PROMOTION // ECONOMIC DEVELOPMENT. Betting on Innovation and Investment in Technology ReinaldoCóser

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1 PROMOTION // ECONOMIC DEVELOPMENT Brazil Betting on Innovation and Investment in Technology ReinaldoCóser The new Petrobras headquarters in central Rio was built by WTorre, which has also preserved more than 20 historical buildings in the city. will be an important year for Brazil. Since 2013 taking office in January 2011, President Dilma Rousseff has seen economic growth contract by almost 5% during her first year and dwindle to around 1% in High business costs and taxes, indebted consumers, low levels of trade, a tight labor market and devaluation of the Brazilian real have combined to create the Brazil cost, pushing prices of Brazilian goods higher than those produced by the country s Latin American neighbors. Rousseff wants to turn Brazil s fortunes around, and her economic mission is to push GDP to 4% in To achieve her goal, investment will need to rise by 25% to match the investment-to-gdp ratio acheived by neighbors like Chile and Peru, all of which grew more than 4% last year. With an economy worth $2.5 trillion, the country brought in over $65 billion in foreign direct investment in Innovation is widely seen as key to Brazil s potential success, harnessing the nation s creativity to shift its commodity-based past into a competitive and technology-driven future. Last August, the president unveiled plans to spend $66 billion on infrastructure over the next 25 years, with more than half invested in the next five to get the country moving. Significant cuts in interest rates will help fuel credit, and tight fiscal policy has kept public debt and deficits under control. The upcoming 2014 FIFA World Cup Brazil and the 2016 Olympic Summer Games in Rio de Janeiro, the nation s art and culture capital, have prompted a regeneration boom in the city. The Rio Negócios Web portal, created by Hélio Viana, president of World Sport Business and Júlio Bueno, Secretary of Economic Development, is an online marketplace set up to ensure that homegrown businesses supply global events and earn a share of the spending. Due to a 250% increase in social spending on key areas like health and education during the last 15 years, 40 million people escaped poverty in Brazil during the last decade. Recent reductions in power prices, coupled with record-low unemployment, are giving businesses and consumers renewed cause for optimism. If Rousseff s policies pay off in 2013, this promises to be an ano maravilhoso or wonderful year for Brazil.

2 PROMOTION 2 // ECONOMIC DEVELOPMENT An Avant-Garde Approach to Business T here are two types of successful businesses. There are companies that study the marketplace, identify opportunities and deliver something better than what is already available. And there are those that go against the flow, strike out in new directions and release revolutionary products and services consumers never dreamed of, but suddenly find they need. Brazil has both types. But three local companies, doing business in different sectors, exemplify the latter approach: building neighborhoods of the future, unearthing deposits of rare metals and even discovering a treatment for cancer by applying avant-garde methodology and unswerving vision. Our slogan is undertake to amaze, says Walter Torre, chairman and founder of WTorre. We are an innovative company in every segment: civil construction, basic infrastructure, shopping malls and hotel chains. In the last 30 years, we amazed the market with unimaginable projects, like the shipyard in Rio Grande do Sul, the biggest dry dock in the southern hemisphere. We are helping the country flourish. Since 1981, WTorre has built a portfolio of over 220 projects, comprising 5 million square meters, at home and abroad. But, as Torre notes, that s just a fraction of what is needed to satisfy a market that, due to strong economic growth over the last decade, now has 50 million new consumers. While conducting research into developing shopping malls, Torre surveyed cities growing faster than the national average and says he was surprised to find more than 75 new agricultural, mining and distribution hubs that were expanding twice as fast as Brazil as a whole. That potential gives the company the confidence to invest in large legacy projects that will outlive the current Olympic boom, including an offshore port at São Vicente in São Paulo state. It aims to complete that initiative ahead of schedule in two and a half years, in addition to opening a new private airport. WTorre is also in talks with Walmart and Intel about building neighborhoods where there is a connection among community, work and leisure, Torre says. It seems obvious, but does not exist in Brazil. We are trying to build a futuristic neighborhood, which is not classified by social class or wealth but by cultural level. At 81 years old, Olacyr de Moraes is one of Brazil s bestknown businessmen. He gained the moniker King of Soy after he cultivated the world s biggest soybean empire. Moraes is now majority shareholder of Itaoeste Serviços e Participações Ltda, a mineral research and development company, which in 2011 discovered a deposit of the rare metal thallium that will help supply global demand for six years. I have always been an innovator, from power production to agriculture, and thrived in all of them, Moraes says. I had a bank, but I sold it and invested in rail tracks and soy production, which I had no knowledge of. This pioneering cost me dearly, but it gave me a feeling of fulfillment, and I am Laboratory technicians at União Química, one of Brazil s largest pharmaceutical companies very happy I pursued it. The country profited from my entrepreneurism. Itaoeste is now benefiting from his experience as it focuses on scarce commodities such as cobalt, titanium, gold and other ores in São Paulo, Piauí and Bahia. In the mining business, there is obviously a component of luck, Moraes says. But we did very meticulous research. We sell small portions of very rare, valuable materials with huge added value, and it works well for us. Founded in 1936, União Química is one of Brazil s biggest pharmaceutical companies. Its three state-of-the-art factories and 2,000 employees manufacture 570 successful products, marketed with 400 brands, in the contraceptive, animal health, over-the-counter and ophthalmology segments. With 600 representatives distributing its drugs via 98% of Brazilian outlets, União Química is ranked 10th nationwide in unit sales. Recently, União Química discovered an anticoagulant that proved very effective in the treatment of melanoma, as well as pancreatic, lung and kidney cancer metastasis. The company hopes to fast-track clinical approvals and have the product on the market in three years. The global pharmaceuticals market is worth $25 billion and growing by 4.8% a year, but in Brazil it is expanding by 25% annually. União Química is uniquely positioned to profit from that growth, and already works in tandem with global giants like Novartis and Laboratoires Théa. It is now looking to forge new alliances. We are after partnerships with technological companies that aren t globalized, to bring innovation to Brazil, says Chairman Fernando Castro Marques.

