A Study to Identify Key Sectors of Opportunity for Atlantic

Transcrição

2011
A Study to Identify Key Sectors of Opportunity for Atlantic
Canadian Firms in Brazil
To Be Canada Inc
Monday, April 04, 2011
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Disclaimer
This report provides an overview and guideline information and must not be relied on to cover
specific situations. Application of the guideline will depend upon the individual circumstances
for which professional advice must be obtained before making decisions, acting or refraining
from acting on any of the information in this publication. We could offer our readers with help
on how to apply the guidelines set out in this publication to their specific circumstances. No
responsibility will be accepted for any liability or loss occurred to any person or entity acting or
refraining from action as a result of any information in this document.
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Introduction
This report has been prepared for The Canada-Atlantic Provinces Agreement on International
Business Development (IBDA). The Governments of Newfoundland and Labrador, Nova Scotia,
New Brunswick and Prince Edward Island are highly cognizant of changing dimensions of the
global economy. Atlantic Canadian Businesses are looking at expanding their operations and
providing services to markets beyond developed economies such as the United States. Since
Brazil is one such market, a study was conducted to identify the potential available to Atlantic
Canadian businesses to export to Brazil in the nine identified sectors:
1. Information and communications technologies
2. Environmental technologies
3. Oil and gas equipment and services
4. Life Sciences and Biotechnology
5. Ocean Technology
6. Defense, Security and Aerospace
7. Mining
8. Education Sector
9. Food/ Seafood
The primary objective of the study was to assess the growth trends for these sectors including
strengths, weaknesses, opportunities and possible threats; broadly in the global context as well
as specifically in the Brazilian context. Further, the study examined the competence and
proficiency of Atlantic Canadian companies to capitalize on the opportunities available in Brazil.
This report also provides information that can be used as a guide on trading with Brazil and its
associated costs. The guide also provides Atlantic companies with an understanding of the
challenges to conducting business in Brazil.
For the creation of the report vast amount of literature and information was reviewed and
relevant and useful articles were studied with a goal to providing companies with information
in a user-friendly and succinct manner.
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The secondary research was supplemented and validated by primary research that included
interviewing key stakeholders and business owners in Atlantic Canada and Brazil who provided
valuable insights into the selected sectors and the Brazilian market.
The findings of this study validate the potential in the Brazilian market and comments on
possible opportunities available to Atlantic Canadian organizations.
Furthermore, the document provides critical information such as a list of professionals that can
be contacted for services in Brazil, information on trade fairs and other useful information for
company leaders exploring the opportunities in Brazil.
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Contents
Introduction ....................................................................................................................................iii
1. Brazil – An Overview .............................................................................................................. 1
1.1 Administrative Divisions ................................................................................................... 1
1.2 Economic Overview .......................................................................................................... 1
1.3 Trade Relations................................................................................................................. 2
1.4 Brazil’s 2011 Index of Economic Freedom ....................................................................... 2
1.5 Cultural Facts .................................................................................................................... 3
2. Canada - Brazil Relations......................................................................................................... 5
3. Atlantic Canadian Export Capabilities ..................................................................................... 6
4. Information and Communications Technologies.................................................................. 10
4.1 Introduction.................................................................................................................... 10
4.2 Subsectors ...................................................................................................................... 10
4.3 Global Context ................................................................................................................ 10
4.4 The Brazilian ICT Sector ................................................................................................. 11
4.5 Macroeconomic Environment........................................................................................ 12
4.6 SWOT Analysis ................................................................................................................ 14
4.7 Key Business Opportunities in Brazil .............................................................................. 15
4.7.1 Brazilian Industry Perspective................................................................................. 16
4.8 The Atlantic Canadian ICT Sector ................................................................................... 17
4.8.1 Atlantic Canadian Industry Perspective .................................................................. 18
4.9 Recommendations and Market Entry Strategies ........................................................... 19
5. Environmental Technologies ................................................................................................ 21
5.1 Introduction.................................................................................................................... 21
5.2 Subsectors ...................................................................................................................... 21
5.3 Global Context ................................................................................................................ 22
5.4 The Brazilian Environmental Technologies Sector ......................................................... 22
5.6 SWOT Analysis ................................................................................................................ 27
5.8 The Atlantic Canadian Environmental Technologies Sector .......................................... 30
6. Oil and Gas Equipment and Services .................................................................................... 33
6.1 Introduction.................................................................................................................... 33
6.2 Subsectors ...................................................................................................................... 33
6.3 Global Context ................................................................................................................ 33
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6.4 The Brazilian Oil and Gas Sector .................................................................................... 34
6.6 SWOT Analysis ................................................................................................................ 37
6.8 The Atlantic Canadian Oil and Gas Sector ...................................................................... 40
7. Life Sciences and Biotechnology ........................................................................................... 43
7.1 Introduction.................................................................................................................... 43
7.2 Subsectors ...................................................................................................................... 43
7.3 Global Context ................................................................................................................ 43
7.4 The Brazilian Life Sciences and Biotechnology Sector ................................................... 44
7.6 SWOT Analysis ................................................................................................................ 48
7.8 The Atlantic Canadian Life Sciences and Biotechnology Sector..................................... 50
8. Ocean Technology................................................................................................................. 53
8.1 Introduction.................................................................................................................... 53
8.2 Subsectors ...................................................................................................................... 53
8.3 Global Market................................................................................................................. 53
8.4 The Brazilian Ocean Technology Sector ......................................................................... 54
8.6 SWOT Analysis ................................................................................................................ 58
8.8 The Atlantic Canadian Ocean Technology Sector .......................................................... 60
9. Aerospace, Defense and Security ......................................................................................... 63
9.1 Introduction.................................................................................................................... 63
9.2 Subsectors ...................................................................................................................... 63
9.3 Global Context ................................................................................................................ 63
9.4 The Brazilian Aerospace, Defense and Security Sector.................................................. 64
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9.6 SWOT Analysis ................................................................................................................ 67
9.7 Key Opportunities in the Brazilian Market..................................................................... 68
9.8 The Atlantic Canadian Aerospace, Defense and Security Sector ................................... 69
10. Mining ................................................................................................................................ 72
10.1
Introduction ................................................................................................................ 72
10.2
Subsectors................................................................................................................... 72
10.3
Global Market ............................................................................................................. 73
10.4
The Brazilian Mining Sector ........................................................................................ 73
10.5
Macroeconomic Environment .................................................................................... 76
10.6
SWOT Analysis ............................................................................................................ 78
10.7
Key Business Opportunities in Brazil .......................................................................... 79
10.8
The Atlantic Canadian Mining Sector ......................................................................... 80
10.9
Recommendations and Market Entry Strategies ....................................................... 82
11. Education Sector ................................................................................................................ 84
11.1
Introduction ................................................................................................................ 84
11.2
Subsectors................................................................................................................... 84
11.3
Global Context ............................................................................................................ 85
11.4
The Brazilian Education Sector ................................................................................... 85
11.5
11.6
SWOT Analysis ............................................................................................................ 89
11.7
Key Opportunities in the Brazilian Market ................................................................. 90
11.8
The Atlantic Canadian Education Sector .................................................................... 91
11.9
Recommendations and Market Entry Strategies ....................................................... 93
12. Food and Seafood .............................................................................................................. 94
12.1
Introduction ................................................................................................................ 94
12.2
Subsectors................................................................................................................... 94
12.3
Global Context ............................................................................................................ 94
12.4
Brazilian Context ......................................................................................................... 95
12.5
12.6
SWOT Analysis ............................................................................................................ 99
12.7
Key Business Opportunities in Brazil ........................................................................ 100
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12.7.1 Brazilian Industry Perspective............................................................................... 101
12.8
The Atlantic Canadian Food and Seafood Sector ..................................................... 102
12.8.1 Atlantic Canadian Industry Perspective ................................................................ 103
12.9
Recommendations and Market Entry Strategies ..................................................... 103
13. Experiences in the Brazilian Market ................................................................................ 105
13.1
Canadian Export Experience ..................................................................................... 105
13.2
Challenges of Entering the Brazilian Market ............................................................ 108
13.3
Best Practices of Entering the Brazilian Market ....................................................... 109
14. Establishing and Conducting Business in Brazil ............................................................... 110
14.1
Establishing a Company in Brazil .............................................................................. 110
14.2
"Doing Business 2011: Making a Difference for Entrepreneurs" ............................. 111
14.3
Government Agencies .............................................................................................. 114
14.4
Tax Structure............................................................................................................. 114
14.4.1 Corporate .............................................................................................................. 114
14.4.2 Federal, State and Municipal Taxes ...................................................................... 115
14.4.7 Payroll Tax and Deductions................................................................................... 118
14.5
Import Regulations & Logistics ................................................................................. 120
14.5.1 Import Tariffs ........................................................................................................ 120
14.5.2 Foreign Cable and Satellite ................................................................................... 121
14.5.3 Duties .................................................................................................................... 122
14.6
Electronic Commerce ............................................................................................... 123
14.7
Industrial Property .................................................................................................... 124
14.8
Dispute Resolution ................................................................................................... 124
14.9
Common Transportation Modes .............................................................................. 124
14.10 Import Programs....................................................................................................... 126
14.10.2 Bonded Warehouse........................................................................................... 128
14.11 Licensed Custom Brokers ......................................................................................... 128
14.12 Shipment Accounting, Reporting & Storage............................................................. 129
14.13 Government Incentives ............................................................................................ 134
14.13.1 Corporate Investments ..................................................................................... 134
14.13.2 Training.............................................................................................................. 139
14.14 Foreign Operation Costs Evaluation ......................................................................... 140
14.14.1 Interest Rates .................................................................................................... 140
14.14.2 Land and building tax ........................................................................................ 140
14.14.3 Premise - Commercial Rent ............................................................................... 140
14.14.4 Wages Skilled/ Unskilled Trade Labor ............................................................... 141
14.14.5 Wages Professional Management Labor .......................................................... 143
14.14.6 Working Capital ................................................................................................. 147
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14.14.7 Transportation Costs ......................................................................................... 147
14.14.8 Insurance (Business).......................................................................................... 148
14.14.9 Office Expenses ................................................................................................. 149
14.15 Depreciation ............................................................................................................. 150
14.16 Professional Fees ...................................................................................................... 150
14.17 Advertising ................................................................................................................ 151
14.18 Budgeting .................................................................................................................. 154
14.18.1 Financial Ratios by Industry / Sector ................................................................. 154
15. Contact Information of Professional Service Providers ................................................... 160
Appendices.................................................................................................................................. 162
Appendix "A" - 2011 Index of Economic Freedom ................................................................. 163
Appendix "B" – Atlantic Canadian Exports to Brazil ............................................................... 167
Appendix "C" – The Canadian Environmental Goods Model.................................................. 169
Appendix "D" - Oil reserves1, per location (onshore and off shore), by State – 2000-2009 . 170
Appendix “E” - Best Prospects for Foreign Suppliers with Petrobras..................................... 171
Appendix “F” - Sales of Consumer Health Products by Sector ............................................... 173
Appendix "G" – Canada’s Ocean Technology Sectors ............................................................ 174
Appendix “H”– Starting a Business in Brazil ........................................................................... 175
Bibliography ................................................................................................................................ 177
Endnotes ..................................................................................................................................... 197
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1. Brazil – An Overview 1 2
Brazil is also known as the Federative Republic of Brazil and República Federativa do Brasil or
Brasil in Portuguese. Brazil is located in Eastern South America, bordering the Atlantic Ocean
and covers a total area of 8.5 million square kilometers. It is a federal republic and its capital is
Brasilia. Portuguese is the official and most widely spoken language. Other less common
languages include Spanish, German, Italian, Japanese, English, and various minor Amerindian
languages. The standard time zone is GMT -3 hours and daylight saving time (1hr begins third
Sunday in October; ends third Sunday in February). Eight-seven percent of its total population
(201 million) is based in urban areas. Brazil’s currency is the Real (R$) and the conversion rate is
1 Canadian dollar ($) = 1.7 Brazil Real (R$). 3
1.1
Administrative Divisions
Brazil has 26 states and 1 federal district*
Acre
Maranhao
Rio de Janeiro
Alagoas
Mato Grosso
Rio Grande do Norte
Amapa
Mato Grosso do Sul
Rio Grande do Sul
Amazonas
Minas Gerais
Rondonia
Bahia
Para
Roraima
Ceara
Paraiba
Santa Catarina
Distrito Federal*
Parana
Sao Paulo
Espirito Santo
Pernambuco
Sergipe
Goias
Piaui
Tocantins
1.2
Economic Overview
Brazil is the largest economy in South American and has enhanced its macroeconomic stability
over the last decade. Much of its growth is fueled by the extensive growth in the agricultural,
mining, manufacturing and services sectors. It was one of the first countries in the developing
markets to recover from the recession. Export recovery enhanced GDP growth in 2010
supported by consumer and investor confidence. Foreign investors are attracted to the
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Brazilian market because of its strong growth and high interest rates. This led to inflation of the
currency and has prompted the government to raise certain taxes on foreign investments.
1.3
Trade Relations
An overview of Brazil’s trade relations are provided in Table 1:
Table 1: Brazil's Trade Relations
Exports
Imports
Value (2010 est.)
US$199.7 billion
US$187.7 billion
Commodities
•
Transport equipment
•
Machinery
•
Iron ore
•
Electrical and transport equipment
•
Soybeans
•
Chemical products
•
Footwear
•
Oil
•
Coffee
•
Automotive parts
•
Autos
•
Electronics
Trading Partners •
China - 12.49 percent
•
US - 16.12 percent
(2009)
•
US - 10.5 percent
•
China - 12.61 percent
•
Argentina - 8.4 percent,
•
Argentina - 8.77 percent
•
Netherlands - 5.39 percent,
•
Germany 7.65 percent
•
Germany - 4.05 percent
•
Japan 4.3 percent
1.4
Brazil’s 2011 Index of Economic Freedom 4
The Index of economic freedom examines three fundamental principles of economic
freedom—empowerment of the individual, non-discrimination, and open competition. Brazil’s
economic freedom score is 56.3, making its economy the 113th freest in the 2011 Index. Its
score is 0.7 point better than last year as a result of improvements in investment freedom and
trade freedom. Brazil is ranked 21st out of 29 countries in the South and Central
America/Caribbean region, and its overall score is below the regional and world averages. An
overview of Brazil’s scores of each dimension are provided in Table 2
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Table 2: Brazil - 2011 World Economic Index
Economic Dimensions
Score
Change
Business Freedom
54.3
– 0.2
Trade Freedom
69.8
0.6
Fiscal Freedom
69
0.6
Government Spending
49.6
– 0.7
Monetary Freedom
75.9
0.1
Investment Freedom
50
5
Financial Freedom
50
no change
Property Rights
50
no change
Freedom from Corruption
37
2
57.8
0.3
Labor Freedom
For a detailed explanation on each of these scores refer to Appendix "A"
1.5
Cultural Facts 5
Brazilian was very friendly when communicating with others, eye contact is expected and
physical contact is accepted regardless of gender or relationship. Brazilians display their
emotions openly however; it is not acceptable to display anger or to reprimand people publicly
- especially in the workplace.
Although Brazilians tend to be informal, business attire is preferable for both men and women.
Bosses are generally addressed as Mr. or Mrs. (pronounced seng-or; seng-ora). Colleagues
should initially be addressed formally too unless they indicate that using first names is
appropriate.
Punctuality is expected when arriving for work. However, meetings may start 10 to 40 minutes
late. Time is seen as a sequence of events rather than chunks of hours or minutes – therefore if
a previous meeting is delayed it will impact the next one. There is flexibility of deadlines
depending on the circumstances. However, if delays are expected these must be discussed with
the relevant authorities at the earliest.
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Decisions are generally made at the top-levels of management. Employees at lower levels are
assigned tasks and expected to comply with instructions. Regulations are very well defined and
acquiescence is expected. Creativity or deviation from past reports or project designs is usually
neither expected nor appreciated.
Religion is not a significant factor in the workplace. However, class plays a big part in Brazilian
society and the respect you receive could vary depending on the class you belong. Class
differences are less prominent in the workplace unless there is a huge disparity of class
between peers which could affect communication flow. Gender can sometimes be an issue
especially in the inlands or along the northeast cost. Women are sometimes not taken seriously
as equals.
Building personal relationship with colleagues or clients before getting to business is essential
as Brazil is a very social country. Personal relationships (connections or favors) can be very
handy when certain projects are being threatened by bureaucracy; a request from one friend to
another will help cross many hurdles that official communications are unable to resolve.
Family relationships are important and personal relationships are created when clients or
colleagues invite families to socialize with each other. Favors and preferential treatment are
expected when personal relationships are established with colleagues, clients or employees.
However, this is not the same as corruption or bribery. Preferential treatment is also received
by those that come from a higher social class or those that are related to an influential family.
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2. Canada - Brazil Relations
Canada and Brazil have enjoyed a cordial bilateral relationship over the years and have signed
numerous agreements, treaties and memorandums of understanding. In November 2008, a
Framework Agreement for Cooperation on Science, Technology and Innovation was signed to
enhance bilateral cooperation in matchmaking activities, and improve industry-to-industry and
industry-to-university collaboration on Research & Development. There have also been
Memorandums of Understandings related to health, labour and sustainable development of
metal and mineral. 6
See Figure 1 for Canada and Brazil’s Trade Balance from 2006 to 2010
Figure 1: Canada - Brazil Trade Balance
Canada - Brazil Trade Balance in Billions
$4.00
$3.00
$2.00
$1.00
$-$1.00
-$2.00
-$3.00
2006
$3.41
2007
$3.36
2008
2009
$2.58$2.69
$2.58
$1.60
$1.51
$1.33
-$0.11
-$0.98
-$2.08
2010
$3.29
$2.57
-$0.72
-$1.85
Total Exports
Total Imports
Trade Balance
Source: Industry Canada Trade Data Online
In 2010, Canada’s bilateral merchandise trade with Brazil was almost $5.85 billion. Canadian
merchandise exports to Brazil increased by 62 percent to $2.57 billion. Canadian merchandise
imports from Brazil were close to $3.3 billion in 2010. 7 The chart above shows a trend in which
the Canadian Exports have been rising steadily from 2006 expect in 2009 (due to the recession).
However, 2010 figures indicate a rebound to pre-recession levels. Similarly, the negative trade
balance has been declining. These trends are positive and indicate a possibility that more
products and services being exported from Canada to Brazil in the future.
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3. Atlantic Canadian Export Capabilities
Atlantic Canada withstood the global recession and has seen some recovery in 2010. Atlantic
Canada’s total exports for 2010 were $27 billion a 14 percent increase from 2009. As expected,
the United States (US) is the largest importer of Atlantic Canadian products and services;
importing almost 78 percent ($21 Billion) of total exports. Considering that developing
countries such as Brazil, Russia, India and China (BRIC) have shown a sustained growth in
international trade volume, it could be beneficial to invest time and effort in developing exports
to these countries. See Figure 2 for Atlantic Canada’s Top 10 export locations
Figure 2: Top 10 Country Exports in 2010
Export Percentage in 2010 - Top 10 Countries
1%
1%
United States (U.S.)
1%
1% 0%
1% 1%
China
9%
Germany
Netherlands
3%
3%
United Kingdom (U.K.)
Japan
Spain
India
79%
Italy (includes Vatican City State)
France (incl. Monaco, French
Antilles)
Others
Atlantic Canada has specific export strengths especially in Petroleum refineries and oil and gas
extraction. Atlantic Canada’s top ten exports in 2010 are illustrated in Figure 3
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Figure 3: Atlantic Canada's Top 10 Export Industries
Atlantic Canada Top 10 Exports Industries (CAD Billions)
14
12
10
8
6
4
2
-
2008
2009
2010
To learn about the Top 25 Industry exports from Atlantic Canada to Brazil for the past five (5)
years refer to Appendix “B”.
Exports from Atlantic Canada to Brazil have been increasing from 2006, except in 2009. These
trends are positive and indicate a possibility of more products and services being exported from
Atlantic Canada to Brazil. It is important to note that imports from Brazil in 2010 have jumped
exponentially causing a negative trade balance of $ 442 million. However, this is due to imports
of Crude Petroleum Oils and Oils Obtained from Bituminous Minerals (almost $ 549 million).
See Figure 4 for Atlantic Canada and Brazil’s Trade Balance.
Figure 4: Atlantic Canada - Brazil Trade Balance
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Atlantic Canada - Brazil Trade Balance in Millions
2006
2007
2008
2009
2010
$800
$607
$600
$400
$200
$117
$44 $72
$106 $52 $54
$130
$53 $77
$165
$63 $70
$-
-$7
-$200
-$400
-$442
-$600
Total Exports
Total Imports
Trade Balance
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Sectors Overview in Brazil
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4. Information and Communications Technologies
4.1
Introduction
The Information and Communication Technologies (ICT) Sector has had varying definitions and
subsectors inclusions over the years. However, in the Canadian context, the ICT sector is
defined as the combination of manufacturing and services industries, which electronically
capture, transmit and display data and information. 8
4.2
Subsectors
Prominent subsectors in the ICT Sector within Canada are: 9
ICT Manufacturing
•
Commercial and Service Industry Machinery Manufacturing
•
Computer and Peripheral Equipment Manufacturing
•
Telephone Apparatus Manufacturing (Wired Communications Equipment)
•
Radio and Television Broadcasting and Wireless Communications Equipment
Manufacturing
•
Audio and Video Equipment Manufacturing
•
Semiconductor and Other Electronic Component Manufacturing
•
Navigational, Measuring, Medical and Control Instruments Manufacturing
•
Communication and Energy Wire and Cable Manufacturing
ICT Services
•
Software Publishers
•
Communications Services
•
Data Processing, Hosting and Related Services
•
Computer Systems Design and Related Services
4.3
Global Context
The global Information Technology (IT) market reached US$ 1.3 trillion in 2007. 10 According to
the initial statistical findings of ABIBEE [Brazilian Electrical and Electronics Industry Association],
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the recent global financial crisis has contributed to the decline of worldwide revenues by 9
percent in the global ICT sector in 2009.11
ICT trends across the globe are similar to those in the Americas. Mobile subscriptions have
overtaken fixed telephone line, which continue to decline. Surprising, mobile phone
penetration in developing countries is much higher than that of developed countries. There is
also an uptake in the adoption of broadband although not at the same pace as mobile cellular
technology. 12
The Global ICT Development trends from 2000 – 2010 are illustrated in Figure
Figure 5: Global ICT Developments 2000 - 2010
100
90
Per 100 inhabitants
80
Global ICT Developments, 2000-2010*
Mobile cellular telephone subscriptions
Internet users
70
Fixed telephone lines
60
Mobile broadband subscriptions
50
Fixed broadband subscriptions
40
30
20
10
0
*Estimates 2000
4.4
2001
2002
2003
2004
2005
2006
2007
2008
2009 2010*
Source: international Telecom Union
The Brazilian ICT Sector 13 14 15
Latin America’s largest IT market is in Brazil with over 45 percent of the total investments in the
region. Business Monitor International expects Brazil’s ICT sector to grow at over 11 percent for
the period 2008-2013.
In 2007, almost 2 percent of Brazil’s GDP (US$ 24 billion) was invested in information
technology; about half this amount (US$ 12.5 billion) was invested in computer hardware, US$
8.5 billion in IT Services and US$ 3 billion in computer software. The growth in the IT sector has
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been supported by Brazil’s economic stability; strong local currency and the ease with which
loans are accessible.
Spending in Brazil’s mature IT market is divided evenly between software, hardware and
services. The southeast region accounts for almost 60 percent of the expenditure whereas the
northeast region accounts for only 8.3 percent. Government incentives have been responsible
for the rapid growth and prosperity of the southern region especially the state of Parana.
Small and medium companies represent 42 percent of the private investment in the sector and
an increasing demand for hardware and services solutions is stimulating the development of
the market. The domestic consumption of PCs, printers, digital cameras and mobile phones
represents more than 20 percent of the Latin American market.
The banking sector in Brazil has provided many business opportunities for the telecom services,
IT and security providers. Banks are projected to continue to increase their IT spending and in
2007, the financial sector accounted for around 20 percent of national IT spending. Moreover,
the banking sector is expected to invest heavily in infrastructure such as ATMs, branches, backoffice systems, technology investment and telecom expenses. Other sectors are also likely to
benefit from new technologies such as digital certification, wireless LAN and mobile data
transmission.
The 2014 FIFA World Cup and 2016 Olympic Games are expected to be a catalyst for large
investments in many sectors especially infrastructure which, in turn, is likely to benefit the IT
sector as well.
Software and Services are estimated to grow at an annual rate of 10 percent. Broadband
subscribers are expected to increase to 22 million over the next five years which would
represent a 10 percent penetration by 2013.
4.5
Macroeconomic Environment
4.5.1 Political
Procurement of information technology goods are governed by Decree 1070 (1994), which
provides preferential treatment to locally produced computer products. Moreover, the rules
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surrounding pricing and technology are complex and non transparent. In order for foreign
investors to participate in contracts funded by multilateral development bankrolls they must
have an established legal presence in Brazil.16
4.5.2 Economic 17
The Brazilian government is spending heavily in ICT especially upgrades to government
departments and e-governance. ICT is a large strategic focus in the Growth Acceleration Plan
and government spending is likely to increase to US$ 23 billion by 2013. Between January and
July 2009 the government had already spent about US$ 1 billion on ICT.
Austrade’s website reports that the Brazilian government has revised its high tariff rates and
aligned its current rates to the GATT (General Agreement on Tariffs and Trade) which makes the
Brazilian ICT sector more attractive and accessible to foreign investors. Some of the principal
duties and taxes identified by Austrade include:
•
Federal Import Tax – most data communications equipment have import duties ranging
from zero to 20 percent, some other equipment as high as 40 percent.
•
IPI Industrial Products Tax – a Federal Excise Tax levied on most domestic and imported
manufactured goods. The current tax ranges from 10-34 percent.
•
ICMS Tax on Merchandise Circulation and Services – a State Government value added
tax applicable to both imports and domestic products and rendered services. The ICMS
tax on imports is assessed ad valorem (according to value) on the cost, insurance and
freight (CIF) value plus the Federal Import Tax plus IPI.
In 2009, an agreement was signed through which close to 10,000 IT programmers would be
trained and was expected to support over 100,000 jobs in the domestic software and services
industry and an additional US$ 1 billion in revenue by 2010.
4.5.3 Socio Cultural 18
There has been a marked increase in the usage of computers and the internet for personal and
commercial purposes. As of 2008, Brazil reported more than 67 million internet users (up from
5 million in 2000). Business-to-business (B2B) e-commerce increased 10 percent from 2004 to
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2006 (9 percent to 19 percent), and business-to-consumer (B2C) sales increased approximately
4 percent in the same period (2.9 percent to 7.45 percent). The value of B2B transactions
amounted to R$ 267.6 billion in 2005, a 37 percent increase from 2004. 19
4.5.4 Technological
In the education sector the one-computer-per-student program is to be implemented
supported by a US$ 50 million funding from Brazil’s central bank. These funds are expected to
help public schools buy low-cost portable computers as well as support infrastructure costs.
The Brazilian government encourages investment in R & D and education in the ICT sector and
has developed several ICT Clusters and Technology Parks. 20
Brazil is a very strong proponent of 'open source' software and the Brazilian government and
state-run enterprises are increasing their support for open source and free software like Linux
and phasing out the use of Windows. The government believes this will save money in the long
run as well as support local developers. 21 A draft decree that would obligate federal
department to change over to open source software has been under consideration and has
received strong support from both the previous Brazilian President Lula and current President
Dilma Rousseff. 22
4.6
SWOT Analysis 23
4.6.1 Strengths
Brazil is the largest markets in Latin America and also one of the fastest growing. The
government has been investing heavily in the ICT sector and includes investment in computer
hardware, IT services and computer software. Government incentives have also been
responsible for the rapid growth of this sector. Domestic consumption of ICT goods and services
are high and represent more than 20 percent of the Latin American market. Requirements of
the banking industry and the upcoming games have further fuelled the growth of this sector.
Retail channels are expanding due to the growing consumer segment fuelled by affordability.
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Furthermore, there is a federal plan to equip all elementary schools with computers indicating
plenty of room for expansion.
The mobile market is robust and benefits from healthy competition from domestic and
international players. Lucrative contracts are being won as fixed-line and mobile operators seek
to keep ahead of each other through investment and new services,
4.6.2 Weaknesses
The PC penetration rate in Brazil is less than 25 percent and these numbers need to be
improved in order for the industry to grow.
There is also a lack of educated professionals in the IT segment as compared to developed
countries and there is estimated to be a shortage of 17,000 trained professionals. Moreover,
the predominant language in Brazil is Portuguese and therefore all software products and
services need to be customized to meet local needs.
The Brazilian government’s affinity to 'open source' software may become an impediment for
companies that have strengths with Microsoft technology.
4.6.3 Threats
One of the major threats to the ICT industry is damage to infrastructure due to security
concerns. Another significant threat comes from illegal and pirated software and counterfeit
computers and notebooks. The gray market for computer hardware in Brazil reduced from 50
percent to 46.4 percent in 2007 whereas software piracy reduced by 1 percent to reach 59
percent. However, these are significantly large percentages and pose a serious threat to the
sector. 24
4.7
Key Business Opportunities in Brazil
There are several opportunities in the rural markets in the telecommunication, broadband,
cable, and IPTV segments. New technologies such as triple-play and quad-play are becoming
increasingly popular. In December 2007, 3G licenses were auctioned and there are
opportunities to provide mobile services to areas that are not currently connected.
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Brazil also has huge communication market potential, with particular focus on the mobile
segment, with the three largest mobile operators owned by foreign investors. The country
already has 143 million mobile phone subscribers and the market continues to show strong
growth. Moreover, several fixed lines and broadband operators are also owned by international
telecom companies.
There are also several opportunities for IT, telecom services and security providers in the
banking industry. As cited by Austrade, the Research and Markets analyst firm reports, "Given
their huge infrastructure and wide portfolio in terms of branches, ATMs, back-office systems,
and Internet, the banking sector accounts for the largest share of total technology investment
and telecom expenses". The financial industry is also expected to invest in new technologies
such as IP-based solutions, digital certification and signature, wireless LAN, and mobile data
transmission. Banking security applications are also in great demand given the growth of online
banking. 25
4.7.1 Brazilian Industry Perspective
According to stakeholders in the Brazilian market, the ICT market in Brazil is growing rapidly and
the Brazilian government encourages open source and local production of software. However,
the sector is mainly dominated by international companies and many Chinese companies are
establishing factories in Brazil. Brazilian law limits international participation in communication
and news companies to 20 percent foreign capital. This law could to be reviewed in 2011.
With the advent of privacy, anti-piracy and anti spamming policies Brazilian consumers are
looking for services that protect their privacy. Internet companies are now developing products
and services to offer content such as news, music, videos, photos, statistics, games and
applications for users.
There are many opportunities available in the sector, such as hardware and software
production. Canadian expertise could be used in games, content and film production, mobile
application and software development. Canada is known as a good game developer and a huge
video content producer. These companies could be great exporters for Brazilian portals.
Canadian expertise can also be applicable in the creation of software for the communication
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sector. Aspects like intellectual assets, with experience in global technology projects, could
improve the sector and Brazil could import the expertise to create more efficient software.
Currently Brazilian companies import from the US because of lower costs and proximity to the
Brazilian market. Some imports are also sourced from Asia, however these imports are not
regular and the Asian companies that export tend to vary. Products or equipments that are
imported are usually not made in Brazil. Moreover, the price of imported Asian products and
equipment tend to be less expensive.
Business leaders in the Brazilian ICT sector believe that the best way for Canadian companies to
participate in this sector would be through partnerships and technology transfers.
4.8
The Atlantic Canadian ICT Sector
The Atlantic Provinces Economic Council (APEC) reported in 2010 that Atlantic Canada's ICT
industry grew nearly twice as fast as the overall economy between 2003 and 2008, contributing
an estimated $2.65 billion to Atlantic Canada's GDP in 2008. Furthermore, the region’s ICT
industry employs over 32,000 individuals in over 2,000 firms. About 70 percent of the ICT
employees work in urban areas such as Halifax, Saint John, Moncton, Fredericton, St. John’s and
Charlottetown.
BellAliant, Eastlink and Rogers lead the telecommunication sector with almost 30 percent of all
ICT employees in the Atlantic region. Longtail Studios and HB Studios are involved in software
development and Keane, Research in Motion and Innovatia provide ICT services. Nautel and
Rutter are the largest ICT manufacturers in the region. 26
Atlantic Canadian companies in the ICT sector perform various services such as security, elearning, IT services, multimedia, geomatics, advanced technology and business solutions.
Telecommunications infrastructures in Atlantic Canada are world class with 100 percent digital
telecommunication network, high-speed digital links, broadband networks, and mobile and
marine communications.
Advanced research and development by universities, research institutes and the business world
enhance the competiveness of the industry. CGI Group Inc. Canada’s largest IT firm is
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headquartered in Moncton, New Brunswick and the University of New Brunswick’s Computer
Science Department is a national leader in IT and advanced software research. 27
Charlottetown, PEI currently has five companies classified under the Entertainment Software
Industry and has strong support from the provincial government. The University of PEI is now
offering a video game programming specialization and a digital art program. One of the largest
companies in this sector is Other Ocean Interactive. 28
ACOA cites an Industry Canada report which states that, "From 1997 to 2004, the ICT industry in
Atlantic Canada experienced an 11 percent Compounded Annual Growth Rate (CAGR) in
exports and a 9.4 percent CAGR in employment in software and computer services. The highly
skilled labour force has one of the lowest rates of turnover and absenteeism in North
America." 29
4.8.1 Atlantic Canadian Industry Perspective
Business leaders interviewed in the ICT industry in Atlantic Canada believe Nova Scotia Business
Inc has been promoting this sector greatly and has announced many investments in the sector.
There has been a lot of consolidation with demand increasing across North America and the ICT
industry is growing at nearly double the rate of the Canadian economy. New data privacy rules
that apply to electronic records of individuals have driven this demand. Canada was a leader in
this field, but the US, Israel and a few others have taken over recently.
Exports include software and intellectual property, internet and information security,
hardware, e-learning, gaming, and media and other web related services. Importers include the
rest of North America especially the US, the UK, Australia, New Zealand, South America, the
European Union (EU), China, other Asian countries, and a small amount from Africa.
Competitive advantages in this industry include effectiveness and marketing support, talent
stability, low turnover and a slight positive cost differential. Companies have the resources they
need, are certified in Microsoft technology and are considered niche or specialty players.
Some of the disadvantages include tax incentive programs in Atlantic Canada as they are not
internationally significant. New Brunswick offers 15 percent whereas the Scientific Research
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and Experimental Development (SRED) tax credits in the US are 35 percent and in the UK 100125 percent.
