2. The Boyden Report
Welcome to the latest edition of The Boyden Report,
a series designed to provide a deeper understanding
of the global market for talent.
At Boyden, we work closely with global companies to
craft their executive strategy. But that strategy must be
continuously re-evaluated. What works in one region
may not be effective in another. Each market has its
own management dynamics.
The Boyden Report is designed to help you navigate
this complexity in the ever-changing global market for
talent. Each report will provide you with the context
to make sustainable strategic decisions about your
executive team. Our series includes reports on India,
China, and Latin America. You can find these by visiting
our website at www.boyden.com.
In this report, we look at another key market that is
emerging as one of the fastest growing economies in
the world – Brazil.
There is suddenly a sense of real excitement about
this market. Perhaps seen as the laggard amongst
the ‘BRICs,’ Brazil is now recognised not only as a
sporting venue – hosting the World Cup in 2014 and
the Olympics in 2016 – but as a serious business
opportunity. Brazil has benefited from globalisation,
without suffering the consequences experienced by
other countries in the global recession. In fact, many of
the executives we talk to on a daily basis told us that
Brazil was the ‘safe port in a storm’.
In this report, we explore how Brazil came to be an
unlikely ‘global hero’ and what this means for growth
prospects in the near future.
3. Contents
Part 1: Brazil’s time has come
Introduction
“Brazil is a ‘serious country’”
Global growth prospects in Brazil
Barriers to growth – real or perceived?
New Brazil in a new global context
Part 2: Avoiding sand: New Brazil’s solid foundations
Foundations of rock, not BRIC
Economic diversity
A robust financial system
Transparency and stability support a greater role in the G20
A well-managed economy
A battle-hardened executive class
Part 3: New Brazil’s opportunity drivers
The consumer market
Brazil’s emergence as an energy superpower
Construction and infrastructure
Part 4: The Boyden View: Hiring in Brazil
Understanding ‘O jeitinho brasileiro’
The Boyden View on hiring in Brazil
Appendix
3
4. Introduction
A significant shift in Brazil’s global stature is underway. Yet, remarkably
little has been published about the country since the financial crisis
threw Brazil’s considerable strengths into relief. Here, we present the
views and insights of senior business executives – the majority of
whom lead Brazilian subsidiaries of multinationals – to hear why they
believe Brazil is now walking on the big stage.
Participants in our research include the following
The view ‘from the ground’: business leaders, whom we sincerely thank for
the Boyden perspective generously sharing their time and personal
perspectives:
The Boyden office in Brazil is witnessing the • Luiz Calil, President of Caterpillar Brazil – winner of
daily transformation of Brazil. John Murray, ‘Best Company to work for’ in Brazil, in the 2009 Great
Partner and head of Boyden Brazil says, Place to Work Institute rankings
“I never before witnessed such optimism here • Francisco Itzaina, CBE, President – South America of
as I do today”. Rolls–Royce International
• Gaetano Crupi, President & General Manager in Brazil
Will Penney, a long-term Partner in the country of Abbott, a global, broad-based healthcare company,
observes that, “Brazilians always used to joke devoted to the discovery, development, manufacture,
that they lived in the eternal ‘country of the and marketing of pharmaceuticals and medical
future,’ but it seems that our ‘future’ has now products, including nutritionals, medical devices, and
arrived”. diagnostics. The acquisition of Solvay Pharmaceuticals
is part of a strategic plan to diversify and grow their
Other partners, Sönke Böge, Joel Garbi, presence in emerging markets including Brazil
and José Pedro Rossi are seeing a flood of • Mark Pitt, President of Sherwin Williams in Brazil.
international and local investment, including Sherwin Williams is the largest producer of paints
mid-sized German manufacturers, retail and and coatings in the United States. It is an $8 billion
consumer companies, and local investment multinational, with 80 branches in Brazil
into infrastructure and ports. Chris Corcoran, • Klaus Pavel, President of Aachen-Laurensberger
Partner at Boyden Brazil and former President Rennverein (Chio), largest horse show in the
of Goodyear subsidiaries in Brazil, Mexico, world; Chairman of RNA Automation, an international
and Chile sums up this sense of boundless manufacturing company based in Germany; Founder of
opportunity when he says “Brazil is truly the FUNDACAO PAVEL, a large social project in Brazil caring
place to be”. for and educating children; Consul of the Federal
Republic of Brazil. Mr. Pavel was brought up in Brazil
• Chris Wall, Business Specialist for Brazil, UK
Trade and Investment
• Richard Taylor, CEO of Taylorenergies Business
Development; Chairman of CleanStar Brasil Bioenergia
Ltda; former President of BP in Brazil and founding
Director of the International Business Academy for
Development delivering executive education between
the UK, Brazil & China
Boyden is proud to be able to present views ‘from the
ground’ in Brazil and to spread the sense of opportunity
and momentum that is so palpable across the country.
4
5. Part 1:
Brazil’s time has come
“I see Brazil as a fantastic country in the future.
I wish I was thirty again. I think it’s a place to
be. It has come of age”.
Francisco Itzaina
President – South America of Rolls-Royce International
The ‘sleeping giant’ is awake at last. For many years “Brazil is a ‘serious country’”
business commentators have seen enormous potential
in Brazil, but there has been a sense of disappointment President Lula’s words, spoken when travelling in
that realising this has been hampered by economic Europe in late 2009, were not just the words of a proud
and political instability. In 2006, Goldman Sachs, the President campaigning for greater global recognition.
creator of the ‘BRIC’ moniker went so far as to raise Brazil has fundamental economic strengths. It has a
the question, “Should Brazil still be part of the BRICs?” vast and growing consumer market, it is rich in valuable
The answer today is a resounding “Yes”. The World commodities such as soya, iron and oil, and it has the
Economic Forum’s Competitiveness Report 2009–2010 world’s largest freshwater resources. Furthermore,
shows that Brazil has advanced eight positions in the Brazil is a world leader in clean fuel technologies such
WEF’s ranking since the previous year, overcoming as ethanol and biofuel. Its land could support three
Russia for the first time and partially closing the gap times more agricultural activity than it does today. With
with India and China. The extent to which Brazil has, in the world’s fuel and food resources increasingly under
fact, broken away from other BRIC countries is explored threat, Brazil is in a strong long-term position.
more fully in Part 2 of this report.
From an international perspective, events over the Did you know?
last two to three years have reset the conventional
view of ‘success’, exposing cracks in the Western 1. Brazil had the world’s best-performing major
world’s financial systems and leaving governments to currency against the US dollar in 2009, with a 36
ponder vast debt levels. In retrospect, Brazil’s stability, percent advance, according to Bloomberg
economic viability, and political solidity are viewed from
a different perspective. Not one bank has collapsed, nor 2. Brazil was home to the world’s largest IPO in 2009.
has any major corporation been bankrupted. Not one Santander Brasil’s IPO valued the bank’s Brazilian
centavo has gone into propping up the financial system, subsidiary at more than the whole of Deutsche Bank
and a rapidly executed tax-break package from the worldwide
government minimised the effect of global recession
on consumer spending. As Chris Wall, UK Trade 3. São Paulo is among the world’s top five futures and
and Investment’s expert on Brazil says, “In previous options markets, by volume traded
financial crises, it’s been the case that when the United
States caught a cold, Brazil caught the flu. For the first 4. Brazil was home to the world’s fastest-growing car
time ever, the United States has caught the flu and market in 2007-2009
Brazil has had the sniffles”.
