market opportunity: brazil renata vasconcellos [email protected] may 2011

Market Opportunity: Brazil

Renata [email protected]

May 2011

2Porter Wright Morris & Arthur LLP© 2010

Brazil in Numbers

● Territory: 514,876.599 square kilometers (3,287,612 sq mi)

● Population: 193 million

● Ninth largest economy in the world, expected to be the fifth economy in the next decade

● GDP: $1,594,489,675,024 (2009)

● GDP per capita: $8,070 (2009)

● Unemployment Rate: 8.3.% (2009), 6.5% (2011, IBGE)

● Per capita incomes forecasted to grow at an average rate of 6% over the next several years


U.S. Exports to Brazil

● U.S. Exports to Brazil: $35.3 billion (2010) (Census) – up 35% from

2009.

● The U.S. is the largest market for Brazilian imports (15% of the

Brazilian import market).

● U.S. exports of goods to Brazil increased by 42.2% in Jan. 2011 to

$3.2 billion, compared to $2.3 billion in Jan. 2010.

● Services: From 2002 to 2009, U.S. service exports to Brazil

increased from $5.1 billion in 2002 to nearly $12.7 billion in 2009.

Service exports to Brazil in 2009 were up 6% from the nearly $12.0

billion exported in 2008.


U.S. Exports to Brazil (2010)

● Largest categories of exports: – Machinery ($7.2 billion), – Aircraft and parts ($4.4 billion),– Electric machinery ($4.3 billion), – Mineral fuel and oil ($4.2 billion),– Chemicals ($2.0 billion).

● Largest U.S. state exporters of goods to Brazil in 2010: – Texas ($7.2 billion), – Florida ($4.7 billion), – California ($2.8 billion),– Illinois ($2.1 billion),– Louisiana ($1.4 billion).


Foreign Investment in Brazil

● Must be registered with the Central Bank of Brazil.

● Cash investments do not require prior official authorization.

● No restrictions on the distribution or remittance of profits abroad.

● Registered foreign capital may be repatriated without prior authorization.

● International remittances that exceed the foreign capital invested is capital gain - subject to a 15% withholding income tax.

● Participation of foreign capital is prohibited only in the following activities: nuclear energy, health services, post office and telegraph services, and aerospace industry. Rural land acquisition by foreigners is restricted.

● Investment guaranty agreement between Brazil and the U.S.

● Brazil is very supportive of international arbitration — a neutral and non-political forum for resolving commercial and investment disputes.


Upcoming Events In Brazil

– 2011 World Military Games

– 2012 UN Rio +20 Climate Summit

– 2013 Confederation Cup

– 2014 World Cup

– 2016 Olympic Games (www.rio2016.com)


Olympic Games - Who is doing What?

● Federal Government:– Ports– Airports

● State and Municipalities– Stadiums– Urban mobility – Financed by Federal Government

● Private Sector– Hotels


Cities Hosting World Cup Games

• Manaus (AM)● Natal (RN)● Fortaleza (CE)● Curitiba (MT)● Recife (PE)● Salvador (BA)

● Brasilia (DF)● Belo Horizonte

(MG)● Rio de Janeiro (RJ)● São Paulo (SP)● Curitiba (PR)● Porto Alegre (RS)


Foreign Investment in Rio

● Expected volume of investment 2011-2012: R$181.4 billion (approx. $113 billion).

● Infrastructure: $36 billion

● World Cup and Olympics: $11.5 billion

● Petrobras: $107.9 billion


Major Projects in Rio

● Comperj Refinary

● Ternium Metallurgy (Iron and Steel)

● New Port of Açu

● Navy and OSX Shipyards

● Third Nuclear Energy Plant

● Bus Rapid Transit System

● Porto Maravilha Project to Remodel Rio’s Port


Rio Investment: Oil and Gas

● Largest oil (81%) and gas (53%) producer in Brazil. Royalty payments from oil and gas production have been increasing.

● Rio’s deep oil extraction is currently 1.7 million barrels a day - more than OPEC members Nigeria and Algeria.

● Recent discovery of vast oil reserves under the salt layer at the Rio coast will require construction of additional infrastructures for exploration.

● Petrochemical – Duque de Caxias Refinery.

● Exploration and production in the Campos Bay.

● Green fuel projects.


Rio Investment: Manufacturing Industries

● Petrochemical (74.9%)– RJ Petrochemical Complex construction.

● Shipbuilding (18%)– Expansion and modernization of shipyards.– New shipyards.

● Steel Mills (2.7%)– Construction of new steel mills (Santa Cruz e

Resende).


Rio Investments: Infrastructure

● Logistics for the World Cup and Olympics

– Construction and remodeling of hotels.

– Construction and remodeling of stadiums and other sport venues.

– Modernization of Tom Jobim Int’l Airport.

– Bullet train construction connecting RJ to SP.

– Road works for the RJ Metropolitan Ring Road.

– Construction of two new subway lines.

– Duplication of BR101 North Highway.

– Costa do Sol project (Cabo Frio).


Rio Investments: Infrastructure

● Logistics

– Dredging of Itaguai port.

– Itaguai port expansion of container and cargo terminals.

– Açu Port Complex (large vessel capability).

– Construction of Açu electric energy station.

– Revitalization of the Port of Rio.

– Construction of Nuclear Power Station Angra 3.

– Construction of Simplicio Hydroelectric Complex.


Promising Areas for U.S. Investments in Rio

● Oil and Gas

– Petrobras Supplier Registration is open to foreign companies

● Iron and Steel

● Infrastructure

● Safety & Equipment

● Tourism

● Creative Industries


Where to Get Assistance in Rio

• Firjan (Industry Federation of RJ)– http://www.firjan.org.br

● Invest Rio – http://www.investrio.com.br

● CODIN (Industrial Development Agency of RJ)– http://www.codin.rj.gov.br

● Rio Negocios (Investment Promotion Agency)– http://rio-negocios.com/

● Brazil Trade Net– http://www.braziltradenet.gov.br

● Apex Brasil (FederalTrade & Investment Promotion Agency)– http://www.apexbrasil.com.br

● U.S. Consulate in Rio– http://www.embaixadaamericana.org.br


Where to Get Assistance in the U.S.

● Brazilian Embassy in Washington D.C.– www.brasilemb.org

● U.S. Chamber of Commerce– www.amcham.com.br

● U.S. Department of Commerce (Brazil desk)– www.doc.gov

● Brazil-American Chamber of Commerce– http://www.brazilcham.com


Tips on Brazilian Business Culture

• Things move slowly.

● Portuguese language is essential.

● First name basis is okay.

● Companies tend to be organized along strictly hierarchical lines.

● Better to deal with the real decision maker.

● Relationships come first, second and third in Brazil.

● Meetings are generally quite informal and relaxed.

● Punctuality is a variable commodity in Brazil.


U.S. Companies in Brazil

Success Stories

● Citibank

● Federal Express

● McDonalds

● Coca-Cola

● Mary Kay

● If you do not take into consideration the Brazilian culture, you will not succeed in Brazil.

market opportunity: brazil renata vasconcellos [email protected] may 2011

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