1 / 44

BRAZIL - Country Report March 2005

BRAZIL - Country Report March 2005. There are several compelling reasons for doing business in Brazil. It is the largest economy in South America and the 12th largest economy in the world After years with of a protectionist economy Brazil opened the economy for foreign competition in 1990

baka
Download Presentation

BRAZIL - Country Report March 2005

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. BRAZIL - Country Report March 2005

  2. There are several compelling reasons for doing business in Brazil. • It is the largest economy in South America and the 12th largest economy in the world • After years with of a protectionist economy Brazil opened the economy for foreign competition in 1990 • The government is commitment to privatization and lower import tariffs • Brazil has since 1985 a stable democratic government • The country has a huge potential growth • It is use by foreign companies as a gateway to Mercosur and other South American countries • Brazil is one of the largest recipients of FDI in the world • The economy and industrial production are growing • There is a large and traditional Swedish presence in Brazil

  3. Agenda • Brazil basics • Economy • Foreign direct investments • Swedish presence in Brazil • Swedish-Brazilian trade

  4. Brazil is a huge country in many aspects. Brazilian basic facts • 5th largest country in the world in area (19 times larger than Sweden) • 174,5 million inhabitants (5th after China, India, USA and Indonesia) • 30 million consumers with Swedish purchasing power or stronger • 47% of total GDP in South-America • FDI investments were US$ 18,2 billion in 2004 Source: Estado de São Paulo (Brazilian newspaper) / IBGE (Brazilian Institute of Geography and Statistics)

  5. Belém • Fortaleza • Manaus • Recife • Brasilia • Belo Horizonte • Rio de Janeiro • São Paulo • Curitiba • Porto Alegre Europe easily fits inside Brazil's boundaries. Brazil - 8 500 000 Km2 Europe - 6 000 000 Km2 • Helsinki Oslo • • Stockholm Sweden - 450 000 Km2 • Berlin • Paris • Madrid Rome • Lisbon • • Athens Source: Swedish-Brazilian Chamber of Commerce / STC Brazil

  6. North North-East Mid. West South - East South Brazil is usually divided into five different geographic regions Political system: President: States: Largest cities: Exchange rates: Life expectancy: Urbanization: Democracy Luis Inácio Lula da Silva 26 and a federal district Brasília (capital), São Paulo, Rio de Janeiro, Curitiba, Porto Alegre, Belo Horizonte USD 1.00 = R$ 2.70 R$ 1.00 =SEK 2.60 67.6 years 82%

  7. Brazil has gone through many changes since it was discovered in 1500. Brazilian history • Brazil was discovered in 1500 by Portuguese explorer Pedro Álvares Cabral, and was divided into a series of separate colonies until its independence was declared • Brazilian independence day is September 7, 1822, followed by an imperial period, marked by educational promotion, communications improvement and agriculture development. Also in may, 1888, slavery was abolished • Brazil was declared republic on November 15, 1889. This period was marked by two long dictatorship periods, totaling 36 years (1930 to 1945 - 1964 to 1985) • In march 1985 power was transferred to a civilian president, and a new constitution was approved in 1988. On November 1989 the first presidential elections of the post-military era were held. Source: KPMG

  8. Brazilians are perhaps one of the most racially mixed people in the world. Brazilian culture • Brazil´s inhabitants are a mix of many races • Portuguese colonizers mixed with the native Indians and African slaves • Dutch and French colonization also took place in the Northeast. In the 19th century, waves of German, Italian, Polish and Japanese immigrants added new elements to the mixture and established settlements mainly in the South Region • Portuguese is the national language, but Brazilian Portuguese is very different in accent and intonation compared to the language spoken in Portugal • Religion: Roman catholic:88%; Protestant: 6%; Afro-Amer. Spirit: 2%; Spiritist: 2%; Atheist: 1%; Other: 1% Source: STC Brazil

  9. Mercosur is a growing common market in South America Key figures about Mercosur • Mercosur is a common market between Brazil, Argentina, Paraguay and Uruguay, and with Chile and Bolivia as associated, not yet full members. • It is a market with a population of about 200 million people and a total GDP of approximately 1.000 billion USD • The principal Mercosur objectives as stated in the Treaty signed in 1991 are: • Free transit of goods, capital and services • To follow a common trade and economic policy, adopting a Common External Tariff (TEC) • Co-ordination of macro and sector economic policies • Commitment of members to adjust their legal framework to facilitate integration Source: KPMG