5. Brazil was a major source of stability for
multinationals in the global recession that started
in 2007. Revenues generated in Brazil were used by
a number of multinationals to ‘shore up the
balance sheet‘
5
6. Part 1: Brazil’s time has come
But the New Brazil has more than just relative more links with Brazil”. The US is now concerned that
strengths. It has a sophisticated and durable financial its commercial links with Brazil are small. Many would
system, a proven and stable democracy, a sustainable believe that Brazil and the US are doing great trade
future – based, in part, on significant oil discoveries in but they are not. There is a lot of effort from the US to
the Santos Basin – and an impressive cadre of business really focus on Brazil, either via a bilateral agreement
leaders and managers who withstood past turbulence or by tailoring a bilateral agreement that can be more
and joined the business world’s executive elite. meaningful to the United States and Brazil taking into
consideration the constraints of MERCOSUL”.
Brazil’s financial system is supported by BM&F
BOVESPA – the second largest stock exchange in Exhibit 1 shows that out of the 50 largest companies
the Americas after the NYSE; one of the largest and in Brazil, nearly 30 percent are headquartered in
most liquid foreign exchange markets in the world; Europe, nearly 60 percent are headquartered in Brazil
and foreign reserves standing at $200 billion. Brazil or elsewhere in the region and just 10 percent are
has a low inflation economy, interest rates that slightly headquartered in the United States.
fluctuate around the 8 percent mark, a successful
regulatory model and investment grade government This chart shows that it is not only foreign multinationals
bonds. Its financial independence is marked by the fact that are prospering in Brazil. The number of ‘home-
that in 2009 it was a net creditor to the IMF. grown’ multinationals is increasing, attracting attention
not only to Brazil’s corporate capabilities, but also to
Brazil’s ‘battle-hardened’ management class, trained the opportunities for global growth among foreign
in a previously volatile business environment, is able multinationals. As Luis Calil, President of Caterpillar
to cope with economic issues that would severely Brazil says, “Brazilian companies are prospering across
challenge executives in more mature markets. As Chris the world. They are exporting because they see their
Wall says, for most executives, the global recession fortune in getting products out to different countries”.
that started in 2007 did not look like a true ‘crisis’ Companies such as Embraer, Brazil Foods, and JBS, to
from a Brazilian perspective: “Most executives will name just a few, are serious global players. Of Boston
say, ‘What crisis?’ Don’t forget that we were living Consulting Group’s 2009 Global Challenger’s list, 14 of
through repeated crises in the nineteen eighties and the 100 top global challengers come from Brazil, details
nineteen nineties. What started off in the early eighties of which are shown in Exhibit 2.
as twenty five percent per month inflation, by the early
nineties was three percent a day. That is a crisis”. It
is somewhat telling therefore, that the CEOs of the The Boyden View:
subsidiaries of the top 20 multinationals in Brazil are The battle-hardened management class
all Brazilian.
“In my 45 years in Brazil, I have never seen
Global growth prospects in Brazil
the Brazilian executive more in demand. When
we were completing a search for a member
The World Bank predicts that if Brazil continues on its
of the Board of Directors of a major American
current path, it will move from being the tenth largest
Fortune 500 company, our client stipulated
economy in the world to the fifth largest by 2016.
that the candidate must be a Brazilian. The
Francisco Itzaina says, quite simply, “Any company
reason was they wanted someone on the
that wants to be global, that is serious about its future
board who could visualise the world through
growth prospects, has to be in Brazil”.
the eyes of an emerging market and who
succeeded in guiding their businesses through
Historically, European businesses have taken advantage
the repeated ups and downs of the Brazilian
of strong cultural links with Brazil, leaving the US to
market over the last fifteen years. You will see
play ‘catch up’. As Gartano Crupi, President & General
more Brazilians on international boards in the
Manager of Abbott, observes, “Spain has been
coming years”.
investing in Brazil – look at telecoms and banking – and
Italy is a major player in the automobile industry and
John deMarmon Murray, Partner, Boyden, São Paolo
in utilities. I think China is looking into making major
investment in Brazil, and France is trying to create
6
7. Part 1: Brazil’s time has come
Exhibit 1
The 50 largest companies in Brazil (by sales figures for 2008) 22 out of 50 are foreign multinationals
5 are Brazilian challengers
Company City/State Business Field Sales Country
1 Petrobras Rio de Janeiro, RJ Petroleum and Energy 38,441
2 BR Distribuidora Rio de Janeiro, RJ Wholesale (fuel) 10,567
3 Telemar Rio de Janeiro, RJ Telecommunications 6,311
4 Telefónica São Paulo, SP Telecommunications 5,699 Spain
5 Ambev São Paulo, SP Beer and drinks 5,344
6 Ipiranga Rio de Janeiro, RJ Wholesale (Fuel) 5,060
7 Volkswagen São Bernardo, SP Automobiles 4,791 Germany
8 Shell Rio de Janeiro, RJ Wholesale (Fuel) 4,382 UK/Holland
9 General Motors São Caetano, SP Automobiles 4,131 US
10 Brasil Telecom Brasilia, DF Telecommunications 3,913
11 Bunge Food Gaspar, SC Food and Drink 3,866 Argentina
12 Pão de Açucar São Paulo, SP Retailer 3,858
13 Vale do Rio Doce Rio de Janeiro, RJ Mining 3,628
14 Carrefour São Paulo, SP Retailer 3,628 France
15 Brasken Camaçari, BA Petrochemical 3,345
16 Esso Rio de Janeiro, RJ Wholesale (Fuel) 3,192 US
17 Texaco Rio de Janeiro, RJ Wholesale (Fuel) 3,175 US
18 Embratel Rio de Janeiro, RJ Telecommunications 3,167 Mexico
19 Cargill São Paulo, SP Food and Drink 3,163 US
20 Eletropaulo São Paulo, SP Utilities (Electricity) 3,056
21 Nestle São Paulo, SP Food and Drink 2,916 Switzerland
22 FIAT Betim, MG Automobiles 2,813 Italy
23 CEMIG Belo Horizonte Utilities (Electricity) 2,649
24 C.S.N. Rio de Janeiro, RJ Iron and Steel 2,573
25 VARIG Porto Alegre, RS Transportation (Air Carrier) 2,375
26 Unilever São Paulo, SP Pharmacy and Hygiene 2,319 UK/Holland
27 Souza Cruz Rio de Janeiro, RJ Tobacco 2,284 UK
28 Embraer São José Campos, SP Airplanes 2,243
29 Gerdau Porto Alegre, RS Iron and Steel 2,206
30 Usiminas Belo Horizonte, MG Iron and Steel 2,200 Brazil/Japan
31 Itaipu Brasilia, DF Utilities (Electricity) 2,184 Brazil/Paraguay
32 REFAP Canoas, RS Petrochemical 2,131
33 Casas Bahia São Caetano do Sul, SP Retailer 2,112
34 AGIP São Paulo, SP Utilities 2,108 Italy
35 Correios Brasília, DF Postal Service 2,074
36 DaimlerChrysler São Bernardo, SP Automobiles 2,022 Germany
37 Sadia Concórdia, SC Food 1,966
38 Light Rio de Janeiro, RJ Utilities (Electricity) 1,891 France
39 Copesul Triunfo, RS Petrochemical 1,891
40 Ford São Bernardo, SP Automobiles 1,890 US
41 Vivo São Paulo, SP Telecommunications 1,870 Portugal/Spain
42 Furnas Rio de Janeiro, RJ Utilities (Electricity) 1,757
43 Bunge Fertilizers São Paulo, SP Fertilizers 1,725 Bermuda
44 CPFL Campinas, SP Utilities (Electricity) 1,576
45 Cosipa São Paulo, SP Iron and Steel 1,573
46 Nokia Manaus, AM Electronics 1,550 Finland
47 Sabesp São Paulo, SP Utilities (Water & Sewage) 1,515
48 Perdigão São Paulo, SP Food 1,483
49 Basf São Bernardo, SP Chemicals 1,461 Germany
50 Copersucar São Paulo, SP Wholesale (Sugar & Alcohol) 1,448
Source: Exame, Brazil’s Business & Economy Magazine
7
8. Part 1: Brazil’s time has come
Exhibit 2
Brazilian members of Boston Consulting Group’s 100 Global Challengers 2009
Company Brief profile
> Camargo Corrêa Group One of the largest conglomerates in Brazil, with activity in construction and engineering, footwear, textiles,
infrastructure, building materials and real estate; 2007 revenues of $6.4 billion; a significant presence across Latin
America, and Spain. Camargo Corrêa doubled in size from 2005-2007, and its international revenues are estimated
to be increasing even faster.