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4 PROMOTION 4 // ECONOMIC DEVELOPMENT From Ideas to Reality In 1972, Andreas Pavel, a German- Brazilian, created a portable cassette player, dubbed the Stereobelt, which he said at the time would add a soundtrack to real life. As he shopped his invention to financial executives, many felt that no one would want to wear headphones in public, and rebuffed his efforts to mass-produce the device. Then, in 1979, Sony launched the Walkman, and the rest is music history. That ahead-of-its-time thinking is typical of Brazilians, who have a history of inventing ingenious solutions to life s little problems, even if sales have not always matched the scope of their imaginations. Today, however, some of Brazil s most innovative companies are developing intelligent answers for bigger questions at the right time and in the right place to convert creativity into success. Brazil began to privatize its ports in 2007, and a year later, as the global financial crisis loomed, Adalberto Sedlacek, the chairman of Grupo Poly, saw his chance: I figured it was the right time, he says. I always learned that crisis is the perfect period to grow. That s when opportunity arises. Sedlacek s background in overseas trade meant he had experienced firsthand the shortcomings of Brazil s existing infrastructure and, given continued growth, saw a bottleneck coming when facilities would stop handling the volume of imports and exports. Thus he gathered a group of investors to acquire Itajaí Port in the state of Santa Catarina, and began to transform its installations and operations into what would become Poly Terminais. After one month, work began, Sedlacek recalls. It s been four years since we started with more than 480,000 square feet, and now there are over 1 million. We still have two more expansions to do. Once it opened, I filled the terminal in just eight months. Poly Terminais now has one of the three bonded warehouses in the state and an impressive client portfolio, including Poly Terminais in Itajaí, Santa Catarina global tire giants such as Goodyear and Bridgestone. Currently 30% of Poly s clients are international, but Sedlacek expects that number to grow significantly in coming years. His goals are vertical integration, increasing efficiency and reducing time and costs. We are working on this new one-stopshop system, everything the customer needs, Sedlacek says. He just has to say where he wants to take it. I ll get it from the production plant, deliver to his distribution center, and do international logistics, national logistics and distribution. He needs to take care of his business. The rest will be my responsibility. To decrease customers expenses, Poly Terminais uses X-ray technologies to advance container inspection and ensure that goods move as quickly as possible. But Sedlacek s ambitions go beyond Brazil s borders. He is exploring opportunities offered by Mercosur to invest in three ships, each able to transport 2,000 containers. These will travel between São Paulo, Paraná, Pernambuco, Rio Grande do Sul and Santa Catarina, and on to Uruguay, Argentina and Paraguay. And he is also working on a cabotage deal to Manaus, capital of Brazil s largest (and landlocked) state, Amazonas. Realizing a vision Fluxo Integrated Solutions was established in 1970 to provide Brazil s nascent petrochemicals industry in northeastern

5 PROMOTION 5 Bahia with innovative products, first in the south and then overseas as demand developed in the 1980s and 1990s. In 2012, it had sales of $150 million, 33% of which was profit, and it aims to reach $90 million in profits by According to Hideo Hama, Fluxo s chairman and founding partner, the company s vision and agility enabled it to introduce cutting-edge technology, such as radar tank-inventory control. It pioneered Swedish-made, real-time stock calculation via satellite and invented a proprietary digital valve system that most companies in the domestic oil industry use today to automate processes. Cutting red tape Established in 1979, Sodré Santoro is South America s biggest auction house, putting everything from cars to real estate on the block. If its founder and chairman, Luiz Sodré Santoro, gets his way, soon it will add signing soccer players to that list. In what is not Pátio Guarulhos in São Paulo, where Sodré Santoro is currently storing 17,000 vehicles so much a rags-to-riches as a scrapto-soccer-stars story, Sodré Santoro started off selling scrap metal, realizing double the market price, and then got into auto auctions. Today, he sells about 80,000 cars a year. With the 2014 FIFA World Cup Brazil coming to Rio de Janeiro, Sodré Santoro s attention has turned to the lucrative soccer market, for which he believes auctions are the best way to cut out middlemen and allow foreign clubs to sign players directly. I found it was difficult to negotiate abroad, especially because of the requests to pay extra on the side. What we need is to get straight to the final client, he says.

