chance of ing films with Spike Lee,” he recalls. contact by Internet with the Portu- working with amounts which are out Three years ago Alencar linked guese director of creation, Miguel of the question for Brazilian clients. up with Pereira at AKQA before ac- Gonçalves, who was looking for “One of the difficulties I had was in cepting an offer from Publicis for good professionals. Within a few e- adapting to the amount of money whom he looks after global accounts mails, the deal was done. involved in the campaigns. An In- such as LG, HP and Delta Airlines. Romania may not seem at first ternet film which would be made in Although he is at the peak of his glance to be the new global epicen- an improvised way in Brazil can have career and represented the United ter but Pahl is surfing the wave as a millions spent on it in the US,” says States as a jurist at the Cyber Lions way of entering a country which is Mauro Alencar, executive vice-presi- this year, Alencar stresses the value a member of the European Union. dent of creation of the Publicis group of the new experiences and the qual- “Romania is seen as one of the main who is responsible ity of life an interna- creative focus points of Eastern Eu- for the digital agen- tional experience ca- rope and has attracted many mul- cies Modem Media reer bring. “In social tinationals looking for new talents,” and Dialog. There are terms, I am the same he says. Besides the professional Alencar comes Brazilians in the as a Sears mattress aspect, Pahl is sure he is undergo- originally from João most unexpected salesman,” he jokes. ing an incomparable personal ex- Pessoa in Paraiba Salles cites Alen- perience. “I have an open mind and and worked along- markets, like car as an example am ready to accept whatever comes side Pereira at Agên- Romania of a Brazilian with along,” he says. z

P I B 27 Interview • Miguel Jorge

Miguel Jorge: “there is potential everywhere” m e mag I olha / F Valor / r e t s o ne C Elia

28 P I B “We’re Going to Occupy Spaces” The emerging world has its eye on the technology and know- how being developed in Brazil. For the Minister of Development, Industry and Foreign Trade, the consequence is billionaire business deals for the Brazilian companies that get in first nely caixeta AND Armando Mendes

razilian companies are goal is to occupy the space so that cess, which is a certification system to expanding throughout we’re in there before the others,” the regulate the flow of rough diamonds the world in the wake of minister told PIB in an interview. in Africa to prevent the profits financ- the recent fast growth of ing guerrilla movements. Angola is emerging countries. But What kind of opportunities do you see for the world’s sixth largest producer of Bas Miguel Jorge, Brazil’s Minister of Brazilian companies around the world? diamonds in terms of quantity, but it’s Development, Industry and Foreign There is potential everywhere, but third by value because almost all the Trade explains, there’s still a lot to be I’d like to single out Africa and Latin stones are of exceptional quality. done to really take advantage of the America. Angola is spectacular. The opportunities that are arising. Jorge, Brazilian government is making a This means Odebrecht is becoming who started his career as a journalist major effort to organize trade mis- a key service supplier to and was later an executive of various sion to Angola and to put Brazilian the Angolan government... large companies before becoming companies in touch with people there. Angola doesn’t have an organized a minister, has under his wing two Few people are aware of the excep- food distribution system, so Ode- key public bodies that promote the tional work that Odebrecht is doing brecht is building the country’s first internationalization of the Brazilian in Angola. The company issues all the supermarket chain. When I was there economy: the Brazilian Export and country’s official documents – birth last year, the company had already Investment Promotion Agency (Apex- certificates, ID cards, passports and opened 22 stores out of a planned Brasil); and the Brazilian Industrial so on. As a partner of the state-owned chain of 60. Odebrecht is looking af- Development Agency (ABDI). As diamond company, Odebrecht exer- ter everything: identifying best loca- examples of projects that are start- cises complete management of the tions, building the stores, importing ing to bear fruit, Jorge singled out the operation in Angola, from mining and the products, placing the gondolas industrial and agricultural ventures cutting through to commercialization. and training the staff. When it’s all developed by ABDI in Venezuela and Anyone who saw the film Blood Dia- completed, the company will hand Cuba. He also mentioned how Brazil- monds will recall the Kimberly Pro- over the chain to the government. ian companies have been active in the new African nations, where they even Why keep on trying Brazil’s National Confederation of carry out some government functions Industry says that the world’s major under contract. This presence could to export to the companies haven’t yet woken up to generate new business for those com- United States if it’s the business potential of Africa and panies that have been quicker off the so much easier to Latin America. What’s the Brazilian mark to establish a presence in the strategy for these markets? new markets ahead of the multina- export to neighboring We want to occupy space, so that tionals from the rich countries. “Our countries? when somebody else arrives they’ll

P I B 29 Interview • Miguel Jorge

find us there already. We should have started this a long time ago. These are markets which are almost “cap- tive” for Brazil, although we have to use the world with caution to not be misunderstood. But what do we have along our almost 1,600 km of border with Colombia? Nothing. Why keep t

on trying to export to the United u do

States if it’s so much easier to export n ha Going to Chile: to neighboring countries? s: Brazilian buses in Santiago hoto P Can you give some examples? Well, I was visiting Venezuela, and What opportunities are there work, and rivers and lakes. This is after two days of meetings the former for Brazilians in Colombia? something Brazil is very interested in. industry minister Cristina Iglesias We are gaining ground in the services President Lula told President Uribe handed me a list of products totaling sector, in heavy construction. The Car- that he was interested in these ship- US$600 million that she would like are railroad project in the center of the yards, and that the Brazilian govern- to import from Brazil – she listed just country is financed by the BDNES, for ment would be interested, if possible, about everything, from beef to toilet example, and it will be built by a Brazil- in doing something there. paper. Where else in the world could ian company. There are also opportu- that happen? We initially distributed nities in mining. The 40-year struggle Can’t Brazilian yards meet the demand? that list to the 140 companies that with the FARC guerrillas means no- In Brazil, it always seems to be all or were participating in the trade mission, body has had the courage to go into nothing. In 1970 we were the world’s and then afterwards to all the others. the forest to work a mine, because they second biggest ship-builder. Then Some time later Edmundo Klotz and could face kidnapping or death. There we simply trashed our shipbuild- the other businessmen of the food sec- are few countries that are so large and ing sector. Now we’ve put it back on tor went back to Caracas with this list, have such mineral wealth that are as its feet and filled it with orders, so and he phoned me to say that Brazil- under-developed as Colombia. there’s no more capacity. ian food companies had closed export contracts worth US$1.2 billion. They During President Lula’s recent visit Is that because of Petrobras? set up an air shuttle to fly things like to Colombia, there were suggestions Well, Petrobras alone needs 200 new powdered and long life milk to Caracas. that Colombian businessmen could ships, counting natural gas ships, oil participate in the development of a tankers and support vessels. Petro- Would you say that opportunities for new Embraer airplane. Is there any- bras will need 38 drilling vessels. Brazilian companies in Colombia are thing concrete in this? Uruguay has some yards that can be essentially the same as in Venezuela? You’re talking about the 390, which used, and so do Colombia and Ar- No, because Colombia and Brazil man- will substitute the Hercules. It will be gentina. Colombia for example could ufacture more or less the same things. a passenger and cargo plane, not just produce river patrol boats, princi- Colombia produces vehicles, footwear, for military use. The president of the pally for Brazil’s northern borders. textiles and so on, so it’s more difficult Correios – the Brazilian postal service President Lula discussed this with to export, because one is competing – is very interested in this plane to carry President Uribe and asked Brazil- with the other. Venezuela is different. mail and parcels. But at this moment I ian Defense Minister Nelson Jobim Thanks to petroleum the country has think it is still in the planning stage. to check out the possibility of doing for decades imported everything it something together with the Colom- needs and not bothered to build up a Does Colombia have bian shipyards. diversified industrial base. Now ABDI an aeronautical industry? is working with the Venezuelans and No, but the country has a good naval What about agriculture? has chosen seven productive sectors construction sector, building good- They are already producing one mil- for an industrialization project there. quality smaller ships for coastal lion liters each of ethanol and biodiesel

30 P I B Now, all Brazilians who go to Cuba, whether they are employees of ABDI or APEX, they always take some cases of cans of guaraná. And a Brazilian company is evaluating the feasibility of building a factory in Cuba.

How does Argentina fit into the current picture? Today Argentina is our biggest single Odebrecht supermarket in trading partner and bilateral trade Angola: a 60-store chain should reach US$30 billion this year. We have tried to boost this bilateral per day in the South of Colombia, and ignition it was possible to comply trade as much as possible and the re- the country has a program to blend this with the emission limits, and we cent agreement making it possible to into the fuel. We would be delighted started exporting again. settle exports between the two coun- if they started importing flexfuel cars tries in pesos and reais is an impor- from Brazil. As they already have a Embrapa is becoming an international tant step in that direction, because it good volume of ethanol production, showcase for modern Brazilian agricul- will simplify trade and reduce trans- they could rapidly build a distribution ture. How can it help win new business? action costs for companies. Another network across the country. We are In Cuba, Embrapa is helping evalu- important example of this policy talking about this with Chile as well. If ate 40,000 hectares for planting with of promoting trade with Argentina you import a gasoline powered car you soy. There was some discussion in is the automotive agreement. This end up tied to that fuel for the next 15 the Cuban government about if this was a stop-gap measure for 15 years, or 17 years, because it will only run on area was appropriate or not for this but recently we renegotiated it for gasoline. The more quickly you switch crop. Well, this is not something for six years. After that period the trade over to flex models, the more the con- a government to discuss, it’s a matter will be completely free, without tax sumer will be free from just fossil fuel. of calling in an agricultural technol- or any other barrier. The footwear This is a great advantage, principally ogy company like Embrapa to check sector is also having discussions. for a country like Colombia that al- the soil and climate conditions, and ready produces ethanol. so on. This initiative could benefit What about? the entire Brazilian agribusiness sec- Indular, which is the only large Most of the Chilean population lives in tor with exports of machinery, agri- footwear factory in Argentina, was Santiago, which is surrounded by the cultural implements and so on. Case acquired by Vulcabras (of Brazil). Andes Mountains. Would using ethanol has already sold dozens of sugarcane All the other Argentine footwear be an environmental solution for Chile? harvesters to the Cubans and they’re producers are small. Indular makes Chile imports all its cars and is very very happy with them, because each quality footwear with a higher add- dependent in terms of energy. It’s new machine substitutes five of the ed value than the Brazilian product. a major consumer of gasoline and old models imported from the former Now the Indular team plans on or- diesel. Santiago was the first city in Czech Republic and from Russia. ganizing the Argentine market to ne- Latin America to bring in strict en- gotiate an agreement with European vironmental rules, because the city What other opportunities makers. The goal is to achieve zero is located in a bowl, so to speak, and does Cuba offer? tariffs for all Brazilian and Argentine all the pollution is concentrated. The Well, Cuba is working with Brazil on footwear in all of Europe, and not just Brazilian vehicle industry had diffi- an ethanol program. Cuba’s Industry the European Union. That means a culty in exporting to Chile until the and Trade Minister Raul de La Nuez reduction from 8% to zero. There’s middle of the 1990s because our ve- visited Brazil late 2007 and went to really a lot going on. Camargo Cor- hicles used carburetors and did not the Center for Sugarcane Technol- rêa, for example, has announced the match the required standards. When ogy in Piracicaba (SP). He also took a possibility of building a new cement carburetors gave way to electronic great fancy to the guaraná soft drink. factory in Argentina. z

P I B 31 Cover Story

The Latin American Spring With the continuous return of growth, the region has broken with decades of stagnation and Latin America has become a favored investment destination for Brazilian companies and the Brazilian government By Armando Mendes, in BogotA a n do u t /H

A stretch of the Pacific Highway: 1,200 km linking Rio Branco V e rm lho in Acre with the Peruvian ports of Ilo and Matarani will cut through the Andes Mountains and the Amazon Forest A m é rico

32 P I B The Latin

he journey began in a football pitch in the Bolivian Amazon alongside the president of Bolivia, Evo Mo- rales, and the ever enthusiastic President Hugo Chávez, of Venezuela. The meeting began in a formal manner but ended with pop music performed by Shakira, on another football field in the Colombian Amazon this time. The singer had two assistants in the form of the two other presidents who were present – Álvaro Uribe of Colombia and Alan García of Peru. Brazil´s President Luiz Inácio Lula da Silva was the only leader who took part in both meetings. Uribe chose his platform in the town of Letícia, the meeting place of the borders of three countries – Peru, Brazil and Colom- bia to commemorate Colombia´s national day on July 20. Shakira sang the national anthem for the Colombian president´s guests and the local people at the small football stadium. For President Lula, the trip to Bolivia and Colombia that July weekend was not just a festive occasion but also a trade mission. Two days earlier in the Bolivian town of Riberalta near Acre, he announced that Brazil would be providing loans to build roads. On the following day, on the eve of the political party in Letícia, Lula led a committee of Brazilian businesspeople to Bogota to discuss business and infrastructure projects with their Colom- bian counterparts. (See page 42).

P I B 33 Cover Story

Brazil is rediscovering Latin America and this can packing sector, bought three meatpackers in Argentina, be seen in various ways. Trade has almost tripled with Chile and Uruguay, respectively,for approximately US$ the region since 2003. The sum of Brazil´s exports and 310 million. At the same time, Artecola, a manufacturer imports with its neighbors surpassed the US$ 60 bil- of industrial adhesive products in the Vale dos Sinos lion mark last year. Brazilian businesspeople are now region of southern Brazil, acquired four companies in increasingly pursuing investment opportunities in Argentina, Chile, Peru and Mexico. neighboring countries. In 2007, Brazilian companies Brazil not only invests in producing goods and invested 15.8% of the total investments abroad of US$ services but is also financing infrastructure projects 11.65 billion in Latin America. This did not even amount in the region amounting to US$ 6.5 billion. Brazil- to 9% in 2006, according to a recent survey by the For- ian companies are building roads and bridges in the eign Trade Studies Center (Funcex)*. In 2007 alone, Andes, hydro-electric plants in Colombia and Ven- Marfrig, one of the largest companies in Brazil´s meat- ezuela, an airport and irrigation channels in Ecuador, gas pipelines in Patagonia, water and sewage treatment stations in Lima and Buenos Aires, as well as a metro project in Caracas. (This amount includes loans which have been approved but the projects have not yet got underway). They are also distributing fuel in Argentina, Uruguay, Paraguay and Chile, producing beer and soft drinks in Argentina, Peru, Bolivia, Chile and six other countries, software and advertising announce- ments in Argentina and making cement and steel everywhere. The region finally seems to be overcoming – or, at least, creating the conditions to overcome – some of its traditional scourges, such as poverty, social upheavals, political instability and low growth. Latin America´s economy grew by 5.7% last year and is expected to expand by 4.7% this year despite the international financial crisis and uncer- tainty on markets in the developed world. The region has grown for six consecutive years, according to figures from the United Nations Eco- nomic Commission for Latin Amer- /PR rt

e ica and the Caribbean (ECLAC). ck

u This is the longest expansion the St region has enjoyed for 40 years.

icardo Brazilian multinationals are s: R playing an important part in this

photo new push forward. Take the ex- Diplomatic bustle: President Lula meets with businessmen in Buenos Aires and ample of Colombia where invest- with President Uribe and singer Shakira at a national festival in Leticia, Colombia ments by Brazilian companies

34 P I B Interview: André Gerdau Johannpeter The Early Bird Starting before the competition has been multiplied tenfold from around a competitive advantage in Latin American US$ 50 million in 2006 to US$ 530 expansion, says the president of the Gerdau steel group million last year. Brazil has become the third-largest investor at the very moment Gerdau, a steel conglomerate when the Colombian based in the southern Brazilian state of economy is taking off. Rio Grande do Sul, made its first moves Colombia´s economy towards becoming a multinational in grew by 7.5% in 2007. 1980 when it bought a steel plant in Much of this big in- Uruguay. Next came Chile, Argentina, crease was due to the Colombia, Mexico and other nearby Votorantim Group´s countries, so that today the region acquisition of control is home to nine of the group’s 13 for-

of a large steelmaker, u eign operations, according to the Dom do

Acerías Paz del Rio. n Cabral Foundation business think-tank. ha / “Gerdau’s skill has been taking good ard n

