Brazil

Creatively coming out ahead.

Brazil’s economy is surging upward, fueled by the vitality of its domestic market, newly discovered oil resources and major infrastructure development as the country prepares to host soccer’s 2014 World Cup and the 2016 Olympic Games.

With economic growth predicted to be above 5% this year, business opportunities will benefit from the creativity and flair for design and innovation that are ingrained in the Brazilian national character and enhanced by the country’s newfound financial fitness, telecoms talent and entrepreneurial energy.

Brazil has a long-established status as a cultural icon. The exuberance of its multiethnic citizens; the magic of its music, from samba to bossa nova; and the organized chaos and color of its Carnival — all of these express Brazilian brilliance.

These days South America’s boldest and most ebullient nation is making its mark on the global economy.

Fashion weeks in São Paulo and Rio de Janeiro now rank among the world’s premier fashion events alongside those in New York, Milan, London and Paris.

Foreign prejudices against Brazil have disappeared in the past three years, says Mario Spaniol, the founder of Carmen Steffens, which sells its handcrafted shoes, handbags and accessories in 23 foreign countries. “These days we are proud to say that we are a Brazilian brand, and we have 180 stores worldwide.”

The increasing global reach of the Carmen Steffens brand and the optimism Spaniol expresses typify the current mood of Brazil’s business community. Signs of growth in the U.S. and Chinese economies are boosting confidence in Brazil because they are the South American country’s second-largest export markets.

With the nation preparing to host the World Cup soccer competition in 2014 and the Olympics in 2016, the government’s Growth Acceleration Program has pumped $250 billion into infrastructure projects.

Foreign direct investment is set to jump a whopping 48% this year to $38 billion, according to the median forecast of about 100 economists in a central bank survey carried out in February.

The recent discovery of huge offshore oil deposits near Rio de Janeiro will further promote future growth, transforming Brazil into one of the world’s biggest oil producers.

As domestic demand for steel rises, Usiminas, Brazil’s largest producer of flat steel, is boosting investment 33% this year to ramp up output, and may revive plans to build a mill in the Minas Gerais state.

With all these developments in the pipeline, utilization of industrial capacity has been increasing every month. Further, mergers and acquisitions are forecast to rise as much as 40% this year, as the buoyant consumer market and the government’s steps to foster homegrown conglomerates increase the attractiveness of corporate combinations.

Both the government and independent analysts forecast that even before the oil starts to flow, Brazil’s $1.3 trillion economy —the most dynamic in Latin America and bigger than those of India and Russia—will expand by 5.5% this year. Guido Mantega, the Brazilian finance minister, says last year saw the creation of nearly a million jobs, and a further 1.6 million are expected this year. He adds that, proportionately, Brazil is creating more employment than China.

Furthermore, he says, Brazil has “growth with quality,” because the economy is expanding in an environment of controlled inflation, stable macroeconomic indicators, job creation and increasingly equitable income distribution.

One of the South American nation’s attractions is certainly its increasing number of relatively affluent consumers. In the past seven years, more than 32 million of the country’s population of 198 million have attained middle-class status, while another 20 million have escaped a state of poverty.

Aldemir Bendine, the CEO of Banco do Brasil, the country’s oldest bank and the largest in South America by assets, says the key factors that have enabled Brazil to withstand the global financial crisis and emerge from it stronger are the strength of its domestic consumption; the central bank’s effective monetary policies, which have given it large international reserves; and the rapid response of the government, whose prompt and effective action maintained the liquidity of the monetary system.

Banco do Brasil actually benefited from the global crisis, says Bendine: “Our agency in New York had capital of around $400 million, and this jumped to $4 billion during the crisis, evidence of the level of trust that investors have in our institution.”

Banco do Brasil is currently involved in 240 corporate finance projects, and this, says Bendine, reflects the pace of change in Brazil’s infrastructure: “We believe it will increase much more. In five years we will become the world’s fifth-largest economy if that investment in infrastructure continues.”

Rio: Soaring to New Heights

The announcement this year of the discovery of huge oil deposits off the coast of Rio de Janeiro has further boosted the soaring economic prospects of the state and the city.

With preparations already under way for the staging of soccer’s World Cup in 2014 and the 2016 Summer Olympics, the promise of 65 million extra barrels of recoverable oil is adding luster to both the city’s and the state’s attractions.

As well as being Brazil’s preeminent tourist destination, Rio is an important industrial, manufacturing, financial and commercial center. It is second only to São Paulo in economic terms and provides the headquarters for Petrobras, the state oil company, and Vale, the world’s largest producer of iron ore.

Sérgio Cabral, the state governor, says new investment is pouring into the state’s economy.

