Day 7 - EDC, Petrobras and Brascan tours

EDC

This morning we had the opportunity to chat with a representative from Export Development Canada (EDC). She came to provide all the benefits of obtaining a new business opportunity in Brazil.

EDC has been doing business in Brazil since 1963. They do business globally, including helping Canadians diversify their portfolio. They are a self-sustainable organization and now have the ability to raise their own capital. They are mandated to remain competitive and sustainable and to assist small companies inside Canada with niche market capabilities.

When asked about the issues surrounding investments in Brazil, we were advised that some of the obstacles facing Canadian businesses interested in investing in Brazil are: high taxes, labour issues, government regulations, and their sophisticated market. The largest barrier however is their language. Brazil is one of the only Latin American countries that do not speak Spanish. This means that anyone wanting to become a serious partner in Brazil must learn to speak Portuguese.

With all the issues facing these partnerships one would think that the EDC would not be profitable, however we learned that they currently have 13 offices outside Canada.

Two of the largest imports from Canada include fertilizer and news print.



More of the Copacabana beach!













A wild and crazy Brazilian BBQ on the beach front of Copacabana. It is designed after a pirate ship and the seafood was some of the best we had ever tasted!









The bathrooms were something you have to see in person. There was shiny gravel all over the floor and in all the sinks, the same crazy theme of things hanging from the roof and on the walls and there was only candle light. It was definitely an experience!











Petrobras

Petrobras is the largest oil manufacturer in Brazil. Petrobras was incorporated in 193 as a government monopoly. The government currently controls 55% of the voting shares in the company. Today they are in 23 different countries and use leading edge technology, including seismic prospecting to locate the oil pockets. They are currently producing 1,855 million barrels of oil per day.

Petrobras currently has 5 areas of interest within the company: Exploration and production, refining, transport and marketing, retailing, natural gas and final Petrochemicals. This allows the company to diversify their products.

What does the future look like for Petrobras? So far they have arranged financing for continued research and development projects and expected growth within the next two years. They advise that consumption of oil and gas products have been stable this year and are expected to increase next year.

In diversifying their company they recently bought a refinery in Japan in an attempt to introduce ethanol to Japan, they are concluding a pipeline running from the South to the North East and will next be venturing into the interior, they have built 2 LNG flexible terminals, are increasing options for bio-fuels and low-carbon technologies, and looking at being a financer of manufacturing bio-fuels such as ethanol. All in all it looks pretty good for Petrobras over the next few years.





The video below is a cool downtown structure that is designed from the Mayan temples to honor the Pope's visit in the 70's.









Brascan

This organization was founded in Sao Paulo in 1889 with the notion of a power tram and has diversified from there. Today this company has $35 billion in properties, $12 billion in renewable power, infrastructure investments, timberlands and agrilands, special funds and fixed income funds. They own a little bit of everything and are successful in it all. This 110 year old company has realized profits every year and have issued dividends to shareholders every year.

One of the most important drivers in their success is the demographics of Brazil. For example, Brazil has a large segment of citizens under 25 years old with interests in shopping in centers, mortgages, and power consumption to name a few. In addition there are more citizens moving from the poor to middle class with more disposable income which also generates buyers for the shopping centers as well as the real estate market.

In the agricultural section of the business they advise that they have essentially taken lemons and made lemonade. They have a lot of land in Brazil that can be used for farm land, however much of this land was very acidic. They have learned that by rotating crops and fertilizing appropriately they can change the alchemy of the soil. They also have the ability to plant two different crops on the same field in the same growing year due to the long growing season, hot weather, and rain. An example provided was the ability to take off the soy beans and immediately plant the corn.

In addition they advised that there are opportunities for their company on the bio-fuel and eco-generation front. This company is also interested in the sugar cane – ethanol opportunities in Brazil right now.

On the timberland front they indicate that they have the ability, again due to the climate, to harvest their lumber in approximately half the time of the native countries. They are currently harvesting pine and eucalyptus.

Moving on to the real estate portion of the business they advise that due to the increase in citizens moving up to the middle class, there is a need for shopping centers. This seemed odd to those coming from the North where we have extreme cold to drive us indoors, however they explained that they have the other extremes, extreme heat and rain. In addition, the shopping centers have security and are safer than shopping on the street.

Brascan has currently opened 11 shopping centers in the last 8 years. They are primarily based on the South East; however have plans for expanding in this area as well.