Growth Potential r advantage of business opportunities

Gerdau, Petrobras e Be in Latin America,” said André Gerdau ll

and the bus manufac- nue Johannpeter, president of what is today

turers Marcopolo and Ema Brazil’s most internationalized group. Busscar are also in Colombia. “Latin America is now a Why the option for neighboring countries? region of potential growth for the At the time, we chose Latin America because of the geographic proximity steel sector, particularly as a result and the relatively similar culture. More recently, our investments have been of the low current consumption of justified by the high rates of growth in the region, driven by investments steel per inhabitant and the high in infrastructure and, consequently, the high growth in demand for steel. rates of growth which need strong Consumption of steel per capita in Latin America is still very low, compared investments in infrastructure and, to developed countries, and this indicates great potential for growth. Ad- in turn, present strong demand for ditionally, Latin American countries are more open to foreign investment steel,” says André Gerdau Johan- and in general now have governments that are politically and economically npeter, chairman of Gerdau which more stable. is based in southern Brazil. Gerdau invested US$ 466 million in the What advantages did Gerdau have compared to local and multinational region in 2007, the year in which companies that were also present in these markets? the company expanded most in In terms of advantages over local groups, I would highlight Gerdau’s great Latin America. It bought plants in experience in steel-making, with well-established processes and quali- Mexico, Venezuela and the Domini- fied people. With respect to third-country multinationals, our advantage can Republic which joined others was having started the process of expansion via acquisition earlier than in Peru and Colombia, along with the competition. This allowed us to acquire companies when asset prices older acquisitions in Chile, Argen- were lower and gave us time to learn to operate efficiently in the Latin tina and Uruguay. American market. Like Gerdau, Brazilian investment in neighboring countries is Will the strategy of international expansion be continued? more varied. In the first wave of ex- Our plan is to continue growing in the region as the opportunities arise, be pansion, Brazilian companies were it by acquisition, alliances or expanding our existing plants. The Gerdau attracted to the Mercosul countries, long-term strategy is based on growth and profitability, and all our invest- particularly Argentina which is the ments will be directed to these goals. Our presence in Latin America fits second-largest economy in South into that strategy perfectly, both in terms of growth, as I explained, and America. Argentina has around US$ also in terms of profitability. 7 billion in investments by Brazilian

P I B 35 Cover Story t u do n ha / o ã alc F raldo — Ge t u do n ha / a Lun illa n o B l nne Yo Siderperu workers: Gerdau invested Petrobras filling station in Buenos Aires: US$466 million in the region in 2007 Brazilian investment amounts to US$ 7 billion

companies which are the main direct foreign investors Its purchasers are people and not other companies which along with American companies. forces it to dispute directly with the consumer´s prefer- The most high profile transaction in this period was ence for beer and soft drinks. As a result, the company, probably the acquisition of the Argentinean brewer Quilm- which is currently present in 12 Latin American countries, es by Ambev (the group formed by the merger of Antarc- became a kind of standard bearer for the Brazilian multi- tica) which started in 2002. This was more visible because, national abroad, aggressively promoting its brands. unlike most Brazilian companies which ventured abroad There is a difference in this new way of interna- in the Americas, AmBev produces and sells a popular item. tional expansion. The big Argentinean market is still in

Going Against To avoid being gobbled up by a global multinational, Fischer the Flow has created a regional network of advertising agencies

Fischer America Argentina After some ups and downs it now Why Latin America? Fischer was born amidst widespread operates in Argentina, Brazil, summed it up as proximity, popular unrest. It was early 2002 Colombia and Mexico, with a language and similar currencies, and Argentina was trying to resolve foothold in Portugal. Venezuela, plus a reason he sees as a crisis sparked by the resignation however, was closed. fundamental: “Brazilian creative of President Fernando de la Rúa “So far there is not one services offer a differential.” and the end of a rigid peso-dollar independent advertising agency Cultural and linguistic affinities exchange rate parity. But it wasn’t south of the Equator that has also make it possible to serve the first time that Brazil’s Fischer gone international,” said Antonio clients in the Spanish-speaking agency had ventured abroad. In Fadiga, president of Fischer part of the continent from a few 1998 the agency set up shop in America. The Brazilian market is key countries. He sees Argentina Venezuela, following a client that no exception. “Brazil is used to and Colombia as key markets. was going international – the being the prey, not the hunter,” Despite all the affinities, national Brahma beer company, now part of said Eduardo Fischer, director of characteristics must be respected. Anheuser-Busch InBev. the Totalcom group that controls Clara Mazzei, the regional From then on, Fischer has the agency. “Multinationals coordinator of the network of swum against the market tide. gobble up advertising talent agencies, spends her days handling Rather than being swallowed by a everywhere, but we thought the subtleties. The language might global multinational like so many Brazilian talent could create be the same Spanish, she said, but Brazilian agencies, it became multinationals. It’s been tough, the way people speak differs from a regional multinational itself. but we’ve reversed the process.” country to country. “Language is

36 P I B Geographical and cultural proximity is view but the Andean countries have en- nies which do not feature on the list of tered the dispute for Brazilian capital, a factor in the 20 top Brazilian multinationals. particularly Chile, Peru and Colombia. attracting These are IT companies like Totvs A high profile transaction was the business and Datasul, which are merging in an at- purchase of Avianca, one of the oldest tempt to form the largest management airlines in the world and the largest in software company based in emerging Colômbia, by the Synergy group which belongs to Ger- countries and the second in terms of market share in Latin mán Efromovich, a Bolivian-born naturalized Brazilian. America (see page 38). This list also includes service com- The deal was made in March 2004 and gave Colombi- panies such as the vehicle hirer, Localiza and Gran Sapore, ans a positive view of Brazilian investment, according a mass catering company from Campinas which is now to consultant Sandra Rios of the National Confedera- active in Mexico and Colombia. It even includes an adver- tion of Industry (CNI). “Agriculture and the upgrad- tising agency, Fischer América, which has operations in ing of infrastructure in Colombia are opportunities for Argentina and Colombia (see box). They are following the Brazil,” she said. path of young multinationals from other continents, ac- Figures from Funcex show that in just six years, cording to to the economist Luís Afonso Lima, chairman from 2001 to 2006, Brazilian companies´ investments of the Brazilian Society for Multinational Companies and in Chile grew by more than 11 times and jumped from Economic Globalization Studies (Sobeet). He believes the less than US$ 160 million to almost US$ 1.8 billion. The geographical and cultural proximity plays a large role in biggest rise occurred between 2005 and 2006. Invest- going international. “Figures from UNCTAD show that ments in Peru increase 5.9 times in the same period. this has also happened in Asia. Companies from Japan These results did not only come from giants like Petro- and Korea started investing in neighboring countries like bras, Gerdau and Votorantim but from smaller compa- Vietnam, Thailand and China,” he said

Fischer (second from left): champagne celebration for the acquisition of Smash

beer drinking with music and the company of friends. In Chile it’s the same thing, while Venezuela and the Caribbean are much happier with the Brazilian model. For Fischer, Brazil and Argentina are similar in the degree of cheekiness that they accept in advertising. In other markets, however, creativity requires ha n do u t caution. “Intelligence is finding a much more formal in Colombia, Beer, a major advertising way to speak to everybody,” said even between parents and children, client virtually all over the world, Clara. At such moments, diversity and morals are stricter,” she said. also creates some advertising helps. Fischer recalled that when Humor, always an advertising tool, problems. In Brazil, beer is the agency had to present a can also vary, from English-style synonymous with fun, partying campaign proposal for various irony in Chile to a more playful and beaches all year round. But, Andean countries, it mounted a style in Argentina. And Mexico asks Mazzei, what about her three-week workshop in Buenos is different again: “To start with, native Argentina where people can Aires with Brazilian planners and they have lunch at three-thirty,” go the beach only one month of the Colombian and Argentine creative joked Fischer. year? The answer is to associate teams. They got the job.

P I B 37 Cover Story

The similarities between the South American coun- Newton, Localiza´s vice-president of franchising. The tries and the various regional markets in Brazil were also company bet on the expansion of the Mercosul and went important for Localiza, a vehicle rental firm based in on to become a large rental company in the region. Belo Horizonte, which is now active throughout almost Other companies do not even need to pursue work the whole of South America. “Brazil is a continental- as they are being approached by potential clients in- sized country. We have a number of environments which terested in technologies created in Brazil. Twenty- are similar to those of South American countries and this three agricultural technicians from Venezuela visited facilitates integration and our operations,” says Aristides a soybean cooperative in the Barreiras region in the

Under the Working together, Totvs and Datasul will be able Same Roof to expand faster throughout Latin America

Two leading Brazilian billing – which was around US$486 The most recent advance came software firms have merged, and million in the 12 months through in Colombia, where the company their Latin America operations will March this year – would come from this year announced it was open- spearhead the changes as the new international operations. ing new franchises in Bogota and group seeks greater international Before the merger, Datasul last Medellin. Datasul received help efficiency. Totvs from São Paulo year took an important step towards from the Colombian commercial and Datasul from Joinville in the consolidating its status as a Brazil- promotion agency Proexport in its State of Santa Catarina are both ian multinational in Latin America search for potential clients. “They producers and vendors of busi- by inaugurating a software develop- were very professional and helped ness management solutions. “The ment center in Cordoba, Argentina, to organize visits to more than 20 first area to feel the effects of the which also serves Spanish-speaking potential clients,” Klaumann said. merger will be international,” said clients. This unit located in Northern The Colombian franchises will also José Rogério Luiz, vice president Argentina will focus on supporting act in the neighboring markets of and director for investor relations Spanish-language clients who were Ecuador, Panama and Peru. at Totvs. “Our goal is previously served out Brazilian companies enjoy cer- to have our operations of Brazil. The Cordoba tain advantages in the Latin Amer- working under the office has a staff of ican market, Klaumann said. One same roof in Mexico over 70 and one of its is scale. Datasul’s R&D investment and also in Argentina functions is to “local- normally exceeds the total billing by the start of 2009.” ize” products – adapt of most local competitors in the Both companies them to local markets. markets it goes into. Technology had been operating Jenal Klaumann, the is another plus. In most countries separately in these Datasul operations the supply of locally-developed countries. Datasul also director for Latin products is pretty meager, but has offices or represen- ha n do u t America, said that Datasul offers business manage- tatives in Chile and Co- Klaumann: scale is a client service has be- ment software that is calibrated competitive advantage lombia and served cli- come faster and more to the needs of midsized and ents in neighboring countries through efficient. “It is better for the client large companies that don’t want this structure. In future the group’s to receive attention from somebody the higher cost of the systems international operations will do busi- who speaks his own language, even developed by the global multina- ness under one brand, probably Tot- though a Brazilian might speak Span- tionals, SAP and Oracle, which vs, said Luiz. Counting the operations ish very well,” he said. Datasul has a tend to be more expensive and of both companies, he estimated that client list of around 190 companies suitable for very large companies. between 4% and 5% of total group spread throughout Latin America. It’s a case of less being better.

38 P I B Ambev in Latin America: Brahma became Brahva in Guatemala (left) and chases the youth market in Venezuela ha n do u t western Bahia, and the town of Cristalina in Goais state near Brasília. Their host was the Campo Group, a company which was responsible in the second half of the 70s for the Cerrados Development Program (Prodecer) which opened Brazil´s Midwest to agribusiness through the use of technology cultivate the soil of the Cerrado region. The Venezuelans were interested because they want to learn to plant in a similar kind of and economic stability of countries in the region (see land known as “sabanas” to reduce Venezuela´s depen- article by President Luiz Inácio Lula da Silva on page dence on imported food. Venezuela imports about one 41). One way of doing this is to help and improve the million tons of soybeans a year and produces just over exporting structure of neighbors, such as Venezuela, 20,000 tons of the product itself. “We are at the dating which has become used to importing all it needs with stage,” says the chairman of Campo, Emiliano Botelho, the money it earns from oil and has not developed its which was responsible for the initial contacts with the domestic production. “It is in Brazil´s interest to reduce Venezuelan government. The aim is for Campo to set the trade deficits the countries in the region have with up a pilot project of 50,000 hectares of soybeans in the us,” says Clemente Baena Soares, one of the officials Venezuelan state of Monagas for the 2009-2010 harvest. who is responsible for the South American department The goal is to plant 500,000 hectares in five years, with of Brazil´s foreign service, the Itamaraty. Brazil exports technical assistance from Embrapa which established much more than it imports from nearly all the Latin an office in Caracas in March. A project like this goes American countries (see page X.) with the exception beyond just the company involved. The entire chain of of Bolivia, due to the gas which Petrobras exploits. The small, medium and large firms could be Brazilian government is pledged to nar- involved - including tractor and machin- row the trade gap. “We want to identify ery manufacturers, suppliers of seeds Brazil has with suppliers of products which Brazil and packaging, providers of technical imports as a way of balancing out trade,” service and companies offering com- a solid trade says adviser Norton Rapesta of the mercial and logistical support. surplus Itamaraty´s trade promotion division . with the The search for natural resources Stability and facilities to enter other markets To help Venezuela produce grains is countries is another reason for Brazilian com- part of a wider objective within Brazil´s in the region panies to go abroad. The attraction for foreign policy – to support the political the petrochemical company Braskem is

P I B 39 Cover Story One of the attractions of Latin America is the natural gas found in Peru and Ven- This is an investment of US$ 850 mil- ezuela which is cheaoper than Brazil- the fact that it lion in polypropylene production plant ian petroleum used in the manufacture has grown more and another US$ 2.5 billion in a poly- of plastic resins. The vice-president of than Brazil ethylene plant set to start operations international business, Roberto Ramos, in 2011-2012. It Peru it is working with sums up the reasons why Braskem Petroperu and Petrobras and consider- started to look to neighboring countries: “Peru has ing building another polyethylene plant. “The aim is gas and ports on the Pacific, with easy access to Asia to be as close as possible to a port, preferably Callao while Venezuela has gas and is close to the American at Lima,” says Ramos. A viability study will be ready and European markets”. by the end of the year and the final decision on the Braskem has two projects in Venezuela where it investment estimated at around US$ 2 billion, should operates in partnership with the state-run Pequiven . be taken in 2009. Braskem is also looking at Bolivia, where it has an agreement of understand-

ha n do u t ing with the state company YPFB which owns the large gas wells to study a similar project to the one in Peru. Braskem is no different from all the other companies studied for this report: practically al of them want to expand and strengthen their business in Latin America. “Going international is inevitable,” says ex-ambassador Sérgio Amaral who is now working in the private sector. Skaf (right) with Arias, of Costa Rica: a very busy agenda Amaral regards Latin America as an attractive opportunity for a number of reasons beginning with the fact that it has Busy Fiesp Works to Diversify grown more than Brazil on average. He also Commercial Partnerships Agenda refers to the return to democracy in the 1980s, the economic reforms in the 1990s and the emergence of social movements Presidents Alan Garcia of Peru and Luiz Inácio Lula which are now incorporated to public life da Silva of Brazil met again in September at the São Paulo in countries with the most solid institu- State Industry Federation (Fiesp) headquarters on Avenida tions. “There is now much more political Paulista. The September get-together brought 150 Peruvian stability,” he says. Those Brazilian compa- businesspeople to Brazil for a meeting that officially nies which are entering neighboring mar- kicked off Peru Week; Brazil’s biggest city enjoyed a blitz of kets at the right time have discovered today Peruvian art exhibitions, food fairs and other activities. Fiesp that, once the initial resistance has been President Paulo Skaf said he wanted to show that there’s no overcome, the international expansion point in trying to exclude commercial partners. “Why do we becomes be necessary and increases the have to choose between closer links with the United States results. There usually no going back once or Peru?” he asked. “Why can’t we be close to both?” a leap like this has been taken. z In August Fiesp staged a Chile Week. Although it has a relatively small market, the country offers investors other * An edited version of the study attractions: stable rules; investment-friendly laws; access to “Investimentos brasileiros na América Asian markets and 57 free trade agreements with just about do Sul: desempenho, estratégias all the important economies in the world. In March of 2009 e políticas”, by Fernando Ribeiro it will be the turn of Argentine President Cristina Kirchner to and Raquel Casado Lima will be hand out her business card to Brazilian company leaders. published in the Revista Brasileira de Comércio Exterior.