“The China Development Bank is opening an office and is already investing in Petrobras; Electrobras, the predominantly state-owned power utility; and Oi, the telecoms operator,” he says.

Eduardo Paes, Rio de Janeiro’s mayor, points out that by staging the Olympics in 1992, Barcelona transformed itself economically and socially. He regards the Catalonian capital’s experience as a template for Rio.

“We have a modern, creative industry cluster and one of the most qualified workforces in the country,” he says. “Ahead of the Olympics we are working to make Rio more business friendly and also providing incentives and support for all those who intend to do business in Rio.”

A strategic plan to attract and facilitate further investment has been drawn up by Rio Negócio, a private agency controlled by the Commercial Association of Rio de Janeiro, in partnership with the city administration.

It is devoted to five areas — energy, creative industries, tourism, infrastructure and innovation industries, says Felipe Goes, the secretary of development in the city of Rio.

In the energy sector, in which Rio is an established R&D center, the city is bidding to host the World Energy Forum in 2015. In the creative industries sector of media, entertainment and sport, Global Village Telecom (GVT), a fixed-telecommunications carrier, will invest $170 million over the next two years.

To meet additional demand in the tourism sector, 16 hotels are in the process of being licensed, and the number of hotel rooms will double by the time the Olympics begin in 2016. Among infrastructure projects, revitalization of Rio’s port facilities and expansion of the subway system are under way. The mayor is heading a campaign to encourage companies to come to Rio, and is devising tax incentives to attract innovation industries such as biotechnology, electronics and computer software.

Known as “Cariocas,” Rio’s citizens are famous for their intense loyalty and identification with their home community. The lifestyle they enjoy has led Rio to be considered the world’s happiest city. It attracts around 3 million tourists a year, accounting for 40% of Brazil’s tourism revenue.

Cabral says hosting the world’s two top sporting events is providing the best possible opportunity to tackle Rio’s problems, which include crime and a dire shortage of basic amenities in certain areas, such as water supply, sanitation and proper roads and lighting.

“The Rio Olympics will leave an environmental legacy. We have engineers
studying sanitation and the rehabilitation of lakes and forests. We want the
first-ever Olympics in South America to be a green Olympics.”

Sérgio Cabral, Governor, State of Rio de Janeiro

The first benefits are already evident, he says, in five of the favelas — the hillside shantytowns that are home to an estimated 25% of Rio’s inhabitants. Peacekeeping units are maintaining a permanent presence in these communities, and a force of 3,300 officers will be operating in 100 more favelas by the end of this year. Officials say these efforts have reduced crime by as much as 85% in some areas.

“The Rio Olympics will leave an environmental legacy,” adds Cabral. “We have engineers studying sanitation and the rehabilitation of lakes and forests. We want the first-ever Olympics in South America to be a green Olympics.”

A Flair for Originality

Equipped as they are with rich diversity, natural flamboyance and creative free spirits, Brazilians have a flair for pushing boundaries.

Whether they are designing dresses, making music, manufacturing cosmetics or creating interior décor, Brazil’s homegrown enterprises frequently manage to bring to their business an extra element of originality or individuality that ensures their success.

Cosmetics company Niely has developed a range of shampoos, conditioners and hair color that is challenging the products of multinational giants Unilever, Procter& Gamble and L’Oréal. Home products retailer Tok&Stok collaborates with Brazil’s internationally renowned designers to produce original home accessories and furniture at affordable prices. Carmen Steffens manufactures a widely diversified range of handcrafted women’s shoes, handbags and accessories that offers Italian quality at a third of the price.

Daniel de Jesus, the founder and president of Niely Cosmetics, describes as possibly “foolhardy” his decision in 2000 to launch his own hair-coloring line to rival those of L’Oréal and Wella Professionals, multinationals with more than 50 years of experience in the Brazilian market.

“The two dominated the market and were very competent, but in the past ten years we have become the sales leader,” he says. “Our success now is challenging the big multinationals in both the color and shampoo sectors.”

Niely is continuing to grow, he explains, because the Brazilian market today is becoming more demanding.

“Customers in the less-advantaged economic groups have grown more prosperous and no longer want to buy the products they bought before. They want better-quality products, and we manufacture quality products,” he says. “Niely today is the bride that everyone wants to marry. It has two lines, Niely Gold shampoo and Cor&Ton hair coloring, that are dominating the market, while most companies strive to have just one strong brand.”

De Jesus attributes his company’s success to its investment in its high-standard research facilities and manufacturing plant. Its competitive advantage, he says, lies with the quality of its products, its speedy decision making and its investment in media publicity.