Some of the companies interviewed do export data, maritime and port securities whereas
others have been reluctant to consider Brazil as an export destination because of the language
barrier, cost of developing the market, logistical distances and need to develop local partners.
Those that do have experience were introduced by Newfoundland Association of Technology
Industries (NATI) and Department of Foreign Affairs and International Trade Canada (DFAIT),
Canadian embassies and consulates, and Atlantic Canada Opportunities Agency (ACOA).
Companies may be interested in outsourcing opportunities or targeted business initiatives.
They believe there is a huge demand for modernization and would like the government to make
more strategic investments. Some believe that promotion of services and services providers or
export consultants who can help them with exports is as important as the funding provided.
4.9
Recommendations and Market Entry Strategies
Atlantic Canadian firms have strength in and opportunities exist in the Brazilian market in the
following segments:
•
Telecommunications - mobile telephony, fixed lines and broadband especially the rural
markets that are relatively untouched. The Cable and IPTV markets are also lucrative
and growing.
• Software & security services – especially in the banking and retail sectors.
• Computer hardware and networking infrastructure in the education industry.
However, Atlantic Canadian companies should be selective in the opportunities they choose to
pursue in this sector. There are high investments needed in infrastructure, knowledge of
Portuguese is a requirement for software and content, the government prefers open source
software and finally, the piracy and counterfeit market are highly prevalent. Despite these
concerns, Atlantic Canadian companies could explore specific opportunities in these niche
segments:
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•
Technologies for the Banking sector
•
Security and Privacy software and technology
•
Internet and data security
•
eLearning and distance education technology
•
Gaming and mobile applications
A long term perspective is important to succeed in the Brazilian market and companies must
not expect results immediately. Atlantic Canadian firms will need to establish local presence
either through resident partners or a subsidiary. Although establishing a local office is
preferred, firms may also be able to appoint local agents, distributors or representatives. Local
partners can be identified through matchmaking services and trade missions.
Trade events are an excellent avenue to meet key Brazilian stakeholders in the ICT sector.
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5. Environmental Technologies
5.1
Introduction
The environmental technology sector or "green economy" has seen increased awareness and
focus in recent years as people, governments and companies have begun to implement
sustainable business practices 30. This shift has come from increased social awareness of our
effect on the environment as well as the continued strain on finite resources worldwide.
Environmental technology, also called green-tech or clean-tech, is not clearly defined and
encompasses many sectors. The two most traditionally used categories when classifying greentech is “end-of pipe” (EOP) and “cleaner” technologies. EOP refers to technology which makes
existing technology more environmentally friendly, whereas cleaner technologies are focused
on creating a new way of doing something which is more energy or environmentally efficient.
For this report the focus will be on the sectors in the green-economy where either type of
technology exists. 31 Traditionally, as green markets mature there is a shift from EOP
investments to clean technology.
5.2
Subsectors
The Environmental sector is a complex industry which includes a wide range of products,
services and applications.
To define and categorize this sector the report will use an
international definition which was developed with Statistics Canada’s Environmental Division. 32
The model divides activities into two different headings: Environmental Protection and
Resource Management. The model also includes a section for those goods and services which
fall under both categories. Refer to Appendix "C" to view an illustration of the model.
Within each segment of the environmental sector, there are sub-sectors:
Environmental Protection – Protection of ambient air and climate, water protection, treatment,
supply and conservation, waste management, remediation, protection of biodiversity and
landscape, noise and vibration abatement, and other environmental protection services.
Resource Management – Management of natural resources, management of energy resources,
and other environmental resource management activities.
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Combined Environmental Protection/Resource Management – Environmental education and
training, environmental policy and legislation, environmental research and development (or
eco-innovation), environmental health and safety, environmental communications and public
awareness, and other environmental services. 33
5.3
Global Context
The Global market value for the green economy is estimated to be worth almost US$ 5.2
trillion. 34 The environmental sector fared quite well overall through the recent downturn as it
was the focus of many countries’ stimulus plans. The environmental market continues to
outgrow the market with the largest percentage of activity being in the alternative fuels and
energy sector 35. It is estimated that by 2020 the market for providing clean and renewable
energy alone could reach 1.9 trillion.36 See Figure 6 for Global Market values of green
economies.
Table 3: Market Values of the 13 largest green economies
Market values of the 13 largest
green economies
Market Value % Global
(US $ Billions)
Total
1. United States
$
1,050
20.61
2. China
$
686
13.47
3. Japan
$
319
6.26
4. India
$
319
6.25
5. Germany
$
214
4.18
6. United Kingdom
$
178
3.50
7. France
$
155
3.04
8. Spain
$
137
2.73
9. Italy
$
135
2.69
10. Brazil
$
131
2.61
11. Russian Federation $
127
2.53
12. Mexico
$
91
1.81
13. Canada
$
89
1.78
Country
Source: (The Globe Foundation, 2010)
5.4
The Brazilian Environmental Technologies Sector
The U.S. Department Of Commerce reports, "Environmental experts estimate that Brazil’s
environmental technologies market (including equipment, engineering / consulting services,
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instrumentation, construction and clean up services) is roughly estimated at US$ 9 billion, of
which US$ 5.2 billion is related to the water and wastewater subsector; solid waste
management at US$ 3.4 billion and air pollution control at US$ 0.6 billion." 37
Brazil is a world-wide leader in some environmental technologies (e.g. Bio-energy) yet
comparatively weaker in other areas (smart grid, water, wastewater, power distribution).
Prominent subsectors in the environment technologies market in Brazil include:
5.4.1 Water
In January 2007, the Brazilian Government signed the National Sanitation Bill which outlines the
federal policy for water and wastewater in Brazil. The Government has set itself a target to
providing the entire population with water and wastewater services by 2030. It is estimated
that in order to reach that goal the Brazilian government will have to invest US$ 5 billion a year
for the next 20 years. 38 Currently, 61 percent of rural areas do not have water or wastewater
services, compared to 7.5 percent in urban areas. Traditionally, this sector has been state run
but it is expected that by 2017 the participation of private companies will have increased to 30
percent from 6.5 percent in 2008. 39
5.4.2 Waste
It has been estimated that 43 percent of the 47 million tonnes of waste that Brazil produces
annually is not disposed of properly. In the urban areas estimates show that almost 50 percent
of this waste is generated from the construction of houses and infrastructure. Brazil does have
an established waste program and is the largest recycler of aluminum in the world. Despite this
there are opportunities for growth in this area. After 20 years of debate, in March of 2010
Brazil’s chamber of deputies approved a national waste policy bill “Omnibus Waste Policy”. It is
expected that this bill will boost investments from both the private and public sector.40
Brazil’s current infrastructure and facilities are inadequate to handle the 3 million tonnes of
hazardous waste it produces each year. This waste is mainly produced in the south and southeast and is cost prohibitive to destroy. 41
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Brazil estimates it has over 15,000 contaminated land sites. Recent legislation approved by the
state of Sao Paulo along with the construction boom has driven the demand to convert these
contaminated sites into usable land. 42
5.4.3 Energy - Ethanol
Brazil is considered the most effective producer of ethanol in the world and 50 percent of the
fuel used in Brazilian vehicles is composed of ethanol.43 Total investments in this sector are
expected to double by 2013 reaching US$ 33 billion. The Brazilian government is pushing to
make ethanol a global commodity and foreign investment in this sector is predicted to grow
from 7 percent in 2007 to 12 percent in 2013. 44
5.4.4 Energy - Power Generation
Brazil receives over 80 percent of their energy through hydro and, in a 10 year energy plan
released in 2009 – 2010, the government laid out its plans to continue focusing renewable
energy specifically wind, biomass and hydro. Brazil is expected to expand its nuclear power
generation which currently account for a little over 3 percent of total output. This has the
benefit of being able to utilize the large uranium mineral reserves that Brazil possesses. 45
Most power generation facilities are located far from the demand and the energy lost during
transmission can be up to 16 percent of total demand. It is expected that the transmission grid
will grow by almost 40 percent in the next 10 years, not including improvements in
infrastructure, security, and efficiencies. 46
5.4.5 Air Emissions Reduction
This category covers both engine and vehicle emissions as well as pollution mitigation control
for industrial and manufacturing capabilities. In the major cities vehicle emission accounts for
62 percent of air pollution and the countryside has seen an increase in emissions because of
increased industrialization and harmful agricultural processes. The state of Sao Paulo recently
set a target to reduce Green House Gas (GHG) emissions by 20 percent by 2020. Brazil lacks
expertise in air quality and almost all technology used to monitor and clean the air comes from
outside the country.47
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5.4.6 Clean Development Mechanism (CDM)
As a non-Annex 1 member of the Kyoto Accord, emission reduction projects in Brazil fall under
the CDM. This allows countries with emission reduction targets to implement an emission
reduction project in a developing country, in this case Brazil, and receive Certified Emission
Reduction (CER) credits to be counted towards their own emission targets. 48 Presently, Brazil
ranks third in the world among countries with annual GHG emissions. In 2008, Brazil had over
165 different projects registered with the CDM and another 438 ongoing projects.49 Total value
of all projects directly related to the CDM is estimated to be worth US$ 118 billion.
5.5
5.5.1 Political
There are many government initiatives in this sector. In 2007, the Brazilian Government signed
the “Growth Acceleration Program” (PAC), a US$ 325.7 billion program for projects focused on
logistics, energy and social infrastructure. The government has already made commitments to
bring the water and wastewater infrastructure in the host cities up to FIFA standards before
2014.50 The government is also working towards making ethanol a global commodity.
Additionally, the government has set targets to reduce GHG by 20 percent in Sao Paulo by
2020.
Brazil has a fairly modern and advanced environmental regulation framework and although
improving, enforcement of these laws is still an issue. 51 Regulators relevant to this sector
include: 52
•
National Agency of for Petroleum, Natural Gas and Biofeuls (Agência Nacional do
Petróleo, Gás Natural e Biocombustíveis - ANP)
•
Federal Water Regulatory Agency (Agência Nacional de Águas – ANA)
•
Brazilian Institute of Environment and Renewable Natural Resources (Instituto Brasileiro
do Meio Ambiente e dos Recursos Naturais Renováveis - IBAMA)
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5.5.2 Economic
The government’s commitment to investing in the environmental sector means it is poised to
be a key driver of the country’s economic growth. Brazil is ranked as the 10th largest green
economy in the world with a market value of US$131 billion. Overall the Environmental
industry is expected to grow by 10 percent in the next five years. 53It is estimated that 50
percent of Brazil’s environmental sector investments are focused on upgrading the water and
solid waste infrastructure. 54
Table 4: Brazil's Environmental Goods & Services
Brazil's Environmental Goods & Services:
Water
Solid Waste
Energy Efficiency
Air Emissions Reduction
%
25.3%
22.2%
19.5%
10.5%
An estimate of the potential business opportunities for foreign owned companies in the
environmental sector is US$ 10 billion; primarily focused in the Water, Solid Waste, Energy
Efficiency and Air Pollution Control.55
5.5.3 Socio-cultural
There is limited awareness about environmental sustainability in developing nations such as
Brazil. However, there have been some initiatives undertaken by the government and the
private sector such as the GHG protocol program that involves large businesses, the Brazilian
environment industry, the Brazilian Council for Sustainable Development, and Fundação Getúlio
Vargas, along with World Resources Institute and the World Business Council on Sustainable
Development to increase awareness of climate change and environmental concerns. 56 There is
also an initiative funded by the Canada Climate Change Development Fund (CCCDF), to support
International Council for Local Environmental Initiatives (ICLEI) and create awareness about
climate change and measuring community greenhouse gas (GHG) emissions. 57 The entire
industry is expected to grow over the next few years helped along by the requirements for the
2014 FIFA World Cup and the 2016 Olympic Games
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5.5.4 Technology
Eighty percent of the country’s energy is created through Hydro. Brazil is a world-wide leader in
bio-fuel technologies (biofuel/ethanol production). 58 It has a strong recycling program and the
world’s most efficient recycler of aluminum. Brazil also has a large potential to capitalize on
wind energy and is one of the three largest suppliers of Uranium (fuel for future nuclear plants).
5.6
SWOT Analysis
5.6.1 Strengths
Brazil in the 10th largest green economy in the world and there are many initiatives undertaken
through public, private and international investments in the various subsectors. There are also
initiatives being undertaken because of the Koyoto agreement for CDM. Brazil has an advanced
environmental regulation framework which sets a strong foundation for an improved green
economy. The upcoming games are further expected to accelerate growth in this sector.
5.6.2 Weaknesses
According to a news broadcast by the World Bank in March 2009, over the last 30 year there
has been substantial damage to Brazil Amazon forests, and each year about 19,000 km2 (7,500
sq miles) are cut down. Ensuring that natural resources are used sustainably has been difficult
for Brazil. The broadcast further states, "Economic forces, poor agricultural practices, weak
property rights, and poor regulatory enforcement have combined to produce these worrying
results. Deforestation is impacting the climate, soil erosion, and biodiversity. Seventy percent
of Brazil’s CO2 emissions come from deforestation and change of land use." 59
Brazil’s current infrastructure and facilities are insufficient to manage the large amount of
waste that it produces each year resulting in over 15,000 contaminated land sites.
5.6.3 Threats
According to the OECD Trade and Environment Working Paper, the government gives
preference to domestically produced goods and services and is not a signatory to the
plurilateral Agreement on Government Procurement of the World Trade Organization (WTO).
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This allows Brazil to use a different standard than those used by signatories. The report further
states, "Although a 1993 law requires major procurement at all government levels to be open
to competitive bidding and awarded to the lowest bidder, with no distinction between Brazilian
and foreign enterprises, in case of a tie for low bid preference may be given to a Brazilian firm.
International bidding is required for most procurement which involves international
development bank funding." 60
Although environmental legislation in Brazil is fairly advanced, these policies are not always
properly implemented or enforced. 61
5.7
In order to fund the Integrated Solid Waste Management and Carbon Finance Project, Brazil has
received a US$50 million loan from the World Bank Group. The World Bank website states, "The
objective of the project is to improve the treatment and final disposal of municipal solid waste
while: (a) supporting (i) the closing of open dumps and the implementation of modern and
environmentally safe landfills or alternatives to waste disposal; (ii) improved municipal solid
waste management practices; (iii) reduction of poverty among waste pickers; and (iv) increased
private sector participation in solid waste service provision; and (b) strengthening Caixa
Economica Federal's capacity to manage carbon finance projects". 62
Currently some of the best opportunities for companies looking to enter the Brazilian
environmental sector are in:
Water and Wastewater – Measurement, control and monitoring technologies; sludge
treatment, leakage detection control, odor removal processes, flow meters (micro/macro
measurements), pipe cleaning, pipe joints and flow control products, automated technology for
wastewater/underground water, industrial effluent, equipment and services for water reuse in
industrial processes and UV systems for water disinfection.6364
Energy – Waste to energy solutions, ethanol, wind, nuclear, hydro, transmission and
distribution (including automated systems and smart grid). 65
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Waste – Solid waste treatment and recycling, odor control equipment, landfill gas emissions
monitoring technologies, etc. Solutions for remediation of contaminated land including: project
management, risk assessment, monitoring strategies, etc.
Air Quality – There are opportunities for air monitoring NOX/VOC control equipment and
emissions monitoring and control.66
Climate Control Mechanisms – Currently Brazil has over 400 different CDM projects directly
related to climate control initiatives. Outside of these projects, there are opportunities in
project design, carbon management and trading and low carbon technologies and
verification. 67
According to business leaders in the environment industry in Brazil, the recycling market is one
of the focus areas within the environment sector in Brazil. As concern with recycling products
has increased in recent years the sector has been growing. The Brazilian recycling sector
employs around 200,000 people. Even though Brazil is considered a world leader in recycling
there is a perception that the sector is stagnant in the country.
Brazil has policies for waste management that only solve the final destination problem but not
selective collection, which is currently implemented by companies. Selective collection needs to
be improved as the number of Brazilian companies who provide this service has not increased
much in recent years.
Opportunities available in this sector include recycling of textiles, packaging, bottles, bags, tires
and recyclable packaging for food, vegetables and clothes. According to the partners of a
recycling company, the machines and equipment for recycling could be improved and garbage
collection and separation could be more organized and efficient. Currently, machinery is
imported from USA, Sweden and China and lower prices are a key factor. Canadian companies
could also have the opportunity to provide expertise to help develop recycling machines.
The best way for international companies to do business in this sector is through local
partnership, joint ventures or technology transfers.
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5.8
The Atlantic Canadian Environmental Technologies Sector 68
Between 1995 and 2002, the environmental industry in Atlantic Canada has seen an increase of
87 percent in revenues and has had higher growth rates than the national employment
averages and number of active companies in the field. In 2004, Industry Canada valued Atlantic
Canada’s environmental market at $1.5 billion annually and had 821 environment companies
exporting their products and services internationally.
Atlantic Canada has pioneered many new innovations in the environmental sector such as
Canada’s first fully integrated waste management facility; a breakthrough mobile
environmental cleanup unit; biodegradable peat moss-based oil absorbents; and software that
simulate environmental management scenarios. These innovations and the ability to provide
integrated environmental and economic solutions have provided Atlantic Canada with the
much needed edge to export its products and solutions across the globe. Some of the examples
reported in ACOA’s industry profile for the environmental industries include:
•
New Brunswick - recognized for its expertise with wastewater (organic waste from pulp
and paper, pharmaceuticals, food processing and potable water).
•
Nova Scotia – has achieved some of the highest diversion rates in solid waste
management (at 50 percent) in the world.
•
Prince Edward Island - recognized for its expertise in wind energy, as well as for solid
waste management planning and systems development.
•
Newfoundland and Labrador - recognized for its expertise in oil spill contingency
planning, oil spill response and remediation.
Traditionally Atlantic Canada has enjoyed a strong reputation in the environmental sector.
Some specific areas of strength and expertise in Atlantic Canada include:
•
Air monitoring services and technology
•
Engineering consulting
•
Geomatics
•
Hydro
•
Instrumentation
•
Marine environmental services
•
Offshore wind
•
Oil spill contingency planning and response
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•
Remediation
•
Solid waste management
•
Tidal
•
Water and wastewater treatment
•
Water resource management
•
Wind
Atlantic Canadian business leaders in the environmental sector felt that there has been a lot of
activity in environmental sustainability and environmental management planning. There was a
draft legislation for the wastewater and fisheries and clean water act and contaminated sites
regulations regarding clean-up criteria for impacted properties. There are also several
government stimulus funding programs along with investments in alternative energy sources,
and soil and ground water remediation. Companies in this industry have seen some
consolidation and in order to grow, export markets are being targeted. Currently, exports
include waste management and master-planning, consulting services from engineers and
scientists, h-back systems, and soil and groundwater remedial design. These products and
services are mostly exported to North America, the Caribbean, Saudi Arabia, Bermuda, Turkey,
Haiti and Peru. Competitive advantages of the industry include the Atlantic Canadian workforce
and work ethic, the low cost of living, leading to privately owned structures and economies of
scale.
Not many Atlantic Canadian companies have had experience in Brazil. There has been some
work done with mines, but not substantial. One of the companies interviewed, got its
opportunity in Brazil because the World Bank was lending to these operations and then hired
them to assess environmental issues for liability and risk. Some companies are wary of investing
in Brazil because of the perceived risks due to poor ethics in the South American markets. Most
companies would be interested in doing more work in Brazil if the opportunities were well
suited to the goals of the company. For a company willing to take some risk, Brazil would be
very attractive because the North American market is saturated. Interests expressed include
opportunities related to water and wastewater, professional engineering services, solid waste
management because of the rudimentary standards and policies in Brazil, mine closures and,
the petroleum industry due to their capacity to invest and resulting higher margins. There are
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also opportunities in products and services that are on the downturn in North America because
those are on the upturn in Brazil.
5.9
following segments:
•
Water and wastewater treatment and water management technologies such as
advanced water treatment (filtration), and water loss prevention.
There is also
increased demand for specialized consulting services and waste treatment technologies.
•
There is also need for equipment, machinery and technologies related to recycling of
garbage and waste materials.
•
Site remediation systems for the over 15,000 contaminated land sites in Brazil
•
There is also a need for technologies related to renewable energies specially wind
energy and biomass.
There are various projects in this sector that are funded by the Brazilian government as well as
governments of other countries such as the US, UK and Canada. Moreover, Brazil also receives
funding from the IDB and World Bank for environment sustainability initiatives. Atlantic
Canadian companies exploring opportunities in this sector could identify specific projects and
determine the procurement authority and process. Detailed information on working on projects
funded by the World Bank and IADB can be found on their website. 69
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6. Oil and Gas Equipment and Services
6.1
Introduction
The Oil and Gas Equipment and Services (OEGS) industry is an important part of the Oil and Gas
Industry and looks at extraction equipment, drilling technologies and maintenance systems. 70
6.2
Subsectors
Industry Canada classifies the OGES industry into two main sectors and further into subsectors: 71
Services Sector: Geophysical Prospecting, Contract Drilling, Pumping, Pipeline Services, Field
Processing, Transportation, Engineering, Geomatics, Marketing, and Other Services
Manufacturing Sector: Drilling Equipment, Drilling Consumables, Pipeline Equipment, Storage,
and Oil Sands Equipment
6.3
Global Context
6.3.1 Oil and Gas
The Oil and Gas industry has been one of the most lucrative industries over the last hundred
years. The global crude oil market shrank by 40.6 percent in 2009 to a value of US$1,358.2
billion. In 2014, the global crude oil market is forecast to have a value of US$2,159.2 billion, an
increase of 59 percent since 2009. On a volume basis the global crude oil market shrank by 3.3
percent in 2009 to reach a volume of 22.9 billion barrels. In 2014, the global crude oil market is
forecast to have a volume of 25.4 billion barrels, an increase of 10.9 percent since 2009. The
Americas account for 42.6 percent of the global crude oil market value. 72
The oil industry consists of state owned and international oil companies, with the most
powerful and lucrative companies being the state owned organizations in the Middle East. The
giants of the industry include Saudi Aramco, National Iranian Oil Company (NIOC) and Qatar
Petroleum. “The six largest international oil companies only account for approximately three
percent of the world’s total output, with ExxonMobil’s oil reserves [accounting] for less than
one percent of the world’s total.” 73 As of 2009, the top ten international petroleum producing
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companies were (according to sales, in billions): Royal Dutch Shell (Netherlands) – US$ 458,
ExxonMobil (United States) – US$ 425, British Petroleum (United Kingdom) – US$ 361, Chevron
(United States) – US$ 255, Total (France) – US $223, ENI (Italy) – US$ 158, Synopec-China
Petroleum (China) – US$154, PetroChina (China) – US$114, Gazprom (Russia) – US$97, and
Petrobras-Petroleo Brasil (Brazil) – US$ 92.74
6.3.2 OGES in Canada 75
In 2010, Industry Canada estimated that the OEGS industry accounted for about $80.7 billion in
revenue and employed about 230,000 people within the two main subsectors. Although every
province participates in this industry Western and Atlantic Canada play a larger role.
Small and Medium sized Enterprises (SMEs) are prominent in the OGES industry with about
2,300 enterprises operating across the various sub-sectors. These enterprises represent all
aspects of the value chain in the industry and provide manufacturing and services mainly to
larger corporations. The industry serves both the domestic and international markets which
include the US followed by Russia, the United Kingdom, Australia, the Middle East, China, Asia,
and South America.
6.4
The Brazilian Oil and Gas Sector
The National Petroleum Agency (ANP) is responsible for issuing exploration and production
licenses and ensuring compliance with relevant regulations. Recent legislation concerning presalt exploration and production has changed the operating environment. The term ‘pre-salt’
refers to “a group of rocks located in the marine portions of most of the Brazilian coast, with
potential for the generation and accumulation of oil.” 76
Most oil production in Brazil comes from the South-eastern region, mainly in the Rio de Janeiro
and Espírito Santo states. More than 90 percent of Brazil’s oil production is offshore in very
deep water and mostly consists of heavy grades. There are five fields in the Campos Basin
(Marlim, Marlim Sul, Marlim Leste, Roncador, and Barracuda) that account for more than half
of Brazil’s crude oil production. These Petrobras-operated fields each produce between
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100,000 and 400,000 barrels per day. 77 Refer to Appendix “D” for Proven Oil reserves (onshore
and offshore) by State – 2000 -2009.
Exploration and Production (E&P) activities in Brazil are carried out by 72 groups of which 36
are foreign companies. 78 Brazil has approximately 12.9 billion barrels of oil reserves in 2011
(second largest in South America behind Venezuela). 79 Brazil is also one of the fastest growing
oil producers in the world. It currently possesses 1.9 million barrels per day of crude oil refining
capacity spread amongst 13 refineries (11 operated by Petrobras, the largest being the
360,000-barrel per day Paulinia refinery in Sao Paulo). 80 The offshore Campos and Santos
Basins, located off of the country’s southeast coast, hold the vast majority of Brazil’s proven
reserves. 81
Petrobras is state owned and the most dominant player in the industry (it holds strategic
positions in the up-stream, mid-stream and down-stream sectors). It held a monopoly in the
country until 1997, when the government opened up the sector. Other companies in the
industry include Royal Dutch Shell, Chevron, Repsol, Anadarko, Devon, Statoil and the BG
Group.82 Petrobras plans to increase its Brazilian refining capacity to more than three million
barrels per day by 2020. Under the company’s 2010-2014 business plan, Petrobras will build
five additional refineries to meet this goal.” 83 The Brazilian oil company OGX is expected to
start producing in the Campos Basin in 2011. Brazil is the second largest producer of ethanol in
the world behind the US.84
There are several Industry Sectors for Oil and Gas in Brazil. This includes biofuels
manufacturing, the extraction of crude petroleum, natural gas extraction, oil and gas industry
regulation, oil refining, and petroleum and petroleum products wholesalers. In 2009, oil
production exceeded oil consumption. Brazil is predicted to be a net exporter of oil through
2012, and crude oil exports are expected to increase.
Brazil also imports some crude oil to
meet the demand of its refinery fleet. 85
The US Commercial Service reports, "The 2010 estimate for Brazil’s oil and gas equipment and
services market is US$ 65.7 billion. Of that amount, US$ 17.4 billion is imported with about US$
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8.7 billion coming from the US. These figures do not include operational expenses, which would
add approximately 40 percent to the market." 86
6.5
6.5.1 Political
The National Petroleum Agency in Brazil (Agência Nacional do Petróleo - ANP) is responsible for
issuing exploration and production licenses and ensuring compliance with relevant regulations,
which controls competition in the country.
The regulatory framework for pre-salt reserves was approved in 2010 and contains four primary
legislations. 87
•
A new agency, Petrosol was created to administer new pre-salt production.
•
In exchange for larger ownership shares the government would be permitted to
capitalize Petrobras by giving it 5 billion barrels of unlicensed pre-salt reserves.
•
A new development fund to manage government revenues from pre-salt oil was
established.
•
A new production sharing agreement (PSA) system for pre-salt reserves was set up.
Brazil is expected to hold an eleventh auction round for exploration blocks in 2011 but only
after the debate over royalty distribution among Brazilian states is completed.
High tariffs aimed at protecting domestic manufacturers were changed to match General
Agreement on Tariffs and Trade (GATT) levels. All import taxes and some state taxes could be
exempted due a special tax regime that relate to the oil and gas sector.
6.5.2 Economic
As of April 03, 2011, the price of crude oil is US $ 107.94 per barrel.88 In recent years, the price
of oil has passed US $100 per barrel, but could continue to rise and surpass current levels with
the uncertainty in the Middle East. The OPEC nations also control the price of oil by the
amount of oil that they produce and ship. An increase in production would decrease the price,
whereas a decrease in production would increase the price (if all other factors remain the
same).
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6.5.3 Socio Cultural
A constant threat to the world oil industry is the risk of natural disasters and man-made
disasters. An example would be the Deepwater BP oil crisis in the Gulf of Mexico in 2010. A
similar disaster by any oil company in the future will lead to economic, environmental and
financial disaster. Any company that has to deal with the cleanup of an oil spill will receive a
backlash from the public, especially from environmental groups.
6.5.4 Technological
More than US$4.5 billion in R & D is expected to be spent by Petrobras by 2016. Petrobras has
tied up with Brazilian universities and will collaborate on research and development projects to
overcome challenges faced during deep sea drilling and advance ultra-deepwater oil
production. 89
6.6
SWOT Analysis
6.6.1 Strengths
Non-OPEC countries have contributed to the global increase in oil production over the last year,
and Brazil is among the leaders in this category. Brazil is expected to have approximately 12.9
billion barrels of oil reserves in 2011 and is predicted to be a net exporter through the year
2012.90 The OGES part in Brazil is large and was estimated to be US$65.7 billion in 2010. Since
1997, the sector has been opened up by the government and is no longer a monopolistic
market. This has resulted in large international players setting up base in Brazil. Besides a rich
reserve of oil and gas, Brazil is also the second largest producer of ethanol in the world.
6.6.2 Weaknesses
With the National Petroleum Agency in Brazil (ANP) in charge of issuing exploration and
production licenses, the increased bureaucracy could hamper possible growth and limit the
number of new players in Brazil.
All potential foreign suppliers need to have a local partner or subsidiary which is registered and
filed under local requirements in order to supply to local companies. Several criteria such as
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economic-financial position, assessment of technical qualifications and adherence to specified
ethical practice are of prime importance to be selected.91
6.6.3 Threats
The Brazilian oil reserve is located offshore (in deepwater), at depths of more than 7,000
meters. Oil drilling at such depths is a concern because there is a risk of another BP Deepwater
disaster, leading to environmental and economic consequences.
Current companies operating in Brazil only have a contract with the Brazilian government for 34
years, including the exploratory phase and the production phase of the projects. The maximum
period for oil production is 27 years. It is unknown if a company can apply for another contract
when the current one expires. In addition, the government receives a cut of the profits from
the oil company.92
6.7
Petrobras, Brazil’s largest oil company plans to invest US$ 224 billion over the next five years.
These investments are directly associated with the pre-salt discoveries and will represent many
opportunities for Canadian companies seeking to invest in Brazil.93 Moreover, Petrobras won
the majority of the concessions from the auctions held in 2008. Therefore, a majority of the
opportunities in the OGES sector are in offering services to Petrobras.
Brazil will be holding pre-salt auction for Oil and Gas blocks later this year. This would provide
an opportunity for partnerships to be forged with the companies that win those contract(s).
The US Commercial Service reports that the following opportunities are open to foreign
operators: 94
Longer-term equipment and service procurement and operational expense needs from
all oil companies (Petrobras and others) could exceed one trillion dollars through 2020 as
the "Tupi" and other pre-salt fields are developed. For its expanded exploration and
production activities, Petrobras plans to contract about 300 new vessels (e.g. oil drilling
and production platforms, ships, platform support boats, and very large crude oil
carriers.) Other equipment and component purchase forecasts for 2010-2014 include:
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•
Pumps (centrifugue, alternative, dosing, etc)
•
Compressors (rotating, centrifugue, turbo-compressor, alternative, etc) 3,200 units
•
Valves (sphere, retention, globe, and others)
834,000 units
•
Heat exchangers (including surface condensers)
3,900 units
•
Bolts
8 million units
•
Gaskets
660,000 units
•
Forged components
15,000 tons
•
Casted/smelted materials
70,000 tons
18,300 units
(Source: 6th Annual ONIP Meeting)
Refer to Appendix “E” for a comprehensive list of equipment and service requirements by
Petrobras.
The oil and gas sector has grown tremendously in Brazil, mainly in Rio de Janeiro, especially
because of the pre-salt discoveries. Available opportunities include the pre salt, investment in
shipyards and sales to Petrobras. Although there are several foreign companies in this sector at
the production level, the oil and gas sector revolves mainly around Petrobras. However, in the
accessories and equipment sector there are fewer foreign companies. Petrobras imports
certain parts and equipment from other countries because it is difficult to find them in Brazil.
Many companies have established departments to purchase parts and equipment in the US
(Houston) and Scotland. One of the representatives interviewed noted that equipment sold to
Petrobras must have the best quality.
Currently, there are many jobs available but few qualified employees to fill vacant positions in
Brazil, so the workforce needs to be better trained and equipment technologies need to be
improved. In the oil and gas equipment and accessories sector companies import raw material,
machines and accessories such as equipment connection, high pressure hoses, usually from
China because of the lower price.
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There are several opportunities available due to the massive ongoing investments. Brazil lacks
new technologies in the oil and gas equipment and accessories sector. So a company that
acquires a different technology may be able to add value to its products or even reduce its
production costs.
Canadian expertise can be applicable to reduce production costs by bringing in new
technologies and equipments. Canadian expertise could also be useful in the training of the
labor force and also in machinery development. The easiest way to participate in the sector
would be through partnership or joint venture.
6.8
The Atlantic Canadian Oil and Gas Sector 95
The energy sector in Atlantic Canada has been growing. The oil and gas industry is one of the
strongest components of the energy sector and expects the annual growth output to reach 15
percent over the next decade. There are three major oil and gas development projects
underway in this region.
96
Three oil refineries in Atlantic Canada have access to marine
transportation for crude oil and petroleum products: the Irving Oil Refinery in Saint John, New
Brunswick; the Imperial Oil Refinery in Dartmouth, Nova Scotia; and the Point Tupper
Fractionation Plant in Point Tupper, Nova Scotia.
The region is also a world leader in energy production, export and research. Atlantic Canada has
topnotch researchers and research facilities, high quality business and transportation
infrastructure, low business and energy costs and well-educated workers The industry is
supported by several companies involved in research and development, drilling, and marine
remote sensing. Other areas of strength include manufacturing of PVC solid floatation, oil
containment booms, oil storage tanks, berms, silt barriers and curtains, permanent rubber
booms, and oil spill response equipments. There is also expertise in production of radio and
data acquisition products for global customers in research, military, and search and rescue.
Atlantic Canada has also developed international niche markets in oceanography, meteorology,
defense, oil and gas and coastal environments and has developed state-of-the-art data
acquisition and telemetry systems for severe environments.
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Since 1998, Atlantic Canada's oil and gas exports have increased by 580 percent, to just over
$12.6 billion in 2009. The value of oil and gas exports currently accounts for more than 60
percent of the total value of the region's top 10 exports. Some of the industry's biggest players
are active in Atlantic Canada, including ExxonMobil Canada, Husky Energy, Suncor Energy, BP
Canada Energy, Chevron Canada Resources and Shell Canada.
