Despite current economic challenges, Brazil continues to offer strong opportunities for U.S. exporters. Brazil's investment grade economy is the 10th largest in the world, with a GDP of $1.5 trillion. Brazil represents approximately half of South America's territory and economy.
Brazil is rich in agricultural, mineral and industrial resources. The economy has experienced stable growth in recent years of 4 to 5%.
Several of Brazil's largest companies are publicly traded on the NYSE including Petrobras (energy), Embraer (aerospace), and Vale (mining). Brazil has been in the spotlight in the United States quite a bit over the last two years. Most of Brazil's allure for US exporters is due to its geographical proximity, booming business opportunities, warm climate and friendly people.
U.S. Exports to Latin America were on the rise in 2006. Notice how Venezuela and Colombia are similar markets in size to Chile. In Venezuela’s case, U.S. exports are increasing due to higher oil revenues and economic activity.
That’s an hypothetical cost buildup for an imported machine, shipped in a 20 foot container, from Miami to the Port of Santos. Illustrates how taxes and fees are calculated. It also illustrates the impact of importing costs on the landed price of the product in the Brazilian market. Some taxes such as Import duty, ICMS, and freight, varies depending on the state or on the product. Note that despite the high mark ups there is a market for new and cutting edge products from the US – particularly electronics. For examples, IPODs sell in duty free shops for US$300 and an Oster chrome blender that would normally sell in the US for US$70, sells here for over $300.
Camille: Here are the main points of contact in all four cities. We are happy to answer any questions you may have.
U.S. Commercial Service
President Luis Inácio “Lula” da Silva <ul><li>Took office on January 1 st , 2003 </li></ul><ul><li>Labor Party- PT </li></ul><ul><li>First mandate - with 61.27% in 2002 </li></ul><ul><li>Second mandate - with 60,83% in 2006 </li></ul><ul><li>Elections October 2010 </li></ul>
Top Exports from Brazil Orange Soy Corn Sugar cane Airplanes Coffee Oil Iron ore Ethanol Meat
<ul><li>Crisis and Recuperation </li></ul><ul><li>Economic Development </li></ul><ul><li>Trading Partners and Best Prospects </li></ul>Doing Business in Brazil
Industrial Production During the Crisis <ul><li>IBGE indicated growth of 0.7% in March </li></ul>By category, in 1 st trimester 2009 compared to same period of 2008, in % : General industry: - 14.7 Consumer goods: -8.0 Capital goods: - 20.8 Durables: - 22.5 Intermediate goods: - 18.1 Semi and non-durable: -3.0
Car Sales During the Crisis <ul><li>Car production increased 34.2% between February and March. </li></ul>08 09
Invest Confidence <ul><li>The main São Paulo Stock Exchange Index, the Bovespa, has risen more than 75% from its low point last October. </li></ul><ul><li>Since January, R$ 5.7 billion has been invested in the Bovespa from overseas </li></ul><ul><li>Bovespa (Blue) vs. Dow Jones Industrial Average (Red). </li></ul>
Brazil’s Reaction to the Crisis <ul><li>Government measures : </li></ul><ul><li>Tax cuts such as IPI, the federal tax on domestic and imported manufactured products. </li></ul><ul><li>Interest rate reduction – 9.25% per year. </li></ul><ul><li>Incentives for civil construction. </li></ul><ul><li>Infrastructure development. </li></ul>
GDP growing projection for 2010 The world recovering Source: Agencia Estado
Bilateral Trade (US$ Thousands) Office of Trade and Industry Information (OTTI), U.S. Department of Commerce
Brazil Compared: U.S. Exports to Latin America Source: Foreign Trade Division, U.S. Census Bureau
<ul><li>Agricultural Sector </li></ul><ul><li>Aerospace (Aircraft and Parts / Airports) </li></ul><ul><li>Electrical Power Systems </li></ul><ul><li>Environmental </li></ul><ul><li>Franchising </li></ul><ul><li>ICT - Information & Communication Technologies </li></ul><ul><li>Insurance </li></ul><ul><li>Medical Equipment </li></ul><ul><li>Mining </li></ul><ul><li>Oil and Gas </li></ul><ul><li>Pharmaceuticals </li></ul><ul><li>Safety & Security </li></ul><ul><li>Transportation (Ports / Railways) </li></ul><ul><li>Travel and Tourism </li></ul>Best Prospects for Sales to Brazil
<ul><li>Rio de Janeiro will host the first-ever Olympic Games in South America August- September 2016, as well as some of the games for the 2014 World Cup. These two events will generate numerous trade and investment opportunities in several areas, for both games and the city. </li></ul>
