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Country Commercial Guides for FY 2000:
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CHAPTER V. LEADING SECTORS FOR U.S. EXPORTS AND INVESTMENT
Best Prospects for Non-Agricultural Goods and Services
The following best prospects are ranked by estimated US$ total U.S exports over the coming year. (See Appendix H, Guide to Commercial Services, for a list of trade specialists responsible for the following sectors.)
Comments: The Brazilian telecommunications sector is the largest in Latin America, with an estimated market of US$ 10 billion in 1999. Pent up demand for basic wireline and cellular service makes Brazil the most attractive market in the region as the ongoing telecommunications privatization process ends in 1999. Brazil's telecommunications sector is among the most progressive with privatization and the introduction of open market competition.
- Rank: 1
- Name of Sector: Telecommunications
- ITA Code: TEL
The Brazilian import market for U.S. With the privatization of the sector telecommunications equipment and components in 1998 surpassed US$ 2 billion. in 1999, the total Brazilian market is expected to burgeon to US$ 10 billion. The U.S. holds the lion's share of the import market with 45 percent of all imports. Japan has 20 percent, Germany 15 percent and France 10 percent.
Investment in the telecommunications sector in Brazil is expected to reach US$ 75 billion during the period of 1995 - 2003. In 1999, investments are expected to reach US$ 10 billion and US$ 11.2 billion in 2000.
From 1946 until 1995, the telecommunications sector in Brazil operated under the aegis of the Brazilian Government. During this period, the government held a monopoly in local, long-distance and international telecommunications. However, on August 15, 1995, the Brazilian Congress voted to end the state telecom monopoly in Brazil, through the approval of Constitutional Amendment No. 8, which authorized the entry of private, domestic and foreign investment into the Brazilian telecommunications sector.
The General Telecommunications Law, which ended the state monopoly and altered the government's role from supplier to regulator of services, changed the Brazilian telecommunications scenario drastically. The General Telecommunications Law also defined the basic organization of telecom services and determined the conditions for the privatization of the Telebrás system.
In addition, in October 1997 the General Telecommunications Law, through a presidential decree, established a regulatory agency, as required by the law, The National Telecommunications Agency (ANATEL). ANATEL represents an important step towards telecom liberalization in Brazil as an independent regulatory agency. ANATEL is responsible for creating and enforcing telecom service regulations, as well as resolving disputes in the administrative arena. It is also ANATEL's responsibility to decide, as a last administrative recourse, on matters under its jurisdiction (There can be no appeal against the Agency's decision to the Ministry of Communications, it must go through the Brazilian judicial system.) ANATEL's tasks are: define and change rules for telecommunications services; manage and monitor radio frequency spectrum and telecom satellite orbits; grant concessions for public service providers; grant authorizations for private service providers; monitor prices and tariffs; conduct bidding processes; verify the execution of concession contract terms; vote on disputes involving economic entities and users; and ensure competition among operators and service providers.
The ongoing telecommunications privatization process:
On January 30, 1998, each of the 27 state-level telephone companies which make up the Telebrás system were divided into two companies-- a cellular company and a wireline telephone company. Each company's general assembly voted to create a new cellular company from the existing company as the next step in the privatization of the entire Telebrás system in July 1998.
The GOB has combined the wireline telephone companies into three regional holding companies.
Tele SP: Telesp, CTBC Tele North-Northeast-East: Teleceará, Telemig, Telergipe, Telasa,
Telma, Telpa, Teleaima, Telpe, Teleamapá,
Teleamazon, Telest, Telern, Telerj;,
Telepará, Telepisa, Telerj, Telebahia Tele Center-South: Telesc, Telebrasília, Telems, CMTR, Telegoiás,
Telemat, Teleacre, Teleron; TeleparThe New Brazilian Telecommunications System
The GOB created twelve companies out of TELEBRAS and sold nineteen percent of the shares it held in these companies to private investors. These shares represented the controlling interest in the companies sold. Below is a list of what was sold and who bought the companies:
EMBRATEL (long-distance call carrier) - purchased by MCI for US$ 2.3 billion; Bell South, Sprint (which wanted EMBRATEL and drove the bidding to a voice bid), Air Touch, and Southwestern Bell participated unsuccessfully in the bidding. MCI VP Jerry de Martino attested that the company intends to invest US$ 1 billion annually in EMBRATEL and to reduce rates by 4-5 percent annually until 2005. Investments would be mostly in fiber optics, satellite services, and public telephones. In 1996, EMBRATEL's net profits reached US$ 405 million, a record in its 32 years of operation, and net revenues totaled US$ 1.7 billion. De Martino also stated that this is the largest MCI investment outside the United States.
TELESP (Sao Paulo fixed line company) - purchased by Telefonica de Espana, Iberdrola, Bilbao Vizcaya Bank, RBS (one of the largest media-telecommunications company in Brazil) and Portugal Telecom for US$ 5 billion;
TELE CENTRO SUL (fixed line - fixed line companies of the following states: Parana, Santa Catarina, Mato Grosso do Sul, Mato Grosso, Goias, Distrito Federal, Tocantins, Rondonia and Acre) - purchased by Telecom Italia and the Brazilian investment bank Opportunity for US$ 1.8 billion;
TELE NORTE LESTE (includes fixed line Telecommunication Company of the state of Rio de Janeiro, (TELERJ), plus the state companies of Minas Gerais, Espirito Santo, Bahia, Amazonas, Para, Roraima and Amapa). Tele Norte Leste was purchased by Andrade Gutierrez (one of the largest civil construction companies in Brazil), La Fonte Alianca do Brasil, Inepar (an important business group from southern Brazil, Brazilian partners of Motorola's Iridium project), Brasil Veiculos and Macal. The purchase price was US$ 3 billion. This is an all Brazilian consortium;
TELESP CELULAR (State of Sao Paulo Cellular Company) - purchased by Portugal Telecom for US$ 3.1 billion;
TELE SUDESTE CELULAR (including cellular companies of Rio de Janeiro and Espirito Santo) - purchased by Telefonica de Espana, Iberdrola, NTT Mobile and Itochu Corp. for US$ 1.2 billion;
TELEMIG CELULAR (Minas Gerais' cellular company) - purchased by the Canadian Telesystem International, Brazilian investment bank Opportunity and pension funds for US$ 655 million;
TELE CELULAR SUL (cellular companies of Rio Grande do Sul, Parana and Santa Catarina) - purchased by Globo Organizations (the most powerful media group in Brazil, owners of O Globo newspaper and TV Globo), Bradesco (the largest Brazilian commercial bank) and Telecom Italia for US$ 606 million;
TELE NORTE CELULAR (includes cellular companies of Amazonas, Para, Roraima, Amapa, and Maranhao) - purchased by the Canadian Telesystem International, the Brazilian investments bank Opportunity and pension funds for US$ 163 million;
TELE CENTRO OESTE CELULAR (cellular companies of Mato Grosso do Sul, Mato Grosso, Distrito Federal, Goias, Tocantins, Rondonia and Acre) - purchased by Splice do Brasil (one of the largest telecommunications equipment manufacturers in Brazil) for US$ 384 million;
TELE LESTE CELULAR (Bahia and Sergipe cellular companies) - purchased by Telefonica de Espana and Iberdrola for US$ 370 million;
TELE NORDESTE CELULAR (cellular companies of six northeast states) - purchased by Globo Organizations, Bradesco and Telecom Italia for US$ 577 million.
(The purchase prices were converted from Brazilian Reais at an exchange rate of US$ 1 to R$ 1.15).
Groups from Spain and Portugal bought 4 of the 12 companies for a total of US$ 9.4 billion. Telefonica de Espana, Iberdrola, Bilbao Vizcaya Bank, and Portugal Telecom are the main players. The Spanish group bought the biggest company for sale, the Telecommunications Company of the State of Sao Paulo (TELESP), while Portugal Telecom purchased TELESP Cellular. The Iberians thus dominate the prized Sao Paulo market, although they face competition on the cellular side from Bell South, which last year purchased the right to offer cellular services in Band B. The Iberdrola Group is already present in other infrastructure sectors of the Brazilian economy. It has participation in the newly privatized gas and electricity companies (the Gas Company of Rio de Janeiro, CEG, and the Energy Company of Bahia, COELBA).
GOB officials expect to earn about US$6 billion from the sale of concessions for the so-called fixed-line "mirror" companies. These companies will be set up to compete against each of the 3 privatized, fixed-line companies and EMBRATEL, the long-distance provider.
On January 21, 1999 Sprint International signed a US$55 million contract (with the Bonari Consortium) to buy the long distance carrier mirror company. Also, on May 5, 1999 the consortium Megatel and Conbras (SLI Wireless, Qualcomm, Bell Canada, and WLL) signed a US$ 42.5 million for the concession of Telesp the State of São Paulo's telecommunications company, Brazil's largest single telephone company outside of EMBRATEL. The tender for the remaining two regions should be submitting their proposals by the end of June 1999.
1997 1998* 1999* (US$ millions) D. Total Market 8,713 10,370 11,090 E. Local Production Equip 3,400 3,530 3,600 F. Local Production Serv 3,500 3,665 3,710 G. Total Exports 197 275 340 H. Total Imports 2,010 3,450 4,120 I. Total Import from U.S. 823 1,100 1,500Exchange Rate: US$ 1.00 = R$ 1.14 (June 1998)
* The above statistics are unofficial estimates.