Some Atlantic Canadian business leaders perceive that the oil and gas sector hasn’t really been
growing, and it could in fact be declining. However, there have been some positive oil and gas
policies relating to blast resistance lately. Exports include oil, gas, educational services, metal
fabrications, and blast resistant tents. Export is a large factor in the industry and importers
include Brazil, Trinidad, the USA, Mexico, Israel, and Europe. The Atlantic Canadian advantages
include being known for Canadian and Nova Scotian education, training, good service, and
workability. Other advantages include strict regulations which have led to a good track record
and being more economical than other alternatives.
Most companies have had experience in Brazil. Some work with underwater wire and rope
cleaning and fixing. However, some companies have the perceptions that in the past there were
issues around getting paid, corruption, regulations not being in place, and it being near
impossible to get access to Petrobras. It took years to break in to the market. These stories tend
to discourage others from trying. Although things seem to have improved lately, the larger
players tend to be more successful. Those that have experience got their opportunities through
trade missions, and through ACOA. Experience from trade shows indicates that Brazilians are
inclined to say positive things, but were unwilling to work towards win-win partnerships. Most
companies would be very interested in Brazil, especially since the pre-salt discovery. Interests
include safety products and services, cleaning, pipes, drill bits and distribution.
6.9
There are tremendous opportunities to supply products and services to the OGES sector in
Brazil with both domestic and foreign oil and gas operators. However, many of these
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opportunities are with Petrobras. A comprehensive list of these opportunities has been
provided in Appendix “E”.
In order to supply to Petrobras, Atlantic Canadian firms must become fully aware of their
procurement guidelines. Petrobras provides suppliers with an online system to register as
goods and service suppliers. Both potential and existing companies can gain information about
the legal, economical, technical, managerial and Health, Safety and Environment (HSE)
requirements that must be adhered to in order to become a supplier to Petrobras. A detailed
guide can be found on their website. 97
Other opportunities in the sector that Atlantic Canadian companies can explore are training and
education services and innovative technologies related to the oil and gas sector.
It is also important to note that in order to be considered as a supplier to any of the oil and gas
companies in Brazil, Atlantic Canadian companies will need to establish local presence that
conform to Brazilian requirements. The ANP would need to be consulted by companies looking
to expand operations in the country. There is a fairly elaborate process that international
companies need to follow in order to enter the Brazilian energy market, specifically the oil and
gas industry. More information can be found on the ANP website. 98
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7. Life Sciences and Biotechnology
7.1
Introduction
The Life Sciences industry has been characterized by advances and improvements in technology
and R&D processes thus intensifying market competition and fuel extensive efforts in successful
innovation. Simultaneously, consumer demand and shifting demographics are exerting greater
pressure to fulfill the promise of efficient and accessible innovative healthcare solutions.99
7.2
Subsectors
The Life Sciences sector includes companies in the fields of biotechnology, pharmaceuticals,
biomedical technologies, life systems technologies, nutraceuticals, food processing,
environmental, biomedical devices, and organizations which are involved in the various stages
of research, development, technology transfer and commercialization.100
"Biotechnology is sometimes not considered a distinct sector but more a collection of
technologies that enhance the discovery and development of new medicines, and diagnosing
and treating patients more effectively." 101 IBIS World’s definition of the sector, “Biotechnology
is also the application of science and technology to living organisms as well as parts, products
and models thereof, to alter living or non-living materials for the production of knowledge and
biotechnology products and services. The definition of biotechnology as used by the US Census
Bureau and the National Science Foundation is - the application of molecular and cellular
processes to solve problems, conduct research, and create goods and services.” 102
7.3
Global Context
In 2007, the global biotechnology market generated total revenues of US$171.8 billion compound annual growth rate (CAGR) of 10.7 percent for the period spanning 2003–07.
103
In
2009, the market grew by 4 percent to US$ 200.9 billion. In 2014, the global biotechnology
market is forecasted to have a value of US$ 318.4 billion, an increase of 58.5 percent from
2009. At 66.2 percent of the market's total value Medical and Healthcare is the largest segment
of the global biotechnology market. Currently, 48.4 percent of the global biotechnology market
value is represented by the Americas.104 The global biotechnology market has grown across the
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world over the last seven year. However, with many patents expected to expire in the near
future and increasing competition the market is expected to decline for the next few years.105
According to Industry Canada, "In 2005, the number of Canadian biotechnology companies
grew to a total of 532, an increase of 9 percent since 2003. According to E&Y, Canada continued
to have the second highest number of biotechnology companies in the world demonstrating a
supportive business climate and Canada’s commitment to growing this vital sector. In 2005,
biotechnology company revenues were $4.2 billion, a 9 percent increase over 2003
revenues." 106
7.4
The Brazilian Life Sciences and Biotechnology Sector
7.4.1 Biotechnology
Biotechnology companies in Brazil are sub-divided into seven sectors: Human and Animal
health, Agriculture, Reagents, Bioenergy, Environment, and Mixed. Human health and
agriculture, represents almost 50 percent of the industry’s activity and represent Brazil’s
research expertise and competitive edge.
107
See Figure 8 for the breakup of Life Sciences
companies by sector.
Figure 6: Percentage of Life Science Companies in Brazil by Sector.
Life Science Companies By Sector (%)
8%
Human Health
4%
31%
9%
Agriculture
Reagents
Animal Health
14%
Mixed
16%
18%
Enivornment
Bioenergy
Fundação Biominas reports that, "Almost one third of Brazilian life science companies are
exporters, reporting sales of US$ 48.4 million in 2008. The most common destination was Latin
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America (33.3 percent), followed by Europe (26.7 percent) and USA/Canada (17.8 percent).
Moreover, 56 percent of the non-exporters plan to enter the international market in the next
couple of years." 108
According to a UK Trade and Investment report, "In 2010, Brazil had approximately 350
biotechnology companies, with an estimated annual turnover of £2.6 billion ( US$4.2 billion)
[representing 1.5 percent of Brazil's GDP] and employed around 28,000 people. Brazil is
internationally recognized for its biotechnology advances, including genomics, cell therapies
(stem cell research), phytotherapics and vaccines." 109 Brazil has over 1,200 patents registered
through the large stem cell research it undertook. Further, in 2009, Brazil was the second
largest user of genetically modified crops (soy, corn and cotton). 110
7.4.2 Health equipment
In 2008, Brazil was one of the top five producers of dental and medical equipments with a
market value of US$ 5.3 billion. In the same year, Brazil exported US$ 580 million worth of
health equipments. This health equipment market caters to over 500,000 hospital beds in 8,200
hospitals and 800 specialized hospitals as well as 7,500 diagnostic units. 111
7.4.3 Pharmaceuticals
The Pharmaceuticals sector in Brazil has been growing at the rate of 8 – 10 percent annually
and was valued at approximately US$ 7 billion. However, the generic drug market has been
growing much faster (20 percent annually). Euromonitor International estimated a growth of
30 percent in the consumer healthcare market from 2009 -2014. Refer to Appendix “F” for
sales of consumer health products by Sector. Brazil is one of the leaders in development of
generic medicines. It is has also made strides in research and development and holds several
patents for basic health, HIV and cancer combative drugs. 112
7.4.4 Vitamins, Nutraceuticals and Phytotherapics
The value of the vitamins and nutraceuticals market is approximately £250 million ($400
million) and is growing at 20 percent each year. "According to the Brazilian Association for
Complementary Medicine (ABMC), this can be related to three main factors: the valorization of
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quality of life, the low cost of the products and the scientific studies corroborating its efficacy.
Brazilian women are the main consumers of vitamins and nutraceuticals, representing 75
percent of the market."113
7.5
7.5.1 Political
The Biotechnologies market in Brazil has been booming in part due to new regulatory
incentives and funds that companies are receiving. In 2007, The National Policy for
Biotechnology – a decree supporting the development of biotechnology in Brazil was signed by
President da Silva (Lula). The objective of the decree was to improve collaboration between the
government, universities and private sector and to develop Brazil into a Biotechnology leader
over the next 15 years. An investment of approximately US$ 5.0 billion is expected over the
next decade and is being spent towards encouraging as many as double the start-up companies
and the development of 20 new PHD programs. Fundação Biominas reports, "The goal is to
encourage biotechnological applications in five different fields: human health, food security,
animal health, industrial products and environmental quality. [Sixty-eight] percent of all
Brazilian life science companies benefit from public policies, demonstrating the relevance of
governmental support. The companies benefit mainly from grants (48.4 percent), but facilitated
credit (9.5 percent) and tax exemption (5.3 percent) are also available incentives."114
7.5.2 Economic
The Federal Government Industrial, Technological and Foreign Trade Policy (PINTEC) is
supported by the Brazilian Ministry of Science and Technology and has been instrumental in
developing many strategic projects that support research, development and innovation. Some
examples reported by Fundação Biominas include: 115
•
Since 2001 the Biotechnology Sectoral Fund has been investing expressive resources in
the organization of genome networks and biotechnological projects relevant to
agriculture (germplasm banks, culture collection) and health (phytomedicines and
biopharmaceuticals).
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•
The Brazilian Innovation Agency (FINEP), which provides grants, i.e. non-reimbursable
funds, and loans to support every stage and dimension of the scientific and technological
development cycle, invested US$ 1 billion in 2007, and US$1.5 billion in 2008 on the
development of innovative products and processes.
•
Recently, FINEP has created new instruments to support nascent high-tech firms. The
Inovar Project, supported by the Inter-American Development Bank (IDB), will promote
new venture capital funds in Brazil. The First Innovative Company Program (PRIME) was
launched to encourage the creation of more than 6,000 innovative companies in the
country from 2009 to 2011.
•
Another instrument in place is the Program for supporting research in enterprises
(PAPPE), a program to provide research grants to individuals in small companies, similar
to the Small Business Innovation Research Program (SBIR), in the US.
A Financial Times special report about genetically modified (GMO) crops states that there has
been a lot of controversy about GMO crops over the years and consumers have had reservation
about consuming genetically engineered or cloned for food, dairy and meat production. Despite
these fears biotech plants have been extensively used in US and other developing nations.
Despite this GM crops abundantly grown in Brazil and the report further states, "the US
accounts for almost half the world’s GM planting (64m hectares), followed by Brazil (21.4m ha)
and Argentina (21.3m ha)." 116
7.5.4 Technological
Technology advancement in the biotechnology sector is extremely important and involves
supplementary focuses such as robotic technologies, electronic medical records and
information technology in hospital management systems. An investment in Information
Technology worth about £32 million ( US$51 million) is expected by 20 large healthcare
organizations in Brazil in an attempt to meet regulations set by the government’s healthcare
regulator ANS (National Agency for Supplementary Healthcare). 117
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7.6
SWOT Analysis
7.6.1 Strengths
There is a high amount of international interest in the Brazilian market. Multinational
pharmaceutical companies are looking at options to acquire local generic pharmaceutical firms.
However, with the extensive investment by the Brazilian government in the biotechnology
industry, local companies themselves are looking at the potential to export and grow both
domestically and internationally. These factors make the Brazilian biotechnology industry
attractive for foreign investors as do the stability of Brazil’s economy, better access to
medicines for the population and governmental policies regarding healthcare. 118
7.6.2 Weakness
Despite Brazil’s attempt and extensive effort to raise expertise in the biotech industry, the
current education and training levels of the workforce is likely to place a severe dampener on
the progress that Brazil hopes to achieve. Also, it has become increasingly difficult for the
private sector to attract qualified workforce and match the incentives provided by the public
sector. Even with changes in the government legislation that support innovative research and
development with public funding these factors are likely to adversely affect the industry. 119
7.6.3 Threats
Patent laws and governmental bureaucracies associated with them sometimes deter
multinationals from introducing new products to the Brazilian market. Patent applications for a
drug could take well over seven years for The National Health Surveillance Agency (Agência
Nacional de Vigilância Sanitária – ANVISA) to process. In some instances even when patents are
approved there could be a possibility that they may be withheld by ANVISA on grounds of
public access. Most of these regulatory concerns tend to stem from the fact that ANVISA
regulators have limited experience in product development and manufacturing. Ethics approval
for clinical trials, biosafety and biodiversity regulations are stringent and cause significant
hardship and delays for companies. 120 There is an estimate that about 18,000 pharmaceutical
patents are currently pending for approval. Another threat is the cascading tax method applied
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to the manufactured goods in Brazil which affect several industries. However, the government
is expected to reduce these taxes so as to make drugs more affordable to the Brazilian
population. 121
7.7
The Brazilian pharmaceutical market represents several opportunities as the size of the market
is large and is expected to continue growing as the government lowers taxes on these products.
Most of the raw materials used in production of generic drugs in Brazil are imported (about 85
percent). Further, the generic drug market is expected to expand due to the expiry of several
drug patents in 2010. There is also a major demand for equipment and services required for
building of pharmaceutical plants. This has led to multinational companies acquiring local
laboratories and creating a strong presence in Brazil. 122
There is a huge demand for health products in Brazil of which the three largest are cough, cold
and allergy medication, analgesics, and vitamins and dietary supplements (neutraceuticals). 123
Stakeholders in the Brazilian biotechnology sector believe that the sector is developing with an
expected growth of 15 percent especially for drug companies. However, the life sciences and
biotechnology industry does not have sufficient numbers of qualified work force.
Companies interviewed currently imports raw material, from USA, France, Germany and China
because of the high quality products at competitive prices. However, these companies did not
import any products from Canada.
There are many available opportunities, such as generic medications, cleaning products,
genetics and microbiology. Brazil could import modern machinery to produce cleaning
products. Canadian companies could participate in biotechnology sector through joint ventures,
partnership and technology transfers.
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7.8
The Atlantic Canadian Life Sciences and Biotechnology Sector
The four Atlantic Provinces are leaders in the biotechnology industry. Newfoundland and
Labrador is recognized internationally for its expertise in marine biology. Nova Scotia’s life
sciences industry is a global leader in human health, medical diagnostics and marine sciences.
Prince Edward Island and New Brunswick are at the forefront of global research in agricultural
biotechnology 124
7.8.1 Regional Profile 125
BioteCanada provides a regional overview of the Atlantic Canadian strengths in the global
market.
Prince Edward Island
Prince Edward Island’s Bioscience Cluster is a leading center for bioactives based research,
product development and commercialization for human, animal and fish health and nutrition.
PEI has established an outstanding collaborative environment of business, research, academia
and government organizations working together to build a strong bioscience-based economic
sector in PEI.
Nova Scotia
Nova Scotia is home to more than 50 life sciences companies with close to 500 products
competing globally. In addition to those already in the marketplace, industry has a rich pipeline
with more than 300 products at various stages of development.
New Brunswick
New Brunswick’s strong R&D and knowledge assets, coupled with abundant forestry,
agriculture, and marine resources, are spawning an innovative bio-industry cluster. With
plentiful forestland and proximity to the sea, New Brunswick is a world leader in tree
improvement and the development of "green" technologies for forest pest protection, as well as
a global leader in the development of "green" fish therapies, fish brood stock and new species
for aquaculture.
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The life science industry is holding steady, but at a higher rate than the rest of the economy,
and it has weathered the recession well with smaller companies leveraging their resources into
research. It is seen positively by most governments and PEI is developing truly helpful policies
to support this sector.
Exports include technical expertise, bio-pesticides, diagnostics, health products, healthier food,
drugs, botanical extracts, medical devices, and nutritional supplements. Importers include
Europe especially Germany and France, other provinces, South America, China, Asia, a small
amount for Africa, and a large amount for the US. Advantages include a good research and
development environment, lower cost of doing business with a favorable tax regime, good
work force, better products, and being niche or specialty players.
Most companies interviewed did not have experience in the Brazilian market, but know that it
holds promise. Brazil did not seem to be affected by the American recession. Many have
identified Brazil as a potential market; however there are deterrents to doing business in Brazil
due to the complexity of its fast paced populous cities. Moreover, focusing on Brazil would
mean that higher priority markets like the US would need to be set aside.. Introductions to the
Brazilian market have been made by NATI, DFAIT, Canadian embassies, consulates, and ACOA.
Many companies would be interested in doing business with Brazil. They know the country has
money to spend, but language barriers are a concern. Companies also realize that a good
trusted partner is important because it can be very hard getting into any foreign market.
Government incentives and efforts would also have to be sector driven and not generic. There
is massive biomass potential, and it could be a captive market for things like diagnostics for
cancer because Brazil may have limited resources in that area. Distribution would also be an
area of interest, if the distributor was well trusted.
7.9
following segments:
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•
Despite the regulatory obstacles the generic drug market in Brazil is large and growing.
Brazilian companies are looking for expertise and advanced technologies to improve
their efficiencies. Given Atlantic Canada’s pioneering innovation there may be
opportunities available for technology transfer.
•
There is also a shortage of skilled workforce in the biotechnology industry providing
opportunities for training and educational services.
•
Nutraceuticals are in high demand in the Brazilian market. However, regulations
procedure established by ANVISA need to be followed in order to import Nutraceuticals
to Brazil.
•
Almost one-fifth of the life science sector is focused on agriculture, there are
opportunities for Atlantic Canadian companies to transfer technology related to tree
improvement and "green technologies for forest pest protection".
Detailed guidelines on petitions, required documents, registration application processes, import
of products, company operation authorization, and payment of sanitary surveillance inspection
fees can be requested via email ([email protected]) from the ANVISA website. 126
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8. Ocean Technology
8.1
Introduction
The Ocean Technology Sector is a broad area which encompasses many different industries and
focus areas. Government of Canada breaks Canada’s Ocean Technology Sector into eight
sectors: Aquaculture, Defense and Security, Education and Training, Fisheries, Marine
Recreation, Marine Transportation, Ocean Observation and Science and Offshore Energy. 127
8.2
Subsectors
Industry Canada has identified 71 subsectors listed under Ocean Technologies. Refer to
Appendix "G" for a list of the subsectors.
8.3
Global Market
In 2000, the global marine industries market was estimated to be valued at US$ 1,084 billion. In
this sector the biggest contributors are oil and gas, shipping and naval expenditures.128
Figure 7: Global Marine Industry - 2000
Global Marine Industries
Underwater Vehicles
Minerals
Ocean Survey
Education & Training
Submarine Cables
Port Management
Marine Equipment
Marine Services
R&D
Aquaculture Production
Shipbuilding
Leisure Boating Revenues
Submarine Telecoms Revenues
Oil & Gas Expenditure
Naval Expenditure
Shipping Revenues
Offshore Oil & Gas Production
1
1
1
3
8
13
15
17
19
22
32
38
$US billion (2000)
Total Worldwide Market
$US 1,084 billion
69
86
225
234
300
0
50
100
150
200
250
300
350
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Although this market is dominated by these key sectors many of the smaller sectors (Ocean
surveys, underwater vehicles, etc.) are vital to the success of these larger sectors. The global
market for ocean observation systems was estimated at approximately US$1.8 billion in 2006
and was expected to grow to US$2.2 billion by 2011.129Countries prominent in this sector
include the US, France, Germany, Norway, Japan, Sweden, the Netherlands, Denmark and the
United Kingdom. International opportunities increase due to environmental awareness as well
as regulatory obligations across coastal regions.130
8.4
The Brazilian Ocean Technology Sector
The Brazilian Ocean Technology sector is divided differently than in Canada. Generally ship and
platform building are tracked separately to Ocean Observation Systems and Naval defense
shipbuilding.
The shipbuilding industry has seen a huge boom and the Brazilian government made this one of
the focuses of its economic development plan. Most of the growth is driven by the oil and gas
sector and Brazil is now constructing some of the largest most advanced supertankers in the
world. In addition to these tankers, the oil industry, along with government initiatives has
created a huge market for other types and sizes of vessels. Currently there are 50,000 people
employed as shipbuilders in Brazil. Sixteen new shipyards are being built and eight older
facilities are being refurbished.131 At present, Brazil has one of the highest levels of demand for
new ships in the world and has the fourth largest number of orders totaling US$ 4.7 billion. 132
Large players in the segment include Transocean, Pride, Noble, Seadrill, Sevan, Modec, BW
Offshore and Teekay. Additionally, international market leaders such as Samsung Heavy
Industries, Hyundai Heavy Industries, Atlantico Sul (ATL), Daewoo, Maua Jurong, STX and the
Chinese shipbuilding giant Cosco (CSSC) are also setting up operations in Brazil. Although,
Brazil’s demand for new ships is high, the government is positioning Brazil to be a shipbuilding
nation and endeavors to build ships domestically. In order to fulfill local content policies
international companies need to partner with Brazilian shipbuilders or investors. 133
This focus on shipbuilding and maritime vessels is supported by the government’s plans to
expand their navy by investing US$ 250 billion dollars over the next 30 years. 134 This booming
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shipbuilding industry is causing growing pains and the current infrastructure, including docks
and repair yards, are inadequate to handle these new strains. 135
Other areas of growth have been Ocean Observation systems for Oil and Gas Exploration as
well as Ocean current and weather tracking. 136 Brazil has also begun to invest in offshore
renewable energy including wave/tidal power and offshore wind farms.137138
8.4.1 Defense
In order of priority, the near-term projects are the submarine program, including 20
conventionally powered subs and six nuclear-powered units; 139 a patrol vessel program of three
different classes: 500 tons, 200 tons and an 1,800-ton Ocean Patrol Vessel (OPV); a new fleet
tanker (AOR); an Escort Frigate program of three ships at about 6,000 tons each; and a MultiPurpose Ship (LPH) of about 20,000 tons. 140
8.4.2 Acoustic Systems and Equipment
Brazil’s expanding offshore oil industry along with the recent events in the Gulf are driving the
demand for more stringent control and monitoring systems. Acoustic sensors which can act as
secondary Blowout Preventers (BOP) in case of emergencies are already "recommended" for all
deep sea operations in Brazil. At this time, Norway is the only other country which requires
these devices on deep sea drilling platforms. Recently a Texas company, DTC International,
won a contract to supply these types of sensors for operations on several of Brazil’s drilling
platforms. 141
Modern weather and tide monitoring buoys are currently being used in Brazil and the country
has taken the lead role in the Quickly Integrated Joint Observing Team (QUIJOTE); a program to
monitor and predict changes in the coastal zone of the South Western Atlantic. 142 AXYS
Technologies based out of Sidney, BC recently delivered three oceanographic and
meteorological data collection buoys to the Brazil Navy Hydrographic Center. 143
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8.4.3 Imaging
In addition to the new navigation and radar systems required for the upgraded navy, Brazil’s Oil
and Gas industry and research institutions are in need of modern equipment that will allow for
accurate imaging and identifying in deep sea conditions.144
8.4.4 Offshore Energy
Brazil has begun to explore offshore energy options and in the north there is the potential to
utilize the tides as an energy source and the southeastern coastline offers opportunities to
harness wave energy. 145 The Brazilian government has just signed a contract that will see
(additional) onshore and offshore wind farms become operational by January 2013. 146
8.4.5 Marine Communications
The Brazilian market will need upgraded communication systems for their new ships and ports.
Recently the Brazilian Government awarded a contract to upgrade the existing national Marine
Communication System.147
8.4.6 Instrumentation and information systems
The ability to not only collect the information but also to be able to use this data is in high
demand. It has been identified that environmental agencies, meteorological services, harbor
authorities, civil protection, research organizations and fisheries departments all are in need of
these systems. 148
8.4.7 Platforms and vehicles
Deep sea platform services including drilling and support activities will be in high demand. 95
percent of Brazil’s goods are shipped by sea and as Brazil continues to grow the current
shipping and dock infrastructure is in need of improvement. Many private companies (most
notably Vale) have invested heavily into upgrading these shipping and dock capabilities. 149
Driven by the oil and gas industry Brazil has begun to invest heavily in their ship building
capabilities. There are currently 82 ships being built (including super tankers) and another 150
in the planning stage. The “Merchant Shipping Fund” (FGCN) is a government program designed
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to free up capital for shipbuilders in Brazil and before 2014 it is expected that it will help invest
US$ 17 billion into the Brazilian ship making industry. 150151
8.4.8 Various Services
The oil and gas industry is estimated to spend US$3.1 billion in ocean research. Brazil has a long
list of sites that companies would like mapped and the requirements of these companies
continue to expand. A current integrated metocean or seabed stability study associated with
well abandonment involves ships, stationary buoys, coastal stations, cores, geophysical lines,
lab testing, reports and modeling. While costs vary with market dynamics, a typical 21 day
cruise is in the range of US$0.5 to US$0.75 million. 152
8.5
8.5.1 Political
Deregulation of the oil industry has attracted many investors and been a boom for the marine
and ocean industry. Brazil has by far the largest military budget in the region which is focused
on protecting their natural resources (mining, oil and gas). This includes a nuclear submarine
program. There is increased environmental awareness and regulations.
Some of the
legislations currently being developed are:
1. Well abandonment procedures
2. Oil spill procedure and reporting
3. Criteria to combat oil spillage
4. A national environmental licensing system 153
Brazil has taken the lead role in the Quickly Integrated Joint Observing Team (QUIJOTE)
program to monitor and predict changes in the coastal zone of the South Western Atlantic.
8.5.2 Economic
The shipbuilding, offshore oil and naval industry is booming and is supported by the
Shipbuilding Guarantee Fund (FGCN) – Government program which is expected to see an
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additional US$ 17 billion of capital injected into the Brazilian shipbuilding industry. The
shipbuilding industry in Brazil has positively impacted its trade balances by directly lowered
currency outflows for payment of shipbuilding at foreign shipyards as well freight payments.154
Further, the annual funding through the Merchant Marine Fund (FMM) increased from US$ 300
million in 2001 to US$ 2.4 billion in 2009. 155
There is increased environmental awareness and presence on the global stage. There has been
an increasing level of pride and a willingness to exert influence on the global stage. The
shipbuilding industry contributed to the generating direct and indirect job opportunities and for
developing new technologies.
8.5.4 Technological
The massive increase of Exploration and Production (E&P) in Brazil, especially in deep-water is
giving rise to a new subsea equipment and technology industry in Brazil. 156 Outdated docks and
ship repair yard infrastructure and technology needs enhancement.
8.6
SWOT Analysis
8.6.1 Strengths
The strong oil and gas sector in Brazil has resulted in large investments in the ocean
technologies sector. Government initiatives and policies have fuelled growth in defense,
acoustic systems and equipment, offshore energy, marine communication, information
systems, deep sea platform and vehicles and research.
8.6.2 Weaknesses
The growth of the ship building industry is hindered by the current infrastructure. Docks and
repair yards need overhaul and upgrades to meet the current demands. There is a lack of
qualified workforce to meet the growing demands of the sector.
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8.6.3 Threat
According to International Maritime Organization (IMO) estimates, world shipping is
responsible for about 3 percent of global CO2 emissions. Emissions from shipping are predicted
to triple by 2050.157 In order to protect climate and reduce emissions there are likely to be
stringent regulations which could threaten the shipping industry.
8.7
This is an extremely important market area for Atlantic Canada and for Brazil. The Ocean
Technology sector supports the two strongest drivers to the Brazilian economy (mining, oil and
gas) and has benefited from numerous government programs, including the FGCN. In addition
the government’s recent focus on expanding the navy has helped create numerous
opportunities for foreign investors and companies.
The largest opportunities come from technologies and services directly supporting mining, oil
and gas or naval shipbuilding operations.
Outside of these key areas there are strong
investment opportunities for modern environmental imaging, tracking and measurement
systems. Government and industry in Brazil have also identified the need to modernize and
expand the ports and associated infrastructure.
Some of the current equipment that is being imported by Brazil for Offshore Supply Vessels
includes:
•
Propellants
•
Controlled Pitch Propeller
•
Water and Oil Separator - 0.5M3/H, P=2BAR (Class)
•
Waste Treatment System for living quarters
•
Hydraulic Control Unit
•
Tow Bar
•
Offshore Cranes
•
Firefighting System (FI-FI)
•
Telecommunication and Safety Systems158
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Stakeholders in the industry believe that the trend is positive with increasing investments due
to the discovery of pre-salts. The industry will continue to grow at least until 2020. The industry
is of vital importance to the Brazilian economy because of its magnitude and breadth. Brazilian
companies are also growing tremendously because of government incentives. There are many
subsidiaries of international companies with stock capacity in Brazil. The sector is dominated by
several players such as SMD, Schilling Robotics, Sonardyne, Oceaneering, and Tritech. A large
part of this industry works with imported materials which mostly includes large equipment not
manufactured in Brazil due to lack of technology and skilled labour. Most of the imports are
sourced from the UK; however imports also come from the US, Canada, Mexico, Italy, France,
Norway, and South Africa. Advanced technology and competitive prices allow these companies
to compete in the Brazilian market. The company interviewed has experience importing from a
Canadian company called Focal Technologies (now called MOOG) based in Dartmouth, NS.
Establishing a partnership is the best way to enter the Brazilian market in this segment.
8.8
The Atlantic Canadian Ocean Technology Sector
The Ocean Technology Sector is extremely strong and diverse with approximately 140 listed
companies. These firms operate in areas such as fishery technology, satellite technology,
electronic navigation, acoustic and radar equipment, oceanography research, ship/boat
building and the oil and gas sector. 159160 Canada enjoys a strong international reputation and is
known for its leading edge technology and expertise in Ocean Technologies. Atlantic Canada is
home to a wide range of scientific and engineering expertise in this field, from ocean mapping
and charting to cold water engineering and geophysical surveying. Some of the world’s most
modern naval vessels and their integrated electronic systems have been designed and built in
this region. Atlantic Canadian companies are also designing and installing some of the most
advanced integrated ocean surveillance systems in the world. Canada is recognized
internationally as a leader in marine industries, including specialized areas such as cold water
technology. 161
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According to business leaders in the Ocean Technology sector, the industry is doubling every
five years, and it remained relative untouched by the recession. Many companies are looking
for business internationally because of new benefits like funding for research and design that
are aligned to university research. Exports include nautical charting services like chart
conversion through international standards, nautical recording systems which are regulated by
the International Maritime Organization (IMO), radar technology, hooks, electrical equipment,
knowledge and concentration work, remodeling, simulations, maritime and port security, ocean
sensing, and harsh-weather environment and arctic systems. Current importers include New
Zealand, the US, Australia, Brazil, South America, the EU, Africa, Europe, Asia, India, Norway,
Russia, China, Korea, Scandinavia, Korea and other Canadian provinces. Some of the
competitive advantages include technical expertise, location and ability to deal with adverse
climatic conditions, university engineering and research, an understanding of the industry,
being niche players, and ownership of scarce resources.
Some of the companies interviewed had experience with Brazil while others did not. Those that
had experience with Brazil exported nautical recorders for commercial ships, and oil spill
management systems with radar technology components. However, these companies have
faced problems with getting visas and with shipping restrictions. Introductions were made by
personal connections, NATI, DFAIT, embassies, consulates, and ACOA. Their work with larger
clients has not led them to Brazil. The only opportunities they had were indirect work with a
company that has connections in Brazil. The companies that are not in Brazil would probably
be interested if the effort was specifically sector driven and if barriers such as application
process and language could be worked around. Interests include navigational work like is done
in New Zealand, commercial marine electronics, maritime and port security.
8.9
Many of the opportunities available in the ocean technologies industry in Brazil are aligned to
the strengths of Atlantic Canadian companies. These include acoustic systems and equipments,
imaging and simulation, marine communications, instrumentation and information systems.
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Atlantic Canada’s reputation and expertise in the ocean technologies sectors provides it with
opportunities to collaborate with the public and private sectors for technology transfers. A
route into the Brazilian market could be through large domestic and multinational companies
that have procured contract for shipbuilding, platform building, and other services.
The two largest trade shows for the Ocean Technologies sector are the Offshore Technology
Conference and Navalshore (shipbuilding/platform). It is recommended that those Atlantic
Canadian companies involved in Ocean Technology and are interested in entering the Brazilian
market should attend one or both of these shows.
Offshore Technology Conference-Brasil
October 4–6, 2011
Rio de Janeiro, Brazil
www.otcbrasil.org
Navalshore 2011
August 3-5, 2011
Centro de Convenções
Rio de Janeiro - RJ – Brazil
http://www.transportweekly.com/pages/en/
news/articles/74795/
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9. Aerospace, Defense and Security
9.1
Introduction
The Aerospace & Defense (A&D) sector is defined as revenues earned by manufacturers from
civil and military aerospace and defense procurements which include equipment, parts, and
maintenance (EPM).162
9.2
Subsectors
The Brazilian market consists of five subsectors: Commercial and Executive Aviation, Defense
Systems, Maintenance, Repair and Overhaul (MRO), Helicopter Manufacturing, and Parts
Manufacturing.
9.3
Global Context
The global aerospace industry appears to be rebounding based on stronger global economic
activity, increased passenger and cargo traffic, and the beginning of airline capacity expansion.
New aircraft orders have declined over the last couple of years, but the industry still has an
order backlog of approximately seven years because there have been fewer contract
cancellations than expected (the overall industry cancellation rate was three percent). In 2010,
many airlines began to increase capacity, which has not occurred since 2008. Year over year,
global airline capacity has increased approximately six percent. New orders and deliveries of
commercial planes have increased, with this demand leading Boeing and Airbus to increase
production rates. 163
The report by Deloitte on the global Manufacturing industry, Compass 2010 indicates that the
global aerospace and defense (A&D) industry is showing positive signs as orders for new
commercial aircraft increased to over 800 units in 2010. There have also been orders for
business jets along with requirements for innovative technologies in cyber security, intelligence,
surveillance, reconnaissance, remotely piloted vehicles, and data fusion which are expected to
drive demand for defense companies. 164
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9.4
The Brazilian Aerospace, Defense and Security Sector
9.4.1 Aerospace
The Brazilian Aerospace Industry is the largest in the Southern Hemisphere. With the second
largest fleet of executive aircraft and the third largest fleet of helicopters and light aircraft,
Brazil is also the fifth biggest aerospace market in the world.165 The National Agency of Civil
Aviation reported that economic growth in Brazil has increased demand in the aviation market.
The leading domestic airline TAM Airline controls a little less than half (45.4 percent) of the
market share, followed by Gol Linhas Aereas, who lost market share in 2009 (fell to 41 percent
from about 42.4 percent). In 2009, other smaller airlines such as WebJet and Azul saw their
combined market share grow to 13 percent 166.
