# Presentation: 164062

## Brazil 2008

**Brazil 2008**
**Presentation by:**
**Mauricio  Vasconcelos**
- U.S. Commercial Service/USDOC
- U.S. Embassy  – Brazil
* *
*February 2008*

## Brazil: 

_***Brazil:***_
- Population: 187 million (Sep.2006)
- Size:  8,547,404 Km2
- 26 States and 1 Federal District

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## Positive Points:

_***Positive Points:***_
- * **Inflation** under control since 1994 (under 5%). Balanced budget.
- *  **Foreign Debt**: US$200 billion but smaller than current reserves. First time ever, in January 2008. ( Zero debt).
- *  **Foreign Direct Investment** at record level in January 2008. (US$35 billion in 2007)
- *  **Stock Exchange**: All time high in Nov.2007 and Feb. 2008.
- *  **Import taxes** are quite lower than used to be (but still high).
- * Higher **competition** through imports and privatization since 1990.
- * Several sectors **privatized**, or partially privatized, since 1990: Steel making, energy, mining, telecommunications. Starting **PPPs**
***  Exchange Rate**:  US$ 1 = R$3.75 in 2002
- R$1.68 in Feb.26, 2008, same value as in May 1999.

## * Investment Grade from international credit rating agencies, expected in 2008.  More favorable terms in international trade and loans, access to credit. 

- * Example:  Automotive industry: **3 million passenger vehicles** in manufactured in 2007 in Brazil, all time high, record exports and record sales in domestic market.
- *  World leader in **ethanol** technology and production. Sales of ethanol larger than gasoline in January 2008.  Most new cars are flex-fuel ethanol/gasoline. (Pres. Bush visit in 2007).
- *  Most industries running at full capacity, especially food, consumer goods, raw materials, oil, ethanol.
- * Large supplier of **raw materials**, high prices in international market. Strong  international demand.
- * **President Lula**:  53% approval rate in Feb. 2008, after five years in office, in the second year of his second term.

## Negative Points:

*** Infra-Structure**: energy, ports, roads, airports.
- * **Privatization** and concessions program: very slow.
- *  Need for huge investments in infra-structure, but no state funds for investments.
- * **Legislation**:  Labour, Fiscal,
- * **Criminality**
- * **Interest Rate**: still very high at 11.25% basic rate, although in all-time low.**   **
-  * **Import taxes** still high (although they have been significantly reduced.)

## The Perfect Rep / Distributor does not exist,  because:   

- *   Financing: Very high interest rates (although the Central Bank basic rate of 11.25% in February 2008 is a historic low).  Possibility of the U.S. Eximbank.
- *   Stocking pre-paid products: extremely expensive and risky
- *   The cost of selling: visits, travel, tests, labor, expertise, after-sales, advertising.
- *   Tests & warranty. Local maintenance.
- *   Price:  Import Tax calculated on price CIF.  Plus two local taxes that are calculated on the price  “CIF plus Import Tax.”
- * Competition: very developed local industry.
- *  The Brazilian rep / distributor will need:   Technical assistance, financing,  sharing expenses,  marketing support,
- *  Try to buy and assemble peripherals (frames, accessories) in Brazil (if possible); to avoid import taxes.
- *  Bonded warehouse.  Just-In-Time delivery very important.
*** A new exporter must spend money, before he can earn money. **

## Mining Equipment Manufacturers in Brazil: 

- Large and diversified Brazilian industry. Many subsidiaries of leading international manufacturers have factories in Brazil.
-  _***Some examples:***_

- * Factory located in Piracicaba / SP -  4100 employees ( 2005)
- * 25 different models in 2004  /  14th largest Brazilian exporter.
- Brazil = 3.4% of CAT sales worldwide in 2004. Exports from Brazil to 120 countries.
- CAT exports in 2006 from Brazil: US$1.14 bi, the 15th  largest Brazilian exporter.

## Volvo Construction Equipment

- * Total sales in Brazil in 2003: US$ 138 mn.                              Total sales in 2004: US$247 mn
- * Exports from Brazil in 2003: US$ 95 million.		      Exports from Brazil in 2004: 179 mn (being US$56 mn to the U.S.)
- * Factory in Pederneiras / SP.

_***Randon:***_  Off-road trucks, components, truck beds, breaks_***  ***_
- * Total sales in 2004:US$800 mn, Exports from Brazil:US$118 mn
- * Market leader in Brazil for trucks, segment under 35 tons
- * Joint-ventures with U.S. Arvin-Meritor and German Jost.
- * Factory in Caxias do Sul / RS.