Niely achieved sales of $226 million last year and expects a 25% increase this year. The company has invested $28 million in a new factory that will be fully operational in four or five years’ time.

“I spent 15 years investing in infrastructure,” de Jesus says. “Decisions here can be taken fast. The Brazilian market is hot now, and I can multiply by five the sales of the Gold line today as the market expands, and the coloring line by twice that.”

Fast Fashion in Furniture

Tok&Stok is Brazil’s largest network of stores dedicated to one-stop shopping for décor. Customers can visit a store, select the complete furnishings and decoration for a room or office, and have it delivered and assembled in a day.

This “fast fashion in furniture” concept requires a capacity to offer clients constant innovation in color and raw materials, as well as trade know-how and an extremely effective system of logistics, say Régis and Ghislaine Dubrule, the husband-and-wife team that founded Tok&Stok. They developed their system in 1978, and now, 32 years later, they have a presence in every major Brazilian city, with a total of 27 stores.

“The material of our products can be wood, glass, chrome tube, aluminum or plastic. The material may vary, but we will always have a great design,” the Dubrules agree.

The sale of decorative items has grown faster than that of furniture and today represents 40% of Tok&Stok sales.

“Brazilians are consumers,” says Régis Dubrule. “If you give them a way, they will consume.”

“We are not a showroom, we are a superstore,” says Ghislaine Dubrule. “Superstores are a new element in the retail sector in Brazil and an important factor in the structure of the store.We launch ten products a day, and that attracts many people into our stores.”

Important factors in the success of Tok&Stok, say the Dubrules, are its extremely organized retail management.

“We have a good management system. We have been pioneers in logistics, in computing and in developing our own system of storage.”

Having achieved an annual growth rate of 25% between 2005 and 2008, the couple was preparing for an IPO, but has put that prospect on hold until the time is right.

A Franchise Ready for Expansion

Carmen Steffens, Brazil’s fastest-growing franchise within the women’s shoes, handbags and accessories sector, is another company contemplating an IPO or a partnership in order to expand.

With 170 stores worldwide, the company has entered into a partnership with singer Mariah Carey to promote the company’s expansion in the U.S.

“Our brand is fashion,” says Mario Spaniol, the company’s founder and president. “We serve a woman who wants a little more attitude, a little more daring and extravagance.”

When he decided to create Carmen Steffens, Spaniol studied manufacturing in Italy, brought his machinery from Germany and invested $4 million in the first four years.

“After my wife took charge of the design, the brand suddenly became a success,” he acknowledges. In a year the company had ten stores, and he decided to create a franchise department with professional management and a training profile.

“We require effective operators for this business to be successful,” he says. “Franchisees will obtain expected results, or I guarantee they can take back the money they invested.

“Unlike other brands, we have great diversification and small volumes,” says Spaniol. “Other brands need 5,000 pairs to make a line. I make a line with six pairs. What is crucial for women? Beauty, comfort and exclusivity. This is the focus of our business.”

The partnership with Mariah Carey is aimed at promoting the Carmen Steffens brand, as well as the singer’s image and her charitable foundations.

“Mariah knew of our own social projects,” says Spaniol. “We have volunteers working in partnership with the municipality, and each year we help 700 working children return to school.”

Building a Brighter Future

As Brazil prepares to expand its oil production industry and to host the world’s two top sporting events, massive infrastructure construction projects are under way. Road, rail and subway routes, sporting venues, hotels, shopping malls, apartment complexes and houses are either being built or being readied for development.

The country is already in the third year of the federal government’s $250 billion four-year growth-acceleration plan, and the administration plans to launch another similar plan before national elections in October. President Luiz Inácio Lula da Silva instigated both programs to boost the country’s economy by encouraging public and private sector investment in infrastructure projects.

As soon as Rio de Janeiro was chosen to stage the 2016 Olympic Games, OAS one of Brazil’s leading civil engineering and construction companies, had a plan of action ready.

“I dedicated myself to this eventuality a year ago,” says Adelmário Pinheiro, the company’s president. At his direction, OAS carried out a case study on how Norway and Canada handled the development of their hydrocarbon industries, and another on how Barcelona prepared for the 1992 Olympics.

“The support base for the oil discoveries might be built partly in Rio, partly in São Paulo and also in Espírito Santo,” says Pinheiro, or Dr. Léo, as he is more generally known. “The same thing will happen with the World Cup and the Olympic Games. Construction projects will develop many business sectors, and we have drawn up strategic plans for OAS to take full advantage of these opportunities.”

Founded in 1976, OAS has immense experience in such mega-projects. Through a strategy devoted mostly to huge business and infrastructure projects, it has completed 60 petrochemical plants and 16 shopping malls. The company is currently participating in a $4 billion hydroelectric project in Peru and the construction of Rio’s subway, which will be able to carry a million passengers daily.

