São Paulo Outlook 2010 - English by Análise Editorial

2 0 1 0

vSão Paulo

Outlook

GLOBAL METROPOLIS GDP

POPULATION

MOBILITY

São Paulo and its area

STOCK EXCHANGE

The metropolitan region

São Paulo’s subway

of influence generate

São Paulo is home to

of São Paulo shelters

system transports

388 billion dollars in

BM&FBovespa, one of

about 20 million people,

1 billion passengers

wealth per year, the

the 5 LARGEST stock

the 3rd LARGEST

every year and is

HIGHEST

exchanges in market

urban agglomeration

among the 15 LARGEST

capitalization

on the planet

in the world

amount worldwide

See more on page 10

www.analise.com

THE CITY OF Sﾃグ PAULO IS FULL OF ATTRACTIONS.

THE BEST OF ALL IS THE PEOPLE.

SÃO PAULO. ELECTED THE BEST TOURISTIC DESTINATION IN BRAZIL*

cityofsaopaulo.com

*Researches: Ministry of Tourism/Sebrae National/FGV and Award “The Best of Viagem e Turismo Magazine – Readers Choice.”

São Paulo

paulo liebert/ae

index

Outlook

14 FUTuRe of SÃO PAULO The opinion of the city's executives about the prospects of São Paulo

16 Understanding São Paulo 18 The city's influence

38 opportunities An analysis of the most promising sectors for investments in the city

40 Promising markets

Children play during a class at a public education center: the school system maintained by the municipal government has 1 million students

42 The motor of Brazil 48 Global business center 56 Intelligence and logistics 62 Mobility and infrastructure

64 challenges What must improve in the city and the actions that have already been taken

66 City of solutions

80 metropolis

120 telecommUNIcations

82 The capitals of development

122 Connected city

84 Emerging cities

126 Wireless expansion

86 financial

128 mobility

88 Consolidated financial center

130 The city that never stops

94 Trading center

134 São Paulo's fleet

96 real estate

136 Healthcare

98 Growth in profits

138 São Paulo healthcare grows

72 The security industry

102 Living in São Paulo

142 Imported patients

104 Constant renovation

144 events 112 law practice

São Paulo OUTLOOK

146 An event every six minutes

114 Cutting-edge law

150 Maximum occupancy

118 Concentration of professionals

152 Calendar www.analise.com

index

166 population

204 income

168 Diversity and qualification

206 One of the ten wealthiest

172 Stable population

210 Soaring sales

174 Families in São Paulo

212 consumption 188 research and development 190 Quality science 194 Scientists' profile

214 The new customers 218 Luxury market

Editorial

Contributors

Presentation

Staff

Methodology

220 The city that never sleeps

226 environmental management

198 Continuing education

228 A step ahead

202 Focus on the market

232 Vehicular inspection

divulgação/BM&FBovespa

196 education

Students visit the headquarters of BM&FBovespa, in the central region of the city: the São Paulo Stock Exchange’s main indicator, the Ibovespa, had one of the best performances in 2009 www.analise.com

São Paulo OUTLOOK

THE CITY OF SÃO PAULO IS FULL OF ATTRACTIONS.

THE BEST OF ALL IS THE PEOPLE.

SÃO PAULO. ELECTED THE BEST TOURISTIC DESTINATION IN BRAZIL*

cityofsaopaulo.com

*Researches: Ministry of Tourism/Sebrae National/FGV and Award “The Best of Viagem e Turismo Magazine – Readers Choice.”

EDITORIAL

an unprecedented survey about the city of São Paulo

hen the opportunity arose During three months, the team consulted dofor Análise Editorial to zens of experts and executives, researched alv make an x-ray of São Paumost one hundred sources, among government Outlook lo city, we soon realized organizations and local and foreign entities, in we were faced with a chalsearch of data and statistics. Also, Análise Edilenging and fascinating torial interviewed more than 200 entrepreneurs project. Challenging because the possibilities and executives, between March and April of METROPOLIS for topics, approaches and sources was huge. 2010, to understand how business is done in To define what is truly important to address the city by the people who do it. and how the information should be displayed, The result confirms that the vocation of São so that the publication does not become a tePaulo is truly to be a business center for the dious mass of data, is reason enough for a vast country, for the region and for several parts of amount of research, not to mention the sorting the world. Most of those interviewed, Braziof the information itself. Fascinating because lian and foreign companies operating in the it requires delving into the complexity of one city, claim that there is no better city to base v of the world’s largest metropolises. their business. When looking at the future, Outlook The result is this edition of SÃO PAULO three out of every four expect an even greater OUTLOOK that is in your hands, a publicagrowth over the next years. METRÓPOLE tion that shows how the city operates for the There is other data in the publication that business world. An impressive job which also gives evidence of the grandness of the city has a noteworthy peculiarity. In addition to the and its cosmopolitan characteristics. Such as English version aimed at the international puthe photographic ensemble, comprised of 16 blic, Análise Editorial produced an edition of photos and produced especially for this edithis publication entirely in Mandarin. This is a tion, that identifies groups of immigrants that singular initiative, which draws the city of São chose the city to build their lives and who Paulo even closer to one of the most important contribute to one of the main differentials of markets in the world. São Paulo and also to one of its greatest sources of wealth: The development process of this edition is in itself a de- its diversity. Another ensemble, also exclusive, points out monstration of São Paulo’s energy. How many cities could what can be done in the city that is referred to as the “most generate 1,500 indicators, 124 photographs and 240 pages 24 hour” city in the world. of relevant information, aimed at those who invest and need We would like here to thank the city government of São structure for their business? Not many. By simply paging Paulo and SPTuris, who saw this yearbook as an important through this publication, you will notice that the metropolis tool to explain the city to those who have never visited it, or, presented here has much to offer. even, for those who are familiar with it but need a substanSão Paulo faces the problems typical of large cities that tial, organized collection of data in one single publication. have grown without any kind of planning. Currently, the And, as such, they became the sponsors of this project. city shelters the sixth largest human agglomeration in the This edition of SÃO PAULO OUTLOOK was distributed world. This project shows just how complex this metropolis by Análise Editorial to the directors of the largest compais. The objective is to explain how the challenges that the nies in Brazil, opinion formers and decision makers. And city still has to overcome impact or can impact the opera- it will be used by São Paulo’s city government and by SPtion of the city and how the authorities and the community Turis in international missions and events, such as the Inare responding to them. SÃO PAULO OUTLOOK attempts ternational Shanghai Fair that will be held between May to show what the city’s true differentials are for business and October 2010, in addition to being made available in and why they can be interpreted as such, in addition to sho- electronic format. wing how the city compares with other large business hubs We hope the content on the following pages does jusaround the world. tice to the grandness of São Paulo city. Good reading. 0 To create this x-ray, more than 40 professionals were emSilvana Quaglio ployed under the leadership of executive editor, Gabriel Attuy. 2 0 1 0