Moreover, Brazil has become one of the fastest growing suppliers in the aerospace industry
over the last ten years, with most growth occurring in the export of regional aircrafts. 167 In
2007, the export of regional aircraft accounted for 75 percent of total exports. At the same
time, 65 percent of total imports to Brazil involved the aircraft parts and 20 percent for smaller
sized aircrafts. The US and the EU are Brazil’s main trading partners - in 2007, the US and the
European Union accounted for approximately 90 percent of total imports to Brazil, while
approximately 60 percent of the Brazilian exports were destined for either one of the two
regions. A large portion of exports were sent to Canada. The Brazilian aerospace sector had a
total of 28 companies operating in 2006 and their revenues accounted for around 1.9 percent
of the total GDP in 2007. 168
The Aerospace industry is dominated by Embraer, the fourth largest commercial airline
manufacturer in the world, and its suppliers. Additional players in the Brazilian market include
Ambra Solutions, A.S. Avionics Services, BrasCopter, Giovanni Passarella, Friuli, Finetornos,
Flight Solutions, Flight technologies Iacit, Gyrofly, Lanmar, INBRAAEROSPACE, Rastreal, Vectra
Technology, Globo Usinagem and Winnstal. Some foreign companies exist in the market, such
as Latecoere (France), Aernnova (Spain), Sobraer (Sonaca Group-Belgium), Pilkington Aerospace (UK) and Gamesa (Spain). Nieva (owned by Embraer) manufactures light aircraft, and
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Aeromot produces small parts for the Eurocopter in South America. Helibras assembles the
Eurocopter for the South American market.169
9.4.2 Defense
The Defense Sector is likely to be enhanced by the “National Defense Strategy (END)”, which
was approved by the Brazilian presidency in December 2008. This program includes a budget of
R$ 2.26 billion to purchase new equipment and airplanes. Today, most purchases in this
segment are still made abroad, but the Brazilian industry will benefit from technology transfer
agreements. 170 In January 2011, Embraer create a defense and security division aimed at
meeting government demands for public safety and critical infrastructure protection (C4ISRcommand, control, communications, computers, intelligence, surveillance and reconnaissance).
Further, the defense and security business was expected to reach annual revenues of US$1.51.8 by 2016. 171
9.4.3 Security 172
Safety and security for individuals and property in Brazil is a cause of great concern for the
Brazilian government and its citizens. It is estimated that a car hijacking occurs once every two
hours in the city of Sao Paulo and more than 300,000 cars are stolen in Brazil each year.
Moreover, according to a 2007 United Nations report, about 10 percent of Brazil’s GDP was
spent on combating increased violent activities.
The annual sales for security equipment and services was estimated at about US$24 billion and
is expected to grow steadily by 15-20 percent annually. The market for electronic security
equipment alone was estimated at US$ 1.5 billion. About 50 percent of the security equipments
in Brazilian market are imported. The US supplies about 50 percent of the total import, whereas
Israel, Korea and Japan provide the rest (each about 10-15 percent of the import market).
One of the largest consumer of electronic security systems are expected to be financial
institutions who are interested in enhancing the security levels in banks. There is an increased
interest in biometric systems and an approximate demand of US$1 billion in security equipment
and services per year. The Brazilian government is also expected to increase spending on high65 | P a g e
tech security systems to ensure foolproof security measures for the 2014 World Cup and 2016
Olympics.
9.5
9.5.1 Political
Foreign Direct investment in domestic airline companies is limited to a maximum of 20 percent
by the Brazilian government. The Aerospace Industries Association of Brazil (AIAB) – is the
national trade association that represents the Brazilian aerospace industries, and its members
are involved in every stage of aeronautic, space and defense activities (including design,
manufacturing, sales, customer support, and MRO services). The AIAB is also a member of
ICCAIA – the International Coordinating Council of Aerospace Industries Associations.173
Although, it seems that the trade dispute between Brazil and Canada over the use of illegal
WTO export subsidies may be forgotten there is a possibility of disagreements coming up in the
future.
9.5.2 Economic
The airline industry has needed to increase its spending on security over the last ten years,
especially since September 11, 2001. The impact of these costs have been passed down to the
consumer in increased taxes, airport and luggage fees, and in the overall cost of a ticket. A
terrorist threat or attack will always impact the airline industry seriously, and an automatic
decline in ridership will occur. This has become the new reality, and airlines will always have to
account for this possibility in its contingency plans.
Terrorist threats and attacks will deter passengers from flying, and they will be more likely to
make alternate travel arrangements. In addition, when the global economy goes through a
downturn, people will not look to spend on airline tickets when there are cheaper options
available. With the trend toward greener technology, consumers are very aware of what
companies are doing to reduce emissions and becoming ‘greener’ companies. If the public
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believes that a company is not doing all it can to become more environmentally friendly, then
that airline will ultimately suffer in public opinion and financially.
9.5.4 Technological
In the aerospace and defense industry, the government is constantly investing in research and
development to provide new technologies in aerospace design and in defense technology.
According to the US Department of State, "In May of 2008 Brazil published the Productive
Development Policy which encourages technological innovations and new investment
opportunities in the country. It sets targets for investment spending to reach 21 percent of GDP
and private investment in R&D to reach 0.64 percent of GDP by 2010. It also sets goals to
increase Brazil’s share of exports to 1.25 percent of the global total and increase the number of
small export businesses." 174
9.6
SWOT Analysis
9.6.1 Strengths
As previously mentioned, Brazil is a leader in aerospace industry and the fifth largest aerospace
market in the world. Embraer is one of the largest commercial airplane manufacturers and has
45 percent of the regional market of 30-60 seat airplanes and is world leader in commercial jets
up to 120 seats 175. Belgium, Chile, China, France, Germany, Italy, Japan, Spain, Sweden, United
Kingdom and the US have strong partnerships with Brazil in the Aerospace sector.176
9.6.2 Weaknesses
There is a requirement and a plan to upgrade security measures in the country, however, the
government has certain budget constraints. Large organizations like Embraer are looking at
financial solutions such as public private partnerships. Although, some Brazilian companies
have some capabilities to counter security concerns in Brazil these are not adequate and
require support from technologically capable foreign firms. 177
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9.6.3 Threats
Some of the inherent threats to the aerospace markets, which are also likely to affect the
Brazilian aerospace industry, are the rising cost of fuel, security threats and terrorism. In 2007,
the US and European Union accounted for 60 percent of Brazilian exports and the slow
recovery of their economies could hamper the export prospects of the industry.
9.7
Key Opportunities in the Brazilian Market
The aerospace industry in Brazil is growing rapidly and presents many opportunities for
suppliers of airline parts and components. The aeronautical segment offers opportunities such
as parts and components for airplanes, helicopters, structural segments, engines, on board
systems and equipment, and air traffic control systems. There is also scope to provide services
for maintenance, repair and overhaul (MRO) to civil and military aircrafts. 178 The aeronautics
maintenance market is expected to grow, and expansion is expected through the coming years.
In the security sector there are opportunities for companies to supply access control, closed
circuit televisions (CCTVs), alarm systems, surveillance technology, drug and explosive
detectors, metal detectors, fire prevention and detection systems, cellular telephone blockers,
biometrics, and home security equipment. 179
Stakeholders in the Brazilian aerospace and security sector reported that, the Brazilian security
sector is becoming increasingly competitive and is growing every year. Several areas in Brazil
require electronic protection equipment. There are currently over 100 equipment
manufacturers and a wide range of distributors and integrators. Available opportunities
include: installation of security equipments such as cameras, alarms and electric fences, image
monitoring and computer security. The production of camera tracking and wireless alarms also
needs enhancement. The company interviewed imports cameras and alarms from Canada
because of the quality. Canadian expertise could be used in the development of digital and
wireless security systems.
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The aerospace industry shows strong expansion in various sectors. However, it does require a
revamp in some government policies to adapt to the existing structure with strong growth and
more expected in the future. When it comes to manufacturing, Embraer aircraft is known
across the world and maintains a strong position in the market. Other strong players in the
market include TAM Airlines and Gol Air Transport.
There is a high import component to this market which includes aircraft parts, material support,
flights etc. Most imports come from the US, Canada and Europe and tend to be priced
reasonably. Bombardier is a known importer in this segment. The best way to enter the market
is through Joint Ventures and Partnerships.
9.8
The Atlantic Canadian Aerospace, Defense and Security Sector
The aerospace and defense industry in Atlantic Canada is growing in international repute, has
strong support from provincial and federal governments and is home to many industry leaders
such as General Dynamics, Honeywell, Pratt & Whitney and IMP. The industry has four business
parks which focus on aerospace and defense, research and development facilities and there are
four international airports in Atlantic Canada. Over the last few years, companies operating in
this sector have increased exports of products and services such as aircraft component parts
and aviation IT systems to advanced aerospace and defense training programs. Canadian
aerospace firms are global market leaders in the manufacture and maintenance of regional
aircraft, business jets, commercial helicopters, small gas turbine engines, flight simulation,
landing gear and space applications. In 2010, the aerospace product and parts manufacturing
industry exported $838,131 worth of products to Brazil. 180
Atlantic Canadian firms have a high standard of performance on the ISO and AS quality
certification programs. These programs are recognized as the international standard for quality
management and the benchmark against which supplier relationships are measured. Each of
Atlantic Canada’s four provinces offers a variety of solutions for the aerospace and defense
industry, which would be an added value to Brazilian firms.
Atlantic Canada also has world class training facilities and post secondary institutes which have
been instrumental in producing highly qualified professionals in the region. This has also
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increased employment rates in the region which has led to the growth in the number of
aerospace engineers in Atlantic Canada outpacing the national average ( up by 137 percent in
recent years), and employment growth for aircraft technicians, mechanics and inspectors is 142
percent double the national average.
Stakeholders in the Atlantic Canadian aerospace and security sector reported that, the
aerospace and defense sector is growing slightly with the economic recovery. It has been
identified as a target for growth by the Atlantic Canadian governments because traditional
markets have declined. Exports from Atlantic Canada include research and design, aircraft
parts, wiring systems, leading edge flat fair empennage, maintenance and overhaul equipment,
and software. Importers include the US, Europe, Asia, South Africa, South America, Ireland,
Britain, and other provinces. Advantages include qualified and stable workforce with high level
of expertise and excellent levels of education, competitive costs, infrastructure, low turnover,
and internal workers being able to contribute to the industry instead of contracting out.
Some companies have experience with Brazil and know that there is no tax for exporting in this
industry. Some have gone to trade shows but discussions weren’t deep enough to explore any
real opportunities; preliminary meetings were good except for language barriers. There seems
to be a huge investment expectation that companies aren’t interested in, especially if they are
given the impression that Brazilian companies do not want to work towards win-win
arrangements. Those that did go to Brazil knew that Embraer is headquartered there, and some
got their opportunity from the Newfoundland government while exploring markets and
attending trade shows. Motivations to export to Brazil include: need for technologically
advanced products, distance to Embraer being similar to traveling to Vancouver, and the
growth of the oil and gas industry. Barriers include: language, rules and regulations, taxes, large
investment of money, and having to be patient to find a partner and a good location. Export
interests include new aircraft programs, defense programs, new products, partners in
technology, new large market exposure, working with Embraer to provide services to the
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manufacturers and other workers, more intense trade shows with prequalified companies and
secondary meetings included, and sponsorship programs.
9.9
There are many opportunities in the Aerospace, Defense and Security sector in Brazil and many
of these demands can be met by Atlantic Canadian firms. There is tremendous scope to
increase exports in the future. This sector has two prominent opportunities; the first is in the
parts, components and maintenance and repair overhaul for civil and military aircrafts. The
second is in providing technology and parts for internal security. Atlantic Canada currently has
export capabilities to provide services for research and design, manufacturing aircraft parts,
wiring systems, flat fair empennage, maintenance and overhaul equipment and software.
Companies seeking opportunities in the Brazilian aerospace, defense and security sector can
participate in exhibitions and trade fairs such as 'Latin America Aero & Defense International
Exhibition & Conferences on Aerospace & Defense Technology' and the 'Intersecurity ExpoBrazil'. Companies can collaboratively approach the ministry of defense and large organizations
such as Embraer to obtain contracts. Also, there may be opportunities to partner with strategic
local suppliers who are already experienced and established in the industry.
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10.
Mining
10.1 Introduction
The mining industry comprises establishments primarily engaged in, or providing support
services for, mining beneficiating or otherwise preparing metallic and non-metallic minerals,
including coal.181
The companies providing supporting goods and services can be divided into those that identify
themselves as mining support/service companies and those that support the mining industry
but do not list themselves as being involved in the mining industry.
10.2 Subsectors
The NAICS classification for mining and the related industries falls under several categories but
doesn’t include companies not primarily engaged in mining or mining support activities.
Table 5: NAICS Classification for Mining
NAICS
Category
212 184
2131 185
333131
417220
423810
532412
Definition 182 183
Primarily engaged in mining, beneficiating or otherwise preparing metallic and nonmetallic minerals, including coal. (e.g. 212222 - Silver Ore Mining)
Primarily engaged in providing support services, on a contract or fee basis, required
for the mining and quarrying of minerals and for the extraction of oil and gas. (e.g.
213113 - Support for Coal Mining)
Manufacturing underground mining machinery and equipment, such as coal
breakers, mining cars, core drills, coal cutters, rock drills and/or manufacturing
mineral beneficiating machinery and equipment used in surface or underground
mines
Establishments primarily engaged in wholesaling new and used mining, oil and gas
well equipment, and petroleum refinery machinery, equipment, supplies and parts
Primarily in the wholesale distribution of construction, mining, and logging
machinery and equipment.
Primarily engaged in renting or leasing heavy equipment without operators that
may be used for construction, mining, or forestry, such as bulldozers, earthmoving
equipment, well-drilling machinery and equipment, or cranes.
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10.3 Global Market
Mining companies saw moderate growth in 2010, and the forecast for 2011 is strong as global
demand for base and precious metals continues to climb. In 2009, mining companies saw
revenues of US$ 325 billion which was hurt by low commodity prices worldwide. 186
A rise in demand, from the developing world in particular, has made performance improvement
and cost savings key challenges within the industry. The rise of resource nationalism is of major
concern to global mining companies and taxation has become an issue at the forefront of CEOs'
minds. Mining companies are also contending with a shortage of skilled workers, particularly in
developing markets. Improving safety and reducing the environmental impact will be ongoing
goals for the mining industry. “Low-carbon” production of minerals will become increasingly
important in the years to come. 187
Figure 8: 2008 - Top Ten Mining Countries
2008 Top Ten Mining Countries as Measured by Mining GDP
(US$ billions)
China
182
USA
129
Australia
64
Brazil
26
South Africa
21
Canada
21
Russia
20
India
19
Chile
18
Colombia
Brazil is the 4th largest mining
country in the world.
Source: SACEA
3
10.4 The Brazilian Mining Sector
Brazil has long been one of the major mining nations and in 2008 was listed as the 4th largest
mining nation, ahead of Canada at 6th position. 188 The Brazilian mining sector has traditionally
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been known for its iron ore production; it is the 2nd largest producer in the world and accounts
for 86 percent Brazil’s mineral exports.
Figure 9: Brazil's Main Substances Exported
Brazil's Main Substances Exported
1.9% 0.01%
6.2% 2.4%
0.35%
6.5%
Iron Ore, 82.6%
Ornamental Rocks, 6.5%
Copper, 6.2%
Kaolin, 2.4%
82.6%
Aluminum (Bauxite), 1.9%
Manganese, 0.01%
Others, 0.35%
2009 estimated exports US$ 26 billion, Source: IBRAM
In addition to iron ore Brazil is a leading supplier of many other minerals. A listing of some of
these minerals, along with their ranking as a world producer are: Niobium 1st, Manganese 2nd,
Tantalite 2nd, Aluminum (Bauxite) 2nd, Chrysotile 3rd, Magnesite 3rd, Graphite 3rd, Vermiculite
4th, Kaolin 5th, Tin 5th, Ornamental Rocks 6th and Phosphate 6th. 189
In 2008, the Mining and Mineral Transformation industries contributed US$ 77 billion dollars to
the Brazilian economy, which is approximately 5.76 percent of their total GDP. This number
dropped in 2009 to approximately US$ 56 billion, including the US$ 26 billion directly
contributed through the act of mining, but there is expected to be an increase of 20 percent for
2010. Overall, it is expected that US$ 50 billion will be invested into the mining sector from
2010 to 2014. 190
The majority of these investments are to be focused on iron ore, bauxite, aluminum, copper
and gold extraction. The production of iron ore as well as nickel is expected to rise dramatically
until 2013. In addition, as the importance of lithium grows there an increase in the extraction of
this mineral is expected in the coming years. 191
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Brazil’s soils are poor in potash and nutrients and currently; Brazil imports 90 percent of its
potash, is the world’s fastest growing consumer, the world’s 4th largest user and the 2nd largest
importer of potash globally. Estimates have Brazilian growers spending US$ 4.5 billion in
potash during 2008 and that many farmers began purchasing lower levels of fertilizer
concentrations because of the increased market prices. This is driving an interest in Potash or
potash substitutes. One example is ThermoPotash which from early testing appears to be a
viable substitute for Potash. This mineral is currently being tested and explored by Amazon
Mining in the western region of Minas Gerais and the mine is expected to be operational by
2014.192
In Brazil, 73 percent of the mining companies are owned by small sized companies, 22.2
percent by medium sized companies and 4.8 percent are operated by larger companies. Of the
2,600 mines currently in Brazil 98 percent of them operate as open pit sites. 193
The overall mineral potential of Brazil is relatively untapped and at this time only 30 percent of
the country has been studied for its mineral content. The Brazilian government through their
“Plano Mineral 2030” intends to double mineral production in the next 20 years. The majority
of this growth will be focused on iron ore where Brazil plans to reach a million tons of ore per
year by 2030 (150 percent above current production numbers). 194
Despite most mines being owned by smaller to mid-size companies in Brazil there are a few
larger interests operating out of Brazil. The first and most recognized is Vale, formerly CVRD.
Vale invested US$ 13 billion in 2010 and plans on investing an additional US$ 24 billion in 2011.
Between 2010 and 2012 Vale is expected to be working on 18 different projects in Brazil with all
of them focused on investments aimed at improving equipment, transportation infrastructure
and water capturing. Vale is responsible for 50 percent of Brazil’s mineral output based on
value and is the country’s largest consumer of electricity. A list of major companies and their
planned investments are listed in the table below. In addition to these companies other major
Brazilian mining companies are AngloAmerican, Votorantim/Metais, AngloGold Ashanti,
Mineraҫão Rio do Norte, Alcoa, Mineraҫão Lapa Vermelha. 195
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Table 6: Major Companies and their Planned Investments
Company
Investment
Notes
Vale/Inco
US$ 37 billion
Multiple locations
CSN
Increase production to 40
Mine: Casa de Pedra
(Companhia Siderúrgica Nacional)
Mt/year
Samarco
Double Iron Ore pellet
Samarco Alegria
production
Complex
Increase production to 46
Serra Azul and Bom
Mt/year (Iron Ore)
Sucesso projects
MMX
Alunorte
Increase production from 4.4 Mt Largest Aluminum
to 6.3 Mt of Aluminum per year
producer in Brazil
Source: IBRAM/Duarte
10.5 Macroeconomic Environment
10.5.1 Political
Brazil is one of the largest mineral producers in the world; however, mining companies
operating in Brazil face some of the largest tax burdens in the world. For companies mining
Bauxite, Coal, Kaolin, Copper, Phosphate, Potassium, Manganese, Gold or Zinc; they pay the
highest or second highest tax loads when compared to other countries; and for iron ore Brazil
has the third highest tax structure in the world.196
The Brazilian government has instituted Plano Mineral 2030 which plans to double Brazil’s
mineral production in 20 years. Brazil’s minister of mines and energy has spoken out about a
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need for a new approach to mining that would allow regulatory bodies to be more agile and
protect the interests of the home market and its workers. 197
In the past, Brazil has suffered from environmental damage due to poorly monitored mining
operators. More recently it has been noted by mining companies that the environmental and
permitting processes/standards in Brazil have become increasingly rigorous and more
complex. 198199
The organization and industry associations relevant to this sector include: 200
•
The Brazilian Mining Institute –IBRAM
•
The Brazilian Aluminum Association- ABAL
•
The Brazilian Gems & Jewellery Trade Association – IBGM
•
Agency for the development of the Brazilian Mineral Sector - ADIMB
10.5.2 Economic
The mining industry is a huge part of the Brazilian economy and is the major reason for their
overall positive trade balance with other nations. The recent economic slowdown saw the
industry slow-down but it is expected to recover to near economic pre slowdown production
levels by the start of 2011. The mining industry is sensitive to commodity pricing and therefore
has a certain amount of volatility. In addition, products like aluminum are extremely energy
intensive and require access to cheap energy, in this case hydroelectric. Of the US$ 56 billion
contributed to the Brazilian GDP only half of this came from the direct mining of the minerals
from the earth with the other half coming from those industries supplying material or services
to the mining companies. 201
The market for machinery in Brazil is rather restricted as most large manufacturer’s already
have operations in Brazil. Most mines are open pit and the Brazilian market for underground
mining is relatively small.202
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According to Jaguar Mining, a Canadian Gold Company, Brazil is a pro-mining country because
of its strong mineral resources, infrastructure, commitment to sustained mining and respect for
the environment.203
10.5.4 Technological
Brazilian companies and the government are now actively looking to diversify the sources for
services and equipment suppliers.
In addition, Brazil has recognized that much of its
environmental and transportation infrastructure is in need of improvement and Vale is leading
the way with over US$ 37 billion of investments planned for rail, transportation and watercapturing in 2010 and 2011. 204 205
10.6 SWOT Analysis
10.6.1 Strengths
The mining industry anticipates that US$28 billion will be invested on equipment alone in Brazil
during the next four years. Demand for Brazil's abundant minerals, notably iron ore and bauxite
have been increasing faster than the historic rate over the past five years, largely due to the
rapid growth of the Chinese economy. With demand stronger than supply, the price of iron ore
has quadrupled in the past five years. Ore can now be placed at ports for a quarter of its sale
price.
Just prior to its privatization in 1997, leading mining company Vale acquired the assets of
several other important ore producers. As a result, it was responsible for 90 percent of the 245
million tonnes of ore exported from Brazil in 2006, 50 percent more than five years previous,
which generated export earnings of almost US$9 billion. Vale plans to increase ore output by 50
percent in the next four years, in an attempt to keep pace with demand which is now increasing
by 10 to 11 percent each year, four times the average of the past 25 years. 206
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10.6.2 Weaknesses
The mining sector in Brazil has one of the top three highest tax burdens. Over a period of 1996
to 2006 the tax burden increased from 25.16 percent to 35.06 percent or an increase of about
40 percent. 207 Any downturn, especially in large economies will adversely affect this sector.
Also, open pit mining adversely affects the environment and requires large investments in
sustainable mining and rehabilitation of the area.
10.6.3 Threats
There is a lot of competition in the mining equipment industry with over 240 international and
50 domestic equipment suppliers servicing the mining industry in Brazil (2006 data). There are
high duties on mining equipment and machinery. Moreover, bureaucracy and regulations slow
down the process. 208 The strength of the global economy also has a direct impact on the
demand of commodities and in turn the mining sector.
10.7 Key Business Opportunities in Brazil
According to the US Commerce Service the market for turnkey machines has been described as
fairly limited as most major manufacturers already have facilities in Brazil. In fact, some of these
multi-national companies even export their machines from Brazil.
This is in part due to the
large import levied on products imported by sea (25 percent). Among the companies already in
Brazil are Caterpillar, Volvo, Case New Holland, Cummins, Ingersoll Rand, Metso, Atlas Copco,
Sandvik, Siemens, Alston, Scania, ABB, 3M, Liebherr and GE.209 Opportunities do exist to supply
or partner with these companies.
Products and services identified as being in demand include earth-movers, belt conveyors,
crushers/grinders, laboratory instruments, drill pieces, carriers/loaders, management and
controlling software, and security devices.
Further, mining companies in Brazil are likely to invest in:
•
Equipment: sample analysis mining laboratory equipment, drilling equipment, earth
movers, crushers/grinders, security devices and environmental control equipment.
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•
Services: drilling, exploration, airborne geophysics, contract mining and engineering
services, materials handling and environmental management.
•
Software: management and controlling, mining, exploration and geophysics. 210 211
The Brazilian mining segment has a share of more than US$40 billion in 2009 and continues to
grow. There are more than 5,000 mines in Brazil. Developing technologies to overcome
distance and infrastructure problems related to transportation and environmental preservation
projects are an important part of industry investment. The federal government has created the
National Mining Plan which predicts investments of around US$ 350 billion over the next 20
years in the Brazilian mining industry.
The mining sector is growing in Brazil with gold being the most valued. Gold mining companies
have had an improved performance after the international financial crisis of 2008. The trend is
to increase the profitability of mining gold. Mining opportunities in this sector include gold,
iron, magnum, uranium, potash and etc. Some of the strong international players in the market
include Barrick Gold Corporation, Anglo Gold Ashanti, Freepor Mc Moran, and Newmont Mining
whereas Vale and Kinross Brasil are strong national players. The company imports coal from
France (Pica Coureevoie) and steel balls from Chile (Moly Copy or Andean Mining).
The easiest way to participate in the sector would be through partnership or joint venture.
10.8 The Atlantic Canadian Mining Sector
From a national perspective Canada is a leader in environmental mining practices and Atlantic
Canadian companies are well respected in these areas. 212 In each of the provinces there are
companies with a wide variety of technical and environmental expertise, depending on the
projects they are involved in. Three of the provinces have reserves and active mineral projects
that are currently being mined and explored in Brazil.
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10.8.1 Provincial
In Newfoundland and Labrador the largest values of mineral shipments (in order) are iron ore,
nickel, copper, and zinc. All of these mineral are currently being mined in Brazil (in particular
iron ore) and several of the largest mines currently being developed in this area are owned by
Vale. 213
Nova Scotia is well known for its gypsum mines but other areas of production include salt,
crushed stone, coal, gold, zinc and other commodities and minerals. Nova Scotia supplies 80
percent of Canada’s gypsum and is the most productive provider of gypsum globally. Part of
this is due to the efficient processing of waste created through another mining operation (The
Scotia Zinc Project). 214
Northern New Brunswick is rich in lead zinc and copper and southern New Brunswick has high
yields in potash.215
Table 7: 2009 - Mineral Production by Province and Territory
2009 Mineral Production by Province and Territory
Province
Newfoundland and
Labrador
Prince Edward
Island
Nova Scotia
New Brunswick
Metallics Nonmetallics
($000)
Coal
Total
Percent of
Production
2,244,081.5
45,714.6
-
2,289,796.1
7.1%
-
3,386.0
-
3,386.0
0.0%
749,602.7
380,082.0
x
x
380,082.0
1,090,375.2
1.2%
3.4%
Source: (Natural Resources Canada, 2010)
x : Confidential
There are not a great number of companies in Atlantic Canada that are listed as mining or
mining support companies.
It is calculated that 441 different suppliers, services and
organizations were involved in the creating of the Ekati Mine, the first operational diamond
mine in Canada. 216 In Atlantic Canada right now there are numerous companies and groups
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working with and supplying to the mining industry yet don’t identify themselves as being part
of this industry, yet have the capabilities and skills that the Brazilian market is looking for.
The mining sector is increasing in size even during the downturn. There have been investments
in product infrastructure to produce machinery like crushing and screening units. There is $185
billion in currently active projects across North America. Some of the companies interviewed
struggle with local recognition and would like to diversify. Exports include limestone, dolomite,
road-building aggregates, other construction aggregates, coal, gold, and fabricated machinery
and equipment. Products are exported to China, Brazil, Venezuela, USA, Trinidad, Argentina,
Chile, Australia, Columbia, Africa, Europe and Mexico. Other provinces and drill companies from
South America and the USA also work with companies in Atlantic Canada. Competitive
advantages include material quality, maritime location, and ability to provide integrated high
value products with more advanced manufacturing. Disadvantages include the small population
and a mindset that people do not want mining in their own backyard that causes localized high
prices.
Some companies have had good experiences in Brazil with no major problems besides the
normal logistics involved with travelling anywhere. Engineering services seem to be in great
demand. Opportunities came through personal contacts. Some mining companies are very
efficient without exploring South America and a lot of companies are looking for more
exposure, but smaller companies are unable to afford the investment in infrastructure. They
are aware that Brazil is a BRIC and is developing faster than in the West, but most are not sure
where areas with potential are likely to be. Interests include contract manufacturing, processed
equipment and joint ventures, and exporting high valued manufacturing products such as
pressure vessel and process modules.
10.9 Recommendations and Market Entry Strategies
The Atlantic Canadian mining sector is quite diverse with each province mining different
minerals. The presence of so many Canadian companies in Brazil along with Vale’s sites in
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Newfoundland offer opportunities to leverage local relationships to help enter the Brazilian
market.
In addition to equipment, services and software there are opportunities for other Atlantic
Companies currently working in support of local mining projects, particularly those that are
already working with Vale or Canadian companies established in Brazil. There are no
restrictions to importing mining equipment in Brazil and the best way to enter this market is to
partner with local representatives or agents as most equipment is sold directly to the end user
and there are very few wholesale distributors. 217
Considering that most sales are made directly to end users strong after sales support and
service should be emphasized. Moreover, there is a need to customize products to ensure that
are compatible to the Brazilian terrain and environment. The procurement process for large
mining companies is mainly centralized. Procurement by small and medium sized companies
also tends to be centralized however there is a possibility that certain purchase decision are
made at individual mines. In some case, mining contractors also play the role of project
managers and could be responsible for the tendering process and technical evaluations;
however, the final buying decision is made by the mining company. 218
The biggest trade show for the mining industry in Brazil is the bi-annual Exposibram, which for
2011 will be taking place September 26-29 in Belo Horizante.219
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11.
Education Sector
11.1 Introduction
The NAICS definition of the education sector includes establishments primarily engaged in
providing instruction and training in a wide variety of subjects. These establishments may be
privately owned and operated, either for profit or not, or they may be publicly owned and
operated.220
11.2 Subsectors221
According to the NAICS, the education sector is classified into the following subsectors:
•
•
•
•
•
•
•
Elementary and Secondary Schools (NAICS 6111) – Comprises of establishments
primarily engaged in basic preparatory education which ordinarily constitutes
kindergarten through 12th grade and includes school boards and school districts.
Community Colleges and C.E.G.E.P.s (NAICS 6112) – Comprises of establishments
primarily engaged in providing academic, or academic and technical, courses and
granting associate degrees, certificates or diplomas that are below the university level.
Universities (NAICS 6113) – Comprises establishments primarily engaged in providing
academic courses and granting degrees at baccalaureate or graduate levels.
Business Schools and Computer and Management Training (NAICS 6114) - Comprises of
establishments primarily engaged in providing courses in office procedures and
secretarial and stenographic skills; conducting training in all phases of computer
activities and offering an array of short-duration courses and seminars for management
and professional development.
Technical and Trade Schools (NAICS 6115) – Comprises of establishments primarily
engaged in providing vocational and technical training in a variety of technical subjects
and trades. The training often leads to non-academic certification. Vocational
correspondence schools are also included.
Other Schools and Instruction (NAICS 6116) – Comprises of establishments primarily
engaged in providing instruction in the fine arts; athletics and sports; languages; and
other instruction (except academic, business, computer, management, and technical
and trade instruction); and providing services, such as tutoring and exam preparation.
Educational Support Services (NAICS 6117) – Comprises of establishments providing noninstructional services that support educational processes or systems.
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11.3 Global Context
According to UNESCO’s Institute of Statistics, Governments of the world invested the equivalent
of Purchasing Power Parities (PPP) US$ 2.46 trillion in education in 2004 (or 1.97 trillion if
converted into U.S. dollars on the basis of market exchange rates). This represents 4.4 percent
of global GDP in PPP US$. This number reflects only public education expenditure and not
private investments. 222
According to the Education Industry Association (EIA), "education is a rapidly expanding
business in the US and many countries. It is quickly becoming a US$1 trillion industry,
representing 10 percent of U.S. gross domestic product, and is second in size to the health care
industry. In the US, federal and state expenditures for education exceed US$750 billion." 223
Despite the economic downturn, the education industry is one of the fastest growing sectors
worldwide and has seen increased demand in foreign education, e-learning and test
preparation markets. In 2007-08, the US represented 60 percent of the global market and
Europe accounted for about 15 percent.224
11.4 The Brazilian Education Sector
There is a lot of potential in the Brazilian educational sector and Brazil has become the 5th
largest education market in the world with about 70 million students. About 93 percent of the
students are enrolled in basic education and 7 percent in undergraduate and graduate schools.
A large majority of Brazilian students attend public schools and less than 20 percent of students
attend private schools. The annual higher education institution requirement is expected to
grow at a CAGR of over 33 percent from 2011-2013. Both public and private players are
expected to benefit from the growth in the sector as enrollment levels in primary and high
schools increase. 225 226
11.4.1 Role of Public and Private Sector
Education industry in Brazil is structured into public and private sectors. 227
Public Sector: The responsibility for public education is primarily divided as follows:
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o Pre-primary and primary education – The municipalities, the states, and the federal
district
o Secondary education – The states, and the federal district for those matters that lie
within their purview
o Vocational and technical education – The states and the federal government
o Higher education – The federal government
Private Sector: The private sector can be involved at all educational levels, upon government’s
approval and evaluation.
The private sector plays a dominant role in the education sector and foreign direct investment
is also prominent in Brazil as the government encourages the participation of the private sector
in higher education. 228
The Brazilian government also recognizes distance learning programs and blended programs
that combine distant learning and traditional formats to make up for the shortage of teachers it
faces. 229
11.4.2 Higher Education
In 2008, approximately 17,000 Brazilians came to Canada to study. Scholarships are available to
Brazilian students and since 2007, about 100 Brazilian students received scholarships to study in
Canadian universities. The Brazilian Association of Canadian Studies (ABECAN) established since
1991 includes 15 Canadian Studies centers throughout Brazil and has over 500 members. This
has contributed to Canada becoming the most popular destination for Brazilians.230 Estimates
by the Canada Education Centre (CEC) indicated that English as a Second Language (ESL)
programs are the most popular and represents 34 percent of the Brazilian students, followed
closely by graduate programs (33 percent), undergraduate (13 percent), FSL (9 percent),
college, technical and CEGEP (8 percent) and high school (3 percent) programs.231 The
popularity of ESL programs stems from the fact that the ability to communicate in English is
considered a competitive edge within the job market and has almost become a prerequisite to
be considered for a good job.
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Education fairs are used as a prominent recruitment strategy in Brazil and a significant one is
the ExpoBELTA organized by Brazilian Education & Language Travel Association (BELTA) every
March. 232
11.4.3 Executive Education and workplace training
Executive Education and workplace training is extremely important in the corporate world.