OAS is committed to its social responsibilities. Its school of productivity provides low-skill workers with basic education, and the company runs classes at each construction site so workers can obtain the education they couldn’t get when they were younger.

“We also have a business school for higher education and a program called ‘The Work of the Future,’” says Pinheiro. “This is my new passion. It is a huge training program for management that is very important for our future.”

Poised for New Growth

Another prominent construction and engineering company, the Niplan Group, describes itself as an entryway for large foreign companies that want to work in Brazil. Niplan provides engineering services, construction and industrial maintenance services in the oil and gas, chemical, steel, petrochemical, food and pharmaceutical sectors. Since its founding 20 years ago, it has achieved sales figures of $227 million per year and has attracted Petrobras, Volkswagen, Unilever and Bayer as clients.

“Within our planned growth, we want to achieve $567 million in annual billing during the next two or three years,” says president and founder Paul Nishimura. “We are growing at a rate of between 20% and 30% a year with our capital structure. Our international plan is to work first in Latin America, especially in the Mercosul countries (Argentina, Brazil, Paraguay and Uruguay).”

Nishimura believes Brazil’s economy will grow solidly over the next ten years. Local and foreign groups interested in investing in Niplan have approached the company, he says, but he is in no hurry to follow up on their interest.

The country is already in the third year of the federal government’s
$250 billion four-year growth-acceleration plan, and the administration plans
to launch another similar plan before national elections in October.

“If one day we can make an IPO, there is no doubt we will do so,” he says.

Nishimura intends to grow Niplan through a partnership or joint venture with a well established foreign technology company.

A Focus on Customer Service

One Brazilian company that is seeking a partnership and additional capital to finance its expansion plans is Cotia Foods.

Cotia Foods distributes national and imported chemical products. These include a wide array of acids, glucose, nitrates and sulphates, which it imports in bulk, packages, and distributes to different industries, from soda production to oil and gas to fertilizer companies.

Alexandre Bien, founder and general manager, created the company with his brother in 1999. He says Cotia has achieved an annual billing of $120 million for the past few years but expects growth of at least 20% this year.

“We work with commodities that anyone can buy and sell, so the difference is the customer service we provide. So it is important for us to understand our customers’ needs,” says Bien.

“We offer technical assistance.We buy in large quantities, store the product and deliver it in any quantity directly to the client’s factory with the necessary technical assistance to improve its use. We create an entire solution for the customer.”

Middle-Class Growth Fosters New Opportunities

Brazil’s economic growth over the past seven years has transformed nearly half the population—around 90 million people—into middle-class consumers, and business sectors ranging from supermarkets and sporting goods suppliers to insurance and fruit juice companies are reaping the benefits.

Life insurance provider Capemisa has experienced exponential growth by selling insurance to families in the lowest economic classes, people who formerly could not afford insurance. The company’s client base has been growing by 60% a year and is expected to exceed a million this year.

José Augusto da Costa Tatagiba, Capemisa’s president, says the company has achieved this increase by introducing a policy that gives full coverage for a cost of only $3 per year. Having invested in efficient technology, Capemisa can reach a mass market while keeping costs to a minimum.

“Personal insurance in Brazil accounts for only 2.7% of GDP, compared to 8% in the U.S. or Europe,” says Tatagiba.

The company relies on advertising to reach a low-income market segment of new consumers, whose families are at high risk if the main wage earner dies. Individuals can take out coverage up to the age of 80, says Tatagiba.

To help the uninitiated visualize the value of a lifetime benefit, the company automatically enters all clients into a lottery with cash prizes.

Capemisa also offers themed insurances such as samba or football insurance that sends 10% of profits to samba schools or a soccer team, and “pink insurance” for women, with a logo that boosts cancer awareness. Capemisa also seeks to help entire families by operating an outreach program that enables children to study or to receive medical treatment.

Says Tatagiba: “Technology nowadays enables us to work with low costs and without the need for intermediaries. I can reach anywhere in Brazil from here without high costs of communication.”

The company is preparing for a stock exchange listing to raise capital for future initiatives.

Energy in a Bottle

Viton 44, which produces high-energy drinks from 34 different types of Brazilian fruits, is one of the companies whose sales have benefited from the growing number of consumers. Created in 1999, the company’s business strategy is to produce and promote an extensive range of such drinks, and it is the leader in Brazil’s soft drink sector.

The first drink it offered was Guaravita, made from juice extracted from guarana, an energy-boosting Amazonian fruit the size of a coffee bean with about twice as much caffeine. Guaravita was followed by Guaraviton, which, in addition to guarana extract, contains taurine, ginseng and other herbs and coloring.