> Coteminas Companhia de Tecidos Norte de Minas (COTEMINAS) and its subsidiaries operate as a textile company in Brazil.
It manufactures cotton thread; finished and semi-finished fabrics for home use; bed linens; tablecloths; bath towels; and
wearing apparel, including T-shirts, socks, and underwear.
> Embraer One of the largest aircraft manufacturers in the world, focusing on specific high growth segments in commercial,
defence, and executive aviation. It has achieved a top position worldwide in regional jets. Embraer was Brazil’s largest
exporter from 1999 to 2001 and the second largest in 2002, 2003 and 2004. By December 2009, it employed more than
16,000 people, over 90% of whom are based in Brazil.
> Gerdau Leading company in the production of long steels in the Americas and one of the major suppliers of specialty long steel
in the world. Now has an industrial presence in 14 countries: Argentina, Brazil, Canada, Chile, Colombia, the Dominican
Republic, Guatemala, India, Mexico, Peru, Spain, the US, Uruguay, and Venezuela.
> JBS-Friboi JBS is the largest the largest beef-sector company in the world, producing chilled and fresh beef, processed beef,
as well as fresh and chilled pork. The company is the world leader in terms of slaughtering capacity – 51.4 thousand
head/day. JBS has a presence in 100% of the world’s consumer markets, thanks to its production structure, with plants
in four of the main beef-producing countries – Brazil, Argentina, the US, and Australia – and to its leadership in exports,
which reach 110 countries.
> Marcopolo Among the top manufacturers of bus bodies and components. Marcopolo manufactures the bodies for a whole range
of coaches, including microbus, intercity, and touring coach. Marcopolo produces over half of the bus bodies made in
Brazil and exports its coaches to more than 60 countries.
> Natura One of the leading Brazilian manufacturers and marketers of skin care, solar filters, cosmetics, perfume, and hair
care products.
> Odebrecht Group Owns a global construction contracting company, Construtora Norberto Odebrecht, that provides engineering
and constuction services in most of South America, as well as Central America, the US, Angola, Portugal,
and the Middle East. The group also owns petrochemical company Braskem, exporting petrochemical products
from Brazil to over 50 nations and every continent. Odebrecht invests in transportation infrastructure in Portugal,
and mining and oil ventures in Africa. It also provides oil production services in the North Sea.
> Perdigão Now registered under the corporate name, Brazil Foods, Perdigão is one of the biggest foodstuffs companies in Latin
America. It is the third largest company in the butchery of poultry in Latin America, and is amongst the ten largest
pig butchers in the world, whilst it is also one of the leading Brazilian companies in the area of milk collection. It is
a company that operates on an international scale with its products reaching more than 110 countries. It is currently
undergoing a merger process with Sadia.
> Petrobras Energy company in oil and oil byproduct exploration, production, refining, marketing, and transportation, both in
Brazil and abroad. It has more than 100 production platforms, 16 refineries, 30,000 kilometres of ducts and more than
6,000 gas stations.
> Sadia Sadia is currently undergoing a merger process with Perdigão, one of the world’s leading producers of chilled and
frozen foods. Established in Brazil in 1944, today Sadia is the market leader in all its segments. It is also Brazil’s main
exporter of meat-based products. Sadia’s brand name has been voted the most important and valuable brand among
all Brazil’s food brands.
> Vale Vale is a multinational mining corporation and one of the largest logistics operators in Brazil. In addition to being the
second-largest mining company in the world, Vale is also the largest producer of iron ore, pellets, and second largest of
nickel in the world. Vale also produces manganese, ferroalloys, copper, bauxite, potash, kaolin, alumina and aluminum.
In the electric energy sector, the company participates in consortia and currently operates nine hydroelectric plants.
> Votorantim Group Among the top five producers of zinc globally, Votorantim Group operates in sectors demanding intensive capital and
a large scale production, such as cement, mining and metallurgy (aluminum, zinc and nickel), steel, pulp and paper,
concentrated orange juice, and self-generation of electricity. It also operates in the financial sector, through Votorantim
Finance, and in new business it invests in biotechnology, information technology, and specialty chemical projects and
companies.
> WEG One of the largest manufacturers of electric motors in Latin America.
Source: Boston Consulting Group; websites of cited companies.
8
9. Part 1: Brazil’s time has come
Despite the global financial crisis, Brazil received US$ However, the real barrier is one of perception. For
12.6 billion in foreign direct investment (FDI) in the international executives who forged their careers at
first half of 2009, according to information supplied by a time when Brazil was reeling from oil shocks, debt
Brazil’s Central Bank. Although the value is lower than defaults, and hyper-inflation, there is still a perception
that recorded for the first half of 2008, analysts such as barrier. As Chris Wall says, “I speak to executives in
economist Luís Afonso Lima, president of the Brazilian very large companies, household names on occasion,
Society of Studies on Transnational Corporations and whose experience of the Brazilian market and
Economic Globalization (Sobeet), take a longer view, therefore their approach to Brazil is based on the
forecasting the result for the year as the third highest in chairman’s own experience in the 1980s when they had
the decade, lower only than 2007 and 2008, when the their fingers burnt ... There’s a belief that it’s still the
volume of funds hit record highs. Brazil of the 1980s and 1990s ... It’s a failure to grasp
the new Brazil”.
Looking forward, this interest from foreign multinationals
is set to continue. Luiz Calil observes, “Brazil by itself
is attracting more and more multinational or global The Boyden View:
companies”. The New Brazil
Gaetano Crupi adds, “Everybody is investing. GE is
announcing investments. General Motors was on the “German industry has rediscovered
front page of a business newspaper saying that every Brazil. We are seeing mid-sized German
single real of profit from Brazil will stay in Brazil because manufacturers expand their Brazilian
of how the market is performing. It’s just a matter factories at the same time that new groups
of keeping up with these announcements in major are coming in for the first time. The oil
newspapers”. and gas boom, the Olympics, and the civil
construction surge have all contributed to
Barriers to growth – real or perceived? the renewed interest as well as opportunities
to offer new technology, but the overriding
Some companies, notably mid-sized companies, remain stimulant for new investment is a perceived
hesitant about Brazil. Why? As the Portuguese saying stability for growth and a strong internal
goes, “Não há bela sem senão”, meaning colloquially, market”.
