The following article comes to the Strategic Sourceror courtesy of Supply Solutions, a leading Supply Management services provider based in Brazil. 

The year 2016 in Brazil began with a very turbulent political and economic environment. Many denunciations have been reported to the Brazilian Federal Court, involving both the President and Ex-President’s party and members of the National Congress. All these events have been causing a very unstable business environment – effectively producing an inflation and a recession at the same time. Companies and customers have been careful; few companies are risking investing, unemployment is increasing rapidly; and people have not been consuming as they had been before. But  export can be the way out of the crisis for the installed industries.

Although the political climate is unpredictable, government sectors must continue to work and seek solutions to their problems. The Brazilian Ministry of Development, Industry and International Commerce had elected 32 markets to be won, recovered, or consolidated. Mercosul countries are the main market for Brazilian goods and services, followed by China, EU, and North America. Winning back market share will be a very challenging task. In 2002, 25% of exports were sold to the US. In 2015, they were 12.6%. In the meantime, other players filled the gap Brazil left behind, so companies will have to be more competitive and confident.

According to Apex (the federal agency created to develop Brazilian goods and services abroad), there are 16 million enterprises in Brazil, out of which 1% exports.  20% of those who export constitute 80% of all traded volume. Apex’s challenge is making Brazilian companies known not only for commodities production, but also for their manufactured and semi-manufactured products. Engineering, biotechnology, and infrastructure sectors will integrate Apex projects in 2016.

In December 2015, CNI – The Brazilian National Confederation of Industry – which is an organization that officially represents Brazilian industry, released a report on the importance of exports due to Brazil’s situation in the short and medium terms.

  • 28% of the enterprises which answered the survey on this subject have exported over the last 12 months. 57% of them intend to increase their volumes.
  • The main sectors willing to expand are Machinery and Equipment, Textile, and Nonmetallic Minerals.  Other sectors which intend to expand, but in a lower level, are Pulp and Paper and Mineral Extraction.
  • 48% of the respondents have not exported over the last 12 months. 13% of them intend to export from now on.
  • The main sectors new to export are Electrical Appliances and Materials and Household, Hygiene, Personal Care and Perfume. In a shorter term forecast there are Leather, Apparel, and Printing sectors.

Even if the current scenario improves and the business environment becomes more favorable in the medium term, some conditions such as currency devaluation and available skilled labor will unfortunately continue for a longer period.  This is why enterprises and the government are looking at export as an alternative to the falling domestic demand, and considering Brazil as a low cost country sourcing candidate also.
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Ken Gaul

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