ESTIMATED INVESTMENTS <ul><li>The state government of Rio de Janeiro estimates that investments from 2010-2016 will reach US$50 billion in infrastructure, construction, transportation, public security, education and training, among others. Most of those investments will occur through Public-Private Partnerships (PPPs) under Brazil’s Growth Acceleration Program (PAC). </li></ul>
INVESTMENTS IN BUILDING AND CONSTRUCTION <ul><li>There will be a huge demand for Architecture/Construction/Engineering (ACE) services to plan and build sport facilities (arenas, stadiums, etc), hotels, infrastructure and transportation projects, as well as port and airport upgrades. </li></ul>
INVESTMENTS IN SPORT FACILITIES <ul><li>Although more than half of Rio 2016 venues are ready, since Rio hosted the 2007 Pan American Olympic Games, about 20 new facilities are to be built. They include: </li></ul><ul><li>An aquatic sports stadium with 18,000 seats with an estimated construction cost of US$40 million. </li></ul><ul><li>An Olympic Park to host gymnastics, cycling, handball, and other sports competitions with an estimated building cost of US$200 million. </li></ul><ul><li>An Olympic village of 32 buildings with 12 floors each and a capacity of over 17,000 beds estimated at US$450 million. </li></ul><ul><li>An Olympic Tennis Center with 16 courts (US$45 million). </li></ul><ul><li>A renovated rowing stadium at Rodrigo de Freitas Lagoon will cost approximately S$2 million. </li></ul><ul><li>An arena in Copacabana for beach volley (US$7 million). </li></ul><ul><li>The renovation of Maracanã Stadium (where the opening and closing Olympic ceremonies will be held as well as soccer games) will cost approximately US$400 million, and must be completed before 2014 to use in the 2014 Soccer World Cup. </li></ul>
INVESTMENTS IN HOTEL/HOSPITAL FACILITIES <ul><li>In 2010, the number of visitors to the city is expected to grow in 10% in comparison to 2008, when 1.68 million tourists came to Rio. By the time of the 2014 Soccer World Cup and the 2016 Olympic Games this number will increase even more. </li></ul><ul><li>Several hotels are being refurbished. </li></ul><ul><li>The municipality of Rio may reduce taxes to attract new investment in hotels; thereby creating opportunities for U.S. hotel chains in refurbishment, architectural projects and building or acquiring existing hotels. </li></ul><ul><li>As for hospitals, a clinic will be built within the Olympic Village. </li></ul>
INVESTMENTS IN INFRASTRUCTURE <ul><li>The estimated investment in infrastructure is about US$15 billion, including US$5 billion in logistics upgrades at seaports and airports. The main projects include: </li></ul><ul><li>The modernization and enlargement of the two International Airport terminals (increasing the airport's capacity from 15 million passengers per year to 25 million), </li></ul><ul><li>Highway widening, </li></ul><ul><li>Construction of “Olympic lanes”, </li></ul><ul><li>The Port of Rio area revitalization to include a new 30,000 square meter leisure area featuring bars, restaurants, an amphitheater, a multi-use space and parking, </li></ul><ul><li>Port dredging, </li></ul><ul><li>Construction of two new subway lines, </li></ul><ul><li>The creation of a Bus Rapid Transit (BRT) system, </li></ul><ul><li>Housing projects (including low income housing) and </li></ul><ul><li>Water sanitation. </li></ul>
INFRA-STRUCTURE MATTERS IN BRAZIL <ul><ul><ul><ul><ul><li>BR US Difference </li></ul></ul></ul></ul></ul><ul><li>Soy production costs 187 238 51 dollars cheaper in Brazil </li></ul><ul><li>Transportation costs 97 26 71 dollars cheaper in U.S. </li></ul><ul><li>Port costs 7 3 4 dollars cheaper in U.S. </li></ul><ul><li>Total 291 267 24 dollars in favor of USA </li></ul><ul><li>Conclusion: </li></ul><ul><li>To produce soy in Brazil is 51 dollars cheaper, but the logistic costs eliminates this advantage. In the end, it is 24 dollars cheaper to get the product to market in the US. </li></ul>Source: Veja Magazine
Hypothetical Cost Buildup for an Imported Machine in US Dollars FOB price of Product 100,000 Freight 2,400 Insurance (1%) 1,000 CIF Price of Product 103,400 Import Duty Rate: 19% -- applied to CIF 19,646 IPI: 5% -- applied to CIF + import duty 6,152 ICMS: 18% -- applied to CIF + import duty + IPI 23,256 Merchant Marine Tax: 25% of ocean freight cost 600 Warehouse: 0.65% of CIF; or min. US$ 170, max US$ 235 235 Terminal Handling Charges: average US$ 100 per container 100 Contribution to Custom Broker's union 2.2% CIF; or min of US$ 71, max US$ 160 160 Custom Brokerage Fee: average 0.65% of CIF or min US$ 170, max US$ 450 450 SISCOMEX Fee 30 Typical Cargo Transportation charge 35 Typical Bank Costs: 2% of FOB 2,000 FINAL COST 156,064