Brazil

Tuesday, November 6th, 2012

A cycle of prosperity that will last for a long time

Finance Minister Mantega points to balanced growth with inflation under control
razils economic performance in recent years has been the envy of many nations. This year, despite independent analysts predicting a slower rate of growth, Minister of Finance Guido Mantega is confidently aiming for expansion at 4 to 4.5 per cent of GDP. I think our current cycle of prosperity will last a long time he confides. The consumer market is increasing, poverty is decreasing, and we now have a social harmony which did not exist before in Brazil. Mantega confesses that he finds the assessment of the ratings agencies strange: The economic indicators in Brazil show much more strength and dynamism than many economies that have better ratings. He is heartened that Brazils rating is at least advancing - last year it was upgraded by all four of the main rating agencies. Brazils net national debt is considerably less than many Western nations at 37% of GDP, and the country attracted 20.5 million. in foreign investment last year. We would be attracting more, if we did not put up some barriers everyone would come to Brazil! Brazilian banks are among the most profitable in the world. We have a system of commodities and very solid futures, with well-established rules. It is a market like very few in the world. Since President Lula da Silva came to power in 2003, a newly prosperous Brazilian middle class has emerged as the result of higher wages up to 80 per cent higher in some cases. This internal consumer market is one of Brazils greatest assets, believes Mantega. It has certainly been good news for the Brazilian information technology indusBrazilian President Dilma Rousseff and Finance Minister Guido Mantega: economic performance predicts a bright future try, which was last year able to produce and sell the economy declines, and so revenue falls. Tax col12 million computers which would previously have while controlling inflation. he declares. We have lection in Brazil is one of the things that grew the been imported. almost full employment in Brazil, but we must inmost because of the tax cuts. Sustaining this dynamic consumer market is at crease our productivity and continue reducing costs. Key to all this has been the role of the Brazilthe heart of Mantegas policy as is avoiding the The drive to reduce costs has seen around 16.9 ian Central Bank. Despite inflationary pressures cycle of short term growth followed by high inbillion taken from the 2012 budget in the form of in 2010 and 2011, Mantega believes the Central flation and public deficit that have dogged Brazil widespread cuts. Mantega will not be drawn on Bank has performed well. Interest rates are now in the past. where these have impacted at an all-time low of 7.25%, down from 12.5% in It is hardly surprising in most: his focus is the yearJuly 2011. The flow of credit has been maina global recession that the on-year increase in governtained, and the cost of servicing the national debt astounding growth Brazil ment investment. As a has been trimmed. returned in the latter part percentage of GDP, this has Since the economic crisis broke in 2008, many of the 2000s would slow. In grown from 16% at the turn nations have instituted more protectionist trade polithe first quarter of 2012, of the millennium to 19.3% cies - an approach which Brazil has had to deploy the services sector and in 2011, a figure which he itself: in September, higher import taxes were anagriculture turned in disis determined to increase. nounced. Mantega is opposed to protectionism and appointing results, and deGovernment investment in currency manipulation, so Brazils actions indimand for basic infrastructure which incate that he sees no other option in the current clicommodities decreased cludes a massive building mate. We fight protectionism, but we also have to from Brazils most imporprogramme of three million defend ourselves. tant export customer, Chi- GUIDO MANTEGA new homes accounts for Mantega has been in office for five years now. na. Trade with the United Brazilian Finance Minister 13.4 billion.Major indusWhat advice does he offer to his European counStates and Europe has altries are being aided by a terparts, who are now experiencing many of the so suffered due to the trourange of tax incentives and problems his country has in the past? bled economies of those regions, although it has access to lines of credit at lower rates. Industrial remained strong with the Mercosul bloc. Product Tax, for example, has been reduced from Combine expansionary monetary policies with 7 per cent to just 1 per cent. fiscal policies that diminish debt, he recommends. Mantega maintains there is much to be positive Conversely, offering such a range of incentives And reduce debt along with efforts to stimulate about. He points to a 2 per cent growth in industry has formalised and increased tax revenue in a couninvestment and growth, because fiscal adjustment in 2011, and the measures the government is taktry notorious for tax evasion. It is not in fact easy alone that leads to stagnation will not get them ing to ensure sustained prosperity. Right now, we to raise revenue from tax by increasing taxes, out of trouble. I are preparing the country for long-term growth,

Investment opportunity for European companies in railways

PAGE 3

Logistics company branches out into new markets

PAGE 7

Rio gets ready to host international upcoming events

PAGE 10 & 11

We now have social harmony which did not exist before in the country

Brazil
SURFACE AREA 3,287,597 sq miles INHABITANT 193,946,886 (2012) CAPITAL Braslia BIGGEST CITY So Paulo LANGUAGE Portuguese CURRENCY Real

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BRAZIL

Transport is a high priority

Government will invest 7.5 billion this year on transport improvement
Transport Minister Paulo Srgio Passos invites foreign companies to invest in Brazil and assures they can make good money as well as contributing to growth

Solid ties
British-Brazilian relations have been and remain excellent

Ambassador of Brazil to the United Kingdom Roberto Jaguaribe says UK is cooperating

razil is a country of superlatives. It is the largest in South America, spreading over 3.2 million square miles of rainforest, plains, mountains, scrublands and highlands. both in geographical area and population, with more than 193 million people. Combine these facts with Brazils surging economy, demand from around the world for its raw materials and manufactured goods, and rising domestic requirements from the Brazilians themselves as they become richer, and it is clear that creating modern transport systems is key to the nations prosperous future. That is the job of Transport Minister Paulo Srgio Passos, who explains that after years of official neglect of the sector, the national government now has the will and the means to transform it into a global transport showcase. For two decades, Brazil suffered high inflation and other economic and financial crises that prevented it from investing in badly-needed infrastructure. Those days are over, he says. Billions of pounds are earmarked for building or upgrading highways, railroads, airports and seaports as Brazil moves from the developing to the developed world, following an exhaustive study designed to pinpoint the countrys transport needs. We carried out what is called the National Logistics and Transport Plan, or PNLT, which precisely evaluated the countrys economy and economic activity between micro-regions, states and the rest of the world. Because this activity converts naturally into transport streams through the movement