40 P I B An irreversible strategy Our collective commitment is to strengthen democracy, economic integration and social justice throughout Latin America Luiz Inácio Lula da Silva*

ight from day one of my Govern- make the most of the fact that we live in a reflect the confidence in the region´s ment, I decided that Brazil´s for- peaceful region which is free of ethnic or potential. In Argentina alone, we have eign policy would give priority religious tension and military rivalries. investments of more than US$ 7 billion to strengthening relationships These are impressive triumphs in a in strategic sectors such as energy, food, Rwith Latin America. The conditions had world which is becoming increasingly transport and cement. This presence is never been so favorable for Brazil to rein- globalized and unpredictable. At a time starting to be seen in other countries in force its relations with the region. when there is tough competition for Latin America and the Caribbean. Like Brazil, Latin America is under- energy, Latin America has some of the In South America, the Brazilian Gov- going a period of exceptional confidence world´s largest reserves if we consider ernment has approved loans for around in the future. We are overcoming social hydro-electric, petroleum, gas, bio-fuels, 50 infrastructure and transport projects inequalities and traditional economic solar, wind and even nuclear power. of US$ 6.5 billion since 2003. This is the weaknesses. The governments of the re- Our region is also extremely well po- same approach that has led Brazil to gion, regardless of their party politics, are sitioned to take on the challenge posed enter the Center American Economic committed to a regional integration project by the current steep rise in food prices Integration Bank recently with a contri- founded on democracy and growth and is which threatens the progress made in bution of US$ 200 million. accompanied by social justice. The quality Through technical missions and re- of life indices have improved, with a decline gional offices, we are contributing Brazil´s in poverty and a rise in the middle class. We are fully involved technical experience and technology to None of this would be possible without in continental this project of integration and regional consistent macroeconomic policies, cen- integration. development. This is the case with train- tered on combating inflation and providing in agriculture and industrial producing credit to the less favored sections of the Investments reflect tion. We are also establishing partnerships population. The resulting increase in the confidence in the with our neighbors which have the condi- creation of formal jobs and higher income potential of the region tions to repeat the economic, social and has created millions of new consumers and environmental results we have harvested a virtuous cycle of sustained growth. reducing poverty at world level. We with the ethanol and biodiesel programs. As a result, the region grew by more have vast areas with agricultural poten- Partnerships based on Brazilian social than 5% on average in 2007 in what was tial and are expanding our production of programs are also helping our neighbors the longest cycle of economic growth agricultural products. combat obstacles to development and the in 40 years. At the same time, trade has Through developments, such as the well-being of their people. reached record levels. Trade between Union of South American Nations, we are Brazil´s strategic option for Latin Brazil and Latin America, for example, creating the political, economic and finan- America will not be reversed. This is the jumped from US$ 23 billion in 2003 to cial bases to speed up the integration of the only way we can bring prosperity to our US$ 63 billion in 2007 and the trend is continent. It is in this spirit that we will people. We will resist the external shocks for further sharp growth. host the Latin American and Caribbean in a world which is facing unparalleled To consolidate these advances, we are Summit Meeting on “Integration and De- challenges and we will make sure our voice strengthening regional integration proj- velopment” in Brazil at which we will take is heard at international discussions. ects, particularly in infrastructure mate- advantage of all the potential synergy and Our collective commitment to rial for transport, communications and complementary nature of the initiatives strengthen democracy, economic integra- energy. We are reinforcing the internal which are already underway. tion and social justice throughout Latin links and creating contacts which will al- Brazil is fully engaged in continen- America is the best contribution we can low us to take advantage of our vast natu- tal integration. Brazilian investments in make to build the more peaceful, prosper- ral resources in a more efficient way and neighboring countries are growing and ous and fair world which we all desire. z *Luiz Inácio Lula da Silva is President of the Federative Republic of Brazil P I B 41 Cover Story Neighbors invite Brazil to help them modernize Brazilian construction companies then continue to the Chile´s Pacific coastline. The road crosses the border at Guajará-Mirim where Brazil will undertake projects worth more build a bridge and pass through Riberalta on the way than US$ 4 billion to build roads, to the Bolivian capital. It will help resolve the trans- railways, gas pipelines and hydro- port and logistical problems which are currently the most serious obstacle to Brazil´s exports to neighboring electric plants Armando Mendes countries, according to a recent survey by the National Confederation of Industry (CNI). ne Saturday morning last July, the Co- Financing the upgrading of the roads and railways lombian President, Álvaro Uribe, told his of neighbors is also an additional attraction for Brazil- Brazilian counterpart, Luiz Inácio Lula da ian companies. It opens the way for Brazilian compa- Silva, that he had been contacted earlier nies to do business in countries with leftist leaders, that week by many Colombians wanting to such as Morales and Chávez, to more conservative know whether Brazil would really be cons- leaders, like Uribe. The Brazilian funds can only be tructing a railway line linking the center of Colombia to used to finance exports of domestic goods and ser- the Caribbean Sea. President Uribe made the announce- vices and these projects will soon be in the hands of ment at a meeting with President Lula before a group of Brazilian companies. For example, the construction more than 100 Brazilian and Colombian executives in a firms Norberto Odebrecht and Camargo Corrêa, will hotel room in the Colombian capital, Bogota. “I told them form a partnership to take part in the Carare railway I would be meeting President Lula today and ask him”, although they have not yet confirmed that they have President Uribe said. Some time later, President Lula been chosen. “The process is somewhere between the confirmed that Brazil would indeed be political decision and the definition of financing the railway which would run technical details,” says Kalil Cury, Ca- from the town of Carare to a port on the Transportation margo Corrêa director for new busi- Magdalena river and from there to the ness. Despite this, Comlombian au- Caribbean. The project will make it ea- and logistics thorities made a presentation of the sier to export coal from Colombia which are the greatest infrastructure projects in his country is the biggest producer in South Ameri- problems at the Bogota meeting in which the Ca- ca. The Brazilian national development rare contract seemed destined for the bank, the BNDES, will finance the pro- for Brazilian Brazilian companies. ject through a loan of US$ 650 million. exports From the construction of gas pipe- The previous evening, on a dusty lines in Patagonia to the widening of the football pitch in Riberalta, a town in the Panama Canal, Brazilian companies are Bolivian Amazon region, Lula had given a similar com- involved in – or disputing, in the case of the Canal – mitment to Bolivia´s President Evo Morales. Brazil will dozens of projects across Latin America. The construc- lend US$ 270 million to upgrade 508 kilometers of un- tion firms were the first to venture abroad due to the paved roads which link the capital La Paz to the north of stagnating home market in the 1980s when the flow of the country. The President of Venezuela, Hugo Chávez, public funds for large engineering projects in Brazil was also in Riberalta to announce loans of US$ 300 mil- dried up. Nowadays, in better times, they are benefiting lion to Morales and challenged Lula to match his “bet”. from the urgent need to reconstruct the infrastructure The Amazon Corridor, as it is called, will link Porto of neighboring countries. The so-called “lost decade” Velho in the Brazilian state of Rondônia to La Paz and did not just affect Brazil but the whole continent.

42 P I B The list of projects includes hydro-electric plants and irrigation projects in various countries, an airport in Ecuador, gas pipelines in Argentina, the expansion of the metro in Caracas, and water and sewage treatment stations in Lima and Buenos Aires. The total value of the projects which have been recently concluded or are under construction is more than US$ 4 t billion. This amount also includes u do the construction of bridges, rail- n ha ways and roads to finalize the links s: hoto between the Atlantic and Pacific P coasts – the inter-ocean corridors. Full order book: the Orinoquia Bridge in Venezuela (above) and gas pipelines This is the case with the road which in Patagonia, Argentina – Brazilian construction companies are everywhere Lula announced in Bolivia and the Pacific Highway, a 1,200-kilometer highway which will reluctant to say how long it will take to travel from Acre link Rio Branco and Assis Brasil, in the state of Acre, to the Pacific on the new road as the Andean stretch to the ports of Ilo and Matarani in southern Peru. Ca- is twisted and slow and hugs almost vertical mountain margo Corrêa, Andrade Gutierrez and Queiroz Galvão faces. However, he guarantees it will be shorter than the will be present, constructing a 306-kilometer stretch long boat trips across the continent required to trans- between the Peruvian towns of Inambari and Azangaro port a cargo from a Brazilian port to Peru or Asia. at a price of US$ 215 million. And the Panama Canal? For the moment this is only Once the highway leaves the Amazon it climbs the a tender bid. Three Brazilian construction firms – Ca- Andes, passes through Cuzco and descends to the other margo Corrêa, Andrade Gutierrez and Queiróz Galvão, side to the Pacific. “Do you know what it´s like to pave once again – are part of one of the multinational con- a road at an altitude of 4,000?” asks Kalil Cury, the Ca- sortia which are prequalified to bid to widen the Ca- margo Corrêa director. (The asphalt has to be changed nal. The winning companies should be announced by due to the cold and rarefied air.) In fact, this existing December by the Panama Canal Authority which runs precarious route is being remade and upgraded. Cury is the waterway. z

P I B 43 Opinion

What Lies Ahead PIB was born a year ago with the mission of covering the international expansion of the Brazilian economy. Specialists Maria Tereza Fleury and Afonso Fleury describe the key events of the last 12 months t

and identify the challenges that await Brazilian u do n

companies as they try to break into the globalized ha s: economy By Maria Tereza Leme Fleury and Afonso Fleury hoto P

n 2006, the flow of direct chase of Chaparral Steel of the Unit- Cláudio Frischtak mentioned how investments out of Brazil ed States by Brazil’s Gerdau, the ac- the production of the subsidiaries exceeded the inward flow quisition of Swift Foods of the US of Brazilian multinationals tends for the first time, and one by JBS-Friboi and Sadia’s 2007 con- to be positively correlated with job result has been for Brazil- struction of a factory in Kaliningrad, creation and exports of their Brazil- Iian multinational companies to oc- in Russia. It should be noted that ian operations. cupy an ever-greater space in the these represent investment flows There’s also a positive effect national and international media. to developed or distant countries, throughout the input supply chain, The birth of PIB a year ago and its outside the Latin American region. with suppliers coming under pres- success amongst businessmen, re- At the same time there has been sure to accompany their clients searchers and people connected another more subtle and establish an in- with official bodies is proof of the change that is essen- ternational presence. importance of the subject. And the tially cultural. It has to Finally, there’s a gain numbers underscore the point: ac- do with the more ac- The question for the country’s im- cording to data from the Brazilian tive stance of govern- is: will age via the promotion Central Bank, in the first half of ment agencies with the process of Brazil as a brand. 2008 the outward flow of Brazilian respect to the process It can thus be said FDI exceeded US$8.5 billion, a re- of internationaliza- be sustainable? that the internation- cord since the Central Bank survey tion of the economy alization of Brazilian began in 1947. and with the positive perception companies generates a positive bal- Various financial factors lie be- of the phenomenon on the part of ance for the country. The question hind this boom, for example the the general public. There’s even an therefore becomes – does the pro- strong real currency, the high in- element of national pride. The ar- cess have the vigor to be sustain- ternational liquidity and the large gument that outward FDI means a able? An initial indicator of its ve- volume of funds flowing in when loss of jobs or resources has been locity is the formation of the stock companies launch their shares on substituted by a perception that it of Brazilian investment abroad. the stock exchange. In 2007, ac- brings gains for the country. Here, data suggests that while cording to KPMG, a consultancy, outward Brazilian FDI has grown the total volume of deals done by What might these gains be? in the last 15 years, it has done so Brazilian companies buying busi- For companies, they are reflected in more slowly than outward FDI of nesses abroad jumped 40% over the greater demand, scale, productivity emerging economies such as China previous year. In all, KPMG identi- and even innovative capacity. At the and Russia. fied 66 such operations. recent National Forum organized by A second question concerns how Some deals were particularly former minister João Paulo dos Reis Brazilian multinationals operate. newsworthy, for example the pur- Velloso in Rio de Janeiro, Professor How does the process of interna-

44 P I B Sadia factory in ...the US headquarters of Kaliningrad and... JBS: far from Latin America tionalization influence the model top of the list we find countries in order to of company management? In a marketing, client rela- learn from them, tech- study by the São Paulo University’s tions and investments Brazilian nologically – Sabó is Nucleus for Research in Technology in research and de- companies an example. We also Policy and Management, conducted velopment, reflecting identified “rebel” sub- with the help of the Foundation for the company’s new must sidiaries that take the the Support of Research in the State situation. Personnel modernize their initiative and become of São Paulo (Fapesp), we examined management skills, management entrepreneurs and act 30 Brazilian multinationals and 67 however, slip back independently of the subsidiaries of foreign companies, down the priority list head office. examining the most important as- – in our view, a priority that should In order for Brazilian companies pects of organizational competence be reconsidered at this point in the to develop, move up the value chain in three moments: before, at the start company’s development. and operate positively in the coun- of and following internationaliza- The study also showed that Bra- tries where they invest, they must tion. We observed that to compete zilian companies are only just start- evolve in the way they manage their in the domestic market, the compa- ing to learn to act as head offices subsidiaries. They need to develop nies attached greatest importance to and how to deal with subsidiaries. new management models, learn to their technological skills, followed Brazilian multinationals seek to manage in a more integrated man- by production and logistics skills. keep control over their operations ner and to take advantage of the Curiously, among the companies and give their subsidiaries very opportunities that the subsidiaries we studied the question of personnel little autonomy and space for ini- identify to develop new business. management was seen as least im- tiative. Just 7% of the subsidiaries The maturity and sustainability of portant for their local operations. studied said that they enjoyed the the internationalization process When companies invest abroad, initiative to develop new products, of Brazilian companies depends, be it via acquisition or the creation assume responsibilities and develop amongst other things, on this abil- of a new subsidiary, the production new business. ity to learn. z and logistics skills tend to be seen Of course there are exceptions, of as most important. The manage- companies with more tradition and ment model and personal manage- experience that have fully assimilat- Maria Tereza Leme Fleury is a director ment rise to second and third place ed the lesson that they need to grant of EAESP/FGV and a professor at FEA/USP. Afonso Fleury is a professor respectively in the ranks of impor- their subsidiaries greater autonomy at Poli/USP. They are authors tance, reflecting the requirements and to develop collective forms of of the book Internationalization of this moment of transition. In the learning (like Odebrecht, for exam- and the Emerging Countries next phase, however, there is an- ple), or of companies that actually (“Internacionalização e os other change of priorities. At the acquire subsidiaries in developed Países Emergentes”).