Source: ABINEE, Associacao Brasileira da Industria Eletrica e EletronicaRank: 2 Name of Sector: Oil and Gas Field Machinery and Services ITA Code: OGMComments: The oil industry in Brazil is rapidly changing because of a new petroleum law, and because of the Brazilian Petroleum Regulatory Agency (ANP)'s role in expanding the presence of major international oil companies. Until recently a very restricted business, the petroleum sector in continental-size Brazil has rapidly evolved into a much more competitive environment. ANP is exercising its role to guarantee a level playing field, and continues to de-regulate up- and downstream petroleum sector activities. Recent focus has been on downstream fraud prevention on the part of the numerous new distributors, which have made considerable headway in diverting market share from the larger, more global firms. The Brazilian market for oil and gas machinery and equipment is estimated at US$ 5,037 million in 1998, of which over US$ 1.400 million (28%) is represented by imports. With the removal of barriers to trade and investment in this sector, the market is expected to grow at an average yearly rate of 15% and imports by 20% over the next five years. PETROBRÁS, the large Government-owned oil company is expected to remain the principal player in the Brazilian petroleum scene for years to come, notwithstanding the presence of noted U.S. and foreign oil sector enterprises. Newly elected PETROBRÁS board members have disclosed that the parastatal will hereafter become increasingly focused on its core business: offshore oil production. Consequently, in the medium term PETROBRÁS can be expected to sell off part of its assets deemed non-essential to its operations, such as oil refineries and petrochemical complexes. Moreover, it is also known to be reviewing its role in the production of natural gas. As can be seen from the above, with market liberalization taking place, the Brazilian petroleum sector is offering very significant sales and investment opportunities for U.S. businesses. In addition to the possibility of independent investment in up- and downstream petroleum projects, over 35 large U.S. companies are to sign billion-dollar joint venture agreements with PETROBRAS, predominantly in offshore Exploration and Production (E&P) ventures. These agreements, however, are currently stalled due to a restrictive fiscal environment, which is currently under negotiation among the Brazilian Petroleum Regulatory Agency (ANP), the industry and the Brazilian Government Finance Ministry (Receita Federal).
Subsector best prospects: (US$ millions) Offshore petroleum exploration services: 1,200 Offshore production equipment: 700 Onshore exploration services: 3001998 *1999 *2000 (US$ millions) Total market 5,037 5,792 6,660 Local production 3,467 3,924 4,437 Exports 130 140 150 Imports 1,440 1,728 2,073 Imports from the U.S. 850 1,250 1,492 * Statistical data are unofficial estimates Source: PETROBRAS/Brazilian trade and industry analysts A. Rank: 3 B. Name of Sector: Sporting Goods and Recreational Equipment C. ITA Code: SPTComments: The Brazilian market for sporting goods reached an estimated US$4.1 billion in 1998, up 10 % from the US$3.5 billion market size in 1997. Market growth should continue through 1999 due to economic stability, increased health consciousness, increased per capita income.U.S. sporting goods products enjoy a strong level of acceptance because Brazilians tend to emulate the American lifestyle. U.S. products usually offer higher quality than local competitors. Imports constitute almost 70% of this market. Strong competition exists in many segments from lower cost Asian (Korean and Taiwanese) imports. Fishing equipment, for example, face strong competition from illegal imports from Paraguay.
The major end-users of sporting goods equipment in Brazil are individuals who exercise at home, at sports clubs and at an increasing number of exercise centers. There are around 10,000 exercise centers in Brazil, including 1,500 in Sao Paulo City. A strong retail sales network exists to support individual demand through large sporting goods chains located at shopping centers, neighborhood sports shops, and sales through the recreational section of large supermarket chains.
Import duties range from 23-25% for products such as fitness equipment, jet skis, and boats. Hunting and fishing equipment require government licenses prior to import into Brazil. Best prospects for U.S. exports of sports equipment to Brazil include bicycles, especially mountain bikes and accessories; fitness equipment; pleasure boats; fishing equipment; and surf gear.
(US$ millions) 1997 1998 1999 D. Total Market Size 3,500 4,100 4,500 E. Total Local Production 1,052 1,222 1,302 F. Total Exports 2 2 2 G. Total Imports 2,450 2,880 3,200 H. Total Imports from U.S. 850 1,000 1,100Statistics are unofficial estimates.
Exchange Rate: US$ 1.00 = R$ 1.65 (May 1999)
Sources: Trade associations, publications and trade contacts.Rank: 4 Name of Sector: Medical Equipment and Devices Code: MEDThe Brazilian market for medical devices and equipment in 1998 of US$ 3.4 billion grew 9.4%, over 1997. Annual 10% growth rate should continue through 2001, according to market sources. Total medical equipment sales in Brazil are approximately 60 % to the public sector and 40% to the private health sector. The United States holds almost one-half of the Brazilian import market for medical equipment with US$ 559 million shipped in 1998, followed by Germany with 25% and Japan with 15% of the market.
Brazil's economic slowdown in 1999 affected government investment plans for public hospitals. To combat the increased cost of imported equipment and supplies the government lowered import duties on 42 products in March 1999. The continued expansion of the private healthcare sector provides the strongest performance and greatest potential for U.S. exporters, particularly for more advanced medical equipment, disposables, diagnostic devices, implants and components. Approximately 41 million Brazilians are covered by private healthcare (26% of the population), a system with US$ 9.4 billion in funding and employing approximately 700,000 people (277, 000 doctors). The remaining 74% of the population still depend on the public system. The new law regulating the private health plans sector, signed by President Cardoso in June 1998, is giving even further impetus to the private health sector in Brazil, stimulating the construction of new hospitals and clinics in larger communities around the country. Due to Brazil's economic recovery, a large number of Brazilians still dependent on the public system should be opting for the private system in the future, according to market analysts.
The $20 billion budget recently announced by the Brazilian Ministry of Health for the 1999-2000 period (through SUS/INAMPS - National Institute for Medical Assistance and Social Security) has changed little from that of 1997-1998, and still considered insufficient by hospital administrators and market analysts. Government expenses per person with under government support rose from US$ 100 in 1996 to approximately US$ 247 in 1998, and in this same period, the Brazilian population increased by 17%. The Brazilian Ministry of Health has announced plans to concentrate investments in basic medicare (through clinics), particularly for the poorer population, and remodel the existing 2,138 public hospitals. The government plans to invest US$ 900 million on its hospital infrastructure in the next two years, using mostly World Bank and Inter-American Development loans for the REFORSUS - SUS Reformulation Project. Another US$ 150 million from the Brazilian government will be used for emergency repairs, mainly in maternity units.
The import duties for medical equipment and devices vary from 0 - 20%, with a large number of products listed in the 16% import tax bracket, in addition to other taxes. Medical equipment of MERCOSUL origin is traded duty free among the members of the South Cone Common Market (Brazil, Argentina, Paraguay and Uruguay).
A FDA-like agency now being created by the Brazilian government, (ANVS - National Health Vigilance Agency) promises to ease the traditionally arduous compulsory product registration process. All medical products must be registered prior to import into Brazil, and a Brazilian based company (a subsidiary or a local agent/distributor) must administer this registration on behalf of the U.S. exporter. This has traditionally been a lengthy and detailed process, and companies should seek the assistance of a local attorney before formalizing any negotiation with their potential agent/distributor in Brazil, particularly concerning contractual details.
Best prospects for US exports to Brazil include: Anesthetics, Cardiac catheters, Automated blood cell counters and analyzers, Auto-scanners, Diagnostic System, Automatic positioning beds (electric), Blood equipment, Cardiac pacemakers, Dental restoration materials, Electrosurgical and electro-therapy apparatus, Endoscopic devices, Enzyme immunoassay systems, HPLC Imaging equipment, Laser treatment for dentistry, Magnetic resonance tomographers, X-ray equipment and parts, Ophthalmic instruments, Surgical instruments, Ultrasonic scanning devices, Visible and UV Light, Spectofluorometers, Orthopedics products.
(US$ Millions) 1998 1999 2000 A. Market Size 3,400 3,731 4,087 B. Local Production 2,250 2,430 2,595 C. Exports 150 167 172 D. Imports 1,300 1,468 1,664 E. Imports from the US 559 616 682 * Statistical data are unofficial estimates Source: Brazilian trade and industry analysts Exchange Rate: US$ 1.00 = R$ 1.65 (May 1999) A. Rank: 5 B. Name of Sector: Automotive Parts and Service Equipment C. ITA Code: APSComments: Brazil's autoparts total sales market in 1998 was US$ 14.5 billion, a drop of 17% compared to the previous year. Imports decreased from US$ 4.4 billion in 1997 to US$ 4.1 billion in 1998 because of reduced production of automobiles from 2,069,703 units in 1997 to 1,573,128 units in 1998. According to the Brazilian Association of Automobile Manufacturers (ANFAVEA), production of automobiles in the first quarter of 1999 reached 404,800 units, a drop of 27% compared to the same period last year in view of the high prevailing interest rates. Depressed automobile production in 1998 and 1999 was a result of the global financial crisis which began in October 1997, and led the Brazilian Government to impose a series of economic measures such as increased internal taxes, import taxes and interest rates which reduced the domestic demand during the first half of 1998. The international financial crisis of the second half of 1998 and the fear of unemployment led Brazilian consumers to postpone purchases. The performance of Brazilian automotive industry in 1999 will depend greatly on negotiations between the Brazilian Government and the OEMs to reduce taxes and a fleet renewal program which could stimulate a recovery of sales.Imports of autoparts were US$ 4.2 billion in 1998, a 5% drop compared to 1997. According to the the Brazilian Association of Autoparts Manufacturers, imports of autoparts should drop to US$ 3.5 billion in 1999 because of the devaluation of the Brazilian currency in January 1999 which resulted in higher prices for imported products. In order to reduce costs, the automobile manufacturers in Brazil confirmed their intention to replace imported autoparts with locally manufactured products. Major international exporters of autoparts to Brazil are Germany with 18.0% of the import market, Argentina with 16.2%, Italy 15.5% and the United States with 14.1%.