of people, material and products, we understand what we need to do in order to expand transport capacity from now until 2031, Passos explains. Funded by the Growth Acceleration Programme (PAC) - a major infrastructure programme launched by the federal government during the Lula da Silva administration - the ministry spent around 6.5 billion pounds on highways, railroads, waterways, shipping and shipbuilding in 2011 and plans an outlay of some 7.5 billion pounds this year. We should be spending double that amount but our expectations over the coming years are to increase investments, and here Im speaking of public, not private investments. Although this investment on the federal level is very small at 1 per cent of GDP, considering what was spent in the past I think we are off to a good start. More than 3,700 miles of railroad are under construction with major projects including the North-South Railway, the bullet train linking Rio de Janeiro, So Paulo and Campinas, the West-East Railway between Ilhus and Barreiras and the Trans-Northeast Railway. Our goal is to build a network of rail lines capable of carrying large amounts of minerals, grain and raw materials throughout Brazil and most importantly, to focus on transportation to the seaports, Passos states. Regarding highways, we are building or improving existing roads where the principle economic activity is agriculture so we can get crops to market. Were also concentrating on putting in highways in economically-depressed areas so they can get a boost. Linking Brazil with its South American neighbours is also a priority. Authorities are

investing on roads and bridges to ease transport to Peru, French Guiana, Paraguay, Argentina and beyond. Among the challenges facing the minister and his team are convincing the government that certain projects have priority, cutting through the bureaucracy and dealing with the countrys environmental regulations. Brazil has very strict environmental laws with which we must adhere, such as as filing environmental impact studies, submitting projects to the various agencies and obtaining licenses, the minister explains. Brazilian environmental laws protect not just biodiversity, flora and fauna, but also the indigenous populations, as well as historic and artistic heritage. When we move into a region where there are Indian villages, there are lengthy negotiations to meet the requirements, he says. And we have areas colonised by black people who are the descendants of slaves. In these cases, we usually have to reroute the highway to respect the wishes of the indigenous population. Private investment is also active in the transport network, especially in the highway sector, and the minister says foreign companies are welcome to participate. Brazil is receptive to foreign capital. We are a democracy, we have a history of respecting contracts and we have wide experience of international capital getting a high return on investment, Passos confirms. We are attracting venture capital to the country and you can be sure that the companies which come here and make the right choices will make money and contribute to the growth of the country. I

Two hundred years ago, British diplomacy and military support was instrumental in securing Brazils independence and today bilateral ties ties across the spectrum - political, economic, cultural and person-to-person - are growing from strength to strength, according to Brazilian ambassador Roberto Jaguaribe. Historically, our relationship has always been extremely important and although there have been ups and downs, I can say that British-Brazilian ties have remained excellent throughout and are once again picking up, he says. Financial and economic links are a case in point. With Brazil's economy one of the fastest growing in the world, UK businesses and investors are keen. Total bilateral trade has increased to 5 billion pounds in 2010, up 25 per cent from 2009. Our governments both believe this figure can be significantly increased and British officials are talking about doubling trade over the next three years. Gold, iron ore, agricultural products, petroleum and aircraft are the five leading Brazilian exports to the UK, while in the other direction Britains top sellers are motor vehicles, agricultural chemicals, pharmaceutical products and whisky. Trade is, of course, only one facet of bilateral relations and with the United Kingdom there are also a lot of reciprocal investments between the two countries, the envoy explains. And then there is scientific and technological cooperation. We believe that innovation and creative industries might be one of the core features of our relationship in the future. Jaguaribe stresses the increasing numbers of Brazilian students flocking to the UK to do university and advanced degree courses, or just to improve their English. Brazilian tourism is also on the rise. Brazilians like the UK. They believe its a very welcoming society, they admire this countrys democratic values, transparency and ethics. At the same time, Im very proud of the Brazilian community here as the people are very dynamic and hard working. The ambassador notes that the two nations are cooperating closely on the Olympic Games. There is no doubt Brazil will be fully prepared for the Olympics and British and Brazilian authorities are working together to ensure the Rio games will be successful, he explains. British companies will benefit from the commercial opportunities of the Games and the 2014 World Cup. Already 20 big British firms have won bids to be involved. I

BRAZIL

ations with booming economiesneed efficient and cheap transport and Brazil is certainly no exception. As the fifth-largest country in the world with mineral and agricultural products much in demand on the export market, Brazil is investing heavily in rail transport to ensure that the need is met. Our government has taken the view that we do not have to wait for the economy to grow in a certain region and then build transportation there, says Eduardo Parente, Chairman of the National Association of Railway Transporters (ANTF). The idea is to invest in transport first and the economy will grow as a consequence. And it certainly makes sense, he adds. Brazil began developing railways in the 19th century, around the same time as the United Kingdom and the United States, but later lagged behind. Lorries became more popular for long-haul freight as they were cheaper and could reach the countrys many rough and remote regions. However, the one area in which the railways thrived was moving iron ore and that remains true today. If you do not have a rail system, the iron ore business is impossible, Parente observes. And in 2002 there was a boom in iron ore, the price went up and suddenly there were new mines and investments. Brazil currently produces 400 million tonnes of iron ore, 150 million tonnes of grain and 50 million tonnes of steel annually. With exports of