São Paulo

GLOBAL GDP

São Paulo and its area

STOCK EXCHANGE

POPULATION

MOBILITY

The metropolitan region

São Paulo’s subway

of inﬂuence generate

São Paulo is home to

of São Paulo shelters

system transports

388 billion dollars in

BM&FBovespa, one of

about 20 million people,

1 billion passengers

LARGEST

wealth per year, the

the 5 LARGEST stock

the 3

LARGEST

exchanges in market

urban agglomeration

among the 15 LARGEST

capitalization

on the planet

in the world

amount worldwide

every year and is

See more on page 10

www.analise.com

2 0 1 0

São Paulo

GLOBAL A área de inﬂuência

BOLSA DE VALORES

A região metropolitana

O sistema de trens do

de São Paulo gera

PIB

São Paulo abriga a

de São Paulo possui

POPULAÇÃO

metrô de São Paulo

MOBILIDADE

388 bilhões de dólares

sede da BM&FBovespa,

cerca de 20 milhões

transporta cerca de

em riqueza por ano, a

que está entre as

de habitantes e é a

1 bilhão de pessoas por

10ª MAIOR cifra entre

5 MAIORES bolsas

3ª MAIOR aglomeração

ano e está entre os

as cidades do mundo

de valores do mundo

urbana do globo

15 MAIORES do planeta

Saiba mais na página 10

www.analise.com

São Paulo OUTLOOK

CONTRIBUTORS CONTRIBUTORS

heavyweight insight SÃO PAULO OUTLOOK’s production had the help of hundreds of professionals. We would like to thank them kindly for their willingness to share their knowledge and to help us improve this edition. The City Government of São Paulo, its entities and departments were particularly important sources of information for this edition. We extend our most heartfelt thanks to these professionals, who were always ready to answer our questions and to help us in this daunting task of creating a full panorama of São Paulo city.

free stock

Acácio Queiroz-president of Chubb Seguros, Adriano Cândido Stringhini-communications director of Sabesp, Adriano Lima-president of Cerâmica Gyotoku, Afonso Carneiro Lima-research coordinator of Fundação Instituto de Administração, Alberto K. Takahashi-CFO of Rede Duque, Alberto Mantuanele-general manager of Icaterm, Aldo de Paula Junior-partner of Sacha Calmon Misabel Derzi Advogados, Alejandro Miguel Roig-communications and foreign relations director of Repsol Brasil, Alessandra Fariaregional director of Axis Communication, Alessandro Vay-human resources manager of Samsung Eletrônica, Alexandre BertoldiCEO of Pinheiro Neto Advogados, Alexandre Kaknis Neto-financial manager of RollsRoyce do Brasil, Alexis Stepanenko-former Mining and Energy Minister, Almir Martinez-director of global investments, André

Almeida-sales manager for Latin America of EF Corporate, Andrea Guasti-business vicepresident of Cisa Trading, Andrea Matarazzo-culture secretary of São Paulo state, Angelo Derenze-director of Casa Cor, Antônio Eduardo Rodrigues-operations vice-president of BRQ IT Services, Antônio Emílio Clemente Fugazza-CFO and investor relations director of Ez Tec, Antônio Fadigapresident of Fischer + Fala, Antônio José Claudio Filho-commercial director of Bycon, Antonio Marcílio Oliveira Silva-commercial director of Mark Flex, Antônio Sérgio Martins Mello-institutional relations director of Fiat Automóveis, Astor Milton Schmitt-CFO and investor relations director of Randon Implementos, Augusto Viannastrategy and operations director of Motorola Industrial, Benjamin Quadros-president of BRQ, Boris Tabacof- vice-president of Suzano Papel e Celulose, Cândido Malta Campos Filho-director of Urbe Planejamento, Carl Emberson-general director of Seminars, Carlos Eduardo Camargo-foreign communications director of Embraer, Carlos Leão-commercial director of Saint Gobain, Carlos Rubens Ferro Vieira-director partner of TGV Consultoria, Carlos Schad-president of Tietê Paraná Development Agency, Celso Cláudio de Hildebrand e Grisi-director president of Instituto de Pesquisa Fractal, Cesar Sanner-director of Sanner Importadora de Pneus, Charles P. Martins-vice-president of Wizard Brasil, Chieko Aoki-president of Blue Tree Hotels, Claudio Borges-techni-