Companies such as Petrobras and Embraer are providing employees with on-the-job training
and educational classes. Business leaders have found it difficult to find qualified workers and
are working with educational institutes to customize specific programs based on their needs.233
In Sao Paulo alone there are 10,000 companies and organizations that run in-house and out-ofhouse training programs. 234
11.5.1 Political
In October 2010, Brazil and Canada signed a memorandum of understanding (MOU) on higher
education which is likely to create greater synergies among universities in both countries
encouraging academic activities such as research collaboration, student exchanges and shortterm awards. This MOU further strengthens ties between Brazil and Canada and develops other
bilateral cooperation, such as the Canada-Brazil Framework Agreement for Cooperation on
Science, Technology and Innovation, signed in November 2008. 235
According to Brazilian Law (9,394/96), all diplomas issued by foreign universities are to be
certified by Brazilian public universities who offer equivalent courses. International reciprocity
agreements are also respected. However, some educators and government groups in Brazil are
not in favor of foreign investments in the country’s educational sector. 236
11.5.2 Economic
In Brazil, education is regarded as a means to raising and sustaining a higher socio-economic
status. However, many Brazilians are unable to afford higher education as it is fairly expensive.
Depending on family status, about 0.8 percent to 5.2 percent of household income is spent on
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education compared to a national average of 3.4 percent. Family spend on education also
varies on geographic regions - from 2.3 percent of household income in the North to around 4.7
percent in the Southeast. 237
Educational fees in Brazil are usually paid monthly and it may be difficult for Brazilians to invest
fees for the entire year at one time. Scholarships, credit and flexible payment plans will need to
be offered in order to boost recruitment. 238
Brazil has literacy levels of 88.6 percent.239 There are some elements of inequality in the
Brazilian education system. On one hand Brazil has a progressive system and on the other hand
basic literacy levels of the general population have been questioned as there is a lack of
professionally qualified workforce in the labour market.
For foreign education, agents, education advisors and consultants play an important role and
provide students with all information required about living and studying in a foreign country.
According to a US Commercial Service report, "Agents’ success in Brazil has a lot to do with the
professionalization of this type of service and also the perception of security that it provides to
parents and students. The Brazilian culture is very family-oriented and it is neither easy nor
natural, as it may be in some European cultures, for a 16 year-old teenager to spend six months
or one year away from their homes. That is normally a tense process that the agent can help
alleviate considerably." 240
The government is committed to the federal plan to equip all elementary schools with
computers. This should dramatically enhance the educational experience in school and provide
students with access to the latest information. Moreover, distance education and eLearning
are becoming an integral part of the education system both in schools and vocational training.
A 2007 report by UNESCO (World Data on Education) reports, "In 2003, the Ministry of
Education launched the Digital Interactive TV Escola with 100 percent Brazilian low-cost
technology. This is a distance-learning instrument that brings the media together by satellite. A
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pilot project was inaugurated in seven Brazilian states: Acre, Amazonas, Ceará, Espírito Santo,
Goiás, Mato Grosso do Sul, and Rio Grande do Sul. TV Escola provides 15 hours of high-quality
educational program, re-transmitting videos from Brazil and the rest of the world. The
programs are repeated to give schools different times to record the program. On weekends the
Open School goes on air – a special selection that aims to meet the interests and needs of the
community." 241
11.6 SWOT Analysis
11.6.1 Strengths
There is tremendous need for higher education services in Brazil. The government encourages
private players and is very open to foreign investment in the educational sector. Many
Brazilians are seeking to learn English to enhance their professional prospects in Brazil. By 2004,
the number of higher education enrolments had grown by 100 percent and quality of education
had improved
11.6.2 Weakness
Despite the improvements in the quality and standard education in Brazil, this sector has many
challenges for the government as well as the corporate world. There is a lack of qualified
workforce to take up high-tech jobs. Mr. Renato da Fonseca, managing executive of the
National Confederation of Industry (CNI), recently said “Our crucial problem is education. The
Asians changed their educational standards and are now benefiting from this. Correcting the
problem takes two decades, but it can be our great opportunity”. There is also a lack of
qualified teachers who teach English in the public education system. The English programs
taught in schools do not have advanced curriculum and most students who learn English, learn
the language superficially with little or no ability to actually speak or write fluently. 242 According
to UNESCO, the historical Brazilian student mobility ratio is around 1 percent, considerably
lower than that of other emerging economies. Although market experts strongly believe this
ratio will increase in coming years, this will depend on strong initiatives and investments (e.g. in
scholarships). 243
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11.6.3 Threats
A proposal first introduced in 2003 to prohibit foreign capital from entering private education
institutions in Brazil was recently reintroduced into the agenda of the Committee on Education
and Culture of the Chamber of Deputies. 244 The depreciation in the Brazilian Real has increased
the cost of foreign education for Brazilians making it less affordable.
11.7 Key Opportunities in the Brazilian Market
There are many opportunities for the private sector in the Brazilian education sector both
within Brazil and in their home countries. Popular courses include English language courses,
vocational, master and management courses. The government of Brazil is very interested in
implementing distance learning and virtual classrooms, especially in the rural areas.
There is a substantial population of the Brazilian market that attends private school and Atlantic
Canadian educational institutes can compete with domestic and international institutes from
US, UK and Australia if the costs are similar and if they are able to provide students with
scholarships and grants.
With over 5,000 English schools operated in Brazil under the franchise system and even more
independent ones and about two million students who attend English classes in these private
language schools, there are many opportunities available in the English language segment. 245
The result of a research conducted by BELTA during ExpoBelta, showed that Canada, the US and
United Kingdom tied for the public's preference of education location, with 40 percent votes
each, whereas Australia came close with 38 percent and Spain with 26 percent preference. The
highest demand was for language courses (63 percent of students). However, interest has
grown for higher study and specialized courses chosen by about 32 percent of students,
Masters (18 percent of students), MBA (13 percent of students). In the study students could
select more than one option. 246
The US Commercial Service guide states that over 88,000 Brazilian students studied abroad in
2007. The UK was the most preferred destination followed by US; however, an informal survey
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indicates that Canada is the most attractive country to study in, especially for Intensive English
programs. 247
Stakeholders in the Brazilian education sector reiterated that, institutes providing English
courses in Brazil are highly competitive and the potential is expanding. The 2016 Olympic
Games and the 2014 World Cup has increased the number of students interested in learning
English. Additionally, oil and gas companies have been investing in English courses for their
employees. English schools in Brazil are also improving and modernizing their services to better
serve students. Opportunities are available for executive courses, virtual classes and adult
classes for students that need to learn English in a short time. The areas of distance education,
virtual classes and blended learning need to be strengthened in Brazil. Currently, English
courses such as Cultura Inglesa, Ibeu, Brittania, Yazigi, CCAA, Wizard, and Fisk dominate the
sector. Educational books, CDs and support materials are imported from England and USA
because of their superior quality. Brazil could also be interested in importing technological
products to enhance virtual classrooms, interactive whiteboards and software.
11.8 The Atlantic Canadian Education Sector
Members of the Education and Training sectors of New Brunswick, Nova Scotia, Prince Edward
Island and Newfoundland and Labrador are willing to collaborate on possible international
opportunities. There is also funding available through the IDBA to assist Atlantic Canadian
businesses enter, explore and succeed in international markets. 248
Nova Scotia has 11 universities, 13 community college campuses despite having a population of
less than 1 million people – "more, per capita, than anywhere else in Canada". The province is
gaining recognition and respect as it engages with the international community and showcases
its expertise. There are opportunities to bid on international development projects with
organizations such as the World Bank and the Caribbean Development Bank. 249
According to an article by Arupa Tesolin, educational exports are an area of huge opportunities
to Atlantic Canadian firms. There is a demand for and great respect for Canadian educational
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products across the globe. Popular exports include curriculum development, textbooks and
education resources, and Canadian schools operating in remote areas and in other countries.
There is also a scope for e-learning and blended learning capabilities emerging among
universities and K-12. 250
According to stakeholders in the Atlantic Canadian education sector, the government is making
significant investments into education in terms of primary, secondary and post-secondary
schools. In terms of international student recruitment, people tend to seek out education
during recessions. Students are much more mobile now and are seeking international
opportunities. In Atlantic Canada, institutions have had growth in international enrolment and
this is expected to continue. In terms of international contract training, this is a US$2 trillion
industry worldwide. Governments in other countries are seeking to develop their workforce by
importing expertise from other countries to train their trainers. There has been dramatic
growth in educational services as more countries are becoming more aware of how essential
education is for their technological and intellectual progress. The Department of Education and
Training receives support from the Atlantic Council to collaborate with other countries and
regions from an Atlantic Canadian perspective on initiatives such as addressing literacy rates.
Currently, exports include education and training services such as international student
recruitment, and contract training. Importers of these services include the Middle East, mainly
Abu Dhabi, the Caribbean, Trinidad, St. Lucia, and the Barbados. Competitive advantages
include an educated population, accessibility to post-secondary education, the Canadian brand
being associated with high quality and receiving substantial capital from the provinces.
Institutes have recruited students from Brazil to Nova Scotia. Sometimes Brazilians have trouble
getting study permits, but generally Brazil is a small but good market to source from. Brazilian
opportunities are received by identifying prospects through onsite agents. Members of
EduNova are interested in diversifying and Brazil is certainly a market of interest. They typically
travel to Brazil a couple times per year. Other companies would be interested in Brazil as well,
however, in order to decide if it is a feasible market they would like to know whether contract
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opportunities are available, if knowledge of Portuguese is essential or are English speaking
consultants competitive. There are also questions regarding ease of delivering a contract and
laws regarding repatriation of profit back to Canada.
The opportunities in the Brazilian education market include, English language courses, higher
education, vocational and executive training and distance learning. There is also a need for
contemporary curriculum design and content creation, technologies for eLearning and virtual
classrooms. Atlantic Canadian firms not only have strengths in higher education, English courses
and distance learning but they are also highly respected globally and provide value for money.
The 2014 World Cup and 2016 Olympics have increased the demand for English courses among
Brazilians. This present a clear and immediate opportunity for institutes offering these courses.
Agents and education fairs are the primary source for institutes to recruit Brazilian students for
various types of courses. Canadians institutes interested in attracting Brazilian students will
need to adapt their fee payment structure to make it more flexible.
There is also a possibility for institutes to offer vocational, English and distance learning courses
to large companies who want to enhance the skills, knowledge and language abilities of their
employees. In order to contact key stakeholders in the Brazilian industry, institutes could
contract agents and participate in trade missions.
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12.
Food and Seafood
12.1 Introduction
The Food and Agriculture Organization (FAO) predicts that in order to meet demand the world
production of food will need to “increase by [approximately] 70 per cent by 2050 as the world
population expands to 9.1 billion people from about 6.8 billion in 2010.” 251
12.2 Subsectors
The Food and Beverage Industry is the largest global business, with food subsectors in
agriculture, seafood, food processing, wholesale and distribution, and retail. The Beverage
industry can be broken down into soft drinks, bottled water and juices, and alcoholic (including
beer, wine, and spirits). The major players in the global market include Nestle, Pepsico,
Unilever, Kraft, Dupont, Dole Food Company, JBS SA and General Mills.252
12.3 Global Context
As of 2007, the global packaged foods industry was “valued at US $1.6 trillion. Meanwhile, the
World Bank [values] the food agriculture sector at approximately ten percent of global GDP (or
US$4.8 trillion).” 253 According to the FAO, the global seafood market was worth approximately
US$400 billion as of 2006. 254
Emerging nations such as China, India, Brazil and Russia (the BRIC nations) are becoming
wealthier, and are changing their eating habits. In particular, they're buying more packaged
foods and consuming more meat.
Companies like Wal-Mart and Carrefour have been
expanding and building more supermarkets around the world. As a result, there is a ‘double
benefit’ of population growth and increased standards of living, which add up to growth in
modern retailing.
With the growing populations and consumer demands in emerging markets, there is an
opportunity for food and beverage companies to export products or set up operations to help
meet the needs of this rapidly expanding consumer base.255 A key opportunity is to follow the
consumer base, and there is a strong and growing consumer base in the Asia-Pacific, Central
and South American regions. Private labels and healthy lifestyle products are key food
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categories to pursue and have become more popular recently as consumers seek cheaper food
options and opportunities to eat at home. “Wellness or healthy lifestyle foods are a significant
global trend, as the growing number of middle-class and affluent consumers in emerging
markets are looking to healthy choices in food products as the next step in their purchasing
evolution.” 256
12.4 Brazilian Context
“The 2010 sales revenue in Brazil's food industry is expected to grow by 10 percent from its
total of R$ 291.6 billion in 2009.” 257
In the food industry, Brazil’s main product is beef and meat production. The drink sector
focuses on soft drinks, bottled water and beer. The Mass Grocery Retail (MGR) industry
includes supermarkets, discount stores, cash and carry, hypermarkets (supercentres),
electronics and home appliances. On the supply side, agriculture production is anticipated to
grow, while on the demand side there are two very distinct consumer bases: one small, wealthy
base of consumers (with purchasing power similar to those in the US) and a larger base with
much lower purchasing power. “Brazil has a highly positive food and drink trade balance thanks
to the country’s highly developed agricultural sector. Brazil is the world’s largest exporter of
coffee, soybean, poultry, beef, orange juice and sugar." 258
China is currently the largest trading partner of Brazil and there are also various trade
agreements that Brazil has signed with other countries.
In 2010, Brazil moved to 5th place in global retail value from 8th place with a value of US$105
billion and had grown by 44 percent since 2005. Brazil has a large agricultural capacity and
supplies the food industry with exceptional quality raw material and ingredients at affordable
prices. "Manufacturers are able to tap into a domestic consumer base that accounts for half of
all consumers in South America and this alone makes Brazil a [preferred] hub for Latin America
and an excellent platform for new product development in the region." 259
Multinational packaged foods players like Nestlé, Unilever, Bunge International and Danone
view Brazil as an important market for growth in the near future. Currently, Nestlé, Danone
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and Kraft have been established in Brazil for over half a century. Hershey and General Mills
have entered the country more recently. New entrants to the Brazilian market that are
recognized in developed markets have found it difficult to gain market share for their products
because Brazilians tend to be more comfortable with established brands, multinationals and
small local companies that they can identify with – established multinationals because of their
long-standing presence, small local companies because of a price advantage. New entrants
must display patience in order to gain consumer trust and build long-term profits. 260
The packaged food market has witnessed significant mergers and acquisitions involving Sadia
and Perdigão, Marfrig and Seara, General Mills and Laticínios Condessa, and JBS and Bertin.
These transactions have strengthened the players in several packaged foods sectors, such as
ready meals, chilled processed foods and frozen processed foods. As a result there is likely to
be an anticipated pressure on retailers and on the consolidation of various distribution
categories. Packaged food in Brazil is set to continue to grow over the next five years as the
affluence level continues to increase, thus increasing the purchasing power of the lower class.
Existing multinationals plan to target the lower income consumers in the future, as it is
currently the largest market in Brazil. 261
In 2010, Brazil’s export of seafood was projected at US$152 million, over 50 percent decrease
from 2007. The biggest importers of Brazilian seafood are the US (37 percent), Spain (21
percent), France (20 percent), followed by Japan and Portugal. Shrimps, lobsters and frozen fish
such as croaker and red porgy are the main species exported. In the same year, Brazil had a
negative trade balance of US$790 million in fishery products and imported US$936 million
worth of seafood which is an increase of 67 percent from 2007. The main species imported
were sardines, hake and cod (the most expensive and accounted for 43 percent of the import
value). 262
Brazzil Magazine reported in 2009 that Brazil was expected to increase its seafood production
by 40 percent by 2011. The then Brazilian President Lula da Silva had approved a bill forming
the Special Secretariat of Aquaculture and Fisheries (SEAP) and appointed its first minister. This
has marked the onset of consolidation in this sector in Brazil. "Although Brazil has 7,300
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kilometers of coastline and some of the world’s largest rivers, the country’s seafood production
amounts to less than 1 million metric tons, one-quarter of which comes from aquaculture."
Moreover, this ministry is also expected to promote seafood consumption within Brazil as the
per capita consumption of seafood in Brazil is much lower (9 kilograms annually) than the
industry standard of 15 kilograms. 263
12.5.1 Political
The consumer sector is expected to take a leading role in driving economic growth, mainly
because of the rise of the middle class and the increasingly positive outlook of the large, lowincome population (which is supported by government policies to assist and raise this section of
society out of poverty). "Between 2009 and 2015, per capita consumption is forecast to grow
by 47 percent (nominal growth rate in local currency terms). With the size of the Brazilian
population forecast to increase by 5 percent over the same period, total food consumption is
expected to grow by 52 percent." Food consumption as a percentage of GDP is forecast to grow
10.31 percent in 2011, 10.36 percent in 2012, 10.44 percent in 2013 and 10.57 percent in 2014
and 2015. 264
Food and drink importers have to follow various long and complicated regulatory requirements
such as providing advance copies of invoices, company registration and certificates of product
testing. There have also been increases in production of meat that has been assisted by
government credit programs as well as high investments in animal genetics, improved pasture
and management practices. 265
The Ministry of Health (MS) or Ministry of Agriculture, Livestock, and Food Supply (MAPA) must
approve all items prior to shipment. Moreover, imports of poultry and beef are banned and
products containing ingredients derived from biotech commodities are severely restricted.266
In 2008, Peru and Brazil created a strategic alliance to jointly promote and market arapaima, a
South American tropical freshwater fish. One of the objectives of this alliance was to, “involve
government, the private sector and local communities and seek to establish an environmentally
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profitable bio-trade that aims to boost production of this fish without harming the
environment." 267
12.5.2 Economic
Marcos Molina, president of Marfrig Alimentos (the second largest meat processor and
producer of beef, broilers and pork in Brazil), recently indicated that the company was unable
to fill 3,000 jobs in its plants because of a shortage in competent staff and laborers in the
Brazilian market. Unemployment in Brazil has reached a low of 6.1 percent in 2010, and is
expected to drop in the months ahead. The competition for labour in Brazil has lead to a rise in
inflation in 2010 (short supply of labour leads to increased salaries). In addition, most of the
country's attention is focused on the infrastructure development for the 2014 World Cup and
the 2016 Summer Olympics; as a result the country is preparing to promote investment into
sectors that traditionally benefit from sporting events (i.e., beer, soft drinks, retail).268
As consumers become more health conscious there has been an increasing trend towards
healthier options and organic foods. There is also an increasing demand for healthy and
functional foods with high-value ingredients in Brazil, and Brazilian importers are looking for
high-end products and well-known brands, as well as imports with packaging, status and
innovation.269
The "Real Plan" implemented during the 1990s was instrumental in the globalization process
and many trade agreements were formed at the time. This made it necessary for the domestic
players to invest in the latest technology in order to remain competitive and has resulted in the
production of high-value products and an increase in overall product quality. There are
estimated to be about 45,000 food-processing companies, including major multinationals in
Brazil. The ability to preserve and freeze foods for longer periods has also had a significant
impact on the food sector reducing food wastage. 270
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12.6 SWOT Analysis
12.6.1 Strengths
Sales revenue in the food industry was expected to grow in 2010. There is also an anticipated
increase in demand for Brazilian goods from China (Brazil’s biggest trading partner) in the near
future. The Brazilian economy is expected to grow by approximately 5.3 percent between 2011
and 2014, and it possesses a strong political system at the moment. Supermarkets are a strong
segment of the Mass Grocery Retail sector, and an emerging middle class means more
customers to appeal to and sell to.
12.6.2 Weaknesses
An increasing world population means that there will be an increase in demand for food in the
future, thus increasing food prices. New entrants to the Brazilian market that are established in
developed markets have found it difficult to gain a foothold in the country because Brazilians
tend to be more comfortable with established brands, multinationals and small local companies
that they can identify with.
There are considerable pressures on prices and margins in the Brazilian food sector mainly due
to tough competition. Business Monitor International reports that costs in Brazil are being
driven up by the logistical conditions in Brazil and the relatively expensive transportation and
distribution.
12.6.3 Threats
The global economy is slowly recovering, and there remains a threat of slow growth over the
next couple of years. The global demand for food is likely to increase in the coming years, which
has led to inflationary prices on the world scene. With the anticipated increase in the world
population to approximately 9 billion in the coming years, there is an underlying pressure on
the food industry to meet this demand. However, the unpredictability of natural events like
droughts and floods will lead to further uncertainty of supply and increased prices.
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12.7 Key Business Opportunities in Brazil
Brazilian importers are looking for high-end products and well-known brands to introduce to
the market, and these companies would be interested in strong brands that can sell a certain
style and innovation. The packaged food industry in Brazil is an opportunity to gain a foothold
in that country and to enter the remaining Latin American markets.
With the Brazilian
population and food market expecting to grow in the next four to five years, there may be an
opportunity to enter the Mass Grocery Retail sector (it is expected to grow by 45 percent
between 2009 and 2015). The convenience, discount and hypermarket type stores may provide
a foreign competitor opportunity to enter the market.
The Brazilian market is mainly a beef and meat eating, and does not have a large seafood
market. However, Brazil's imports of sardines, hake and cod were worth US$ 936 million in
2010.
There is also a small but emerging healthy lifestyle products and food market in Brazil that is
growing. A Trade Commissioner Service’s report on the Agriculture Sector Profile in Brazil
identified that, 271
"Organic foods, functional 'better for you' foods and naturally healthy foods are
expected to increase in sales over the next five years with a growth rate ranging from 20
percent for ready meals and as high as 120 percent for snack bars. As a result of the
increase in population age, the busier lifestyles and increasing demand for healthier
foods, there are consumption trends for purchasing more 'light' foods and healthy snack
foods. Opportunities in segments of baby food, bakery, canned/preserved products
confectionery, dairy, dried processed food, frozen processed food, ice cream, meal
replacement, noodles, oil & fats, pasta, ready meals, sauces, dressings, snack bars, soup,
spreads, and sweet and savoury snacks all represent a potential niche for Canadian
ingredients, technologies or as niche specific item."
Further, a report by the Agri-Food Trade Service on opportunities in the Brazilian food market
identifies the following priority areas: 272
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20442
30212
30322
30559
80222
80820
80940
130239
200520
220410
Meat of Sheep, Cuts with Bone In, Nesoi, Frozen;
Salmon, Pacific, Atlantic & Danube, with Bones, Frozen;
Atlantic and Danube Salmon with Bones, Frozen;
Fish, Dried, Whether or Not Salted but Not Smoked Nesoi;
Hazelnuts or Filberts, Fresh or Dried Shelled;
Pears and Quinces, Fresh;
Plums, Prunes and Sloes, Fresh;
Mucilage & Thickener Wether or Not Modified, from Vegetable Products Nesoi;
Potatoes Prepared or Preserved, Other than by Vinegar or Acetic Acid, Not Frozen;
Sparkling Wine of Fresh Grapes.
The Brazilian food and drink sector is growing very fast. In the drink sector the market could be
strengthened and in the food sector kitchen equipment and cooking machinery needs
improvement. Energy drink companies import cans and "taurine", which is the main ingredient
to produce energetic drinks from Malaysia, because it is the only country that produces a 250ml
can. The energetic drink industry grew by 363 percent from 2009 to 2010. The government
provides tax benefit and the IPI (federal excise tax on the manufacturing of good) rate was
reduced by 27 percent to R$48 cents per gallon produced. Without this benefit the energetic
market would not have survived. RedBull and Coca-Cola (Burn Energetic) dominate the sector.
Food companies import cooking machines and kitchen equipments from the US and Italy
because these countries offer highly efficient and modern products. The companies
interviewed did not have experience with Canadian companies exporting any products or
services in their segment of the food and drink sector. According to a partner in an energy drink
company, the best way for a Canadian company to participate in this sector would be through
JV or partnerships. However, the easiest way for a Canadian company to participate in the
Brazilian market would be through technology transfers.
Another aspect of the Brazilian food sector, which is growing fast, is the "away from home"
segment. The growth has been three times more than GDP. The food sector in Brazil is evolving
and equipment and products are being modernized. The food sector in Brazil is already strong
and the market continues to grow. Brazilian companies are becoming stronger, but for many of
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them it is still difficult to compete with foreign companies. Food service is a huge opportunity in
this sector. Food service’s companies prepare food based on buyer's needs and facilitate and
improve food sales in restaurants. Fast Food is also an important available opportunity in the
sector. Kitchen equipment and cooking machinery need upgrades. Domestic companies that
dominate the sector are: Spoleto, Vivenda do Camarao Usina das Massas.
12.8 The Atlantic Canadian Food and Seafood Sector 273274
The agriculture industry in Atlantic Canada exports its potatoes, apples, carrots, cauliflower,
corn, chanterelle mushrooms, fiddlehead greens and maple sugar. Cranberries are planted and
harvested for the production of condiments and juices, and the climate is suited to grape
growing for wine. In addition, Atlantic Canada is the wild blueberry capital of the world. The
blueberry is known for its health benefits and antioxidant properties, and it gets processed into
Kosher-certified wines.
The region also exports frozen foods globally.
Atlantic Canada’s excellent transportation
infrastructure (air, sea and land) continues to support the fisheries and aquaculture industry as
it develops innovative harvesting, processing and conservation technologies. Atlantic Canada
has four international airports and two major container ports (Halifax and Saint John) for
exports.
The Seafood Industry in Atlantic Canada is recognized internationally for its quality, leadership
and innovation. It accounts for the vast majority of Canada’s rich variety of harvested and
processed groundfish, shellfish, and pelagic products exported worldwide. It is the world’s
leading producer of canned sardines and the leading exporter of fresh lobster. It exports crab,
lobster, herring, frozen fish and fillets, shrimp, halibut, salted fish, scallops and mackerel. It is
an industry leader in new packaging techniques that can extend the shelf life of fresh seafood
products for up to 10 days. The industry is placing greater emphasis on value-added products
such as hors d’oeuvres, pâtés and frozen fish entrées.
The Atlantic Seafood Industry is
developing markets for non-traditional and under-utilized species, and applying new
technologies to a growing aquaculture industry (farmed seafood). It is also targeting niche
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markets worldwide with specialized products such as sea urchins, Irish moss and frozen herring
roe.
The food industry is growing only slightly each year. The recession in US is improving and this
means Atlantic Canadian exports are also improving. The Gulf oil spill ruined the reputation of
seafood in that region and this may be a good opportunity for Atlantic Canadian companies to
offer their services. There have been severe restrictions on exports of Russian potato and grains
and all these reasons have increased the demand for Atlantic Canadian fish and potato stocks.
Fish and potatoes make up a large market share of the food industry. The domestic market in
Atlantic Canada is very small, so for decades exporting has been essential. Other exports
include fruits, vegetables, and meat. Traditional importers have been the US and central
Canada. Other importers include the EU and Japan - depending on the value of the products it is
sometimes more affordable to transport shipments by air. Competitive advantages include:
having large quantities of high quality food, the lower supply in other countries due to labor,
water or other concerns. The Atlantic Canadian brand is also associated with food safety,
quality, the association with Anne of Green Gables, and exporting experience also increase the
reputation of products from Atlantic Canada.
The companies interviewed did not have much experience with Brazil. However, there was
awareness that Brazil is flourishing and that it should be targeted, as transportation costs
should not be a concern. Most companies would be interested in Brazil, especially seafood
companies. Meat may not be an area of large exports to Brazil as it is domestically produced in
Brazil and exported in large quantities. Export interests include sales and joint ventures and
possibly processed products or drinks like juice.
Atlantic Canadian companies can look for opportunities in the food market segments that are
expected to grow in Brazil in the future. It is important to note that imported products are
usually not price competitive in the Brazilian market as compared to those produced in Latin
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America due to the tax benefits that available to MERCOSUR countries. 275 Therefore, the best
approach would be to find premium market segments that have a small market share currently
but are expected to grow in time. Atlantic Canadian companies can establish themselves by
developing a brand that represents quality and is easily recognizable in the Brazilian Market.
Some of the products that could be exported are potatoes, vegetables and fish (the salt fish
market is growing in Brazil particularly Atlantic Cod).
In order for Atlantic Canadian products to succeed in the Brazilian market, marketing and
branding must consider the language and culture of Brazil. For Example, Atlantic Cod is
commonly known as "Bacalhau" and is considered a top quality fish in the Brazilian market.
Atlantic Canadian exporters should be aware of the slow progress in the Brazilian market due to
bureaucracy. An agent is required to facilitate export processes. 276
The Food Ingredients South America Trade Show
Venue: Expo Center Norte
Country:
Sao Paulo, Brazil
Start Date:
18-SEP-12
Industry:
Agriculture & Forestry
End Date:
20-SEP-12
http://fi-southamerica.ingredientsnetwork.com/
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13.
Experiences in the Brazilian Market
Canadian companies actively export to Brazil in various sectors; of which the most popular are
the ICT and mining sectors. Other popular sectors include oil and gas equipment services,
aerospace, defense and security, and environmental technologies.
Exports from the information and communication industry include software such as timesheet
management, geographic applications for marketing tools, incident reporting and
telecommunication products.
Some companies in the educational sector have set up franchises for language schools outside
of Canada and provide English language instruction, university preparation classes, teachers’
training and foundation year programs. Other services from the education sector include
certified multilingual services in over 60 languages like verbal education, consulting, global
marketing, written translations, spoken interpretations, and education for the food, film and
environmental industries.
Exports from the mining industry include minerals, metals, power, mining equipment, new
mine consumables, Electric Arc Furnace (EAF) lance tips for steelmaking and other consolidated
goods. Canadian exporters have also set up refineries, power plants, and infrastructure in Brazil
as well as provide environmental management, remediation and planning.
The oil and gas equipment industry exports oil and gas purification systems, power and data
transmission systems and other engineering products to Brazil. Exporters from the aerospace,
defense and security industry send commercial antennae and airport radar antenna.
Exporters from the environmental industry send custom equipments.
13.1 Canadian Export Experience
Most Canadian companies actively exporting to Brazil also export globally across all continents
and have office locations ranging from 40 to 130 countries. Some specific regions mentioned by
those interviewed included the Middle East, East Asia, most of Europe, North America, and
Latin America. Countries where Canadian companies are actively exporting include: Argentina,
Australia, China, Columbia, Germany, India, Japan, Korea, Mexico, Norway, Saudi Arabia,
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Singapore, Sweden, Syria, Switzerland, Taiwan, United Arab Emirates, the United States of
America, the United Kingdom, and Turkey.
Despite the competition there is high potential in the export markets – in fact one of the
companies operating in the ICT industry has been able to achieve 85 percent market share in
the Latin American market.
Brazil is a target market for many Canadian companies due to its growth potential as an
emerging economy. As one of the fastest developing countries in the world and the largest
economy in South America, it is strong and is doing very well for itself. However, in order to be
successful it is important to build strategic and strong alliances within the country.
Brazil’s oil and gas offshore industry is expanding and is a potential market for companies
interested in the steel, mining and telecommunications industry. One of the companies
exporting computer systems has found immense success within Brazil’s hydrograph community
which is very open to imports of specialized products in navigation and marine activities. The
Brazilian navy has been a strategic client for them for over 10 years. However, it would be very
difficult to be successful without a reliable local partner or office location.
The upcoming World Cup and Olympic events has everyone excited and there is expected to be
an increase in demand for many products and services over the next few years. However, the
demand for imports from Canada to Brazil has been varied and depends on the industry within
which the company operates or sometimes on the strategy of the individual company itself.
The ICT industry has had mixed response from the Brazilian market; while some have not seen
much growth or demand others find that demand has been steadily increasing. This growth was
attributed to their long-term as well as personal relationships with clients. On the whole,
companies find that bilateral relationships in the Brazilian market have been beneficial to both
parties and their clients are glad to have access to the most advanced technology in world.
Most companies say there has been very small or static growth. This is blamed on the cyclicality
of the industry and the higher value of the products, even though they feel like manufacturers
are in limited supply.
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The education sector in Brazil is highly competitive especially now that the cost advantage on a
lower Canadian dollar to the American dollar no longer exists. Cost advantage and high quality
are no longer the only competitive edge and Canadian institutes have to work harder to come
up with innovative products and services that appeal to Brazilians. Overall Brazilians seem to
enjoy living in Canada rather than other places in North America and they also tend to be a
good source for word of mouth promotion for Canadian education.
The mining industry has seen a tremendous increase in growth and demand in the recent years.
However, there are also some constraints with importing products to Brazil particularly in the
mining sector – companies are sometimes forced to send as much product as possible at a time
rather than many smaller shipments. Furthermore, over 100 percent in import taxes are often
charged for these products. There is a tendency for Brazil to be highly protective of its
indigenous companies and will import only those products that are in great demand but are not
locally available.
The trend for exports in the marine and oil and gas industry seems to be varied with some
companies experiencing more interests in imports than in other industries. There is also a
recent trend of importers from the aerospace, defense and security sectors seeking partners by
contacting Atlantic Canadian companies through their website.
In the environmental technologies industry there has been a trend to work in partnership with
US companies. One of the companies interviewed was invited by an American company to be
the environmental auditor and made significant contributions to the Bolivia to Brazil pipeline
project. There has also been an increase in requests from Brazil’s geological society seeking
technology transfers.
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13.2 Challenges of Entering the Brazilian Market
Some of the common challenges that are faced by Canadian exporters include:
13.2.1 Language and Local Customs
Brazil is the only Latin American country that has Portuguese as its local language and not
Spanish. Although English is becoming more popular lately it is not widely spoken across the
country and most business is conducted in Portuguese. One of the software development firms
suspects that its limited success in the Brazilian market is due to the fact that their software is
currently available only in English.
13.2.2 Technological Advancement:
Some companies that experimented with online sales have not had the success they hoped for
and have attributed this to the lower levels of technologically advancement in Brazil as
compared to Canada.
13.2.3 Import Duties and Regulations:
Some companies have found the importing structure pretty closed due to complex bureaucracy
and taxing systems. Import regulations have taxes for certain products at about 120 percent on
average. Obtaining an import certificate is essential and sometimes it seems more advisable to
export larger quantities at one time rather than to export more number of times. Import
regulations are more supportive of local companies. Also, Brazil offers more perks if products
are assembled or manufactured domestically rather than imported. All these factors are
compounded by high import duties which create a price barrier make it more difficult for
Brazilian companies to import products from outside Brazil. Setting up operation in Brazil can
be expensive and cost inefficient.
13.2.4 Business Structure
Most companies have found that it is impossible to work in Brazil without some sort of local
presence or a local partner. The local partner needs to be reliable and have sufficient
knowledge about cultural nuances, local customs as well as legal and procedural regulations.
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Another difficultly that companies often face is repatriating money out of Brazil. Besides the
typical visa and language issues, the delivery time from North America to Brazil is relatively
long.
13.3 Best Practices of Entering the Brazilian Market
To be successful in Brazil it is imperative to have local operations or have a tie-up with a local
partner. Partnering with a good representative that knows the people, policies and procedures
needed is the fastest way to get a foothold in any country.
However, it is also important to ensure that business control is determined at the onset of the
relationship to ensure that mismanagement of capital does not take place. There have been
instances when local partners have tied with companies only to gain additional capital.