When asked if the economic crisis has impacted their company they replied that the growth rates were affected slightly last year, however with the last quarter they have seen potential growth and are just waiting to see if this is going to be the trend.

All in all, Brascan is another successful company operating in Brazil. We were also advised that they are not opposed to considering joint opportunities within Brazil with Canadian counterparts.


The view from the boardroom that we met in was absolutely spectacular with the Sugar Loaf mountain in the background from one side and the bay's marina from the other. Those would make for some hard meetings to focus on the task at hand!

Day 6 - Government services and Consulate General of Canada

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Poupoutempo is a government agency that allows the people of Sao Paulo and around Brazil to access any government department in one quick stop for free. They are able to process over 30, 000 people per day.

Everything you need can be obtained in this one place. When entering the architecture is open and you can see that it is color coded. The government wanted to make this building as open and easy to access as possible. In addition to color coding each agency, there are signs posted on the floors and walls to provide direction to the clients. There are also various staff members available for assistance.

The first stop for us was where the Brazilian people obtain their ID. Here it is called RG. You will require this ID in order to obtain anything else. This ID can be issued twice in a lifetime, You can obtain this when you are young as well as when you get older. This ID is even required to obtain employment. We were advised that they produce 2,500 ID’s per day in this facility.

We then moved on to the elections area. Voting is mandatory in Brazil for everyone over the age of 18. Each region has a specific number that you are assigned when you turn 18. You must obtain this number in this building. When it comes time to vote you must vote. If you missed the vote you must come and advise the government in writing why you did not vote, you may also have to pay a penalty fee.

Moving on we were advised that they encourage feedback and are striving for 100% satisfaction among their clients. They are currently achieving 98%. It is their goal to treat everyone equally and fairly and to provide good service to everyone.

Next we learned that lawyers have special ID in order to allow for additional retirement benefits and get access to court. It was interesting that lawyers get there own booth and ID.

Moving along the line on the floor, we come to the telephone company. In this area you do everything from set up and cancel service, to pay your bills. Any issue involving the phone company gets handled in this area.

There was the state bank section for paying taxes, bills and regular banking transactions from 7am to 7pm. There was a free internet access section and a state utilities section to pay the bill, request service or complain about bills.

The most interesting section of the tour of the contractor complaints section. If someone had work done and they didn't like the service or the contract was not fulfilled they could complain and the government would look into it. If needed a negotiator would be appointed, free of charge. Amazing, we need that in Canada.

We were given a video presentation of the Poupoutempa and in turn provided our gracious hostesses some gifts of appreciation. Anna got the traditional kiss on each cheek and Brent got a little worried he would get the same in front of the whole class. But alas, he only got a handshake!

We headed to the Consulate General of Canada's office and had to get ID cards from the security desks by providing our passports to get through security. The Canadian office was like walking through Banff, Alberta, but I never did find out if the river stones under the glass floor were imported from the Great White North or not.

We were treated to a presentation of what Canada and Brazil are doing (and not doing) in business, government and economics. And were encouraged to go back home and try to improve relations with Canadian business and industry with Brazil into the future.

The vice president of Scotia Bank over all of Brazil then introduced what Scotia Bank is doing all over the world and specifically how Brazilian banks operate and how Scotia Bank can assist the country with their international expertise.

We had a great buffet lunch at the mall in the district and headed to the airport. We stopped for an hour to shop at the mall by the airport as we had some time before our flight to Rio.

Lots of the group had small packages either for them or a loved one at home. Austin had a larger bag as he and Brian had got some clothes. The ride to the airport took an unusual turn when someone asked what he paid for the shirt. Austin, to those who know him, rarely has any trouble telling it like it is. This shirt however turned out to be quite a competition of the group verses Austin to get out of him how much he paid for it! At the time of publication, his official answer is he got a good deal and even got 30% off but no official price tag had been revealed. But to help change the subject, while on the beach of Copacabana, he negotiated with a street vendor for 5 additional shirts for him and his sons. I guess the truth will never be known. What happens in Brazil, stays in Brazil!

After arriving in Rio de Janerio our bus and guide picked us up and drove us to the hotel overlooking the famous Copacabana beach. We all met for a stroll along the board walk and stopped for drinks to celebrate Jason's birthday. The group split up after supper on the strip and enjoyed the evening.

Well he finally did it, Kelly took off his sweater vest and jacket to enjoy the evening on the beach, since that has never happened, we had to capture the magical moment.