cal and project vice-president of ArcelorMittal Tubarão, Claudio Luiz da Silva HaddadCEO of Insper, Claudio Luiz Lottembergpresident of Albert Einstein Hospital, Claudio Manassero-president of Tectrain, Claudio Oliveira-general director of Redecard, Clóvis Ailton Madeira-partner of Directa Auditores, Cristina Ferraz-market relations director of Casa Cor, Cyro Magalhães-human capital director of Watson Wyatt Brasil, Dacio Damiani-technical manager of Golden Cross, Daniel Bueno-marketing manager of HDC, David Augusto Rodrigues Perna-analyst at Banco Safra, David Barioni Netopresident of Facility, David José Santaliestra de Figueiredo-legal director of Banco de Lage Landen Brasil, Décio Ricardo Galvão-executive director of BHS, Denise Nader Porcelli-vice-president of legal matters of Rhodia Latin America, Dilezio Ciamarro-director of Ciamarro Têxtil, Dirceu Varejão-commercial director of Vitopel, Domingos Figueiredo de Abreu-investor relations director of Bradesco, Dorival Oliveira-development director of Arcos Dourados, Edgard Antonio Pereiraconsultant of Edgard Pereira& Associados, Eduardo de Oliveira-operations director of CIEE, Eduardo Faci-business director of MedLink Saúde, Eduardo Henrique de Lima Peralta-partner of Peralta group, Eduardo Pocetti-CEO of BDO Trevisan, Élio Bergemann-president of Estre Ambiental, Emerson Bonfim Ribeiro-legal director of Ford Credit, Emerson Casali-executive manager of labor relations and associative development of CNI, Evaldo Barbosa-sales manager of REP, Evandro Araújo-director of Cooperfloresta, Evandro Moraes-commercial manager of Aleusa Brasil, Evandro Orsi-director of economy and statistics of Abi-

From the first row, clockwise: Dorival Oliveira, director of development of Arcos Dourados; Alessandra Faria, regional director of Axis Communication; Sérgio Diniz, financial director of GMAC Bank; Maria Laura Santos, marketing director of BDF NIVEA Brasil; Paulo Pianez, sustainability director of Carrefour; Nestor Castro Neto, president of Voith Paper South America; Boris Tabacof, vice-president of Suzano Papel e Celulose; Wagner Ferrari, executive director of banking center network of Santander Group; Juan Quirós, president of Advento group; Márcia Nakahara, commercial director of Symantec Brasil

São Paulo OUTLOOK

www.analise.com

CONTRIBUTORS

maq, Expedito Borges da Fonseca-executive director of Editora San Borges, Fabiano Cespe Barbosa-national environment supervisor of Delta Construção, Fábio Medeiroscorporate commercial director of Gran Sapore, Fábio Nascimento-business manager of Air Liquide Brasil, Fábio Tanaka-sales manager of Akzo Nobel, Fabrício Buenocommercial officer of Cargo World Logística Internacional, Fernando Arbache-managing partner of Arbache Serviços Educacionais e Treinamento, Fernando Barreto Bergamincorporate strategy manager of Camargo Corrêa Desenvolvimento Imobiliário, Fernando Moura-board of director’s member of Banco Alfa de Investimentos, Flávia Alves Bravineditorial director of Saraiva, Galo López Noriega-academic coordinator of Insper, Gil Duarte-partner of Leblon Green, Glaydon Mendes Coelho-commercial director of DIB do Brasil, Henrique Rodrigues-commercial director of Madevale, Hitoshi Castro-director of Banco Fator, Horacio Lafer Pivacounselor of Klabin, Humberto Gómez Rojo-president of Bridgestone Latin America and Brasil, Ireno de Carvalho-commercial director of Kodo, Jailton de Abreu-president of Marilan Alimentos, Jaime Vergani-director of Randon, Jammes Rossi-partner of Turbimoendas, Jandir Santin-general director of Laminados Triunfos, Jayme Nigri-consultant, João Carlos Senise-vice president of Human Resources of Pepsico do Brasil, João Dória Júnior-president of Doria Associados, John Lin-partner director of Fama Private Equity, Jorge da Cunha Lima-president of the Curator Council of the Padre Anchieta Foundation, Jorge Parente Frota Júniorpresident of the Social Responsibility Council of CNI, José Américo Braz-sales manager of EMIC, José Henrique do Prado Fay-managing director of Alemão Oswaldo Cruz Hospital, José Mário-general manager of CSN, José Roberto Lettiere-director of administration and finances and investor relations of Alpargatas, Josef Barat-managing director of Planam, Juan Quirós-president of Advento group, Julião Flaves Gaúna-director president of the Social Responsibility Council of FIEMS, Junior Carrara-security sales manager of Anixter, Khalil Kaddissi-corporate legal manager of TOTVS, Leandro A. de Conto-innovations manager of Cya, Leomar Luiz Somensi-commercial director of Aurora Alimentos, Leonardo Martinez-partner of Lorumara Importadora e Exportadora, Leonel Andrade-president of Credicard, Eduardo Wilson Bar-commercial director of Lincx Sistemas de Saúde, Lucy Aparecida de Sousa-president of Apimec Nacional, Luis Carlos Bonfim-sales executive of Whitford, Luis Eduardo Moehlecke-director of Evasola, Luis José Santos Cabral-senior consultant of Transpetro, Luiz Alberto Ferreirabusiness director of MGI, Luiz Alves de Lima Filho-executive manager of Petrobras Distribuidora, Luiz Antonio Biazolli-commercial director of ALE Combustíveis, Luiz Antônio Mameri-president of Odebrecht