6 PROMOTION 6 // ECONOMIC DEVELOPMENT Smaller Players Think Big According to government data, Brazil s financial sector encompasses more than 2,300 institutions, including 150 banks with total assets in excess of $1.78 trillion. Subject to strict standards, Brazil s banks emerged from the global financial crisis relatively unharmed, and credit rose by almost 40% in the two years after September In such a competitive environment, just being in the marketplace is not enough. Smaller players need to carve out niches to survive and grow. TMG Capital provides consultancy services to international private equity funds interested in investing in Brazil. Its CEO and president, Luiz Francisco Novelli Viana, had a successful track record of resuscitating businesses before starting his own company, which occurred soon after Brazil s Plano Real (Real Plan) economic program conquered hyperinflation in the mid-1990s. We were probably among the three pioneers in private equity in Brazil, he says. TMG Capital s first fund focused on small and medium-size companies created during the era of hyperinflation, when the marketplace was highly fragmented. Cash was flowing and shareholders profited, but businesses became inefficient and uncompetitive. TMG s innovative approach revolutionized the Brazilian dental care sector, due to investment in technology, management and strategies, and TMG grew even more when it took one of its companies public. It has since created two other funds that invest in emerging markets, and it now has a portfolio worth $400 million. Among its investments is BoaVista Serviços, a credit bureau that tracks the spending habits of 90% of Brazil s 200 million people. Using state-of-theart algorithms and cloud computing, it compiles data from 2,200 points, Luiz Francisco Novelli Viana, CEO and president of TMG Capital allowing BoaVista to offer personalized financial packages to fuel consumption. The predictability of credit behavior is important for innovation, Viana says. Founded in 2009, Banco Gerador initially focused on Brazil s booming northeastern region, where the economy is growing at the same speed as China s and has a unique business culture. The bank adopted an unorthodox approach to segmentation, initially offering affordable banking to low-income individuals through financial shops, before it started working with global consultancy firms on high-level mergers and acquisitions and IPOs.

7 ECONOMIC DEVELOPMENT // PROMOTION 7 Construction Boom Helps Build Business The Brazilian Association of Technology for Equipment and Maintenance estimates that while Brazil accounts for just 4% of the global equipment market, it represents 40% of the Latin American market. Machinery for the civil engineering and construction industries accounts for more than three-quarters of the national market. This is good news for Brasil Máquinas de Construção (BMC), established in 2007 to distribute high-quality machinery from companies like South Korea s Hyundai Heavy Industries. Facing stiff competition from established brands, BMC has One of BMC s distribution points become the domestic market leader and the world s number one distributor of Hyundai products in just five years. It recently invested $150 million in a factory to build Hyundai machinery in Brazil. Bullish about prospects in the current climate, BMC s chairman, Felipe Cavalieri, has also invested in new ventures in mining, finance and construction, and recently bought 50% of a consulting firm that specializes in external trade. We use our capacity and know-how to build projects, he says. Brazil has a habit of importing. We want to export and know our client, too. The objective is to reach $3 billion in exports by Sóllitta Grupo is another diversified player with an ambitious growth strategy. Founded two decades ago, the organization concentrates its efforts on the development of innovative products for niche markets. A group of five companies, it is active in high-density Roberto Gadotti, chairman of Sóllitta Grupo polyvinyl chloride (PVC) piping, anticorrosion treatments for steel tubes, fuel pump and tank installation, and fuel distribution safety inspections under the Ecotest brand. According to Sóllitta s chairman Roberto Gadotti, the company is growing quickly and looking for partners to help develop new technology solutions. By 2014, its new factory will begin serving the offshore oil industry, and in the next five years, it plans to roll out Ecotest nationwide.

8 PROMOTION 8 // ECONOMIC DEVELOPMENT Established Names, New Directions Since the 1950s, Brazil s economic ups and downs have resembled a roller coaster. Conducting business in the country, let alone becoming successful, has been tough. Despite these difficult conditions, three homegrown companies, with at least half a century s history each under their belts, have not only survived but prospered. Agrale, the sole national tractor manufacturer to plow its way through Brazil s recent economic troughs, celebrated its 50th anniversary last year. Founded in 1962, Agrale first made two-wheeled tractors, and later diversified with commercial vehicles, buses and fourwheel-drive vehicles, as well as motors and generators under its Lintec brand. When Hugo Zattera became chairman in 1995, Agrale took over chassis manufacturing for Marcopolo s Volare buses, and it has made 45,000 units since In 1998, it began building trucks for Navistar International, a manufacturer and marketer based in the United States, for whom it now handles all production. With annual sales of more than $1 billion, Agrale sells across Brazil and in 10 other nations in South America, the Caribbean and Africa. Agrale is a serious, competitive and innovative company, Zattera says. We always reached new markets before competitors. When some only saw difficulties, we saw opportunities and focused on our goals. Zattera notes that Agrale strives to always insert some degree of innovation into its products, like the company s natural gas vehicle, 400 units of which circle the streets of Lima, Peru, and its deal with Siemens, the German engineering and manufacturing company, to develop a hybrid bus. To make growth viable, we need to maintain our former markets, Zattera says. This is our strategy, and we foresee growth of just over 20% next year. Marcos Riboli Hugo Zattera, chairman of Agrale The family-owned Brennand Group started 80 years ago as a sugar and alcohol producer before diversifying into cement, ceramic and glass. In 2000, it established an energy business that focused on small hydroelectric power SINCE 1997 TMG is a pioneering and independent Brazilian Private Equity Please visit us at tmg.com.br Strategy and Management Business Building

