Brazil Is Booming

[GoFlyKiteNow]

Brazil Is Booming (and Maddening)
U.S. companies are keen to expand into Latin America's biggest market, but CFOs report that Brazil poses unique challenges.
Kate O'Sullivan - CFO Magazine

July 15, 2010

As the world's 10th largest economy and one of the fastest to emerge from the global recession, Brazil is the hot market of the moment, and not just because of its famous beaches. With a stable currency; a growing, consumption-oriented middle class; and a gross domestic product expected to rise at 4% to 5% per year over the next 10 years, it's no surprise that Latin America's biggest market is attracting CFOs' attention: nearly one-third of finance chiefs considering international market expansion over the next two years have set their sights on Brazil, according to the Duke University/CFO Magazine Global Business Outlook Survey.

But the promise of growth — so enticing in the face of a weak recovery in the United States and Europe — doesn't come without strings attached. Finance chiefs and other experts who have been in the market for years warn that Brazil's tax and legal systems are among the world's most convoluted. A thicket of labor laws can also ensnare unsuspecting businesses, and corruption and personal security remain much more significant concerns than in more-fully developed markets.

Yet despite these serious risks, companies continue to flock to Brazil. Larry Harding, president of High Street Partners, an international business-services firm that advises companies on overseas expansion, has more clients interested in entering the country than ever before. High Street recently opened a Miami office to serve as a support hub for its growing volume of business in Brazil.

Paul Lehmann, finance chief at Overhead Door, a maker of residential and commercial garage doors, began researching the opportunities in Brazil in 2007. Although the company sells doors there through its international sales group, it has yet to establish its own subsidiary in the region. "Brazil is certainly on our radar screen," Lehmann says, "not only for its own population, but also as a portal to the rest of Latin America." Still, he notes that the country's infrastructure continues to develop, posing potential distribution challenges, and that for a small company like Overhead Door, import duties are prohibitively high. As a result, "we're hunting for joint-venture partners that would allow us to expand there." Lehmann is also considering partnerships in other Latin American countries that might provide entree to Brazil without the crippling import taxes.

"Brazil is an interesting and unique blend of opportunity and risk," says Thack Brown, CFO of SAP Latin America and a nine-year resident of the country. "The biggest advice I would give to someone looking to expand into Brazil would be to take the time to really understand the environment. You want to get into Brazil a little bit slower than you would some other more-developed, more-transparent markets."

 

[GoFlyKiteNow]

On top of the world: Why Brazil is booming

By David Usborne

Friday, 9 July 2010

It is a 100th birthday party in a well-to-do postcode of Sao Paulo, where the house of our journalist host – he and another writer pal are actually each turning 50 – slips graciously down a slope to a terrace and the chatter is nearly all politics. Then the DJ cuts the music in the middle of a samba everyone knows. They reflexively fill in: "Ò coisinha tão bonitinha do papai" – "Oh daddy's beautiful little thing".

Not everything in Brazil is beautiful. Not the slums, or favelas, which ring cities like this one or Rio de Janeiro, or last Saturday's national glee when Argentina – neighbour and perennial rival – crashed out of the World Cup one day after the Brazilian squad's humiliating Dutch demise. ("Que desgraca!" squealed an old man when the stricken face of Diego Maradona filled the TVs in a bar on Sao Paulo's Teodoro Street.)

Yet you cannot spend a day in Brazil without sensing the economic miracles happening here – first quarter growth touched 9 per cent and the helicopter pads atop the skyscrapers of Sao Paulo are buzzing with air traffic again – or hearing of the achievements of its President, Luiz Inácio Lula da Silva, recently named the world's most influential leader by Time Magazine, in raising the country's profile on the world stage and lifting much of the population out of poverty. The somewhat lefty party-goers were not actually thinking of Lula and Brazil as they sang about daddy and his baby, but they could have been.

The legacy of President Lula, a former lathe operator, is a conversation point if only because the race to succeed him kicks off this week. The constitution bars him running for a third term. While his hand-picked successor in the ruling Workers' Party, Dilma Rousseff, is an electoral virgin (she was his chief-of-staff), polls suggest she will prevail on election day in early October, thwarting the hopes of conservative opposition leader José Serra, a respected former governor of Sao Paulo state.

"I never imagined Brazil really becoming such a strong country, especially how it has in the last 10 years," muses Carlos Jereissati, chief executive at Iguatemi, Brazil's largest chain of shopping centres. "Everyone is looking at us and saying: 'Wow, these people are really growing – they have the economy, they have the oil, they have the Olympics and the World Cup, we need to pay attention!'"

No one knows this better than Mr Jereissati who travels to London, New York, Paris and Milan to lure new luxury brands to his malls. Diane von Furstenberg, the fashion designer, recently opened her first Brazil outlet in Iguatemi's flagship mall in Sao Paulo. She says it has been the best opening in her company's history, selling "over a million dollars in its first six weeks of business".

