By Joe Leahy in São Paulo – Bloomberg Multinationals are winning the search for growth in Brazil and are still setting high targets for Latin America’s biggest country, despite a slowdown in the economy and sagging business confidence.
Germany’s SAP said its software business in Brazil grew 40 per cent last year, while Global Logistic Properties, Asia’s largest provider of modern logistics facilities, is targeting new development this year equal to nearly 29 per cent of its existing portfolio.
“Much of our growth was because we focused on those geographies [within Brazil] that were not addressed before,” said Diego Dzodan, SAP’s president of Latin America and the Caribbean. “We can decouple overall growth in the economy from growth in our business,” he added.
Brazil’s economy was among the most dynamic of the so-called Bric economies – which also include Russia, India and China – until 2011 when it suffered the effects of overheating and the eurozone crisis.
This was exacerbated by government intervention to control prices in fossil fuel and energy, as well as ad hoc tax breaks and currency controls aimed at warding off hot money from abroad.
While growth was better than expected in the final quarter of last year, it is likely to have been lacklustre in the first quarter of 2014, keeping the country on track for the weakest four-year period of economic expansion since the early 1990s.
Yet the rapid growth of Brazil’s lower middle class over the past decade and a boom in the country’s poorer north and northeast is continuing to create opportunities for multinationals in spite of the slowdown.
In March, American International Group said it expected revenue from underwritten premiums in Brazil to rise 40 per cent this year. The US insurer is aiming to make Brazil one of its top-five markets by 2017. Anheuser-Busch InBev, the world’s biggest brewer, in February forecast a return to growth in Brazil this year.
Brazil has made more efforts than other emerging market countries such as India and Russia to force through the structural reforms needed for greater investment, but progress is painfully slow. Foreign domestic investment was $64.5bn at the end of April, little changed from its highs over the past few years
“We like Brazil long term” said Jeffrey Schwartz, co-founder of Global Logistic Properties, in an interview in São Paulo.
The company, which is 36 per cent controlled by Singapore’s investment company GIC, was also a market leader in terms of completed logistics space in China and Japan.
Mr Schwartz said Brazil’s under-developed logistics market was creating opportunities, with the country boasting only one-fifteenth of the distribution space per capita of the US. Of this, only 20 per cent could be considered “modern”.
“So you have a massive shortage of good space and you have growing ecommerce,” Mr Schwartz said. Brazilians are the second-biggest users of Facebook in the world.
Global Logistics Properties is investing $400m to expand its existing 1.4m sq m of warehouse space by 400,000 sq m. It will also spend $1.34bn to acquire 1.2m sq m of completed developments from rival BR Properties in a deal expected to close by June.
http://www.ft.com/intl/cms/s/0/7946f25a-e401-11e3-8565-00144feabdc0.html MULTINATIONALS FLOURISH IN BRAZIL DESPITE SLOWDOWN
Contribuição do A.Carlos Telles, diretor do núcleo-RJ, para o site do IBCO