Railway industry grows way beyond GDP evolution

Since concession process began, freight tonnage has registered steady and impressive expansion
a further 50 million tonnes of other commodities, there is certainly demand for the expansion of the country's rail freight capacity. According to the ANTF, which represents rail freight companies responsible for 11 of the 12 existing railway systems created during the concession process of the late 1990s, the network covers almost 18,000 miles. Since the concession process began, freight tonnage has registered steady and impressive growth way beyond Brazils GDP evolution. The number of freight containers shipped on the national network also increased, again reflecting the growth of the rail industry and the nations economy. Operational safety is another highlight, since rail accident rates are a tenth of what they were when the network was state-run. Nevertheless, bottlenecks exist. But in order to solve them, the Brazilian Ministry of Transportation has had to invest just 1 per cent of GDP into roads and railroads - the rest has come from the private sector, which has invested nearly 9.3 billion in rail alone in the 15 years since the concession process began. In 2011, railway investment hit an all-time high, reaching 1,469 billion. There is a demand for rail transport which is not being served and we could export more if we had the right means of getting goods to our ports and borders, Parente says. "For example, right now we have to increase investment in cargo, which will not necessarily pay for itself. The distances are short in Rio de Janeiro and Sao Paulo, areas where the country's GDP is concentrated. Anywhere else in the world you would need a distance of at least 500 kilometres before starting to think about building a railroad." Additional challenges facing the industry are the shortage of manpower and the high cost of capital, two problems also holding back other sectors of the Brazilian economy keen to take advantage of the boom. Unlike other industries, we are not too worried about the lack of engineers. What we actually need are more people who can make simple repairs, explains Parente, who is also the president of MRS Logistica S.A., one of Brazils biggest rail companies and which hauls over 150 million tonnes of freight per year. Foreign input could be a partial solution to these problems, and the chairman believes both know-how and funding would be welcome. Europeans are very good at logistical operations like containers and multi-modal systems. We are looking forward to new European investments and technologies in Brazil. There is so much opportunity for both sectors to expand here. The timing would be perfect." I
* The exchange rate, at 31 October 2012, was 1 = R$3.27
The total railway network covers almost 18,000 miles. Operational safety has increased and accident rates have decreased ten times during the concessionary period in comparison to when network was State-run

Concessionary Investment | 1996-2011 (BRL million*)

We are looking forward for new European investments and technologies in Brazil. The timing would be perfect
EDUARDO PARENTE, Chairman of ANTF

Growth Rates: Railway Production vs. Brazilian GDP

BRAZIL

Changes are bringing business opportunity

Companies need European partners and technology transfer

W
CBIC President Paulo Simao is certain that the risk of a housing bubble in Brazil is zero

orking hand in glove with federal government to carry out some of the most ambitious and costly infrastructure projects in the world is the chief task of the Brazilian Construction Industry Council (CBIC). Headquartered in Brasilia, it has representative offices in every state. Our main job is to stay close to the executive and legislative branches of government on the implementation of the major national policies that are af-

fecting our sector. We monitor projects and let the government know about issues which concern us, explains CBIC President Paulo Simao. A big job. Along with the multi-billion-pound building and refurbishing of stadiums and other infrastructure for the upcoming global sporting events, there is also the governments Growth Acceleration Programme (PAC) which will see 320 billion spent on building homes and schools, improving transport, boosting energy production and upgrading this huge countrys water, electricity and sewage systems.

I believe PAC has been the greatest achievement for the construction sector. It gives the industry greater visibility in the area of infrastructure. The greatest success has been the 'My Home, My Life' scheme to provide lower class housing, he says. CBIC has created the 'Sanitation is Life' plan. Still awaiting approval, it will involve improving the country's sanitation system. We will create a federal fund that will finance these regional projects and once a project is running and generating revenue, the income reverts to the fund for new

projects, he says. But despite all this money flowing into the Brazilian construction industry, Simao is confident that the country will not go the way of Spain, the United States or other developed economies which have suffered the burst of a housing bubble, with devastating results. The risk of that is zero because the housing market has two strong sources of financing: savings accounts and a guarantee fund.These were both created many years ago, have their own terms and rules regarding interest rates, and are controlled by the banking system which is very rigid and secure." And there is room in Brazil for foreign construction companies to participate in all that is happening, especially those which work together with local firms and bring in new technology, Simao says. Brazil is undergoing enormous change which will open new opportunities for investors. I

BRAZIL

A reference point for the booming construction industry

Cofix president says good times will continue for many years

strong economy,massive government and private outlay on major vicil engineering projects, the World Cup and Olympic Games, and an explosion in the demand housing for the low and middle-classes are all fuelling amazing opportunities for construction companies in Brazil. One such company, Cofix Construes e Empreendimentos of Rio de Janeiro, which offers expertise for concrete structures and rents construction cranes, is doing its bit to build Brazil. Except for a dip in business after the global economic crisis of 2008, the construction business in Brazil has grown tremendously and we have consolidated ourselves firmly in the market, says President and CEO Joo Fernandes. Founded 36 years ago by Portuguese businessmen who emigrated to Brazil, Cofix is now a leader in its sector in Rio, with 95 per cent of its business in concrete structures. The remaining 5 per cent is generated by its crane rental operations which began just last year. "Our company is already a reference point for the industry. The advantage we have over our competition is that our clients trust us to honour our commitments. We are known for quality, safety and productivity, and Cofix has

Joo Fernandes predicts Brasil will need 25 million new homes in the next 10 years

won many prestigious awards acknowledging this, Fernandes explains. Last year, Brazils construction industry grew by 4.8 per cent and now accounts for over 5 per cent of total GDP and 21 per cent of industrial GDP, according to government statistics. Construction activity is expected to grow a further 5% in 2012, analysts say. The Cofix president believes that the good times will continue for many years to come, pointing out that the country already needs 8 million new homes. With the increase in the num-

ber of people joining the middle class plus normal population growth, in ten years we will need 25 million homes, he adds. Despite the boom in its fortunes, Brazils construction industry faces acute challenges such as the urgent need for qualified personnel, a problem Cofix is tackling head on. We have our own internal training scheme through which employees become qualified within nine months, he explains. Cofix is also dedicated to the advancement of women in the industry, not just in the office but also out on the construction site, as part of its social responsibility programme. Another challenge for the sector is the scarcity of cement which, for various reasons, is difficult to import. Fernandes argues that increasing the number of cement producers and changing construction methods to rely more on steel are two possible solutions. Looking ahead, the president says he is satisfied with what he has achieved so far, but stresses that when it comes to quality, a good company chief should not rest on his laurels. The excellence of your product or service is something that can never be fully achieved, it is something that you have to keep pursuing, Fernandes says. I

