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!