Northeast Brazil - The Undiscovered Key To The Future

When I mentioned to friends in England that I was heading to Brazil to work, the immediate question that followed each time without fail was, ‘Sao Paulo or Rio?’

It seemed no one knows of Recife, despite the fact that it is the capital of the Northeast of Brazil, which is currently a sea of business opportunity waiting to be exploited.

The main sectors of opportunity include renewable energy, ICT and pharmaceuticals; and it is essential that companies in the UK and abroad realise the potential for business in these areas.


Renewable Energy

Brazilhas one of the cleanest energy matrix in world and energy consumption will almost double by 2020. Hydroelectric energy, which is relied on too much up here is not effective because of droughts and the arid land of the Northeast.

Wind energy is a massive opportunity. 64% of wind generation inBrazilhappens in the Northeast region ofBrazil, and Pernambuco is to be the home ofBrazil’s first wind cluster in Suape. The aim by 2021 is to haveBrazilrely on wind turbines for up to 10 percent of its generating capacity. This is a great business opportunity because the Northeast provides more than half of the wind energy inBraziland this is increasing.

 

ICT

Recifehas emerged as one ofBrazil’s biggest tech-hubs since 2000, it is also an important hub for skilled IT professionals, and its computer science department ranks among the top 5 inLatin America. This hub, called Porto Digital, is growing steadily, and a significant area to be recognised.

There are obvious business opportunities here because ICT is an ever-growing market, and also because the Northeast and specifically Porto Digital is more or less internationally unknown, so there is a lot to be discovered and taken advantage of.

The tech hub is also attracting investors and CEOs because the average wage of a skilled IT professional is usually 30% lower inRecifethanSao PauloorRio.

As of 2010 Porto Digital alone generated a revenue of more that R$ 800 million and accounts for 3.5% of Pernambuco’s GDP. At the moment it lags behind the South andSao Paulo, but it has the chance to improve by internationalising itself.

 

Pharmaceutical

The pharmaceutical industry inBrazilis one of the worlds largest, and drug expenditures inBrazilare among the fastest growing.Brazilis an emerging pharmaceutical market with the demand for pharmaceutical products grows approximately 10% per year. The benefit of the Northeast is Goiana in Pernambuco; the pharmaceutical hub, which aims to endBrazil's dependence on foreign pharmaceuticals.

In 2002-2010 the region’s middle class grew greatly, which signified the growth of the purchasing power of the population, leading to more people to pay for pharmaceuticals, and requiring private medical insurance. Furthermore, the increasingly aging population comes with more chronic diseases and more demand for drugs, creating a vital business opportunity.

 

Automotive

AfterItaly,Brazilis the largest country of production for Fiat, where the Fiat brand is the market leader. The Fiat plant, also in Goiana, is massive investment in the automotive sector. In 2011 Fiat got 18.3% of its Brazilian sales from the Northeast, where its market share was almost 28%, which was well above its 22 .8% share of the whole Brazilian market. Additionally, Fiat’s marketing investment in the Northeast has grown more rapidly than its national investment. The factory, once ready, will generate 4,500 jobs and have the capacity to produce up to 250,000 cars per year.

 

PortofSuape

This Port, also located in the state of Pernambuco, is the best public port inBrazil, with a huge demand for expansion. It is connected to more than 160 ports on all continents; it has 100 companies in operation and a further 35 in the phase of implantation, and private investments add up to around US$ 18 billion.

The Port consolidates Pernambuco as a distribution centre of goods and services of the oil, gas, offshore and shipping industries. Reasons for entrepreneurs to invest are the availability of an efficient infrastructure, the existence of targeted industrial centres, training programs of the local workforce and tax benefits.

SuapePorthandled 15 million tones of cargo in 2010, which should reach 45 million tonnes by 2015. It also has key environmental considerations; of its 13,500 hectares, 59% is allocated to the preservation of the environment, and moreover, it has several sustainability and environmental programmes.

 

Mining

The mining sector in the Northeast received the most foreign investment between 2010-2013, but it currently lacks investment in logistics infrastructure. The main substances being mined are iron ore and gold. There exists the Pedra Branca PGM project, which involves 57 exploration concessions totalling approximately 70,000 hectares inCearáState. There was also the discovery of a high-quality iron ore mine in Piauí, with reserves of around 2.97 billion tonnes.

There are 18 qualified producers of gypsum in the Northeast. In the ‘Araripe Gypsum Zone’, the companies produce 2.5 million tons of high quality gypsum, generating 60,000 direct jobs in the region, and they export worldwide a large variety of products and represent 95% of the gypsum internal market.

 

Transnordestina Railway

The Transnordestina Railway is an integrated logistics solution to attend toBrazil’s Northeast region, especially with the transportation of agricultural products and ore, also to raise the competitiveness of the agricultural and mineral production in the Northeast. It is supposedly to be completed December of this year; hopefully Brazilian time-keeping won’t apply! 12,000 jobs are expected to be generated from this project. The company Odebrecht is employing 7,000 of the 11,000 people working on the rail revitalization program. To cope with the labour demand, the company has launched a training initiative called Programa Acreditar to involve the local labour force which is beneficial for the Northeast area.

 

Transposition ofSao FranciscoRiver

The aim of this project is to address the problems caused by droughts in the Northeast and supply water to locations with no easy access to water; in 2025 for 12 million people in 390 municipalities in the four Northeastern states of Pernambuco, Ceará, Paraíba andRio Grandedo Norte. It is considered the largest infrastructure project of the government’s “Accelerated Growth Program,” which will alter the river and surrounding ecosystem by transposing the river’s flow. The river represents 60% of water reserves in the northeast region ofBrazil, and the project includes the construction of hydroelectric dams, pumping stations, aqueducts, tunnels, and water reservoirs. Furthermore there will be the construction of two large channels, each over 600 km in length, to supply 12 million people and 268 cities with water and to irrigate 300,000 hectares of land. The expectations of this project are 12 million people to benefit from the water supply, 150,000 jobs generated, and to be finished at the end of 2015.

Subsequently, it is clear that the Northeast is not to be underestimated or disregarded. Its economy on its own is still bigger than economies of most Latin American countries; every state from North/Northeast has grown faster than the Brazilian average, and there are numerous and diverse opportunities for international business.

Lucas Lacombe & Ricardo Demarchi

MEI Associate Directors, North East Brazil

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