www.analise.com

Latin America and Angola, Luiz Aubert Neto-president of ABIMAQ, Luiz F. M. Vieiravice-president of Booz&Company, Luiz Fernando Christe Roschel-legal manager of Voith, Luiz Gebrim-medical director of Pérola Byington Hospital, Luiz Ongaratto-CEO of Tramontina, Luiz Sérgio Correia-senior engineer of Panasonic, Lydia Sayeg-president of Casa Leão, Maílson Ferreira da Nóbrega-partner of Tendências Consultoria, Manoel Horácio Francisco da Silva-president of Banco Fator, Marcelo Alecrim-president of ALE Combustíveis, Marcelo Doria Durazzo-CEO of M D Durazzo Serviços Médicos, Marcelo dos Santos Campos-manager of legal center of Delta Construção, Marcelo Finotti-corporate manager of Credit Products of Serasa Experian, Marcelo Mendes-commercial vice-president of SAS, Marcelo Noll Barboza-president of Dasa, Márcia Nakahara-commercial director of Symantec Brasil, Márcio Percival Alves Pinto-financial vice-president of Caixa Econômica Federal, Marco Antônio Branquinho Junior-assistant director of Cedro Têxtil, Marco Antônio Coelho Filho-executive director of Empresa Brasil de Comunicação, Marcos Fonseca-director of RFR Reciclagem, Marcos Hashimoto-partner of Lebre Consultoria, Marcos Rimoli Próspero-vice-president of human capital of Walmart Brasil, Maria Elisa Gualandi Verri-partner of TozziniFreire Advogados, Maria Laura Santosmarketing director of BDF NIVEA Brasil, Mariana Palha-director of Prime International Medical Concierge, Mário Allan Ferraz Mafra-administrative and financial director of Wheaton Brasil Vidros, Maurício Bacellar-communications and sustainability director of TIM Brasil, Mauro Daffre-director of new businesses of NÓS, Mauro GamaCEO of services at Rolls-Royce Brasil, Maximiliano Guimarães Fischer- administrativefinancial and investor relations director of Profarma, Michael Lenn Ceitlin-CEO of Mundial, Miguel Abuhab-chairman of the board of directors of NeoGrid, Milto Portiguione-director of Remac, Murilo Morenoproduction director of MAJ Moreno, Nelson Duarte-administrative vice-president of Helbor Empreendimentos, Nelson Falavinavice-president of sales of Tetra Pak, Nestor Castro Neto-president of Voith Paper South America, Norberto Antônio Camargo-administrative manager of Proquitec, Octavio Ratto Júnior-vice president of Banco Luso Brasileiro, Odair Renosto-industrial director of Caterpillar Brasil, Osmar Elias Zogbipresident of EAZ Participações, Otávio Carvalheira-market growth and strategy director of Alcoa, Othniel Lopes-president of Parmalat, Paulo César Furlanetto-CFO of Liquigás, Paulo Sérgio Kakinoff-president of Audi Brasil, Paulo Pianez-sustainability director of Carrefour, Paulo Veras-counselor of Instituto Empreender Endeavor, Paulo Ximenes-partner of Ximenes Engenharia, Pedro M. Martins-director of Brazilian Business School, Plínio Assmann-partner of