Day 5 - HTA and avionics manufacturing

Today we went to a smaller city just outside of Sao Paulo to visit High Technology Aeronautics, a trading company founded in 2002 and growing rapidly. Last year there were only seven companies in the consortium, today there are twenty. This company was founded by employees who are no longer working for Embraer, an airplane manufacturer.

They, like everyone else in Brazil are very concerned with recycling and even have bins for organic waste like apple cores and banana peels!

We started out with an open air presentation in a covered enclosure on site with no walls by HTA and Mirage.

The purpose of HTA is to assist those in the association in the creation of business relationships and partnerships with organizations from other countries. Currently there are exports to Canada, USA, Gaza, Dubhai, and Geneva.

The benefits of HTA are the promotion and recognition of companies on a global scale. Those currently in the association have the advantage of the partnerships and communication strategies globally. Each company is responsible for obtaining and maintaining their business connections

however obtaining new networks occurs through the association travelling to Canada, USA, and other countries to explain the benefits these companies can provide to current businesses around the world

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There are currently 2500 workers employed within the companies associated with HTA. When asked about recruitment challenges they advised that in the early 90’s Embraer downsized and had to lay off 4000 employees. It is from these lay offs that some of the companies in the association originated and the current employee pool is drawn.

When asked about the current economic challenges, they advised that there were problems with suppliers and some agreements must be frozen because the companies could not take the 20 year debt required, however they are stable. In fact, Embraer has now opened a factory in the United States to try to keep up with the Executive market in the U.S.

How stable is the current association? It has grown from seven companies to t

wenty companies within the last year and within another couple of months has the opportunity to merge with a few more companies. The expectation is that there will be fifty companies within the next year.

Mirage

This company was founded in 1976 and is the oldest supplier for Embraer.

90% of the company’s production is for aeronautics parts and the other 10% is for commodity parts. In addition, Mirage also produces prototypes for companies to assist with research and development. Included in these products is fake landing gear, sold for training purposes.

The current crisis in Brazil has not diminished the production capacity of the company. While the volume of product required has remained the same, the price requested by the clients has diminished. There has been a significant price decrease within the last year.

Currently Mirage exports to Brad-Whitney and BRT in Canada. B

rad Whitney requires product from Mirage, whereas BRT only requires a service, their research and development expertise.

Mirage currently has three existing companies in different cities within Brazil. The first two companies employ 150 employees with salaries ranging from $800/ month (Real) for cleaning staff to $10,000/month (Real) for top executives.

We were treated with a tour of the facility and what parts they provide to the airplanes, we needed safety goggles and ear plugs inside the machine shop. This picture was to prove to

my wife that I went on the trip as I am always behind the camera!

The Brazilian BBQ

It is a wonderful experience! The salad, cheese table and small dishes are buffet style and then the waiters bring a variety of meats from salmon to lamb, beef to chicken to the table on swords and offer as much as you want. They continue to bring different types of meat until you say stop or die, whichever comes first. These lunches can easily last 2 hours in Brazil as lunch is the largest meal of the day.

Everyone had a great time and had way too much to eat. I apparently left too early to walk off some meat before the bus arrived as others told me of the delicious dessert cart that followed!

Astra

We were met to a high level of security as this plant was in the city's poorer neighborhood. In other areas of the neighborhood, the nails on the top of the fence were replaced with broken glass and metal shards. The fence is even topped with electrical fence wiring!

The heat was intense in the afternoon after arriving at Astra, it was over 30C and most of the group was wearing suit jackets that slowly came off, until the heat won out and Kelly actually took off his sweater vest and suit jacket! We didn't think that was ever possible!

This was also a manufacturing company that manufactures the smaller parts for the major airline companies such as Embraer and Bombardier. The President of the HTA is the current owner of Astra. This company began 25 years ago machining parts for guns and has progressed throughout the years to a successful aeronautics engineering company.

The economic situation has affected them more significantly in the last year. They have since expanded into other areas to cover their losses in the aeronautics industry. This includes the auto industry, as well as other miscellaneous industries requiring the smaller machined parts.

Astra has reduced production from 100,000 pieces to 40, 000 pieces since the economic crisis began. They are however currently attempting to obtain contracts in France, Germany, Sp

ain, and America.

They are a small company; however they have the entrepreneurial spirit that will guide them through the current crisis.

After a long, hot day of touring and learning, a two hour bus ride back to Sao Paulo was a great chance to catch a few zzzz'z! (Shhh)