“There’s no such thing as perfection”. As is the case
with every market, the picture in Brazil is not all rosy. Sönke Böge, Partner, Boyden, São Paolo
In the World Bank’s ‘Doing Business’ survey – which
ranks countries on the ease of setting up and running
a business there – Brazil is ranked 129th out of 183
countries. However, it is worth noting that this survey is
used as an indicator for start-ups and small businesses,
rather than as a measure for larger businesses that have
the resources to facilitate expansion plans.
In terms of geographic mobility, the advantage Brazil has New Brazil in a new global context
in its high volume of agricultural land comes at a price.
Transport infrastructure, across a country that in terms Economists have warned us for years that the world
of size is ranked 5th largest in the world, is inhibiting stage is fundamentally changing due to globalisation
Brazil’s commercial advances. As for access to finance, and the growth of emerging markets. But the financial
credit is very expensive and only the government will crisis has accelerated the impact of that process,
lend for long periods, and even then, not to everyone. exposing the weaknesses of Western governments and
Taxation is complicated, with different tax systems in and economies as compared with the relative strengths
different regions. The legal system is also complex, of countries such as Brazil.
making commercial disputes best avoided.
9
10. Part 1: Brazil’s time has come
According to politicians, business leaders and other In terms of financial management, Chris Wall notes,
drivers of opinion, Brazil is expected to emerge from “Europe has tended to sit in judgment on Latin America
the global recession in better economic shape than in the past. Brazilians are very aware of the irony of
most of the other G20 countries. As Richard Taylor, that now”.
CEO of Taylorenergies Business Development says
“The G20 is now the main global forum for international It is clear then that Brazil has focused on strengthening
economic development and Brazil is seen as one of its domestic position, rather than pursuing a strategy that
its leaders”. Francisco Itzaina observes that, “Brazil is involved international risk. In the next section we explore
becoming an international player. It’s globalising its own how the foundations of the country have been made
economy”. The New Brazil is a different place, and the secure, the phenomena driving major opportunities for
attitude of business leaders and politicians around the multinationals, and the dynamics of hiring, retaining and
world around is changing. developing senior executives in the New Brazil.
“Europe has tended to sit in judgment
on Latin America in the past. Brazilians
are very aware of the irony of that now”.
Chris Wall, Business Specialist for Brazil, to UK Trade
and Investment.
10
11. Part 2:
Avoiding sand:
New Brazil’s solid foundations
Foundations of rock, not BRIC
“Brazil is at a different level of development, on the development curve,
than the other BRIC countries,” says Francisco Itzaina, President – South
America of Rolls-Royce International.
Lumped together in the ‘BRICs’ (Brazil, Russia, India security and predictability to expatriate families, often
and China), Brazil’s advantages can be overlooked, the top priority for executives on the ‘global fast track’.
such as its more sophisticated social systems, and
infrastructure, political stability, and democratic Politically, Brazil has achieved stability in the form
participation in politics, cultural and religious unity, of a robust, established democratic republic. “Brazil
linguistic homogeny and economic stability and has become now, I wouldn’t say ‘mature’, but it has
diversity. The ‘BRIC’ acronym itself is a Western embarked upon maturity in terms of its democracy and
construct which can be counter-productive in linking the relative consolidation of the strength of its
Brazil with other emerging markets that carry greater political institutions”, comments Mark Pitt, President
political and economic risk. of Sherwin Williams.
Exhibit 3 shows a more detailed classification of In terms of economic and financial infrastructure, Brazil
emerging economies, based on analysis by the FTSE is also more advanced. As we will explore later, the
Group. Brazil is clearly distinguished from other banking system and financial markets are large, stable,
countries in the BRIC grouping, with countries such as and relatively mature. President Lula has asserted,
Hungary, Poland, Mexico, South Africa, and Taiwan its “No country in the world has the fiscal soundness that
more appropriate ‘peers’. Brazil has”.
What does Brazil’s different ‘emerging status’ mean
in reality? Exhibit 3
Brazil as an ‘Advanced Emerging Economy’
The provision of healthcare is one example of how ahead of the RICs
Brazil is more advanced in terms of social infrastructure.
As Gaetano Crupi explains, “The healthcare system The FTSE Group distinguishes Brazil from Russia, India and
in Brazil is well established when compared to China China on the basis of national income and the development
of market infrastructure. It classes Brazil as an Advanced
and India ... you have a public health center in place Emerging Market, along with countries such as Poland,
in every state and every city. There is a very good Mexico, and South Africa, whilst relegating Russia, India and
distribution system. The number of drugstores is high China to Secondary Emerging Markets, along with Pakistan,
Indonesia, Columbia, and Morocco.
but the number of hospitals may not be enough yet,
but compared with Russia, India and China, it is a totally The Advanced Emerging Markets are:
different ball game”. • Brazil • Hungary • Mexico • Poland • South Africa
• Taiwan
US and European executives working in Brazilian The Secondary Emerging Markets are:
subsidiaries therefore enjoy a lifestyle that few would • Argentina • Chile • China • Columbia • Czech Republic
see as that of a nascent emerging market. As a • Egypt • India • Indonesia • Malaysia • Morocco • Pakistan
• Peru • Philippines • Russia • Thailand • Turkey
‘foreign posting’ there is much to recommend Brazil.
For example, in religious and linguistic terms, there is Source: FTSE Global Equity Index Series Country Classification
remarkable unity for a country that is more than two
and a half times the size of India. This brings a sense of
11
12. Part 2: Avoiding sand: New Brazil’s solid foundations
Economic diversity Exhibit 4
Economic activity and diversity across Brazil
“There really is a high degree of economic
diversity. And I think that is really one
of the strengths during a crisis”, says
Richard Taylor.
Perhaps the most significant advantage
Brazil has over its emerging market
‘competitors’ is the diversity of its
economy, shown in Exhibit 4. While
commodities and natural resources are
important, the Brazilian economy does not
rely on just one or two key industry sectors
to fuel growth.
Brazil’s natural resources are considerable.
Oil revenues are set to multiply as the
‘pre-salt’ potential of the Santos Basin is
exploited. Brazil’s iron ore, manganese,
bauxite, nickel, uranium, gemstones, wood,
and aluminium resources are also significant.
These resources are fuelling industrial
growth around the world. As Gaetano Crupi
says, “China needs commodities and many
commodities are coming from Brazil”.
Brazil’s diverse industries range from
automobiles, steel, and petrochemicals to
Source: University of Texas, Austin, USA
computers, aircraft, and consumer durables.
Spotlight on the Aviation Business
Two success stories in the Brazilian Aviation industry: Embraer and Azul
Embraer is a major success story in aviation. Since privatisation in 1994 Embraer has turned itself into
the world’s biggest manufacturer of mid-range passenger jets. Some 96 percent of the company’s
revenue now comes from exports to commercial airlines in China, India, Poland, Britain and the US.
But it is not the only success story in aviation. Richard Taylor cites the amazing growth story of Azul,
the low cost airline, as a good example of “an organisation where they think that the opportunities and
the scale of the opportunity in Brazil more than offset the challenges of working here”. Azul was set up
by a Brazilian-born US citizen. By June 2009, six months after beginning operations, Azul had the third
largest market share of the Brazilian domestic airline market, after TAM and Gol Airlines.
