The Economic and Financial Magazine for Entrepreneurs and Managers

Oct 21, 2019

In the article, Mr. Graziano Messana speaks why Brazil is an important market for Italian SMEs, and it is already brief advice on how to invest in Brazil.   

Mapping opportunities, promising sectors, Italian presence in Brazil, and the Brazilian economic situation, find out what are the investment opportunities in Brazil.

See the companies that have decided to invest in Brazil here.

Messana (GM Venture): Brazil is also a land of great opportunities for SMEs

Investing in this country means being able to significantly increase the business of Italian companies in very receptive markets that have numbers equal to a continent

L’uscita dell’ebook Doing Business in Brasile” è stata l’occasione per parlare di quanto questo mercato sudamericano sia importante per l’Italia e, soprattutto,

The release of the “Doing Business in Brazil ebook was an opportunity to talk about how important this South American market is for Italy and, above all, for the present and future of Italian companies. A country is as big as a continent that can represent an endless panorama of opportunities for our companies, even SMEs. We talked about this with Graziano Messana, Managing Partner of GM Venture.

Why write an ebook like “Doing Business in Brazil”? And why invest in Brazil in 2019?

Brazil emerges from a major political and economic crisis that has gone through it over the years

2015-2016, with a full recession. It has surpassed it and is broken at a very attractive cruising speed in terms of GDP, and especially with low inflation, with a lower interest rate, almost a record.

Italian companies play a significant role in Brazil. Following a Memorandum of Understanding between the Italian Embassy and those of Japan, China, France, and the United States, which defines the flow of inflows from outside over Brazil, it emerges that Italy between the end of 2018 and the beginning of 2019 is the first investor in Brazil.

From here, we started to question each other, and with the Embassy, it was decided to update a work started in 2013, but with a slightly different course. We wanted to focus on specific sectors, on the analysis of the Italian presence purified by factors that could perhaps before disturbing the data.

For example, Enel, which has become the first operator in terms of energy distribution, has 122 companies in Brazil. In our census, this flow is worth two companies: one that has under its hat all the distribution, in which Enel is precisely the leader, and the other that has all the renewable energies, where it is still the leader.

Brazil is important for an Italian company because, for example, behind Enel, many companies are operating in the energy sector. Or behind FIAT, which announces the largest investments since the 1970s, go about 80 companies operating in the automotive sector.

Then, for Italian companies, it’s a very important context. Today we have 972 presences of Italian companies that have invested in Brazil and are present with branches or branches on site. This is certainly an excellent opportunity because it is a country very close culturally to Italy and that this Bolsonaro government has somewhat encouraged, stating that it believed in the USA, Israel and Italy.

Our country exports machinery while Brazil is a commodity country, it needs industry, and therefore it is the right chemistry.

It is therefore not a question of relocation but investment.

This is precisely an investment because, for example, in the energy sector, Enel is providing energy to Brazilian households. It is, therefore, a business that adds to the group holding company a new country and further investment returns. In the case of Fiat, it carries with it an induced Italian SME, which are our entrepreneurial fabric, and that goes to a new country tow. This generates wealth for Italian companies that see this new great market that opens up, and certainly do not remain in the national borders.

What are the economic and financial conditions in the country at this time?

It’s a bit of a peculiar moment. It comes from interest rates that had risen to 14% up to 3-4 years ago, while today it stands at 5.5%, the lowest rate Brazil has ever had in history. On inflation – it is hard, but it must be said – Brazil is not Argentina. This has a rate of 50% compared to 3.5% in Brazil, which also has important monetary reserves. They are very different realities.

Then the conditions for which in recent years Brazil has not had an investment-grade are improving slowly. Of course, the risk factor is not lowered from one year to the next because the country needs structural reforms.

It must be said, however, that in November 2017, an excellent reform of labour law was approved, while the pension reform is on the way, and it is another extremely important step, and that the government is debating tax reform. So, the combination of all this macroeconomic information, but also concerning reforms, they see a country that is changing its skin.

Italy is Brazil’s second-largest trading partner, and we are about to become the first on an annual basis. What are the main areas of interest and with what prospects?

Many areas are extremely interesting. For example, renewable energy is a sector that is growing by 600%. Fintech sees 45 million people without a bank account. The digital market is growing extremely much and Goldman Sachs estimates that the market volume will be 24 billion dollars between now and the next ten years.

It’s a country with the Internet of Things (IoT) that is developing smart cities, and it’s entering agriculture. This is a particularly important sector since Brazil is the world’s leading producer of meat, chicken, sugar, orange juice and a whole range of commodities. In this context, the sector is worth as much as Spain and Portugal put together, the new technologies in which Italian companies are already operating, applying their solutions on a large scale. Brazil is a country of volumes. Even in retail, you can see this kind of opportunity.

The opportunities span many areas in which Italy has excellence. Today there are 120 million internet users and 58 million online buyers, which equates to the Italian population. There are opportunities in the pharmaceuticals sector, in the automotive, in the energy sector, also on the renewable side. Digital security and home automation are also growing a lot. These are the sectors of technology that have developed in Europe in recent years and are now being applied in a country that is as big as a continent.

Geographically, you have mapped the opportunities. What are the main ones and why?

Given the huge size of the country, the opportunities that can be seen in the south are certainly different than those we can identify in the north.

Just to understand, Sao Paulo is a super industrialized state where most of the Brazilian GDP is produced. But the Azimut that produces boats has settled in the south of Brazil, has created an induced manufacturer that helps to build luxury yachts because it found in this site of the Sul the right environment. Whereas in the northeast we see large wind farms.

Brazil has an energy matrix opposed to Italy. Despite what can be said – sometimes, themes such as fires in the Amazon are exploited – Brazil is an environmentally friendly country: it produces 80% of energy from renewable sources. And so, there is a lot to do in this area.

What is the presence of the Italian System in Brazil?

I believe that Brazil is one of the few countries in which the Italian System is very articulated. There’s the Embassy which is a top and it’s a kind of director’s box. Then we have several consulates, the ice, the system of the Chambers of Commerce. We have for ten years the only office in South America of SACE, operating in Sao Paulo, which is operating push strategy policies and is a reference. He did operations with Braskem in chemistry, with Nexa in the mining industry. Transactions made in favour of Italian suppliers who can sell to these companies.

Then there is a scientific and cultural attaché. We, therefore, have a system Italy articulated and coordinated by the Embassy.

In addition to those already present, what are the Italian companies that can look to the country as an investment? Even SMEs?

Among the great names excellent absent, I see ERG and SNAM. There will be a progressive release of the gas market with a very good chance of investing. Besides, with the privatization of airports, ENAV can also take a look. And in the following of the above sectors, all Italian SMEs have possibilities. Companies that also charge 5 million euros have opened a subsidiary in Brazil, finding satisfaction, selling and distributing their products in such a large market.

I, therefore, do not see a dimensional constraint of the company: even those with a small turnover can invest in Brazil and do good business. It depends a lot on the degree of propensity to go abroad of the entrepreneur. It doesn’t have to be a necessity, because otherwise, the company goes bankrupt, but it has to be an opportunity to grow the business and make it last over time.

Original article in Italian.

See more about doing business in Brazil here.

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