9 ECONOMIC DEVELOPMENT // PROMOTION 9 stations. Brennand Energia reached a total capacity of 356MW by the end of last year, and is aiming for 600MW by 2015 with new hydro and wind power plants. What s more, the group s founder has interests beyond business. In 2002, Ricardo Brennand, a collector of historical objects and art, opened the Ricardo Brennand Institute in Recife, which consists of a museum, art gallery, library and park, and had a clear goal in mind. We built it with the purpose of bringing education to the population, especially the poor, he says. His daughter Lourdes Brennand echoes his sentiments. My father has always given much importance to education, she says. So this has been his contribution, to share knowledge. Founded in 1951 by José Carlos da Silva Jr., now its chairman, São Braz manufactures over 200 food and beverage products, including one of northeast Brazil s most popular coffee brands. In addition to producing corn and coffee Ensuring That Brazil Stays in School Last October, the lower house of Brazil s Congress approved the National Education Plan, which will dedicate 10% of GDP to education by If the Senate passes it, it will propel Brazil to number one in education spending worldwide. Brazil is making a serious effort to develop a knowledge-based society. Currently, its literacy, numeracy and scientific knowledge rates lag behind those of its rivals in the global marketplace, and only 11% of its people hold a college degree. But private universities are booming, representing 75% of Brazil s 2,400 higher education institutions, and the government is working with them to offer subsidized places for students. An island of Portuguese speakers in Vinícius Lins Lubambo beans, São Braz has branched into media and cars, with two TV channels, a radio station, a newspaper and regional auto dealerships. With competition, you can only succeed if you have superior quality and are bold enough to cover all regions, attend to consumer needs, recognize habits and develop products that adjust to that reality, Silva Jr. says. We are buying new land to extend the products we produce and take advantage of our capital. The fact that we are a traditional company gives us credibility; we have had possibilities to grow, and that is what we have accomplished. The Brennand Institute in Recife features a collection of historical objects. a mostly Spanish-speaking continent, Brazil has traditionally favored English as a second language. Brasas, a Brazilian company established in 1967, is a pioneer in language education in the country and now offers in-depth English courses in more than 50 locations across the nation. Family-owned Brasas says that it can help anyone, from eight-year olds to adults, to learn English in 18 months due to its high-quality teaching staff and its unique methodology. While 70% of its students are professionals seeking to further their careers, 20% are children whose parents want an English education for them. The company also works with corporations such as oil giant Petrobras to help hundreds of executives communicate with their overseas counterparts. We are very concerned about quality and the product we sell to the students, says Brasas director Peter George O Donnell. People look to us for our quality and speed; that is what inspires them to choose us over the competition. TRANSFORMING STEEL WITH THE LATEST TECHNOLOGY AND THE HIGHEST QUALITY FROM BRAZIL TO THE WORLD 41 years of experience Brazil s 5th largest steel processor More than 30 market segments served - Automotive, Construction, Oil and Gas, Mining, Energy, Sugarcane-Energy, Agricultural Implements and Machinery, among others More than 1,248,613 square feet of constructed industrial area MAIN PRODUCTS Structural Steel Tubes and Conduction Pipes, Electrical Conduits, Structural Profiles, Steel Roofing, Scaffolding Systems, Steel Props, Construction Systems, Automotive Parts and Components, Exhaust Systems for OEM and Aftermarket tuper@tuper.com.br