12
13. Part 2: Avoiding sand: New Brazil’s solid foundations
The economy is also driven by agriculture and forestry, More than half of this comprises pastureland that can
manufacturing, chemicals and a strong services be converted to other agricultural uses, while about a
industry, notably banking and insurance. quarter remains unexplored.
The industrial sector is particularly significant, In the long term, Brazil’s ability to feed and fuel itself
accounting for 30 percent of GDP. The shipping industry and others puts it in a very strong position, particularly
is large and growing. Francisco Itzaina says, “The in an era when energy and food security are widespread
shipping industry was practically dead at the end of the concerns. For Francisco Itzaina, “Food production is
1990s. Now there are probably between twenty and one of the elements that will lead the internal Brazilian
thirty thousand people working in the shipyards”. economy in the future”.
Brazil’s agribusiness has enormous potential for
expansion. According to Agriculture Ministry estimates,
aside from Amazonian forest reserves, Brazil has 388
million hectares of quality agricultural land.
Spotlight on the Agribusiness
In the past decade, Brazil has strengthened its lead as one of the world’s agricultural powerhouses,
aided by market liberalisation, a more competitive local currency, higher government financing, and
sustained productivity advances.
Global soybean exports
Million metric tons
• Over 90 percent of Brazil’s poultry exports are
Other concentrated in just 10 companies that have
100 Other South America invested heavily in what are now some of the
Brazil
80 most modern production facilities in the world
Argentina
United States
60 • Brazil is the largest beef exporter and second-
largest producer of beef in the world. It is also
40
home to the world’s largest commercial cattle
20 herd – totalling roughly 290 million head
0
1990 1995 2000 2005 2010
• Brazil has been the world’s largest coffee
2015 2019
producer and exporter since the mid-nineteenth
century and now accounts for about 30 percent
• Soybeans are Brazil’s fastest-growing shipments, of global exports
and Brazil is set to challenge the US’s position as
the world’s largest exporter in the next decade • Brazil produces over 50 percent of the world’s
orange juice and Brazilian producers control
• Brazil is the world’s leading exporter of chickens, about 80 percent of the international frozen
sugar, coffee, beef, and orange juice concentrated orange juice market. Brazil is also
an important producer and exporter of many
• As much as 40 percent of the world’s chickens other foods, including pork, tropical fruits, corn,
come from Brazil, and this figure is expected to cotton, forestry products, and tobacco
rise to a 48 percent market share by 2018,
according to US Department of Agriculture
estimates
13
14. Part 2: Avoiding sand: New Brazil’s solid foundations
A robust financial system To give one example, before the 2007 global financial
crisis took hold, the hedge fund industry in Brazil was
“During the entire world economic crisis – and this is growing at a staggering pace, from $92 billion in 2002
a very strong signal – during the entire crisis there was to $750 billion by the end of 2007. The pool of talent
not one single financial institution that went bankrupt in reflects this: there are an estimated 142 private equity
Brazil. Not one”, says Gaetano Crupi. and venture capital fund managers who manage 181
funds with investments in over 500 local companies in
Brazil’s financial services market is today one of the a broad range of sectors.
most developed among the emerging economies.
Transparency and stability support
The strength of Brazil’s financial institutions goes a greater role in the G20
back to the mid-1990s when the country confronted
its own successive economic crises. This set in Brazil’s banking system is unusually transparent. The
motion fundamental changes in economic policy and bank settlement system operates in real time, so all
performance. banks know their cash positions at any given moment
and the central bank has an overall picture of the
Since then, the entire financial services system has liquidity in the system. As Gaetano Crupi explains,
developed substantially, particularly in the last few “This is a huge advantage not only for the government,
years: foreign exchange, mutual funds, hedge funds, but for companies and individuals doing business. From
credit and bond markets have all thrived amid Brazil’s an IT perspective in the banking system, there is no
economic growth and stability. faster and better process system in the world in terms
of cashing a cheque today and putting it in your account
in thirty-five minutes the same day”.
The Boyden View: Executive Search in a multi-
faceted emerging economy
Another unusually transparent area of the system is in
the fund management arena. All onshore funds must
provide daily liquidity reports to Brazil’s Securities
“The COO of a global food ingredients
and Exchange Commission (the Comissão de Valores
company asked me about the availability of
Mobiliários-CVM), disclosing the net asset value of their
world-class executive talent in Brazil. His firm
funds, albeit with a 48-hour delay. At the end of every
is now investing here and upgrading its local
month funds disclose what they were holding 90 days
management team. The answer was easy: in the
ago. The data is freely available to everyone on the
last twenty years Brazil has developed a superb
CVM’s website. The hedge fund industry is also subject
talent pool. Of course finding and hiring the
to the same regulation, making Brazilian hedge funds
best person is always a challenge, but there are
unusually transparent.
lots of professionals out there who are well-
schooled, balanced, versatile, and with solid
Other elements of regulation have helped stabilise the
leadership skills.
system. A key reason for the sector’s resilience is a
high capitalization requirement – the minimum capital
These days it is rare for an international
adequacy requirement in Brazil is 11%, compared
company to have expatriate managers, unless
with 8% under the Basel regulations that other banks
it is just part of plan to develop a particular
around the world follow. New rules for publicly-traded
individual. Talent is nicely distributed across
companies brought in by the São Paulo stock exchange
the main sectors of the Brazilian economy, and
(BOVESPA) in 2002 have benefitted equity investors,
when there is a momentary supply/demand
with fair treatment of minority stakeholders enshrined
disequilibrium, talent flows easily between the
in law; under current guidelines it is illegal to issue
sectors”.
shares that pay out different amounts to different
holders in the event of a takeover.
William Penney, Managing Director,
Boyden, São Paolo
In the light of its successful regulatory model, Brazil is
seeking a greater role in global reforms being discussed
under the auspices of the G20.
14
15. Part 2: Avoiding sand: New Brazil’s solid foundations
It has specifically requested from the IMF greater
The Boyden View:
involvement in global regulatory discussions and is
Brazilian Financial Services talent
seeking an enhanced leadership role in the Fund itself.
There will be many opportunities for growth within
“The Brazilian Financial Service market is strong,
the financial services sector. Gaetano Crupi sees
and largely ignored the financial crisis that
a number of specific opportunities arising: “Brazil
disturbed the developed world. This market is
will retain a very strong financial services industry.
dominated by large national banks that already
Commercial and investment banks are strengthening,
hold positions amongst the largest international
and I think associated with that, solid engineering
banks. Major international banks are also present
and infrastructure will be needed ... It is likely that
in Brazil and their positive performance has,
mortgages are going to regain some buoyancy and I
in fact, helped improve the worldwide results
believe that European business leaders are looking at
reported from the head office.
Brazil more closely than they have ever before”.
The Brazilian currency, the Real, has been strong
and has also contributed to the confidence and
credibility of Brazil amongst foreign investors.
This confidence has grown as investors realised
the Brazilian banking regulations are and have
been strong and effective in keeping the Brazilian
banks out of trouble. With this said, the financial
market is healthy and active, presenting excellent
opportunities for specialised talent”.
