National Library Bibliothèque nationale 1*1 of Canada du Canada Acquisitions and Acquisitions et Bibliographie Services services bibliographiques 395 Wellington Street 395. tue Wellington OaawaON K1AON4 OttawaON K1AON4 Canada Canada The author has granted a non- L'auteur a accordé une licence non exclusive licence allowing the exclusive permettant à la National Library of Canada to Bibliothèque nationale du Canada de reproduce, loan, distn'bute or sel1 reproduire, prêter, distribuer ou copies of ths thesis in microform, vendre des copies de cette thèse sous paper or electronic formats. la fome de micro fi ch el^ de reproduction sur papier ou sur format électronique. The author retains ownership of the L'auteur conserve la propriété du copyright in this thesis. Neither the droit d'auteur qui protège cette thèse. thesis nor substantial emacts firom it Ni la thèse ni des extraits substantiels may be printed or othervcrise de celle-ci ne doivent êeimprimés reproduced without the author's ou autrement reproduits sans son permission. autorisation. CANADIANS IN BRAZIL BRASCAN AND BRAZILIAN DEVELOPMENT Deus é Brnsiliero - e tnmbém da Lighr (Cod is a Brazilian - and also works for the Light) This thesis looks at the role played by the Brazilian Traction, Light and Power Company Lirnited (Brascm) in the development process in Brazil since 1899. Bmcan, as one of Canada's iargest multinationals hdits stmt in Brazil and continues to be one of the more concrete links that tie the two countries together. The contextuai frameworks are considered through a discussion of the Litenture on multinational corporations in the developing world as well as an account of Canadian relations with Brazil. The case study follows Brazilian Traction, Light and Power's growth in Brazil and the important role that this company played in establishing the infrastructure hmework that assisted the econornic growth of Brazil. It is argued that the company played an integral role in Bdan development through the expansion of its operations in the utility sector. It is asserted that Brascan's operations in Brazil were also benefited by some speciai characteristics of both the sector and the specific qualities of the company and that these factors diowed the Company to remain in that country for close to a century. I would like to thank Dr. Henry Veltmeyer, Dr. Peter McKenna, and Dr. Julia Sagebien for being on my cornmittee and providing valuable input. Special thanks to Annette Wright, IDS secretary, for al1 her assistance and good humour. A vety speciai thanks to Lloyd Burchiil for his invaluable technical expertise, help and patience. Thank you also to Alan Dean, Vice President, Corponte Development at Brascan Limited for taking the time to respond to rny inquiries and the providing valuable information regarding Brascan and its operations. 1 would dso like to thank my three families. My Chatswonh farnily; Mum, Dad, Michael, Grandrna and the rest of my family who were always interested in my work and provided much needed support and patience. Their king there meant so much and made it dl worthwhile. My Kingston Family; Agnes. Rob. Robin, Rachel, Chris, and Carla dong with friends and colleagues who played an important role in my undergraduate years at Queen's. My Halifax family; my friends and colleagues in the [DS programme and those 1 have had the pleasure of getting to know outside of the academic setting. Their friendship will always be treasured. To al1 these people I wish to express my heartfelt thanks. TABLE OF CONTENTS CHAPTER ONE: INTRODUCTION CHAPTER TWO: LITERATURE REVIEW 2.1 Introduction 7 .? Methodology 3.3 Literature Review 2 4 Theoretical Framework CHAPTER THREE: CANADIAN - BRAZILIAN RELATIONS 3.1 Introduction 3.3 Foreign Policy 3.3 Investment CHAPTER FOUR: CASE STUDY OF BRASCAN BRAZIL 4.1 Introduction 4.2 Background of the Brazilian Traction, Light, and Power Company Limited 4.3 Eiectrical Ceneration Interes ts 4.4 Other Utility Interests 4.5 Post- 1973 Interests CHAPTER FIVE: CONCLUSION FIGURES AND TABLES BIBLIOGRAPHY LIST OF FIGURES AND TABLES Figure 1.1 Table 3.1 Canadian Direct Investment, 1920- 199 1 Figure 3.1 Totai Canadian, South/Centd America and Brazil Direct Investment, 1920- 199 1 Figure 3.2 Canadian Direct Investment, SouWCentrd America and Brazil, 1920- 199 1 Table 3.2 Investment in Bd,1973-1974 Table 3.3 investrnent in Brazil. December 1987 Table 3 -4 Stock of Foreign Investrnent in Brazil, 199 1 Figure 4.1 Brascan Limited Corporate Structure, 1970 Figure 4.2 Brascm Limited Principal Investments, 1975 Figure 4.3 Brazilian Light and Power System, 1968 Table 4.1 Brascan Limited Assets, January 1979 Table 4.2 Brazilian Electrical Capacity, 1900- 1987 TabIe 4.3 Brazilian, Siio Paulo Light, Rio de Janeiro Light Electrical Capacity, 19 12- 1978 Table 4.4 Brazilian Traction, Light and Power Company Limited, 19 12- 1978 Figure 4.4 Brazilim Electrical Capacity, 1900- 1987 Figure 4.5 Brazilian, S5o Paulo Light, Rio de Janeiro Light Elecuical Capacity, 19 12- 1978 