10 PROMOTION 10 // ECONOMIC DEVELOPMENT Value-Added Innovation According to the Merriam-Webster dictionary definition, innovation means the introduction of something new: an idea, a method, or a device. But there s another form of innovation, which involves using an existing idea, process or tool in a new or improved way. Let s call it Brazinnovation. Three Brazilian companies located in Santa Catarina, Rio de Janeiro and Rio Grande do Sul have adopted processes and adapted products already available in the marketplace, adding value with the unique quality of Brazinnovation. They now manufacture and market proprietary brands of footwear, vehicle exhausts and tubing, and plastic film and laminates, sold both across the country and around the world. Twin brothers Alexandre and Pedro Grendene established their eponymous company in 1971 as a family business when they opened a factory in Rio Grande do Sul. At first they manufactured plastic baskets for wine bottles, which were previously wrapped in wicker. Then they started to produce plastic components for agricultural machinery, before diversifying into nylon soles and heels for other manufacturers shoes. In 1978, they made their first pair of plastic, injection-molded sandals, an enterprise that led to the production of thousands and eventually millions more shoes. While Grendene did not invent the technology it still uses to produce 180 million pairs of shoes, boots, sandals and flip-flops every year, which generate about $900 million in revenue, the company is a pioneer in the allplastic footwear industry. We started experimenting with materials to make them lighter and began to imagine that would be possible to insert air during injection, Alexandre Grendene says. At first we could reduce the weight Grendene produces footwear that is sold in 90 countries. by half. Currently, the technology is so advanced that we can reduce the weight of the material by five times. It was this technological development that enabled the manufacturing of our Rider sandals. Still sold today, Riders are available in various colors and styles, and is just one brand in an extensive range of men s, women s and children s models. Grendene s Melissa range for women, introduced in 1979 and inspired by the sandals of French fishermen, also continues to rank among the company s most popular products. But that success spawned cheap imitators and forced the company to find creative ways to maintain market share. Our Melissas started being copied worldwide, Alexandre Grendene says. So we began to innovate in marketing, advertising on Globo TV. They did not know how to do merchandising of shoes during soap operas. We taught them. We started to bring French couturiers to catwalk shows in Brazil when nobody had done that. We were concerned about creating a sustainable brand. Our marketing strategy worked. Today, collaborations with some of the world s most sought-after designers, such as Vivienne Westwood and Karl Lagerfeld, and tie-ins with famous brands like Liberty Art Fabrics and the Muppets, keep the brand fresh, and Melissa sandals are sold exclusively in sophisticated boutiques. Last year, Grendene signed a deal with a Riobased retail chain to create dedicated Melissa stores. The company currently has 50 outlets, but is aiming for 150 in the near future. For now, Brazilian customers buy three-quarters of the company s overall products, but Grendene exports the remaining 25% and sells them through

11 ECONOMIC DEVELOPMENT // PROMOTION 11 more than 20,000 points of sale outside the country. These include Galeria Melissa in New York City, with new concept stores planned to open soon in London and Shanghai. This is just the tip of the iceberg, Alexandre Grendene says, as the company begins to focus its attention overseas. We want to grow abroad, he adds. Here, you can grow, but it s hard to double in size quickly. The world is big. We have always been very competitive and need to export. We have a motto: few products and huge quantity. Without a large volume of sales, we would not have profits. Because of this, we are focused on very few products and large productivity. We want our products to be the same for all countries. Reaching new milestones Vulcan is Brazil s largest manufacturer of plastic film and laminates, and has been at the forefront of technological development for more than six decades. Headquartered in Rio de Janeiro, with production facilities in São Paulo, France and the Netherlands, the company makes a wide array of products under its Con-Tact brand, including canvas for trucks, automotive upholstery, geomembranes for construction, and vinyl flooring, as well as pool liners, home decoration and fashion items, visual communication and packaging applications, and adhesive plastics. Occidental Petroleum owned Vulcan until 2001, when it was posting annual profits of about $50 million. In that same year Grupo Brasil acquired it and since then the company s revenue has reached three times that figure. In mid-2011, it announced new investments valued at nearly $160 million over the next five years. Vulcan plans to open three new factories in Alagoas to manufacture polyvinyl chloride (PVC) products. This would create as many as 800 new jobs. According to Jonas Assis, the company s chairman, by searching for inspiration in every market sector, listening closely to customer needs, and creating innovative products in its laboratories, Vulcan is constantly pushing the boundaries of plastics technology. We manufacture a mirror that is not made of glass, but of PVC, he says. It is as good as glass, but lighter, will not break if dropped, and will not give you seven years bad luck. The world is big. We have always been very competitive and need to export. Alexandre Grendene Investing in knowledge Founded in 1971 to manufacture aftermarket exhaust systems for motor vehicles, Tuper has consistently introduced new lines of business by leveraging its technical expertise in one sector to break into another. We consider ourselves a technological company, says Frank Bollmann, Your OPPORTUNITY in the RIGHT PLACE and TIME Founded only 25 years ago, Tocantins is the newest Brazilian state and already is an example of growth for the country. In addition to its abundant natural resources, the state is located in central Brazil and is strategically positioned for production and export. Sustainable growth happens through strong government investment in transport and infrastructure as well as incentives and credit lines to benefit industrial, commercial and agricultural ventures working with government agencies dedicated to the preservation of natural resources. Tocantins offers a real network of opportunities ready to connect big businesses.