José Pedro Rossi, Partner and Head of Financial
Services Practice, Boyden, São Paolo
Spotlight on the financial ecosystem in Brazil
• Brazilian banks – both private and public – rank among the largest in the region. For example, Itau Unibanco is
Latin America’s largest bank, the ninth largest bank in the Americas, and the 12th largest bank in the world. At
the end of March 2009, Brazil’s banking system was larger in terms of market capitalization than the UK’s and
that of every other EU member country
• The Brazilian foreign exchange market – in both spot and derivatives trading – is large and liquid, which makes
the Real one of the most traded emerging market currencies
• Brazilian investment funds – notably, the country’s pension funds – are significant players in the asset
management industry, with nearly R$1.2 trillion (US$515.6 billion) under management, or about 40 percent of
Brazil’s GDP
• Brazil’s pension fund industry was the eighth largest in the world at the end of 2008
• São Paulo’s futures and options market is one of the five largest in the world by volume traded
• The BM&F BOVESPA is Latin America’s leading stock exchange and the second largest in the Americas after the
NYSE. It offers a broad range of financial products for trading equity and commodity-based derivatives
Source: Boston Consulting Group, October 2009
15
16. Part 3: Avoiding sand: New Brazil’s solid foundations
A well-managed economy In addition, Brazilian executives’ ability to navigate
the complexities of the taxation system and certain
“It was Lula’s predecessor who stabilised the currency elements of government bureaucracy makes them more
and Lula came to power intent on steering the economy effective in multinational organisations abroad, despite
in the same solid way,” says Chris Wall. barriers that would seem insurmountable to others.
Francisco Itzaina also suggests that multinationals
Perhaps burned by experiences in the past, Brazil’s have used Brazil as a training ground for management,
leader has recognised that common sense and good when he says, “There is a good reason why a lot of the
brains are more important than political leaning, when multinational companies that have been operating here
it comes to running the economy. When President Lula for years are sending their executives to be trained in
took over from Cardoso in 2002, he did not change the Brazil”.
economic team.
Not only are Brazilians highly skilled in handling external
As Gaetano Crupi puts it: “He is a very intelligent man. complexity and economic volatility, they are also
He never changed the leadership of the economic technically valued. As Mark Pitt comments, “Brazil has
team. He kept the president of the Central Bank and been able to export a lot of executives, especially in
he didn’t bring on any ill-prepared people. He surrounds the manufacturing and finance areas ... (for) engineers
himself with smart people”. coming out of school, Brazil is probably as good as
Korea, China, India”.
In the thick of the global crisis, the government kept
consumer spending up with tax breaks on cars, This is, in part due to an entrenched culture of aspiration
household electrical goods, and construction materials. in the country, a diverse economy that has been
fostering technical expertise in different areas, from
The current administration has also opened up a agriculture to hydro-electricity over many decades and
dialogue with the business community. As Mark Pitt world-class universities in São Paulo and Rio de Janeiro.
says, “The current President does talk to business, is
sensitive to the issues, and listens to business leaders. In conclusion, the foundations are strong: political
He doesn’t always react the way business wants but, and financial stability, economic diversity, and strong
there is a much broader and deeper dialogue than ever leadership throughout government and private
existed before and I think that will probably continue organisations. But it is the powerful forces that are
with the next President”. driving the New Brazil that are claiming the attention of
multinationals across the world.
The Brazilian government has steered its way
through the global economic crisis and beyond.
Although many in Brazil and abroad question the
Lula government’s prolific public sector spending, for
many the government have demonstrated a long-term
commitment to managing a stable, robust economy and
reducing its debt burden.
A battle-hardened executive class
“Anyone today who is thirty-five or over has cut his
teeth in dreadful times in Brazil. They don’t take the
stability that they have now for granted and they are not
going to,” says Chris Wall.
Brazilian executives have been forced to grow and
adapt in extraordinary economic circumstances,
something which gives them a depth of experience,
adaptability, and flexibility that is not necessarily shared
by their more sheltered European and US counterparts.
16
17. Part 3:
New Brazil’s opportunity drivers
There are three major factors attracting those looking As Gaetano Crupi explains: “Once people have access
to Brazil for future growth: first, the size of the to money, they can afford out-of-pocket expenses at
consumer market; secondly, the development of world- a drug store, for example ... . The hospital business is
class industries such as energy; and thirdly, greater definitely a place where the market is expanding.
interaction with global entities – economic as well as There is a lot of room for growth. That is why we
sporting. Francisco Itzaina sums it up, “The opportunity have seen a lot of mergers and acquisitions in the
is there for anybody who wants to grab it”. healthcare industry”.
The consumer market
“You have twenty million people who suddenly
have purchasing power. We are talking about basically
twenty million people that have been moved either
from a Class D to a Class C, or from a Class C to B”,
says Gaetano Crupi.
Brazil is the fifth most populous country in the world,
with over 190 million people. The commercial point,
though, is that there is a growing class of millions at
who have purchasing power for the first time, and The Bolsa Familia wealth redistribution programme
a small but powerful class at the top of the pyramid has contributed to this phenomenon, lifting some 30
with a strong taste for luxury goods. These evolving million people out of poverty, by providing financial
consumer groups present a huge opportunity for aid to poor Brazilian families on condition that their
Brazilian companies and multinationals. children attend school and are vaccinated. Still poor by
global standards, this group has significant collective
The shift in purchasing power has been truly dramatic. purchasing power. As Chris Wall says, “It has suddenly
The Fundação Getulio Vargas business school (FGV) created a lower middle class of people with some kind
calculated that the number of people in ‘Class C’ of disposable income, that they didn’t have before ... .
shifted from 42 percent to 52 percent from 2004 -2008. They have a surplus at the end of the month, and
The Class C population is described as people with a whether that is thirty dollars, or less, they suddenly
monthly income of roughly $600-$2,500, who have jobs become consumers for the kinds of things that you and
in the formal economy, and who have access to credit. I take for granted. Brazil has suddenly got a market for
In a country of 190 million people, that’s an addition of popular cheap family cars, flat screen TVs, PCs, mobile
roughly 20 million consumers with purchasing power in phones”. Companies in Brazil have taken advantage
just four years. The effect on all consumer goods and of this market, structuring finance packages to suit
services industries has been and will be dramatic. Just payments of around thirty dollars a month.
one example of the impact of the growing consumer
market is in the healthcare market.
17
18. Part 3: Avoiding sand: New Brazil’s solid foundations
For the new middle classes, credit is also becoming It’s amazing; São Paulo has more than seventy
steadily more available. Consumer credit has grown by shopping centres – the highest number in Brazil and,
28 percent each year in nominal terms over the past for that matter, in the world”. Tiffany, the jeweller, has
three years. Loans for bigger items, such as cars and more stores in São Paulo than anywhere else in the
apartments became available for the first time, as part world and over the years, Louis Vuitton’s global profits
of a series of reforms carried out in Lula’s first term. have peaked in São Paulo.
Meanwhile, at the top end of the market, there is a Overall, the consumer market from bottom end, cheap
large and growing consumer market for luxury goods. goods to top end luxury is huge and growing and
As Luiz Calil points out, “We have the second biggest the trend is set to continue, as shown in Exhibit 5.
dealership for Porsche in the world; we have the Goldman Sachs predicts that consumer spending will
second biggest dealership for Lamborghini in the increase by 4 percent in 2010, compared with a flat
world; we have the largest fleet for instance, for consumer spending figure for advanced economies.
aeroplanes for agriculture in the world; we have the Over the long term, Goldman Sachs predicts that
largest fleet of helicopters in the world. As for personal Brazil’s income per capita will continue to rise, and the
consumption, São Paulo is the city that has the highest multinationals and Brazilian companies best positioned
consumption of Italian wine in the world; I think we to take advantage of that growth will be the global
have one of the highest levels of consumption of leaders of the future.