Despite this two year decline, the automotive sector in Brazil is expanding substantially. By the end of the year 2000 a large number of automobile manufacturers will have built new plants in Brazil to produce for the domestic and export market. Current producers include Fiat, Ford, GM, Volkswagen, Honda and Chrysler. By the end of 1999, Audi, Renault, Toyota and Mercedes Benz will have started production. The expansion of the automobile industry is attracting a large number of international autoparts producers to establish manufacturing facilities near the new automobile plants.
Leading best prospects for U.S. exporters include:
Subassemblies and accessories for tractors and automotive vehicles; Spark ignition and internal combustion engines; Gearboxes for automotive vehicles; Other subassemblies and parts for explosion engines; Cylinder blocks, valve heads and crankcases for explosion engines; Other brakes and its subassemblies for tractors and automotive vehicles; Soft vulcanized rubber joints and gaskets; Subassemblies and accessories for vehicle bodies; Vehicle ignition keys; Subassemblies and engine parts.
(US$ millions) 1997 1998 1999* D. Market Size 16,500 14,467 9,500 E. Local Production 16,100 14,500 10,500 F. Exports 4,000 4,186 4,500 G. Imports 4,400 4,153 3,500 H. Imports from the U.S. 594 581 490 * Statistics are unofficial estimates. Exchange Rate: US$ 1.00 = R$ 1.65 (May 1999) Source: Sindipecas, National Association of Auto parts Industries, ANFAVEA A. Rank: 6 B. Name of Sector: Drugs/Pharmaceuticals C. ITA CODE: DRGIn 1998, Brazil's pharmaceutical market reached sales of US$ 10.3 billion, as compared to US$ 12.73 in 1997. Industry sources estimate that 1999 sector sales will meet 1998's level, which is very positive since Brazil's GDP for 1999 is expected to be lower than 1998.
Despite the estimated 15 million new consumers that entered the market, consumption of medicament units declined from 1,765 units in 1996 to 1,641 in 1998. This reduction is due to the price increases for medicine in general. Today, the Brazilian consumer demands good quality products at competitive prices. Total sales in 1998 were 5.3% lower than 1997 and 9.5% lower than 1996.
Although total sales are down, imports are up since foreign products are taking an ever large share of the market. According to the Brazilian Association of Pharmaceuticals Industry (ABIFARMA), total Brazilian imports of pharmaceutical products in 1998 was US$ 1.25 billion an increase of 15% as compared to 1997. Of that total, nearly US$ 171 million in products was imported from the U.S, Brazil's largest international supplier.
Brazil is the largest market in Latin America and represents 67% of the MERCOSUL market, as shown in the following table:Argentina 30% Brazil 67% Paraguay 1% Uruguay 3%Source: World Review
The value of the Brazilian market is almost two times that of Argentina, which is the second in the Latin American market. Of particular notes, Latin America constitutes the fastest growing pharmaceutical market in the world. Of the four MERCOSUL countries, Brazil is arguably the preferred country for investment in the sector. In 1998, Brazil was the 6th biggest market for pharmaceutical products in the world, representing 3% of the total sales worldwide.
The Brazilian market is composed, basically, of generics and brand products. In 1996 (latest statistics), original and licensed brands had a market share of about 58% whereas generics and "other" brands shared about 42%. The generic market is expected to increase substantially in 1999, as a result of the new Generic Law, approved by the Brazilian Senate in early 1999. The Over-the-Counter - OTC market is also growing in Brazil, since medicines can not be sold in supermarkets.
In Brazil, health insurance companies do not reimburse patients for medicines purchased outside hospitals. Like most countries in Latin America, over 80% of drug expenses are paid by private means. The average per capita consumption of pharmaceuticals in Brazil is US$ 61 according to current data from the Pan American Health Organization (PAHO). However, this kind of data does not track the purchasing trends of the population nor does it describe how the consumer purchases pharmaceutical products.
Certainly, one of the most problematic areas of the pharmaceutical sector in Brazil is the lack of access most members of the population have to essential drugs. Estimates vary among sources, and from 40% to 50% of the population have limited or no access to needed pharmaceutical drugs.
According to Brazilian legislation, the production, manufacturing, imports, exports and sales of any medical products, pharmaceuticals and cosmetics can only be handled by authorized companies, that are registered with the National Agency for Sanitary Health - ANVS, an agency of the Brazilian Ministry of Health. This is the Brazilian counterpart of the U.S. Food and Drug Administration (for more information on registration procedures, please, refer to Section D - Market Access).
The Brazilian market is composed, basically of:Laboratories 400 Drugstores 45,000 Hospitals 5,000 Agents/Distributors 1,000 Doctors 150,000 Products 5,200 Direct Employees 47,100 Indirect Employees 250,000 Statistical Data (US$ millions) 1997 1998 1999* D. Total Market Size 12.7 10.3 11.0 E. Local Production 11.6 9.5 10.0 F. Imports 1.2 1.0 1.3 G. Exports 100 200 300 H. Imports from the U.S. 200 200 200*The above statistics are unofficial estimates.
Sources: SECEX - Brazilian Government Statistics and ABIFARMA- Brazilian Association of Pharmaceutical Industries
Average Exchange Rate in 1998: R$ 1.00 = US$ 1.15A. Rank: 7 B. Name of Sector: Pollution Control Equipment and Services C. ITA Code: POLEnvironmental experts estimate that sales in Brazil's environmental technologies market reached an estimated US$ 2 billion in 1998, a 10% increase over 1997, including equipment, engineering and consulting services and instrumentation associated with pollution control and cleanup projects. The most important environmental subsectors (in descending order) are: water and wastewater treatment (approximately 60% of the total market), solid waste treatment (domestic, industrial and hazardous) and air pollution control. Basic sanitation demand is estimated around US$ 35 billion.Best prospects for U.S. environmental products and services include: Environmental engineering and consulting services; Management and operation of water and wastewater treatment stations; Equipment and technology for water/wastewater treatment stations,general pollution projects/installations, etc.; Solid waste management technologies: domestic garbage, sludge, co-processing, incineration, recycling, etc.; Clean technologies; Soil recovery technologies; Automation and monitoring systems for water and wastewater treatment plants.
Brazil's environmental market consists of public water companies and manufacturers, particularly large and export-oriented companies, implementing ISO 14000 environmental quality norms. Smaller and medium-sized companies are also beginning to consider environmental solutions in anticipation of new regulations. The Brazilian government passed an Environmental Law in February 1998, increasing responsibilities and penalties for environmental crimes. By 2000 a new law regarding water collection taxes and limits to contaminants in wastewater will be passed and water prices will increase significantly. As a result, demand for water reuse and technologies for water and wastewater treatment will increase over the next two years.
Brazilian firms supply 85% of the environmental equipment and services, with United States contributing 30% of the foreign participation in Brazil, followed by Germany, France, Canada and Japan.
The Brazilian market for solid waste equipment and services is just beginning to be established with participation by several Brazilian and foreign companies. Engineering and consulting companies, distributors of foreign equipment and local established equipment manufacturers supply this US$ 500 million market. Brazilian solid waste is mainly comprised of organic material (65%), plastic (3%), paper, corrugated cardboard and newspaper (25%, metal (4%) and glass (3%).
(US$ millions) 1997 1998* 1999* D. Market Size 1,663 1,250 1,400 E. Local Production 1,530 1,050 1,150 F. Exports 137 140 160 G. Imports 270 350 400 H. Imports from the U.S. 81 100 130* Statistics are unofficial estimates.
Exchange Rate: US$ 1.00 = R$ 1.7 (April 1998)
Sources: Revista da Industria - FIESP, Federation of Industries of the State of São Paulo, Revista Quimica e Derivados, Journal Gazeta Mercantil, Revista Saneamento Ambiental, Brazilian environmental consulting firms and DESAM, Environmental Department of the Brazilian association of Machinery Industry.A. Rank: 8 B. Name of Sector: Security and Safety Equipment C. ITA Code: SECComments: The Brazilian market for security and safety equipment is approximately US$ 700 million, consisting of a US$ 500 million market for safety products and a US$ 200 million market for security equipment.
The large market for safety products is due to the high level of workplace accidents, estimated at 430,000 cases per year. However, this market is almost entirely supplied by local manufacturers.
U.S. firms will find better opportunities in the security sector, where foreign products supply about 80% of the market. Crime rates have been increasing dramatically in large cities. According to a recent statistics released by the Secretary of Public Security of the State of Sao Paulo, the number of robberies registered in the State of Sao Paulo during the first quarter of 1999 was 52,360, 20% higher compared to the same period in 1998. Security awareness is higher in large cities, and about 2.5 million homes are equipped with some kind of security device to prevent robberies. Local trade contacts estimate that the market for security products will grow at an average rate of 25% per year over the next four years.