Guaravita and Guaraviton are cheaper than other high-energy soft drinks, says Neville Proa, the founder and president of Viton 44.

“We have drinks for any taste, and all of them are alcohol- and CO₂-free and safe to consume,” he says. “They are made from natural produce with a composition of incredible quality, and prepared in our own labs.”

Viton 44 doesn’t export its drinks, which are distributed in glass containers, to the U.S. because of their limited shelf life. But Proa is considering the possibility of selling them in the U.S. in syrup form.

The company has three production plants, in Rio de Janeiro, São Paulo and Minas Gerais. Franchises supply the rest of the country. Proa’s aim is to expand Viton 44, ideally with a partner who has in-depth knowledge of the soft-drink sector.

Clear Results

Grupo Europa, the country’s market leader in producing and supplying water purification systems, has achieved double-digit growth every year since its creation in 1984 and expects to achieve close to 15% this year.

Múcio de Souza, the group’s founder and president, attributes its success to its policy of using top-of-the-line technology and manufacturing its products to the highest national and international standards.

“We use hollow fiber technology imported from Japan and ultraviolet light technology from Holland and Hungary,” says de Souza.

A key element of the group’s strategy has been to establish a presence in every one of the country’s state capitals and in every important city. It now has 352 offices, 176 stores and 171 kiosks throughout Brazil. The six companies in the group manufacture 20,000 water purifiers a month and have the capacity to triple production without installing additional facilities.

Despite its name, Grupo Europa is an entirely Brazilian concern.

“We chose the name Europa because the continent has an image of
solidity and tradition, two key factors that we wanted our group to possess.”

Múcio de Souza, Founder and President, Grupo Europa

“When we started the group, we chose the name Europa because the continent has an image of solidity and tradition, two key factors that we wanted our group to possess,” says de Souza. “The European continent is well regarded for its technology, and therefore it symbolizes the three pillars of the group: solidity, tradition and technology.

“We show one of our purification filters being cleaned after 15 days of use,” says de Souza. “People can see the immense amount of pollutants that have been extracted. The water is dark, muddy brown. Our systems extract chlorine and bacteria, leaving clean, crisp water.”

Going for Gold

Another enterprise that has flourished thanks to the burgeoning ranks of the middle class is Grupo SBF, the leading sporting-goods chain in Latin America. For the past decade SBF has expanded at an average annual rate of 35%, and it now has 125 stores operating under the brand names Centauro, By Tennis and Almax Sports.

“We doubled our network size in the last two years, and the group now has almost 6,000 employees,” says Sebastião Bomfim Filho, the group’s founder and chief executive.

SBF began operating in cities with a million
inhabitants and then spread to population centers ranging from 250,000 to 750,000. The By Tennis and Almax brands have a presence in shopping malls that target higher economic sectors, while its Centauro chain targets lower economic sectors.

“As soon as the lower economic classes are able to develop and practice more sports, we will have a great opportunity to expand our business,” says Bomfim. “The group has an expansion plan in readiness to meet this increased demand.”

SBF’s competitive advantages, he says, are its logistics network, which extends throughout the country; its focus on the quality of the products it sells; and its ethical sales policy, which is built upon merit, transparency and profitability.

In addition to selling global brands such as Nike, SBF has its own brands that fill in niche markets.

“For example,” says Bomfim, “the Brazilian woman prefers a different fit of clothes [compared] to European women. Foreign manufacturers have difficulty in adapting to this, so our brands enter these areas in an efficient manner.”

Bomfim plans to open an average of 50 new stores per year, with the aim of having 400 premises by 2014, along with significant income growth.

“In 2014, the year of the World Cup in Brazil, we will be one of the ten largest global players in sports products,” he says. “Internationally, the market is starting a new phase of great events, incentives and investments, which will make the years between 2010 and 2020 a golden decade.”

Uniquely Carioca

The higher sales of grocery products also reflect the increased spending power of lower-income groups.

Prezunic, a Rio de Janeiro supermarket chain that achieved the country’s seventh-best profits last year, opened its 30th store in November last year. All of them are located in the state of Rio de Janeiro.

“When we opened the company in 2001, we had no idea that by the end of the decade we would have inaugurated 30 stores,” says Andréa Cunha, the company’s president.

Prezunic’s well-defined business strategy incorporates optimized shelving spaces, impressive in-store hygiene, stores that don’t exceed 27,000 square feet in size, and an average of 20 checkout counters per store. It has achieved annual sales of just over $1 billion in 2009, an increase of 18% over 2008. The company provides friendly, local customer service that is reflective of the warm and outgoing Carioca personality creating a close-knit connection with the community.