Table 4.5 Braziliqn Electric Light and Power, 1963- 1977 TabIe 4.6 Brazilian Traction, Light and Power: Capital Expenditure, 1940 - 1977 Table 4.7 Growth Rates in Brazilian GDP, Industry, and kW Hour Sales for Brazilian Traction. Light and Power, 1948 - 1977 Figure 4.6 The Edper Empire, 1987 Table 4.8 Brascan Limited Production, 1987 Figure 4.7 Brascan Lirnited Corporate Affiliates, 1989 Figure 4.8 Bmcan Limited Corporate Structure, 1992 Figure 4.9 Brascan Limited Corporate Structure, 1993 Figure 4.10 Brascan Limited Corporate Structure, 1995 Figure 4.1 1 Brriscan Brazil Lirnited Corporate Structure, 1996 CHAPTER ONE INTRODUCTION Brazil has emerged as a strong economic power in the 1st decades. This largest country in Latin Arnenca has developed from an ignored and peripheral Portuguese colonial outpost to a nation that has recently begun to emerge as a major economic power. Today. Brazil's economy ranks as eighth largest in the world with a GDP of over US$369 000 million in 1992; not much less thm Canada's US$537 000 miliion.1 Brazil's sheer size, second largest in area in the Western hemisphere, and the sixth most populous nation on the globe with a population of around 160 million, makes this country a fascinating study.2 These three factors alone; economic strength. geographic scope, and population size have resulted in Brazil being touted as a potentiai superpower. The so-called "Brazilian Miracle" in the 1970s, during which Bruil grew from having the forty-eighth largest economy to its current position of eighth add to this view. This economic growth has been analyzed by scholars from many angles and a weaith of studies on the impact of multinational or transnational corporations on developing nations, using Brazil as a case study, have contributed to the debate over the role of the multinational in bringing about development in the developing world. Charity A. Dorgun. ed. Gale Countrv and World Rankings Reporter, (New York: Gale Research Inc. 1995). p. 624. ? Ibid. p. 35. Canada has had a significant relationship with Brazil over the past century and since the late 1800s. the two countries have had extensive interactions in the financing of infrastructure projects, particularly utilities. Bruil is the largest recipient of Canadian investrnent in South America and until 1974 was the venue for the largest single Canadian foreign investment. In 199 1, Candian investment in Brazil totalled around CAN$2 billion. This made Brazil the third largest destination of Canadian investrnent dollars after the United States and Great Britain. Trade between the two countries was estimated in 199 1 to be valued at CAN$ 1.3 billion, making Brazil Canada's most important trading partner in Latin ~rnenca.~Canadian companies such as agricultural equipment manufacturer, Varity Corporation (fonnerly Massey Ferguson), aluminum developer and producer Alcan and Brascan Brazil have had signifiant impacts on the Brazilian economy. In an attempt to provide focus, this thesis will look at one of the more important players in the Brazilian development process, a Canadian multinational company that has contributed one of the earliest, longest, and largest investrnents in Brazil - Brascan BraziL4 Brascan Limited, a multifaceted, Toronto-based holding Company, has a long history of industrial, real estate and other types of financiai investment in Brazil. For the last century, Brascan Brazil. which had previously existed as the Brazilian Traction, Light and Power Company Lirnited, has played an integrai role in Brazil's ernergence as an econornic power particularly through its extensive utility interests in the econornic heartland of Brazil, the Siio Paulo - Rio de Janeiro axis. This thesis primarily stems from a personai interest in things Brazilian, an interest in the projection of Canadian interests abroad and an interest in international business issues. The aim of this thcsis is threefold: 1) The thesis will argue that Brascan Brazil has W. E. Hewitt. "Brazilian Studies in Canada" in Latin Amencan Research Review, Volume 30, Number 1, 1995, p. 132. Bmcan Brazil refers to the Brazilian arm of the Toronto based Bnscan Limited. Over the years the name of the company hris changed from the Brazilian Traction, Light, and Power Company Limited to its current name, Brascan Bmil. The electrical interests were, and continue to be, known euphemistically by Brazilians as the Light. played an important historical role in the development of the economic base and indusuial infrastructure which exists in Brazil today through an analysis of the company's electric utility interests as well as its other opentions. 2) The selection of this case study will dernonstrate that certain multinational corporations and their investments can make important contributions to the economic and industrial progress of developing countries. 3)It will also be shown that Canadian relations and foreign policy regarding Bnzil have been directly related to Canadian business interests in the Brazilian economy.