If local offices are set up, it is best to hire locally in order to minimize a negative impact on
operations. Reliable and knowledgeable local employees will know who to talk to and get
appropriate paperwork done in order to imports products. In order to do business in Brazil,
companies must understand the language, cultural nuances and understand how social issues,
the economy and politics can affect their efforts. There are also instances of corruption that
may only be bypassed through bribes. There have been instances when just one incorrectly
placed additional screw in a consignment will cause delays and possible rejection of the entire
import process.
Overall, flexibility of the registration procedures and customizing programs to fit the needs of
the market will help in the medium and long-term to win more business in Brazil. Another key
factor to success is specializing in products or services that are not easily available locally. Last
but not the least, patience and building strong relationships with customers will bring long term
success.
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14.
Establishing and Conducting Business in Brazil
Establishing a business in Brazil involves its own unique processes, procedures and costs. A
thorough understanding of these factors allows a company to plan well and ensure that they
are prepared.
14.1 Establishing a Company in Brazil 277
14.1.1 Types of companies
Under the Brazilian law various types of enterprises may be established in Brazil. These include
the following seven types 278:
•
Non-profit company (Sociedade simples)
•
General partnership (Sociedade em nome coletivo)
•
Limited partnership (Sociedade em comandita simples)
•
Limited partnership by shares (Sociedade em comandita por ações)
•
Overt/covert partnership (Sociedade em conta de participação)
•
Limited Liability company (Sociedade limitada / Ltda.)
•
Corporation (Sociedade anônima / S.A.)
Foreign businesses most frequently use Corporations (S.A.) or Limited Liability Companies (LLC.)
while establishing subsidiaries and joint ventures. As in Canada this provides limited liability for
the individuals and treats the company as a legal entity separate from its owners.
It is also possible to establish other forms of corporation such as "consortia or special types of
partnership". However, these do not have a legal status and the "parties or owners have
individual rights and obligations for the common benefit of the group. These contractual
structures are usually adopted to meet specific purposes or for non-corporate businesses."
General Partnerships which placed unlimited liability for the partners were also popular
because of tax benefits. They are less popular now than in the past as these benefits have now
been extended to other forms of corporations.
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14.1.2 Restrictions on foreign investment 279
Prior Government permission is required for foreign investment in sectors related to healthcare
or products, postal and telegraph services, nuclear power, domestic flights, sanitation, road
transport, aerospace industries, banks and financial institutions, mining companies, oil
refineries, and maritime. Ownership of properties and businesses in rural or border areas are
subject to national security control.
14.1.3 Acquisition of properties
Other than places that are considered to comprise Brazil’s national security individuals and
foreign entities that are registered with the Individual (CPF) or Corporate Taxpayers Registry
(CNPJ), have the same right as national individuals to acquire properties.
Foreigners who are permanent residents, corporations permitted to operate in Brazil or
Brazilian corporations controlled by foreigners may be permitted to buy rural under certain
conditions and limitations.
"Other foreign entities without authorization to operate in Brazil and foreigners without
permanent residence in the country can only acquire rural properties under the following
circumstances:
•
Foreigners may acquire rural properties as inheritance
•
Foreigners can buy land for a maximum of 50 agricultural modules. All purchases of land
between 3 and 50 modules are subject to prior approval from the National Institute for
Colonization and Agrarian Reform (INCRA);
•
The purchase of more than one property with more than three agricultural modules is
subject to approval from INCRA. The purchase of properties with more than 20 rural
modules is subject to the approval of a plan of land use."
14.2 "Doing Business 2011: Making a Difference for Entrepreneurs"280
"Doing Business 2011: Making a Difference for Entrepreneurs" a recent report by the World
Bank and the International Finance Corporation ranked Brazil 127 out of 183 economies in the
ease of doing Business. "Doing Business provides a quantitative measure of regulations for
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starting a business, dealing with construction permits, registering property, getting credit,
protecting investors, paying taxes, trading across borders, enforcing contracts and closing a
business—as they apply to domestic small and medium-size enterprises. It also looks at
regulations on employing workers as well as a new measure on getting electricity."
A comparison of Brazil to global good practice economies as well as selected economies
Figure 10: Ease of Doing Business - Global Rank
Ease of Doing Business - Global Rank
160
140
115
120
100
60
35
40
0
134
79
80
20
127
1
4
5
7
43
18
Sourced and adapted from: Doing Business 2011
Starting a business in Brazil takes 120 days, versus an average of 56.7 days in Latin America and
Caribbean and compared to an average of 13.8 days in OECD nations. Refer to Appendix “H” to
read about the procedure, average time and cost required to start a Business in Brazil.
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14.2.1 Trading Across Borders
Brazil is ranked 114 overall for Trading across Borders.
Table 8: Trading Across Borders
Indicator
Brazil
LAC
OECD
Documents to export (number)
8
6.6
4.4
Time to export (days)
13
18
10.9
1,790
1,228.30
1,058.70
Documents to import (number)
7
7.1
4.9
Time to import (days)
17
20.1
11.4
1,730
1,487.90
1,106.30
Cost to export (US$ per container)
Cost to import (US$ per container)
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14.3 Government Agencies
The main regulatory agencies regarding business activities are the following: 281
1. The Central Bank (BACEN): Responsible for the execution of monetary policy, exchange
and controls, registration and control, and the regulation of banks and financial
institutions.
2. Securities Commission (CVM):
Responsible for the securities markets and listed
companies.
3. Administrative Council for the Economic Defense (CADE): Responsible for investigating
and suppressing unfair business practice and antitrust monitoring.
4. Foreign Trade Department (DECEX) of the bank of Brazil: Responsible for administration
of foreign trade and control of export and import licenses.
Considering the privatization of some public services implemented in the past few years, the
Brazilian Government created regulatory agencies with the administrative autonomy to
supervise and regulate specific activities. The various agencies include: 282
1. National Electricity Agency (ANEEL).
2. Telecommunication Services (ANATEL).
3. Health Services (ANS).
4. National Agency of Petroleum, Natural Gas and Biofuels (ANP)
14.4 Tax Structure
14.4.1 Corporate
The Corporate Tax rates for 2010 are 34%, consisting of a basic tax rate of 15%. There is also a
surtax of 10% for annual income of over R$ 240,000. An additional 9% is added for social
contribution on net profits.
Any Capital Gains incurred by companies are added to the
company’s regular income. 283
Tax Deductions in Brazil are treated uniquely. Corporate losses are carried forward indefinitely,
with 30% of the current year’s taxable income set off against the future year’s loss.
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Depreciation is deducted using the straight line method, and companies can claim different
amounts depending on the amount of work completed. Thin capitalization rules relating to
interest expenses have been in effect in Brazil since January 1, 2010. 284
14.4.2 Federal, State and Municipal Taxes
There are many taxes that the Brazilian government levies on the public and on corporations at
the Federal, State and Municipal level.
14.4.3 Federal Taxes
Federal Taxes include the Import Tax (II), the Export Tax (IE), the Industrialized Products Tax
(IPI), the Credit Operations Tax (IOF), the Rural Property Tax (ITR), the Corporate Income Tax
(IRPJ), the Social Contribution Tax on Profits (CSLL), the Federal Value-Added or Excise Tax on
Manufactured Goods (IPI), the Financial Transactions Tax(IOF), the Contribution for Intervening
in Economic Domain (CIDE), the Tax for Social Security Financing (COFINS) and the Profit
Participation Contribution Tax(PIS/PASEP), and the Employer Social Security Contributions Tax
(INSS). 285 See Table 3 for a list of the Federal Taxes.
Table 3: Federal Taxes in Brazil
Federal Tax
Percentage
Import Tax (II)
0 – 35%
Export Tax (IE)
30%
Industrialized Products Tax (IPI)
Based on the sales price when product leaves
industrial establishment, or upon import
Credit Operations Tax (IOF)
Varies depending on the type of transaction
Rural Property Tax (ITR)
0.03% – 20%
Corporate Income Tax (IRPJ)
15%, with a surcharge of 10% on companies
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earning over R$ 240,000 per year
Social Contribution Tax on Profits (CSLL)
15% for financial institutions, 9% for other
institutions
Federal Value-Added or Excise Tax on 0% - 335%, depending on type of goods
Manufactured Goods (IPI)
produced
Financial Transactions Tax (IOF)
0.0041% per day for credit transactions within
Brazil with an additional 0.38% on foreign
exchange
Contribution for Intervening in Economic 10%
Domain (CIDE)
Tax for Social Security Financing (COFINS) and COFINS: 3% - 7.6%;
Profit
Participation
Contribution
Tax PIS: 0.65% - 1.65%
(PIS/PASEP)
Employer Social Security Contributions (INSS)
Employer: 37.3%; Employee: 7.65% - 11%
14.4.4 State Taxes
State Taxes include the Heritage and Donation Tax (ITCMS)/ ITCMD, the Circulation of Goods
and Services Tax (State VAT – ICMS), the Property of Vehicles Tax (IPVA) and the Value-Added
Tax on the circulation of goods and services Tax (ICMS). Table 4 below lists the State Taxes. 286
State Tax
Percentage
Heritage and Donation Tax (ITCMS/ITCMD)
2% - 6%
Circulation of Goods and Services (State VAT –
17% - 19%; sometimes higher, sometimes
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ICMS)
lower
Property of Vehicles Tax (IPVA)
Usually over R$ 1,000 (annually)
Value-Added Tax on the Circulation of Goods and
7% - 25%
Services (ICMS)
14.4.5 Municipal Taxes
Municipal Taxes consist of the Urban Property Tax (IPTU), the Transmission of Property Tax
(ITBI), the Services Tax (ISS), and the Real Estate Property and Real Estate Transfer Taxes. See
Table 5 for a list of Municipal Taxes. The Urban Property Tax is levied on the ownership or
possession of urban properties and is charged according to municipal laws. 287
Table 5: Municipal Taxes in Brazil
MUNICIPAL TAX
PERCENTAGES
Urban Property Tax (IPTU)
Charged According to Municipal Laws
Transmission of Property Tax (ITBI)
Up to 8%
Services Tax (ISS)
2% - 5%
Real Estate Property Taxes
0.3% - 1%
Real Estate Transfer Taxes
2% - 6%
14.4.6 Foreign Companies in Brazil
Foreign companies are subject to Brazilian taxation if they carry out certain sales activities in
Brazil through agents or representatives that legally reside in the country and have the legal
means to bind the foreign seller, or through a domestic branch of a foreign seller. Basic income
taxes are levied on operating profits of a company that is chartered in Brazil (operating profits
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are determined to be gross revenue minus: the cost of goods sold or services rendered, all
commercial, administrative, and operating expenses, and other charges, reserves and losses
authorized by law). Brazilian companies may opt to be taxed on actual or presumed income
(The Lucro Real method, based on actual annual or quarterly taxable income; or The Lucro
Presumido method, based on estimated or deemed taxable income).288
Expenses can be deducted if they are deemed necessary activities for the company. Each
company determines at the beginning of the fiscal year whether it will record its gains and
losses on obligations in foreign currencies via the accrual or cash accounting method. Losses
are classified as either ‘operational’ or ‘nonoperational.’ Non-operational losses are set off
against non-operational gains, and tax losses incurred in one fiscal year may be carried forward
indefinitely (limited to 30% of taxable income in each carry forward year). Losses cannot be
carried back to take advantage of tax recovery opportunities. 289
Capital Gains Taxation is treated in the same manner as ordinary profits, subject to certain
restrictions pertaining to capital losses against ordinary profits. Any capital gains recognized by
non-residents are subject to a 15% withholding tax. If the non-resident lives in a country
deemed to be a tax haven (i.e., a country that taxes income at a rate lower than 20%), the
capital gains tax is increased to 25%. By comparison, Canadians are charged between 10% and
25%. 290
In addition, foreigners are usually charged a 15% withholding tax and the 10% CIDE on any
royalty payments. The tax year in Brazil is the calendar year, and each tax has a specific due
date. As in Canada, every business entity in Brazil (corporations, partnerships, branches and
agencies of companies based in Brazil) files an annual income tax return for the previous
calendar year. However the deadline for the submission of tax returns is June 30th (as opposed
to April 30th in Canada). Companies that submit their payments late are charged interest and
face other possible government penalties.291
14.4.7 Payroll Tax and Deductions
The domestic tax system is complex, which includes multiple cascading taxes and tax disputes
among various states, and it poses challenges to foreign companies operating in Brazil. Payroll
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taxes are filed online and are approximately 8.8%, based on gross salaries. As of February 2010,
Income Tax is paid according to each individual’s income level (as displayed in Table 1). 292 The
employer contributes 37.3% of the employee’s gross salary, which includes 28.8% for social
security and 8.5% for a severance fund. The employee contributes between 7.65% - 11% of his
or her gross salary. The employee's payment, which is capped, is based on a "contribution
salary table" provided by the government. Individuals pay a 15% tax on capital gains, and
dividend income from local companies is tax exempt.293
Table 1: Income Tax Levels in Brazil
Income Level
Tax Rate
(In Brazilian Real)
(In Percentage)
BRL 1 – BRL 17,208
No Tax Paid
BRL 17,209 – BRL 25,800
7.5
BRL 25,801 – BRL 34,392
15
BRL 34,393 – BRL 42,984
22.5
Over BRL 42,984
27.5
Non-Residents
27.5 (flat rate)
In Brazil tax is deducted at source from the following payments to non-residents:
•
Dividend - 0%
•
Interest - 15% to 25%
•
Royalties - 15%,
•
Services -15%.
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14.4.8 Social Security Contributions
Social Security contributions by the employer and the employee are subject to a ceiling defined
by law and outlined in Table 2.
Table 2: Social Security Contributions
Contributor
Percentage Contribution
Employer
Gross Salary
37.3%
Social Security
28.8%
Severance Fund
8.5%
Employee
Gross Salary
7.65% – 11%
14.5 Import Regulations & Logistics
The government levies tariffs on incoming products to be sold in the Brazilian market. With
Brazil currently a member of the MERCOSUR group of countries, there are certain tariffs that
are imposed on imports, which act in a similar fashion to the Canadian government’s tariffs
imposed on non-NAFTA countries for imported goods. Brazil also utilizes a simplified clearance
process on express deliveries. There is a merchant marine tax and a tax on each foreign film
released in the country. In addition, foreign cable and satellite providers are subject to taxes.
14.5.1 Import Tariffs
Brazil is a member of the MERCOSUR common market (which includes Argentina, Brazil,
Paraguay and Uruguay). MERCOSUR’s Common External Tariff (the CET, also known as the
import tariff) averages 11.5%, and ranges from 0% - 35% ad valorem, with many country120 | P a g e
specific exceptions. Each MERCOSUR country is able to charge a tariff on imported products
from outside the region, as long as the product travels through at least one MERCOSUR
member before the product reaches its final destination. In December 2009, Brazil and the
other MERCOSUR countries approved tariff increases to hundreds of products in the CET,
including dairy, textiles, bags, backpacks and suitcases. For many products, the tariff was
increased to the bound limit of 32% (the limit according to WTO rules). 294
All express delivery goods that are imported to Brazil go through the Simplified Customs
Clearance process and are levied at 60% duty (maximum charges for these services are $10,000
for exports and $3,000 for imports). 295
A 25% merchant marine tax on long distance freight at Brazilian ports puts foreign agricultural
products at a competitive disadvantage to MERCOSUR products. Brazil applies a 60% flat
import tax on most manufactured retail goods imported via mail and express shipment by
individuals that go through a simplified customs clearance procedure called RTS (simplified tax
regime). Goods with a value of over $3,000 cannot be imported using this regime.296
All importers and exporters must obtain a license and be duly registered with the Foreign Trade
Department (DECEX) of the Ministry of Development and the Industry and Foreign Commerce.
Several incentives encourage exporting by Brazilian companies, and there are usually no
restrictions on exports (except when exporting express shipments). 297
14.5.2 Foreign Cable and Satellite
Foreign cable and satellite television programmers are subject to an 11% remittance tax. This
tax can be voided if the foreign programmer re-invests 3% of its remittances in Brazilian
audiovisual services.
In addition, remittances to foreign producers of audiovisual works are
subject to a 25% income withholding tax (the CONDECINE, or Contribution to the Development
of a National Film Industry). The CONDECINE tax is also levied on any foreign video and audio
advertising (Brazil requires that 100% of all films and television shows be printed locally.
Importation of color prints for the theatrical and television markets is prohibited). 298
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Cable companies have a cap on foreign ownership of 49%, and any foreign company must have
its headquarters located in Brazil for at least the past 10 years. 299
14.5.3 Duties
The Profit Participation Contribution Tax (PIS) and the Social Security Financing Tax (COFINS)
are specifically targeted at imported goods and services, and briefly outlined in Table 6 (with a
description below). In addition, there is a further description of the tax base on these imported
goods and services.
Table 6: PIS and COFINS Taxes
Contributions
Levied On
Triggered by:
Services originating abroad that:
Entry of foreign goods, OR
Are rendered in Brazil, OR
Payment, credit, delivery, use or remittance to Whose results are felt in Brazil
foreigners
As of May 2004 PIS and COFINS taxes were charged on imports of foreign products and services
(PIS-Imports and COFINS-Imports). These quasi-tax contributions are triggered by (a) the entry
of foreign goods in the Brazilian Territory, or (b) by payment, credit, delivery, use or remittance
of funds to foreign-based persons in consideration for services rendered. 300 PIS and COFINS are
paid by: 301
1. The importer (individual or legal entity that brings the goods into the Brazilian territory);
2. An individual or legal entity retaining services from a foreign-based resident; and
3. The service beneficiary, if the principal is also resident or domiciled abroad
The tax is charged when the goods are imported or upon the hiring of foreign services. PIS and
COFINS adopt the same rates as those charged under the non-cumulative taxation system, and
the taxes are due: 302
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1. On the date of registration of the Declaration of Import (DI) (in the case of imports of
goods)
2. On the date of payment, credit, delivery, use or remittance, for service imports or under
specific circumstances, and
3. On the date of expiration of the period of stay at a bonded warehouse.
Companies qualifying for the non-cumulative taxation regime include their contributions that
may translate into future credits set off against contributions levied on the income from the
sale of the respective goods and services in Brazil (based on the tax rate for the PIS-Imports and
COFINS-Imports). These credits apply to contributions on imports of goods intended for further
resale, or on the manufacture of goods or provision of services intended for sale.303
In addition, Brazil uses a system called "Mercosur Common Nomenclature" (NCM) to classify
import duties and taxation on products imported to the country. For example: 304
1. NCM 38.12.2000 - Miscellaneous chemical products: import duty (14%), ICMS (18%), IPI
(10%), PIS (1.65%), and COFINS (7.60%).
2. NCM 72.12.5010 -Iron and steel: import duty (2%), ICMS (18%), IPI (5%), PIS (1.65%),
and COFINS (7.60%);
3. NCM 96.05.0000: Miscellaneous manufactured articles: import duty (18%), ICMS (18%),
IPI (10%), PIS (1.65%), and COFINS (7.60%)
4. NCM 84.01.2000: Nuclear reactors, boilers, machinery and mechanical appliances; parts
thereof: import duty (14%), ICMS (18%), IPI (0%), PIS (1.65%), and COFINS (7.60%).
The most updated information on specific products categories can be downloaded from the
"Ministério do Desenvolvimento, Indústria e Comércio Exterior" website. [The page is in
Portuguese however, there is an excel file in English available at the bottom of the page].305
14.6 Electronic Commerce
Electronic business and contracts are widely used in Brazil as the general legislation give them
validity. Brazilian general legislation such as the Civil code, the Consumer Protection code, the
Commerce Protection Code, the Commercial Code, the Intellectual Property Legislation and
Copyright Legislation all protect electronic business. 306
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14.7 Industrial Property
The National Institute of Industrial Property (INPI) regulates matters relating to industrial
property (i.e., patents, trademarks, manufacturing processes, technology and know-how). All
licensed property and technology is required to be registered with INPI, in order to remit
royalties and fees abroad. The INPI will not approve licensing arrangements that restrict or
control a licensee’s exports because these provisions violate Brazil’s antitrust laws.
An
application must be filed with the INPI to register technical assistance or a technology transfer
contract. The application covers a five year period, but could be extended an additional five
years if additional time is required to complete the technology transfer. The INPI rarely
authorizes an extension as long as five years, but it does permit extensions of less than five
years. Any royalty remittances require INPI certification and registration with the central
bank. 307
14.8 Dispute Resolution
Dispute Resolution in Brazil is very specific and protects the Brazilian market. There is specific
resolution that protects against monopolistic scenarios (i.e., collusion with competitors). The
Brazilian government also works in conjunction with other foreign government organizations in
order to reduce and eliminate anti-competitive behavior.
The Brazilian government has adopted summary proceedings in labour-related cases, and these
disputes are settled in one hearing. Preliminary conciliation committees consisting of employee
union representatives and employer associations are formed to hear disputes and resolve
matters in order to avoid and resolve arduous labour cases. If these matters end up in court,
they would likely last over a period of years. This conciliation process is employed to expedite
these issues.308
14.9 Common Transportation Modes 309
The National Department of Infrastructure and Transportation (NDIT) is the federal agency in
charge of implementing policy about roads, railways, waterways and ports.
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14.9.1 Sea Transportation
Trade between the South American companies commonly occurs via sea and these routes cover
main ports in Venezuela, Colombia, Ecuador, Peru, Chile, Argentina, Uruguay and Brazil.
This means of transportation is preferred due to the large quantities of product that can be
shipped at a time thus decreasing freight costs. Lower freight costs are important as these costs
are included in customs value and import taxes are calculated based on these. The advantage of
using sea transport is that all types of perishable, fragile or hazardous good can be transported.
Transshipment is not required by freighters on these routes which saves as lot of time and
ensures timely deliveries. Ship owners in Brazil represented by a network of agents commonly
known as maritime agent. These agents are located in capital cities and are may negotiate with
traders and issue necessary documentation. Payments can be either collect or prepaid and
depend on the International Commercial terms agreed.
14.9.2 Air Transportation
Air transportation is generally used when time is of essence and there is urgency to transport
shipments. Naturally, this mode of transport is more expensive and costs depend on weight,
cubic meter or transported unit (container). Several air freight companies have strong
operations within Brazil as do courier companies who are permitted to carry small packages.
Fares can be negotiated with the airlines directly or through airfreight agent authorized by
them. Most airlines operators are members of the International Air Transport Association
(IATA) or the International Civil Aviation Organization (ICAO) and have established freight
charges which are required to be mentioned on the Airway Bill (AWB). However, other freight
carriers not associated with the international association may be able more receptive to
negotiations as they are not required to maintain regular routes.
14.9.3 Road Transportation
Most of the other South American countries share land borders with Brazil making road
transportation common mode of trade in Brazil. There are several land routes and specialized
companies that freight cargo between cities on the Pacific Coast and Brazil. Trade between the
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MERCOSUR countries is simplified due to unified duties and cargo transportation among
members is authorized if freight companies provide authorities with the International Cargo
Declaration (MIC). Outposts of the Federal Revenue Service and Customs Administration, with
the Siscomex system are available at the border for clearance of goods. All companies that run
on the South American land route must be authorized based on the Agreement on
International Land Transportation – ATIT (signed by Latin American countries). The National
Agency for Land Transportation - ANTT is the regulatory body that supervises road
transportation in Brazil.
14.9.4 Railroad Transportation
The use of railroad for international cargo transportation is weak and limited to Argentina,
Paraguay and Bolivia. In 2008, Brazil had a network of almost 28,000 kilometers of tracks.
Freight capacity usually depends on the size of the wagons, traction power and composition of
the train and can carry up to 100 tons of cargo or containers. Freight may be charged on a per
ton basis or as a single freight in the form of a closed vehicle. The bill of lading used in rail
transportation is the International Rail Transport (TIF).
14.10 Import Programs
This Ministry reviews all applications for import, and the Importer’s information must be
included in full (including disclosure forms and the financial information for both the exporting
and importing firm). This license is valid for 60 days from the date of shipment, and cannot be
extended.310 Importers are advised that any goods imported into Brazil must be classified with
identification codes. Any mislabeling of goods will lead to fines being charged to the importing
firm. The certificate of origin is the most important document for importing as it contains the
corporation, the country of origin, and the legal basis for importing the product.
Table 8: What to include in import applications
Information Included In Application
Importer’s information (including financials of both exporter and importer)
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Disclosure forms
The certificate of origin
Full technological description and/or ingredients
The unit price of each item
The value of the shipment
Payment options
Each product imported must contain its technological description and/or ingredients, the unit
price of each item and the total value of the shipment, including weight and size. In addition,
the available payment options must be included in the shipment. All imports must include two
copies of the commercial invoice and the Bill of Lading. 311
14.10.1
Carrier Programs
Every foreign exporter is responsible for applying for an import license (depending on the type
of product being exported) to the SECEX (Secretariat for Foreign Trade). 312 The Siscomex
system (an integrated computer program that tracks all imports and exports and is meant to
facilitate trade) reduces the amount of documents needed for normal trade relations. Each
licensed importer can track its shipments in real time. 313 Without a Siscomex account, trade
with Brazil can be very difficult. Importers and exporter are registered in the Siscomex at the
Registro de Exportadores e Importadores (REI) the first time they import or export goods. An
automatic or non-automatic license may be required to import products into Brazil. Most
products fall under the automatic license category. However, some products may require
approval from the ministries and other government agencies such as the National Petroleum
Agency (ANP), Brazilian Institute of Environment (IBAMA) and Ministry of Science and
Technology (MCT).
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14.10.2
Bonded Warehouse
Various companies in many Brazilian industries expect foreign companies to keep a large supply
of goods. Currently, there exists a ‘bonded warehouse regime’ (Entreposto Aduaneiro) that
provides logistical tools for stock management in Brazil. All imported goods can be placed in a
bonded warehouse for up to three years, but require annual permit renewals. While in storage
at these warehouses, the importers can provide functionality tests on the products for
customers and even label the goods. Various manufacturing activities are also available, from
assembly to re-packaging to maintenance and repair. Documentation for goods shipped to a
bonded warehouse is the same as for any other goods being imported. Goods that are stored
in bonded warehouses go through the same customs clearance as those goods directly
imported, however utilizing a bonded warehouse regime cuts down the time required to clear
the goods through customs (mainly because paperwork has been verified prior to shipment).
The more efficient bonded warehouses have their own bank branches and customs clearance
offices on the premises.314
14.11 Licensed Custom Brokers
According to International Trade Canada, there are several Brazilian freight forwarders,
customs brokers and shipping companies that are interested in conducting business with
Canada, as listed here (most companies have more than one office in Brazil): 315
1. Logimasters – Masters in Logistics
2. Plus Brazil (import and export assistance)
3. Greenwich Agenciamento de Cargas Internacionais LTDA (Experience working with P&W
/ Embraer as well as Otis Elevators, Husky and Duracell exports from Canada to Brazil)
4. Grupo
Unitrade
(Specializes
in
customs
clearance
of
samples
and
accompanied/unaccompanied baggage. Can assist with transporting equipment for
trade fairs, seminars, or samples in the entry ports of Rio de Janeiro and São Paulo)
5. CTX Logistics LTDA (International Trade Operations and Logistics, handles imports and
exports international logistics as well as landing documentation routinely required by
Brazilian customs)
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6. Kuehne - Nagel Serviços Logisticos (Part of the KN group, with 27 offices in Canada)
7. Figwal Transportes Internacionais LTDA (in- and outbound Brazil door-to-door transport
operations, handles logistics by Air, Sea and Road charter flights and vessels, AOG
(Aircraft on Ground) spare parts operations, helicopters both by air and sea,
warehousing and distribution, live cargo, crosstrade operations, customs clearance)
There are other companies that specialize in this work, but the above companies have either
worked with Canadian companies in the past or expressed an interest in doing so. Additional
companies include Sam.A.Ro Transportes Internacionais (freight forwarder), Minas Trading –
Commercial Importadora Exportadora (freight forwarder), Hraifa Logistica Integrada Ltda
(freight forwarder), Unilog – Universal Logistics Services (air freight), and Cargofast Logistics Do
Brazil Ltda (freight forwarder). 316
14.12 Shipment Accounting, Reporting & Storage 317
According to Aeromar, a Brazilian shipping company, the following rules must be adhered to
when shipping to Brazil. It is extremely important to ensure compliance to all these laws related
to importing cargo through ports. This will ensure that costs are maintained and transit time is
kept to a minimum.
In Brazil, storage is usually charged based on the quantity of pallets at rate US$20.00 per pallet,
per month. The size of the pallet is around 120x100x100 cm. Storage is charged by the space it
occupies, however this price and type of storage is not for perishable cargo.
14.12.1
Master Bill of Landing (MBL) Consignee:
Freight is always prepaid, and Brazilian law does not accept master collect for Non Vessel
Operating Common Carrier (NVOCC) Shipments. Ocean freight on master B/L cannot be higher
than on House Bill of Landing (HB/L). Freight amounts must be displayed in figures and words;
“As Agreed/As Arranged” is Forbidden. It is important to remember the following information
when shipping via this route:
1. The consignee receives two (2) originals and six (6) copies (No Photocopies).
2. “Marks and Numbers” must correspond to marking on the cargo
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3. Port of loading must be identical as declared on the container manifest.
4. Pieces, Weight, and m3 must be identical as declared on the cargo manifest.
5. Total ocean freight must be lower than declared on house B/L, or lower than the total of
all freights declared on each house B/L.
6. Freight must always show the container number or part lot of the container number and
seal number independently whether it deals with LCL or FCL shipments.
7. When the Brazilian flag is required, it means that Brazilian customs requires a Brazilian
flag B/L (master B/L) and not only that cargo must be shipped on a Brazilian vessel.
Please note that the need to use the Brazilian flag is mainly for machines and when
cargo arrives, the consignee presents the Brazilian B/L to customs and gets the
exemption of Brazilian duties such as IPI, II.
14.12.2
House Bill of Landing
The Shipper and the Consignee is indicated as per the L/C (not the forwarder or the customs
broker). Parties must be notified as per the L/C (it is acceptable to notify the forwarder or the
customs broker as well). The ocean freight on the HB/L must be declared in the same currency
as on the master B/L; the different currencies are not allowed by Brazilian central bank. When a
letter of credit requires a foreign currency, the equivalent value must be mentioned. For
example, if the master B/L DM currency in the B/L must be issued in US dollars, the shipper must
also mention the equivalent in the DM currency.
Brazilian authorities are not permitted to issue HB/L for “in transit cargo” to Paraguay,
Uruguay, or any other country. Only ocean freight, bunker surcharge and port congestion
surcharges can be sent or collected. All other freight on board (FOB) charges, such as inland
freight, THC, etc., must be collected from shippers. If sales terms are “ex-works,” charges must
not be added to freight charges. It must be shown separately on the HB/L, or a separate invoice
has to be produced.
The freight declared on the HB/L or the total freight for all HB/L must be higher than or equal to
the freight declared on the master B/L. The Port of loading declared on the HB/L must be
identical to that declared on the master B/L and the cargo manifest. The Place of Receipt field
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must be filled out if the cargo is to be received in a different location than the loading port
declared on the master B/L and the cargo manifest. The shipper must indicate the container
number, or the part lot of the container number, and sealed non-negotiable copies that are sent
to the NHO must be the same as the originals (with copies released to the shipper in proper
time). During loading, if there are any broken-down pallets in the container due to operational
problems on the shipper’s end, Brazilian authorities must be informed before the vessel arrives.
The HB/L must be dated as the master B/L; never date the HB/L after the master B/L. Brazilian
customs are checking each HB/L with the master B/L. As of July 3rd, 1997, customs authorities
have to issue another set of HB/L. Finally, Cash on Delivery (COD) shipments are not permitted
to Brazil.
14.12.3
Cargo Manifest
A manifest must be issued for each shipment, must be typed, stamped, and signed in ink (no
photocopies or fax copies accepted). Any marks and numbers must be identical with markings
on any packages on the container. The quantities of packages and the weight must match with
the actual number of pieces/weight indicated on the container, and must be equal with the
pertinent HB/L. Each B/L has to show a unique B/L number in the respective field. In case of
saco, the company must distinguish individual shipment numbers with 1, 2, 3, etc. In case of a
split shipment B/L, charges are to be pro-rated and shown on the pertinent HB/L. The actual
port of loading must be identical with the Master B/L and the manifest.
14.12.4
Commercial Invoices
When received from shippers, the original copies must be sent with the shipping documents. In
case the shipper prefers to send to the consignee directly, this information must be indicated on
the distribution of documents (this will avoid being asked about each shipment by Brazilian
authorities). The shipper must keep copies of documents in its files, and not the originals. Only
when the consignee receives the original invoice can the cargo be cleared. Until this happens,
the warehouse and demurrage fees continue to run. Brazilian customs considers a form an
original when it is stamped and signed in ink.
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14.12.5
Import License (LI)
Prior authorization is required to import specific goods, and this authorization should be
received before shipment. This authorization is valid for 60 days and cannot be extended. If the
cargo is shipped before the import license was issued, the consignee will have to pay heavy fines
(30% on the CIF value). Without the import license number, product cannot be shipped or
received. One import license can be used for several partial shipments. When the import license
has expired, the consignee must provide a new license.
14.12.6
Co-Loader shipments
Import licenses serve as a statistical control of Brazilian customs authorities. Freight Forwarders
are not allowed to import in their name. To accept co-loads, the shipper offers its HB/L.
Otherwise, to accept the co-load, the company must issue a PPD sub-master to the shipping
company, but the co-loader must have an NVOCC register/license in Brazil. CO-COALOADING is
FORBIDDEN. If a shipper wants to co-load its HB/L with another licensed NVO operator, the
same rule applies - it must get a PPD Sub-Master B/L to the shipping company. It is important
to make sure this NVO is the one who issues the steam line B/L.
14.12.7
Documents – Distribution
The following documents must be provided as soon as the vessel leaves the port of origin:
1. Master (o) B/L: Two (2) – three (3) originals (signed) and six (6) copies (NO PHOTOCOPIES).
2. HB/L: Six (6) copies, of which three (3) copies must be signed in ink (NO PHOTOCOPIES).
3. Cargo manifest: Three (3) originals signed in ink.
4. Original invoice: Billing the shipping company the freight charges (for collect shipments).
5. Original credit note: Crediting the shipping company for the profit share.
6. All shipping documents must be dispatched by Courier directly to NHO (Note: Couriers may
take four (4) – five(5) business days to deliver documentation to the shipping company, but
sometimes it could take longer because Brazilian customs intervene by making random
checks. Do not send the documents via mail).
