Companies say they must be in Brazil

(Reuters) – Multinationals seeking advice on entering Latin America’s largest economy are telling global business consultants Bain & Company that “they have to be in Brazil,” partner Pedro Cordeiro said on Thursday.

Speaking at the Latin American Investment Summit from the Sao Paulo office of Reuters, Cordeiro said that not only oil majors were keen to gain a foothold in one of the hottest exploration and production markets in the world.

“Construction, infrastructure, the electric energy, companies are eager to find a way into these sectors here. There are companies that left Brazil during hyperinflation and now regret leaving. Unilever (ULVR.L) stayed and its decision has now paid off. It has done very well,” Cordeiro said.

One of the first major economies to exit recession since the global financial crisis deteriorated in 2008, Brazil is expected to grow more than 5 percent in 2010 on the back of robust domestic consumer demand.

But it is the new massive oil finds off Brazil’s coast that have captured the eye of the world’s high technology oil industry at a time when demand for natural resources from fast growing emerging economies like China are seemingly insatiable.

Cordeiro said that Brazil’s oil and gas sector, which currently accounts for about 8 to 10 percent of gross domestic product, will more than double to 25 percent in the next 10 years.

“Brazil is the focus of the global oil industry right now,” said Cordeiro. “Like Norway, Brazil has all the ingredients to become as great an exporter of oil services as oil and gas.”

He said that the size of Brazil’s vast subsalt oil fields were critical to providing the scale on which the local oil services industries could become competitive.

“Whether Brazil will be competitive globally in building valves or oil platforms is still unclear but whichever it is, it will depend on the advantage of scale,” Cordeiro said.

Brazil’s state-run oil company Petrobras (PETR4.SA)(PBR.N) and other foreign oil firms have been finding a sea of hydrocarbons under the ocean floor off Brazil’s coast that some say could amount to 50 billion to 100 billion barrels of crude.

“There will certainly be a lot of demand for state-of-the-art deepwater technology in developing the subsalt area,” he said. “This technology that will be developed to produce from the subsalt is the know-how that will eventually be used in developing the deepwater fields around the world.”

“This is why companies are saying to us ‘We need to be in Brazil or we’re afraid we will miss out’,” he added.

He said Brazil had great domestic growth potential and although it lacked the billion-person consumer bases of China and India, it possessed a certain Western business culture that appeals to many foreign companies that are coming to Brazil.

“All the ingredients are here but it will also depend on government policy, like a good chocolate souffle is not simply made from sugar, chocolate and egg,” said Cordeiro. “You need a good chef to bring it all together.”

(Reporting by Reese Ewing and Marcelo Teixiera; Additional reporting by Denise Luna and Brian Ellsworth in Rio de Janeiro; Editing by Phil Berlowitz)

Published by Hildete Vodopives

Hildete de Moraes Vodopives is founder of Brazil Global and of the Harvard Strategists Group. She has a PhD in Economic History and advises companies and investment agencies in international business development.She served as Corporate Relations Director and later, on the board of the Brazilian Investment Analysts Association (APIMEC).

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s