12 PROMOTION 12 // ECONOMIC DEVELOPMENT Tuper s chairman. To become strong in technology, it is necessary to form your own team of technicians. We invest in people and knowledge. There is a lot of freedom to create. We make our own machines and tools, and always have ongoing projects. This helps us grow over 20% every year. After a decade of making its name in mufflers, Tuper began producing welded carbon steel tubes and is now Brazil s leading carbon steel tube manufacturer. Ten years later, Tuper diversified into steel sheet roofing and profiles. In 2000, it consolidated its exhaust business with original equipment manufacturer (OEM) parts for auto assemblers. In 2009, Tuper acquired Vanzin Automotive, reinforcing its presence in aftermarket exhaust systems. As part of the same deal, it acquired Vanfix Plásticos, which makes 18 million plastic components every year, and a haulage firm to handle logistics. The following year, it began production of galvanized The newly inaugurated Tuper Oil and Gas plant, in São Bento do Sul, Santa Catarina. Developing Sustainable Energy As Brazil s economy has expanded, demand for energy has risen. In petroleum and ethanol production, the nation ranks third in the Americas, after Venezuela and the United States. These two fuels account for almost 40% of consumption, but hydroelectricity, which provides 29%, and other renewables including biomass from sugarcane, which contributes over 20% of the mix have seen the greatest growth in recent years. Strong private sector investment in renewables has produced dividends: Revenues in 2011 topped $104 billion, due to an increase of 2.5% per annum since According to Edison Lobão, Brazil s minister of Mines and Energy, the country will attract another $235 billion over the next decade enough for 36 hydro plants, 12 gigawatts of biomass and 11 gigawatts of wind power. Last September, President Dilma Rousseff introduced tax cuts across Brazil s electricity sector to improve prices for consumers and businesses while seeking to boost growth. The reduction of energy costs generates a systemic effect, which will impact the economy as a whole, Rousseff says. It will promote international competitiveness, reduce inflation and stimulate investment. Founded in 2005, Diferencial Energia has carved out a niche by selecting projects carefully, streamlining operations and calculating risk-to-reward ratios well. Working with other suppliers, it built an innovative energy marketing portal that cuts costs, saves time and streamlines its operations. In 2012, the company turned $60 million in profit with a workforce of 30 people. Diferencial Energia is involved in natural gas and funds biomass projects using eucalyptus, and constantly monitors technological advances and prospective fuel sources to stay cutting-edge. As its chairman, Eduardo Lanari Prado, says, We have to find value and an equation that is different from the competition s to succeed. As the market becomes more sophisticated, we become more sophisticated and innovative.

13 PROMOTION 13 tubes at Latin America s most advanced plant and created Tuper Commercial to handle its sales and distribution. Last year, Tuper launched another venture from a new 370,000-squarefoot state-of-the-art factory, which will manufacture large diameter tubes for structural applications and the hydrocarbons industry. The company is ready to expand operations in the oil and petroleum industry internationally with the establishment of a new distribution office in Houston, Texas, and it has research and development partnerships in Germany, Italy, Austria and the United States. Throughout its history, the company has invested in technology, people and product quality, but Bollmann says the real secret of Tuper s success is to work, work and work even harder. Spotlight on Innovation ESPÍRITO SANTO The Brazilian State with the best opportunities for you to invest, work and live. Geociclo is a technology-based company that applies biotechnology to develop innovative and sustainable solutions to increase efficiency. Although it s a major world food supplier, Brazil currently imports 70% of its fertilizers. With an eye to the future, Geociclo collects readily available waste and turns it into slow-release fertilizer pellets to increase agricultural production at a lower cost. Headed by Olavo Monteiro de Carvalho (pictured above), the company is building the world s largest organomineral fertilizer production plant. This report is the fifth installment of a series on Brazil. For more information, please contact: Gabriel Guttierrez at g.guttierrez@forbes-cm.com Brazil project director: Florence Lilti Project coordinators: Gavin Thwaites, Eduarda Ribeiro and Rosie Venn

14 PROMOTION 14 // ECONOMIC DEVELOPMENT Brazil s Emerging Fashion Market Gets High Marks for Style Brazilians are notorious for their flamboyant and fun fashion choices, from the micro-bikinis seen on Rio de Janeiro s beaches to Ipanema flip-flops, worn almost everywhere and with everything from jeans and T-shirts, to evening gowns, making the country s colorful creations mustwears in wardrobes worldwide. The homegrown fashion industry has also earned the right to strut its stuff on coveted catwalks, as designers, manufacturers and retailers have taken giant steps to transform Brazil into the world s fifth biggest textile producer and fourth largest manufacturer of finished clothing. Two major fashion events São Paulo Fashion Week (SPFW), Latin America s hottest style ticket, and Fashion Rio define trends for the continent. Distribute your brand throughout Brazil? Yes we can. Despite global sales of $63 billion in 2011 and internationally known brands like Issa, Pedro Lourenço and Osklen, Brazil s fashion fortunes depend on the domestic market. According to the Brazilian Textile and Apparel Industry Association (ABIT), only 5% of production is currently destined for export. However, one recent arrival to the local fashion firmament has already started to explore markets overseas. Founded in 2002, La Estampa produces a dazzling array of high-quality fabrics, creating colors and prints used by some of the country s leading designers and the world s biggest retailers, including Spain s Inditex, the company behind Zara. La Estampa explored partnerships with European brands before finding a Spanish, family-owned company that COMPLETE CONSTRUCTION AND MATERIAL HANDLING SOLUTIONS understood its philosophy and wanted to grow outside Europe. Their partnership has made La Estampa one of the biggest suppliers for Inditex. La Estampa also has its sights set on the U.S. market, where it is looking for partners who share its DNA. From showrooms in Rio de Janeiro and São Paulo, as well as via a national sales network, La Estampa combines a talented creative team, personalized service, world-class logistics and cutting-edge technology to deliver made-to-measure solutions. The company now sells 12 million meters of fabric every year to 1,800 wholesale clients. Our competitive advantage is based on the number of fabrics we sell, says Marcelo Castelão, La Estampa s managing director. We have more than 150 different types. La Estampa is also at the forefront of digital printing, which has revolutionized the industry in recent years. Producing four times as much fabric as cylinder printing and capable of more detailed designs, for some time digital printing remained the sole domain of high-end brands due to its high cost. But as chains started to demand its benefits, Castelão found a supplier working on the next generation of digital printing. With this, we can produce in two and a half days what used to take a month, Castelão says. We can process an order with less cost and a smaller environment impact. With annual growth of 30% to 35% and ambitious plans to triple revenue by 2016, La Estampa is poised to explode onto the global stage. What we do today is the tip of the iceberg compared with what we can do, Castelão says. If we continue investing in marketing, operations and customer service, this is just the beginning. Retailer TNG is another Brazilian fashion giant that has shown spectacular growth over the last 25 years, and retains massive scope for further expansion. Its motto is

