“We have woken up to internationalization”

You could call him Brazil’s unofficial commercial ambassador. As the head of ApexBrasil, the Brazilian Trade and Investment Promotion Agency, and also of the World Association of Investment Promotion Agencies (Waipa), Alessandro Teixeira travels the globe with a double mission: promoting exports of Brazilian goods and services, and attracting foreign investment. Wherever he goes, he takes along a tailor-made present – a book of Brazilian history, so that whoever he meets can see where Brazil is coming from, and where it’s going. “We´ve been open to foreign trade for less than 20 years so we’re new kids on the block, but already we’re performing like an old-timer,” said Teixeira, who hails from the southern state of Rio Grande do Sul and holds a doctorate in economics from Sussex University, in England. Teixeira is betting that Brazil’s multinational companies have now reached the point of maturity where the country will be investing US$70 billion abroad in 10 years’ time – triple the amount seen in 2008, which was a record for the sector. He uses Chinese data to argue that Brazil and China are now at similar levels of internationalization. “A little bit more, in the case of China,” he says. Teixeira sees China as Brazil’s next great leap forward – Apex-Brasil opened a business center in Beijing seven months ago, and Brazil’s biggest-ever foreign trade fair participation is scheduled for Expo Shanghai 2010. It’s a strategic moment for Brazil to stake out its position in the Asian market. But Teixeira isn’t looking just at emerging economies. The ApexBrasil unit in Cuba opened a month ago and already has six Brazilian companies ready to invest. It’s one of the world’s most closed economies, but the welcome mat is out for Brazil.

How do you rate the performance of Brazilian companies abroad?

The figures for Brazil are truly impressive. The country hardly invested anything abroad until 2002, and internationalization of the Brazilian economy really started at the end of 2003. That was when we took the plunge. Until then, foreign investments by Brazilian companies averaged less than US$1 billion a year. In 2008 they reached US$21 billion. For 2009, I reckon we’ll be doing well if we manage between US$8 billion and US$10 billion.

Is that the impact of the financialcrisis?

According to Waipa, the global flow of foreign direct investment (FDI) looks set to fall by around 40% this year, against a record of US$1.8 trillion in 2008. We expect to reach US$1.2 trillion this year and US$1.5 trillion in 2010.

What opportunities do you see for Brazilian companies in this new postcrisis world? Given the rapid recovery of the Brazilian economy, it has been suggested that the government could use part of the country’s foreign exchange reserves to stimulate the internationalization of Brazilian companies. How are discussions going?

We’re talking about various possibilities. There was a debate about using part of the reserves back in May of 2008 when Finance Minister Guido Mantega announced the government would use resources from the federal budget to create Brazil’s Sovereign Fund, which has the same purpose. There’s a new awareness about the importance of our companies investing abroad. Internationalization has a very positive long-term impact for an economy; it goes way beyond simply attracting investment. Of course investments are good for the country that receives them, but they’re even better for the investor. If Brazil really wants to be one of the world’s five largest economies in the coming years, it has to internationalize and strengthen Brazilian companies. Then we’ll see the emergence of a wave of entrepreneurs looking to overseas markets. Internationalization is and will continue to be an innovative policy of the Brazilian government, and it will grow stronger. Of course, I can only speak for the current government, but I imagine that future administrations will have to continue along the same path.

Brazil is enjoying a much higher profile in international forums. Is this image excessive in terms of our companies’ presence abroad?

I wouldn’t say so. The same movement happened with China, which is now being described as the world’s second largest economy. China received around US$92 billion in foreign investment in 2008 and invested US$51 billion abroad. This relationship is very similar to Brazil – roughly 50%. A little more, in the case of China. This shows that the two emerging economies are at similar stages in their processes of internationalization, relatively speaking.

But for this new international status of Brazil to be consolidated, doesn’t it require more companies that are robust and identifi ed with the country?

Well, that’s already happening. Brazil has some big companies, for example Gerdau, Vale, Embraer, Votorantim and the major construction companies. These are already associated with Brazil.

Would you include Inbev?

I would, because the directors, the managers and all the middle management are Brazilian. It is seen around the world, more and more, as a Brazilian company. American newspapers refer to it as a Brazilian Beverage Company, and the Europeans as well. We are going to need more and more companies established abroad. This brings us to the important question of Brazil’s commercial image, which is not something that can be built up just by the government. We need companies that reflect the country’s commercial sector, and that’s what we´ve got today.

What is the role of Apex-Brasil in identifying commercial opportunties abroad?