Rio-based firm Cofix Contrues e Empreendimentos offers expertise on concrete structures and rents all kinds of construction cranes supporting building industry

Number of calls for tenders

BRAZIL

Prepared for the world

Egesa growing in South America and Africa

Fantastic opportunity
CCL is investing in the public tendering process

giant Petrobras. You have to adapt and be very hen speaking of his comwell structured," Ribiero explains. panys major infrastrucAnd it is paying off. This year the president ture projects, Egesa says he expects Egesa to earn around 385 president Elmo Teodoro million, a significant increase from 2011, and Ribeiro likes to boast that he predicts that figure will remain stable over among them is a bridge the next few years. linking Brazil and French Guiana, France's overseas territory which borders north-eastEgesa is also becoming involved in propern Brazil. We built a very erty development and is beautiful cable-stayed bridge again looking abroad by bidconnecting Brazil and the ding on contracts in MozamFrench territory and weve bique, Ecuador and Bolivia. done other iconic works Weve also been asked to since the company began focome to Qatar. It is very far cusing on important conaway but we are thinking struction work in 1985, he about it, he says. says. Like many companies here, At that time we were a Egesa has a piece of the small outfit building highWorld Cup action with its ways in the Middle East and renovation of the stadium in Africa. We started working Belo Horizonte, and is parin Brazil once political and ticipating in the governeconomic change got underments ambitious 'My Home, way with the ending of the My Life' project to provide former dictatorship. low-income housing. Headquartered in the city Were also active in the Amaof Belo Horizonte, Egesa tozon region which gets a lot day is involved in just about Egesa President Elmo Teodoro Ribeiro: of international attention beevery construction and in- company prepared itself and got Isos cause of environmental isfrastructure sector one could certifications to work with Petrobras sues. And I have to stress that imagine: roadways, oil and with government oversight, gas pipelines, dams, railroads, ports, airports, you cant even cut down a tree there nowadays sanitation systems, irrigation, mining, houswithout authorisation, the president says. ing and many more. Ribiero is eager to cooperate with the many Two years ago, the companys fortunes reforeign companies eyeing opportunities in ally took off, but the president says it took careBrazil, where he sees plenty of work to go ful and considered preparation. We planned around for the foreseeable future. Were bidahead and obtained several ISO standards. ding on many projects now and were open, This is important when youre going to work completely open, to working with foreign with demanding partners like the petroleum partners. I

ith just a dozen years in the business, Construtora Colares Linhares (CCL) is already a recognised name in Brazils ever-growing construction industry and with the countrys increasing demand for infrastructure projects, its future looks assured. We already have almost 13 years in public works projects such as roads, ports, bridges and sanitation, and now were involved in the oil and gas sector, says company director Ricardo Linhares Colares.

adding that tendering can be very difficult. It is a very competitive process as there are lots of companies bidding on the projects and there is a lot of bureaucracy, many documents to file, Colares says. He points, as other industry chiefs interviewed have, to the transport bottlenecks that continue to hinder economic development. Despite this, he predicts that the industry will remain in good health for some time to come. Its a great market right now and were doing all we can to ensure we have a good part of it. Like other Brazilian business leaders, Co-

I think we can meet any challenge our sector faces

RICARDO LINHARES COLARES Colares Linhares Director
Contracts with petroleum companies Petrobras and Transpetro include a wastewater treatment plant and steel tank construction as part of a project to return clean water to the sea after it is used by the companies. CCL specialises in transport infrastructure, highway maintenance, road paving and urban infrastructure, and is one of the major construction companies active in its home base of Rio de Janeiro. But we also work with other state administrations in the rest of Brazil and with the federal government, explains the director, lares complains about a lack of skilled personnel, and actively recruits employees from competitors. Although it depends on how many projects we have going and what stages they are in, we are in constant need of staff ranging from engineers and technicians to managers and administration personnel, he says. However, I think we can meet any challenges our sector faces as CCL is known for its commitment, agility and the quality of our work in an industry which is doing so much to advance Brazil. I

BRAZIL

Investing to boost transport volumes

America Latina Logistics tell us that by increasing their infrastructure, new markets open up and cash flows

ising demand for transport services in Latin Americas biggest market, an emphasis on efficiency, cost and service, and customised solutions for clients have all helped make Amrica Latina Logstica (ALL) the continents largest independent logistics company. Our transport networks are spread across a region that accounts for 80% of the countrys GDP, says chief operating officer Eduardo M.C. Pelleisone. Founded in 1997, ALLs first accomplishment was to obtain the rights to operate southern Brazils railway network serving the important ports of Paranagu, So Francisco do Sul and Rio Grande as part of a government privatisation programme. In the ten years prior to privatisation, the network was unprofitable, there was no investment and so the whole operation was stagnant for a long period of time, notes chief financial and investor relations officer Rodrigo Barros. Since we took over we have been investing every year to boost transport volume, increasing it by around 12 per cent annually, and that means a rise in efficiency and improved productivity. Two years later, ALL purchased two railway concessions in Argentina linked to its Brazilian operations and in 2001 bought a trucking outfit which complemented its rail business. Three more Brazilian rail concessions followed in 2006 and a container highway service and iron ore mining operation were launched last year. Now celebrating its 15th anniversary, the listed company's operations have contributed

