Monday, 15 May 2017 20:11

Brazil a Failed State?

A reader has asked the “philosophical” question in the title. As he points out, the economy is in shambles, corruption continues rampant, inflation threatens to run away, protests seem futile because no politicians seem to do anything except cover their backsides and pad their bank accounts.

Published in Economy

China's Premier Li Keqiang arrived in Brasilia on Monday to sign agreements on infrastructure, energy and aviation that experts say could reach 100 billion dollars. The South American tour also includes Colombia, Peru and Chile and aims to restructure China's resource-driven trade with Latin American countries by including more value-added products.
PM Li Keqiang will be meeting with President Rousseff Tuesday in Brasilia and sign a raft of agreements before flying to Rio do Janeiro (Pic Xinhua)

Li is scheduled to meet Brazilian President DilmaRousseff in Brasilia on Tuesday, sign the agreements and meet the press.
He will also address Chinese and local corporate leaders about Beijing's plan to upgrade its trade with Latin America's largest economy through better financing and targeted industries. Li will then fly to Rio.
"I expect to deepen political trust and economic cooperation with Brazilian leaders with an focus on industrial capacity, equipment manufacturing cooperation and infrastructure construction," Li said upon his arrival at the airport in Brasilia.

High Speed Railways

China previously had said deals expected to be signed with Brazil include a feasibility study for a rail link from Peru's Pacific coast to Brazil's Atlantic coast. The project seeks to lower transport costs of Brazilian products to China. It also would fit into China's plan to export globally its expertise on high-speed railways.
Under the Program of Investments in Logistics, Brazil will invest 65.8 billion in construction and expansion of its aging highways and railways. A total of 20.8 billion will be used to double Brazil's 5,700 kilometers of highways, while 45 billion will be used to build 10,000 kilometers of railways, according to Xinhua News Agency.
Chen Duqing, China's former ambassador to Brazil, said the construction projects mean big opportunities for Chinese companies as Brazil strives to upgrade its infrastructure, especially the transportation system.

Investments

"It is imperative for the country to modernize its transportation network, so as to improve efficiency and encourage spending. Chinese companies are usually at a more advantageous position for these infrastructure construction biddings because they come with a financing plan," Chen said.
The investments are to be made through the private sector, with the government selling highway and railway concessions to private companies.

Political trust and economic cooperation with focus on industrial capacity, equipment manufacturing cooperation and infrastructure, anticipated PM Li

Brazil's transportation system consists mainly of main road and railway networks, where the railway capacity accounts for only 24%. Railway networks are used mainly in the south, the southeast and northeast of Brazil, more than 35% of which was built 60 years ago.
Chen said logistics are a main problem because high costs have increased Brazil's agriculture prices and reduced their competitiveness with overseas producers.
The country relies heavily on road transportation for grains, sometimes impossible to transport during rainy periods. Railways and waterways are cheaper and faster, but underdeveloped.

According to the Brazilian Association of Cereal Exporters (ANEC), the average price for shipping soybeans from Brazil has been nearly 98 dollars per ton over the past three years, which is five times higher than in the United States and considered the most expensive in the world.
However former ambassador Chen said Chinese companies must get involved in Brazil to learn about local laws and rules before completing deals.
Brazilian daily newspaper O Globo reported a change of interest among Chinese investors for value-added industries.
"There is a kind of evolution of Chinese investment in Brazil. We have already been in a third wave. It started in the energy sector with China's State Grid, and now there is much interest in railways," O Globo quoted GuilhermeBilli, head of the trade-promotion sector at the Brazilian embassy in Beijing.
The State Grid Corporation of China has invested more than 1bn dollars to construct and manage power transmission projects in Brazil. Chinese investors are also very interested in railways and "all the large railways groups in China want to operate in Brazil," added Billi.
China has been Brazil's largest trade partner since 2009, accounting for 18% of the country's foreign trade. Despite a slight decrease, bilateral trade last year was 78 billion, according to Brazilian authorities.

Published in Economy

Dec 2014. Strong commodity pricing, growing consumermarkets and low interest rates underpin continued economy growth in Latin America. What do market experts predict for the region’s fastest growing industries? What do creeping protectionism, increased competition and corruption spell for international companies in places like Brazil, Argentina and Mexico?

 

We pose these questions to John Price, Managing Director of GIA Partner, Americas Market Intelligence, based in Miami, USA.