Prezunic provides its 6,700 employees with health plans and opportunities to study. It also offers work to people with physical disabilities and senior citizens. “Our people are very creative and caring,” says Cunha.

“Internationally, the market is starting a new phase of great events, incentives and investments,
which will make the years between 2010 and 2020 a golden decade.”

Sebastião Bomfim Filho, Founder and Chief Executive, Grupo SBF

Connecting a Continent

In the world’s fifth-largest country by area, with 5,000 cities and many more remote communities still in the early stages of development, logistical expertise in the movement of goods is a vital requirement.

Grupo Beta, a Brazilian enterprise consisting of five independent companies, provides that expertise, specializing in storage and distribution by air, road, sea and river.

“In a region like Belém or Manaus, it can take four days by boat to deliver goods,” says Michel Atie, the company’s president.

He estimates that logistical business has tripled in Brazil in recent years and is continuing to grow.

Grupo Beta is planning to expand its operations into nearby countries, and is seeking a partner willing to invest in transforming the company into the continent’s best and largest logistics operator.

Headquartered in São Paulo, Grupo Beta has a modern operational management and control headquarters, 16 branches, its own fleet of cargo aircraft and light vehicles, more than 2,500 square feet of storage space, and 85 operating bases covering 1,200 cities.

“We have made a six-year-long investment in developing a strong and smart system of operations that is the best in Brazil,” says Atie.

With annual earnings of just over $100 million, the group is aiming for annual growth of between 20% and 40%.

Atie anticipates expanding Beta’s operations into Bolivia, Peru, Colombia, Venezuela, Argentina and Chile, as well as the U.S.

“There is space for us to make, at the very least, two or three flights a week taking freight to and from the U.S., if we can establish reciprocity with the U.S. market,” he says.

Ready for the World Stage

Brazil’s banking sector is expected to continue recording sizable growth over the next four years, thanks to its cautious credit policies. And Banco do Brasil, the country’s oldest financial institution, plans to capitalize on the situation by investing $40 million to create more offices in the U.S.

Having begun operating in 1808, the bank is a 202-year-old institution that keeps modernizing every year, says Aldemir Bendine, its president and chief executive.

“We are working to consolidate our position in the Brazilian market, but we want to grow on the world stage as well,” he says.

Banco do Brasil has a long-standing tradition of maintaining offices abroad, and has a presence in 23 countries. In Japan, approximately 140,000 members of the 350,000-strong Brazilian community are clients of the bank.

“There are about 1.4 million Brazilians living in the U.S., the largest community of Brazilians living abroad, and we want to replicate that success there,” he says. “Our first move is to wait for authorization from the Federal Reserve to open a bank in the U.S., where we will be able to help Brazilians and Brazilian companies and stimulate trade exchange.”

The bank has agencies in New York and Miami, and plans to open others in New Jersey, Connecticut and Massachusetts, where there are also large Brazilian communities. It is also considering expansion in Latin America. Banco do Brasil is already South America’s largest bank.

“Banks cannot survive without scale,” says Bendine, explaining why his institution will continue to seek acquisitions both to increase its scale of operations and to enter niche markets.

Through the acquisition of Nossa Caixa, Banco do Brasil became the biggest bank in São Paulo, while it entered a partnership with Banco Votorantim specifically to gain access to the domestic car-financing market.

Bendine aims for his bank to be present wherever else in the world Brazilian companies have established themselves.

“I’ve thought about Banco do Brasil becoming the largest bank in the Americas,” says Bendine. “Maybe it will not happen in my term, but I want to leave seeds for my successors to do it in the future.”

The Future Is Now

The founder of Microsoft was attending a meeting on the 24th floor of a building in Brasilia in 1996 when, looking idly out of a window, he spotted a plane displaying a sign: “Welcome Bill Gates, TBA.”

Being Bill Gates, he asked to personally meet whoever was responsible for the sign. And that is how Cristina Boner, the founder of Grupo TBA, became a business partner of Gates and Microsoft.

Today Grupo TBA is one of the top information technology (IT) companies in Brazil, providing a comprehensive range of network infrastructure.With sales of $227 million in 2009, the group is aiming to double that figure within two years and, in the longer term, to become a leading multinational technology group active in the mobility, cloud computing and software markets.

“In the past, technology was a business of low volume and high price,” says Boner. “Today’s technology is high volume and low price. This is a radical change that is affecting all our lives. Geographically there is an annual market of $240 billion that is not being served.”

Currently, says Mauro Muratorio Not, TBA’s CEO, the group caters to Brazil’s internal market, but it is opening an important window onto the foreign market.