America Latina Logistics Chief Operating Officer Eduardo Pelleisone and Chief Financial and Investor Relations Officer Rodrigo Barros explain that railways are a more efficient logistics system than trucking in terms of cost, consuming one third of the fuel

to 65 per cent of the GDP of the Mercosur trade bloc (Argentina,Brazil, P a r a g u a y, Uruguay and Venezuela). It also serves seven of the busiest ports in Brazil and Argentina, which handle 78 per cent of South Americas grain exports, and ALL is also active in Chile. ALLs 13,235 miles of rail track, 1,085 locomotives, 31,650 railcars, 650 highway vehicles, 7 distribution centres and warehousing facilities provide its growing list of clients with door-to-door transport, local pick-up and delivery and complete storage services. Railways are a more efficient logistics system in terms of cost than trucking. They are also more environmentally friendly than the truck - a train consumes a third of the fuel to transport the same cargo over the same distance, argues Barros. This means a gain for the client and it benefits the country as a whole from both an environmental and cost-related point of view. Growth will come naturally to ALL, Pelleisone predicts, as investment brings in new customers in new sectors. From the moment you begin to improve infrastructure, new markets start to open up, and as the cash begins to flow, you make more investments and improve the level of service, which allows you to add cargo with

more added value and so on. Its a virtuous circle, he says. And there are still markets which the company has barely tapped, the executives say, such as Brazils booming automobile industry. Then there is the agricultural sector where we could double our business to have a market share of about 55 per cent in an industry which clearly has enormous potential, Barros says. Our new container business is bringing in an integrated system like they have in the United States, Canada and Russia, with a terminal in the interior of the country to receive containers off trucks which are then shipped on by rail. The systems principle advantage is that it takes pressure off Brazils bottlenecked seaports which are expensive for clients compared to the cheaper interior terminals. Integration is also the idea behind the companys involvement with a concern which owned land at the port of Santos and a mining outfit involved in iron ore extraction. So we formed this mine-railway-port solution and through expansion of the mine, we hope to be shipping 27 million tonnes of ore within four years from an operation which today is underexploited because of the logistics, says Barros. Pelleisone sees the steps the company has taken over the past two years as a clear path towards healthy growth. I think Brazil is going to go through a period of heavy investment in transport infrastructure, whether from private initiative or the government, the COO says. And we believe that this company can be the most important player in the logistics sector to use that infrastructure because of our locality, agility and decision- making power. I

Foreign partnerships
Camargo Correa says association is the way to go

mains the beating heart of the group. And, in amargo Corra, a private conglomlight of the US$250 billion that is projected to be erate with interests across diverse ininvested by foreign businesses in Brazil's econodustries, is one of the companies at my between now and 2016 , Camargo is looking the heart of Brazil's modernisation drito its long and strong history of working with forve. The group is a force in driving the eign companies to help the country drag itself incountry forward with advancing techto the super-efficient mode of its international nical and engineering expertise. counterparts. Founded in the 1930s as a construction comTwo key areas that many view as holding Brazil pany, Camargo Corra has grown to dominate back have been identified as a lack of labour effithat industry and expand into numerous others, ciency and insufficient including infrastructure, skilled workers. utilities, motorway tolling Dalton Santos Avancini and maintenance, shippresident of the conbuilding, even flip-flop struction company said: manufacture through the fashionable Havaianas The comparisons that we brand, with operations in have with other countries 19 countries. are absurd. There are some Camargo Correa's concases where we are 50% less struction arm is a market productive - compared with leader in the industry naSingapore, for example. tionally, and is one of the Camargo Corra's history largest companies worldof overseas associations wide generation of elec- President of Camargo Correa Construction Dalton points the way to growth. tricity. It is responsible Santos Avancini and Corporate Affairs Vice President It favours the arrival of for building more than Marcelo Sturlini Bisord: co-productivity capital for investing, it half of the hydroelectric favours the possibility of plants in Brazil; growing fast. We can open doors so that businessInterCement, one of the top two Brazilian cement es can develop the know-how which will allow them companies, is wholly owned by Camargo Correa, to explore foreign markets. In reality, the only way which also controls a third of Portuguese cement for Brazil to grow quickly is with investment of forgiant Cimpor. The group's highways unit owns eign capital. 11 different subsidiaries than operate the nations Marcelo Sturlini Bisordi, Corporate Affairs major toll roads and bridges. It has joint ownerVice President, stresses that social responsibilship of Estaleiro Atlantico Sul, the biggest shipity is one of the groups strongest characterisbuilding concern in the Southern Hemisphere. tics, thanks to the Camargo Correa Institute that All this relegates footwear manufacturer Alparspreads awareness that a business responsibilgatas to last place in the value of the group's conity is much more then obtaining profit, and encerns, despite its revenues of over 1 billion. sures that the company gives back to the society But construction, especially infrastructure, rewhere it operates. I

BRAZIL

Braslia is home for power, businesses and technology

FIBRA announces es that the Federal District is investing in a high-tech park

The Federal District is integrating economy and ecology: Brasilia's technology and digital park will be a centre of global scientific and technological innovation

resh from celebrating, in 2010, its 50th anniversary as the national capital of Brazil, the city of Braslia and its surrounding Federal District are keen to boost business there through new, green and knowledge-based industries that will provide jobs for its rapidly rising population. Playing a key role in this effort is the Federation of Industries of the Federal District of Brazil (FIBRA) whose sector members account for more than 10 per cent of the districts GDP. Composed of 3 main branches which are responsible for professional training, social responsibility and fostering links with local schools, universities and industry, the federation is headed by President Antonio Rocha da Silva. Our primary task is to boost the Federal District as a manufacturing and business centre, declares Rocha da Silva, who points out that the region has the highest per capita income in the country. Figures show that government activity accounts for more than 50 per cent of the districts GDP, with services, industry and commerce accounting for the rest, primarily communications, banking and financial services, food production, entertainment, and legal services. Logically, FIBRA wants to reduce the weight of the government in the GDP, but plans to do so in a sustainable and environmentally-friendly manner.