Best prospects for U.S. exporters are access control systems, burglar alarms, closed-circuit TV systems, and residential security devices.
Market statistics for security equipment. (US$ millions) 1997 1998 1999 D. Total Market Size 150 200 250 E. Total Local Production 37 40 50 F. Total Exports 7 10 11 G. Total Imports 120 170 211 H Imports from U.S. 60 85 105The above statistics are unofficial estimates.
Exchange Rate: US$ 1.00 = R$ 1.65 (May 1999)
Sources: Secretaria de Comercio Exterior (SECEX), ANIMASEG - National Association of Manifacturers of Safety Products, ABRASEG, Brazilian Association of Agents, Retailers and Distributors of Security Equipment; ABESE - Brazilian Association of Electronic Security Dealers.Market statistics for safety equipment. (US$ millions) 1997 1998 1999 D. Total Market Size 450 500 525 E. Total Local Production 430 475 500 F. Total Exports 10 10 11 G. Total Imports 30 35 36 H. Imports from the U.S. 15 17 18The above statistics are unofficial estimates.
Exchange Rate: US$ 1.00 = R$ 1.65 (May 1999)
Sources: Secretaria de Comercio Exterior (SECEX), trade associations, publications and industry contacts.A. Rank: 9 B. Name of Sector: Building Products C. ITA Code: BLDComments: In 1998, building products sales in Brazil were approximately US$ 22 billion, an increase of 8.5% over 1997. Despite recent economic turbulence in Brazil that resulted in currency devaluation and a significant slowdown of industrial activities in several sectors, the building products sector was one of the least affected. Preliminary data for the first quarter of 1999 collected by the Brazilian Association of Construction Materials Retailers (ANAMACO), indicated that sales levels during the period were similar to the same period in 1998.
Local trade contacts expect that the market will increase about 8% in 1999. The "Do-It-Yourself" market, although still small, is a new segment in Brazil that has been experiencing fast growth. This could be observed in this segment's trade show, "Bricollage", that received 80,000 visitors in 1998, six times more than in 1997.
The Brazilian market for building products is largely supplied by local firms that have a solid presence throughout the country. Imports of building products started a few years ago and represent only 1.3% of the market. However, the import share of the market is expanding at a faster pace than the total market growth, as consumers become more demanding and appreciate the higher quality of products available internationally. Imports from the United States in 1998 were approximately US$ 80 million, equivalent to 27% of the import market.
The construction method in Brazil relies heavily on inexpensive and abundant manual labor, with predominant use of brick and concrete. Pre-manufactured products remain scarce and approximately 30% of the materials are wasted at the construction job sites. One of the major difficulties faced by U.S. manufacturers of building products is the lack of standard measurements in Brazil. However, an interest in standardization and more efficient ways of construction is expanding quickly among contractors and building products manufacturers. It should not be long until the market becomes more advantageous to suppliers of pre-manufactured products.
Best prospects for U.S. exporters include electrical outlets, bathroom fixtures, flooring and floor coverings, insulation and waterproofing products, and builder tools and instruments. The market for building products designed to match traditional wood-framed U.S. houses is almost non-existent in Brazil. U.S. manufacturers of such products need to make considerable investments and to introduce their product in the market to gain consumers' acceptance.
(In US$ million) 1997 1998 1999 D. Total Market Size 24,382 22,000 23,760 E. Total Local Production 24,840 22,500 24,290 F. Total Exports 660 800 860 G. Total Imports 202 300 330 H. Imports from the U.S. 68 80 90The above statistics are unofficial estimates.
Exchange Rate: US$ 1.00 = R$ 1.65 (May 1998)
Sources: Secretaria de Comercio Exterior (SECEX), Brazilian Association of Building Products Retailers (ANAMACO), Association of the Construction Industry (SINDUSCON), and other industry source.A. Rank: 10 B. Name of Sector: Mining Equipment C. ITA Code: MINComments: The Brazilian market for mining equipment is one of the largest in the world. Brazil is a major producer of several minerals, especially iron ore, gold, bauxite, kaolin, manganese and niobium. The mineral potential of the country has not been fully assessed and ongoing geological surveys may still find significant deposits. There are also many well-known deposits that are not being currently exploited, but that could be developed in the future if world market prices increase.
Most of the mining activities in Brazil are open pit. The local market for underground mining equipment is relatively small when compared to the market for open pit mining. In the long term (three to seven years), however, there will be a trend to increase the number of underground mines. The largest installed mining operations are for iron ore. The total output of processed ore in 1998 was 190 million metric tons.
CVRD, Companhia Vale do Rio Doce, the largest Brazilian mining company, is responsible for nearly 23 percent of the mineral output of this country, in terms of value. CVRD was privatized in May 1997, and there are no longer any significant state-owned mining operations in Brazil.
The largest mining investment planned for the coming years in Brazil is the Salobo project, a joint venture between CVRD and the Anglo-American group. The project calls for an investment of more than US$1 billion to produce copper and gold in the north of Brazil. Extensive geological and metallurgical research has been done, but the project has been on hold for three years. Market sources have recently informed that the project may not be feasible in the medium term, based on current metal prices.
The decrease of the total market size in 1999 is not because of a market recession. It reflects a decrease in dollar earnings due to the recent currency devaluation of nearly 40% in early 1999. For the same reason, imports are also expected to slow down during 1999. Brazil has a very diversified local mining equipment industry, with a high export volume. This export business is expected to increase significantly during 1999.
Comments: The Brazilian Association of Machine Manufacturers (ABIMAQ), estimated that the Brazilian market for machine tools in 1998 was US $ 896 million of which 37% was supplied by local production and 63% by imports. Despite the current economic recession in Brazil, ABIMAQ has optimistic expectations for the consumption of machine tools in 1999. According to ABIMAQ's statistics, the total market for machine tools in 1999 will grow by 6% in 1999 over 1998 to reach US$ 949.1 million. Local production should increase by 8% and reach US$ 518 million and imports should grow by 4% in 1999 and reach US$ 588.8 million. The Brazilian market for machine tools is expected to expand at a 15% annual rate from 2000 to 2001, due to increased investments in the following industries: automotive (US$ 18.3 billion from 1996 to the year 2000), auto parts (annual investments of over US$ 1.5 billion per year largely oriented toward new machinery and upgrade to meet OEM requirements), household appliances (US$ 2 billion from 1998 to the year 2002), as well as replacement of those obsolete machines currently in operation in Brazil. A 1998 study of 5,000 industrial companies published by a technical Brazilian magazine, Maquinas e Metais, estimated that there are currently 184,000 machine tools operating in Brazil of which only 16,000 or 8.7% are CNC machines. The study also shows that 57% of the machine tools in operation are more than 10 years old. After the Brazilian market began to open more to imported products in 1990, a number of local producers of machines initiated representation and distribution of international manufacturers whose products complement their production lines. In order to avoid competing with the large volume of local universal representatives of imported machinery in Brazil, representatives tend to search for niche products that also generate higher profit margins. Local representatives of machine tools advertise in technical magazines and participate in major trade shows. Many international machine tool manufacturers open sales offices and "technology centers" comprising of a show room, machine parts warehouse, technical assistance and training. Major third country suppliers include Germany with 25% of the import market, Italy with 18%, and the US with 15%. The best U.S. export prospects are those not currently manufactured in Brazil and which currently enjoy a 5% import tariff. These include special CNC electro-erosion cutting machines, multi axis CNC machines with automatic tool exchangers, tree axis with more than 3 speed machines, CNC grinding gear machines, machines for texturing cylindrical surfaces, circular automatic machines for cold multi-cutting metal tubes, CNC sawing machine for tube cutting, speed above 50 meters per minute, CNC machines for cutting and transporting steel tubes, with quality control systems and tube marking, several types of automatic presses, CNC machines for folding and stamping metal wires and metal stripes, machines for tube manufacturing, CNC machines for punching, marking and cutting of metal sheets, automatic machines for sharpening and drilling round metal tubes, machines for expanding tubes and for making internal and external threads through rolling; and CNC machines for straightening, folding and cutting metal wires.(US$ millions) 1997 1998* 1999* D. Total Market Size 3,100 3,210 2,810 E. Total Local Production 3,240 3,320 2,950 F. Total Exports 305 300 330 G. Total Imports 165 190 190 H. Imports from the U.S. 85 90 90* Statistics are unofficial estimates
Exchange Rate: US$1.00 = R$1.65 (May 1999)
Sources: Industry and trade analysts and specializes magazinesA. Rank: 11 B. Sector: Metalworking Machinery C. ITA Code: MTL(US$ millions) 1997 1998 1999* D. Total Market Size 937 895.6 949.1 E. Total Local Production 545 479.6 518.0 F. Total Exports 147 150.1 157.6 G. Total Imports 539 566.1 588.8 H. Total Imports from the U.S.* 80 84.9 88.3* Statistics are unofficial estimates.
Exchange Rate: US$ 1.00 = R$ 1.65 (May 1999)
Source: Brazilian Association of Machine Manufacturers (ABIMAQ/SINDIMAQ)A. Rank: 12 B. Name of Sector: Construction Machinery C. ITA Code: CONComments: The Brazilian market for construction machinery in 1998 was approximately US$ 1.3 billion, an increase of 10% over 1997. According to local equipment manufacturers, sales of construction machinery decreased in the first quarter of 1999 due to the economic turbulence in Brazil. However, they expect that the market will level off at 1998 volumes by the end of 1999. Long-term forecasts are conservatively optimistic in view of investments in the recently privatized sectors such as transportation, telecommunications and energy. These new concessionaires have contractual commitments with the government to maintain, upgrade and expand the existing infrastructure.