  10. Agenda • Brazil basics • Economy • Foreign direct investments • Swedish presence in Brazil • Swedish-Brazilian trade

  11. After a period of turbulence the economy was stabilized during 2003 and showed a healthy growth in 2004 Current economic outlook Speculations and uncertainty related to the presidential elections led to significant economic turbulence during 2002. • 2003-2004: The elected president – Lula – continued economic politics: • Maintain fight against inflation • Keep primary surplus in budget • Continue paying foreign debt • Keep privatizations • Incentives to exporters

  12. but The business climate is positive right now – but the Lula government has a number of important issues to deal with Current economic outlook - Total tax pressure is high: 38 % - Interest rates are very high: ~19% - Need for investments in infrastructure - Bureaucracy continues as a problem - Government agencies are less independent - Security is a main concern + Industry growth is high: 7,6 % + GDP higher than expected: 5.2 % + Currency stable + Inflation controlled: 7,6% + Country risk below 400 + Exports are over USD 100 Bi (+32%) • The big challenge is now to carry out some important reforms (fiscal area, labor laws, administrative and legal systems, etc.). This will not be easy considering that 1) 2006 is election year 2) PT is divided on many issues and 3) loss of power in congress • In a positive scenario - where current economic politics continues and necessary reforms are made - Brazil could enter a phase of “sustainable growth”

  13. Foreign debt Inflation (average/month) Reserves Exchange rate Imports tariffs Mercosur (trade) Ports Privatization of the state companies Infotech market Foreign capital Patents Electricity sector Telecommunications Gas distribution Oil Mining sector Railways • Worrying • 26,00% • USD 8.7 Billion • Fixed • Average 42% • USD 3.6 Billion • Monopoly • None • Protected • Discrimination • None • Monopoly • Monopoly • Monopoly • Monopoly • Monopoly • Monopoly • High but manageable • 0,63 % • USD 46 Billion • Floating • Average 38,0% • USD 15,3 Billion • Privatized • Substantial • Free • Equal rights • Patent laws • Concessions law • Privatized • Opening process • Opening process • Privatized • Concessions law During the last decade major achievements have been achieved in the Brazilian economy 1990 2004 Source: Swedish-Brazilian Chamber of Commerce / STC Brazil

  14. The “Plano Real” is the most successful economic reform program in the history of Brazil. Brazil´s economic reform program from 1994 has four key features • Monetary stabilization • Tax reform • Privatization and deregulation • Market liberalization Source: Ministry of Finance/ Brazilian Central Bank

  15. The “Plano Real” is the most successful economic reform program in the history of Brazil (cont…). Monthly inflation, comparison with previous stabilisation plans % 90 Collor 1 80 The “Plano Real” was launched on July 1, 1994 Mar 90 79,11 70 60 50 40 Verão Real Bresser 30 Collor 2 Cruzado 20 Dec 02 2,1 Dec 04 0,6 Jul 95 3,72 Dec 03 0,5 10 Jul 98 -0,77 Dec 01 0,25 0 1994 2001 2002 2004 2003 1985 1986 1987 1988 1989 1990 1991 1992 1993 1995 1996 1997 1998 1999 2000 -10 Based on monthly IPC-FIPE rate from Jan/85 to Dez/04 Source: FIPE

  16. Inflation is today relatively stable. Inflation – ( IPCA*) % 15 12,5 9,3 8,9 10 7,6 7,6 5,9 5,1 5 1,6 0 2005** 1998 1999 2000 2001 2002 2004 2003 * IPCA - Consumer Price * *Target – Central Bank Source: IPEA - Institute of Applied Economic Research

  17. The interest rates are high to keep inflation under control. Interest Rate ( SELIC*) % 40 31,2 30 22,9 19,4 19,0 19,0 16,3 20 15,7 10 0 1998 1999 2000 2001 2002 2003 2004 *SELIC is the Central Bank average rate based on banks transactions Source: IBGE / Brazilian Central Bank

  18. Brazil had 2004 the best GDP growth for the last 10 years GDP Growth % by country- 2004 1,7 Germany UK 5,2 3,2 4,0 5 Japan 4,4 4,2 USA 4,4 4,0* 5,2 Brazil 4 3,3 Source: IBGE, BEA, OCDA, INDEC, Chinese goverment 3 2,7 1,9 2 1,3 3,6 1 0,5 0,1 04 02 03 05 96 97 95 98 99 00 01 *Estimate Source: IBGE - Brazilian Institute of Geography and Statistics

  19. Foreign reserves are increasing essentially the last two years Brazilian foreign reserve Bi USD 70 60 54 52 45 46 50 45 36 36 40 33 30 20 10 0 2004 2003 1997 1998 1999 2000 2001 2002 Source: Brazilian Central Bank