Brain Engenharia, Rafael Mendes Gomeslegal vice-president of Walmart Brasil, Ramiro Gonçalez-market intelligence director of FIA-USP, Reginaldo Silva-quality manager of Orion, Reinaldo Moreno-partner of Captania, Renato Astolfi-commercial director of Euroamerica Pneus, Renato de Britto-general manager of legal department of Semp Toshiba, Renato Nizo-accounts manager of Banco do Brasil, Renato Pelissaromarket development manager of Yahoo! Brasil, Ricardo Alves Bastos-vice-president of legal and corporate matters of Johnson&Johnson Latin America, Ricardo Loureiro-president of Serasa Experian, Ricardo Magalhães Simonsen-director of Mineral Engenharia e Meio Ambiente, Ricardo Miranda Apa-board advisor of GE Química, Ricardo Verona-rubber unit manager of Quantiq, Roberta Gonzaga-accounts manager of Lanxess, Roberto Faldini-president of Faldini Participações, Roberto Vertamatti-managing director of Apus Serviços Contábeis, Robson Tuma-corporate planning director of Liquigás, Rodrigo Pinheiro de Campos-sales manager of Apolo Tubos e Equipamentos, Roger Shoji Miyake-commercial director of Abbott Laboratórios do Brasil, Romeu Tuma-Senator of the Republic, Ronaldo Megda-vice-president of Tracker do Brasil, Ronnie Peterson C. Bitencourt-technical manager of Lab System, Rosana Lima Zanini-legal director of Droga Raia, Rubens Lopes da Silva-partner of Macso Legate Consultores, Rubens Ogawa-general manager of credit of Banco Panamericano, Sandra Barbosa-operational director of Vantine Solutions, Sérgio Borriello-financial and controllership vice-president of Sul América Seguros, Sérgio Diniz-CFO of GMAC Bank, Sergio Pereira-international trade director of Nitroquímica, Sergio Pinheiro Rodrigueslogistics vice-president of Caixa Econômica Federal, Sergio Souza-general director of Interfile, Sérgio Waib-president of Maior group, Sidney Matos-general director and vice-president of JCB Brasil, Silvio Guitticommercial manager of Schneider Eletric, Silvio Lima-commercial manager of Inebras, Simone Caggiano-ambassador of Audi in Brazil, Solano Magno da Silva Neiva-president of Wtorre, Soraya Rosar-executive manager of international affairs of CNI, Telma Sobolh-president of the volunteer department of Albert Einstein Hospital, Valéria Sepulveda da Costa-general human resources manager of Semp Toshiba, Valmir Jorge Gibi-president of Madeireira Santa Rita, Vilmar Teixeira-general director of Regional Química, Wagner Ferrari-executive director of banking center network of Santander Group, Waldir Luiz dos Santos-commercial director of Espaço da Madeira, Walter Lazzarini-director of Walter Lazzarini Consultoria Ambiental, Walter Romano-executive manager of Sicetel, Wanderson Crisp-sales manager of Equipabor Comércio de Máquinas, Wanks de Souza-financial manager of Simbras 0

São Paulo OUTLOOK

Itaci BATISTA/AE

PRESENTATION PRESENTATION

The Edifício Altino Arantes, also known as the Banespa building, in the central region of the city, is the third highest in São Paulo and was built in 1947: the state bank was sold to Spain-based Santander in 2000

to explain a city Classifying and comparing large global urban centers is a complex task that requires standardized methodologies and parameters 10

São Paulo OUTLOOK

ão Paulo is a grand city in many aspects. In generation of wealth, the urban agglomeration is currently the world’s tenth largest, according to estimates of consulting firm, PricewaterhouseCoopers and, in 2025, is expected to reach the sixth highest Gross Domestic Product (GDP). With almost 20 million inhabitants, the metropolitan region of São Paulo is the third largest in the world, according to the UN. Furthermore, the city is in 12th place worldwide in number of international business events, according to the International Congress www.analise.com

PRESENTATION

and Convention Association (ICCA), is among the 25 most expensive for a foreigner to live according to research of Canadian-owned consulting firm, Mercer, and has the second largest taxi fleet, only second to New York. The relevance of giant urban centers in shaping global economic trends is unquestionable. They are agglomerations of consumers, entrepreneurs, company headquarters, decisions, capital, labor and a series of other values that, if analyzed, can give us a hint of which place is most expensive, attractive, conservative or up-to-date. The challenge in this aspect is to produce a broad overview to classify these centers. The points we can measure and rank more easily are the social, economic and cultural indicators. This data refers to each city, but most of what makes a place relevant is its interaction with and influence on the rest of the market. How then do we evaluate cities, such as São Paulo, Shanghai and Mumbai, and compare them to established business centers, such as New York, London or Tokyo? One of the broadest classifications for cities was created by Globalization and World Cities Research Network (GaWC), a group of studies based in the university of Loughborough in England that includes the collaboration of several other institutions and researchers. In this analysis, the most influential cities are ranked as alpha++. This category includes only New York and London, “clearly more integrated than all other cities,” according to the institution’s report. The alpha+ group is comprised of eight cities, among which Paris, Tokyo, Milan and Shanghai, which “complement” the two main ones. The alpha and alpha- cities, in which São Paulo is included, comprise 31 which “link major economic regions and states into the world economy”. From this standpoint, the world’s main cities act as the link that connects their region or area of influence to the rest of the market. In this two-way exchange, they gather local information and distribute it to the network, while allowing regionalized access to global www.analise.com

intelligence. The importance of a city, therefore, also depends on its location, if it is close to another more influential one and if this region has any global interest. If we look at cities from this point of view, the importance of these centers becomes clearer. The information and capital that moves the global economy must necessarily flow through them. The contact points of this network become important and begin to require quality services and infrastructure and to concentrate decision makers.