Q1: What industries have great potential for growth over the next 3­5 years?

“Consumer credit will continue to grow at 8% to12% per year in Latin America over the next few years ­ after growing at more than 20% per year since 2003.

The region remains under­banked and a rising middle and working class now demands and deserves access to credit. Servicing those credit needs will be both banks, who wish to focus on upper and middle income consumers (about 15­25% of the population) as well as non­bank lenders such as utilities, retailers and others. Non­bank lenders are leading the charge to offer credit to the base of the consumer pyramid, in order to lure them into their principal business, be that telephone services or the sale of refrigerators.

Thee expansion of credit and rising incomes bode well for the further expansion of retailing, extending from Wal­Martstyle discounting stores all the way up to luxury brand shops.At the other extreme of the supply chain is manufacturing. Mexico has made gradual improvements to its production efficiencies and costs, while Chinese assembly costs are soaring due to a tight labor market. As a result, Mexican manufacturers are taking back some of the assembly contracts they lost to Chinese competitors over the last 10­15 years. That trend will continue.”

Q2: What trends do you see in the consumer and retail industries?

“I see some interesting trends in the generic drugs and automotive industries, consumer behavior, as well as medical tourism.

Most Latin American health systems are still dominated by the public sector. Though government coffers are healthier these days thanks to high commodity prices, most new monies are earmarked for infrastructure expansion, not operational expenses like pharmaceuticals for their hospitals. Thus the growth of generics in countries like Argentina, Brazil, and Mexico has been a blessing to publichealth budgets. Several governments, led by Argentina, go out of their way to aid the growth of generic firms, many ofwhich are homegrown, by forcing prescriptions to name only the generic title of a drug, rather than the innovating brand name. This trend is likely to grow.

Buying a car is a large expense for almost any consumer. Selling cars is next to impossible if credit cannot be extended to customers. The expansion of credit access in Latin America is the principal driver behind the explosion of car sales across the region. Per capita car ownership in Latin America has more than doubled over the last decade and will do so again over the next ten years.

Latin American consumers increasingly buy beyond their cash reserve means thanks to the newly granted access to unsecured credit. Whereas middle class consumers paid for cars with cash or lay away plans in the past, today they stepup their brand ambitions and spend twice as much on their next car as their last.

In Mexico, Central America and even Ecuador, the first seedlings of a medical tourism market are growing. The prize is the imminent retirement of the US and European baby­boomers, many of whom have travelled at one point in time to Latin America. These destinations offer cost­effective nursing and other services as well as access to US­trained doctors, not to mention sunshine, warmth and culture. They often build medical tourism style resorts within the compounds of walled enclosures, in order to mitigate the security concerns of would­be retirees. Increasingly, international hotel brands are lending their names to these investments as a further stamp of excellenceto the project.”

Q3: What maajor trends do you see in the manufacturing and industrial sectors?

“Mexican manufacturing is resurging thanks to its increasingly competitive labor rates vis­à­vis China and its logistical cost advantage as the neighbor to the US.

Mexican export assembly is particularly competitive with physically heavy products like aerospace, white goods and automobiles. Mexico is the fastest growing aeronautical assembly market in the world today with over 100 manufacturers investing over the last eight years.

In Brazil and Colombia, both infrastructure and consumption booms have helped boost the prospects of domestic manufacturing. While strong currencies in both countries have curtailed their ability to export manufactured goods, the booming domestic market has more than made up for the loss of markets overseas.”

Q4: Can you elaborate on trends you see in the telecommunications and media sectors?

“Today, there are 110 mobile phones for every 100 Latin Americans. The region is one of the most penetrated in the world. However, only 10% to 15% of those mobile phones are smart phones. That will change over the next five years as more than 150 million smart phones are sold across LatAm. The jump in data exchange will strain existing 2.5 G and 3G infrastructure and spur the need for 4G infrastructure.

At the lower end of the income stream, non­traditional lenders, selected banks and new start­ups are all chasing thepromise of mobile payments. Turning every phone owner into an electronic payment maker is not as far fetched a goal as it once seemed. In Latin America, the lack of bank infrastructure in rural and small town areas, security issues and the international transaction needs of remittance recipients all underpin the demand for mobile payments.”