  20. Industry growth was 7,7 % in 2004 Annual variation GDP subsector in % 2004 7,9 7,7 2003 5,7 5,6 5,3 4,5 1,1 0,5 -1,9 -5,2 Farming Commerce Processing Industry Construction Other Services Source: IBGE - Brazilian Institute of Geography and Statistics

  21. Steel was fast-growing sector in terms of profitability in 2004 Return on the net equity in % 2004 2003 45,1 32,0 24,3 23,8 20,6 14,4 Pulp and Paper Chemistry Siderugy Source: Brazilian Central Bank

  22. Corruption is still present in Brazil 9,7 10 9,5 9,2 Score 0-10 8 7,5 7,4 Country RANKING-1 to 146 # 6 4,6 4,5 3,9 4 3,6 3,4 3,2 2,8 2,8 2,5 2 1,5 107 88 92 146 3 17 44 47 1 6 20 59 64 71 77 USA India China Chile Haiti Finland Russia Brazil Turkey Mexico Sweden Denmark Argentina South Korea South Africa Source: Transparency Internaton Corruptions Index- 2004

  23. Brazil GDP is over than 50% of total GDP in South America. Top 5 biggest GDP in 2003 ( US$ million – market exchange rate ) 500 452 400 300 200 102 94 80 100 64 0 Brazil Argentina Venezuela Colombia Chile Source: The Economist Inteligence Unit

  24. The most attractive location for FDI in Latin America the next three years is Brazil Intended destiny of FDI (%) Brazil Mexico Argentina Chile Venezuela Peru. Colombia Uruguay 0 60 20 40 Source: UNCTAD Nov 2004

  25. Services is the dominating sector in Brazil. GDP by sector 59% Services 8% 33% Agriculture Manufacturing Source: BNDES

  26. There are approximately 30 million people in Brazil with Swedish purchasing power or stronger. Family income of different consumer groups in Brazil (USD/month) Classes A/B Classes D/E 18% 42% Class C 40% Classes D/E - Income from 0 to 217 USD Class C From USD 217 to 725 USD Class A/B From 725 USD and more Source: IBGE- Brazilian Institute of Geography and Statistics

  27. Agenda • Brazil basics • Economy • Foreign direct investments • Swedish presence in Brazil • Swedish-Brazilian trade • Industry sectors

  28. Among the emerging economies, Brazil is the 1st destination of direct investments for many countries. Brazilian foreign direct investors France Spain Germany Sweden Italy Swizerland Netherlands USA Source: BNDES

  29. Due to less privatisation, FDI in Brazil has decreased but still represents a substantial amount. FDI Brazil (USD bi) 35 32 30 29 30 25 19 19 20 17 15 15 11 10 6 5 2 0 03* 94 95 96 97 98 99 00 01 02 * forecast Source: Federal Government Planning and Budget Ministry of Brazil / SOBEET.

  30. A large share of the biggest Brazilian groups is represented by companies with foreign ownership. 310 biggest Brazilian groups by capital origin - 2000 4% 23% 73% National Foreign State Source: Annual Report Gazeta Mercantil 2001 / Cense, Nielesen, Bacen and Abras

  31. Agenda • Brazil basics • Economy • Foreign direct investments • Swedish presence in Brazil • Swedish-Brazilian trade • Industry sectors

  32. Sweden has a long industrial history in Brazil Swedish-Brazilian industrial history • Ericsson delivers the first telephone switch to Brazil in 1891 • The Johnson line starts regular transportation between Sweden and Brazil in 1908 • ASEA supplies electric equipment to the sugar loaf cable car in Rio de Janeiro in 1912 • AGA and SKF where the first two companies to get established in Brazil in 1915 • Skånska Cement supplied cement to the Corcovado statue construction in 1931 (sometimes called “Limhamns-Jesus”) Source: Swedish-Brazilian Chamber of Commerce / STC Brazil

  33. Today São Paulo is “Sweden’s largest industrial city” Swedish-Brazilian industry • The Swedish business community consists of over 180 companies and 28.000 employees • An average of 4-6 new Swedish companies have entered Brazil during the last few years • The Swedish-Brazilian companies invested over USD 3.3 billion over the last five years and plan investments for the coming five-year period of more than USD 3 billion • “São Paulo har vuxit fram som en av de absolut viktigaste tillverkningsorterna för bolagen vi är engagerade i. Vi ser dessutom Brasilien som en viktig tillväxtmarknad” - Marcus Wallenberg till Veckans Affärer Source: SOBEET, Swedish-Brazilian Chamber of Commerce / STC Brazil

  34. MG SP RJ PR The majority of the Swedish companies are situated in four states Source: Swedish-Brazilian Chamber of Commerce/ STC Brazil

