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  Edition nº 29

Cover Story

Fostering investments

Through specific credit lines for export and internationalization, offered by public and private entities, such as the BNDES, which allocated US$ 11.2 billion to that end in 2010, Brazilian and Canadian companies have an alternative for growth, bilateral cooperation and attaining global scale.

Daniella Turano

Between 2003 and 2009, Brazilian total direct investments in Canada reached 13.7 billion Canadian dollars, according to the most recent data of Foreign Affairs and International Trade Canada. The total reverse flow of the same kind of investments in the Brazilian economy reached 5.7 billion Canadian dollars.  The shared interest in stronger trade relations not only reflects the good phase experienced by the two nations, but also the search for executives and companies looking for business opportunities. Often enough, decisions are encouraged – and expedited – by the offering of specific financing to who exports, grows production abroad and takes the first step outside of one’s original market. Products offered by public banks and entities may be essential for entrepreneurial projects, apart from setting signs for the future.

Such is the case of the credit line Export Development Canada (EDC) granted Vale. In October 2010, the export development agency formally granted a loan of up to US$ 1 billion to be used in projects focused on export and on the Brazilian mining company’s future transactions in Canada. “EDC funds support new investments and the growth of Canadian companies domestically and in foreign markets, both in terms of developing their strategies and purchasing at least 10% of assets or capital of other companies”, explains Jean Cardyn, the entity’s vice-president in Brazil.

“In the case of direct foreign investment, we consider its influence on corporate management, including decisions on exports and the participation of national brands in global supply chains”, adds Cardyn. A change in management opened the door for Brazilian entrepreneurs: funds became available also for interested foreign parties. Last year, loans and supporting insurance for bilateral trade totaled 2.7 billion Canadian dollars. “We expect to benefit partnerships that foster development, increase competitiveness and strengthen trade flows”, says Cardyn. In the case of Vale, he explains, the expectation is that the loan will integrate suppliers and small engineering companies into a production chain with intercontinental scale.

One factor contributes to the interest in supporting financing: the stability of the banking systems in Brazil and Canada, in combination with overcoming the international financial crisis. For Guillaume Légaré, director for South America of the National Bank of Canada (NBC), the prospect of Brazilian banks becoming international is expected to increase bilateral cooperation in this field. “The institutions will seek to increase their presence abroad and, considering the huge potential of the national market, create an even more interesting banking environment. The two countries may strengthen ties, which, in turn, will open new paths for bilateral trade”, states Légaré.

Légaré notes “growing interest in Brazil, not only in export, but also in long-term investment”. One of the reasons for this is that the country, like other emerging nations, offers a better outlook for economic stability. “There are opportunities in several fields, such as oil and gas, mining, infrastructure, health and education”, points out Légaré.

For lawyer Dan M. Kraft, of consultancy Kraft International Consultants Inc., of Montreal (Quebec), there is room for Canadian banks to enter retailing in Brazil. He says that “what is lacking is this kind of movement and a closer relation with service exporters”. Kraft also calls attention to the lack of information Brazilian entrepreneurs face about incentives for research and development projects offered by Canadian entities.  “There is a vibrant scientific environment, money is available, and the incentives are unbeatable”, he says. Credit is also available to small and medium companies. “I’ve never heard about the “Canada cost”, as you would say in Brazil. Rates may appear to be higher, but there are compensations”, assures Kraft.

The Eliane group, specialized in manufacturing and marketing porcelain products and ceramic linings, has experience with going international. “We have been active in the Canadian market for more than 20 years, where we enjoy excellent brand recognition”, states Marcio Muller, International Operations manager. Among the company’s clients, Muller emphasizes the Home Depot chain, with 180 stores in Canada. “The country’s economic stability and per capita consumption are some of the factors that made us set up a regional distribution center”, explains Muller. Although Eliane did not resort to a specific bank credit for its local projects, the executive points out that such instruments are important for international operations.

OFFICIAL SUPPORT – In Brazil, BNDES – the National Economic and Social Development Bank occupies a position similar to that of EDC. The institution supports direct investment abroad and to that end uses a specific instrument, the International Financing of Companies, intended for initiatives related with setting up new units, buying businesses, expanding or modernizing installations and buying stakes in ventures used to develop projects in other countries. The operations focus on fostering the insertion and the strengthening of Brazilian-owned companies in the international market, by supporting investments or projects to be implemented abroad, while contributing to Brazil’s development.

In January, Radar Cinema e Televisão obtained a R$ 3.5 million loan for the production of the second phase of an animation series (Escola pra cachorro), comprising 26 episodes, co-produced by Canadian Cité-Amérique. In 2009, the program had also been supported, having been as successful as the Peixonauta series and also a co-production with Canada.

“The international credit line is fairly recent. BNDES has perceived that there may be opportunities in several fields in Canada. It is a bilateral flow and we hope to grow a lot”, explains Sérgio Földes Guimarães, Internationalization superintendent. This kind of credit reflects the perception that many Brazilian brands are looking for other countries. According to Guimarães, to better make use of competitive advantages in each market, one must invest in globalization. “Usually, exporting is the first step”, Guimarães goes on to say.

The increase in available funds reflects this entrepreneurial initiative to win new consumers. From 2004 to 2010, BNDES loans to export companies increased from US$ 3.8 billion to US$ 11.2 billion. In part, this growth is related to greater exposure of Brazilian products at international trade fairs and on the occasion of trade missions. “In 2010, Brazilian entrepreneurs attended events such as Sial and Aeromart in Canada. Furthermore, Canadian executives visited Brazil to see production installations and lines, among other activities.

Each event provides immediate results and makes future business possible”, assesses Mauricio Borges, president of APEX – Brasil, the country’s Export and Investment Promotion Agency.

APEX sees the Canadian market as a priority, for example, for the project developed with CECOMPI – Competitiveness and Innovation Center of São Paulo State’s Eastern Cone that encompasses 59 companies of the aeronautical industry. Market surveys and initiatives in political and diplomatic articulations are planned for this year. “In general, we allocate half the funds needed to participate in such initiatives, while interested companies contribute the rest”, adds Borges. With this model, the number of supported industries grew from 46 to 80 in the last four years. For 2011, the target is to come closer to Canada.

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