The boom means Mr Jereissati is ready to expand and quickly. "While it took us 20 years to do eight malls, we are probably going to do twice that in the next five years – we have a lot of money to do things." That is thanks largely to the expansion of the middle classes and their growing spending power.

http://www.independent.co.uk/news/w...-the-world-why-brazil-is-booming-2022103.html

 

[manokie]

Some quick facts here

Brazil's GDP per capita: $8,220 (2009)
Sinkapore's GDP per capita: $50,300 (2009 est.)

Brazil's Median Wage for Engineers: $45,000 BRL per year = $35,000 SGD per year
Sinkie leh? Maybe the same?


This tells us that GDP figures are nothing, guys...
You want high GDP? Make HDB prices high and have many events like YOG, F1 etc.. But who's gaining from all these economic figures??? You guess

Source:
http://veja.abril.com.br/111109/popup_remuneracao.html

 

[longbow]

Brazilian economy is being lifted by Chinese imports of commodities. China recently overtook US as Brazil's largest trading partners. And China is running a trade deficit with Brazil even though Chinese are basically imported low valued added commodities and exporting value added finished products. So the amount of commodities imported by the Chinese must be staggering. I believe that one of the doomsday investor predicting China bust is short Brazilian, Chilean, Peruvian commodity companies. Just imagine - to profit from China bust you short Latin American commodity companies - that shows the link.

These 2 countries are very close and there is even talk of future naval exchanges!!



Here is a recent report of China Brazil trade.

FACTBOX-Brazil-China ties surge with trade and investment

+0.00+0.00%12:02pm PDT
April 13 | Tue Apr 13, 2010 1:15pm EDT

April 13 (Reuters) - Chinese President Hu Jintao goes to Brazil on Wednesday for his first state visit to the country since 2004. China is now Brazil's top trade partner, after displacing the United States in 2009. [ID:nN13248277]

Here are some facts about the China-Brazil relationship.

TRADE

* China became Brazil's top trade partner in 2009, displacing the United States. Bilateral trade was worth $36 billion last year, tripling in value over the past five years. Brazil had a trade surplus with China of $4.3 billion last year, reversing deficits in the previous two years.

* Most of the trade flows are of commodities from Brazil to China, and manufactured goods from China to Brazil. About 98 percent of Chinese exports to Brazil are manufactured products, while minerals and soybeans make up two-thirds of Brazil's exports to China.

* China buys Brazilian iron ore, copper, soybeans and oil, among other raw goods. Brazilian imports from China include shoes, textiles and furniture.

* The number of Brazilian firms that bought more than $50 million worth of goods from China rose to 41 in 2009 from 12 in 2005, official data show. The overall number buying from China more than doubled to 16,853 in 2009 from about 7,158 in 2005.

RECENT MAJOR DEALS

* East China Mineral Exploration and Development Bureau (ECE) agreed in March to pay $1.2 billion for Brazilian iron ore miner Itaminas Comercio de Minerios. [ID:nN24176723]

* Four Chinese firms are involved in the bidding for a 40 percent stake in a Brazilian offshore oil field being sold by Norway's Statoil (STL.OL), a source with direct knowledge of the sale said last month. [ID:nTOE62I07L]

* China last May agreed to lend $10 billion to Brazil's Petrobras (PETR4.SA)(PBR.N) in return for guaranteed oil supply over the next decade.
* Brazilian aircraft maker Embraer (EMBR3.SA)(ERJ.N) in December signed a $2.2 billion deal with a unit of state-owned China Development Bank (CDB) to fund the sale of regional jets in Asia. Embraer has a factory in the northeastern Chinese city of Harbin.

DIPLOMATIC TIES

* The two countries officially established diplomatic relations in 1974, but the relationship gained steam in the 1980s under China's "reform and opening up" policy and after Brazil's military dictatorship was replaced by democracy.

* Both countries are important emerging powers who want developing nations to have a larger say in world affairs.

* China, as the world's third-largest economy, has a close if sometimes fractious relationship with the United States, and a permanent United Nations security council seat. Brazil, on the other hand, has to push harder for a place at the international table and a role beyond Latin America.

* Both are pushing for reform and a greater say for developing countries in global financial institutions like the World Bank and the International Monetary Fund, particularly after the global financial crisis.

TENSIONS

* Lack of language skills and academic expertise, on both sides though more pronounced in Brazil, exacerbate a cultural gap between Communist-ruled China and democratic Brazil.

* Brazilian politicians and businesses share U.S. concerns that Chinese exports made more competitive by the cheap yuan currency are undermining local industries.

* Brazil would like Chinese support for its bid to get a permanent seat on the U.N. Security Council.

* China would like Brazil to be more aggressive in opening up its economy to foreign investment, a process that China's government feels is progressing too slowly

 

[GoFlyKiteNow]

A coincidence.

Just saw an hour ago on Bloomberg TV where a Brazilian economics professor in a
panel discussion states that China has little impact on
Brazil economy. Its the US and Latin American trade that power the Brazil economy.

