Giuliana Napolitano
São Paulo – The Brazilian federal government is prepared to support the internationalization of Brazilian companies. Together with Brazilian president Luiz Inácio Lula da Silva’s statements, that businessmen need to “lose their fear” and transform their companies into multinationals, this target is now also part of the Brazilian Development Bank (BNDES) strategy.
In the beginning of 2004, the institution is going to create a credit line to finance companies interested in establishing offices abroad. To analysts heard by ANBA, the government is going in the right direction. “This support is very important,” states the executive director of the Institute for Studies in aid of Industrial Development (Iedi), Julio Sérgio Gomes de Almeida.
For now, however, the initiative is just beginning. Studies for establishment of the government targets have not yet finished; there are also no studies about Brazilian companies already operating abroad. Estimates come from private organizations. According to Brazilian Foreign Trade Association (AEB) director José Augusto de Castro, around 500 Brazilian companies currently have some kind of representation internationally – included in this figure are trade offices that use a variety of different methods to distribute products on the international market. This answers to around 0.01% of the total companies in operation in Brazil today, and to less than 3% of those that export.
The number of companies capable of producing abroad, however, is smaller still: Castro believes that this figure be around 30. Included in this small group are giants such as Brazilian oil company Petrobras, airplane maker Embraer, steelworks Companhia Siderúrgica Nacional (CSN) and Gerdau, and bus body maker Marcopolo. “Few companies take the decision to establish offices abroad, says the specialist.
Unfinished grade school
To Almeida e Castro, this low internationalization of companies is due to a lack of exporting tradition in the country. To have an idea, in Brazil, there are currently around 4 million companies. Of these just 17,000 export, that is 0.4% of the total. “The figures are too low. This shows that companies do not feel confident enough to export, and less so to open branches abroad,” evaluates the AEB director.
Gomes de Almeida also recalls that one of the most common forms of internationalization is that generated by export. “Normally a company that is mature in international trade heads in the direction of opening branches abroad,” he explains. Castro agrees: “Export would be the company grade school for the foreign market; having an office abroad would be high school. Having a factory operating abroad would be like college. We currently have not even finished grade school.”
According to the Iedi director, other reasons that cause companies to go onto the international market are natural or mineral resources in other countries, and technological superiority – this last is the case with the Asian countries. Yet neither of these hypothesis may be applied to Brazil. “In Brazil’s current phase, the internationalization process is 99% related to export,” says Almeida.
Establishment of the brand and fixed export
One of the main advantages of opening a factory or office abroad is that this eases sales of your products. “You contribute to fixing your brand abroad,” states Almeida. “Apart from that, you can generate fixed export,” adds Castro. This occurs when, for example, a company in the country of origin supplies raw material to its subsidiary abroad.
Yet, there are people who criticize the idea of internationalization. The Iedi director himself is one of them. “It is necessary to be very careful so as not to eliminate jobs in the country,” he defends, stating that the opening of multinationals only generates jobs outside Brazil. Augusto de Castro disagrees. To him, supporting internationalization is fundamental.
The AEB analyst recalls that in the past, the government has already had broader programs in this area. In the 1980s, for example, there was the Export Financing Fund (Finex), which supported the opening of branches abroad. “And with no value limitation,” he pointed out. Nowadays, according to him, the BNDES is fixing a maximum financing of US$ 500,000 per year for this kind of credit.
Worldwide the tendency is also for greater internationalization. According to a report by the United Nations Conference on Trade and Development (Unctad), between 1995 and 2001, the direct foreign investment stock of developed countries – which is the volume of productive investment made abroad by these nations – rose 123%, to US$ 5.8 trillion. In the case of developing countries, the growth has been 188%, to US$ 800 billion.
Banking paradises
A report by the Brazilian Society of Transnational Corporations and Economic Globalization (Sobeet) shows that, in the case of Brazil, over half the funds are directed to banking paradises, like the Cayman Islands and the Bahamas. “(This) is due to the business strategy of investing around the world through holdings established in banking paradises,” says the text.
The worry with taxes and tariffs, notwithstanding, is another reason that may make a company opt for internationalization, finishes Almeida. CSN, for example, attempting to avoid North American customs barriers against imported steelworks products, opened a factory in the United States.
According to Brazilian Central Bank figures, after the banking paradises, the countries receiving the largest quantities of funds from Brazil are the United States, Argentina, Spain and Portugal.