  35. Auto industry leads Swedish investments in Brazil Accumulated Swedish investments Auto industry Metallurgy Electric / electronic industry including Telecom Chemical industry Mechanical industry 36% 20% 14% 12% 5% Source: Brazilian Central Bank

  36. Examples of major multinationals active in Brazil ABB AGA Gases Alfa Laval Astra Zeneca Atlas Copco Autoliv Electrolux Ericsson Interprint Arla Food Electrical equipment Industrial gases Mechanical equipment Pharmaceuticals Mechanical equipment Automotive parts Consumer goods Telecommunications Business forms, security printing, Dairy products Pharmacia Upjohn Sandvik Scania SKF Svedala Swedish Match Telia Tetra Pak Trelleborg Veracel (Stora) Volvo Pharmaceuticals Cutting tools Automotive industry Ball bearings Mining equipment Consumer products Telecommunications Liquid packaging Rubber products Pulp and paper Automotive industry Company Sector Company Sector Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce Sweden has a strong presence in Brazil, through its multinational companies Source: Swedish-Brazilian Chamber of Commerce/ STC Brazil

  37. Company Sector Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce Several Swedish companies have started their activities in Brazil during the last years Swedish companies established in Brazil 1998-2002 Akers Allgon BT Gambro Hörnell LGPMedi Team Nynas PIAB Scandinavian Steel Segerström Telia Overseas TESSMölnlycke Heath Care Gateway Equipment for rolling mills Antennas for telecom Fork lifts Hemodialysis equipment Safety equipment welding Amplifiers for telecom Caries remover Special petroleum oils Vacuum system Steel trader Mechanical industry Mobile system operator Medical Supplies Entrance Control Source: Swedish-Brazilian Chamber of Commerce / STC Brazil

  38. Company Sector Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce There are several examples of successful Swedish exporters represented in Brazil Swedish exporters in Brazil 2002 Absolut Vodka BT industries Borgstena Kalmar LMV Orrefors Kosta Boda PIAB Perstorp Flooring Tarkett Thule Roxtec Beverages Forklift Textiles for vehicles Forklifts Crystals Vacuum equipment Flooring Flooring Rack for vehicles Sealings for cables and pipes - In total there are over 1400 companies exporting to Brazil Source: Swedish-Brazilian Chamber of Commerce / STC Brazil

  39. Agenda • Brazil basics • Economy • Foreign direct investments • Swedish presence in Brazil • Swedish-Brazilian trade

  40. 1000 800 600 400 200 0 1994 1995 1996 1997 1998 1999 2000 Sweden has a large trade surplus with Brazil Swedish-Brazilian Trade (USD FOB - millions) Exports to Brazil Imports from Brazil 819 512 2001 2002 2003 2004 Source: SECEX

  41. Sweden exports traditional industrialized products and imports basic goods as well as industrialized products Swedish-Brazilian Trade in 2003 - % Imported from Brazil Exported to Brazil Machines and instruments 17.0% Coffee 16.0% Electrical appliances 12.0% Motor vehicles and parts 12.0% Animal food - Soy 10.0% Meat – frozen and refrigerated 7.0% Iron and steel 4.0% Fresh Fruits 3.0% Machines and instruments 30.0% Electrical appliances 28.0% Motor vehicles and parts 13.0% Iron and steel 4.0% Optical equipment, photo and surgical equip. 3.0% Pharmaceutical products 3.0% Plastics and rubber 2.0% Inorganic chemical products 2.0% Source: Sveriges Statistiska Centralbyrå

  42. Business climate in Brazil - Conclusions - Big market – huge business potential - Industry and economy performances are good and the forecast is optimistic - Still need for economic reforms – high taxes, bureaucracy, etc. - Do right from the beginning – analyze the market, find right partners and get local support = good business

  43. Swedish-Brazilian Chamber / Swedish Trade Council Brazil can support your company to do business in Brazil Contact information São Paulo Head Office Rio Branch Office • Johan Fager • Phone: +55 11 3066-2550 • Fax: +55 11 3064-3042 • Email: johan.fager@swedishtrade.se • Web site: www.swedcham.com.br • Address: Rua Oscar Freire, 379, cj. 121 • Zip:01426-001 • City: São Paulo • Country: Brazil • Lars Magnusson • Phone/Fax: +55 21 2521-9843 • Email: lars.magnusson@swedishtrade.se • Web site: www.swedcham.com.br • Address: Rua da Candelária, 9, sala 1101 • Zip: 20091-020 • City: Rio de Janeiro • Country: Brazil

More Related