Q5: Massive investments are being made in infrastructure projects. How do you see China’s involvement in all this?

“Infrastructure spending is entering a frenzied period as Brazil races to meet its commitments to host the Olympics (2016) and as they did for the World Cup (2014). Then youhave the Colombian take on the ambitious task of connecting their topographically isolated cities and towns and the Peruvian move to better connect the Sierra with the coast. The Chileans continue the reconstruction efforts aftertheir devastating 2011 earthquake, while Panama races to complete its $15 billion canal, and Mexico catches up on decades of under spending in roads, hospitals, schools and ports.

The new player in the infrastructure game is China. Much of the $70 billion that they have lent since 2007 is earmarked for infrastructure. The Chinese want to help Latin America deliver its natural resources from often isolated deposit areas to their ports. Improving commodity throughput will help Chinese manufacturing stay competitive. Along with Chinese monies comes the offer ofChinese engineering prowess and Chinese construction equipment. While the Chinese entry helps boost the size of infrastructure spending, those new projects are often off­limits to non­Chinese suppliers.”

Published in Economy
Tuesday, 14 January 2014 00:00

BBC News And Documentary

Latin America has been growing economically and financially at a spectacular rate the last twenty years. Mexico, Colombia, Chile an not in the last place exhyberant Brazil.
EyesOnSuriname reports on a documentary made by the BBC.

Published in eoB Radio
Tuesday, 11 February 2014 00:00

Argentina appeals US court decision

Crisis

The government of Cristina Fernandez de Kirchner can save time with this appeal.

Argentina asked Tuesday to the U.S. Supreme Court to review an adverse decision in a lawsuit brought by hedge funds defaulted sovereign bonds by the end of 2001.  " Argentina today filed a petition with the Supreme Court of the United States requesting to review the erroneous decisions of the lower courts that prohibit our country to make payment of the coupons debt compliance ," the economy ministry said in a statement.

Published in Economy
Tuesday, 18 March 2014 00:00

No Wake Up call for Brazil

Higher Coffee Prices not much help for Brazil’s Economy

A surge in coffee prices won’t do much to wake up the economy in Brazil, one of the world’s biggest producer of the beans. Concerns about sluggish Brazilian growth have spurred investors to pull their cash, causing the country’s currency to depreciate nearly 20% against the dollar over the past year.

Published in Economy
Sunday, 06 July 2014 00:00

Where does Brazil go?

At the time of a severe global crisis, many experts wonder what the impact on Brazil will be. Do not just look at the short term.

Where does this country go in the near and not so near future? O Globo took this question to government officials, economists, teachers, doctors, scientists and sportsmen.
The goal was to draw a portrait of Brazil they would want for the next 10 or 20 years.
In 2022, for example, completing the bicentennial of Independence, Brazil should be between the five major global economies and one of its main energy reserves.
Gross Domestic Product (GDP, the sum of goods and services produced) will jump from $ 2.4 trillion last year to about $ 3.5 trillion, advancing on the path to reach the $ 5 trillion in 2030.
In 2022, nearly 210 million Brazilians, of which 70% of working age - all time record - will be a consumer market to envy the great nations and allow the country to start the next decade with a mission to stop being to perform, the old promise of the future.

In the Executive branch, there is no official flight plan that goes far beyond ten years with clear goals.
In general, the plans are the size of government.
The Union, for example, had difficulty making partnerships with China in the area of biodiversity conservation, while with Rio +20, we only have 10 year industrial projects. Asians are planning for the next three decades, said one government official, minister Izabella Teixeira.
Team members of President Dilma Rousseff, said that a major challenge is to reconcile the policies to expand the domestic market, with more income and access to credit, strategies for sustainability of the country.
And this will be increasingly the Brazilian reality in coming decades.
The actions of the Ministry of Finance to consider sustainable practices are still residual.
For the private sector, every effort should be concentrated in education, investments and tax and administrative reforms.
- The environment is on the agenda of the economy, in isolated projects, but growing: the My House, My Life plan, for example, expands the number of dwellings in the country, but now requires green materials. Tax advantages for more efficient cars that are being discussed now will be another novelty - a government source says.
Strategic planning is fragile.