Champagne in the world.
18
19. Part 3: Avoiding sand: New Brazil’s solid foundations
Exhibit 5: A strong consumer market
EM consumption should be strong in 2010 Income per capita expected to continue to rise
12 Average growth 2009 – 2010 (%) 80 000s USD
70
10
60
8 50
6 40
30
4
20
2 10
0 0
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
-2
USA
EM
Brazil
World
Geramany
France
France
Italy
Mexico
UK
Spain
Adv. Econ
-4
Source: Goldman Sachs (Exhibit shows adapted charts)
Brazil’s emergence as an energy superpower Exhibit 6:
“We have discovered incredible resources of oil, to the Brazil’s potential position in global oil production
point that Brazil could probably climb the ladder to one
250
of the five or six largest producers of oil in the world.
And maybe even higher than that, depending on how 200
big this layer of oil is,” says Francisco Itzaina.
150
Oil 100
50
Petrobras announced in 2007 that it had discovered
0
one of the world’s largest oil fields in the Santos Basin
Saudi
Iran
Iraq
Kuwait
Brazil
UAE
Venezuela
Russia
Libya
Nigeria
Kazakhstan
US
China
Qatar
Mexico
Algeria
Brazil
Angola
Norway
in the Atlantic Ocean. Although the actual volume
of recoverable reserves is still unknown, it could
boost Brazil’s reserves from 14.9 billion barrels of
oil equivalent (boe) to some 100 billion boe, making
Source: Credit Suisse and FIESP
it the largest oil discovery in the world in the last 20
years. Once the pre-salt layer is exploited, according to
Credit Suisse and FESP (the Federation and Centre for
Industry in São Paulo), this discovery is likely to propel
Brazil from the 16th largest oil and gas-producing nation
– currently among Algeria, Mexico and Angola – to the
5th largest in the world, up amongst the oil-producing
nations of the Middle East, as shown in Exhibit 6.
Whilst the government have ring-fenced the pre-salt
areas for extraction by state-owned Petrobras, there will
be plentiful opportunities for multinationals to benefit
both in the non-pre-salt areas and as non-operative
partners in the pre-salt zone. As Chris Wall explains,
“The Petrobras corporate plan was considered by many
to be the largest in the world when it was launched.
They’re spending one hundred and seventy four billion
dollars, or thirty billion dollars a year over the next
19
20. Part 3: Avoiding sand: New Brazil’s solid foundations
five years. They are spending on ships, on rigs, on A lot of the salt is in ultra-deep water, and as the
submersibles, on pipelines, all the things you can exploration moves deeper and deeper the more the
imagine, education and training in the oil and gas sector, technology will need to be developed.
safety and all the rest of it ... in some cases there is a
60 percent requirement for local content. In other cases Brazilian start-up OSX Estaleiros, part of the EBX group
there is a zero requirement”. owned by Brazilian billionaire Eike Batista, is already on
course to supply ships and other equipment to the oil
As Richard Taylor summarizes, “There will be many, and gas industry, having raised R$2.5 billion (US$1.37
many opportunities for small companies, medium-sized billion) in an IPO in the first quarter of 2010.
companies, and large multinational companies to be
suppliers to the operated fields”.
Spotlight on opportunities in oil for multinationals:
Wellstream
There are mid-sized multinationals which have already taken advantage of the opportunities presented
by Petrobras’s oil discoveries in the Santos Basin. Wellstream is one such example. Wellstream is
a flexible pipeline manufacturer that came to Brazil in 2003. It became the first company to qualify
products for operation in 2,000 metres water depth following many years of work in technical
cooperation with Petrobras.
Wellstream is based in Newcastle in the UK, and now have a manufacturing facility in Niteroi, Brazil
to take advantage of growing market demand in the region. Richard Taylor says, “Now the Brazil
operations are I think the most profitable and biggest operations that they have in their portfolio”.
Renewable energy
The Boyden View: opportunities for small,
medium and large sized multinational companies It is not only oil and gas that make Brazil such a
significant energy player. As the rest of the world
struggles with rebalancing their renewable energy
“The Brazilian economy ‘emerged’ some time
credentials, Brazil has been investing in hydro-electric
ago for large global companies. They are all here,
plants and ethanol fuels for cars for 30 years. Brazil
and generally well-structured. Now it’s more
sources more than 80 percent of its energy from
interesting to see the way small and medium
big hydroelectric projects. Despite objections from
firms are flocking in. They often start with a sales
environmental groups, there are plans to build two
or technical assistance activity and expand from
new hydroelectric plants on the Madeira River in the
there. At Boyden we have a substantial activity
Amazon region and a further plan to build a dam at
in helping such smaller firms find their very first
Belo Monte on the Xingu river (Amazon region).
people here”.
William Penney, Managing Director, Boyden, But it is really the ethanol-fuels that have attracted
São Paolo the world’s attention. Brazil has the largest and most
successful ethanol industry in the world, based on
20
21. Part 3: Avoiding sand: New Brazil’s solid foundations
home-grown sugar cane, not on food grains as in many and cheaper. Definitely Brazil will become a leader in
other countries. that area”.
Following the oil shocks of the ‘70s, which doubled Brazilian innovation has enabled flex-fuel technology
Brazil’s import bill within a year and triggered to become workable and affordable. The Brazilian
uncontrolled inflation, the government made mandatory subsidiaries of Bosch Magneti Marelli and Delphi
the use of ethanol blends with gasoline. Last year, 94 Automotive Systems have been instrumental in
percent of all new cars were ‘flex-fuel’, with engines developing flex-fuel technology.
that allow for either gasoline or ethanol or any choice
of the two, depending on the driver’s choice. Brazil is The latest innovation within the Brazilian flexible-fuel
now the world’s largest ethanol exporter and its second technology is the development of flex-fuel motorcycles,
largest ethanol producer after the United States, as with the first flex motorcycle launched by Honda in
shown in Exhibit 7. March 2009.
As Richard Taylor says, “Brazil has reached a world There are big opportunities for growth and investment
leadership position here ... it will probably be at the in this area.
forefront of new innovations as well”. Francisco Itzaina
echoes this when he says ,“You find this country George Soros invested $800 million in ethanol
leading the world in sustainable energy technology. distilleries through a local subsidiary, Adecoagro; the
Many things that are being done today are an incubator Cargill Group bought 63 percent of Cevasa, the largest
for the technology that will change the years ahead”. ethanol plant in Brazil; and the US’s Global Foods will
invest US$1 billion to construct ethanol plants. Richard
Gaetano Crupi notes, “Brazil has more patent protection Taylor points out that there is “a big opportunity to have
filings in energy and agriculture than pharmaceuticals more bio components in trains, buses and electricity
or any other area. So there is a lot of investment there generation equipment”. Most public transport is
and there is a lot of technology and it is getting cleaner running on fossil fuels, but could be run on biodiesel.