The Brazilian market is predominantly supplied by the locally established subsidiaries of multinational firms such as Caterpillar, FiatAllis, Volvo, Case and Komatsu. Imports of construction machinery initiated in 1993 with the opening of the Brazilian market, and are growing rapidly. In 1998, machinery imports reached approximately US$ 135 million, an increase of 12.5% over 1997. U.S. imports represent approximately 50% of the import market.
Best prospects for U.S. exporters include air compressors, aerial platforms, asphalt plants, light towers, concrete equipment, as well as parts and accessories.
(US$ millions) 1997 1998 1999 D. Total Market Size 1,200 1,320 1,320 E. Total Local Production 1,700 1,950 1,950 F. Total Exports 620 765 765 G. Total Imports 120 135 135 H. Total Imports from U.S. 60 75 75The above statistics are unofficial estimates.
Exchange Rate: US$ 1.00 = R$ 1.65 (May 1999)
Sources: SOBRATEMA - Brazilian Society for Maintenance Technology; ABICMAQ/SINDIMAQ - Brazilian Association of Basic Industries.A. Rank: 13 B. Sector: Electrical Power Systems C. Code: ELPComments: The total Brazilian market for electrical power equipment (ELP), including generation, transmission, and distribution segments, is estimated to have reached US$ 3.11 billion in 1998 -- up 22% from the previous year. For 1999 and 2000, the market should equal that of 1998 in terms of local Brazilian currency levels. However, translated into dollars, the Brazilian market for ELP should drop to US$ 2.1 billion in 1999 as a result of the thirty percent devaluation of the Brazilian Real against the U.S. dollar. The Real devaluation will also affect import results in 1999, as anticipated by ABINEE, the Brazilian Association of the Electrical and Electronic Industries. ABINEE estimates that imports of ELP equipment should decrease by 10% or 15% in 1999 approximating US$ 315 million. However, trade contacts foresee import volumes slightly recuperating due to the importation of thermal power generation equipment.
Locally established manufacturers, including multinationals, such as Asea Brown Boveri, Siemens, Schneider, Coemsa-Ansaldo, Alstom, Voith and Toshiba as well as U.S. companies, Eaton/Cutler Hammer, G.E., Coopers, and Hubbell are predominant suppliers in this market. Export opportunities for U.S. companies hold good prospects in the power distribution field and in the fast-growing natural gas power generation market. Currently, hydro power plants account for over 90% of total power generation in Brazil. However, their share is expected to drop to 83% in the next five years as new natural gas comes online from the Bolivia/Argentina Brazil gas pipeline.
The power sector market is expected to grow substantially over the short-to-medium-term given Brazil's needs to increase its power generation by over 3,500 MW each year through 2008 to meet an expected energy consumption average rate of 4.7% a year. In ten year's time, Brazil's installed power capacity is expected to jump from 61,300 MW to 104,600 MW, according to preliminary statistics released by Eletrobras in its 1999/2008 Power Expansion Plan. Additionally, the on-going Brazilian privatization process, which has to date (May 1999) privatized sixteen power distribution companies and one bulk energy supplier, is expected to continue through 2000 selling over fifteen power companies. Foreign investor participation in the Brazilian privatization program to date has exceeded 25 percent of the total sector privatization. The United States leads the field (AES, Enron, Houston Industries, Community Energy Alternatives, and Southern Electric), followed by Spain (Endesa and Iberdrola); Chile (Chilectra); France (EDF); and others/ Portugal (EDP).
The market niches emerging in Brazil are in small-to-mid-sized cogeneration projects such as those in progress by Brazil's oil and gas parastatal, Petrobras. A total of 2,800 MW is to be generated from its refinery cogeneration program. Industrial cogeneration projects, such as those under consideration by steam intensive industries as well as by large commercial buildings, may also offer business opportunities for U.S. companies.
On October 15, 1997 during President Clinton's visit to Rio, the U.S. Department of Energy signed a Clean Coal Technology Agreement with the Brazilian Government. In the coal sector the U.S. Trade and Development Agency has already signed two grants with two more are in process. Due to the higher costs of importing gas, coal is expected to increase in the overall share of Brazilian energy supply from two percent to about twelve percent, according to the GOB Deputy Minister for Mines and Energy. Currently four Brazilian coal companies (Metropolitana, Copelmi, Criciuma and Catarinese) are forming joint ventureships with U.S. firms. The Brazilian States of Rio Grande do Sul and Santa Catarina account for 97 percent of the 4.6 million tons of Brazilian coal production.
ANEEL, the Brazilian Power Regulatory Agency, plans to tender 3,710 MW of hydro power plants in 1999. Construction of selected transmission lines is also expected to be open for private participation and operation by mid-1999.
Brazilian electrical power companies are now required to invest in energy efficiency programs. GOB officials estimate a market of $250 million a year for efficiency products as a result of the new regulation to reduce Brazil's annual energy wastes of about $2.5 billion. Additionally, PROCEL, the GOB energy efficiency agency, with the support of USAID, the United States Agency for International Development, is negotiating a $160 million loan with the World Bank to improve the efficiency of electricity supply and use.
Renewable energy is still considered costly in Brazil and geographically limited. Biomass, particularly sugar bagasse, can be expected to offer opportunities in the short to medium term given Brazil's large sugar cane production.
(US$ millions) 1997 1998 1999* D. Total Market Size 2,450 3,113 2,191 E. Total Local Production 2,280 2,890 2,036 F. Total Exports 130 128 160 G. Total Imports 300 351 315 H. Total Imports from U.S. 63 77 69* Statistics are unofficial estimates from trade sources.
Exchange Rate: US$ 1.00 = R$ 1.65 (May 1999)
Sources: Brazilian Association of Electrical/Electronic Industries ABINEE)and Eletrobras.Rank: 14 Name of Sector: Agricultural Machinery ITA Code: AGMComments: The Brazilian agricultural market is one of the most promising worldwide, not only because of its size and enormous cultivated area, but also because of its potential for increased efficiency. Currently, less than 17% of Brazil's cultivated land is profitable. Agricultural production and processing concentrates in the South and Center South, but new cropland's are opening in the Center West and Northeast, and these regions are gaining agricultural significance.
The total market for agricultural machinery in Brazil was estimated at US$ 3.4 billion in 1998, with local production around US$ 3.6 million and US$ 109 million in imports. Imports from the U.S. constitute approximately 45% of total import market or US$ 52 million in 1998, with Italy, Australia, Sweden, Israel, France, Holland and Japan also holding significant market share in certain subsectors.
Despite Brazil's flat economic performance in 1998 and projected 1 to 3% decline for 1999, agriculture is the bright spot for Brazil, with 9.2% growth in the first quarter of 1999. Local farmers, taking advantage of the recent Brazilian currency devaluation, substantially increased purchases of domestically manufactured agricultural machinery in order to boast export production. The strong performance of the agricultural sector generated an increase of 15.4% in sales of agricultural machinery in the first quarter of 1999. This situation did not favor U.S. exporters of conventional agricultural machinery, who, besides dealing with the disadvantage of the exchange rate, also have to compete with efficient distribution channels, local technical assistance, and access to federal sources of financing provided by Brazilian firms manufacturing similar products. This scenario does not seriously impact U.S. exporters of more advanced agricultural machinery, which holds the best market potential, due to the limited local availability of these products.
Best U.S. export prospects in this sector include machinery with higher efficiency levels, automated devices and new technology. Products presenting good prospects for U.S. exporters include: harvesting/threshing machinery; cleaning, sorting, grading, milling and working cereals, seeds, vegetables and grains machinery; poultry equipment; milking machines; irrigation equipment; fruit sorting and grading machines; weather monitoring systems; and GPS devices.
(US$ Millions) 1997 1998* 1999* A. Total Market 3,232 3,470 3,750 B. Local Production 3,342 3,600 3,900 C. Total Exports 217 240 260 D. Total Imports 107 109 110 E. Imports from the U.S. 31 52 57* The above statistics are unofficial estimates. Estimates do not include tractors, considered part of the automotive sector.
Exchange Rate: US$ 1.00 = R$ 1.65 (May 1999)
Sources: ABIMAQ, Brazilian Association of Machinery, ANFAVEA, Brazilian Association of Automotive Vehicles, and estimates from local companies.A. Rank: 15 B. Sector: Plastic Production Machinery C. ITA Code: PMEComments: In 1998, the Brazilian market for plastics production machinery was estimated at US$ 801.77 million of which about 59% was supplied by local production and 41% by imports. The domestic consumption of plastics production machinery is expected to drop by 10% in 1999 due to the current economic recession in Brazil and the devaluation of Brazilian currency, which should result in decreased imports. In 1998, imports of plastics production machinery were forecasted at US$ 358.7 million and should drop to US$ 288.75 million in 1999.
According to statistics from the Brazilian Secretariat of International Trade (SECEX), Brazilian imports of plastics machinery in 1997 were valued at US$ 419.90 million. The major suppliers were Italians with 24% of the market, followed by German and U.S. suppliers with 16% of the import market each.