Each of the 24 ministries and 13 agencies with ministerial status in Brasilia has a specific plan, which often does not communicate with others. The president herself, according to close aides, has a very particular vision. Economist João Paulo dos Reis Velloso, who was planning minister in the governments Medici and Geisel, is sarcastic when speaking of long-term strategy officer:
" If you know of one, let me know ", he joked. - The PACplan has nothing bad, but it's just a program. It was then that turned Planning ministry that began chickening out – the economist, responsible for the II National Development Plan (NDP) for 1975-79 said.
The "Brazil 2022" compendium of more than 100 pages prepared by the Secretariat of Strategic Affairs (SAE) of the Presidency at the time was still commanded by the then Minister Samuel Pinheiro Guimarães, is the official document that is closer to a vision strategic long term.
Created in 2010 still under Lula, the report sees a further sovereign country, participating on equal terms in international forums like the UN Security Council and the G-20, with a fairer and more progressive by 2022.
There are 180 related dreams - some vague, others more accurate - but without their means of making them reality. The list of desires, which are being called "Centennial Goals", including everything from growing more than 7% per year and reducing by half the number of homicides in the country to double the number of cities served by air services through zero the Brazilian housing deficit, ensuring 100% access to sanitation and the population reached five books per capita as the national readership.
At this time, the SAE is expanding what would have been the first attempt to create guidelines for the longer term the country. The Minister Wellington Moreira Franco says that the Plan is being made in 2022 + 10.
Goals should be known in 2013.
Regional inequality continues to drop.
In addition to the enormous growth of the consumer market, with almost 20 million Brazilians until 2022, investments and government record that projection to the economically active population (70%), must lead Brazil to the list of the top five, passing Germany and France.
However, Brazil would be overtaken by India and would be fifth.
Exact placement, however, depend on the rest of the world. If all grow, the chances of the country are smaller rise in the rankings. The National Confederation of Industry (CNI), meanwhile, estimates that the country could have a GDP in 2030 of U.S. $ 4.497 trillion and $ 5.226 trillion, depending on whether the average growth of the country stand at 3.3% per annum - first scenario - or 3.9% in the second estimate. The top four ranking will be, according to the organization, China, USA, Japan and India.
José Augusto Coelho Fernandes, Director of Policy and Strategy CNI believes that the country's future is in the hands of Brazilians:
" 70% believe that the agenda of the country's future is in the hands of the Brazilians. Of course it's better an environment of global growth, but part of our solutions depend on it. We need more education, more innovation, tax reform, labor rules more modern and more investment in infrastructure, regardless of whether or not the worsening crisis in Europe, the U.S. recovery and China's growth" he explained.
Vanessa Corrêa Petrelli, the new president of the IPEA, says that to talk about the future of the country it is necessary to study its recent past. The average growth in Brazil in the last two decades of the last century, of 2.2%, nearly doubled to 4.3% per year between 2004 and 2011:
" During this period investment rose, increased consumption, we take the momentum of the commodities, the government made a strong social policy of income distribution and public banks expanded the credit. The growth reduced inequality between regions, which should be intensified in the next two decades ", says the economist.
Investments need to keep growing strong to account for this expansion. The CNI, for example, indicates that the country will need seven million homes in 15 years, at a cost of $ 60 billion. The wind array will be the third most used in 2020, with more than 6% of the park to generate electricity. Environmentalists want that sanitation is universalized by 2030.
The oil is on the agenda of the country with exploration in the pre-salt. This is one of the biggest bets of the government, he expects the country to be lifted in the next 20 years to the ranking of the big five reserves on the planet that can attract more than $ 350 billion in investments there.
Although it has not got the approval of the project that distributes petroleum resources that will be taken from depths unimaginable until very recently, government and private sector are preparing for the future. The government works for that wealth to be used as a savings from the creation of the Social Fund, which may leave until the end of the year.
To the economist Sergio Besserman, oil has to be the provider of funds for the transition to the economy of the future, which will be based on sustainability:
- We can do what Celso Furtado called dynamic displacement of the center. With a lot of science, technology and low carbon.

Published in Economy
Friday, 06 June 2014 00:00

Doing Business In Brazil

Researching the Market
Why Brazil? Brazil is simply too big a market to ignore. It is the fifth-largest country in the world, with a population of approximately 200 million. It has one of the world's most rapidly developing economies and a GDP per head that is greater than either India or China. It has natural resources in abundance, a developed industrial base, high standards in scientific research and substantial human capital.

Published in Start Ups
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