21
22. Part 3: Avoiding sand: New Brazil’s solid foundations
Exhibit 7: Electricity and ethanol production
Electricity generation Brazil’s ethanol production* Global ethanol production
Source (Kw hours, bn) Barrels per day (000) % (2006)
*Indicates small volume of biodiesel Total = 40bn litres
Hydroelectric
Nuclear
Other renewables
400 Other
Conventional thermal
400 EU 8%
4%
350
300
300
200 US
250 46%
Brazil
42%
100
200
0 150
1995 97 99 2001 03 2005 1997 98 2000 02 04 06 07
Source: EIA/Financial Times Source: EIA/Financial Times Source: Brazil Institute
Wind
The Boyden View: Local executives with expertise
at putting together local teams There is also potential for more wind power. Brazil
depends on hydroelectricity for more than three-
quarters of its electricity, but authorities are pushing
biomass and wind as primary alternatives. Wind energy’s
We advise US and European clients keen greatest potential in Brazil is during the dry season, so
to invest in construction projects to hire it is considered a hedge against low rainfall and the
‘international Brazilians’ who can communicate geographical spread of existing hydro resources.
well with headquarters. Not only this, but
executives who are expert at putting local teams In December 2009, the Brazilian government conducted
together – they need a combination of industry its first wind-only energy auction. More than 1,800MW
expertise, recent local knowledge and experience of wind energy was contracted at $82.8 per MWh.
in working with global companies. The proceeds of the auction will allow for the
construction of 71 generation projects across five states
“Sometimes our client wants to bring a senior in the northeast and south of the country. The auction
executive over from the corporate base to attracted a number of international players, including the
oversee the investment. This can work, but local units of Energias de Portugal, Electricité de France,
we put a lot of work in crafting these roles to Spain’s Iberdrola, EnerFin of the United States and
make sure first, that the responsibilities and several Brazilian companies.
expectations of the expatriate are very clear, and
secondly, that the accountability of the Brazilian
executive is realistic.
When we review the final candidates, we then
need to make sure, of course, that as ‘co-leaders’
they will work together well.
Jim Hertlein, Managing Director, Boyden
Houston; Director Boyden World Corporation
22
23. Part 3: Avoiding sand: New Brazil’s solid foundations
Construction and infrastructure
“Construction is going to be big, and not only for the It is not only Brazilian companies who are well positioned
reasons of the Olympics and World Cup and so forth, to capitalise on these opportunities. The construction
but also from a housing perspective.... Today hiring an market in Brazil is well developed and has a lot of
engineer is tough. There are not enough engineers out experience of working with international suppliers, such
there and so those are the technical jobs that are going as Thales, Siemens, and Bombardier.
to be in very high demand”, says Gaetano Crupi.
The boom beyond the Olympics
The Olympics 2016
It is not just the Olympics that are stimulating investment
The Wall Street Journal’s Market Watch says that in infrastructure and construction. Boyden’s José Pedro
some estimates predict that the Olympics will bring in Rossi tells us, “local companies are investing heavily in
as much as US$51 billion in investments. Not only is infrastructure, including port facilities”.
there to be huge investments in the stadia and sports
facilities, but also in airports, monorails, light railways, The investment in port facilities is particularly interesting.
bus routes, and a high speed train from São Paulo to Bahia, for example, is investing in the creation of a new
Rio de Janeiro. Virtually every sector that is tracked port complex, Porto Sul, which will include a port, railway,
by local and international investors is set to benefit in waterways, roads, and an international airport with
some way from the Olympics: steel companies, mobile industrial capacity. Bahia is also setting up an industrial
phone carriers, airline operators, and media companies naval centre in the Bay of All Saints, which is the second
for example, are expected to benefit. biggest navigable bay in the world and the biggest deep
water gulf in Brazil. The enterprise will be aimed at the
The fact that the country will also host the 2014 FIFA construction of petroleum platforms, including semi-
World Cup gives Brazil further incentive to upgrade submersives, Floating, Production, Storage and Offtake
its infrastructure. The Brazilian government have (FPSO) ships, drilling platforms, oil tankers, and other
already launched its flagship investment programme types of vessels.
aimed at stimulating economic growth and developing
infrastructure. Announced in 2007, the Accelerated Overall, the opportunities for Brazilian and foreign
Growth Programme has allocated about $300 billion multinationals in Brazil abound, on the basis of the vast
for the next four years and a further $200 billion for and growing consumer base, the potential of Brazil both
investments post-2010. as renewable and petro-chemical energy power and the
innumerable opportunities that come from both Olympic
In the rail sector, for example, the Brazilian Government fever and wider economic growth.
have pledged in the region of $4 billion in the lead-up to
the World Cup.
23
24. Part 4:
The Boyden View: Hiring in Brazil
Understanding ‘o jeitinho brasileiro’
“Egos flourish in a different way in different
parts of the world”.
Francisco Itzaina
President – South America of Rolls-Royce International
In order to understand talent in Brazil, one has to and Italian are still spoken alongside Portuguese.
understand “o jeitinho brasileiro” – meaning the Gaetano Crupi points out that, “During the military
Brazilian Way. The Brazilian Way is a unique formula, years, France was the one really hosting all the
redolent with European and immigrant influence, philosophers and thought leaders from Brazil. So that
morphed into its own unique South American form. link always existed”.
As Chris Wall says, “Brazil is mixture of Germans and
Italians and Spanish and Portuguese and Arabs from Chris Wall calls Europe Brazil’s ‘muse’: “Brazil tends
the Middle East, not forgetting the huge population of to look towards Europe much more than it tends to
Brazilians who are descended from the slaves which look towards the United States as its muse in industrial
were brought over from Africa to work on the sugar development culturally and commercially”.
plantations, and the large population in São Paulo which
is descended from Japanese immigrants. All mixed up The relationship with the US is interesting.
together, all the result of waves of immigration over An Economist article suggests that Brazil and the
the last 100 to 130 years”. São Paulo is the largest United States have more in common than they realise,
Italian city in the world, for example: home to 6 million with the relationship involving egos in a different
Italians, whereas the entire metropolitan area of Rome, way. As Gaetano Crupi puts it, “Brazil does not like
the largest city in Italy itself, is home to a maximum the ‘young child syndrome’, they do not want to be
estimate of 3.7 million people, according to the OECD. dependent on the US”.
The entrepreneurial spirit is strong. Chris Wall observes So, to take Francisco Itzaina’s axiom, that “egos
“There is this drive. Don’t forget it’s the new world flourish in a different way in different parts of the
– people whose immediate relatives left Europe for world”, drawing upon Brazil’s executive talent means
Brazil, took a risk, and so they tend to be people who understanding what makes egos flourish in different
have grown up in a culture of ‘can do’. And a culture contexts, cultures, and regions.
of ‘yes, my parents might have been poor, but I am
going to be better’”. Klaus Pavel, Chairman of Aachen- Next, we share insights from senior executives and
Laurensberger Rennverein, makes the contrast with Boyden professionals on how to go about hiring
Europe: “My impression is that there is quite a strong talented executives in Brazil and the skills that are
entrepreneurial culture, maybe more there than in strategically and tactically important.
Europe, where my impression is that it is suffering from
so much regulation”. 1 The multi-sensory imperative
However, the cultural link with Europe is powerful. The first thing for foreign executives in multinationals
About 54 percent (103 million) of Brazilians are mainly who are hoping to expand their Brazilian subsidiaries
of European origin, descendants of immigrants from and need to find the right talent, is to travel to Brazil to
Portugal, Italy, Spain, Germany and Eastern Europe. get a feel for the jeitinho brasileiro. Francisco Itzaina
South of São Paulo, in the rich agricultural region, there advises: “The first thing to do is get on a plane and
exist European-style standards of living, where German come over here, in order to understand everything.
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