The Apex-Brasil centers are effectively incubators for internationalization. Just now for example we have around 130 mid-sized companies in our office in the United States. They’re registered there as American companies, and really they’re going through the first stage of internationalization. When Apex-Brasil set up these offices it did not have the international reach that it has today, as the world’s second best agency in terms of inward investment. We enjoy international respect. We conduct market and investment studies and promote business and distribution workshops, but each center enjoys operational flexibility. In Brussels we will undertake technical lobbying of the European Union, with respect to both investments and exports. Our goal is to generate business, be it in the form of investment or foreign trade.

Can you give some concrete examples?

Well, for example we conducted the internationalization process of Giraffa’s, a Brasília-based fast food chain that is due to open in the American market next year. I’m a big fan of Giraffa’s, I eat there every day. The meat is excellent and the beans are always hot. Americans will soon be able to go there and pay US$6 for rice, beans, meat and manioc flour... and fried banana. It’s not a top-line restaurant, of course, but it’s better than any other fast-food. We also helped Habib’s (another Brazilian fast-food chain specializing in Arab-style food) to go international; it will have 10 outlets in China. When we opened the Apex-Brasil center in China, some people said: “There’s no possibility whatsoever in China.” Well, one year later we’ve shown them to be wrong.

What does Cuba offer Brazilian companies?

It’s a great option as a foreign trade platform. We are working with six investments there including EMS, one of the biggest Brazilian pharmaceutical companies. The company worked hard to expand its production and it needed to boost its technology. Cuba is completely closed to the pharmaceutical market but it’s one of the best markets in terms of innovation and technological development in the sector. There was a huge line of companies wanting to get in – Indian and Chinese companies. But we were the first, not just to produce medicines in Cuba but also to transfer technology. And this will undoubtedly improve the position of EMS in Brazil. Fanavid is another example; it’s a mid-sized producer of glass products in Brazil that’s investing US$150 million in partnership with the Cuban government to set up a factory in the country. If Fanavid was alone, it would probably not have been able to get into the market.

Various sectors of the government are gearing up to promote internationalization. IPEA (a federal economic research institute and think-tank) recently announced it is creating an international directorate to study the process. Inmetro (the national metrology institute) is also involved, as are Embrapa (the federal agriculture research agency) and the Brazilian Development Bank (BNDES), which has just opened offi ces in London and Montevideo. It seems that the government has woken up to the importance of a multi-pronged, coordinated action?

That’s exactly it. Inmetro is helping companies to position themselves more adequately in the process of internationalization by adapting their products, standardizing production and innovation. For example – maybe a company needs to conduct a chemical test of a specific product because it can only enter a specific market if it has these documents. Well, Inmetro can do that. And IPEA provides data and economic intelligence for the process. The critical point about internationalization today, in my opinion, is less to do with information and more about financial support for the internationalization process.

That takes us back to the question of Brazil’s foreign exchange reserves. How can they be used to promote internationalization?

There are various options, and we are likely to finalize a more concise proposal in the coming months. But what matters here is that the government has woken up to the need to have a specific policy for this. I don’t like to plagiarize the president, but for the first time in the history of this country we going to have a policy of internationalization for the productive sector, and this policy will become stronger and stronger.

Where do you think Brazilian internationalization will be in 10 years time?

In 10 years we´ll triple our investments abroad. I expect Brazil to reach US$70 billion a year of outward FDI. I also expect to see companies that are easily recognized as being Brazilian. Internationalization of Brazilian companies started with the engineering sector, and the modus operandi of this market is extremely valuable. We have helped and also learned from these companies. Today Odebrecht is taking over 1,000 Brazilian products to Africa, including boots, helmets, and trousers. One of the best case studies of internationalization in the Brazilian foods sector is the supermarket chain that Odebrecth has in Luanda, in Angola.

Which sectors do you see as particularly promising for internationalization?

Brazil has the potential to become established in various sectors. One that I would bet on is communications, advertising companies. This area is certainly going to be more and more internationalized, thanks to the competence of Brazilian firms. Nizan Guanaes (of the ABC group) already has some companies in the United States. He takes Brazilian culture right into the company. He grew in Brazil, gained strength in Brazil. Now he’s looking at the market and saying to himself – “I have to go to the United States, that’s where I’ll compete.”

What is Brazil preparing for Expo Shanghai, in 2010?

It will be Brazil’s biggest-ever trade fair presentation. We want to use it to push internationalization. I’m not talking just about a stand that looks good; it will have an impact from the business point of view. China is today the world’s biggest and fastest-growing capitalist country, with the fastest job creation. I wouldn’t bet – I don’t think anybody could – on how the future will play out in China, because few people understand China adequately. In fact, Brazil doesn’t understand. If Brazilian businessmen understood China, we would already have our own strategy to work

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