15 PROMOTION 15 HOW DO YOU SPELL SUCCESS IN FASHION? TNG. TNG is a Brazilian fashion brand that has been in business for 28 years. Initially TNG marketed primarily to the male consumer, however in 2000, due to popularity, it started to also cater to the female customer. TNG has been increasing its presence considerably on the Brazilian fashion scene, appearing at Fashion Rio as well as other important events on the national fashion calendar. Today, TNG has 170 stores and works with 600 retail brands selling a total of 5 million items each year. Such numbers makes TNG one of the most important players in the Brazilian fashion market. Tito Bessa Jr. and Brazilian actress Isis Valverde closing the TNG show at Fashion Rio. outside the ordinary, and it was founded by CEO Tito Bessa Jr., who dropped out of college to open his first menswear store in São Paulo in Noticing the women coming to his stores, Bessa added a women s line to TNG s catalog in 1999 and has showcased his collections during Rio s annual fashion week since its inaugural edition in Women now account for over a third of total sales of close to $200 million, and in Brazil, TNG s market presence rivals that of global chains like H&M and Zara. TNG has a national network of 170 shops and operates an e-commerce site, but research from IBOPE Intelligence estimates that the brand has the potential to open up to 700 wholly owned stores and to sell its products through 1,800 multi-brand outlets. According to Bessa, this growth is in addition to expansion into children s clothing, accessories and other segments. Bessa has already been in talks with prospective investors about raising additional capital to take his business to the next level. TNG has traditionally opened 10 to 15 stores a year financed by profits alone. But he says that with outside investment, we want to set up 50 to 60 stores per year in the next four or five years.

16 PROMOTION 16 // ECONOMIC DEVELOPMENT States of the Nation Brazil is the world s fifth-largest nation by area. It is divided into 26 states as well as the federal district and capital, Brasília. The largest states, Amazonas and Pará, occupy territories larger than neighboring nations such as Peru and Colombia, while the six most populated are each home to at least 10 million residents, with more than 40 million calling the state of São Paulo home. The top six states in terms of population São Paulo, Minas Gerais, Rio de Janeiro, Bahia, Rio de Grande do Sul and Paraná collectively contribute around two-thirds of Brazil s total GDP. Some of the country s smaller states, however, are among its fastest-growing, and as their populations transition to the middle class, they are boosting both Brazil s consumption and its economic expansion. Espírito Santo, which lies along Brazil s southeastern coast, bordered by Bahia and Minas Gerais to the north and west and by Rio de Janeiro to the south, is one of the country s success stories. Modestly proportioned and ranking 23rd nationwide by territory, it boasts a population of about 3.5 million and an economy that grew 9.2% in 2011, on par with China s growth and well above the national 2.7% increase. That booming economy was founded on agriculture, primarily coffee and fruit processed for juice, but has become increasingly diversified, expanding into offshore oil and gas, mining and steelmaking, as well as housing one of Latin America s largest ports. Eighty percent of Brazil s ornamental rock exports originate in the state. Espírito Santo is Victoria, Capital of Espírito Santo Governor Renato Casagrande recently launched PROEDES, Espírito Santo s sustainable development program. pushing revenues and federal funds into road and rail networks, education and sanitation projects. The state has also secured close to $50 billion in investment through 2016 to drive development in hydrocarbons, build a new port and support the burgeoning service sector. I want investors to find clarity and transparency in relationships, says Espírito Santo s governor, Renato Casagrande, and good opportunities for business. But Casagrande is just as concerned about ensuring that the state s progress continues, and he recently launched PROEDES, a statewide sustainable development program focusing on domestic and global competitiveness. I also want people to think of Espírito Santo for its quality of life, he says. Our development has to be sustainable economically, environmentally and technologically. The concept of sustainability has to be distributed throughout the whole territory and be efficient, so our quality of life remains at a high level. Paraíba As the easternmost point in the Americas, Paraíba is another territorially compact state that is beginning to punch above its weight economically. Located on the country s northeast seaboard, between Rio Grande do Norte, Ceará, and Pernambuco, Paraíba is home to

