By Jerry Pierce Jr.
It appears that 2013 is going to be a strong economic year for Brazil. President Rousseff’s administration is showing flexibility and making changes which are allowing a more coordinated effort between the public and private sectors. The growth in the middle class is real and continuing. Major upcoming international events like the World Cup are forcing the government to bypass the usual bureaucracy and take serious action to invest, build and prepare in order to avoid missing deadlines and suffering world embarrassment.
So, what business sectors will benefit most from these events this year and in the years to come? Here is my list of the 10 hottest industries in Brazil.
1. Sports and Entertainment
The impetus to this growth in the Brazilian sports and entertainment industry is the investment and preparation for the 2014 World Cup and the 2016 Olympics. Several billions of dollars are being invested in new and remodeled stadiums. In order to receive a return on this investment these stadium owners must incorporate the concept of a multi-use facilities. American companies like AEG are experts at getting the most ”bang for the buck” at sports and entertainment venues. Stadium owners must fill the seats with a diversity of events besides soccer. A variety of sporting and entertainment events must be procured, from rodeos to monster trucks to Cirque de Soleil. Multi-use for arenas is a new concept for Brazil but its time has come.
2. Infrastructure Development
The Brazilian government gets it now. Brazil has to move quickly to develop its infrastructure in order to ensure long term economic growth and in preparation for increased tourism from major international events. The federal government has created an infrastructure fund and is aggressively and sincerely reaching out to the private sector, both domestic and international. The need is for roads, metro, hotels, airports, seaports, railroads, bridges, tunnels, telecommunications infrastructure, and power plants. The government intends to invest $470 billion in these projects.
3. IT and IT Security
With all the growth and advancement of technology into Brazilian industry, there are vast opportunities for companies that can manage it. New and more sophisticated software tools require continual maintenance. With more data traveling through the internet and being stored in the cloud the need for systems and cyber security has also increased. The Brazilian Information & Technology Market will be strongly impacted by a new tripod of technologies: Cloud Computing, Big Data and Enterprise Mobility. Companies will need to integrate these technologies into their business strategy and invest in their IT infrastructure in order to preserve their competitiveness and generate new sources of revenue.
This month the percentage of mobile phones in Brazil that are smartphones hit the 50% mark. There is much room to grow. E-commerce is quickly expanding in Brazil but e-purchase with mobile devices is in its infancy. Brazil is number two in the world in social media usage on sites like Facebook, MySpace, and YouTube despite only 37% of the population having connectivity. Brazilian telecoms regulator ANATEL predicted that mobile connections in the country should reach one billion by 2022. Brazil already represents the largest e-commerce market in Latin America. Brazil’s online population is larger than the total population of Spain, France or the UK.
5. Banking - Brazil's banking industry is financially strong and attracts huge inflow of foreign investment. Two of the largest banks in Brazil are government owned, but private Brazilian banks like Itaú and Bradesco are doing exceptionally well. US and other foreign banks also have a significant share of the financial market. Most banks have opened subsidiaries dedicated to investment banking. Mortgage and consumer loans, for the most part, are only just being introduced.
6. Oil and Gas
Brazil is the 9th-largest oil producer in the world, with a production of 2.57 million barrels per day. Petrobrás, a semi-government owned oil/energy company, is the 8th-biggest company in the world, and is responsible for 80% of the nation's overall oil production. Abundant supplies of oil and natural gas have been discovered. This year, after years of delay, the Brazilian government will be publishing the bids for the new oil and gas concessions. Many of these new finds are deep offshore and there is much need for technical assistance, specialized equipment, and investment. There also is room for partnerships. In addition, at the end of the year the government will issue a bid for blocks of shale oil and gas.
7. Electrical Energy
Brazil is one of the world's leading producers of hydroelectric power, and hydropower accounts for 69 percent of the country's total electricity generation. Nuclear energy contributes 4 percent of Brazil's electricity. The country currently has 2 nuclear reactors, Angra I and Angra II, with planning underway for a third reactor at Angra. Due to recent water shortages, the government is also investing heavily in thermoelectric plants. After a power struggle on retail pricing, the government now has begun to compromise with the energy companies on fair pricing. Hundreds of millions of dollars are being invested to ensure the energy reliability needed to attract new business to the country, especially in the manufacturing sector.
Agriculture in Brazil is well diversified. The country is the world's largest producer of sugarcane, coffee, tropical fruits, and frozen concentrated orange juice (FCOJ). Also important for Brazilian agriculture are soybeans, corn, cotton, cocoa, and tobacco and forest products. Brazil also has the largest cattle herd in the world, over 50 percent larger than that of the US.
9. Retail and Consumer Goods - Cars, clothing, refrigerators, TV’s etc. The growing middle class in Brazil is spending to purchase these and many other consumer products and there is no sign of slowing down. The consumer spending is reminiscent of the US in the 1950’s. With the option to make payments in up to 20 installments, more people can buy. In addition, last year’s reduction in the interest rates is allowing more people access to credit.
10. Low Budget Restaurant Chains
The growing middle class in Brazil has to eat somewhere and many are choosing to eat in the fast growing low budget restaurant chain industry. Besides the local brands, Olive Garden, Red Lobster, Outback, Applebee’s as well as other American chains are in Brazil or on their way. These low budget restaurants are doing extremely well and the quality of their food product is quite good. They are also found in the finest shopping centers and there is always a waiting list.
These hot industries present serious business opportunities for those companies that are willing to take a look at Brazilian marketplace. Besides these 10 industries, there are several other key business sectors in Brazil that are expecting positive growth , such as healthcare and mining. It has been almost three decades since the return of democracy to Brazil. The country that has always been known for its potential is finally beginning to live up to it.