Our challenge is to enhance our tourism offer and to increase the number of beds
ANTONIO ROCHA DA SILVA FIBRA President
Land is already too precious for large, heavy industrial plants such as automobile assembly lines so the idea is to establish light industries which are technologically advanced, knowledge-based and clean. A perfect fit is FIBRAs largest current project, and one which the entire Federal District is pinning its hopes on: the Parque Technolgico Capital Digital or Capital Digital Technology Park which is to cover 300 acres and

camargocorrea.com.br

host dozens of high-tech companies. Eventually, following an expected 628 million investment, exports of IT and communications products and services produced at the park should be worth some 65 million annually, Rocha da Silva says. The technology park, along with other sustainable industries expanding in the Federal District, will create around 80,000 new jobs by 2022, according to predictions by FIBRA. In a bid to meet this demand for qualified employees, new vocational schools offering training and qualifications in a wide range of professions and technologies are opening in Brasilia with enrolment growing each year. All of this activity will add significantly to our already increasing figures regarding exports from the Federal District, he hopes. Last year, our exports grew 20 per cent over 2010, although some of this was from jet fuel used by international airlines flying out of Brasilia airport which is counted as an export. Tourism is another attractive sector where FIBRA is focusing on growth. There is no doubt that the city is heavily visited as it is the centre of political power, Rocha da Silva says. However, our challenge is to enhance our tourism offer and we have to work on increasing the number of hotel beds, for example, so there will be lower prices for visitors. Now in his third term as president of FIBRA, Rocha da Silva has been instrumental in promoting the district as a great place to do business, and not just in Brazil. FIBRA regularly participates in Brazilian trade missions seeking investment from abroad and recently Rocha da Silva accompanied president Dilma Rousseff to a summit of the BRICS (Brazil, Russia, India, China and South Africa) nations in India to generate interest among companies there. India, he says, is an excellent source of investment for Brasilia, especially in the IT sector and a representative of the technology park was also with the Brazilian delegation. Wed also be happy to see more British companies exploring potential joint ventures that could generate synergy between two different approaches to business, he explains. Brasilia and the Federal District should be recognised both here and abroad for its excellent entrepreneurship and business-friendly environment and not just as the administrative and political capital of Brazil, the president says. And I firmly believe its possible. I

BRAZIL

Minister of Tourism is going for gold

Gasto Vieira believes World Cup and Olympic legacy can propel Brazils tourism to global superstardom

razil is a vast and beautiful country, offering a variety of experiences that are rarely found within one nation. Sun, sea and beaches; rivers, mountains and rainforests: We have an incredible variety of things to do. enthuses Brazils Minister of Tourism, Gasto Vieira. The upcoming big events, as Vieira refers to them, are foremost in the planning of the Ministry of Tourism. And with the World Cup in 2014 and the Olympics in 2016, Brazil has a lot to get ready for. Its airports already operate at overcapacity, and its lack of good quality hotel accommodation, particularly in Rio, is notorious.

But Vieira is looking much further ahead than 2014. A country that has the capacity to incorporate 48 million Brazilians into the new middle class is a country that can attract the interest of foreign investors, he declares. The new middle class are responsible for more domestic tourism than ever before, placing tourism high on the list of economic priorities. According to the World Travel and Tourism Council, Brazil is Latin Americas fastest growing travel and tourism economy. Domestic tourism spend grew by 6.5% in 2011 to around 80 billion. We want Brazil to become one of the top five touristic destinations in the world in the next 15 or 20 years, he announces. The infrastructure we build for the big events will allow
Rio de Janeiro, with its beaches and famous celebration events, is still the most visited place in the country followed by Foz do Igua and its waterfalls, and Sao Paulo for the conference and business traveller. Florianopolis is popular thanks to its paradise beaches, and Salvador de Bahia is a big cultural hotspot. The government plans to prepare Brazil to become one of the top five touristic destinations of the world in the next two decades

us to reach this goal. The sheer scale of the country over 13.2 million square miles - demands infrastructure. The public and private funding being invested in new hotels, roads, airports and facilities is all part of a longer term consolidation to ensure that Brazil can fulfil its promise. We have much more potential to increase the number of foreign visitors. We currently welcome 50% Argentinians, 25% Europeans, 25% Americans to Brazil this is too little. We are consolidating a politic of tourism in Brazil. Vieira says. To be ready for the big events, we are working on urban mobility and new modes of transportation. We are taking care of accessibility for the disabled, developing a system of bilingual information, and training a labour force so they will be able to provide a good service during the events. The Ministry of Tourism, alongside the Education Ministry, has invested 102 million in a training programme called PRONATEC which will see a total of 240,000 Brazilians over the next three years receive training for careers in the tourism industry. A bilingual programme will soon be launched to send Brazilians to the US to learn English, and to MERCOSUR partners to learn Spanish. Vieira has analysed the patterns of Brazilians travelling abroad, and would like the home country to get a bigger share. After the Chinese, Brazilians are the tourists that spend the most. When Brazilians go to the US, the total amount they spend on credit cards amounts to 2.76 billion. Our big challenge is to make them spend more money here. Vieira is conscious that the overvaluation of the real has made Brazil an expensive destination. We have a floating exchange rate and cant do much to influence that. What we can do is increase our competitiveness. In Europe and the US, Brazilian tourists get discounts

Minister of Tourism Gasto Vieira: We need to decrease the costs for foreign tourists to consume Brazilian products

through tax returns at airports. Here that does not happen yet.We also need to decrease the costs for foreign tourists to consume Brazilian products. Vieira is confident of Brazils power to attract foreign investment in tourism. Our country has focus; our president has courage. It is the destination for investors that fear the European crisis might take longer than we thought. Our biggest challenge is to do it all at once. But we will get to the World Cup and the Olympics in very good shape. We are going to leave a legacy to the Brazilian people that will transform Brazil into one of the big tourist destinations of the world. I