P I B 45 Special Report

Dias, the exception: former butcher got rich with vans and now has supermarkets, a wholesaler and a meatpacker “Today I am muito busy” Mixing Portuguese and English in their every-day just over four years by the 1.80-meter Dias, who tips the scales at around 135 conversation, Brazilians now make up 40% of the kilos. Until 2003 he lived in São José population in the small town of Gort in Western do Rio Preto, in upstate São Paulo, and Ireland. Some are doing well and are very busy. Others worked as a personal trainer. “I was super-fit,” said the 30-year-old busi- have been less fortunate... By Adriana Setti, in Gort nessman. But then he received an ultimatum from Eucles, his younger itting in his office in an I am muito busy,” he confides to a visi- brother. Eucles had some business imposing two-story house tor, before returning to one mobile to ventures in Europe, a network of inter- with five rooms and mod- tell a supplier his proposed price was national money-transfer agencies and ern decoration, Anael too high: “This no good to me, brother.” selling telephone cards for immigrants. Barbosa Dias seems a Dias speaks English that he learned on It was growing fast and he needed a Slong way from his native Cassilândia, the street, blunt and basic, then slips trustworthy partner to open up new a rural town in the Western Brazilian back into his native rustic Portuguese areas of business. state of Mato Grosso do Sul. Simulta- to complain into another mobile about When he arrived, Dias spent nine neously juggling three mobile phones, a container stuck in Brazil. months working in a meatpacking Dias has a life-style that contrasts Thick gold rings and heavy gold company in Edenderry, 63 km from sharply with peaceful little Gort, a chains draped from his neck and Dublin. Saving up, he bought a 1997 town of 3,500 people just miles from wrist would suggest that business is van, put in some shelves and hit the Ireland’s beautiful Galway Bay. “Today good in this mini empire built up in road looking for Brazilian expats, go-

46 P I B tti se a n adria s: hoto P

Lindimar, owner of the Via Brazil supermarket: “The Irish love Brazilian guaraná, candies, coffee and beans”

containers with a cold store and modern stocking technology. In addition, the Dias brothers have rented a small meatpacking plant in Tyrellspass, 80 km from Dublin. “The y secret of our success is to use the front Dias opened a store in Setubal, in

ill O’Re part of the bull, which Irish consumers Portugal. The idea is to use Ireland as v id

D a tend to sneer at but which Brazilians a platform from which to supply not and other immigrants such as the Af- just the throngs of Brazilians spread ing door-to-door selling imports from ricans like,” he said. Trading under the throughout Europe, but also the im- the home country – rice, beans, guava name of Troy Meats, his meatpacker migrant communities from other jelly, cassava flour, candies and other has four employees producing 4,000 origins and even the local population. tidbits that were snapped up eagerly kilos of beef cuts and 1,000 kilos of in- “If the gold mine gives out one day, by homesick Brazilians. dustrialized meat products per week. for example with lots of Brazilians Now Dias has six vans criss-cross- Both the meat products and the typical going back home, I’ll be able to do ing the country, all driven by Brazilian Brazilian items are exported to Portu- just fine,” Dias said. employees. “My best salesman is doing gal, the United Kingdom and Germa- So far this meteoric career in up to ¤7,000 a week,” he said. “From ny. And just like the big supermarket Ireland has netted the young Bra- here on I want to expand my fleet and chains, Dias is investing in his own zilian such trophies as a farm in delegate all this area of mobile shops brand – products such as rice, beans, Cassilândia complete with boat, jet- to him. I just can’t handle all the work.” wheat flour and cassava flour are sold ski and motorbikes, law school for In a little over three years, Dias and in Gort in packaging carrying the Real his younger brother, a beachfront his brother have opened four super- Brazil brand. apartment in the southern Brazil- markets and a wholesaler of Brazilian Dias wouldn’t say how much he’s ian state of Santa Catarina, the large produce, all called Real billing, but indicated it house which serves as home and of- Brazil. The storeroom had doubled in the last fice, and medical treatment for his near the center of Gort Real Transfer two years. “If it goes father, who suffered a stroke. This became too small to on like this, I’ll be a last item is costing him an average handle all the goods de- will flyB razilian billionaire,” he said. of R$20,000 – some US$12,000 – livered by two contain- country singers The goal now is to per month. The party scheduled er shipments a month Bruno and build up the business for November to mark the fourth so another warehouse in mainland Europe anniversary of Real Transfer, the will be ready soon, big Marrone to Gort and expand the cus- money transfer company set up by enough to handle 15 for a party tomer base. Recently, his brother Eucles, will be reason

P I B 47 Special Report

enough to fly over the “Bruno and make the trip com- Gort school: Marrone” Brazilian country music prised 25 butchers. of the 180 duo from Goiás state. Last year’s “Brazilians are children party was enlivened by Brazilian much more creative enrolled, 80 funk artist MC Créu, composer of than the Irish when are Brazilian such notable songs as “Dança do it comes to butcher- Créu” which has a frenetic dance ing meat,” said Isaías Silva, an English rhythm and normally features scant- teacher in Campo Grande who was ily clad girls gyrating what might be hired by the Irish Ministry of Justice delicately described as well round- to act as an interpreter in judicial ques- ed hips. And for a year’s-end party tions, and who is a kind of commu- Dias is planning something really nity leader for the Brazilians in Gort. special – he plans hooking up Gort “What’s more they are responsible and Cassilândia in a real-time on- workers, quick to learn the local cuts line barbecue, with giant screens and never miss a day’s work.” Noting y and interviews at each end. the success of the Brazilian work-

ers, other Irish companies went to ill O’Re v id

Uncertain destiny the Anapolis region looking for more D a While Dias is reaping the fruits of people. One such company was Sean the tough years he’s spent so far Duffy Meat Exports, from Gort. zilians. The Gort colony represents from Brazil, just a stone’s throw Attracted by the promise of wag- around 10% of all the Brazilians liv- from his house a group of some fifty es of around ¤100 a day, still more ing in Ireland. Nine out of ten are in of his fellow countrymen gathered Anapolis people packed their bags the country illegally and so cannot in the main square of Gort face an and headed to Ireland under their visit Brazil without running the risk uncertain future. These are unem- own steam, without any prior contact of being barred when they return. ployed Brazilians who hang around with the local meatpackers and with- In Gort, the friends and family of in the hope of picking up odd jobs, out even a visa in their passports. One the meatpackers now work in other even if just for a few hours – bored such was Alan dos Reis Monteiro, a sectors that need labor – in civil con- men in hooded jackets who speak specialist in animal slaughter. “When struction, as domestic servants, in neither English nor Gaelic, just their I arrived I didn’t know how to make homes for old people, in hotels, restau- native Portuguese, looking for any a phone call, I had no money, I went rants, schools and factories, on farms kind of work. These Brazilians in hungry,” he recalled. “But finally I and in many other places. Alfredo Neto, the town square are the sad side of landed my first job, and from then 20, is a star of the Galway United foot- a story that started almost a decade on I have always had work.” Once ball team in the neighboring town. ago, one that had some happy end- he was settled in, Monteiro was fol- Encouraged by the ease of setting ings but many which are less so. In lowed by his wife and two children. up a company in Ireland, some small 1998 a production unit of Brazil’s Both father and son work at the same businesses are starting to appear JBS-Friboi meatpacking company meatpacker, while the mother and among those members of the commu- was forced to close. It was the Vila daughter work at an hotel. nity who have legal residence. They Fabril plant in Anapolis, a city of Many other stories like that of the include two beauty salons, two cyber- 320,000 people in Western Brazil. Monteiro family help explain a curi- cafés, a franchise of the Wizard Eng- One of the managers ous demographic phe- lish language school (with Brazilian was Jerry O’Callaghan, nomenon: 40% of the teachers), two supermarkets selling an Irishman who had population of Gort is Brazilian produce (one of them a Real lived in Brazil since The Real Brazil now composed of Bra- Brazil store), and a clothes shop selling the 1970s, and he be- supermarket zilians, 90% of whom tight-fitting, low-cut clothes and plat- came a kind of link be- recently came from Anapolis. form shoes that an Irish girl would tween rural Brazil and Eighty of the 180 chil- have difficulty walking in. The average rural Ireland. The first opened a shop dren enrolled at the wage in the town is ¤10 per hour, but wave of workers to in Portugal local school are Bra- it can reach ¤15 in the building trade

48 P I B all of the 80 Brazilians who worked there have found jobs at other meatpackers in the region, but not all of the other butchers and people with different skills have been so lucky. In 2004, when 10 new countries joined the European Union, Ireland was one of the few “older” members to quickly open up its labor market to workers from the new members. As a consequence, Ireland received thousands of workers from countries in Eastern Europe, above all from Poland. There are currently 150,000 Polish people living in Ire- land. In addition to having valid documents, they normally have a greater facility for learning English. Since then, Ireland has stopped is- At the weekends, while the Irish Simone Bueno, originally from suing work visas for non-Europeans. take refuge in the pubs until mid- Goiás State where Anapolis is located What’s more, the country is going night, the parking lot of the Real Bra- and now owner of Star Hairdressing through an economic crisis that has zil supermarket is packed with cars which operates on the second floor of pushed the unemployment rate up parked with their doors open and a large house in the central square, is to 5.2%, the highest level since 1999. Brazilian music blaring. Others, less one of the Brazilians who are bring- Even people who already had per- discreet, drive up and down the ing new life to Gort. She has up to 40 mission to work there have had their street to show off their powerful new clients per day, many of them Irish. visa renewal refused in recent years. purchases. It’s a scene that might be Bueno has three full-time employees And a new immigration law due to typical of any small rural town in and three part-timers that help out at come into force in October promises Brazil, and now it has been incorpo- the weekends. Another meeting place to make life much more difficult for rated into the life of Gort. Little by is the cybercafé run by Josi and Nilton illegal immigrants. little the consumption habits of Irish Vieira de Souza, a couple from Lon- As the economy of Gort depends families in the region are also chang- drina. On the notice board the small on the presence of the Brazilian ing. “They love Brazilian guaraná, ads announce jobs vacant, Brazilian community – 40% of property is candies, coffee and beans,” said Lin- parties and local taxi drivers. rented to Brazilians, for example – dimar Souza from Paraná State, own- Souza founded the now-defunct the immigration department has so er of the Via Brazil supermarket. Gort Brazilian Association. “We spent far turned a blind eye to the situa- “The Brazilians have given new all day doing voluntary work, trans- tion. Only a few rowdies tend to have life to a town that was stopped in lating documents, and the queues trouble with the police. However, time,” said Scottish sociologist Frank were never-ending,” said Murray, nobody is sure how long this situa- Murray, who acquired fluent Portu- who also helped out at the association. tion will be able to continue. On the guese in the four years he spent “The great problem was the language, other hand, in August JBS-Friboi re- working in a Brazilian university. given that less than 10% can speak opened the Vila Fabril meatpacking “Today, the local economy and much English reasonably, and this opens plant, the same one whose closure of the social life of the town depend the door to people being exploited sparked the exodus of local people on the presence of this community,” by unscrupulous employees.” to Ireland. The US$10 million invest- he said. Murray knows practically all ment has created 260 new jobs in the local residents and their respec- Long journey home? Anapolis. Might this be the moment tive life stories and is seen by them as A year ago, the Sean Duffy meat- for the butchers of Gort to start the a kind of guardian angel. packing plant closed down. Almost long journey back home? z

P I B 49 Special Report

From Brazil to the world Multinationals like Whirlpool, Merial, New Holland and Dow maintain centers of excellence in Brazil Antonio Carlos Santomauro

he workforce is first class, the industrial environment is diversified and the costs are attractive. As multinational Tcompanies from the most varied sectors increasingly choose Brazil to base their centers for developing global products factors like these are fundamental in taking the decision. However, a country can also benefit in some cases from something which is less tangible. “Brazil- ians are pro-active and always ready to take on challenges,” says Marcelo Fischer, general manager of technology for the American washing machine manufacturer Whirlpool. Computer games, giant electric turbines, efficient washing machines, software for mobile phones, and heavy agricultural machinery are only a few of the products developed by multinationals in Brazil and highlight the diversity of skills which have been developed in the country. The capital which irri- gates these development centers is foreign, as is the profit obtained, but the presence of this type of structure brings a series of benefits which remain in Brazil. The path followed by the Bra- zilian subsidiary of the French- American company Merial, which makes veterinary products, is a good example of this. In recent

O ri en t e years, the company´s manufactur- Eli s a

ing complex at Paulínia, in upstate

An a São Paulo, has received investments Duarte, of Siemens: center of development for energy generation in Brazil of US$ 40 million. Most of the oper-

50 P I B ations, which had previously been ing global. Motorola Siemens, the giant Ger- scattered across different countries, chose Brazil at the man group which has were brought to Brazil after the end of the 90s be- The strength development centers head office noticed that the human cause of the country´s of the domestic for different items for resources and infrastructure there vast experience of the generation, trans- brought together ideal conditions telecommunications. market is mission and distribu- for the development of the busi- During that period of Brazil’s tion of energy located ness. “The country ended up being euphoria in relation secret weapon in Brazil. The compa- a logical destination in the struc- to investments in ny will export R$ 340 ture,” says the Merial CEO Alfredo the Internet, expe- million from Brazil in Ihde. The local subsidiary, which rienced professionals were worth 2008 alone. “Lots of opportunities used to concentrate on exports to their weight in gold. The costs at are now arising in thermal energy, Latin America, now also exports to that time were much higher – com- such as burning biomass,” Duarte the United States and Europe. “The bined with the Brazilian´s obvious says, highlighting a new develop- plan is to reach 2010 with exports enthusiasm for the cellular tele- ment frontier on the market. to more than 60 countries,” he adds. phone. The bet paid off. Motorola´s The same factor was of key im- Merial´s Brazilian operations are Brazilian operation exported US$ portance two decades ago when the currently focusing all production 430 million last year alone. Italian company Case New Holland on anti-parasite, pastes and chew- able products for animals on a global scale. As a result, exports should soar from US$ 35 million this year to US$ 300 million in 2010. The US company Motorola is also located in upstate São Paulo, in the municipality of Jaguariúna where it employs 900 workers at its center for developing software for mobile phones. The result of the work of these researchers benefits millions of users of Motorola products throughout the world every day. “A lot of what we do here is not even used by Brazilian consumers,” says Rosana Fernandes, Motorola´s director of research and development. One of the company´s latest achievements in Brazil was the

development of software to allow ha n do u t mobile phones to use Microsoft´s A CNH sugarcane harvester: production cost was a factor in choosing Brazil popular instant message tools (Windows Live Messenger better An additional triumph which (CNH of the Fiat group) centered known as MSN Messenger). This boosts Brazil´s competitiveness in its technological development and was made in partnership with Bill the dispute for becoming the head- production of mechanized sugar Gates´s company. Another recent quarters for global platforms is the cane cutters and harvesters in Bra- great breakthrough for the Brazil- existence of a large domestic market zil. “The decision took the cost ian team was the creation of the for various sectors. “Brazil is very factor into consideration which at U3 cellular which is exported to a important globally in the hydraulic that time was much lower. How- number of Latin American coun- generation of energy,” says Newton ever, what swung the decision was tries and is on the verge of becom- Duarte, director of the energy area for the strategic view in favor of the do-

P I B 51 Special Report

mestic market growing,” says Carlos motors. “Brazil´s know-how makes also attracted cross-border plat- Santiago, the company´s industrial it the leader in the development of forms. International Paper, for director. In the first semester of the the Flex system,” says Besaliel Bo- example, was attracted by Brazil´s year, two-thirds of the production of telho, vice-president of Robert Bo- excellence in eucalyptus produc- 1,500 machines remained in Brazil sch in Latin America. The company tion. Decades of investments in while the rest were exported. has invested more than R$ 1 billion genetic engineering in Brazil have in Brazil over the last five years. turned the eucalyptus, a native of Accumulated experience Brazil plays a strategic role in Australia, into top products in the The dynamic automobile industry the white-line electro-domestic sector thanks to its fast growth to installed in Brazil is full of good ex- appliances market for Whirlpool, maturity and excellent productivity. amples. Brazil has been the single owner of the Brastemp and Con- “Brazil´s productivity is even higher world center for developing the ar- sul brands. The company arrived than that of Australia,” Nilson Car- chitecture of General Motors´ medi- in Brazil at the start of the 90s af- doso, commercial director of Inter- um-sized pickup trucks since 2006. ter acquiring Multibrás which had national Paper. It vied with South Korea for the an enormous tradition in research Another American company, position and won thanks to the ex- and development. Softwares devel- Dow, which is a giant in the chem- perience it has accumulated in the oped in Whirlpool´s technological icals sector, will set up the first category. “Korea is responsible for centers in the town of Rio Claro in operation of its project to produce smaller vehicles, an area in which upstate São Paulo and Joinville in green plastic produced from etha- it is more experienced,” says Pedro Santa Catarina are used in Mexico nol in Brazil. The product was de- Manuchakian, GM´s vice-president and Spain while its technology for veloped in partnership with the for engineering for Latin America, refrigerators has been adopted in Brazilian groups Crystalsev and Africa and the Middle East. Mexico and Poland. Washing ma- Santelisa Vale and will initially be Brazil´s excellence in develop- chines designed in Brazil are used directed at the domestic market. It ing global automobile products is in India and China. A total of 30 will be the first integrated alcohol also seen in the autoparts sector. countries receive Brazilian prod- chemical center in the world in Germany´s Bosch group created its ucts or technology which have been which the same plant will house system for Flex Fuel motors in Bra- developed within Whirlpool. the sugar cane cultivation, the eth- zil and its unit in Curitiba is now a Another sector in which the anol plant and the plastic produc- Center of World Skills in the pro- country is outstanding in global tion unit. The complex will employ duction of components for diesel terms is agribusiness and this has 800 people initially. Interzone, a producer of vid- eogames based in Chicago, was attracted by another Brazilian specialty - football. When it decided to create a game based on football, the company´s executive did not stop for a moment to think where to go. They headed for Brazil and set up a development structure. Other stu- dios in China and Australia will be responsible for the technical part of the products but the entire artistic creation, which includes a backdrop of Rio de Janeiro, is being carried out in Brazil. Interzone Football will be launched throughout the world by the end of this year and highlights

ha n do u t another intangible quality which Merial laboratory: the Brazilian subsidiary will export to 60 countries only Brazil can provide. z

52 P I B Know more:XXXNBQBHPWCStXXXNEBHPWCS

Brazil. We have everything UPQSPEVDFNPSF

In order to increase production, the Federal Government is investing R$ 78 billion in the next harvest, with more credit, more technical assistance and lower interest rates.