A big part of what makes a city relevant is its influence on other markets The other side of this equation is social. The increasing presence of companies and services in cities means more people, which generates other demands under the quality of life criteria. Safety, transport infrastructure, public services and education are only a few. These matters are not directly related to business, but to the people who conduct it. In both aspects, business and social environment, São Paulo registers impressive indicators. In May 2010, the city was ranked as sixth in the world as that which will most attract investments over the next three years, according to a KPMG study in combination with Greater Paris Investment Agency. The survey sample was comprised of more than 500 multinational executives asked to speak of the plans of their companies. When asked about which cities are expected to become more appealing over the next three years, regardless of the prospects of their companies, São Paulo was again placed in sixth, ahead of London, Paris and Dubai. In this discussion, Análise Editorial decided to make its contribution by creating a small survey aimed at more than 200 São Paulo-based entrepreneurs. These professionals pointed out, based on their experience in conducting business in São Paulo, the main positive points of the city as compared

with other centers, and where the city is expected to grow more significantly over the next decade. The result can be seen as of page 16 in this edition. In the social field, the city has given a leap in quality and availability of public services over the past few years. The amount of doctors in activity in the city, for example, jumped 31% from 2000 to 2009, while the population grew 5%. The city already has 84% of its sewage collected, an increase of 14 percentage points over the past 15 years, and 70% treated, ahead of countries, such as Spain, for example. Between 2000 and 2009, the number of homicides registered in the city dropped 77% to a rate of 11 for every 100 thousand inhabitants, similar to that of Mexico. In a few São Paulo districts, the index is closer to four for every 100 thousand inhabitants, equal to those of the safest cities in the world, such as Stockholm in Sweden. In addition to being one of the world’s largest in a series of indicators, São Paulo has also managed to grow in quality of life. The city has a Human Development Index (HDI) of 0.841, considered to be high and indicative of a highly developed region. In the Gini coefficient, which measures inequality in income distribution, the city stands at 0.45, close to the US rate. This does not mean that São Paulo city does not have a series of challenges to face and problems that still require efficient solutions. Some of these issues are analyzed on page 64 onwards in this edition. In terms of mobility, safety and environmental management, for example, the capital city still faces problems that are characteristic of developing cities. Regardless of the methodology used to evaluate and compare the cities, the general outlook for São Paulo is undoubtedly positive. More than prominence in the rankings, the data shows that the city has undergone profound change in the past decade and is now starting to reap the benefits of this growth. To verify this, one needs only to become familiar with it. 0 gabriel attuy

São Paulo OUTLOOK

THE CITY OF SÃO PAULO IS FULL OF ATTRACTIONS.

THE BEST OF ALL IS THE PEOPLE.

SÃO PAULO. ELECTED THE BEST TOURISTIC DESTINATION IN BRAZIL*

cityofsaopaulo.com

*Researches: Ministry of Tourism/Sebrae National/FGV and Award “The Best of Viagem e Turismo Magazine – Readers Choice.”

METHODOLOGY

Criteria used 1) Sources of information

2) Comparing cities

The sources used for the data referring to Gross Domestic Product (GDP), population, public services and other information related to official indicators of the municipality, metropolitan region and state of São Paulo, in addition to Brazil, were official entities linked to their respective governmental areas. Those most consulted are listed below. Municipal Traffic Engineering Department (CET), São Paulo City Tourism and Events Company (SPTuris), São Paulo Conventions & Visitors Bureau, São Paulo Transports (SPTrans), in addition to city departments. State Environmental Company of São Paulo State (Cetesb), Basic Sanitation Company of São Paulo State (Sabesp), São Paulo’s Subway Company (Metrô), Metropolitan Train Company of São Paulo City (CPTM), Data Analysis State System Foundation (Seade), São Paulo State Research Support Foundation (Fapesp), in addition to state departments. Federal, self-governing federal entities and state companies National Electrical Power Agency (Aneel), National Telecommunications Agency (Anatel), Central Bank (BC), National Economic and Social Development Bank (BNDES), Brazilian Airport Infrastructure Company (Infraero), Brazilian Geography and Statistics Bureau (IBGE), in addition to the ministries. Studies, reports and professionals of teaching institutions were also consulted, mainly from the Getúlio Vargas Foundation (FGV), the University of São Paulo (USP), the Applied Economic Research Institute (Ipea) in addition to the Viva o Centro and Nossa São Paulo associations. The data referring to specific sectors of the economy was collected mainly from class entities and private-sector companies. Those most consulted were: Brazilian Hotel Industry Association (Abih), Brazilian Association of Credit Card and Service Companies (Abecs), Brazilian Gastronomy, Board and Tourism Association (Abresi), Brazilian Mall Storeowners’ Association (Alshop), Comercial Association of São Paulo (ACSP), National Association of Financial Executives (Anefac), São Paulo Stock Exchange, Brazilian Equity Studies Company (Embraesp), Regional Medical Council of São Paulo State (Cremesp), Brazilian Bank Federation (Febraban), São Paulo State Industry Federation (Fiesp), Brazilian Bar Association (OAB), Civil Construction Industry Syndicate (Sinduscon), Syndicate for Purchase, Sale, Rental and Administration of Residential and Commercial Property Companies of São Paulo (Secovi) and Brazilian Fair Organizers’ Union (Ubrafe).

