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April 10, 2015

Brazilian investment in the US has doubled in the last 5 years

Article translated from Dario Palhares article published in RevistaPIB.com.br

There was a time when Brazil was just a direct investment receiver.

Today the country “exports” large amounts of capital abroad, and reveals a clear and strong preference for the United States.

The process began at the end of the last decade when Brazilian conglomerates began acquiring US companies weakened by the financial crisis.

The investments gained momentum, more recently, with the simultaneous heating of the American economy and the business cooling in Brazil.

The result is that the stock of Brazilian direct investment in U.S., one of the largest consumer poles in the planet jumped from 7,270 to 14.852 billion dollars between 2009 and 2013, reaching the ninth largest rate of evolution of the period.

This level of investment has been high compared to other BRICS countries: Russia (10.6 billion dollars in 2012), India (11,040), China (8.023) and Africa South (3,647).

"Many Brazilian companies are rethinking strategies and accelerating their internationalization processes. The option for the United States is the safest, but a significant challenge because it is a very competitive market with low margins, "says Fabio Yukio Yamada, head of Tradebrz, and commercial representative in Brazil for the state governments of Pennsylvania, Florida, Missouri, Delaware, and Maryland.

The America Chamber of Commerce (AmCham), has seen a growth of interest.

Trade missions of the institution to North America gained scale in the last five years.

Today there are five each season on average, and for the first time, there are waiting lists.

The next mission, in November, will focus on entrepreneurship and innovation, with stops in New York, Boston and Miami.

"Since 2009, we have taken over 240 local executives to the United States, everything indicates that  AmCham will need to strengthen the program in 2015. Our site has recorded an increase of 317% in downloads of manuals geared for those who want to do business or invest in the United States: 838 in 2013 to 3500 from January to August," says Michelle Shayo Tchernobilsky, director of institutional relations of the House.

Another barometer of curiosity was the crowded launch of SelectUSA, capital attraction program, held at the Chamber's headquarters in São Paulo, on August 27.

"The event attracted more than 300 entrepreneurs and executives. Another 100 who were on the waiting list, could not get in, "says Michelle.

In addition to businessmen and authorities - cases of Liliana Ayalde, the US ambassador in the country, and Kenneth Hyatt, deputy undersecretary of the Department of Commerce - the presentation of SelectUSA told, of course, with the presence of sales representatives, in Brazil, US state governments, including Yamada and José Madeira, serving Georgia.

The first pole of Brazilian investments is Pennsylvania, which has 24 offices with jurisdiction over 72 countries. "When I took office in 2001, there were two Brazilian companies there, if that. In the last five years, demand took off," remarked Yamada.

Two large national groups were protagonists in the period of business that shook that state.

In 2010, Braskem landed in Philadelphia and successfully bid for $ 350 million, the propylene division of Sunoco.

In 2013, Brazilian 3G Capital investors, Jorge Paulo Lemann, Carlos Alberto and Marcel Herrmann Telles Sicupira, acquired AnheuserBusch brewery, and the fast-food franchise, Burger King. Most recently 3G Capital acquired controlling shares of Heinz condiments industry, based in Pittsburgh. The deal, in partnership with the American investor Warren Buffett, reached the figure of 23 billion dollars.

"The latest investment came from Fibria, the largest domestic producer of eucalyptus pulp, which has just opened a warehouse in the port of Philadelphia," cites Yamada. 

Maryland, another state represented by Tradebrz also records the increase of Brazilian capital in the last decade.

In 2012, the São Paulo DK Diagnostics Laboratory installed an outpost in Frederick. Last year, EMS announce the investment of $200 million in Montgomery, through the subsidiary Brace Pharmaceuticals in a research laboratory.

"The decision of Brace Pharmaceuticals to establish its headquarters in the United States, Maryland, reaffirms the position of the state as one of the most important places in the world for life sciences and innovation", celebrated at the time, Democrat Martin O ' Malley, head of the state executive.

In the south, Georgia has established itself as one of the preferred bases for Brazilian entrepreneurs in American soil.
Fifteen national groups are present there, including Coteminas, Embraco, Votorantim and WEG.  One of the early pioneers is Gerdau, a steel mill established in 2001, in the small city of Cartersville.

The greatest impact business occurred in September 2009 when the JBS group disbursed $800 million for control of Pilgrim's Pride, processor of chicken with 26 production facilities in that state. 

"In total, 47 Brazilian operations employing 6000 workers," says José Madeira, managing director and international representative in Georgia.

The benefits of Georgia include, among other factors, free training of manpower, exemption from local taxes on sales to other states, tax credits for cargo handling in the ports of Savannah and Brunswick, and tax incentives of up to $ 4,000 per job generated.

"Often, Georgia is considered one of the best options for business in the United States. Recently, the magazine Area Development put it in first place in the country, " said Madeira. 

Owner of a similar arsenal of goodies, Puerto Rico has entered the race for attracting Brazilian investments. Subject, since 1898, to the United States, the former Spanish colony, which plans to become the 51st star American flag, is eyeing corporations for so-called "life sciences" – pharmaceutical and biotechnology labs, and manufacturers of medical appliances.

"We invoice on average $ 40 billion a year just with exports of biopharmaceuticals," says Antonio Medina Comas, director of the Industrial Development Company of Puerto Rico. Between August and September, the executive was at the head of a delegation on an official visit to the country.

In addition to the launch of SelectUSA, the agenda included meetings at the Federation of São Paulo State Industries (FIESP), in the pharmaceutical sector entities and other industries. In all meetings, the Puerto Ricans put their assets on the table, waving federal tax exemption on sales to the United States, average rates of 4% in local taxes and tax credits corresponding to 50% of the amount of investment in development and clinical research.

It now remains to know which will be the first Brazilian company to settle in the island.

"Puerto Rico is the best gateway for Brazilian companies in the United States. We share the Latin culture and in our case, reduced taxes, " says Medina.




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