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7. **As of March 30th, 1997, it is necessary to present documents to Brazilian customs 48
hours before the vessel arrives. If the shipping company cannot present them, they will have
to pay fines. They need to receive the documents at least five (5) days before the vessels
arrival. **
8. Copies must be original form – photo or fax copies are not accepted by customs. Delay costs
are unpredictable (minimum US $250) and can reach prohibitive levels, as customs
calculates fines per the number of boxes in a container. The courier waybill number must be
mailed or faxed to the shipping company.
The Master B/L is to be issued by the carrier at origin and dated before vessel arrivals. The
“HB/L - Correction approved” stamps are not allowed with respect to consignee, ocean rate and
on board date. When freight charges must be corrected after the vessel’s arrival, the correction
letter must be made at origin and stamped by the local Brazilian consulate. The correction
approved stamps are not accepted for shipments with the final destination being the Rio de
Janeiro port because for these shipments it will be necessary to issue a new set of HB/L, with
same number. The correction letter must be dated before the vessel’s arrival. The correction
letter submitted to Brazilian customs after the vessel’s arrival requires 15 – 20 days to be
accepted. The consignee also has to pay fines for late payments of the merchant marine
renewal tax, and will be charged for the extra warehousing and demurrage fees for FCL
shipments. For any correction, including a letter of corrections will be accepted by Brazilian
authorities only up to 30 days after the vessel arrives. 318
14.12.8
Fines
If documents are not available but submitted to Brazilian customs 24 hours before the vessel
arrives, a fine will be charged for which the origin sending station is responsible (for Customs:
4.84 – 9.30 UFIR per Volume, where 1 UFIR = US $0.60; for Sunaman: US $25.00 per shipment).
Custom Clearance Process
1. All consignees must provide a power of attorney to the customs broker. This document must
be registered at customs; this takes about 05–10 working days.
2. The broker must provide the customs with the following documents:
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•
Original bill of lading already released by the forwarder
•
Original commercial invoice
•
Packing list
•
Import declaration (issued by consignee’s customs broker at moment of customs
clearance)
3. All goods and documents will be checked by the customs. Goods will be checked for
quantities, weight and matched with descriptions provided on the documents.
4. The entire process is likely to take at least 7 working days.
14.13 Government Incentives 319
In order to encourage foreign investment in Brazil, the government offers incentives that will
encourage entry into the Brazilian market and the expansion of its economy, but only if the
entry does not compromise the financial and competitive position of domestic firms.
14.13.1
Corporate Investments
14.13.1.1 Ex Tarifario
In order to improve the infrastructure and services in Brazil, the government economic policy
encourages the investment in capital goods and the expansion and improvement of industrial
park. In order to ensure that the world-class technologies are used to achieve this goal the ex
tarifario incentive provides reduction of import taxes levied on the cost of machinery and
equipments not currently manufactured domestically. The Ministry of Development, Industry
and Foreign Trade (MDIC) considers all requests related to the ex tarifario and maintains an
updated list of products eligible under this rule. A temporary reduction of Import Tax (II)
varying from 0 percent to 2 percent may be applied to imports of capital assets and IT and
telecommunication goods not produced in Brazil. (Resolução CAMEX 35/2006)
14.13.1.2 ICMS Incentives on Import
Some states have instituted incentives such as the Development Fund of Port Activities
(FUNDAP) and the Programa Pró-Emprego. These incentives provide benefit for companies with
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trade conducted through certain ports and airports or those that display "social or economic
interest" in a state by increasing projects related to technological improvement, exports and
imports development. Examples include the State of Espírito Santo and Santa Catarina. Import
of goods through these incentives could reduce ICMS burdens by about 50 percent or could
even be deferred in some cases.
14.13.1.3 Free Trade Zone – MANAUS
The Manaus free-trade zone (ZFM) attracts industries and commerce to the Amazon region. All
imported foreign goods receive tax incentives, provided they are consumed within that zone or
are exported abroad. Sales or transfers of these goods to other areas of Brazil result in
payment of the previously exempt taxes.
Foreign controlled subsidiaries may establish
assembly or manufacturing operations and enjoy the same benefits as local companies. Sales
from other parts of Brazil to the Manaus free-trade zone are also entitled to some tax benefits.
These fiscal benefits are applicable to specific areas of the Western Amazon region. 320 The
various tax incentives available in the region are listed in Table XX 321
Tax
Incentive
IRPJ
75% reduction until 2013
PIS/COFINS
reduction in certain cases
IPI
Import tax (II)
ICMS
Exemption or reduction of IPI on foreign products intended to be consumed
or manufactured in ZFM and on goods produced in the ZFM
Reduction up to 88% of II on the importation of materials to be used on
manufacturing in ZFM
tax refund (between 55% and 100% depending on the project)
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14.13.1.4 Regional Incentives for the North and Northeast Regions
The SUDAM (Superintendence for Development of the Amazon Region) and SUDENE
(Superintendence for Development of the Northeastern Region) were created to promote
development in the North and Northeast regions of Brazil.
The various tax incentives available in the region are listed in Table XX 322
Tax
Incentive
IRPJ
75% reduction for 10 years
PIS/COFINS
Faster consumption of the credits (12 months)
Tax on Foreign Exchange
Exemption of IOF on the exchange transactions performed for
Transactions (IOF)
the payment of imported goods
AFRMM
Exemption from the Merchant Marine Fee
14.13.1.5 Technological Innovation Incentive (R&D)
Research and Development tax incentives are available companies who have incurred expenses
on activities related to "scientific and technological research and technological innovation
development". These incentives are expected to encourage new product development and
technological advancement in Brazil. There is no prior approval required from regulatory
authorities to receive benefits and the projects are submitted to authorities after the project is
successfully completed. However, the choice of projects and how they are presented to
authorities can play a strong in influencing the approval process.
The various tax benefits available under this incentive are listed in Table XX 323
Tax
Incentive
Reduction of 60 to 80 percent of the amounts spent with
IRPJ
development of technology (in addition to the regular
deduction). These deductions also benefit other companies and
are not limited to technology focused companies alone.
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Subject to certain conditions, 50 percent IPI reduction can be
IPI
received on equipment, instruments, accessories and parts
that meant for research and technological development
New machinery and equipment used in research activities and
technological development of technological innovation can also
benefit from the full accelerated depreciation applied on the
same year of purchase.
14.13.1.6 Special Regime for the Oil and Gas Industry
REPETRO – the Special Regime for the Oil and Gas Industry is a special import regulation for the
import of resources to be used on research activities and exploitation of petroleum and natural
gas. In order to qualify for REPETRO prior approval from tax authorities is required.
Tax
Incentive
IPI
Import Tax (II)
Import of equipment is free of Import Tax, Excise Tax and social
contributions.
PIS / COFINS
14.13.1.7 Special Regime for Infrastructure Development
REIDI – the Special Regime for the Infrastructure Development applies infrastructure
development such as transport, ports, energy, sanitation and irrigation. In order to qualify for
REIDI prior approval from tax authorities is required.
Tax
Incentive
Exemption on the internal sale and import of machinery,
PIS / COFINS
equipments and other building material as well as services used
in infrastructure projects. The exemption is applicable to the
entire supply chain of providers.
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14.13.1.8 Manufacture of IT and Automation Equipments (Lei de Informática)
This tax benefit is provided for the business development or production of information
technology and automation equipments to be invested in research and development. In order
to qualify prior approval from tax authorities is required.
Tax
Incentive
80 percent reduction (until 2014)
75 percent reduction (until 2015);
IPI
70 percent reduction (until 2019, when it will be eliminated).
Midwest of Brazil and SUDAM / SUDENE area will provide
higher percentages of IPI reduction
14.13.1.9 Miscellaneous Incentives
PADIS – Technological Development of Industry and Semiconductors is expected to promote
the development of semiconductors and specific equipments by granting 100 percent IRPJ
reduction on the sales of semiconductor electronic devices and information displays and the
reductions of Import Tax (II), IPI, PIS/COFINS in certain cases.
REPORTO – Modernization and Development of Brazilian Ports is expected to promote
investments in the recovery, modernization and development of Brazilian ports and railway
system. REPORTO grants exemption from or reduction of Import Tax (II), IPI, PIS/COFINS and
ICMS, in certain cases.
RETAERO – Special Tax Regime for the Brazilian Aeronautical Industry for companies that
manufacture components and equipment to be used in the maintenance, modernization, repair
and industrialization of specifics types of aircrafts. These companies could receive reduction of
IPI and PIS/COFINS.
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REPES – Special Tax Regime for the Export of IT Services, provide companies with deferral of IPI,
PIS/COFINS for certain transactions.
RECAP – Special Tax Regime for the Acquisition of Goods by Export Companies, provide
companies with deferral of PIS/COFINS for certain transactions.
14.13.2
Training
The Brazilian government acknowledges that in order for the Brazilian economy to continue to
emerge as a global power, there needs to be investment in training and development over
various industries. In recent years, the government has committed to this training by focusing
on labour reform by allowing employees to take time off work to enroll in training courses. It
has also signed agreements with corporations to develop training centres in the information
technology industry (with Cadence Design Systems). The Ministry of Agrarian Development has
also committed to rural communities through its dedication to train workers and teach these
communities to share their knowledge and resources. The government is committed to
implementing labour reform to facilitate employer/employee relationships. As a result, a
company may suspend the employment contract of a worker for two to five months, offering
the worker a retraining course. 324
Concerned by the limited supply of skilled labour in Brazil, 76% of companies invest in training
programs for its professionals. This is indicated by a study conducted by AMCHAM (American
Chamber of Commerce). In addition to training, 60% of companies subsidize external courses
to train their employees, while 40% develop partnerships with training centres. "The study
indicates a recovery of corporate investment in training. During the height of the global crisis,
[companies did not focus on training], and [it is] again [becoming] a priority," explains executive
director of AMCHAM, Gabriel Rico. Rico also discovered that 47% of businesses spend 5% to
10% of the time working with professional trainers, while 12% of businesses indicated that they
spend between 10% and 20% of the time with professionals. Only 5% of businesses spend over
20% of the time training.325
Results from the survey indicate that for approximately 63% of companies, the priority is the
development of partnerships with educational institutions, while 43% of respondents
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participated in training programs in conjunction with other companies. The survey also found
that 52% of responding companies consider training centres as appropriate [and important] to
the organization.
However, 47% indicated that institutions are expensive and totally
inadequate.326
14.14 Foreign Operation Costs Evaluation
Foreign operating costs cover various aspects. In order to completely understand the costs
associated with operations, this section will discuss the various costs associated with business
such as land, rent, wages for skilled and unskilled labour, pensions, social assistance and other
associated benefits (i.e., vacation).
14.14.1
Interest Rates
One relevant cost associated with doing business in Brazil is the interest rate. As of January
2011, interest rates in Brazil were around 11.25%.
14.14.2
Land and building tax
The Urban Land and Building Tax (IPTU) is assessed on direct or beneficial ownership and
possession of urban properties. It corresponds to two different taxes: (a) a building tax levied
on direct or beneficial ownership and possession of real properties located in urban areas, and
(b) an urban land tax levied on direct or beneficial ownership and possession of land in urban
areas. It is determined annually on the assessed value of real property.327
14.14.3
Premise - Commercial Rent
Office space in São Paulo is the most expensive in Latin America; however, other cities and
provinces may have space available at a lower cost. Increased rents in centralized areas have
been responsible for redevelopment of industrial property into commercial or mixed use.
Premium office space is also available at Alphaville (development outside São Paulo). Average
rents in Rio de Janeiro are R$ 138 m2 per month with total occupancy cost at R$ 158 m2 per
month whereas those in São Paulo are R$ 145 m2 per month with total occupancy cost at R$
165 m2 per month.328
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14.14.4
Wages Skilled/ Unskilled Trade Labor
The 1988 constitution legalized unions, collective bargaining negotiations and the right to strike
in the private and public sectors. It also outlined overtime rates and provided for a monthly
minimum wage and the regulation of working hours. Labour entitlements include maternity
leave, vacation, worker’s compensation, social services, medical assistance and unemployment
benefits. Working Hours include a 44 hour work week and overtime pay of 50% of base pay.
Around-the-clock operations are required to have six hour shifts, with overtime paid for work
beyond six hours. Minors (those under the age of 18) can work a maximum of 8 hours a day,
and most foreign and domestic firms have a working week of five 8-hour days. The cost of
labour is considered high because of the mandatory charges and taxes attached to
employment. Wages account for (at most) two-thirds of the total costs of hiring labour, and
annual negotiations normally set wage levels for industrial labour (which is adjusted annually
instead of monthly or semi-annually). States are allowed to raise the ‘minimum’ wage beyond
the federal level if they have the resources to do so. Any salary adjustments are determined via
negotiation between both parties. If the parties are unable to reach an agreement, they can
refer the dispute to a labour court for arbitration. 329
With the recent government investment in post-secondary education, there has been an
increase in the amount of young people obtaining university degrees. However, its skilled
labour occupies a very small percentage of the population (8% - 10%), which indicates that the
majority of the workforce in Brazil is unskilled (approximately 90%). 330
Besides Salaries there are other costs associated with labour.
14.14.4.1 Pensions
Pension value is based on an employee’s contributions during that person’s working life
(capped at BRL 3,416 for the 2010 tax year), and benefits are indexed to inflation.331
14.14.4.2 Social Assistance
Employers contribute 8.5% of wages to each worker’s deferred salary account at the Length of
Service Guarantee Fund, 20% of an employee’s wages to the National Institute for Social
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Security (INSS), and a maximum of 8.8% on other social security taxes. Employees contribute
7.65% - 11%, depending on their salary categories. INSS coverage includes medical and hospital
assistance, and sick pay covers 91% of the employee’s salary after 15 days of absence (sick pay
is 100% for the first 15 days); maternity benefits are up to one month’s minimum wage. All
companies subject to the INSS tax must also contribute 0.2% of payroll to the National Institute
of Colonisation and Agrarian Reform. An additional 0.6% wage tax is assessed to support the
activities of Small Business Administration.332
14.14.4.3 Other Benefits
Compulsory benefits add 50% to 80% to base wages of full time employees on permanent
contracts, and paid vacations of 30 calendar days are granted after a full year of service with no
more than six absences in that year. Employees have the right to work one-third of their
vacation period at double pay if they so choose. A bonus of one-third of one month’s base pay
is due at the time vacation is taken. Other paid vacations include national, state, and local
holidays, and a few days for the death of a relative and for marriage. Maternity leave is
mandatory for the first four months after giving birth for female employees, and male
employees receive paternity leave of five days (both paid by the Social Security Agency).
Employers have the option to offer an additional two months of maternity to female
employees, and deduct the amount paid for this period from its corporate income tax. A
mandatory bonus of one month’s pay (called the 14th salary) must be 50% paid by November of
each year, with remaining balance paid at year end. 333
Employers are compelled to pay a Transportation subsidy to workers (for transport to and from
work or for subsidization of the transit expense by paying all such costs exceeding 6% of an
employee’s gross salary), and is tax deductable for employers. Companies pay into a national
subsidised savings program for workers (PIS), administered by the national savings bank
system. Employers can set up a voluntary profit-sharing plan for its employees called the
Workers’ Individual Retirement Plan (PAIT) as a type of retirement fund.334
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14.14.4.4 Termination of Employment
A worker under contract for a specific assignment or a fixed term (maximum of two years) may
be dismissed at the expiration of the contract without further employment liability. Any
employee terminated without cause is entitled to one-half of the balance of the contract due
over the remaining time of the contract. The employer is responsible to provide give eight days
notice (or equivalent compensation) if the employee is paid weekly, or 30 days notice if the
employee is paid at longer intervals or has been employed more than one year. An employee
who resigns must give the same notice, and any unused vacation time must be paid upon leave.
Employers are required to contribute 8% of payroll into locked accounts (FGTS) that are part of
the severance pay system. If an employee is changing jobs by choice, the accumulated balance
is transferable. Employees may draw on the FGTS accounts for certain purposes such as health
emergencies or a down payment on a house. If an employer is found to have unlawfully
dismissed an employee, that worker is entitled to a 40% into his or her FGTS account, and
employers are fined an additional 10%. 335
14.14.5
Wages Professional Management Labor
The table below provides the average salaries in the Brazilian market. Salary are determined
based on factors such as qualifications, skills, experience and market demand.336
As mentioned above, the recent government investment in post-secondary education has
provided an opportunity for more people to obtain university degrees. Skilled labour (and
possibly professional management) occupies a very small percentage of the population (8% 10%). 337
Figure XX: Management Salaries in Brazil, 2011 338
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Median Salaries by City (R$)
120,000
102,627
100,000
85,234
72,606
80,000
54,000
60,000
78,112
60,402
70,818
40,000
20,000
0
Porto
Curitiba,
Belo
Campinas, Salvador,
São Paulo, Rio de
São Paulo Janeiro, Alegre, Rio Parana Horizonte, São Paulo Bahia
Minas
Rio de Grande Do
Gerais
Sul
Janeiro
Median Salaries by Industry (R$)
140,000
120,000
120,000
100,000
80,000
60,000
73,588
85,817
60,738
99,933
61,445
68,130
40,000
20,000
0
144 | P a g e
Median Salaries by Job (R$)
300,000
253,419
250,000
200,000
150,000
134,454
124,051
100,000
68,578
94,340
81,384
70,750
50,000
0
Regional
Sales
Manager
Country Mechanical Project Information Sr. Software Electrical
Manager, Engineer Manager, Technology Engineer / Engineer
General
Information
(IT)
Developer /
Operations
Technology Manager Programmer
(IT)
14.14.5.1 Forms of Compensation and Aid
Compensation and aid is determined by the level of expertise of the individual and ability of the
corporation to pay, and includes:
1. Variable pay
2. Profit sharing and results (extra pay)
3. The 14th salary
4. The recognition program
5. The pension plan
6. Life insurance
7. Additional time for homework (for those enrolled in training courses)
8. The granting of stock options for all employees
9. Aid for rent (in transfer)
10. Loans for home ownership
11. Car financing (for purchases of automobiles)
12. Car-expenses paid
13. Parking
14. Transportation to and from the workplace (i.e., bus passes or service)
145 | P a g e
15. The sale of products manufactured by the company, discounted to aid parents of
exceptional children, to buy school materials and legal assistance
14.14.5.2 Benefits
A list of corporate benefits is included in the table below.
Table 12: Some benefits for employees in the Brazilian market
BENEFITS
Health
INCLUDES
Sickness, medical, psychiatric and psychological care,
coverage for treatment of chemical dependency (i.e., drug or
alcohol abuse), homeopathy, infertility, therapy,
acupuncture, medical check-ups, a medical plan with free
choices (including coverage to retirement), health or dental
coverage (including orthodontic appliances), ambulatory aid,
vision, discounts on the purchase and delivery of drugs in the
workplace, and gym memberships and spa treatments (for
executives).
Food
Supermarket vouchers, free breakfasts and snacks provided
by the company, collective meals, and different menus for
employees with health concerns (i.e., diabetes and high
cholesterol).
Education and Development
Insurance education, scholarships, language courses, child
instruction, reimbursement for undergraduate and graduate
programs/courses, training courses including distance
learning (via CD-ROM), job rotation, career internships,
career development with foreign assignments, availability of
146 | P a g e
a library and video library.
Other
Family planning, assistance with household budgeting, job
security, pre-retirement support, etc.
14.14.6
Working Capital
The National Bank for Social and Economic Development (BNDES) offers low-cost financing in
order to support the implementation, expansion, modernization or relocation of a plant,
including capital goods acquisition and associated working capital. 339
14.14.7
Transportation Costs
Approximate freight costs for ocean transport from Atlantic Canada to Rio de Janeiro is $2000
per container load (20 feet) and includes a transit time of about 13 days. Approximate freight
costs for air transport from Atlantic Canada to Rio de Janeiro is $15 per kilogram and includes a
transit time of about 11 hours.340
14.14.7.1 Vehicles
Total cost of ownership of vehicles includes the following: 341

Depreciation – affected by brand and model desirability, perceived quality, reliability
and used demand vs. availability

Fuel – fuel cost and consumption

Insurance – third party and comprehensive premiums

Service and maintenance costs – schedules, parts costs and labour times

Acquisition & finance – purchase price, interest and fees

Taxation – registration and recurrent taxation, dependant on CO2

Tyres – individual tyre cost and expected wear rates of tyres
According to Juris Way, online education system, “A truck 4X2 Toyota Hilux double cabin,
which costs $ 73,766 in Brazil, is sold for 88,100 pesos for the "Argentine brothers", the
147 | P a g e
equivalent of U.S. $ 59,979. More luxurious, imported the Ford Edge is offered in the
Brazilian market for $ 149,700, but in Mexico is sold for less than half the price: 364,000
pesos, or U.S. $ 59,282. The reason for such difference in price - and that generates more
discussions between automakers and government - is the tax burden. In Brazil, Tax on
Industrialized Products (IPI), Tax on Circulation of Goods and Services (ICMS), Social
Integration Program (PIS) and Contribution for the Financing of Social Security (COFINS)
represent on average 30.4% of value that comes to the Brazilian”.342
14.14.8
Insurance (Business)
Reputable insurance brokers in Brazil are helpful in recommending a business’ insurance needs,
and they can compare and negotiate deals between various insurance companies.
Table 15: Types of Insurance
TYPE
PROTECTED AGAINST
Vehicle
Third party or comprehensive
Personnel
Sickness, accident or illness,
income protection, trauma,
Public Liability
Table 15 lists the main types of
insurance: Vehicle Insurance, Personnel
Insurance, Public Liability Insurance,
Building and content insurance.
All
vehicles must legally be insured to a third
party liability level. Third party insurance
life, disability (self-employed
protects against claims made against you
require private insurance)
for personal injuries and legal costs.
Compulsory for negligence,
Comprehensive vehicle insurance covers
damages caused to your car, and against
death, injury, property damage,
injury, property damage, fire and theft.
financial
Employers are required to provide
accident or sickness coverage for their
Building and
Content
Property and its contents
employees and self-employed people
need coverage through a private insurer.
148 | P a g e
There are several forms of insurance, including income protection, trauma, life and disability.
Public Liability Insurance is mandatory and protects against third parties for negligence, death,
injury, loss and damage of property, and economic or financial loss. Building and Contents
Insurance protects property and contents against fire, water and other natural occurrences
(i.e., earthquakes, lightning, storms, explosions, burglary and theft).343
14.14.9
Office Expenses
Expenses can be deducted if they are deemed necessary activities for the company. Exchange
gains and losses on obligations in foreign currencies may be taxed on the accrual or cash basis,
according to the taxpayer’s choice for the calendar year. 344
14.14.9.1 Telephone / Utility
The federal government negotiates the price of electricity and telephone services with
companies providing these services, and these prices are linked to the Telecommunications
Services Index (IST) and determined with other indices. Electricity prices change with the
fluctuation of the exchange rate, because the energy generated by the Itaipu dam (jointlyowned by the governments of Brazil and Paraguay) is priced in US dollars. Tariff adjustments
are also granted to electricity distributors. With the appreciation of the Real against the US
Dollar, electricity prices have been decreasing. 345
AES Eletropaulo is the largest electricity distributor in Latin America. The main telephone
service providers in Brazil are Telefônica and Embratel, and they also provide broadband
internet and cable television services (as Rogers and Bell in Canada). 346
The gas supplied in Sao Paulo is sold by tank (butijão), is distributed by private companies
(Ultragaz and Liquigas are the main providers), and most people exchange their empty tanks for
full tanks from company trucks. Water in Sao Paulo State is mainly provided by the stateowned water utility company Sabesp. Utility bills are distributed by mail and charged on a
monthly basis. The most common payment method for utility services is through the bank –
either in person, online, or by direct debit. 347
149 | P a g e
14.15 Depreciation
Depreciation is deducted using the straight line method, and companies can claim different
amounts depending on the amount of work completed. For example, companies that produce
two shifts can claim 150% of the standard depreciation rates, while companies working in three
shifts are entitled to 200% of the standard rates. Companies involved in the development of
technical research can use accelerated depreciation for tax purposes (and multinationals
cannot consolidate for tax purposes). 348
14.16 Professional Fees
There are professional from different fields that can be contracted/ employed in Brazil, and
below is an estimated breakdown of Legal, Architectural and Engineering fees in the country.
14.16.1.1 Legal Fees
Law firms prefer to charge for their services by the hour, whereas the legal departments of
corporations want to sign contracts with fixed prices in order to control their costs. In order to
maintain hourly billing (which accounts for a major share of revenue from the medium and
large firms) lawyers have agreed to establish a ceiling for their fees. A study conducted by
British consultancy LexisNexis Martindale-Hubbell, in partnership with the Brazilian Legal
Marketing firm Gonçalves and Gonçalves, found that nearly half (46%) of the general counsels
of 112 medium- and large-scale firms in the country prefer contracts with fixed prices. 349 For
property and real estate purchases, it is advised that foreign purchasers use a trusted Brazilian
lawyer who is registered with the Brazilian Bar Association (OAB). Legal fees are usually 1% 2% of the purchase price. 350
14.16.1.2 Architect Fees
The Institute of Architects of Brazil (IAB) and the Brazilian Association of Architecture (ASBEA)
recommend that services can be charged on percentage of spending on labour, or by fixed
value from a table that verify the amount of man hours needed to implement the project.
When utilizing the percentage formula, architects usually charge between 5% and 10% of time
spent on the work. The percentage charged will vary depending on the size and complexity of
150 | P a g e
the project. Usually larger projects cost a lower percentage whereas the smaller projects can
easily exceed 10%.
Major newspapers regularly publish tables with price ranges per square foot charged by these
professionals. In this case the value of the charge does not depend on the time spent on the
project. The disadvantage of this system of recovery is that a major project does not require
more work by the architect and therefore should not cost more.
14.16.1.3 Engineering professional salaries
A recent study by the National Confederation of Industry indicates that only approximately
50,000 students major in engineering each year and about 150,000 professionals graduate each
year. This has lead to a shortage in the industry, and key stake holders are in the process of
determining how to solve the problem. 351
"There's a huge drop in engineering education in Brazil," says Mario Sergio Salerno, professor
and coordinator of the Laboratory of Innovation Management at the Polytechnic School of USP,
and speaker of the congress Brazil Automation ISA 2010, which discusses inter alia the lack of
engineers in Brazil. "There are a large number of registrations, about 460,000 per year, but few
students graduate." 352
A study at the beginning of this year by the Institute of Applied Economic Research (IPEA)
shows that by 2015, for every seven openings in the market, only two engineers will have the
experience to practice. The average salary for engineers in Brazil is as follows: 353
• Masters or Doctorate level Engineers: R$ 6,938.39 per month
• Mechanical Engineers (undergraduates): R$ 5,576.49 per month
• Civil Engineers (undergraduates): R$ 5,476.85 per month 354
14.17 Advertising
Media ownership is highly concentrated in Brazil. Home-grown conglomerates such as Globo,
Brazil's most-successful broadcaster, owns television and radio networks, newspapers and payTV operations. Brazilian-made television programs are produced and aired around the world
151 | P a g e
and attract large audiences. Brazilian media companies provide digital television services, and
are determined to eliminate analogue television transmissions by 2016.355356
14.17.1.1 The Press
Brazil has more than 465 daily newspapers, with nine exceeding 100,000 copies sold per day
(seven in the Rio-Sao Paulo region).357 The cost of advertising in Brazilian newspapers depends
on the advertisement, the number of lines to be used, and the type of advertisement. The cost
to advertise in Diarios Associados in 2010 included the following: 358
1.
Midia de Apoio (on web site)
a) Super Banner: BRL 46 (cost per thousand); BRL 38 (run of site); BRL 2,520
(run of site lot)
b) Banner 2: BRL 25 (cost per thousand)
c) Rectangle: BRL 50 (cost per thousand)
d) Full Banner: BRL 43 (cost per thousand); BRL 36 (run of site); BRL 2,290 (run
of site lot)
e) Half Banner: BRL 25 (cost per thousand)
f) Square Button: BRL 35 (cost per thousand)
g) Wide Skyscraper: BRL 55 (cost per thousand)
2.
Midia de Apoio (print advertisement)
a) Super Banner: BRL 61 (cost per thousand)
b) Side Seal: BRL 30 (cost per thousand)
c) Seal Offering: BRL 907
Circulation of the daily newspapers in Brazil continues to grow. The average circulation of daily
newspapers in Brazil has grown 69.4% in the last ten years, from 4.2 million to 7.2 million
copies sold. Some of the more popular publications/news agencies include: 359
1. Dia: One of Rio de Janeiro’s daily newspapers
2. Correio Brazilense: The influential daily paper
152 | P a g e
3. Globo: Owned by Rio de Janeiro daily
4. Jornal do Brasil: Another Rio de Janeiro daily paper
5. Folha de Sao Paulo: Daily paper in Sao Paulo
6. Estado de Sao Paulo: Another daily paper in Sao Paulo
14.17.1.2 Television
Television is a primary means of entertainment and information for most Brazilians, and
programming is available via open channels (provided free) or closed channels (through
subscriptions such as pay-per-view).
In 2007, Brazil was introduced to digital television.
According to Anatel, a body was created in 1997 to regulate and supervise the
telecommunications sector. Some of the television networks in Brazil include:
1. TV Band: Commercial network operated by Grupo Bandeirantes
2. Rede Globo: Major commercial network operated by Globo
3. Sistema Brasileiro de Televisao (SBT): Major commercial network
4. TV Record: Major commercial network
5. NBR: Operated by state-run Radiobras
6. Rede TV: Commercial network
7. TV Cultura: Provide public, educational and cultural programmes
The value of announcements on television depends on the advertisement location, the duration
of the advertisement, and the broadcast schedule. Thirty-second advertisements during peak
viewing hours for all the States in Brazil costs US $200,000. In Sao Paulo, the advertising costs
are approximately US $80,000. Advertisements transmitted in other states at off-peak hours
are usually cheaper.
153 | P a g e
14.17.1.3 Radio and News Agencies
The various radio stations and News Agencies in Brazil include:
1. Radio Nacional - FM and mediumwave (AM) network operated by state-run Radiobras
2. Globo Radio - commercial networks operated by Globo
3. Radio Eldorado - affiliated to O Estado de Sao Paulo newspaper
4. Radio Bandeirantes - network operated by Grupo Bandeirantes
5. Radio Cultura - public, cultural programmes
6. Agencia Brasil - state-owned
7. Agencia Estado - private, Sao Paulo-based
8. Agencia Globo – private 360
14.18 Budgeting
14.18.1
Financial Ratios by Industry / Sector
14.18.1.1 Return on Equity:
There is a wide range of Return on Equity (ROE) values in the chart below, and the high and low
values could be a result of a combination of factors. Low values could result from low income
or other factors affecting net income (i.e., amortization). On the other hand, ROE values that
are very high could be a result of strong revenues, or possibly from a lack in investing in
research and development. This would depend on the individual company, or it could be
considered an industry average. Ideally firms with higher ROE would have higher share prices,
but it order to determine this further, a more in-depth analysis of each industry and each
company would be required.
Table 16: Return on Equity, ROE (%): 361
SECTOR
Water and Sanitation
Food Sector
RATIO
6.57
10.30
154 | P a g e
Automotive
Construction, Engineering and Real Estate
Consume
Electronics
Energy
Pharmaceutical
Financial Institutions
Tourism
Mining
Motor, Machines and Tools
Oil and gas
Pulp and Paper
Chemistry
Health
Services
Steel and metallurgy
Information Technology
Textile
Transport and Logistic
Retail
Average
4.62
7.64
13.72
-1.10
8.63
76.68
16.38
-43.20
3.24
10.73
-0.14
31.60
5.14
10.84
25.79
-16.31
15.12
14.00
8.92
14.18.1.2 Return on Assets:
The risk return on assets (ROA) below indicates how predictable the return on assets is within a
given segment, similar to the measure of equity risk by their volatility (BODIE, KANE, Marcus,
2008). It is the average of a measure of variation of ROA of the companies comprising the
industry. 362
Table 17: Return on Assets, ROA (%): 363
SECTOR
Water and Sanitation
Construction, Engineering and Real Estate
Food Sector
Mining
RATIO
3.10
3.11
3.65
4.12
155 | P a g e
Pulp and Paper
Energy
Telecommunication
Automotive
Retail
Health
Oil and gas
Chemistry
Electronics
Services
Motors, Machinesand Tools
Financial Institutions
Textile
Steel Metallurgy
Consume
Information Technology
Transport and Logistic
Average
Sectors with lower ROA demonstrate more
5.31
5.35
5.48
6.30
6.51
6.95
7.47
7.58
7.61
8.23
8.24
8.79
9.29
10.18
15.11
16.26
19.57
8.01
stable returns and little variation over time. Low
ROA values indicate that the profitability of that sector is more predictable, even if the ROA is
designed to be lower or higher than other sectors. This also measures the ability of future
planning, and it becomes easier to predict scenarios. 364
In the year 2009,365 Brazilian companies listed on the stock exchange were valued at a market
capitalization rate of 74.3% of GDP (which equals US $1.1 trillion). As of December 2010,366 the
country’s discount rate equaled 10.75%, its deposit rate was 9.89%, and its lending rate was
39.70%. The country also maintained a savings rate of 7.60% and a T-bill rate of 10.96%.
14.18.1.3 Sector Specific Financial Ratios (Average and Range)
Prof. Aswath Damodaran - Professor of Finance at the Stern School of Business at New York
University has compiled an excel sheet for comparison of financial information ratios for Brazil
across sectors. An indicative table with average and range information for companies within a
156 | P a g e
sector has been tabulated for quick reference. For detailed information (company wise) you can
download the Excel sheet from Prof. Damodaran’s website.