“While Microsoft, Oracle and IBM continue to develop technology, they require companies like TBA to pass this technology on to users,” he explains.

The penetration of broadband and personal computing services is still relatively low in Brazil, but with the upward mobility of consumers, use of IT equipment is increasing among the general population and small businesses at the bottom of the economic pyramid.

From 1948 until 1992, the government banned the import of IT. This policy had some benefits, says Muratorio Not. Brazilians had to improvise or develop their own technology, and it made them more creative.

“Because of the country’s history of inflation, the banking system had to be very agile, and technology was the key element to making that happen,” he explains. “So Brazil developed a good technology for automation.”

There are two specific lines of growth for the future, he says: cloud computing and telephone mobility.

“This will bring down the final barrier for people and small businesses to enter the digital world. Much of our investment is focused on cloud computing, data software as a service and an area of mobility and e-storage. The more people use the Internet and the cloud, the more they will need storage.”

The Country of the Future

“For the last two decades, Brazil was [regarded as] the country of the future,” says Jaques Scvirer, president of Medidata, another leading systems, data and voice communication network. “Today that future has arrived.”

Medidata has been active in the IT market since 1976. Scvirer says his company’s best quality is its ability to reinvent itself in accordance with the ongoing evolution of digital technology.

During the period of the IT import ban, when everything except mainframe computers had to be developed and manufactured in Brazil, Medidata transformed itself into a systems house, using available IT components such as disk drives, video terminals, printers and tapes to add internally developed application software.

“The resulting computer system had a better performance, supported more terminals and processed applications much faster than the computers offered by the original manufacturers,” says Scvirer. “We succeeded in acquiring important customers, domestically and internationally, including Shell and Exxon.”

Medidata implemented online billing for the gas and oil warehouses situated around the country.

“We started as a systems house and became a system integrator with open-architecture products,” Scvirer says. “We closed our manufacturing facility and transformed our development staff into integrator engineers.We are now one of the largest integrators in Brazil, with expertise in both IT and data communications.”

With 60% of its business coming from São Paulo and 30% from Rio de Janeiro, Medidata has a roster of clients that includes large companies like Telefónica, Vivo, Oi, Petrobras and Itaú Unibanco as well as medium-size enterprises. Having achieved annual sales of around $210 million in 2008, Medidata’s goal is to double the size of the company every three or four years.

It plans to expand in the Brazilian market by a process of diversification. “We want to acquire businesses that have synergies with our own and that are operating in markets in which we are not present,” says Scvirer.

Pillars of Success

Grupo Ação, another technology firm, has 22 years of experience in Brazil’s IT sector. It has followed up on its success by acquiring Aktio, a company that distributes IT solutions in Argentina and Uruguay. It now intends to expand its operations into Colombia, Paraguay, Chile, Venezuela and Mexico.

The secret of its success, says Enio Issa, Ação’s president, is that it gives client companies a complete solution for their various IT demands.

“For our clients, taking product solutions from several companies becomes increasingly complex and expensive,” he explains. “As company CEOs become increasingly focused on their own business activities, they have less time to devote to their technology.

“We offer all IBM solutions that can be customized to the needs of the customer, and we aggregate all the tools and assume the risk in any project. We have a project manager who manages everything. If it doesn’t work for our clients, they do not have to pay.”

The three pillars of Ação’s approach are planning, commitment and hard work. In the South American market, detailed planning is not very common, he says. Commitment for the long term is also vital, as is hard work. Ação achieved a revenue of $284 million in 2008 and aims to achieve $570 million in five years.

Issa sees no geographic restriction on the company’s expansion plans.

“We want to expand operations in Latin America, increasing Ação’s portfolio of partners and customers and connecting with businesses in neighboring countries,” says Issa. “In addition, we have a wider range of offerings for the entire Hispanic market.”

He sees large- and middle-market opportunities in Russia, India and China, and believes there would be space for Ação in the more mature middle market of the U.S.

Ação has received IBM prizes for innovation and best distribution, and on four occasions has won distinction as the largest distributor of Oracle in Latin America.

Innovative Strength

Brazil’s leading exponent of Internet hosting, Locaweb, has half a million hosted domains and more than 1.7 million e-mail account clients. Its corporate clients include energy companies and financial institutions.

Locaweb has demonstrated its innovative strength by the manner in which it has harnessed the cloud computing concept.

“We launched a cloud product that any business can understand,” says Locaweb’s founder and president, Gilberto Mautner. “Our site has a video explaining what cloud computing is, how it can be used, how much it costs and how it can be bought.We explain it in such a way that clients who have no technical background can understand its benefits.”