In relation to the data presented in this edition which compares cities of different countries, it is important to point out that most of the information sources used do not differentiate between the so-called municipalities and the metropolitan regions or urban agglomerations. This is because the concept of metropolitan region is not standardized and may mean different things to different countries. In most cases, the information presented relates to a) the data available and b) the cutoff point that is most similar to the others from a methodological point of view. This criteria was also used in the reports of the United Nations Organization (UNO), and its related entities, and in reports of consulting firm PricewaterhouseCoopers, the main sources of information for the data that compares cities in this edition. Also used a source of data were the World Health Organization (WHO), Organization for Economic Co-operation and Development (OECD), International Court of Arbitration (ICC), the World Bank, Joint Commission International (JCI), International Congress & Convention Association (ICCA), JP Morgan, Cushman & Wakefield, London Business School, Morgan Stanley, International Data Corporation (IDC) and Delloitte. In the context of cities in development, the criteria used was, whenever possible, to compare São Paulo to the main cities of BRIC countries, mainly Shanghai (China), Mumbai (India) and Moscow (Russia). In the case of cities in developed countries, the preference was given to the cities of New York and London, which have similar characteristics to São Paulo’s capital city as they are all important financial centers.

www.analise.com

3) Structure of publication São Paulo Outlook is divided into five main sections. The São Paulo’s Future section (page 14) includes an opinion survey with 200 of São Paulo’s most prominent entrepreneurs about the business environment and the future of the city. The Opportunities Section (page 38) highlights 14 business segments that are growing in the city and that offer good investment opportunities. The Challenges section (page 64) highlights ten of the main issues that São Paulo will have to face in the next decade. The Emerging Cities section (page 80) highlights and compares São Paulo with other cities in emerging countries. From page 86 onwards, 13 large economic and social topics are analyzed through organized sections that include news articles, infographics and photographs. 0

Editorial Committee

Eduardo Oinegue Silvana Quaglio e Alexandre Secco

CEO

Silvana Quaglio

Editorial Director Alexandre Secco

Comercial Director Alexandre Raciskas

Rua Major Quedinho, 111, 16° andar CEP 01050-904, São Paulo-SP Tel. (55 11) 3201-2300 Fax (55 11) 3201-2310 contato@analisecom

www.analise.com

São Paulo Outlook

PUBLISHER Silvana Quaglio EDITOR Alexandre Secco

Executive Editor: Gabriel Attuy Assistant-Editors: Ana Paula Marques and Célia Almudena Reporters: Carlos Larios, Giselle Godoi, Juliane Almeida, Larissa Martins, Paula Quintas, Valquiria Oliveira and Vivian Stychnicki Research: Aline Fraga, Bruna Abjon, Diogo Leite, Monique Abranches, Paulo Andrade, Renata Marins, Ricardo Simões, Sumaya Oliveira and Thaís Teles IT/Management: Cristiano Carlos da Silva IT: Henrique Dergado Layout: Cesar H. Paciornik e Régis Schwert Collaborators: Alisson Avila, Ana Landi, Andréa Háfez, Cássio Bittencourt, Cláudio Gatti, Claudio Rossi, Eduardo Belo, Françoise Terzian, Gilda Castral, Henrique Morais, Josélia Aguiar, Leonardo Pimenta Mourão, LiaVasconcelos, Marcio Caparica e Tatiana Petit Revision: Mary Ferrarini Translation: Sogl Traduções Circulation/Management: Lígia Donatelli

Advertising/Business executives: Alessandra Soares e Márcia Pires

São Paulo OUTLOOK

JOSÉ LUIS DA CONCEIÇÃO/AE

Children in room of the Catarina Kentenich Educational Center in the city’s northern region - 55% of the executive interviewed in the survey mentioned the high educational level as one of the advantages for investing in São Paulo

Or at laorem ilisi tio do commodo odion ver si. Andit autpatem eraessim quat. Magna coreet loreet lumsandit exeril eugait nis ex essi blaore molor si. Riliquipsusto dunt praessendre digna aliquissequi er ad doleseq uisisisisim zzril

Future

of S達o Paulo In the following pages is an analysis of the projections for the city in the next decade The opinion of executives about current and future business

Main sectors with most potential for growth in the city

Paulo Liebert/AE

PERSPECTIVE saúde PERSPECTIVE

Professional and amateur sporting events attract thousands of tourists to the city, such as the “Cycling and Learning” Event (photo) which brought together 8 thousand cyclists in 2009

understanding SÃO PAULO Análise Editorial interviewed 200 São Paulobased entrepreneurs to understand the qualities and challenges facing this global business center 16

São Paulo OUTLOOK

www.analise.com

PERSPECTIVE

ão Paulo is a city in transition. The city, which is the third largest urban agglomeration in the world in number of inhabitants and the tenth in generation of wealth, offers a wide array of investment opportunities and is situated in one of the markets that is expected to grow the fastest over the next years. The emerging economies are expected to grow around 6% over the next ten years, as compared with the forecast of 2% for developed countries, according to the Bank for International Settlements (BIS). The BRIC block, of which Sao Paulo city is a part of, is expected to lead the global economic growth. According to a projection from Goldman Sachs, these four countries by 2020 should together reach 50% of the Gross Domestic Product (GDP) of the G7 countries and the expectation is that Brazil will have the fifth highest GDP in the world. As well as being in one of the most promising markets in development, the city also shows signs of being more developed than most of its partners in Latin America and Asia since it enables better life quality levels, labor training and service availability. To better understand São Paulo’s attractions, Análise Editorial’s team developed, for the São Paulo Outlook publication, an opinion survey

for 200 entrepreneurs and executives who work at the main companies based in the city. The results, opinions and indicators shown on the next pages reflect the perspective of those who operate in São Paulo, do business in Brazil and have a privileged viewpoint of the city.