The greater consumption of food products is a world phenomenon caused, specially, by the economical growth of countries such as China, India and Brazil itself. The world needs more food. We have high field technology, the strength of the rural producer and plenty of good land to plant. Brazil has everything to consolidate itself as a world large producer of food products.

Check the main measures: t*ODSFBTFPGQVCMJDTUPDLPGGPPEQSPEVDUTGSPN tNJMMJPOGBNJMZGBSNFSTXJMMCFCFOFGJUFECZUIF 1.5 to 6 million tons in 2009. new “Mais Alimentos” credit line up to 2010. t1SPOBGBOOVBMJOUFSFTUTSFEVDFEUP t" OFX DSFEJU MJOF GPS UIF SFDVQFSBUJPO PG t%JTDPVOUTPGVQUP BMSFBEZOFHPUJBUFE degraded areas. with the industry, to allow family farmers to t*ODSFBTF CZ PG UIF UFDIOJDBM OVNCFST JO purchase up to 60 thousand tractors and 300 the field. thousand machines and implements, up to 2010.

Ewerton Alvestassembler Renata Alvesthousewife Alves Family Strategy ne to Keys po u r ess / G r P ma Zu Demonstrators protest against the invasion of Georgia by Russia troops: unstable environment for business The political risk of internationalization Brazilian companies are forced to face unknown challenges, and at times threats, when going abroad Bruno K. Reis

he recent fighting be- ratists in Bolivian provinces such as than Brazil, but according to Carlos tween Georgia and Rus- Santa Cruz and president Evo Mo- Caicedo, Latin American Director sia, disputes between rales, as well as the U.S. election in of Exclusive Analysis, a political Argentine President Cris- November are all events that can risk analysis firm based in London, tina Kirchner and Vice affect Brazilian investments abroad. itís far riskier to invest in Argentina TPresident Julio Cobos, the possibil- Not even a high GDP means itís safe than Brazil. ity of a third term for Alvaro Uribe in to invest in a particular country. For According to the companyís busi- Colombia, the conflict between sepa- example, Argentina is growing faster ness index measures, which ranges

54 P I B s r e t / Reu rito n B to s a G Demonstrators protest against the invasion of Georgia by Russia troops: unstable environment for business Bolivia boiling: anti-government separatist groups cut gas supplies to Brazil

from a scale of 0 and 10, Brazilís risk of Eurasia Group, a consulting firm When heavily investing abroad, is 1.6, while Argentinaís rates a 3.5, specializing in international risk businesses hope that their capi- one of the highest scores in Latin analysis and based in New York, tal will be protected from abrupt America. Brazilís rating is better be- political risk is any risk related to changes in the political and eco- cause the country is following the governmental decisions could sig- nomic climate. From the politi- rules of the game and has strong in- nificantly affect asset prices, in fi- cal point of view, it is hoped that stitutions, with three relatively au- nance or investments. According to the “rules of the game” will be re- tonomous governmental powers. In Almeida, the international political spected and that countries receiv- Argentina, on the other hand, there arena is directly linked to the eco- ing investment money will assure exists the sentiment that the Kirch- nomic arena. stability in the business environ- ner era will end in chaos, harkening These risks can be related to do- ment and adherence to accords back seven years, when then-pres- mestic and international political is- and agreements. These are, ac- ident Fernando de la Rúa resigned sues, as well as economic, social and cording to Caicedo, the first issues in the midst of the gravest economic security issues, including terrorism. that businesses ask about when crisis in the history of the country. On this point, however, the defini- searching for risk analysis firms. According to Caicedo, a similar tion of terrorism is defined by the They fear that the government of a difference can be observed when insurance companies. The attacks by country receiving investments will comparing Colombia, with a strong the PCC (Brazil’s organized criminal not honor signed contracts, as was tradition of democracy, to Peru, network) in São Paulo, for example, the case with the energy industry which is showing good macroeco- were considered acts of terrorism by in Bolivia when the country decid- nomic numbers, but has a history risk agencies, rather than the result ed in 2006 to nationalize a portion of coup díetat. For Erasto Almeida, of common criminality. of its gas industry, which directly

P I B 55 Strategy

affected investments of Brazilian political risk, as is hap- recent years, Brazil still and European companies. pening with companies is a mainly an exporter Risk analysis changed a bit after such as Vale and Sadia, Most of commodities and the 1990s, with the maturization or to hire consultants to emerging manufactured products, of several emerging countries, in- handle these matters. economies mainly raw materials cluding Brazil. Before, analysis in In this sense, the and hand-made goods. emerging countries was focused Brazilian case is even have Accordingly, a num- on constant political and economic more interesting. First stabilized ber of the principal anarchy. Cabinet changes, new eco- of all, as Brazilian com- multinationals of the nomic plans to combat inflation, panies do not have a tradition of country fit this profile, as proven by currency changes, and a series of international expansion, they must a study of Brazilian multinationals measures, such as price freezes in adapt their decisions to the hard by Columbia University in the U.S. the 1980s, made political risk anal- realities and inherent difficulties of in partnership with the Dom Cabral ysis a chaotic endeavor. For some the process of internationalization. Foundation, a leading Brazilian busi- time now, a good portion of these This includes hard lessons learned ness school. In this study, commodi- countries have been stable from an working with “complicated” coun- ties represent 67.5 percent of the as- institutional point of view. tries. Secondly, within the current sets of Brazilian multinational, while Much of the current instability international economic context, and raw industrial products represent is no longer a national issue, but particularly the rise of China and In- 19.2 percent. more of a sector issue. In this sense, dia, there has been a significant rise In what way does the profile there exist sectors whose crises in commodity prices. Finally, most of Brazilian exporters and Brazil- make investment in a particular Brazilian multinationals are export- ian multinationals relate to politi- country a risky proposition. For ers, and despite observed advances in cal risk? In the first place, a major the most part, there are sectors in portion of the worldwide which political pressures and par- demand for commodities is

tisan and ideological interests are H a n do u t concentrated in the develop- particularly strong, as is the case ing countries. Consequently, with the energy telecommunica- the principal buyers of Bra- tions, finance and media sectors, zilian products are countries for example. This is due to the fact whose institutions, despite that these sectors are greatly de- some political stability, do pendent on government decisions. not excel in transparency It is critically important that busi- and trust. Secondly, as Brazil- nesses with direct interests in these ian multinationals specialize sectors stay constantly informed in commodities (Petrobras and aware of potential political and and Vale, to name two of the regulatory changes. biggest), they have reached Obviously many businesses that positions as worldwide lead- intend to venture outside the coun- ers in their sectors. As they try will encounter politically un- begin to act as big global stable situations, weak institutions players, these businesses are and regulatory processes that do obliged to scale and to grow not offer much transparency. Many their positions in relation to of these businesses are stuck be- their competitors. It just so tween the necessity of expansion and happens that many remain- fear of investment loss. Companies ing sources of mining and therefore need petroleum are situated in de- to rely on inter- Caicedo: respect veloping countries, in those nal departments for the rules places still susceptible to po- dedicated to of the game litical instability. z

56 P I B New Markets

in US dollars. To make things worse, roughly 50% of components are imported in strong currencies such as the euro and the yen. “Without this joint venture, the company would be totally stagnant,” Viana said. During the last year Aeromot was forced to get rid of its aircraft main- tenance and parts supply business, which accounted for 40% of total revenue. “The weak dollar forced us to cut back and concentrate on aircraft production,” the businessman said. The forecast for 2008 is to produce 15 planes, just eight of them P r ev i e w for the overseas market, with billings of R$15 million – some US$9 g ên cia /A Vianna, with a group of Chinese: the “sky’s the million – at the most. U e b l limit” for the partnership Aeromot’s new joint venture s Lu ca s will be in Guizhou Province, in the southwest of China. The initial annual production run is planned at 50 of the Ximango model, a two-seat Oriental Patience powered glider that is used mainly for pilot training and aerial patrol- After long negotiations, Aeromot hopes to start ling. In exchange for transferring technology, the Brazilian company producing airplanes with its Chinese partner in 2009 will have a 25% stake in the joint ARLETE LORINI venture and receive royalties. The Porto Alegre factory will supply n recent months, a group Viana, founder and president of machined parts like the landing of more than 20 Chinese Aeromot. “In February of 2009 we gear, which comprise some 15% of workers have been training should start production in China.” the airplane’s value. Estimates are with Aeromot, a light air- The factory is the result of a joint that the planes built in China will craft maker located in Porto venture signed with China National be sold for between US$150,000 and IAlegre, the capital of Rio Grande do Guizhou Aviation Industry (Gaic), US$200,000, given that they will be Sul State. Through December they a giant Chinese state company that used by the Chinese government. will learn all the steps of building a builds everything from Russian MiG In addition to the fantastic poten- plane, from lamination to final as- fighters to cars and motorbikes. tial of the Chinese market, Aeromot sembly. The training is one of the Once everything is finalized, the is optimistic about the prospect for last steps in a process that started in project will provide a new lease of growing technologically with its new 2002 and should end with produc- life for the Brazilian company which partners. The contract signed with tion of Brazilian aircraft in China. has been suffering from an adverse ex- the Chinese paves the way for the After six years of protracted change rate, given that its major cus- company to develop, in partnership, negotiations, 77-year-old Brazilian tomers are foreign. Aeromot sales in new four-seater or six-seater models. engineer Cláudio Barreto Viana the United States alone have totaled 59 “Our partner has the market and the believes he is now closer to seeing of the Ximango model since 1995. Of money to invest,” said Viana. “The the craft he created being produced the 21 airplanes built in 2007, 17 were sky’s the limit for the Chinese avia- in China. “It took truly Oriental exported. However, the company has tion market.” And that’s just what Vi- patience to get to this point,” said found it difficult to readjust its prices ana has been patiently waiting for. z

P I B 57 Image

Building the Brazilian Brand

Brazilian companies Andrea, of polish their images Dialogue: “What works in Brazil to facilitate doesn’t always expansion abroad work here” By Christine Puleo

ate last year, mining company Companhia Vale do Rio Doce decided to give its name and logo a make- over for the first time in Lsixty years. Specifically, the company adopted its Brazilian nickname – Vale - as its official global name, and replaced its stern and monochromatic logo with a new design in green and yellow – the ubiquitous colors of Brazil. Certain- ly the company’s yellow and green color scheme was meant to invoke the flag of Brazil? Not exactly, according to Marco Rezende, partner at São Paulo-based branding firm Cauduro Martino who, along with international partner Lippincott in New York, masterminded Vale’s new look. After all, the logo had to speak to a global audience, even those unfamiliar with the Brazil- ian flag. “The green represents en- vironmentalism and sustainability, and the golden yellow represents energy and wealth,” says Rezende. “The old identity was military looking, a chevron, a military badge.” Rezende is proud to be part of what he considers to be the first truly global Brazilian brand. “Bra- zilian companies are starting to see the value of branding: if they do not learn, they will lose money. A

brand is a winning proposition,” he Z ach s says. Besides being appropriate for

the international public, the new M itch e ll

58 P I B Vale visual identity maintained a identity offers a key market differ- tion. At this time, her office spends strong connection with Brazilian entiator. This is the true for one 50 percent of the time working Building the Brazilian Brand constituents. In addition to the of Hermann’s clients, cosmetics with multinationals targeting the green and yellow logo, the adop- company nuNAAT, whose brand Brazilian market, and 50 percent tion of Vale as official name carries is inextricably linked to Brazil, working with Brazilian companies some weight with the local popu- from which its natural products going global. Magri sees Brazilian lation; it was chosen over other are derived. companies, which she considers possibilities including CVRD (as to have the most global focus and it was best known in the U.S. and Reverse Path adaptability in Latin America, as be- Asia) and Rio Doce (the name most Nearly all of the world’s largest coming increasingly sophisticated common in Europe). global communications firms in their strategy over the past five Communications consultant maintain a São Paulo presence. years. “Brazilian companies started Andrea Herrmann, a Brazilian liv- Historically, these companies as- to go abroad by using Chambers of ing in the U.S. for more than a de- sisted multination- Commerce and in- cade, also recognizes the value of als with interests dustry associations building Brazilian brands. Along in Brazil or other Building that promote dif- with two Latin American partners, South American a national ferent sectors,” says Herrmann launched Dialogue, a countries. Lately, Magri. “Now they are marketing communications con- however, there has identity can starting to work more sultancy to tend to the needs of been a shift in direc- be a decisive with communications Latin American companies enter- tion, with business factor for firms. They have all ing the U.S. market. “What works increasingly flow- the infrastructure to in Brazil does not necessarily work ing out of Brazil and business establish their spe- here,” says Herrmann. “These into other markets. success cific images.” companies need to understand According to Shei- Edelman, another this.” While in most cases, compa- la Magri, the head of the São Paulo enormous global firm, also notes an nies need to let go of their Brazil- office of Hill & Knowlton, one of the upswing in Brazilian clients search- ian habits to create a global image; largest communications firms in the ing for international expertise. Ac- in others cases touting a Brazilian world, business is changing direc- cording to Ronald Mincheff, president of Edelman’s São Paulo office, his company spends 80 percent of its time assisting multinationals Some basic tips going into Brazil, and 20 percent Specialists explain how to make a good impression abroad working with Brazilian companies going to the international :: In some cases it can be important to maintain a Brazilian identity. market. “This year, the propor- More frequently, however, it’s better to come across as a global tion has remained the same, but concern. the volume is growing,” he says. :: Remember that what works in Brazil won’t always work in other Mincheff says the major Brazilian markets. companies, such as Vale, Petrobras and Embraer have already laid pond :: Be humble. A big fish in the Brazilian might be seen as a the groundwork, and are helping by the inhabitants of the global ocean. minnow other companies in their ventures :: Make priorities. Activities must have a well-defined focus toavoid abroad. “These Brazilian multina- wasting resources. tionals are casting a different light on Brazil,” he comments. Hire local professionals or a local company. :: Certainly, images are not made :: D on’t simply translate your message. Transform it. Adapt it for your overnight. But perhaps the swift- new public. est image enhancement ever or- chestrated by a Brazilian entity

P I B 59 Image

New Look a bright new logo is always a good weapon to improve communication. It happened with Vale, and now Unica has a new logo to promote Brazilian ethanol