Locaweb already has 22% of the hosting market. Locaweb’s mission, he says, is to facilitate its clients’ access to innovation, so that they can succeed through technology that enables a reduction of costs and a means of gaining more business.

Innovative Telecom Sector Offers Growth Potential

The acquisition of GVT, Brazil’s fastest-growing fixed-line telephone and broadband carrier, by the French media conglomerate Vivendi has focused attention on the potential for growth in the South American nation’s telecommunications sector.

The move is expected to intensify competition between GVT and the other major player, Net Serviços, Latin America’s largest multi-service communications company. In a deal valued at $4.2 billion, Vivendi trumped a $4 billion bid from Telefónica of Spain to land GVT.

“This was an opportunity not to miss,” says Jean-Bernard Lévy, Vivendi’s CEO and now also chairman of GVT’s board of directors. “We are very excited with GVT’s business model. It is very innovative and has efficient technical solutions coupled with very sophisticated marketing tools.”

Broadband penetration is not high in Brazil, he points out, and this gives GVT a significant competitive advantage. “We feel we can leverage this over the years by increasing penetration,” he says.

The French company has opened up a credit line worth $350 million to sustain GVT’s expansion and investment plans. These aim to extend the company’s presence and increase its broadband reach in the northeast and southeast areas of the country, particularly in nine key cities and throughout the Rio de Janeiro and São Paulo states.

Levy says that Vivendi’s involvement with GVT and Brazil should be viewed as permanent. “The fact that Vivendi has a long-term vision for GVT will be an essential success factor,” he says.

Emphasizing that Vivendi pursues a decentralized form of management, he explains: “GVT will remain an independent company, with decisions made in Brazil by the people who are as close as possible to the market: consumers, customers, competitors, regulators and other stakeholders.”

GVT is revolutionizing the telecoms industry by offering the most up-to-date technology at a fraction of the prices its competitors charge, says Amos Genish, the company’s CEO.

A recent survey named GVT one of the 25 most innovative companies in Brazil.

“The pursuit of innovation pervades GVT in all management aspects and is a key fundamental of our business model,” says Genish. “This kind of recognition shows that the efforts of all our team towards innovation are being noticed by the market as a whole.”

GVT’s net revenue is forecast to rise by 26% this year and its earnings before tax by 30%.

In the competition with GVT that lies ahead, Net Serviços’ current advantage is its network. The company, which offers television, broadband Internet and cable telephone connections, already has a presence in 93 Brazilian cities and has a 50% market share of themed television and a 38% market share of broadband, serving 10.7 million homes.

In 2009, the company’s Pay TV client base rose by 20% to 3.6 million over 2008. Broadband penetration increased by 30% to 2.8 million and telephone lines in service increased by 42% to 2.5 million, while net revenue rose by 25% to $2.6 million.

“For a subscription of R$39.90 (US$23) per month, Net offers telephony, Internet connection of 100 kilobits per second, and a TV signal through cable in every corner of the house, providing free-to-air and must-carry channels,” says José Antonio Guaraldi Félix, Net Serviços’ CEO.

The network is available to homes in every economic sector.

“The challenge is to find a product that a lower-income audience wants and, more important, that meets its needs,” says Félix.

He believes that, given the current economic developments in Brazil, those belonging to less-advantaged economic classes will improve their purchasing power and move up.

“I believe that human behavior is aimed at improvement and that the upward mobility is out there,” says Félix. “In the future, everyone will have more or less the same ability to do things, the same bandwidth and content. What will differentiate companies will be the level of service. So we have a great focus on operational excellence. We want to be the best provider of multi-service in the country.”

He has no thoughts of expanding Net’s activities elsewhere in Latin America, because Brazil offers sufficient opportunity for growth. However, he believes the company would benefit from an American technological partnership to maintain its competitive edge.

At the time of press, the currency conversion rate was R$1 (Brazilian reals) = US$0.566 (U.S. dollars). All monetary figures stated are U.S. dollars unless otherwise indicated.

Director: Lucas Montes de Oca / Managing Editor: Beverley Blythe / Editor: Michael Knipe / Art Director: Lisa Pampillonia / Project Managers: Florence Lilti, Matthew Harris, Lauren Denny and Fadrique Alvarez de Toledo / Commercial Director: Carolina Mateo / Cover Photos: São Paulo, Paulo Fridman/Corbis; Bridge Detail, Pulsar Imagens/Delfim Matins; Museum of Contemporary Art, Rio de Janiero, Alamy; Fashion Week, São Paulo Sebastiao Moreiras/epa/Corbis

This special advertising feature was produced by Insight Publications, a division of Impact Media International Ltd. www.insight-publications.com