## CNH:  Case + New Holland + FIAT-Allis + O&K, Kobelco 

- * Mining, construction and agriculture machinery
- * More than 16,000 machines/year in Brazil.
- * 40% share of Brazilian market for agriculture and construction machinery
- * Total sales in Brazil: + US$1 bn; Exports + 25% (including to US)
- * Bank CNC Capital, has financed 30,000 clients.
- * Factories in Curitiba, Piracicaba and Contagem.
- * Also of the same FIAT Group:  IVECO trucks, factory in MG.

## Cummins

- * Manufactured 42,000 engines in 2003. Exported 6,500.
- * In 2004: 49,000 engines.
- * Factory in Guarulhos / SP.

_***Ingersoll Rand  ***_
- * Compressors, temperature control division Thermo King, refrigeration equipment Hussmann.
- * Factory in Londrina / PR: average of 60% Brazilian components. Exports equipment to Latin American countries and components Ingersoll Rand / USA.

## METSO  (Finland) 

- * Took over Svedala, Dynapac, Nordberg, Trellex and Faço. www.metsominerals.com.br  /  Factory in Sorocaba / SP.
- * Total sales in Brazil: approximately US$ 100 million in 2003,  exports from Brazil = 35%, especially Latin America, USA and Canada.    World total sales: Euro 5.2 billion/y.
- * Sold Euro 50 million to Sossego CVRD Project, being approximately 50% made in Brazil and 50% imported.
- * Supplier of crushers, screens, transportation systems and engineering projects. Has a foundry for 1,900 tons/year.
_***P & H MinePro Services ***_
- *  Supplier of shovel loaders, draglines, excavators. Assembly line in Belo Horizonte.   Total sales in Brazil in 2006 were US$60 million, being 12% of that amount exports from Brazil.

## Sandvik  (Sweden)

- *  Total sales 2003: US$ 190 million
- * 32% of total sales was mining and construction equipment (drilling tools and cruching equipment), 40% tools and 28% specialty steel.
_***Palfinger (Austria) ***_
- * Cranes for mining, oil and construction. Reach stackers.
- * US$ 19 million in 2003.  Factory in Caxias do Sul / RS.
_***Haver & Boecker (Germany)***_
- * Factory in Monte Mor / SP, since 1975. Exported two giant screens to Syncrude Sweet Blend / Canada for betuminous oil sands, 2003 / 2004.

## Scania-Vabis do Brasil:

- Manufactured 18,500 units (buses and trucks, combined) during 2006, being 65% exported and 35% sold in Brazil.
- Forecast for year 2007 (in May-07) is a total output of 23,000 units, being 72% for export and 28% for the Brazilian market.
- Started manufacturing in Brazil in 1959.

## GE Transportation 

- * Started manufacturing locomotives in Brazil in 2005.
- * Has manufactured 50 locomotives till Feb. 2008, only smaller locomotives, up to 3000 HP.
- * Plan to manufacture 30 locomotives in 2008, including big ones, up to 6000 HP.

## Others Leading Manufacturers in Brazil:

- Atlas Copco		Asea Brown Boveri		Alstom
- Boart Longyear 	Dorr-Oliver			Flygt
- Goodyear		Liebherr
- NSK,    FAG,   Timken and	SKF  bearings
- Orica (blasting systems) 		Schenk Process
- Saint-Gobain ceramics				Siemens
- Voith			Wehr				Schenk
***Trucks:****  Mercedes Benz, Ford, Scania, Volvo, Iveco, Caterpillar*
***SKF:****  manufactures automotive components, in Cajamar / SP.  Imports and distributes bearings. *
***Aircraft:****  Embraer*

## Mining Trade  Show: 

- Exposibram:  Sep., 2009 (Held every two years, in Belo Horizonte).  Sponsor and organizer:  IBRAM / The Brazilian Mining Institute: www.ibram.org.br
_***Websites:***_
- http://brasil.infomine.com/news/partners/brasilmineral/welcome.asp  www.signuseditora.com.br  ( Magazine “Brazil Mineral”)      www.minerios.com.br/minerios  (Magazine “Minerios”)     www.inthemine.com.br (New magazine, started in 2006)
- www.geologo.com.br      (professional geologists association)  www.abimaq.org.br   (ABIMAQ - Brazilian Association of Machinery Manufacturers, with online database of manufacturers)   www.abmbrasil.com.br  (ABM - Brazilian Metallurgy Association)

## Obrigado!   

- Thank you !!
- Mauricio Vasconcelos                                                                   U.S. Commercial Service                                                                    Belo Horizonte  -  Brazil                                                                                                      mauricio.vasconcelos@mail.doc.gov                                                     Tel.: (55 – 31) 3213.1573

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