The plastics machinery currently in use in Brazil include 27,000 plastics injection machines (estimated 500-600 annual demand), 5,500 plastics extrusion machines (estimated 300 annual demand) and 7,000 plastics blow molding machines (estimated 300 annual demand).
The import tariff on plastics production machinery is currently 19% and is scheduled to drop to 18% in 2000 and 14% in 2001. Imports of a number of machines not manufactured in Brazil may be imported with a 5% import tariff.
Leading best prospects for U.S. exporters include:
- Some special heavy injection machines (weighing more than 10,000 kilograms);
- Structural foam injection molding machines, with 12 or more injection nozzles, closing strength equal or superior to 500 metric tons, mold exchange system plates larger than 1.80 meter X 2.20 meters and LPC;
- CNC injection molding machines with closing strength equal or superior to 2,200 metric tons, injection volume equal or superior to 11,000 grams and opening equal or superior to 1,900 mm; Rubber parts injection molding machines, with vertical or horizontal closing capacity equal or superior to 300 metric tons, with microprocessor, heated pressure plates, injection chambers with temperature controlled circulating water and rubber strip feed rolls;
- Machine for manufacturing polyurethane foam with foam platform towers, with tanks for mixing raw materials, pressure chamber, CNC and six additional injection gauges;
- Special heavy plastics extrusion machines weighing over 10,000 kilograms;
- Solid (tubular or fiber optic cable) coating extrusion machines, with synchronized filling device, speed equal or over 200 meters/minute and automatic tension control;
- Co-polymer extrusion system, for bi-oriented polypropylene films, with extrusion machines, feeding systems, electronic controls, with extrusion capacity ranging from 25 to 450 kilograms per hour;
- Integrated cooper wire extrusion machines, speed of 100 meters per minute, gauge equal or larger than 5 square mm, automatic color exchanger system, wire un-winder and heater, cooling channel, color mixing system, traction system and LPC;
- Heavy blow molding machines (weighing more than 10,000 kilograms);
- Automatic thermoplastics molding machines. Simultaneous injection, rolling and blowing;
- Heavy vacuum forming machines weighing more than 10,000 kg; Machines for pressure/vacuum thermoforming, for the production of plastics packaging, with capacity of 100,000 pieces per hour;
- Machines for filling dies with polyurethane, by injection, with pressure equal or superior to 210 bar, for panels and refrigerated chambers;
- Gas injection devices in hollow plastic parts;
- Extrusion gauges and thickness of polypropylene bi-oriented film automatic control.
(US$ millions) 1997 1998 1999* D. Total Market Size 823 801.8 721.6 E. Total Local Production 515 471.1 500.5 F. Total Exports 22 28.0 30.0 G. Total Imports 330 358.7 251.1 H. Total Imports from the U.S. 52 57.4 40.2* Statistics are unofficial estimates.
Exchange Rate: US$ 1.00 = R$ 1.65 (May 1999)
Source: Brazilian Association of Machine Manufacturers (ABIMAQ/SINDIMAQ)Rank: 16 Name of Sector: Packing Equipment Code: PKGComments: The Brazilian packaging equipment sector was estimated at US$ 362 million in 1998, with local production around US$ 253 million. Local production is mainly directed towards the local market, with exports reaching no more than US$ 15 million in 1998. Prior to Brazil's market opening in 1990, multinational groups controlled the packaging machinery market, in many cases, using outdated manufacturing technology, which satisfied local demand. With the opening of the market, end-users requirements expanded to include higher level of packaging technology often only available through imports. As a result, local manufacturers had to adapt and are now producing higher quality and more appealing equipment that can effectively compete with imports.
Imported packaging machinery holds approximately 35% of the Brazilian packaging equipment market totaling around US$ 124 million in 1998. The United States exported US$ 37 million in packaging equipment to Brazil in 1998, holding 30% of the total import market. Besides the United States, Germany and Italy are traditional suppliers of packaging equipment to Brazil, holding 30 and 24% of the import market, respectively.
This scenario will tend to change with the recent Brazilian currency devaluation. According to industry specialists, exports of packaging equipment will certainly increase, mostly to Mercosul countries, but the impact on imports is still uncertain. Imported basic packaging equipment will probably lose market to comparable locally manufactured equipment, while imports of more advanced equipment, without local competition, should not be seriously affected.
Major end-users of packaging equipment are the food, beverage, cosmetic, perfume, personal hygiene, and pharmaceuticals industries. The food industry represents the largest end-user market for packaging equipment in Brazil and processes approximately 60% of all packaging produced in Brazil.
Best sales prospects include machinery for filling, closing, sealing, capsuling or labeling bottles, cans, boxes, bags or other containers; machinery for aerating beverages; machinery for vacuum filling flexible containers; automatic strapping, binding, and sealing machinery; machines for cleaning or drying bottles and other containers; automatic dry foods packaging machinery; capping or sealing machinery; capsuling machinery; filling and labeling machinery; and packing and/or labeling machinery.
(US$ Millions) 1997 1998* 1999* A. Total Market 320 362 408 B. Local Production 220 253 290 C. Total Exports 13 15 18 D. Total Imports 113 124 136 E. Imports from the U.S. 34 37 40* Statistics are unofficial estimates.
Exchange Rate: US$ 1.00 = R$ 1.65 (May 1999)
Source: Brazilian Association of Machine Manufacturers (ABIMAQ/SINDIMAQ)A. Rank: 17 B. Sector: Laboratory and Scientific Equipment and Process Controls - Industrial C. ITA Code: LAB and PCIThe Brazilian market for industrial instrumentation and analytical equipment is very competitive with active participation by several Brazilian and foreign companies. This US$ 120 million market is supplied 45% by imports primarily made-up of industrial analysis equipment. New industries being installed in Brazil stimulate current and future demand for instrumentation and analytical equipment. The strongest new investment growth areas in Brazil include sugar mills, cement, pulp and paper, petrochemical, steel, sanitation, food, automotive and chemical industries. Also, the opening of the petroleum sector will generate business for industrial instrumentation and analytical sectors. The most competitive U.S. export products in this sector include chromatographs, spectrometers, spectrophotometers, laboratory equipment and analysis, flow meters and pressure and temperature gauges.
The market is likely to remain flat in 1999 due to the Brazilian economic slowdown. However, in the medium-term, the Brazilian market should grow slightly (2-5%) over the next few years. According to trade sources, investments from the public and private sectors, including universities, research institutes and industries should continue at steady rate. Industries are increasing their production efficiency and modernization to become competitive. Brazil leads Latin American country in ISO 9000 certified companies.
Also, automation of production lines has increased demand for electronic instruments like pressure and temperature gauges and process controls systems. According to the Brazilian Association of Electric and Electronic Industry, the process automation market was US$ 1.6 billion in 1998 and is expected to be US$ 2 billion in 2000. Automation of production lines is increasing demand for electronic transmitters in Brazil, but analogic devices still have a presence due to their low cost and easy operation. Brazilian and international companies are importing and manufacturing automation systems in Brazil. Yokogawa, ABB, Siemens and Fisher-Rosemount are some of the foreign players in the Brazilian automation market.
The major end-users of industrial instrumentation and analytical equipment and services in Brazil are sugar mills, cement, pulp and paper, petrochemical, steel, sanitation, food, automotive and chemical industries. Research institutes and universities are also considered a potential market for U.S. companies.
The market for industrial instrumentation equipment (US$ 80 million) is twice that of industrial analytical equipment (US$ 40 million). Brazilian companies dominate 80% of the industrial instrumentation market, but only 5% of the analysis market. High technology investments in Brazil that demand highly accurate analytical instruments are at the root of the 95% import rates for analytical equipment. In industrial instrumentation, a number of Brazilian and international companies manufacturing in Brazil supply the bulk of this market at prices that make it difficult for imports to compete.
STATISTICAL DATA
Industrial Instrumentation Market: (US$ Million) 1998* 1999* 2000* Total Market 80 95 110 Local Production 60 75 90 Exports 0 0 0 Import Market 20 20 20 Imports from the U.S. 8 8 8.3* Statistics are unofficial estimates.
Exchange Rate: US$ 1.00 = R$ 1.65 (May 1999)
Source: industry and trade contactsIndustrial Analysis Market: 1998* 1999* 2000* (US$ Million) (% of growth) Total Market 40 45 50 Local Production 4 6 8 Exports 0 0 0 Import Market 36 39 42 Imports from the U.S. 22 25 30Statistics are unofficial estimates.
Exchange Rate: US$ 1.00 = R$ 1.65 (May 1999)
Sources: Revista da Industria - FIESP, Federation of Industries of the State of São Paulo, Revista Quimica e Derivados, Journal Gazeta Mercantil, Brazilian consulting firms and ABINEE -- Brazilian Association of Electronic Industry.Rank: 18 Name of Sector: Food Processing and Packaging Machinery Code: FPPComments: The Brazilian food processing and packaging machinery sector is estimated at US$ 550 million. Imports represent 32% of this market, totaling an estimated US$ 180 million in 1998. Germany and Italy are traditional suppliers of food processing and packaging machinery to Brazil, together holding 51% of the import market. Most imports from these two countries are through local subsidiaries importing from headquarters. U.S. exports of food processing and packaging machinery to Brazil reached an estimated US$ 20 million in 1998, holding 11% of the total import market.