Right in the heart of vibrant So Paulo

Hope that national optimism will increase sales

ituated in the heart of So Paulo, Hotel Maksoud was built in the 1970s by Henry Maksoud, a Brazilian entrepreneur, engineer and businessman. Son of Lebanese immigrants, Maksouds job as a renowned engineer led him to stay in hotels all over the world. He developed a vision of what a world-class 5* hotel should be, and chose Sao Paolo, where he studied, as the city in which to build it. Over 30 years on, the hotel is still family owned and 100% independent. Henry Maksouds grandson also Henry Maksoud - is Director of Operations. He began his rise to his current position at the age of 15 in the hotels kitchens, making him well- placed to offer a perspective on the past, current and future climate for the hospitality and tourism sector.

chains arrived. By around 2002/3, the market in So Paulo was saturated. We had the same number of rooms as New York City, but only a quarter of the occupancy. As an independent business, we suffered. We had to downsize the company to just 280 employees, and change the concept of the hotel to focus on conferences and events. So Paulo has become a very expensive place to run a hotel. I need to sell 1200 rooms a month, and I get top rates for just 10% of these. The rest I have to sell through group deals to booking sites. People like luxury, but they dont like to pay for it. Brazil is very much in the spotlight right now. How do you think the rest of the world views Brazil? Companies, rather than government, do more to advocate for Brazil. They have promoted the idea that Brazilians work hard. President Rousseff is doing a fantastic job restructuring things, making it a lot more professional. What challenges do you see for the future? The challenge for us and all hotels is to engage new markets through new technologies and social media. Almost 50% of our market is business custom from the United States if that changes, we will struggle. I hope Europe will start to do more business here. Another challenge is the quality of our education. I like to take on trainees and give them opportunity, but often they do not want to learn. Government training schemes are helping, but a culture of learning needs to be developed. Are things changing for the better in Brazil? Yes. But Brazil is still 20 years away from Europe. We must understand that despite our progress, we still have a lot of poor people. As an economist, I get asked to speak at universities but I dont talk about economics. I talk about working and studying hard. You dont get to be a director without learning the lessons and workingfrom the bottom up. I

What can you tell us about the hotel industry in So Paulo? When our hotel opened in 1979, it was one of the worlds leading hotels. We had 1300 staff, five restaurants, a nightclub Frank Sinatra put on a concert to inaugurate the hotel in 1981. But during the economic crisis of the 1990s, the climate got much more difficult. The construction industry found that building aparthotels, which could be sold on piecemeal, was more profitable. Then the American hotel

Maksoud Hotel Director of Operations Henry Maksoud points that So Paulo has become an expensive place

10

BRAZIL

Rio turns to face a brighter future

State Governor Cabral, in an exclusive interview with us, reflects on the regeneration of The Marvellous City
Interview by Roberta Brum

n 2016, Rio will host the Olympic and Paralympic Games. In 2014, Rio will not only host the World Cup final, in its famous Maracan stadium, but will also be the gateway to Brazil for the anticipated half a million tourists who will follow their teams in hope of footballing glory. 2013 will see the state hosting the Confederations Cup and World Catholic Youth Day, which attracts over three million participants. So how has the state, which in 2006 was languishing twentieth of twenty seven Brazilian states receiving federal funding, achieved such accolades? According to Standard & Poors, the international rating agency which awarded the state of Rio de Janeiro investment grade classification in 2010,

its decision to do so was in large part down to the states strong administration during the previous three years. Here, Sergio Cabral, Governor of the State of Rio de Janeiro, shares his thoughts on Rios unique journey to its current enviable position on the international stage. Since you became governor in 2007, Rio has witnessed a cycle of new public policies and investments that seem to be successfully fuelling the states regeneration. How has this been achieved? We put together an excellent team that has prepared quality, innovative projects. Federal, state and municipal governments are now collaborating in ways they did not previously. A supportive fraternal relationship has grown which has seen feder-

al government willing to provide resource to support our projects. We now top the list of states receiving federal funding. Much international media attention has focused on your policy of slum pacification, in which a major army and police security operation has sought to dismantle the power structure of the armed gangs and drug traffickers which have controlled Rios shanty towns, or favelas. What have been the key strategies? We knew that after 30 years of a government policy of abandonment we could not change the history of public security without very bold strategies - we had to create a new style of policing. When the state allows the slums to grow and offers no security, the state is conniving with the creation and growth of some kind of parallel power, be it militia or drug dealer. We have created a system of goals and results tracking which incentivises officers of all ranks to work towards crime reduction targets. Previously, corruption was such that officers were, effectively, paid to kill. Now, all officers in a district that reaches its targets for each six month period can earn earn just under 1000 extra. Targets for reducing homicides now include killings by police officers as well as those perpetrated by drug gangs. This measure is driving down police corruption. The introduction of Police Pacification Units (UPPs) is having a dramatic affect. These units form a permanent presence in the community after the criminals have been driven out. They are staffed by young officers who have no history with the previous force and are trained in community security policy. Residents are better able to accept their presence because of this. What impact is this having on favela communities and in the city in general? Pacification has enabled us to start building an infrastructure and social policies. People in the favelas are experiencing their first chance to have a local police force; they are able to come and go without fear. We are building pavements, providing street cleaning and electricity, increasing access to hospitals, schools, sport and leisure facilities. In the past five years we have doubled the sanitation system. All this is increasing the value of real estate. Rio is becoming the capital of national

After 30 years of a government policy of abandonment we could not change the hostory of public security without very bold strategies - we had to create a new style of policing
SRGIO CABRAL Rio de Janeiro state governor