Jank, of Unica: wearing down the resistance to ethanol in the United States ha n do u t

was the recent effort of UNICA, The association’s president, Mar- focus. Europeans, like Brazilians, the association of Brazilian sugar cos Jank, gave a series of interviews are more sensitive to environmen- growers headquartered in São Pau- to important media. “The country tal issues related to ethanol pro- lo. The organization, which repre- is experiencing an oil crisis and duction than U.S. counterparts, for sents sugar and ethanol producers, the current presidential election whom ethanol is currently more of launched a media campaign in the brings the environmental debate to an economic issue. The organiza- U.S. to fight high tariffs on Brazil- the forefront,” says Adhemar Altieri, tion launched an office in Brussels ian ethanol imports. director of corporate communica- to maintain proximity to the Euro- tions at UNICA. “The coverage we pean commission responsible for Global warming received went well beyond our ex- renewable energy initiatives for The communications strategy, co- pectations.” In August, as part of its the continent. ordinated by U.S.-based Fleishman- communications program, UNICA UNICA has made a major splash, Hillard (specifically its VOX Global unveiled a logo for ethanol, with but the recent activities are a small Mandate consultancy), presented versions in Portuguese and English, part of its ongoing global efforts. ethanol as a low-cost fuel alternative intending to make ethanol recog- “Public relations and branding are and a solution to global warming. nizable worldwide as the principal part of a middle to long-term pro- UNICA timed its program to coin- brand of alternative fuel. cess,” says Mincheff of Brazilian cide with the 4th of July weekend—a At the beginning of 2008, UNI- efforts at crafting a global image. holiday when many Americans take CA had already launched a success- “Objectives, strategies and fund- to the road and burn millions of gal- ful communications effort in Eu- ing need to reflect that the process lons of (expensive) gasoline. rope, but with a slightly different takes time.” z

60 P I B Legislation

REACH for Your Wallet! The European Union will start requiring that exporters register products containing certain chemical substances. Be prepared, because tock / Keys the approval process Containers at Hamburg, in tock s Germany: chemical substances

won’t be cheap oto

e F under tight regulation g

By Andrea Flores, in Paris A

ny company that ex- European control process called a French lawyer who specializes in ports or plans export- REACH – Registration, Evaluation, commercial and international law. ing to any of the 27 Authorization and Restriction of According to Nivault, products clas- countries in the Euro- Chemicals. It came into force in sified as dangerous will not neces- pean Union had better June of 2007 with the aim of pre- sarily be banned, but they could payA close attention to the calendar, venting the entry into and circula- face limitations on quantity or even because December 1st marks the tion inside the EU of products that be substituted. deadline for pre-registration of all are harmful to consumers and the The rules determine that all ap- products that contain chemical sub- environment. The legislation was proved products will receive a direct stances among their raw materials under discussion from authorization and will and are destined to the EU market 2001, following an ab- then be able to be reg- in quantities equal to or greater than normal increase in the istered. This will be one metric tonne. A company ex- incidence of illnesses Strict control done in three distinct porting shoes, for example, will have among Europeans re- for more stages: in 2010 for to prove that the glue it uses meets lated to toxic waste, than 100,000 exporters shipping European standards, while Brazil- for example asthma, over 1,000 tonnes per ian ethanol and biofuels will have certain types of cancer types year; in 2013 for those to demonstrate that they comply and skin problems. of material shipping between 100 with the requirements if they want According to the and 1,000 tonnes, and to expand their sales in the region. regulations, pre-registration must in 2018 for the smaller exporters Similarly, makers of drinks, paints, be done on the site of the Euro- in the range of one to 100 tonnes certain types of plastics and many pean Chemicals Agency (ECHA)*, per year. This final stage will be other sectors will have to meet the located in Finland. Pre-registration expensive for the exporter – the new regulations if they use any of is roughly like obtaining an identity minimum cost will be ¤30,000 for the more than 100,000 substances card for the product and will be es- the registration. Nivault estimates that will come under EU control. sential to be able to continue ex- that a company billing ¤40 million Companies that have not reg- porting, even for products contain- a year will have to spend ¤3 million istered by the deadline will not be ing substances deemed undesirable for the registration. z able to export to the Old Continent by the EU. “Products will be ana- until they regularize their situa- lyzed only at the next stage of the *More information at tion. The measure is part of a new process,” said Paul-André Nivault, www.reach-pre-registration.eu

P I B 61 Finance Mahomet Comes to the Mountain Rather than trying to takeover foreign stock markets, Brazil’s BM&F Bovespa is betting on attracting foreign investors By Juliana Garçon

fter five years of virtually tracting foreign companies to the uninterrupted growth, Brazilian capitals market. There the Bovespa shares was a lot of speculation when the index in May started merger was announced about the a prolonged down- new bourse’s capacity for making wardA slide. Investors bit their nails acquisitions. But the path chosen but bourse directors didn’t fret over is to remain firmly centered in São market fluctuations. They kept their Paulo and use this base to negotiate eye fixed firmly on ambitious plans partnerships that have the potential for international expansion of BM&F to attract new business. After updat- Bovespa, the giant created in March ing its technology infrastructure to 2008 through the merger of the São integrate completely into the global Paulo Stock Exchange (Bovespa) and financial transactions system and to the Brazilian Mercantile & Futures eliminate any cultural and linguistic Exchange (BM&F). The goal is to barriers that could stymie its plans, consolidate São Paulo BM&F Bovespa set out as a financial business to talk with other Latin center for the emerg- American stock mar- ing world, in a global Latin America kets. It was the first scenario where econ- is first target step in an approach omies of scale will be for a stock to emerging markets essential for bourses around the world, in- to survive. BM&F market seeking cluding China, India, Bovespa now ranks partners Russia and dozens of world number three in other smaller coun- market value, at US$18 billion, and it’s tries. Soon it will be possible to buy m betting that not only will it escape the and sell stocks on three Chilean mar- e mag sector trend towards concentration, kets, three Argentine markets and I

but it will position itself as one of the one Colombian market without leav- olha / F rpa

world’s most important centers. ing São Paulo. “Our goal is to close e V

BM&F Bovespa’s strategy for operational agreements and develop ilo n a

conquering the world involves at- the other local markets,” said Paulo D

62 P I B ne to Keys po u r / G oto F op T

Global trading: de Souza Oliveira Brazil’s BM&F Junior, chief busi- will integrate ness development with the office at BM&F Chicago stock Bovespa. “That’s market (above) the only way that companies in these countries will list their stocks here too.” According to Oliveira, it makes sense thinking of a two-stage process because in general companies float their shares in their home market and then seek foreign markets once they have reached a certain stage of equilibrium.

In Globex Brazil’s new bourse will certainly receive another stimulus with the inclusion of future products in the Chicago stock market’s Globex. Chicago owns 2.5% of BM&F Bove- spa. As a publicly traded company, BM&F Bovespa is wary about making growth predictions. But the potential is clear, given that taking part in Globex means availability on 100,000 client terminals in over 80 countries. Today just some 700 terminals are hooked into the trading session. To trade in the stocks and bonds available on BM&F Bovespa,

P I B 63 Finance

the hordes of investors using Globex eigners account for roughly a third is designed to handle up to ten times will simply need to register with a of business volume. the number of bids and five times Brazilian broker. Global market sentiment will the number of deals, compared with Joining this network means that determine when and by how much current levels. “Up to now, the bro- the commodities and futures trad- joining the global system will boost ker has been an ‘ear juggler’ han- ing that was previously conducted trading volume on the Brazilian dling two clients simultaneously by on the BM&F will have the same bourse. However, specialists told phone,” joked Oliveira. “Brazil is chance of attracting foreign inves- PIB that volume could rise by as one of the last markets in the world tors as the company stocks listed in much as fivefold in the next two to to adopt the new technology.” what used to be Bovespa, where for- three years. The new digital system Major Brazilian investors such as banks, insurance companies and investment funds can also use the A Warm Welcome system. But the greatest impact on Brokers invest in technology; look to international business the market is likely to come from foreigners who were already in- In a move to provide foreign investors with access to the Brazilian terested in investing in Brazil, but market, local brokers are spending heavily to upgrade their technology. had problems accessing the market. Many want to stand out from the pack by offering exclusive services that Imagine for example how difficult can attract outsiders and drive up business volume. Planner Corretora, for it is for the employee of a bank in example, has hired 11 staff with previous international banking experience Asia phoning a broker in São Paulo. outside of Brazil to bring in the cultures of Wall Street and the City of Lon- Or even the situation of Brazilians don – not to mention the good contacts and future clients. operating abroad who lose excessive Three of Planner’s new staff were living outside of Brazil before joining the time phoning and placing their order. brokerage. In addition to fluency inE nglish – a must – the team has members The really big rise in trading volume who speak Spanish and French. The idea is for the new team to cover virtually in expected for the next phase, with the whole market, from the most fashionable stocks to the most complex bets the arrival of market newcomers. on futures markets. Additionally, foreigners will be offered kits of financial products based on interest and exchange rates. “We will offer the external Algorithms client much more than just basic products,” said Stephan de Sabrits, respon- The clients that both the brokers and

sible for Planner’s international area. He predicted the BM&F are most looking for are that the flow of international investors will multiply the investment funds that use so-

H a n do u t fourfold the total business volume of the brokerage called algorithmic (or quantitative, by the end of next year. or high-frequency) trading, which The Fator brokerage is positioning itself to attract requires a digital system. These principally US clients. Alexandre Carneiro, respon- funds use sophisticated computer sible for the derivatives area, said the company saw programs to compare prices in doz- internationalization as a strategy not so much for ens of markets and discover arbitrage Carneiro, of expansion, but rather for survival. “We believe the opportunities, issue orders and close Fator: goal market will double in the next three years and so will deals. Such opportunities might in- is to double our income,” he said. clude for example to buying for less in size Brazilian authorities have expanded the options and selling for more, buying shares for buying foreign assets, and in future local clients of the same company in different will want to conduct transactions abroad. Fator has invested in technology, markets, or making paired purchas- staff and the variety of services offered, adding six traders to focus on foreign es, amongst other things. They carry investors, increasing from four to seven the number of agricultural contracts out thousands of arbitrage trades specialists – basically because of ethanol – and is hiring economists with with small margins, seeking to earn expertise in the futures market to beef up operations in this area. The company on the volume of deals made. Rough- will thus be able to deliver more reports and economic information. “Maybe ly one fifth of all trades on the New brokers are lucky the market is currently in a downturn,” said Carneiro. “It York Stock Exchange result from means we can build up our expertise at a more moderate pace.” such a process. z

64 P I B Technology Beef Made to Order Brazilian beef is enjoyed around the world, and the high quality is the result of investments in sophisticated services of genetic improvement which are now winning markets abroad By Vicente Vilardaga, in Uberaba (MG) ess r P ca D`Aragon, of Alta nse o Genetics: “Exports / F have the potential to

dolfo double rapidly” L.A

razilian bovine genetics are both the technology and controlled and improvement, there is a great today the most advanced genetic material. According to data domestic demand for genetics ser- and promising in the from the federal government’s For- vices and there have also been grow- world, and that helps make eign Trade Secretariat, the total value ing international opportunities.” Brazilian beef a global suc- of exports of bovine semen rose from The leading Brazilian farms, ones Bcess. In addition to being home to the US$479,300 to US$908,500 over the that are dedicated to producing better world’s largest commercial beef herd, last two years and the volume rose animals and improving their breeds, with around 200 million head of cat- from 104,700 doses to 162,900 doses. are boosting the profitability of their tle, and holding the world record for “This market has great potential herds by using sperm and embryo beef exports, Brazil is the most ac- and Brazil is the leader,” said Mú- banks. Mata Velha, in Uberaba, is one tive competitor offering genetic ser- cio Alvim, director of of the great centers vices for various cattle breeds. Local Cenatte, a company lo- for Zebu cattle breed- companies are constantly seeking to cated in Pedro Lobato ing in Brazil. There, improve the national beef herd, and (MG) which exported Brazil has thousands of top-class to this end are adopting and devel- a batch of Zebu dairy the world’s animals constitute a oping techniques such as DNA analy- cattle embryos to Can- largest permanent source of sis, in vitro fertilization, cloning and ada at the start of this reproductive mate- embryo selection. The good results year. “Thanks to ef- commercial rial. And even though have paved the way for exporting forts in herd selection beef herd Brazil is already at the

P I B 65 Technology

cutting edge in the sector, experts say while earlier technologies produced port sales of semen. “Little by little we there’s still a long way to go. “Brazil 15 at the most. According to data from are receiving the export certifications could increase its production very the Brazilian Society for Embryo Te- that guarantee our genetic material is quickly and genetics can show us the chnology (SBTE), in 2006 there were clean and illness-free,” said Gerson way,” said Henry Berger, manager of 396,000 cases of bovine in vitro ferti- Simão, general manager of Brazil- the genetic services division of Me- lization worldwide. Of these, 198,000 ian Cattle. Between 2004 and 2007, rial, a French-American multina- were in Brazil. revenue from exports of semen by tional which opened a subsidiary in Brazilian leadership in the sector companies participating in the pro- Brazil at the end of last year, focused becomes even more evident when gram increased from US$378,800 to on DNA analysis. “Gene sequencing you visit the city of Uberaba in the US$653,400. Overall sales by the con- means we can select Triângulo Mineiro re- sortium rose from US$14.7 million to with confidence the gion of Minas Gerais US$60.1 million, including sale of live best bulls and breed- State. It’s one of the animals and production inputs such ing cows, ensure pre- Originally from world’s leading centers as seeds and veterinary products. cocious offspring, im- India, Zebu for development of bo- Brazilian genetic material is cur- prove herd character- cattle have vine genetic research. rently exported to Angola, Argentina, istics and reduce herd The city has five in- Colombia, Ecuador, Malaysia, Para- deficiencies,” he said. been improved semination centers, 15 guay and Venezuela. The country has The demand for in Brazil breeding centers and also made progress in the export of Brazilian bovine ge- 60 farms that produce live animals for breed improvement. netics has to do with the way that fine genetics and high-efficiency Government data shows that last year breeds such as Nelore, Gir dairy cat- cows and bulls. The city is home to the country shipped out 7,381 thor- tle, Guzerat dairy cattle and North the headquarters of the Brazilian As- oughbred bovine cattle – cows that America’s Brahman Zebu strain are sociation of Zebu Breeders (ABCZ) were pregnant, with calves or ready so well adapted to tropical climes. which has for some decades now been ess Roughly 80% of Brazil’s beef herd conducting genealogical registration r P

is made up of these breeds which, and promoting the selection of Asian ca nse while they originated in India, have breeds. Local farmers started travel- o / F been radically improved in recent ling to India early in the 20th century decades in Brazilian farms. to seek out good bulls and cows, and dolfo At Jacarezinho, in Valparaíso (SP), the region has become a reference for s: L.A hoto there are 19,000 head of Nelore and breeding technology and control of P Bradford cattle, the latter a breed information about the national herd. originating in South Africa. The fo- This work now underpins the recent cus is on improving productivity, in- good performance of the beef and creasing the added value of the meat dairy sectors in Brazil and has been and the exports. “An efficient farm strongly supported by breeders. Now, must be able to slaughter its Nelore it’s equally strongly supported by the cattle precociously,” said Ian Hill, di- genetic services companies. rector of Agropecuária Jacarezinho, In 2003, ABCZ created Brazilian a farm that complies with European Cattle, an international program to Union traceability requirements and promote cattle breeding solutions. is about to start exporting to that This now involves 18 companies and market via the Bertin packing house. has only served to highlight the international demand for Brazilian genet- Lots of champions ics. Last year Brazilian Cattle notched The recent progress of genetic engi- up its first export sale of embryos, the neering is driving the market. Mo- Cenatte deal described above which dern in vitro fertilization techniques was worth US$95,000. Also, the ven- can result in up to 60 calves per cow, ture has seen a huge increase in ex- Alta Genetics, of Uberaba: semen processing center is an ultra-clean environment with rigorous quality control

