Artigos do Prof. Marins e textos dos programas de TV

Brazil: A glass of wine, half empty, half full

(written in November, 2000)


Which country is this? What is really happening in Brazil? Why are the largest Americans and Europeans companies confirming that their main portfolio of investments for next 10 – 15 years will be in this part of the world? Are they turning to Our Lady Aparecida (the Brazil's Guardian) cultists? It is time to review our situation and come from a parochial attitude to a conscious discussion critical to the present moment of Brazil. During the World Economic Forum at Davos, all Ministers and Authorities have declared the intention of their countries to continuously invest in Brazil in future years, in amounts never thought of before. Then, what does the Brazilian market really represent?

We frequently receive confused data about Brazil. The newspapers only show us corruption, rape, crime, favelas, lost bullet, poverty and all kind of negatives and afflictions… and even so companies are still coming to Brazil, why?
Well, the Spanish and Portuguese companies are typically larger in Brazil than at their own countries, as it happens in other companies from other regions. Then, it is time to explain with reliable data – official research data – instead of information from dubious sources that only brings confusion.

A good example was given on April of last year during celebrations of 500th birthday of Brazil, when the newspapers informed the world that at the time of discovery, there were 5 million Indians living in Brazil. Well, if nobody knows yet exactly how many people were on Cabral's fleet (Pedro Alvares Cabral), how could someone assure that population of the country was 5 million of Indians? Some crazy people based on speculations about mortality promoted by the Spanish's invaders to the Mexican population, have concluded that the number of Indians living here were 5 million and this number has been turned into an absolute "truth"! In the same way they are comfortable to say that there are today 120,000 living on São Paulo's streets and there are 45 million of miserable people etc., etc. When will have had enough of such stupid figures?

In order to come from a parochial attitude to a conscious understanding of what is really happening, we need to clarify what is the world's definition of a "mature market".  It is a market where the consumption growth is equivalent to the vegetative increase of its population, i.e., if population increases, then economic demand also increases. If population does not increase then the demand remains static. Thus, the demand of beer in USA, for instance, has increased 2% on last 5 years and is expected to grow another 2% on next 5 years. In Japan, 35 City Halls require their citizens to prove parking capability before a dealer confirms a sale of a new car – a vital space problem. The demand of cookies at England did not grow on last 10 years.

In  "mature markets" – USA, England, Japan – we can also find "mature companies" like IBM, Toyota, Electrolux, and many others who need developing markets, where the growth of demand can be higher than the vegetative increase of their population.  Which are these markets? China, India and Brazil, mainly. Despite of its population, China still has 76% of the people living at rural areas, India has 72% while Brazil has only 22%. So  the country which is ready to demand occidental products (and also has an occidental culture) with some technology is Brazil and, by extension, the Mercosul. That is why the large corporations are coming to Brazil and looking for opportunities to diversify their investments. According to AC Nielsen, the Brazilian market has increased on last 5 years:

· 859% in disposable diapers
· 310% in cat food
· 282% in flavored milk
· 273% in dog food
· 219% in pasteurized milk
· 201% in instantaneous pastas
· 176% in corn flakes
· 116% in frozen meats
· 81% in mineral water
 
Presently Brazilian market represents some very interesting demand data yearly:

· 82% more washers than Canada, and now is the 4th in world.
· 343% over Canadian consumption of soft drinks, and now is the 3rd in the world.
· US$ 1.3 billion on diet / light food. It was US$ 100 million by 1990 and is expected to be US$ 6 billion by 2010.
· 63,400 mt on toothpaste, which is 456% more than Italy's consumption.
· 51,400 new titles of edited books, which is 12% more than Italy.
· US$ 1.2 billion on CD's, and is now the 5th in the world.
· 681,900 mt on cookies, which is 27% over Japan and is now the 2nd in the world.
· 66% more refrigerators than the United Kingdom, and is now the 4th in the world.
· 11 million Internet users.
· 95% of income tax declaration thru Internet, and is the 1st in the world.
· 6th carmaker in the world: Ford, GM, Chrysler, Toyota, Mitsubishi, Honda, Renault, Peugeot-Citroen; Fiat,
Volkswagen, SAAB Scania and Volvo.
· 8th economy in the world.
 
It is important to mention that, what is known as Medium Economic Class in Brazil presently represents 35 million of families (according to IBGE, the official statistical organ of Brazilian Government), which is:

· 8% more than the population of Germany.
· Bigger than the populations of Belgium, Hungary, Portugal, Sweden, Austria, Switzerland, Finland, Denmark, Norway, Ireland, New Zealand and Luxembourg all together.
· Bigger than the populations of France and Canada together.
· 33% of USA population.
· 72% of Japan population.
 
The Brazilian GDP represents 42% of all Latin American countries (including Mexico) and 13.3% of all developing countries (including China). Other references:

· All Argentinean GDP is lower that São Paulo State's GDP.
· All Chilean GDP is equivalent to Campinas region GDP (a city of São Paulo State).
· All Uruguayan GDP is equivalent to Santo Amaro's GDP (a district of São Paulo City).
 
Presently, according to Ernst & Young, Brazil is considered the 5th country in the world in Purchasing Power Parity. The ranking is: USA, China, Japan, Germany, Brazil, …

If it is true that we have today 33 million of poor people, we also have 140 million of "non-poor" people.  This means a lot in the world of mature companies. We have reason to believe that in 5 years, at most, domestic interest rates will be at international levels.

Brazilian companies have high levels of liquidity, as they do not take loans on domestic banks (otherwise they would bankrupt quickly due to the high interest rates).  The growth in 5 years can be exponential, since the population will then increase demand, which is still repressed, creating a virtuous circle of growth to the market. That is why many main international banks are buying domestic banks and / or expanding their activity. This is the right moment to believe and invest in Brazil, as its future is much bigger than its' past.

It is important that we do not only look at the sad side of this country, which will always be there, but we may look at the richer side, which has a huge potential and is attracting to the main countries in the world.

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