BRAZIL

11

Energy to diversify the economy and to promote inovation

Economic Development Department focuses on sustainability of development and social growth

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and international investments. Ministry of Industry and Trade figures show that in 2010 we received around 11 billion in investments, almost double that of So Paulo and Minas Gerais combined. In 2012, we believe this figure will be even higher. Earlier this year we launched a microfinance initiative in Rocinha, the largest favela. Investe Rio will provide access to finance for individuals and small businesses in the community. Jobs are being created Rolls Royce has recently announced the expansion of its factory here. You have been an advocate of progressive social policy reform. What progress has been made here? With regard to abortion, I have a vision of a policy which guarantees the womans right to choose. Brazil is very behind in this subject. Other very Catholic countries, like Spain, have managed to guarantee freedom of choice for women, but in Brazil these rights still do not exist. According to unofficial data, there are a million illegal abortions a year in Brazil. Then we have Ministry of Health data showing 250,000 women have turned to the public health system to repair the damage done by these backstreet abortions. Poor women have no options at all. I see this as governmental hypocrisy. On gay rights, we have made better progress. In May 2011 the Supreme Court voted to allow samesex couples the same rights enjoyed by those in heterosexual relationships. But there is still more to be done - the church lobby and its supporters in congress have so far blocked attempts to legislate against homophobic crime. In May this year we launched a high profile media campaign in which we have invested R$4 million, called Rio Sem Homofobia (Rio without homophobia). Brazils economic boom has been watched with interest by the financial markets. What opportunities do you see for British investors? Rio is a microcosm of Brazil. Brazil is a country of logistics and Rio is the state of logistics - we have ports, airports, and railways, and are investing heavily in infrastructure. Plus, we have the opportunities provided by the largest calendar of events on the planet in the next 10 years. Many people believe that Rio de Janeiro will not meet the goals for the Olympics. What answer would you give them? He who lives, will see. I

Sugar Loaf cable car; Copacabana beach during its famous New Years celebration; the Christ the Redeemer statue and the Maracan stadium under refurbish for 2014 Worldcup: Rios biggest attractions

s Secretary of State for Economic Development, Energy, Industry and Services for the State of Rio de Janeiro, Julio Bueno is the man tasked with capitalising on the optimism surrounding the states regeneration. As Brazil gears up to host two of the biggest sporting spectacles on the planet, the sense of anticipation is palpable. Buenos main responsibility is to attract private investment . Confidence in the private sector is key to long term sustainability and job creation in Rios burgeoning economy, and will be vital if the battle to restore public security is to be won in the long term. The state is one of the smallest in Brazil but is the third most populous, with 16 million inhabitants, and has the second largest economy behind the state of Sao Paulo. If statistics from his time in office are anything to go by, Bueno has cause to be optimistic. In 2010, Brazils Ministry of Labour ranked the state of Rio first in generating employment and income. 190,000 new jobs with a formal contract were offered 23.3% higher than the states previous record in 2008. In the same year, a record number of new companies were launched: 41,025, in contrast to 29,321 in 2007. The Global Metro Monitor, set up by the Brookings Institution and the London School of Economics, reported that Rios capital has outperformed giants like New York and Paris in the international ranking of economic dynamism of large cities, jumping from the 100th to the 10th place. According to a study by the Federation of Industries of Rio de Janeiro (FIRJAN), by 2013 Rio will receive around 31.6 billion. And thats not including the sizeable economic contribution that the World Cup and Olympics are hoped to make. One of Buenos key successes has been the diversification of Rios economy. Rio is the largest producer of oil and natural gas in Brazil, and it is expected that its automotive industry will soon become the second largest in the country. Other key industries include service, information technology, and entertainment. Today we are seeing a wave of investment in research and development that is extraordinary. Despite the current vigour of Rios economy, Bueno is not one to be complacent. He identifies the problem areas for Brazils economy as infrastructure, education and innovation. He should be pleased, then, that an increase in research and development investment will see Rio making a significant contribution to the innovation industry. Companies locating their research arms to the state of Rio include General Electric (GE), BG Group, Siemens, LOreal, and Cisco. Here you also have what I call the economy of the twenty-first century being developed and leveraged. It is an important moment of economic diversification. Bueno again attributes this success to the streamlined working of Rios government, but is also careful to note that ultimate ownership of Brazils re-

Secretary of State for Economic Development Julio Bueno: Rio State is the top producer of oil and gas

sources lies with its population. Government has played a vital role in providing financial incentives, tax, licensing, and infrastructure, but public participation has also been key. In Brazil, 40% of the economy is public, so there has to be a large interaction with the public sector for any investment. Our role is to facilitate this. When it comes to the question of how funds from Brazils recently expanded oil industry should be invested, Bueno reiterates his belief that the Brazilian people should profit from their resources and economy. He believes strongly in people engaging in democracy to ensure their representatives use the countrys resources responsibly. I believe that there must be a commitment to use it to ensure the sustainability of development and social growth. Resources should be used in education, in sanitation. We need to take care of it. A new campaign called Rio Capital of Energy is set to build Rios reputation for innovation. Buenos response to the campaign is typical of his concern for public interest. The economy of Rio is heavily based on oil, gas, nuclear and thermal. We must have a commitment to the future. I strongly believe in changing the habits of the citizen and helping them to save energy. The Capital of Energy programme will promote technological innovation in energy and mobilise society to use energy more efficiently. Most importantly for Bueno, it will engage school children in addressing these themes. Bueno sees a clear distinction between Brazil and the other BRIC countries in terms of its appeal to UK investors: Brazil has many advantages: it is a reliable country that respects contracts. It has a free press, it is a democracy and has very similar values to the UK. We are neither Russia, nor India, nor China. We are against terrorism. Here the level of corruption is much less - a foreign company that comes, like BG, finds a suitable environment for doing business. This is the biggest advantage we have: free press, free trade and democracy. I