--
Another extract..From Financial Times.com

"" Those hoping that China can keep the global economy afloat are likely to be disappointed. The world’s leading growth engine in recent years is slowing, from 11 per cent-plus towards a 7 per cent rate by year’s end. That will damage China’s exporters, while spelling bad news for export-growth in the rest of Asia, which increasingly relies on Chinese imports too. ""

 

[GoFlyKiteNow]

Brazil lifts interest rates by 75 basis points to slow roaring economy

Wall Street Journal

BRAZIL'S central bank started putting the brakes on its roaring economy today with a 75 basis-point increase in the country's reference lending rate.

Brazil's rate hike mirrors moves in other emerging markets, including India and Malaysia, which have seen their economies accelerate out of the recent global crisis.

The central bank's monetary policy committee's decision to raise the Selic rate to 9.50 per cent annually is expected to be the first in a series of increases aimed at cooling inflationary pressures.

In a simple statement, the committee said the unanimous decision was taken "to assure the convergence of inflation with the trajectory of targets".

A rate hike -- the first time in 20 months -- was widely expected but there was little consensus on the size of the increase.

A Dow Jones survey of 18 economists, conducted last week, had 12 forecasting a 50-basis-point increase and six predicting a 75-basis-point increase.

But clearly the central bank committee chose to respond aggressively to recent data that shows Brazil's economy is heating up, possibly at levels not seen in a quarter of a century.

February retail sales rose 12.3 per cent on the year, while February industrial output jumped 18.4 per cent using the same comparison. Goldman Sachs and others say Brazil grew 10 per cent or more in the first quarter.

"The decision indicates the central bank realised they previously underestimated the strength of the economy and the accompanying inflation risks," said Jankiel Santos, economist at BES Investimento in Sao Paulo.

"The central bank now sees that they could have raised rates last month and have opted to catch up," Mr Santos said.

 

[longbow]

1)Brasil is make big bucks from exporting commodities to china.
2) Brasil/China trade = $36B a year more than Brasil US trade
3) Brasil has a trade surplus with China
4) China alone has invested tens of billions in Brazilian oil/gas/commodities.

Given this importance, it is true that any downturn in Chinese economy will have an adverse impact on Brasil.

Hard to put much about what some professor said. Would be better to link what was his point of view.

Here is a telegraph article in May

By Malcolm Moore in Shanghai
Published: 6:28PM BST 09 May 2009


Carnival celebrations in Rio de Janeiro, Brazil Photo: AFP/GETTY Welber Barral, the Brazilian trade minister, said total trade between Brazil and China had amounted to $3.2bn (£2.14bn) in April, representing a near twelve-fold increase since 2001.

The sum was greater than the $2.8 billion of imports and exports to the US and represented the second consecutive month that China had topped the trade table.


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The US has been Brazil's principal trading partner for nearly 80 years, but a sudden surge in Chinese demand for Brazilian iron ore in the first quarter of this year dislodged the Americans.

The news is the latest sign of China's increasing challenge to US hegemony in Latin America. China has been steadily increasing its sphere of influence and has become particularly close to the four "Red" South American countries: Venezuela, Bolivia, Ecuador and Peru.

China is already Chile's primary trading partner.

In February, China's vice president, Xi Jinping, and its vice prime minister, Hui Liangyu, both travelled through South America to cement ties. They visited nine countries, including Brazil and Mexico,

Venezuela, Ecuador and even Colombia, a staunch US ally. The month before, China contributed $350m to the Inter-American Development Bank.

However, despite much fanfare, China has not signed a bilateral trade agreement with Mercosur, the Latin American free trade bloc. Critics also point out that much of China's foreign investment in Latin America is funnelled directly into offshore tax havens in the Cayman Islands and Bermuda.

Brazil said it now aimed to diversify its range of products to China. Currently the bulk of Brazilian exports is made up of soya beans, for Chinese tofu, iron ore, cellulose and fuel. President Lula is expected to ink further oil and gas deals when he arrives in Beijing for talks on May 18.

"This is a very pressing issue to watch," said Mr Smith. "Brazil is seeking investment from many sources, including China, to help fund exploration from the Santos Basin, which will be very expensive to extract".

 

[zuoom]

the B in BRIC.

is it sustainable?

 

[GoFlyKiteNow]

the B in BRIC.

is it sustainable?

Brazil is super rich in minerals., oil, gas, land, water and almost everything under the sun.

It has a well educated middle class population with English/Spanish language and professional, business skills.
Portuguese their main language though.
It has the entire Latin America as trading partners.
Brazil also has a good industrial base.
It is close to USA , Europe politically ( Democratic) as well as geographically.

The entire world is awash with liquidity now, desperately looking
for safe sound investment opportunities. Money is not an issue
for most European and American Banks. The Fed interest rate
is so low, that money is cheap.

Brazil do not need any help or assistance from outside
to run its economy.