17 ECONOMIC DEVELOPMENT // PROMOTION million people and attracted more than a million visitors in 2012 thanks to its pristine Atlantic beaches and historic colonial capital, João Pessoa. Tourism will likely remain one of the pillars of Paraíba s economy and an important contributor to the growing service sector, while industrial development is focused on the country s second largest cement plant and a $500 million canal that will irrigate almost 40,000 acres of agricultural land. The federal government committed nearly half a billion dollars to the largest highway program it has undertaken in Paraíba, which will pave almost 1,200 miles of roads and provide access to 50 cities by And last November, Governor Ricardo Coutinho signed a $250 million deal with the National Bank for Economic and Social Development (BNDES) to fund a wide range of infrastructure projects. These projects include one of Coutinho s priorities: education. Paraíba already has 21 cities with higher education institutions, but it is opening 15 new state technical schools and has cut illiteracy by a third in just two years. The governor believes that an educated workforce is essential to attracting business to the state. Paraíba is open for investment, says Coutinho. It has a clear policy for public and private investments. This is what really matters, that the investment works out, because when the company succeeds, the state succeeds as well. Piauí More than four times the size of Paraíba, but with a population of just over 3 million, Piauí has traditionally ranked among Brazil s least developed states. Mostly inland, with only 40 miles of coast in the north, it is located in the northeast and borders five other states. In recent years, however, due to rich natural resources and strong institutional support, Piauí has been firmly on course for a brighter future. Government programs to alleviate poverty have reduced the number of the Serra da Capivara National Park, Piauí poor from 40% to 7% in a decade. With five hydropower plants and wind farms located in the north and south, almost three-quarters of the state has easy access to energy, and Piauí is a leader in biomass. The state will soon be selfsufficient in terms of energy, according to Governor Wilson Nunes Martins, a neurosurgeon by trade who was elected in 2010 and is a descendant of Piauí s first governor. The agribusiness sector is flourishing. Soybeans, corn, cotton, cashews and honey are its primary cash crops, alongside seed production and livestock

18 PROMOTION 18 // ECONOMIC DEVELOPMENT rearing. Piauí also has Brazil s thirdlargest iron ore mine and possesses phosphate, nickel and precious stone deposits. Tourist attractions, including its 100 miles of Atlantic and fluvial beaches, the Parnaíba River Delta, and the UNESCO World Heritage listed Serra da Capivara National Park, are quickly diversifying the state s economy. Piauí has great potential, says Nunes Martins. We took big steps in the last decade, having an annual revenue of $3 billion and annual growth of around 10%. Tocantins Tocantins is Brazil s youngest state, created in 1988 after it split off from Goiás to the south. Landlocked and bordered by six other states, and home to less than 1.4 million people, it covers an area of over 275,000 square kilometers in the heart of the country, on the border between the Amazon rain forest and the coastal savanna. The Araguaia and Tocantins rivers feed the region s fertile pastures, and Velha waterfall in Jalapão State Park, Tocantins it contains the world s largest river island, Ilha do Bananal. And the stunning tropical savanna of Jalapão State Park the location for the 18th season of Survivor is becoming popular with adventure seekers and ecotourists alike. Governor José Wilson Siqueira Campos, a leader in the separatist movement, has acted as Tocantins first, third, fifth, and now eighth governor since the state was created. In his career, he has helped his state prosper, and in 1989 he oversaw the construction of the Belo Monte hydroelectric dam, Brazil s first private-public partnership. He also was instrumental in paving over 3,000 miles of road and extending 23,000 miles of transmission lines statewide. In his current mandate, the governor has signed off on a $2.5 billion manufacturing plant for Brazilian cellulose giant Braxcel. The plant is projected to be producing 1.5 million tons of cellulose a year by He has also authorized a Spanish company to begin feasibility studies for a $375 million surface transportation network in the state capital of Palmas, and he recently toured Spain to promote Tocantins enviable environment for development of renewable energy projects. Siqueira Campos has set up an environmental and sustainable development department to ensure that Tocantins retains its place as the least deforested state in the Amazon, while still furthering economic progress. Our people are engaged in the process of searching for innovation, he says, because that way we do not hurt future employment or economic competitiveness. We have to promote social sustainability. PARAÍBA BEAUTIFUL AND SUSTAINABLE Paraíba aims to foster sustainable tourism. Paraíba has 75 miles of breathtaking coastline as well as Dinosaur s valley, and archaeological sites. João Pessoa, the state capital, is one of the oldest cities in Brazil. Its beautiful historical downtown is considered a heritage site by IPHAN (Historic and Artistic National Heritage Institute). Paraíba colored cotton is internationally recognized. Initially developed by Embrapa (Brazilian Enterprise for Agricultural Research), the product has been commercialized mostly by cooperatives, conquering national and international markets. The c olored cotton appeals to the consumer market that demands organic, environmentally friendly, hypo allergenic materials.

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