End-users of food processing and packaging machinery in Brazil are small to large food companies. Several multinational food companies operating in Brazil have recently concentrated their business in specific market segments by selling off other operations. As a result, many smaller Brazilian companies unable to attain economies of scale and lower costs are struggling to survive in this market.
The growth in domestic consumption that followed the 1994 market stabilization policy, Real Plan, had a direct impact on the Brazilian food industry. Through a series of currency stabilization and anti-inflationary measures, the Real Plan increased the number of consumers in the market by over 15 million. According to the IPEA, the Research Institute for Applied Economics, Brazil will have an average annual per capita growth of 4 to 5% through 2005. While slower economic performance in 1998 and 99 is limiting non-essential purchases by this new consumer class, supermarkets are holding prices within 5% of 1998 levels to encourage stable consumption.
In 1997, BNDES, the Brazilian Development Bank, lent US$ 2 billion to food processing companies, a 31% increase from 1996. The beer sector borrowed US$ 497 million (a 66% increase), the poultry sector received US$ 96 million (a 131% increase) and the rice processing sector received US$ 12 million (a 220% increase). Part of these resources lent to the food industry (US$ 194 million)came from BNDES-Eximbank operations. According to the Information Center of Gazeta Mercantil, a total of US$ 7.5 million in investments are programmed for the period from 1998 to 2003 in the food industry, and another US$ 7.0 billion in the beverage industry.
Best U.S. export prospects in this sector include machinery with higher efficiency levels, automated devices and new technology. Products presenting strong prospects for U.S. exporters are bottle cleaning/washing machines, baking machinery and meat processing machines.
(US$ Millions) 1997 1998* 1999* A. Total Market Size 623 550 577 B. Total Local Production 635 390 409 C. Total Exports 69 20 21 D. Total Imports 57 180 189 E. Imports from the U.S. 10 20 21* The above statistics are unofficial estimates.
Source: Abimaq, Siscomex and Industry specialists.
Exchange Rate: US$ 1.00 = R$ 1.65 (May 1999)A. Rank: 19 B. Name of Sector: Architectural/Construction/Engineering Services A. ITA Code: ACEComments: The Brazilian construction industry in 1998 was estimated at US$ 90 billion, corresponding to approximately 9.2% of the GDP. Brazil's currency devaluation in January 1999, followed by the economic recession, slowed down some of the construction activities, but long term forecasts are conservatively optimistic in view of investments in the recently privatized transportation, telecommunications and energy sectors.
Many Brazilian architectural, construction and engineering companies offer internationally recognized competitiveness and experience. Many of them obtained the ISO 9000 certification in the last couple of years and have strong presence in foreign countries. However, the majority of small to mid-sized firms are still open to new technologies to improve the efficiency and quality of construction work. The best strategy for U.S. architectural, construction and engineering firms is to stablish partnerships with solid Brazilian firms who know the culture and business practices in Brazil. Several foreign firms have successfully entered the market in recent years using this strategy.
Best prospects for U.S. suppliers of architectural, construction and engineering services concentrate in the following segments:
Infrastructure: At the end of 1988, the Brazilian Association of Infrastructure and Basic Industries (ABDIB) had identified 1,442 infrastructure projects that called for investments of US$ 229.2 billion through 2003. According to ABDIB, US$ 72.5 billion of this figure represented projects already in process that are expected to be successfully completed. The remaining projects may suffer delays due to the current economic situation. The market expects a quick resumption of the projects and U.S. engineering consultants would find good opportunities in this segment. Projects are divided into the following sectors:
Sector US$ billion No. of Projects - Electrical Energy 95.1 826 - Transportation/Ports 52.3 224 - Oil/Gas/Petrochemicals 39.6 134 - Sanitation/Environment 15.3 152 - Pulp/Paper 9.7 23 - Metallurgy 9.0 30 - Mining/Cement 8.2 53 TOTAL 229.2 1442Residential Construction: This segment suffered a significant slowdown in 1998 due to lack of financing and high interest rates. The Sales volume of new homes in the Sao Paulo Metropolitan Area, the largest and the most important city in Brazil, dropped 26.8% in 1998 compared to 1997. In view of increasing unemployment, local trade contacts do not expect significant growth in this segment in 1999. Nevertheless, leading contractors are looking for new products and technologies that would reduce construction costs, especially for lower-income family housing.
Hotel and resorts: investments of approximately US$ 2.4 billion are planned in more than 70 new hotels to be built by the end of year 2000. Major hotel chains such as Melia (Spain), Posadas (Mexico), Accor (Brazil), Choice (USA), among others have plans to open several hotels in the next couple of years to meet the repressed demand for business hotels in major Brazilian cities. Foreign architects are participating in some of the projects, in partnership with Brazilian architects and engineering firms.
Industrial Construction: This segment was the least affected by the economic turbulence that hit the country in January 1999. Many investors believed in a fairly quick economic recovery and although they slowed down industrial production, many maintained their plant expansion and or construction plans. For foreign investors this led to lower U.S. dollar costs for such industrial construction. Constructors specializing in industrial construction are seeking alternative construction methods to reduce construction times and material losses.
No trade data are available for these service sectors.
Sources: trade associations, publications and trade contacts.
A. Rank: 20 B. Name of Sector: Defense C. ITA Code: DEFComments: The Defense sector in Brazil is the largest in Latin America due to the size of the country, both in geography and population. However, Brazil today has the lowest military budget/GDP ratio in Latin America except for Costa Rica. Brazil's Armed Forces currently seeks to update and modernize its military material and a new Ministry of Defense is being established to coordinate procurement replacing separate Army, Navy and Air Force procurement operations. The Brazilian Military is consistently short of cash. Fiscal year 1999 military spending was budgeted at approximately US$11 billion. Due to continued federal budget tightening, defense budgets will most likely remain level at best for the next several years.
Brazil has a diversified industry, which produces a wide variety of defense equipment and supplies, ranging from small arms to aircraft. Since the zenith of Brazil's arms industry and arms exports in the mid-1980s, many Brazilian arms manufacturers have suffered through an extreme financial crisis due to lack of domestic orders and changing international arms procurement patterns. Brazil's Armed Forces currently seeks to update and modernize its military material. As an example, the Brazilian Air Force has 6 F-5 and 4 Mirage, 20 Tucano airplanes, 20 Xavantes, 6 Gastes Learjet, 6 Bandeirantes, 4 Bell Jet Ranger and 30 Esquilos. The average age of these aircraft is 27 years. The Army is the largest of the Armed services with 200,000 men, 520 M-41C tanks, 795 troop trucks and 46 helicopters. The Navy is equipped with 5 submarines, 10 frigates, 5 corvettes, 73 helicopters and 1 sea-plane carrier. In Brazil the Army, Navy & Air Force run independently under a new a Ministry of Defense, but have no central coordinated procurement office. The Brazilian Congress provides an annual budget to each armed service for its own use.
Currently, the Air Force is planning to replace its 6 F-5 and 4 Mirages. Suppliers are encouraged to present their best offers. Concurrently, the Navy is upgrading its sonar equipment for its 10 frigates and the Army has several projects to procure missiles and radars.
The principal commercial opportunities for U.S. defense companies in this sector lie among the subsectors mentioned above. However, sector specialists emphasize the need for Brazil to modernize every aspect of its military material, down to the smallest purchases including gas masks, backpacks, boots, etc. U.S. companies interested in participating in any military government tender must have a local representative and meet with procurement officers personally during the bidding process. Statistics for defense equipment are not made available. GOB has a central procurement office in the U.S1701 22nd Street N.W., Washington, DC 20008 Tel: (202) 332-5522/483-4031, Fax: (202) 483-4684.
No trade data are available for this sector.
Sources: trade associations, publications and trade contacts.
A. Rank: 21 B. Name of Sector: Cosmetics and Toiletries B. ITA Code: COSIn 1998, Brazil's Cosmetics and toiletries market, which includes the subsectors of personal hygiene (66%), cosmetics (23%) and perfumes (11%), reached net sales of US$ 4,8 billion, up only 0.34% over 1997. This flat growth resulted from Brazil's recessionary climate beginning in 1998 and 30% currency devaluation in January 1999. The cost of imported products increased and even local Brazilian cosmetic/toiletry prices rose due to their large scale of imported raw materials. Market analysts expect this flat growth to hold through the end of 1999 and level off at 4-5% increase annually in 2000 and 2001, provided Brazil's economic recovery continues.
The growth in general consumption in Brazil, more than doubled in the three years since 1994 with the establishment of the economic stabilization plan, the Real Plan, largely due to the estimated 15 million new consumers that entered the market. According to market analysts, this consumption increase will continue strong, with the Brazil's economic recovery. The new consumer base now demands better quality products and has prompted local producers and importers to improve their product lines. Also the elimination of high inflation led consumers to demand more for their money, and has forced suppliers to cut costs, while maintaining and improving quality.
According to the Cosmetic and Toiletry Producers Association (ABIHPEC), total Brazilian imports of cosmetics and toiletries reached US$ 235 million in 1998, down 6% from US$ 250 million level in 1997. Of that total, around US$ 52 million in products was imported from the United States, Brazil's largest international supplier of those products.
Best prospects for US exports include facial and body skincare, sun protection creams and lotions, shampoos and "men's products", including good quality lotions and shaving preparations, ethnic products (dark skin cosmetics and toiletries), and hair treatment products (40%) of the market.