(http://pages.stern.nyu.edu/~adamodar/)
157 | P a g e
Figure 11: Sector Specific Financial Ratios - Average
Market
Market
Debt to
Debt to
Current
EV/
capital
Equity
PE
EBIT
ratio
ratio
1 ICT
42.87%
86.08%
33.36
30.94
2 Environmental
39.37%
78.09%
39.11
3 OGES
12.67%
17.30%
4
8.06%
5 Ocean Technology
6 Defense, Security
EV/
Return
Net
Pre-tax
Effectiv
Profit
Operatin
e Tax
Margin
g Margin
Rate
70.49%
(39.41%)
78.05%
49.22%
7.56%
10.80%
5.69%
17.18%
14.30%
24.00
5.15%
3.52%
(11.17%)
(13.98%)
13.41%
5.99
11.19
19.59%
61.18%
(122.27%)
(78.12%)
26.79%
11.37
2.72
87.77
4.81%
8.35%
(1087.1%)
(180.03%)
12.99%
17.21
13.40
1.72
1.30
14.67%
11.12%
4.72%
7.50%
15.45%
21.59
9.55
27.31
2.12
1.35
4.15%
(23.06%)
14.65%
0.27%
6.54%
1.90%
42.79
75.35
27.40
9.69
3.78
5.52%
23.03%
2.24%
4.89%
6.20%
83.02%
61.37
22.67
15.35
2.74
2.74
12.39%
17.98%
2.93%
(6.66%)
16.18%
EV/Inv
EV/
Capital
Sales
13.23
5.88
8.92
49.75%
17.42
18.80
1.50
4.29
1572.72
9.89
9.36
6.99
9.45%
67.52
23.37
24.87
10.66%
12.71%
38.12
17.00
38.42%
69.21%
11.01
7 Mining
8.18%
10.85%
8 Education Sector
1.83%
9 Food/ Seafood
37.91%
Sectors
EBIT
DA
on
Equity
(ROC or
ROIC)
technologies
Life Sciences and
Biotechnology
and Aerospace
Page | 158
Figure 12: Sector Specific Financial Ratios - Range
Market
Debt to
capital
ratio
0.00% 81.82%
Market
Debt to
Equity
ratio
0.00% 450.19%
Current
PE
EV/
EBIT
EV/
EBITDA
EV/Inv
Capital
EV/
Sales
Return
on
Equity
7.40 76.42
2.76 269.11
2.45 32.34
0.56 29.91
0.32 124.96
2 Environmental technologies
15.26%
56.50%
18.01% 129.88%
6.74 87.34
12.79
22.06
10.17 31.92
0.80 2.60
3 OGES
0.00% 37.47%
0.00% 59.93%
5.31 6,252.11
9.62 10.34
7.24 11.94
4
Life Sciences and
Biotechnology
5 Ocean Technology
0.00% 19.41%
0.00% 24.09%
10.12 254.59
7.73 49.38
0.00% 17.48%
0.00% 21.19%
15.47 76.12
6 Defense, Security and
Aerospace
7 Mining
26.56%
54.39%
36.17% 119.25%
0.00% 24.55%
8 Education Sector
9 Food/ Seafood
Sectors
1 ICT
(ROC or
ROIC)
Net Profit
Margin
Pre-tax
Operating
Margin
Effective
Tax
Rate
2.96% 322.55%
(54.61%)
578.28%
(1,361.23%)
- 55.84%
(26.06%) 995.59%
0.00% 42.54%
2.50 6.70
(11.14%)
- 18.08%
5.50% 17.05%
(13.45%) 15.47%
13.90% 20.34%
0.00% 22.74%
1.24 17.23
0.33 111.45
(15.81%)
- 21.06%
(22.10%)
- 22.83%
82.46% 25.81%
(110.90%) 22.47%
0.00% 39.94%
5.91 49.41
1.02 13.55
0.24 76.50
(3.16%) 41.91%
(61.02%)
191.01%
(1,151.86%)
- 14.01%
(787.97%) 23.14%
0.00% 50.00%
12.33
20.08
5.41 16.85
2.54 3.03
1.36 275.05
(9.49%) 18.39%
(7.38%) 18.31%
(4,901.96%)
- 13.70%
(660.78%) 21.90%
0.00% 50.00%
8.26 14.41
12.57
20.35
9.16 19.58
1.55 2.00
1.00 1.58
10.36% 22.97%
6.385 13.89%
1.65% 6.68%
5.87% 9.29%
0.00% 45.93%
0.00% 32.54%
8.63 34.55
9.55
27.31
1.12 3.89
0.68 2.03
(34.41%)
- 33.63%
(56.06%)
- 17.75%
11.61% 17.68%
(14.46%) 15.00%
0.00% 19.63%
0.06% 5.12%
0.06% 5.39%
23.26 70.51
25.44
157.60
19.39 35.08
4.63 16.21
2.03 5.83
(7.71%) 14.83%
(4.13%) 33.90%
(11.35%) 8.77%
(2.27%) 12.09
0.00% 17.01%
4.75% 70.26%
4.99% 236.29%
8.28 277.38
8.47 73.29
6.80 43.19
0.53 24.18
0.64 16.19
(55.52%)
- 86.01%
(23.33%)
126.96%
(60.49%) 67.40%
(141.15%) 38.42%
0.00% 50.00%
159 | P a g e
15.
Contact Information of Professional Service Providers
Firm Name
Contact person
Souza, Cescon, Paulo Calil Franco Padis
Barrieu
& (Partner)
Flesch
Advogados
Services
Legal services:
Industrial and Intellectual
Property; Estate Planning;
Corporate Law, M&A and
private Equity; Banking and
structured
Finance;
Infrastructure and Project
Finance; Capital Market; Tax
Law;
Litigation
and
Arbitration;
Environmental
Law; Agribusiness
Domingues e Joao Henrique Brum
Accounting; Tax; Personnel;
Domingues and Pinho Financial
Pinho
Management;
Contadores
Contadores
Paralegal;
Document
Management;
Information
Management; HR.
Zugno Duquia Guilherme Ziegler Zugno
Financial and Capital Market,
Advogados
Jorge Alberto Zugno
Mergers and Acquisitions,
Marcelo Soares Duquia
Banking Law, Tax Law,
(Partners)
Contracts, and Foreign Trade.
Trench, Rossi Gabrielle Galdino
and Watanabe
Fees
Partner :
U$480 to 550
Sr.
Associate:
U$360 to 420
Associate: U$300
to 330
Jr.
Associate:
U$220 to 240
Trainees:
U$100 to 150
Contact information
Rua:Funchal, 418 11 andar,
04551 060, Sao Paulo SP, Brasil
T 55 11 3089 6141
F 55 11 3089 6565 [email protected]
www.scbf.com.br
Around U$ 100 per email: [email protected]
hour
Tel: 55 21 3231-3735
Fax: 55 3231-3717
www.dpc.com.br
U$ 250 per hour
Av. Taquara, 146, Cj 203 - Bairro
Petrópolis, CEP 90460-210 - Porto Alegre RS - Brasil
Telephone: (55 51) 3061 8082
[email protected]
www.zugnoduquia.com.br
Av. Rio Branco, 1, 19 floor, Sector B
Securities; Corporate planning Partners: R$900
and restructuring; Shareholder Local
partners: Centro, Rio de Janeiro RJ
CEP 20090-003
and partner agreements; R$800
Corporate documents
Consultants: R$800 Tel.:(21) 2206-4985
160 | P a g e
Firm Name
Contact person
Andre Texeira Tiago Guerra Machado
Law Office
Bichara, Barata, Luiz Gustavo A. S. Bichara
Costa & Rocha
Services
Fees
Contact information
to R$1090
Fax.: (21) 2206-4949
Sr.
Associates: Cel.: (21) 7619-1898
R$480 to R$580
www.trechrossiewtanabe.com.br
Jr.
Associates: [email protected]
R$380 to R$470
Law Clerks:
R$130 to R$170
Tax Advisory; Administrative U$ 200 per hour
Oil & Gas Law Alliance
Av. Rio Branco, n? 89 901
Tax Litigation; Judicial Tax
Centro Rio de Janeiro RJ
Litigation; Corporate and
CEP 20040-004
Contract Advisory / Litigation
Tel.:(21) 2203-0330
Fax.: (21) 2203-0331
Cel.: (21) 7619-1898
www.at.adv.br
[email protected]
Tax;
Commercial;
Social U$ 280 per hour
Offices in Rio de Janeiro, São Paulo,
Security; Corporate; Banking;
Brasília, Vitória, Volta Redonda
Labour; Civil; Environmental;
Tel: (55 21) 3231-8011
Fax: (55 21) 2224-5295
Administrative and
Constitutional; Real Estate Oil
[email protected]
and Gas; International Trade
www.bbcr.com.br
and Antitrust
161 | P a g e
Appendices
Page | 162
Appendix "A" - 2011 Index of Economic Freedom 367368
The Index of economic freedom examines three
freedom—empowerment of
fundamental principles of economic
the individual, non-discrimination, and open competition. The
following is the excerpt of Brazil’s 2011 score on all 10 dimensions of economic freedom. Please
note that this portion of the report is reproduced as is without any changes to language or
content as per the copyright notice for this material that allows copying, distributing, displaying
or performing the work but not altering, transforming, or building upon this work.
Introduction
Brazil’s economic freedom score is 56.3, making its economy the 113th freest in the 2011 Index.
Its score is 0.7 point better than last year as a result of improvements in investment freedom
and trade freedom. Brazil is ranked 21st out of 29 countries in the South and Central
America/Caribbean region, and its overall score is below the regional and world averages.
The Brazilian economy has been expanding with the help of booming commodity exports. Over
the past decade, economic growth has averaged around 4 percent, accompanied generally by
low inflation. Brazil has a large agricultural and industrial base, but a growing services sector
has accounted for over 60 percent of GDP in recent years. The global financial and economic
turmoil’s impact has been moderate.
The state’s role in the economy has been heavy and even increasing. However, the efficiency
and overall quality of government services remain poor despite high government spending as a
percentage of GDP. Barriers to entrepreneurial activity include burdensome taxes, inefficient
regulation, poor access to long-term financing, and a rigid labor market. The judicial system
remains vulnerable to political influence and corruption.
Background
Brazil’s democratic constitution dates from 1988. Workers’ Party President Luiz Inacio “Lula” da
Silva, elected in 2002 and re-elected in 2006, was constitutionally barred from seeking a third
term. In the October 2010 presidential elections, Lula’s hand-picked successor, Dilma Rousseff,
was elected Brazil’s first female president. Brazil has benefited from surging prices for its
163 | P a g e
booming exports of commodities and weathered the global economic downturn in 2009 better
than many developed countries did. A stable currency has boosted living standards, and the
middle class is growing. Brazil is the world’s fifth-largest country. Its almost 200 million people
are heavily concentrated on the coast, where a dozen major metropolitan areas offer direct
access to the Atlantic Ocean.
Business Freedom
54.3
– 0.2
Despite some progress, organizing new investment and production remains cumbersome and
bureaucratic. It is costly and time-consuming to launch or close a business.
Trade Freedom
69.8
+ 0.6
Brazil’s weighted average tariff rate was 7.6 percent in 2009. Import bans and restrictions,
market access barriers in services, high tariffs, border taxes and fees, restrictive regulatory and
licensing rules, subsidies, complex customs procedures, and problematic protection of
intellectual property rights add to the cost of trade. Fifteen points were deducted from Brazil’s
trade freedom score to account for non-tariff barriers.
Fiscal Freedom
69
+ 0.6
Brazil’s top income tax rate is 27.5 percent. The standard corporate tax rate is 15 percent, but a
surtax of 10 percent and a 9 percent social contribution on net profit paid by most industries
bring the effective rate to 34 percent. Other taxes include a real estate transfer tax and a tax on
financial transactions. In the most recent year, overall tax revenue as a percentage of GDP was
34.4 percent.
Government Spending
49.6
– 0.7
In the most recent year, total government expenditures, including consumption and transfer
payments, held steady at 41 percent of GDP. Public debt is now below 40 percent of GDP.
Besides debt service, government spending is focused mainly on pensions, transfers to local
governments, and the bureaucracy. Additional planned stimulus spending will widen the overall
fiscal deficit. Tax and pension reform, abandoned during the global crisis, are back on the fiscal
agenda.
164 | P a g e
Monetary Freedom
75.9
+ 0.1
Inflation has been better controlled in recent years, averaging 5 percent between 2007 and
2009. Prudent fiscal and monetary policies are credited with helping Brazil to avoid the worst of
the global financial crisis of 2008 and 2009. Although such public services as railways,
telecommunications, and electricity have been privatized, regulatory agencies oversee prices.
The National Petroleum Agency fixes the wholesale price of fuel, and the government controls
airfares. Ten points were deducted from Brazil’s monetary freedom score to account for price
controls.
Investment Freedom
50
+ 5.0
Foreign investors are granted national treatment, but foreign investment is restricted in several
industries. In general, Brazilian nationals must constitute at least two thirds of all employees
and receive at least two-thirds of total payroll in firms employing three or more persons.
Bureaucracy and administration are non-transparent, burdensome, complex, and subject to
corruption. Legal disputes can be time-consuming. There are few restrictions on foreign
exchange transactions. Foreign investors, upon registering their investments with the central
bank, may remit dividends, capital (including capital gains), and royalties.
The central bank regulates outward direct investment in some cases, including transfers and
remittances. Foreign investors must obtain specific authorization to purchase land along
borders.
Financial Freedom
50
no change
Brazil’s financial sector is diversified and competitive, but the state’s role remains considerable.
Public-sector commercial and development bank assets account for around 40 percent of the
financial system’s total assets. The two largest state-owned banks control about 25 percent of
total assets, and the government directs banks to channel loans to preferred sectors. Three of
the top 10 banks are now foreign-owned. Brazil’s insurance sector is now the region’s largest,
and the reinsurance market was opened to private sector competition in 2008. A Credit
Guarantee Fund was introduced in March 2009 to provide state guarantees on bank certificates
of deposit. Overall, the banking sector has withstood the global financial turmoil relatively well.
165 | P a g e
Property Rights
50
no change
Contracts are generally considered secure, but Brazil’s judiciary is inefficient, subject to political
and economic influence, and lacks resources and staff training. Decisions can take years, and
judgments by the Supreme Federal Tribunal are not automatically binding on lower courts.
Protection of intellectual property rights has improved, but piracy of copyrighted material
persists.
Freedom from Corruption
37
+ 2.0
Corruption is perceived as significant. Brazil ranks 75th out of 180 countries in Transparency
International’s Corruption Perceptions Index for 2009. Corruption can be an obstacle to
investment. Businesses bidding on government procurement contracts can encounter
corruption, which is also a problem in the lower courts.
Labor Freedom
57.8
+ 0.3
Rigid and outmoded labor regulations undermine employment and productivity growth. The
non-salary cost of employing a worker is high, and dismissing a redundant employee can be
costly. Mandated benefits amplify overall labor costs. The informal sector remains sizeable.
166 | P a g e
Appendix "B" – Atlantic Canadian Exports to Brazil
Listing of Export in Top 25 Industries in Millions
Industries
21239 - Other Non-Metallic Mineral Mining
and Quarrying
32212 - Paper Mills
32412 - Asphalt Paving, Roofing and
Saturated Materials Manufacturing
21231 - Stone Mining and Quarrying
33149 - Non-Ferrous Metal (except Copper
and Aluminum) Rolling, Drawing, Extruding
and Alloying
32621 - Tire Manufacturing
33361 - Engine, Turbine and Power
Transmission Equipment Manufacturing
33641 - Aerospace Product and Parts
Manufacturing
11121 - Vegetable and Melon Farming
31171 - Seafood Product Preparation and
Packaging
33999
All
Other
Miscellaneous
Manufacturing
11212 - Dairy Cattle and Milk Production
33451 - Navigational, Measuring, Medical
and Control Instruments Manufacturing
33591 - Battery Manufacturing
33422 - Radio and Television Broadcasting
and Wireless Communications Equipment
Manufacturing
41812 - Recyclable Paper and Paperboard
Wholesaler-Distributors
33313 - Mining and Oil and Gas Field
Machinery Manufacturing
31141 - Frozen Food Manufacturing
33392 - Material Handling Equipment
2006
65.04
2007
60.15
2008
92.69
2009
39.30
2010
124.55
43.36
0.00
34.33
0.00
16.99
0.00
7.20
0.00
20.20
2.45
0.81
0.00
1.61
0.00
1.18
0.00
0.00
2.55
1.90
1.83
2.28
0.01
4.05
0.02
8.51
0.03
1.68
1.49
1.68
1.06
0.00
0.00
0.00
0.70
0.84
0.28
0.55
0.35
0.00
0.38
0.08
0.00
0.33
0.75
0.69
0.39
0.74
0.88
0.02
0.65
0.19
0.08
0.16
0.39
0.34
0.55
0.17
0.25
0.60
0.58
0.00
0.59
0.00
0.50
0.00
0.54
0.00
1.25
0.56
0.56
0.00
0.00
0.00
0.00
0.48
0.05
0.11
0.08
1.40
0.32
0.09
0.33
0.20
0.21
0.33
0.13
0.27
0.78
0.31
0.28
167 | P a g e
Manufacturing
33421 - Telephone Apparatus Manufacturing
33312
Construction
Machinery
Manufacturing
32619 - Other Plastic Product Manufacturing
32519 - Other Basic Organic Chemical
Manufacturing
32629
Other
Rubber
Product
Manufacturing
33631 - Motor Vehicle Gasoline Engine and
Engine Parts Manufacturing
SUB-TOTAL
OTHERS
TOTAL (ALL INDUSTRIES)
0.05
0.00
0.00
0.01
0.00
0.03
0.02
0.12
0.26
0.20
0.19
0.00
0.32
0.00
0.33
0.00
0.19
0.10
0.16
0.15
0.13
0.08
1.14
0.03
0.13
0.04
0.02
0.05
0.41
0.10
114.45
103.24
58.27
161.28
2.20
116.65
2.67
105.92
124.2
5
6.14
130.3
9
4.91
63.19
3.51
164.79
168 | P a g e
Appendix "C" – The Canadian Environmental Goods Model
169 | P a g e
Appendix "D" - Oil reserves1, per location (onshore and off shore), by State –
2000-2009
170 | P a g e
Appendix “E” - Best Prospects for Foreign Suppliers with Petrobras369
Petrobras considers the following critical equipment and services as best prospects for foreign
suppliers:
E&P critical equipment
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Production pipelines alloy coatings
Turbo compressors (6-10 Mw)
Polyester mooring cables
Mooring systems
Drilling pipelines
Electrical cables
Control systems for well control
Oil and gas metering systems
Offshore drilling rigs
Gravel packing
Drill bits
Steam generators (25-50 x 10 6 BTU/d);
Special sphere subsea valves
Subsea sensors for analysis of oil and grease traces in water
Gas turbines
Special steels (alloys, chrome, etc) to support sub-salt corrosion, and H2S
Critical services for E&P activities
•
•
•
•
•
•
•
•
Drilling
Work over services
Flexible lines and umbilical laying services
Support to ROV vehicles
Support to mooring activities
Special vessels
Subsea interconnection services
Monitoring and inspection techniques for structural integrity of flexible risers
Downstream segment (refineries, etc) critical equipment and services
•
•
•
HCC Reactors
Boiler works with special alloys (reactors, towers, pressure vessels)
Boilers
171 | P a g e
•
•
•
•
Heat exchangers working with H2S traces (ASTM A 387degree 11)
API pumps
Basic design services
Thermal power project design
Based on Petrobras 2008 Annual report, the US Commercial Service Brazil found that
Petrobras’s direct procurement amounted to US$ 45.2 billion - US$ 7 billion in goods and US$
38.2 billion in services. Procure from Brazilian suppliers increased by 8 percent over 2007 and
accounted for 78 percent in 2008. Foreign suppliers account for only 19.4 percent of the goods
and 22.5 percent of the services.
172 | P a g e
Appendix “F” - Sales of Consumer Health Products by Sector
173 | P a g e
Appendix "G" – Canada’s Ocean Technology Sectors
Canada's Ocean Technology Sector
Aquaculture
Equipment
Operations
Other
Site Development
Defence and Security
Communications
Equipment
Industry Promotion
Marine Acoustics
Military
Modeling and Forecasting
Port Security
Safety/Evacuation
Search and Rescue
Seismic Survey
Sovereignty
Surveillance
System Integration
Source: http://ocean.cinmaps.ca/asset_map
Marine Transportation
Communications
Equipment
Industry Promotion
Information
Instrumentation
Naval Architecture
Navigation
Other
Performance Evaluation
Port Design
Port Management
Port Security
Safety/Evacuation
Search and Rescue
Underwater Intervention
Vessel Monitoring
Education and Training
Safety/Evacuation
Underwater intervention
Ocean Observation and Science
Coastal Zone Management
Communications
Data Fusion
Equipment
Hydrography
Industry promotion
Instrumentation
Marine Acoustics
Monitoring
Ocean Mapping and Survey
Oceanography/Meteorology
Other
Seismic Survey
Surveillance
Underwater Intervention
Underwater Vehicles
Offshore Energy
Coastal Zone Management
Emergency Response
Equipment
Exploration
Industry Promotion
Other
Production and Processing
Renewables
Safety/Evacuation
Fisheries
Harvesting
Monitoring
Other
Processing
Vessel Monitoring
Equipment
Navigation
Underwater Vehicles
Page | 174
Appendix “H”– Starting a Business in Brazil
No.
1
2
Time to
Complete
Check company name with State Commercial 1 day
Registry Office
Pay registration fees
1 day
Procedure
3
Register with the commercial board of the state 1 day
where the main office is located and obtain
identification number (NIRE)
4
Register for federal and state tax (Secretaria da About 22 days
Receita Federal do MinistÃ©rio da Fazenda, (including
SRF/MF), obtain the CNPJ number, which also inspection visit)
registers employees with the National Institute
of Social Security (Instituto Nacional da
Seguridade Social, INSS)
*5
Receive state tax inspection
6
*7
*8
Associated
Costs
R$ 9
see following
procedures
R$75 registration
+ R$50
(expediting fee)
no charge
1 day
no charge
(simultaneous
with procedure 4)
Get the authorization to print receipts/invoices 1 day
no charge
from the Secretaria da Fazenda Estadual
Register with the Municipal Taxpayersâ€™ 5 days (
Registry (Secretaria Municipal de FinanÃ§as) of Simultaneous
the City of SÃ£o Paulo
with previous
procedure)
Pay TFE to the Municipal Taxpayersâ€™ Registry 1 day
(simultaneous
with previous
Procedure)
no charge
R$ 425.46 (for
retailing
business), may
vary depending
on business
activity
Page | 175
9
Get the authorization to print receipts/invoices 1 day
from the Secretaria Municipal de FinanÃ§as
no charge
10
Order receipts/invoices (notas fiscais) with CNPJ 3 days
numbers from authorized printing companies
R$ 600 (R$0.6 per
page, assume
printing 1000)
no charge
* 11
Apply to the municipality for an operations 90 days,
permit (auto de licenÃ§a de funcionamento)
simultaneous
with previous
procedure
* 12 Register the employees in the social integration 1 day,
program (Programa de IntegraÃ§Ã£o Social, PIS) simultaneous
with Procedure
10
* 13 Open a special fund for unemployment (FGTS) 1 day,
account in bank
simultaneous
with Procedure
10
* 14 Notify the Ministry of Labor (Cadastro Geral de 1 day,
empregados e desempregados, CAGED)
simultaneous
with Procedure
10
* 15 Registration with the Patronal Union and with 5 days,
the Employees Union.
simultaneous
with Procedure
10
* Takes place simultaneously with another procedure.
no charge
no charge
no charge
Annual fee to be
paid depending
on the Union.
176 | P a g e
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Endnotes
1
(Central Intelligence Agency, 2011)
2
(Ministry of External Relations)
3
Rate on Mon, 7 March, 2011 - http://fx-rate.net/CAD/BRL/
4
(The Heritage Foundation & Wall Street Journal, 2011)
5
(Foreign Affairs and International Trade Canada, 2009)
6
(Governement of Canada, 2009)
7
(Industry Canada, 2011)
8
9
10
(Marega, 2008)
11
(Canadian Trade Commissioner Service, 2010)
12
(International Telecom Union, 2009)
13
(Invest in Brazil, 2010)
14
(Marega, 2008)
15
(Austrade, 2010)
16
(SICE, 2006)
17
(Austrade, 2010)
18
(Austrade, 2010)
19
(Ecommerce Journal, 2009)
20
(Pohl, 2010)
21
(Austrade, 2010)
22
(Furusho, 2011)
23
(Austrade, 2010)
24
(US Commercial Service Brazil, 2009)
25
(Austrade, 2010)
26
(APEC, 2010)
27
(Gambale, 2007)
28
(The Entertainment Software Association of Canada (ESAC), 2009)
29
(Atlantic Canada Opportunities Agency, 2009)
30
(González, 2009)
31
(Gonzalez, 2005)
32
(Environmental Careers Organization, 2010)
197 | P a g e
33
(Environmental Careers Organization, 2010)
34
(The Globe Foundation, 2010)
35
(Innovas Solutions Ltd., 2009)
36
(Worldwatch Institute, 2008)
37
(US Commercial Service, 2009)
38
39
(UK Trade & Investment (Env. & Water), 2010)
40
41
42
43
44
(Canadian Trade Commissioner Services, 2010)
45
(UK Trade & Investment (Power), 2010)
46
47
48
(UNFCCC, 2006)
49
50
51
(Crawford C. , 2009)
52
(OECD, 2008)
53
54
55
56
(Fransen, 2008)
57
(Canadian International Development Agency, 2007)
58
(Worldwatch Institute, 2008)
59
(The World Bank, 2009)
60
(Lucon & Fernandes Rei, 2006)
61
(U.S. Library of Congress, 1994)
62
(World Bank, 2010)
63
64
65
(UK Trade & Investment (Power), 2010)
66
198 | P a g e
67
(UNFCCC, 2006)
68
69
Guidelines for Procurement of World Bank funded projects http://bit.ly/ft8GdS | Guidelines for procurement of
IDB Projects http://www.iadb.org/en/countries/brazil/brazil-and-the-idb,1002.html
70
71
72
(Datamonitor, 2010)
73
(Arabian Oil and Gas Staff, 2009)
74
(Arabian Oil and Gas Staff, 2009)
75
76
(Pre-Salt, 2009)
77
(U.S. Energy Information Administration, 2011)
78
(Filho, Nelson Narciso, 2009)
79
80
81
82
83
84
85
(MBendi Information Services, 2011)
86
87
88
(Oil-price.net, 2011)
89
(Invest in Brazil, 2011)
90
91
(Austrade, 2010)
92
(Filho, Nelson Narciso, 2009)
93
94
95
96
(Oil Field Directory, 2009)
97
Petrobras Supplier Channel http://www.petrobras.com.br/en/supplier-channel/
98
ANP Website (Portuguese) http://www.anp.gov.br/
99
(Deloitte, 2007)
199 | P a g e
100
(Calgary Technologies, 2006)
101
(PwC, 2010)
102
(IBISWorld, 2011)
103
(Datamonitor, 2009)
104
(Datamonitor, 2010)
105
(Datamonitor, 2009)
106
107
(Fundação Biominas, 2007)
108
109
(UK Trade and Investment, 2010)
110
(Brazilian Trade and Investment Promotion Agency, 2010)
111
112
113
114
115
116
(Cookson, 2010)
117
118
119
(Collins, 2008)
120
(Collins, 2008)
121
(U.S. Commercial Service, 2010)
122
123
124
125
(BioteCanada , 2011)
126
Website for ANVISA Services - http://bit.ly/anvisainportugese (Portuguese)
127
(Canadian Industry Mapping System, 2010)
128
(Westwood, 2004)
129
(Douglas Westwood, 2006)
130
131
(McQuilling Services, LLC, 2010)
132
(Business Monitor International, 2011)
133
(Paschoa, Brazil Shipbuilding: A Forecast, 2010)
200 | P a g e
134
(PoderNaval, 2009)
135
136
(Cavalcante, 2007)
137
(Estefen, 2007)
138
(Iberdrola, 2010)
139
(Boyle, 2010)
140
(Cavas, 2009)
141
(DTC International, Inc., 2010)
142
143
(AXYS, 2010)
144
145
(Estefen, 2007)
146
(Iberdrola, 2010)
147
(ICS Electronics Ltd., 2010)
148
149
(Duarte, 2010)
150
(People's Daily Online, 2010)
151
(Augusto & Portes, 2008)
152
153
154
(da Cruz Nunes & da Silveira Lob, 2008)
155
(SINAVAL, 2011)
156
(Paschoa, Subsea Technology Development in Brazil - The Birth of a New Local Industry, 2010)
157
(World Ocean Review, 2010)
158
(UKTI, 2010)
159
(ACZISC Secretariat and Canmac Economics Ltd. (Vol.1), 2006)
160
The Canadian Ocean Technology Sector in Canada broken down into sectors and the corresponding companies
http://ocean.cinmaps.ca/asset_map
161
(Atlantic Canada Opportunities Agencies, 2006)
162
(Datamonitor, 2010)
163
(Gomes, 2010)
164
(Deloitte Touche Tohmatsu (DTT) , 2010)
165
(Yamashita, 2009)
166
201 | P a g e
167
(ECORYS Research and Consulting., 2009)
168
(ECORYS Research and Consulting., 2009)
169
(Yamashita, 2009)
170
(Yamashita, 2009)
171
(Warwick, 2011)
172
173
(Yamashita, 2009)
174
(US Department of State, 2009)
175
176
(Swiss Business Hub Brazil, 2009)
177
(Warwick, 2011)
178
(Aerospace Industries Association of Brazil - AIAB, 2011)
179
180
181
182
183
(U.S. Census Bureau, 2008)
184
In order to be concise this does not go into the separate categories of mining that these companies are
segmented into.
185
At this level this group still contains companies primarily engaged in oil and gas exploration. A complete list of
all the NAICS sub-categories can be found on the US Census Bureau web page.
186
(PWC, 2010)
187
(PWC, 2011)
188
(Baxter, 2010)
189
(IBRAM, 2011)
190
(IBRAM, 2011)
191
(IBRAM, 2011)
192
(Chadwick, 2010)
193
(IBRAM, 2011)
194
(Duarte, 2010)
195
(Duarte, 2010)
196
(IBRAM, 2011)
197
(Feller, 2010)
198
(Chadwick, 2010)
202 | P a g e
199
(Feller, 2010)
200
(Swedish Trade Council, 2006)
201
(IBRAM, 2011)
202
203
(International Mining, 2006)
204
(IBRAM, 2011)
205
(Duarte, 2010)
206
(Oxford Analytica, 2007)
207
(IBRAM, 2011)
208
209
210
(Duarte, 2010)
211
(Feller, 2010)
212
(The Mining Association of Canada, 2009)
213
(Canadian Mining Magazine, 2008)
214
215
216
(National Resources Canada, 2000)
217
(Winner, 2010)
218
219
(Infomine, 2011)
220
221
(Statistics Canada, 2010)
222
(Worldometers, 2009)
223
(Standards & Poor's, 2010)
224
(A&M Mind Power Solutions, 2011)
225
(RNCOS Industry Research Solutions, 2010)
226
(Rodrigues, 2009)
227
(UNESCO, 2010)
228
(Rodrigues, 2009)
229
(Davidson, 2004)
230
(Governement of Canada, 2009)
231
232
(Rodrigues, 2009)
203 | P a g e
233
(Downie, 2007)
234
http://static.globaltrade.net/files/pdf/20100921065037.pdf
235
236
237
238
(Rodrigues, 2009)
239
(Central Intelligence Agency, 2011)
240
(Rodrigues, 2009)
241
(UNESCO - International Bureau of Education, 2006 - 07)
242
(Rodrigues, 2009)
243
244
245
(Rodrigues, 2009)
246
(Antunes, 2010)
247
(Rodrigues, 2009)
248
(Government of Canada, 2010)
249
(Canadian Trade Commissioner Service - Nova Scotia, 2011)
250
(Tesolin, 2004)
251
(Waldie, 2011)
252
253
(Murray, 2007)
254
(Murray, 2007)
255
(Kuh, 2010)
256
(Kuh, 2010)
257
(ReportLinker.com, 2010)
258
259
(Motta, 2011)
260
261
(Motta, 2011)
262
(Santos, 2010)
263
(SeafoodSource staff , 2009)
264
265
266
(USDA Foreign Agriculture Service, 2009)
204 | P a g e
267
(Mackey, 2008)
268
(MercoPress, 2010)
269
(Kuh, 2010)
270
271
(Trade Commisioner Service, 2007)
272
(Agri-Food Trade Service, 2008)
273
(Atlantic Canada Opportunites Agency, 2005)
274
(Atlantic Canada Opportunites Agency, 2005)
275
(USDA Foreign Agriculture Service, 2009)
276
(Nova Scotia Department of Fisheries and Aquaculture, 2007)
277
278
(Nes, Should you Form a Ltda. or S.A. Company in Brazil?, 2010)
279
(PricewaterhouseCoopers, 2010)
280
(World Bank and International Finance Corporation, 2011)
281
282
283
(Worldwide-Tax.com, 2010)
284
285
(Deloitte, 2010)
286
287
(Deloitte, 2010)
288
(Deloitte, 2010)
289
(Deloitte, 2010)
290
(Deloitte, 2010)
291
(Deloitte, 2010)
292
293
294
295
296
297
298
(MOFCOM, 2007)
299
(US Department of State, 2010)
300
(Deloitte, 2010)
205 | P a g e
301
(Deloitte, 2010)
302
(Deloitte, 2010)
303
(Deloitte, 2010)
304
(Brazil Business Network, 2011)
305
(Ministry of External Relations)" -
306
(Durval de, Noronha Goyos Jr., 2008)
307
(Deloitte, 2010)
308
(Deloitte, 2010)
309
(Brazil – Ministry of External Relations, 2007)
310
(Laposte Export Solutions, 2011)
311
312
313
314
(Nes, Bonded Warehouse in Brazil, 2011)
315
316
(Global Trade Net, 2011)
317
(Aeromar, 2010)
318
(Aeromar, 2010)
319
(Faria, 2010)
320
321
(Faria, 2010)
322
(Faria, 2010)
323
(Faria, 2010)
324
(Szymanski, 2008)
325
(Administradores.com.br, 2010)
326
(Administradores.com.br, 2010)
327
(Sao Paulo Chamber of Commerce, 2003)
328
(CB Richard Ellis, 2010)
329
(Deloitte, 2010)
330
(Marianna, 2007)
331
(Deloitte, 2010)
332
(Deloitte, 2010)
333
(Deloitte, 2010)
334
(Deloitte, 2010)
206 | P a g e
335
(Deloitte, 2010)
336
(Guialog, 2011)
337
(Marianna, 2007)
338
(PayScale, 2011)
339
340
(Global Shipping Cost, 2009)
341
(JATO)
342
(Juris Way Online Education System)
343
(Startup Overseas, 2010)
344
(Deloitte, 2010)
345
(Investor Relations Group, 2008)
346
(Angloinfo Sao Paulo, 2011)
347
(Angloinfo Sao Paulo, 2011)
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(Senges, 2011)
350
(Property Brazil Estate, 2011)
351
(Casaeimoveis, 2011)
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(Mundovestibular, 2011)
355
(Midiainteressante, 2011)
356
(BBC, 2010)
357
(Portal Brazil, 2011) (Portal Brazil, 2011)
358
(UAI, 2010)
359
(UAI, 2010)
361
(Diego, 2010)
362
(Diego, 2010)
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(Diego, 2010)
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(Diego, 2010)
365
(Principal Global Indicators, 2010)
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(Principal Global Indicators, 2010)
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(The Heritage Foundation & Wall Street Journal, 2011)
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A Study to Identify Key Sectors of Opportunity for Atlantic

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