Stepping up, and stepping out in Brazil

A series of Brazil Business Forums, organised by the Latin America-New Zealand Business Council, were held in mid-November 2009 to foster better understanding among business and academic communities of the commercial opportunities available in Brazil.

Secretary of Foreign Affairs and Trade John Allen told the Forum in Auckland that New Zealand could not afford to overlook Brazil.

“At a time when everyone in New Zealand is focused on Asia, it is in my view really important that we understand that as a small trading nation, we must be diversified,” Mr Allen said.

“As a small trading nation, we must have both geographic and product diversification. We do right now, but it’s critical to continue to cement that diversity of market access and in our view Brazil represents a real opportunity.

“It is a serious player on the world stage now. It will become significantly more influential. It’s going to host the Olympics. It’s got it all going. And I’m very encouraged by what I have heard this afternoon of the New Zealand business appetite to step up, step out and engage in the Brazilian market.”       

Despite appearances to the contrary, “the reality is that the two countries are incredibly similar and our interests are remarkably similar,” Mr Allen said.

“When you think about the opportunities, think about the similarities between the two countries.

“Think about the reality that there is a deep capability in agricultural science, a deep capability in agricultural production, a deep capability in agricultural marketing, and think about how that might be leveraged by business in this country.”

Mario Marconini, Brazil’s former International Trade Secretary, was brought to New Zealand to speak at the Forums by the Ministry of Foreign and Affairs and Trade’s Latin America Strategy Fund.

Mr Marconini said “all the solutions to the world’s problems will somehow have to pass through Brazil.”

He shared good news and “not so good news” about doing business in Brazil.

The good news:

• Brazil had “done its homework”, transforming from a “basket case” two decades ago to a very successful economic and political model, involving inflation targeting and privatisation at home and regional and global leadership abroad.
• Politically, Brazil’s democracy had matured – with all leading parties moving to the centre, and President Lula successfully “demystifying the left”, ensuring business confidence that orthodox economic policies would be pursued, no matter who was elected President next year.
• Brazil’s industry had been restructured, yielding huge gains in productivity, diversification of the production base, and a markedly improved investment landscape.
• Brazil was benefiting from a “commodities miracle” with a 64 percent increase in commodities prices between 2000 and 2008. Yet, Brazil still had huge potential for growth as only 9 percent of the country’s arable land was currently being utilised.
• Brazil had proved to be economically very resilient – to have “Brazilience”. Its immense, dynamic domestic market and its large foreign reserves were two reasons why it had been able to emerge from the global economic crisis better than almost any other country in the world.

The not so good news:

• Brazil continued to suffer an infrastructure and logistics deficit.
• Brazil still needed significant tax and labour reform. The tax burden was too high and the cost of labour stifling.
• The political system continued to hold Brazil back: the reforms the country needed required a three-fifth majority in the Brazilian Congress, yet the President’s party never commanded even a simple majority.

Overall, New Zealand businesses would find significant opportunities in Brazil – but should “display patience” in pursuing them.

The Brazilian Government also sponsored the Forums, bringing Alexandre Pundek of the Brazilian Central Bank from Brazil to deliver a keynote address (PDF 835KB).

Mr Pundek noted:

• Only five countries in the world had over 2 million square kilometres in land area, over 100 million people, and over US$600m in GDP: Brazil, the United States, Russia, China and India.
• Brazil’s inflation targeting regime, which followed New Zealand’s example, had been very successful over the past 10 years.
• Brazil’s export profile was very diversified, becoming less reliant on the United States.
• The lack of availability of investment and credit in Brazil was a constraint to greater economic growth.
• Robust household earnings and business confidence were significant factors in contributing to Brazil’s resilience in the face of the global economic crisis.

For more information, please email Brazil Desk Officer Michael Appleton: michael.appleton@mfat.govt.nz.