66 P I B for breeding. In 2006, just 1,213 top- China wants Zebu quality bulls and cows were shipped Technology interchange with the Asian giant is under way abroad. “The international market is today buying Brazilian genetics,” Brazilian bovine genetic material looks set to spread through said Luis Alfredo D’Aragon, general China. The interchange between veterinary specialists and technicians manger of the Alta Genetics semen of the two countries has already become a commonplace, and all that’s processing center in Uberaba. “But missing for business to take off is the signature of an agreement between the non-tariff barriers are still high, the countries’ sanitary authorities and definition of a commercial protocol. and they curb our potential.” A mission of seven Chinese scientists visited Uberaba (MG) and ratified a International shipments of semen cooperation agreement with the Brazilian Association of Zebu Breeders and embryos frequently face phyto- (ABCZ) for technology transfer that was signed in 2005. The group visited sanitary barriers that are greater than farms and insemination centers to collect information that can speed up those facing beef. D’Aragon explained the bilateral negotiations. that Latin American countries for The Chinese want to import semen and embryos of Zebu beef and example could buy much more Bra- dairy breeds. They face the challenge of increasing the supply of beef zilian genetic material, and exports and milk in the Chinese domestic market, where milk consumption is just have the potential to double in a short eight liters per year, or 10% of the world average, and there is strong time. Europe, however, does not al- pressure on demand. “Zebu genetics are ideal for us to improve the qua- low importation of Brazilian genetic lity of the herds in the South of China, where the climate is tropical,” said material because of the country’s re- Gerson Simão. A green light for trade in bovine genetic material could cord on foot and mouth disease. pave the way for studies and projects launched three years ago by ABCZ and the Yunnan Research Institute to set up an experimental dairy farm in Cloning China for breeding Gir cattle, a type of Zebu. Despite the production technologies now being mastered, there is still no real market for bovine clones. The- re is no regulation, and in practice the clones are like ghosts – there is no legal way to register them. So far, the only purchasers of this kind of service are the owners of elite animals, interested in multiplying their source of genetic material. Another restriction on cloning is that it does not result in any effective improvement to the breed, but simply provides a copy of a high-quality animal. Either way, the service is currently available in the Brazilian market for around R$50,000 – some US$30,000. Cenatte is negotiating a contract that would boost production to an average of two clones per month. The In Vitro Brasil genetics center in Mogi Mirim (SP) announced in May of this year the birth of a hornless Nelore clone called Diago TN. The original Diago is a breed record-holder with 160,000 doses Alta Genetics, of Uberaba: semen processing center is an ultra-clean environment with rigorous quality control of semen sold. z

P I B 67 Small Business ha n do u t The Large Hadron Collider: Brazilian entrepreneurs helped build the world’s largest machine The Map of the World Brazil’s small business agency prepares said Rossiter. Based on this, Sebrae will offer the most appropriate tools

a program to promote internationalization for each case. “The greatest obstacle By Flávio de Carvalho Serpa to survival in the external market is the lack of strategy and preparation. razil’s smaller companies a list of the best solutions for each Sebrae will fill this gap.” will soon gain a power- type of business. “We don’t want to Although Brazil’s micro and ful ally in the fight to offer generic answers,” said Raissa small companies have been grow- win overseas markets. Rossiter, market access manager of ing rapidly in recent years, they still Starting October, the Sebrae. “The program will address represent an insignificant share of BBrazilian Support Service for Mi- the individual needs of businessmen exports. What’s worse is that this cro and Small Companies (Sebrae) who have already made at least one share is dropping, above all because will launch its Internationaliza- export sale.” of the unfavorable exchange rate, tion Program. The federal agency The program starts with a self- down from 2.3% of all Brazilian ex- conducted extensive research to evaluation by the company. “The ports in 1999 to 1.4% in 2007. Sebrae identify all the problems faced by idea is to ascertain just how ready predicts that the new program will small-scale exporters and compiled it is to face the international market,” help achieve the government goal

68 P I B of increasing the number of just 53% of companies small exporting companies surveyed said they had by some 10% through 2010. made any kind of improvement or introduced Good examples anything new in their The goal is for more and business recently. Those more entrepreneurs to fol- that had made an invest- low the example of Titã ment said it was worth- Eletrocomerciais, a com- while: 46% of this cate- pany in Araraquara in São gory said they increased Paulo State. Created in 1995 their turnover, 39% saw to make food display cabi- productivity go up and nets, Titã now exports al- 24% hired more staff. most 25% of its output and Another Sebrae re- has clients such as the Star- port showed similar find- bucks coffee-shop chain ings. It found that small and large US convenience and medium sized com- store chains. The company panies classed as high- sells to 11 countries and is intensity users of tech- constantly gaining new in- nology – ones that invest t u

ternational markets. Last do significantly in research n year, exports grew 33% in ha and development – en- es/ a dollar terms. For 2008 the v joyed much greater than No goal was to grow another average progress in con- io en

30%, but this was close to g quering foreign markets. u being achieved by the mid- E Micro companies in this Rossiter, of Sebrae: “Lack of strategy is an obstacle” dle of the year. group exported 18.8% Titã has no magical solution to LHC is a 27-km underground circle more from 2005 to 2006, while handle the unfavorable exchange that can simulate atomic collisions small companies saw exports grow rate. “We are cutting costs, mak- similar to the Big Bang. 14.8% in the same period. At the ing agreements and expanding our Two small São Paulo companies other end of the innovation spec- business with new clients, but it’s not called Megaflex and Griffus helped trum are the companies classed as possible to pass all the increases onto Marroquim to build his equip- low-intensity users of technology, the price,” said Ednael Carlos Magal- ment. Taking part in something and the difference was startling: hães, commercial di- like the CERN proj- micro companies in this group ex- rector and a partner at ect means receiving ported 6.4% less in 2006, compared the company. the most rigorous with 2005, and small companies saw Rio de Janeiro Innovation is quality certification their international presence shrink physicist Fernando essential for imaginable. Regular by 0.3% in the same period. Marroquim offers small companies household electronic Life was even better for the small another success story. equipment could be companies that sought help from gov- Marroquim designed to advance vaporized inside the ernment agencies. For example, the and built items of internationally LHC, because of the 4,160 companies that participated in equipment for the radiation it emits. projects run by the Brazilian Export Large Hadron Collider (LHC) which Marroquim’s work has taken and Investment Promotion Agency, has just been completed by the Europe- him so far because it embodies Apex-Brasil, exported 27.5% more bean Organization for Nuclear Research something that is fundamental to tween January and May of 2008 than (CERN) on the frontier of France and the survival of small and mid-sized they did in the same period last year. Switzerland. Often described as the companies: innovation. According A clear demonstration of the value of largest machine ever built by man, the to a study by Sebrae in São Paulo, courage and innovation. z

P I B 69 Transport The Stamina of a Veteran With 36 years of overseas experience and now present in 11 countries, the Randon Group is leveraging its accumulated know-how to gain a foothold in the United States and China By Arlete Lorini, in Caxias do Sul

he Randon Group is ma- we have to invest abroad as well.” The rket leader in all the seg- Fras-le investment in the sought-after ments where it operates Chinese market will be modest to start in Brazil, from truck trai- with, but it could open the door to a lers, semi-trailers and future expansion by the group. “We Tbus bodies to autoparts, with billings are going one step at a time to acquire tipped to exceed US$2.5 billion this the experience and get to know the year. But it’s not complacent. On the Chinese market,” Randon said. contrary, the nine-company conglom- The foreign market today repre- erate which operates in 11 countries sents 20% of Randon’s total billing worldwide from its base in Caxias do and the goal is to hike this to 30% Sul in the southern state of Rio Grande within two or three years. “We started do Sul is always on the lookout for going international when we decided new global opportunities. In recent we wanted to grow,” said Erino Tonon, months Randon’s Fras-le subsidiary Randon’s director of operations. “We which produces brakes for the vehi- had achieved a level of market share cle industry has been taking two more in Brazil that would have been very important steps in the group’s process expensive to increase, and so it was of internationalization. better to sell abroad.” In addition to acquiring Randon products have the brake pad produc- already established a tion unit of a company External leadership position in in the United States, market already various foreign mar- Fras-le also announced generates 20% kets. The company is the construction of a leader in Chile, Argen- factory in China (see of the group’s tina, Angola and Alge- box). “Randon believes revenue ria in the segment of that the only way to semi-trailers, while in guarantee the survival of the company the area of friction materials, Fras-le is to establish a global presence,” said is leader in Argentina, Chile and the Alexandre Randon, the 46-year-old United States (for brake pads). P r ev i e w engineer who is vice-president of the Randon’s foreign growth could group and the son of Raul Anselmo come through greater exports or g ên cia /A Randon, one of the founders. “It’s no through overseas manufacturing U e b l

good being global just as an exporter, operations. “We know in which re- Lu ca s

70 P I B gions of the world we want to establish partnerships to assemble our products, and in which we want to have a complete industrial operation,” Tonon said. “Even with the low value of the (US) dollar, we are still competitive exporting to some countries.” The rhythm of Randon’s foreign expansion has been held back only by the excellent performance of the Brazilian domestic market. “Randon has never ceased looking for business opportunities abroad, but the strong demand in Brazil has restrained the company,” said Rafael Weber, an analyst at Geração Futuro. “The moment the domestic market ceases to be so favorable, Randon is set to embark on a more aggressive strategy of internationalization.”

Creative irresponsibility Selling to foreign markets is nothing new for Randon, which started exporting in 1972, to Uruguay. Foreign sales have grown rapidly in recent years and should reach US$275 million in 2008. Rather than being part of a strategic plan, however, the first international ventures were much more a question of seizing opportunities as they arose. In 1977, for example, Ran- don won a tender to sell over 1,000 semi-trailers to Algeria – this at a time when the company’s total production wasn’t more than 750 units a year. “It was an act of creative irresponsibility by Randon, but we managed to fulfill the contract in one and a half years,” said Tonon. In addition to the volume to be delivered, the company had to adapt its products for use with tractor trucks that cross the Sahara Desert. In fact, the Middle East has been Randon director- very important in Randon’s export general Tonon: history, so much so that the company “Increasing our share of the domestic market had to set up a specific unit at head would have cost too office just to deal with foreign cli- much. It’s better ents. This was in 1978. “It was at the selling abroad” time of the second petroleum shock

P I B 71 Transport

and there was a lot of wealth in the Across five continents Randon is present around the world, region, where everything had to be with factories, assembly units and offices built,” recalled Tonon. However, the region was torn by intense conflicts. This frightened off European suppliers. “Randon was willing to run the risks – I think our courage came

Germany from our ignorance,” said Tonon. china* United At some moments in the 1970s States maroCcos Algeria and 1980s, exports represented half United cuba Arab of Randon’s total billings. And in mExico Emirates 1983, when the company was going Kenya through the Brazilian equivalent, roughly speaking, of US “Chapter 11” chile guarulhos (SP) Caxias do Sul (RS) South reorganization, it was helped out of Africa its most serious crisis by a massive argentina order from Algeria. Group exports picked up strongly again in 1996, Assembly Distribution fActories Offices units centers thanks to the acquisition of Fras- le which already had offices in the United States and Argentina. An- Fras-le spearheads global expansion other export boost came from 2002 Since the Randon Group acquired Fras-le in 1996, exports by this onwards with the opening of offices maker of automotive friction materials have soared from US$9 million to in countries such as Dubai, South Af- US$80 million a year. The overseas market already absorbs half of produc- rica and Morocco. In addition to rep- tion and generates 40% of the company’s billing, making it the most in- resenting the company commercially, ternationally-oriented member of the Randon conglomerate. The trend is these subsidiaries have the mission for this position to be consolidated with two new operations in the United of identifying local partners to set States and China. “Even with the Brazilian domestic market so strong, the up local assembly operations using best growth opportunities for Fras-le are abroad,” said 32-year-old Daniel CKD exports from Brazil. Since 2005 Raul Randon, youngest member of the founding family who is Fras-le Randon has operated this way in Mo- director-superintendent and director for investor relations. “The weak US rocco, Algeria, Kenya and Cuba. Lo- dollar has made it easier for the company to invest abroad.” cal CKD assembly means that prod- The United States is Fras-le’s largest export market, taking half of the ucts can be placed in these markets company’s exports, and Fras-le is US leader in brake pads. With the recent at prices that are at least 30% below acquisition of assets and clients of Haldex, a US company, Fras-le will boost an imported alternative, by avoiding its US billing by around US$30 million a year, increase its share of the market local tariff barriers and freight costs. for brake pads and enjoy a closer relationship with vehicle builders. “We would not be competitive in The Asian market represents just 5% of Fras-le’s exports but is seen these countries if we exported fin- as the company’s best growth area for the coming years. Plans call for the ished products from Brazil,” Tonon Chinese factory in Zhejiang Province to start operating in mid-2009 to sup- observed. However, the company ply the internal and regional Asian markets. The strategy is for the Chinese said it has delayed implementing this factory to focus on production of items with lower added value where the model in South Africa because of the company cannot be competitive out of Brazil. devaluation of the local currency. The aim is to gain in labor cost and also in logistics, by being closer to the Randon has acquired other types clients. The Chinese operation also gets around the problem of Brazil’s strong of foreign experience, in addition to real currency. Investments in China are US$3.5 million, which the company exports and CKD assembly opera- sees as small but potentially just the start. “We shall increase our investment tions. Some experiences have been as demand requires, and as we feel we have the muscle to take on the chal- less pleasant. In 1992 the company set lenges of the country,” said Randon. “You can’t just walk into China.” (AL) up a semi-trailer assembly operation

72 P I B Randon: “You can´t be a global and local production would not be company if worthwhile, given the low techno- your employees logical level of the competition. don’t have a global vision” Irrespective of type or location, P r ev i e w Randon policy is that all foreign operations must be run by Brazilians. g ên cia /A The only exceptions are the CKD U e b l operations, where the Brazilian

s Lu ca s company just provides initial training. This pattern will hold good for Shipping CKD: final the new operations in China and the assembly takes place abroad United States. “Our strategy is to implement our management model via people who share the company’s culture and values, and additionally it makes communication with head office much easier,” said Alexandre Randon. “The challenge will be greater in China, given the huge dis- tance and enormous cultural gap.” The company currently has 200 employees working outside of Brazil, 28 of them Brazilian expatriates. To develop the global culture within the group, the company operates a kind of rotation with employees generally ha n do u t spending two or three years abroad in Portugal, taking advantage of the quired a new dimension. “We want to and then returning to Brazil. More common language. The idea was to be make Argentina a small benchmark than 120 employees have worked closer to African clients and to launch factory that can be replicated by Ran- abroad. There is no formal prepa- a manufacturing operation aimed at don in other countries,” he said. ration for expatriates within the the European market. The project Similar to the days when it started group, but those selected are nor- lasted six years but the results were exporting and conquered the Mid- mally drawn from a talent data-base below expectations. “It was a learn- dle East, Randon now has its sights that lists professionals who have the ing process,” said Tonon. Two years set on developing the market for its potential to rise up the management later, the group set up a factory in semi-trailers in countries as little- ladder. One requirement is fluency Argentina which went through some known as Azerbaijan and Turkmeni- in a foreign language. tough times during the economic cri- stan. “These are countries with great Since 1994 the company has of- sis that swept that country at the start potential,” Tonon said. “As markets fered support to employees who of the current decade. they interest us more seek to learn a second language. “We lost a lot of money than India or Russia.” Initially there wasn’t much interest, with the devaluation of Fras-le exports fric- but as the international operations the peso, but today the Countries like tion material to Rus- have grown so has the number of operation is profitable,” sia, but Tonon said he employees opting to use this bene- Tonon said. Production Azerbaijan and couldn’t see any possi- fit. Normally, employees who work in that country is still Turkmenistan bility of breaking into abroad for a spell end up being pro- small, representing less are in the these markets with moted within the company. “It’s no than 2% of the group’s semi-trailers. Logistics good trying to be a global company total billings, but now company’s costs rule out export- if your employees don’t have a global the operation has ac- sights ing finished products vision,” said Randon. z

P I B 73 Service In the Footsteps of Asterix Starting a business in France requires a lot of patience to handle the bureaucracy but the results can make it worthwhile By Andrea Flores, in Paris

ainted blue and yellow, the building at number 95 on Rue Cléry, in Paris, can hardly go unnoticed by pedestrians more used Pto the greys and browns of city architecture. The three-story building has been home since September of 2007 to the Brazilian CVC group, one of Latin America’s largest tour operators that has outlets in Argen- tina, Chile and Uruguay and is now making a major bid to conquer the French market. In addition to investing almost ¤1 million to open its first European subsidiary, CVC had to battle the fearful French bureaucracy for almost 15 months. But for Silvia Helena Cerqueira, the Brazil- ian director of the Parisian branch, the suffering was not in vain. “The investment has been substantial, but the return has as well,” she said. “The most difficult thing was having to go almost a whole year without billing anything.” Now she’s looking to recover the initial capital in three years. CVC was founded 36 years ago by businessman Guilherme Paulus. Today the company’s European ven-

ture is part of an expansion plan that ha n do u t has carried it from 36 to 350 agen- Long job: led by Paulus (center), CVC has opened a Paris office – but it was a tough process cies in Brazil between 2000 and 2007. The choice of Paris as the guro or Fortaleza,” Cerqueira said. Opening a multinational subsid- beach-head for entry into the Euro- Another important point is the in- iary in France is a long process, Cer- pean market was no accident: of the crease in the flow of European pas- queira says. “In our case, as I already 58,000 travelers that CVC takes to sengers to Latin America. “Today had a French visa, we didn’t have to the Old Continent each year, 38,000 CVC feels ready to receive them. bother about the paperwork to send go via the French capital. “Our cli- Fifteen years ago this wasn’t the a Brazilian staffer here. But for any- ents want to find the same service case, because our priority was still one who needs it, just getting the here that we give them in Porto Se- the Brazilian market.” visa can take three to six months.”