The more advanced lines of cosmeceuticals (bio-cosmetics) are another group of imported products that are readily accepted in Brazil. The marketing in Brazil is changing and demand for products such as anti-wrinkle creams, anti-acne and similar products, is increasing. Also, the nutraceuticals (containing "skin food", such as vitamins) is another growth market. The Brazilian consumer of these products is less price sensitive than the standard consumer. Sales in this sophisticated market in 1998 was US$ 316 million, up 8% from 1997, a level much higher than the overall sector.
Registration of cosmetics and most toiletries with the Brazilian Ministry of Health is compulsory before sale. The Ministry recently announced that it would deregulate, i.e. exempt the grade 1 (lower-risk) cosmetic from compulsory registration by August 1999. This will simplify the importation of a large number of cosmetics. Import tariffs range from 18% to 21% (Harmonized Codes of 3303 to 3401 and 5601), depending on the product, and the tax on industrial product (IPI) rates reach up to 40% for both imported and locally manufactured products such as perfumes and colognes.
(US$ million) 1998 1999 2000 (Estimate) (Estimate) A. Market Size 4,800 4,817 5,058 B. Local Production 4,648 4,665 4,898 C. Exports 83 84 88 D. Imports 235 236 248 E. Imports from US 52 53 56A. Rank: 22 B. Name of Sector: Computer Hardware and Peripherals C. ITA Code: CPTComments: The computer hardware sector is one of the leading sectors in Brazil with reported market of almost U$ 6 billion in 1998. The computer hardware and peripherals segment grew by almost 17% in 1998 and is expected to grow 5% in 1999 and 14% in 2000. According to industry experts, the drop in the 1999 growth rate is due to a significant sales decrease in the first quarter of 1999 when the local currency was devaluated by 50%, greatly increasing the cost of imported computer products.
Despite this sales decline, the computer hardware sector in Brazil is likely to continue expanding substantially on the near term as industry and commerce continue important automation upgrades, and the number of home users continues to boom. By the end of 1999 a large number of new PCs will have to replace old ones installed for companies to reach Y2K compliance.
Approximately 1.5 billion desktops were sold in Brazil in 1998, with 38% purchased by the SOHO market. PC use is growing with increased use of Internet, estimated at 3.8 million in 1999 and expected to reach 7.5 million in 2003.
Most PCs in Brazil are locally manufactured by global players including IBM, Compaq, ABC Bull, Hewlett-Packard, etc. and Brazilian manufacturers such as Itautec, Microtec, UIS and Tropcom. Companies manufacturing PCs locally receive fiscal benefits through the "Basic Productive Process" (PPB) which assures more competitive prices to PC local manufacturers as long as they invest 5% of their gross revenues in research and development in the sector. In these cases, Brazilian made PCs retail at a price up to 35% less than imported ones.
Personal computers, video monitors, printers and digital switchboards are currently subject to a 30% import tariff, which makes competition with local manufacturers stiff, especially when considering the local manufacturing PPB benefit. The PPB benefit is in force since April 1993 and will expire on October 29, 1999. Several Associations, Unions and domestic manufacturers related to the computer sector are submitting a project to the Brazilian Congress in a joint effort to give continuity to the benefit.
Most computer hardware imports into Brazil consist of peripherals, assessories and components related to manufacturing. U.S. exports hold 85 % of import market share. Best prospects for U.S. exports of computer hardware include: laptops, scanners, printers, DVDs, handheld devices, network products, storage devices and quickcams.
Other hardware and peripheral products have an average import tariff of 18 %. By the year 2006 import tariffs for computer-related products are projected to be 12-16%. The tariffs will steadily decrease as Brazil adapts tariff levels consistant with the other Mercosul countries (Southern Cone Common Market).
COMPUTER HARDWARE
(US$ millions) 1998 1999 2000(*) Market Size 5,971 6,269 7,146 Local Production 3,799 3,989 4,547 Exports 235 247 281 Imports 2092 2,197 2,504 Imports from the U.S. 1781 1,870 2,132(*) Statistics are unofficial estimates.
Exchange Rate: US$ 1.00 = R$ 1.80 (July 1999)
Source: IDC, ABINEE, MCT-SEPINBest Prospects for Agricultural and Food Products
Name of Sector: Cotton HTS 5201Comments: Since the beginning of the 1990's, Brazilian cotton growers have experienced many problems with high production costs and increased competition. Growers with mechanize systems of production have been able to overcome these problems while many small under-capitalized growers have gone out of business. Although Brazilian cotton production recovered somewhat in MY97/98 (production is estimated 380,000 mt, up almost 36% from the previous year). Brazil will continue to import a substantial volume of cotton.
(US$ millions - FOB) 1998 1999* 2000* A. Total Market Size 1115 1005 1000 B. Total Local Production 300 255 325 C. Total Exports 0 0 0 D. Total Imports 815 750 675 E. Total Imports from the U.S. 0 80 60*Statistics are unofficial Estimates.
Exchange Rate: US$ 1.00 = R$ 1.17 (June 1998)
Source: Secretaria de Comercio Exterior (SECEX) - MDIC, Ministry of Finance, and USDA FASName of Sector: Wheat HTS 1001Comments: Brazil's domestic production of wheat is far below its domestic consumption needs and therefore the country has a large annual import demand for wheat, of which much is supplied by Argentina. From September 1996 until November 1998, the United States had been out of the Brazilian wheat market because of phytosanitary issues. Currently, however, U.S. Hard Red Winter (HRW) wheat is allowed into Brazil and the approval of two additional types of wheat are expected shortly (as of June 1999). Import demand for the local marketing year 99/00 (August 1999 - July 2000) is currently estimated at 5.6 million metric tons (mt), with Argentina supplying about 4.0-4.5 million metric tons, which leaves about 1.2-1.6 million mt for other suppliers.
(Million Metric Tons) 1998 1999* 2000* A. Total Market Size 8.54 8.54 8.65 B. Total Local Production 2.19 2.70 2.90 C. Total Exports 0.00 0.00 0.00 D. Total Imports 6.10 5.60 5.75 E. Total Imports from the U.S. 1.00 0.75 0.75* Statistics are unofficial estimates.
Source: Secretaria de Comércio Exterior (SECEX) - MICT, Ministry of Finance, and USDA Foreign Agricultural Service.
Name of Sector: Apples and Pears
HTS 0808.10 and 0808.20.10Comments: Brazil is becoming an important apple producer but continues to import high volumes of apples, particularly in years of short domestic production. Brazilian apple production is estimated at nearly 700,000 metric tons in 1998/99. Brazil has virtually no commercial production of pears. Argentina and Chile are the major suppliers of apples and pears to Brazil and benefit from preferential tariff treatment. However, there is growing awareness of U.S. products and quality, and the United States production season is opposite Argentina's and Chile's allowing for a marketing window for both fruits, but particularly for pears. U.S. exporters have major opportunities in this market which is expected to grow by over 2 percent per year. In 1998, Brazil was the third largest export market for U.S. pears.
(US$ Millions - FOB) 1998 1999* 2000* A. Total Market Size 800 820 884 B. Total Local Production 661 690 759 C. Total Exports 11 27 35 D. Total Imports 128 103 90 E. Total Imports from the U.S. 12 8 8* Statistics are unofficial estimates.
Source: Secretaria de Comércio Exterior (SECEX) - MICT, Ministry of Finance, and USDA Foreign Agricultural Service.
Name of Sector: Whey, and Lactose HTS: 0404, 172Comments: Although Brazil produces a small amount of whey derived from its cheese production, whey is considered a residue and is seldom used as a food ingredient. Most of the whey used by the dairy and beverage industry in Brazil is imported. The market is booming because of the increasing use of whey in dairy-based drinks (yogurt), as well as for animal feed purposes. This offers a great opportunity for U.S. exporters because local production does not meet demand. The EU is the major competitor for this product.
(US$ Millions - FOB) 1998 1999* 2000* A. Total Market Size 25 28 32 B. Total Local Production 15 16 18 C. Total Exports 0 0 0 D. Total Imports 10 12 14 E. Total Imports from the U.S. 3 2 3* Statistics are unofficial estimates.
Source: Secretaria de Comércio Exterior (SECEX) - MICT, Ministry of Finance, and USDA Foreign Agricultural Service.
Name of Sector: Vegetable Seeds HTS 1209Comments: The best prospects for U.S. seeds continue to be in the vegetable seed sector, where, despite the economic slowdown in the Brazilian economy in 1998 and 1999, there is expected to be a continued need for high quality seeds, for which Brazil, as yet, does not have the technical production capacity. Other major sources of imported vegetable seeds are the EU, Israel, and Japan.
(US$ Millions - FOB) 1998 1999* 2000* A. Total Market Size 35 38 41 B. Total Local Production 14 15 16 C. Total Exports 1 1 1 D. Total Imports 20 22 24 E. Total Imports from the U.S. 7 6 7* Statistics are unofficial estimates.
Source: Secretaria de Comércio Exterior (SECEX) - MICT, Ministry of Finance, and USDA Foreign Agricultural Service.
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[end of document] Note* International Copyright, United States Government, 1998 (or other year of first publication). All rights under foreign copyright laws are reserved. All portions of this publication are protected against any type or form of reproduction, communications to the public and the preparation of adaptations, arrangement and alterations outside the United States. U. S. copyright is not asserted under the U.S. Copyright Law, Title17, United States Code.
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