74 P I B To Paris, step by step Result, an international consultancy, spells out the steps to go through if you want to do business in France: :: Take part in French trade fairs that specialize in your sector :: Study the market carefully :: Look for partners and support organizations in Brazil and L o n go the European Union E n io :: Protect your brand in Brazil cover the difference in time zones. Partnerships by registering it with INPI “When it’s lunchtime here, the day is According to lawyer Charles Henry (the patent office) just starting in our Brazilian offices,” Chenut, a specialist in commercial :: Draw up your business said Garcia. “That’s the time when and international law, it’s often plan very carefully we exchange information with the virtually inevitable that companies head office.” look for a French partner. Partner- :: Be patient – the process of Companies like CVC and offices ship with a local company or profes- opening a company can take like Gouvêa Vieira have chosen to sionals can facilitate the successful up to two years in France send Brazilian professionals to tack- conclusion of some business deals, :: Prepare well to minimize the le the French market, but that’s not in addition to eliminating or reduc- cultural and language barriers always the rule. Frequently, to sim- ing the costs involved for a company plify the process and save the time it to set up its own operation. “With The first steps in the process, started takes to get an expatriate used to the a French partner, there are better in January of 2006, were to obtain new country, the best option is to chances of winning a tender, for a cabis – an official document that hire a local person. That’s what Per- example,” said Chenut. And he was certifies to the judicial existence of digão, Brazil’s largest meat products speaking from personal experience. a company – and a license to operate company, did when it hired French- Last May, his law firm merged with in tourism. The extreme French bu- man Michel Pineau to set up its first two Brazilian offices interested in reaucracy can also be seen in more subsidiary in the country, opened operating in the City of Light. prosaic situations. CVC took over a two and a half years ago in the city Chenut recognized that a merg- month just to get a license to install of Quimper in Brittany. “The com- er such as his is less common, be- a simple garbage can in its office. pany’s main goal was to facilitate cause it implies a permanent rela- The time difference in relation to the relationship with local clients, tionship. The best solution, he said, Brazil is three to five hours, depend- but there’s no denying that French is one that is still little known to ing on the season of the year. This people prefer doing business in their Brazilian businessmen – the con- can be another problem for a com- own language and with someone of tract of international consortium. pany planning to establish a foot- their own culture,” said Pineau. He The agreement is based on tem- hold in France. “When we have to worked for 14 years in Doux, the porary cooperation for specific close a contract, there’s nothing for company that controls Frangosul, projects. There are several advan- it but to work overtime,” said Cer- a competitor of Perdigão in Brazil. tages. “The consortium can easily queira. Lawyer Maria Isabel Neves The French subsidiary is producing be ended, it costs less and is sim- Garcia, a partner in the Paris office good results for Perdigão. With an pler,” said Chenut. Later this year of the Gouvêa Vieira law firm, which operational cost of ¤500,000 a year, he will be publishing his book “In- opened 14 years ago, was forced to the subsidiary generated business ternational Consortium Contracts” hire an additional receptionist to worth ¤50 million in 2007. in Brazil. z

P I B 75 Globe-Trotter t u do / 123RF n g ha s: Wen ock hoto P H g n o W

Masdar City, in the United Arab Emirates: project for a sustainable city in a desert flowing with petroleum Let’s Hear It for Ethanol! The recent runaway spiral in the price of The Abu Dhabi forum is an essential political arena petroleum, the leading fuel in the global energy for discussion about the transition of the world energy matrix, has sparked a world-wide rush for alternative matrix, Peçanha said. It’s also where the money is. energy sources. So dominant has the theme become And the investors. And the know-how. Interaction that the world’s leading suppliers, investors and Times said it hopes to take a delegation of at least 200 specialists came together in January in Abu Dhabi, Brazilians to the next Forum, scheduled for January. in the United Arab Emirates, to hold the first-ever One curious detail is that the staggering wealth World Future Energy Summit. Brazil, however, was of Abu Dhabi is built on petroleum, which of course is not represented in a manner that fully reflected its a major villain in the current discussion. In addition potential as a supplier of renewable energy. But that to hosting the World Future Energy Summit, the could change next year. Arab state has given other signs that it’s alive to 21st Interaction Times, a São Paulo-based international century concerns. The beginning of 2008 saw work relations consultancy, is helping organize the 2009 start on the enormous Masdar City project, which Summit and is determined that ethanol gain more space when it’s finished in 2012 will be the world’s first on the agenda. The company is selecting top speakers completely self-sustaining city, with zero carbon such as Brazil’s Minister for Long-Term Strategic emissions. (Andressa Rovani) Planning Roberto Mangabeira Unger to really explain ethanol to the world. “We have to put forward our More information: point of view in these wider discussions,” said Marcus www.interactiontimes.com Peçanha, executive director of the consultancy. www.worldfutureenergysummit.com

76 P I B COB t u do n ha / rto e ob R r e d n a W “Brazil House”, in Beijing: the Olympic Games were a springboard for business and a center for international jet setting, with the presence of Prince Albert of Monaco (center)

Olympic Success ha n do u t Brazilian athletes were a 1999 and exports to 25 countries. showroom for Brazilian companies. bit disappointed with their medals The company invested some R$30 It was also headquarters for the haul at the Beijing Olympics, but million – roughly US$18 million – in campaign to bring the 2016 Games the Games were an undeniable the Games, counting sponsorship to Rio de Janeiro. success for some Brazilian of TV broadcasts and supplying Another company gaining an companies that invested in the over 60,000 uniform items. Olympic boost was Café Machado. event. Sports apparel maker “It was another opportunity to “In addition to supplying coffee Olympikus, part of the Vulcabras show the world our products,” said to all the visitors at Casa Brasil, group, enjoyed great visibility Márcio Callage, Olympikus we could sit down with local during the competitions. Not marketing manager. In addition to businessmen to start talking only was the company the official branding athletes’ uniforms, about coffee exports,” said uniform supplier to the Brazilian Olympikus displayed its wares in the Christian Santiago e Silva of delegation; it also dressed athletes Casa Brasil, or Brazil House, a the Brazilian Coffee Industry from Uruguay, Haiti, Nicaragua, special area set up by the COB at the Association. Café Machado went the Dominican Republic and other Jianguo Garden Hotel. The space to Beijing with the help of the Latin American and Caribbean became a kind of informal embassy Association and opened its first nations. Olympikus has been for Brazil during the Games, shop in China this year, in Nanjing. official supplier to theB razilian hosting interviews with Brazilian Two more will be opened in 2009. Olympic Committee (COB) since medal winners and acting as a (Mariana Canedo, in Beijing)

Emerging Packaging ha n do u t Packaging Brands, a Rio de Janeiro company, is leveraging its 14 years of experience managing brands in the Brazilian market to win new clients in emerging markets. SC Johnson of the United States, for example, has entrusted the Rio company with developing packaging for the Glade brand of hygiene and cleaning products sold in 34 developing markets. The challenge of internationalization has prompted Packaging to adopt an on-line system that allows overseas clients to accompany in real time what is being done in Bra- zil, without worrying about international time differences. Global team: “We wake up in the morning and we can already access com- Packaging Brands ments that clients have made during the night,” said com- wins the world pany president Maria Luz Schneider. (AR)

P I B 77 Globe-Trotter

Circuit

ha n do u t Check out some calendar highlights in Brazil and around the world

n RIO SUMMER November 5 to 9, Rio de Janeiro (RJ), Brazil. First edition of a beachwear fashion event. www.riosummer.com.br

n PACE Prime Global Leaders October 16 and 17, Belo Horizonte (MG), Brazil. Developing managers with a global outlook. www.amcham.com.br

n Apex-Brasil Award for Excellence in Exporting October 22, São Paulo (SP), Brazil. Recognizes this year’s sector highlights. www.premioapexbrasil.com.br

n International Food Fair October 19 to 23, Paris, France. The world’s largest food fair. www.sial.fr Beto Brant: the Brazilian director (left) is one of the attractions of the Brazilian Film Festival in Moscow n VIII International Datagro Conference on Sugar and Ethanol Brazilian October October 27 and 28, São Paulo, Brazil. One of the most traditional Russians are keen movie-goers, and now they have a chance to see events of the sugar and ethanol a bit more of the Brazilian cinema. Working in partnership with the Brazilian sector in Brazil. Ministry of External Affairs and the Brazilian Embassy in Russia, the São Paulo www.datagro.com.br company Linhas e Laudas Comunicação is promoting the First Brazilian Film Festival in Moscow, October 21-26, the moment when the two countries cel- ebrate 180 years of diplomatic relations. Festival curator Ederaldo Kosa, one of the partners in Linhas e Laudas, says the idea is to disseminate Brazilian How is culture among the Russian population. “Cinema makes it possible to show other peoples a little of the Brazilian soul,” he said. your English? Films will be shown in Portuguese with Russian subtitles. There will The Editora be debates with director Beto Brant (whose films include Dog Without an Aduaneiras Owner and The Invader (Cão sem Dono and O Invasor) and actress Deb- publishing house ora Falabella (whose films include Lisbela and The Prisoner (Lisbela and has just launched o Prisioneiro). “Russia has produced some of the world’s most influential the 8th edition of movie makers such as Eisenstein, Tarkovsky and more Terminglês, by busi- recently Sokurov,” said Brazilian Ambassador to nessman and mar- Russia Carlos Antonio da Rocha Paranhos. The keting professor festival will be held in the Great Room of the E.P.Luna – a 266- M. I. Rudomino For- page glossary of the

eign Literature Li- ha n do u t English expressions most com- brary, famous for monly used in foreign trade, hosting some of the plus an ample list of websites most important cul- related to the topic. Recom- tural events in Mos- mended bookshop price R$65. cow. (Glaucy Vulcano)

78 P I B If IFRS is a challenge for your business, count on who can help you: PwC.

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© 2008 PricewaterhouseCoopers. All rights reserved. PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.

11269-013 an 202x266 Price.indd 2 9/16/08 5:27:20 PM Globe-Trotter – Vietnam N e to

L ima e Men do nç a d e

J o ã Express Tourism João de Mendonça Lima Neto, Brazil’s ambassador to Vietnam, isn’t the slightest bit bothered by the crazy traffic of thousands of motorbikes weaving thorough the streets of Hanoi, where he has lived since the start of this year. Any gridlock is more than compensated by the exotic Asian atmosphere – the temples, pagodas and historic monuments – that blends with the visible influence of colonial architecture in the shape of tree- lined streets and flower-filled public squares. Check out Lima Neto’s tips for a quick visit to a city that has almost a Hoan Kiem thousand years of history. Lake: enjoy the tranquility

If you just have a few hours...... your best bet is a xich lo (tricycle) trip from the Hotel Metropole through the Old Quarter of downtown Hanoi, where 36 narrow streets are packed with a rich selection of local craftwork. That’s where you’ll find the best choices in silk and linen NE

TO cloth, embroidery, clothing EYS in general, lacquer-work, PO K U painting and porcelain. Pho soup: / GR And don’t forget to try Pho a delicacy ESS of local cuisine soup, the best-loved item of MA PR U

Z popular Vietnamese cuisine.

80 P I B If you have a whole weekend...... in addition to the above tips, consider going to Ha Long Bay (102 km from Hanoi). Tourist agencies offer various packages that include transport, boat trips and meals. The bay has more than 3,000 cliffs, giant rocks and tiny islands in a sea of total tranquility – absolutely unforgettable. If you like mountains go to Sa Pa, 1,600 meters up, where there are wonderful views of terraced rice plantations. Get there by train – the carriage of the Victoria Hotel will knock you out!

tock Rice plantations in Sa

/ Keys Pa: magnificent scenery tock s oto e F g A

If you have a full day...... start with Ho Chi Minh’s house, just behind his Mausoleum. Then don’t miss the exceptional collection of paintings in lacquer and on silk at the Fine Arts Museum, and drop by the Military History Museum to get a feel for what the Vietnamese people went through in their fight for independence. Afterwards, enjoy the peace of Hoan Kiem Lake. The Club Opera is a great place for lunch, before taking a trip through the Old Quarter. And if you’ve still some energy left, check out the Ho Chi Minh puppets water theater. For dinner, choose ne Mausoleum: between local menus at the Wild Rice or

to venerated Wild Lotus restaurants or international Keys

po memory fare at Bobby Chinn or Vertical.

/ G / oto

F P I B 81

op T In Transit • By Marcelo Lins*

Honduran Adventures After a journey full of hassles, businessman Marcelo Lins finally “landed” by bus in Tegucigalpa, a city he knew only from the geography books

I probably never imagined that one day the capital by bus, a brutal journey of over four hours along a I would end up in a city called Tegucigalpa, dangerous, snaking highway. a place I remembered vaguely from my Finally the bus “landed” in Tegucigalpa, and I quickly saw schoolbooks so many years ago. But in fact, that the excitement wasn’t over. The country doesn’t have any my professional career has led me to travel special regional dish, for example like the Brazilian feijoada bean to the capital of Honduras quite frequently stew, and as I make a point of avoiding anything too exotic, over the last couple of years. And on one of principally whenever I’m close to Mexico with its infamous these journeys, thanks to some appalling “Montezuma’s revenge”, I went to the Bodeguita Italiana, weather, my flight from Miami made two tucked away in the charming Las Minitas neighborhood. The attempts to touch down at Toncontín tables are in the middle of what is virtually an emporium, Airport. After each failed landing it diverted surrounded by shelves packed with olives, wines and sauces. I to San Pedro Sula, the country’s second asked for pasta and grilled meat, a common dish in those parts. largest city. Before it took off for a third “Sorry, we don’t do that,” replied Averardo Orazzini, the friendly attempt I decided to get off and head for owner. I was a bit taken aback, but accepted his suggestion of a fine spaghetti carbonara. I experienced more picturesque moments in the same city in a famous barbecue restaurant called Ni Fu Ni Fa. Accustomed as I am to the somewhat elastic hours of Brazilian restaurants, I arrived with friends for dinner at 10 at night. But at the door, a bouncer with a 12-gauge shotgun told us the place was closed. Just then the door opened to let out the last of the guests and the Argentine manager came and asked us if he could help.

A lc ân tara “Yes, we were hoping to have dinner,” we explained. With great kindness he took us in and sat chatting until the last drop of a He l en a second bottle of fine Spanish wine. The Honduran people are very friendly, but if you’re doing business there you have to be rather careful, in particular in terms of personal safety. My biggest scare was in the city of Santa Rosa de Copan. I was spending the night in the Elvir hotel, the best in town, and decided to take a stroll before dinner. At the door was a guard with a shotgun just like the guy outside the restaurant in Tegucigalpa. “If you’re going out, don’t go further than I can see,” he warned me. I reckoned it was probably wiser to eat in the hotel and go to bed without my walk. z

* Marcelo Lins directing partner of ML&A Communications, in São Paulo

82 P I B 014004_202x266_325.pdf September 17, 2008 16:30:53 1 de 1

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