Corporate intelligence and business tourism São Paulo city, the main financial hub of Latin America, is also known for being the decision-making center of the main companies that operate in the region. Like other large urban centers in developed countries, São Paulo’s industrial production has moved to the interior of the state or to other regions in the country. In addition to attracting companies, São Paulo also has a reliable business environment structure. When asked which sectors have the greatest potential to develop over the next decade, the interviewees pointed out financial services, information technology and legal services. In these three sectors, the infrastructure and labor available are comparable to those offered in the main cities of the world. One of the points that most stands out in São Paulo’s infrastructure, according to the executives interviewed, is equipment related to the business tourism sector. São Paulo has the experience and the structure to hold

Profile of companies surveyed Business sector

Structure in São Paulo 14%

HQ and industrial base

Commerce

33%

Industry

Industrial base

61%

Services

29%

Branch

Among the 208 companies that answered the questionnaire www.analise.com

55%

Head Office

conventions and fairs and is 12th in the world in number of international events according to the ranking of the International Congress and Convention Association (ICCA). The main challenges that the city will have to face over the next decade in order to continue being attractive for investors and to improve its business environment are mobility and public security. Among those interviewed, 49% believe that mobility will not get easier in the city over the next ten years. Long commutes are a characteristic problem in large cities, and São Paulo is dealing with it mainly through investments to expand public transport, a matter of utmost importance according to 57% of the interviewees.

Profile of interviewees and methodology In order to carry out the survey, Análise Editorial’s team interviewed entrepreneurs, executives, consultants, analysts and partners of companies whose headquarters are based in the city of São Paulo or that do business often in the region. In all, 208 interviews were held in March and April of 2010. The purpose of the survey was to get the opinion of executives about the current situation of the city and the outlook for the next ten years from the viewpoint of these experienced professionals and not an opinion that would reflect the official position of the companies that employ them. The 208 interviewees work at companies from 55 different sectors of the economy, with emphasis on the areas of finance and insurance (10.6% of the sample), IT (7.3%), machinery and equipment (7.3%) and construction and real estate (4.4%). Out of all the companies or corporate groups that took part in the survey, 55% are headquartered in the city, 29% have a branch in São Paulo and 14% have both their HQ and production facilities in the region. More than 60% of the interviewees worked in the service sector. 0

São Paulo OUTLOOK

the city’s influence São Paulo city is the center of what will be the third largest urban agglomeration in the world by the end of 2010, according to estimates of the World Urbanization Prospects report of the UN. See the scale and Francisco importance of this metropolis Morato Mairiporã Franco da Rocha Cajamar Pirapora do Bom Jesus

The city The 6th largest city in the world in inhabitants

Population

11,04 mln

Area

1.523 km²

GDP

R$ 320 bln

35% of the State’s GDP

Santana de Parnaíba Barueri Jandira Itapevi

US$ 161 bln

12% of Brazil’s GDP

Caieiras

Vargem Grande Paulista

Osasco Carapicuíba

São Paulo

Taboão da Serra Embu

São Caetano do Sul Diadema

600,000 companies

Cotia

Itapecerica da Serra

São Bernard do Campo São Lourenço da Serra

Embu-Guaçu

Juquitiba

Sources: The breakdown of the metropolitan region of São Paulo and the population data are from the Brazilian Geography and Statistics Bureau (IBGE) and refer to 2009. The Gross Domestic Product (GDP) information, including per capita, is from the Seade Foundation linked to the Economy and Planning Department of the state government of São Paulo and refers to 2007

SP São Paulo

Santa Isabel

PR ATLANTIC OCEAN

Arujá Guararema

Guarulhos

Itaquaquecetuba Mogi das Cruzes Poá Salesópolis

Ferraz de Vasconcelos Biritiba Mirim

Suzano Mauá Ribeirão Pires Rio Grande da Serra Santo André

The metropolitan region The 3rd largest urban agglomeration in the world

C T I N A A T L

Cities

Population

19,8 mln

Area

7.943 km²

GDP

US$ 255 bln

R$ 509 bln

19% of Brazil’s GDP 56% of the State’s GDP

illustration/Cássio Bittencourt

perspective perspective

Investment

BUSINESS CENTER

ão Paulo city has consolidated its vocation as an aggregator of service companies over the past decade. Likewise to almost all large urban centers worldwide, industrial production has relocated to the suburbs and other regions of the country. Production leaves but the decision-making centers stay. This is what the survey drawn up by Análise Editorial for the São Paulo Outlook edition found out. Almost three fourths of the 200 executives interviewed claimed that, if they had to choose today, they would base their company headquarters in the city. The city’s profile as the company’s center of intelligence is confirmed by the sectors mentioned as having the greatest potential for growth. Out of all those interviewed, 66% stated that the financial sector is the most promising for the next decade. The second most voted was the information technology sector (IT). The city already concentrates most of the companies and professionals and shelters, among other multinational companies, the head offices of IBM, Dell, HP and SAP. Brazilian domestic demand is high and has consumed most of these services, until now. The expectation is that the expertise of São Paulo’s citizens will create opportunities in the international market.

Head office Where would you place your company’s HQ today?

28 %

Other Brazilian cities

72%

São Paulo

Business areas What are the sectors with most growth potential?

66% 56%

Financial services

IT services

40% 30% 27% R&D

Publicity and advertising

Legal services

Benjamin Quadros, president of BRQ

São Paulo is the business capital of Brazil “ and will tend to stand out for the growth of

”

its economy and its importance in the world

São Paulo OUTLOOK

www.analise.com

perspective

Resources

The city’s strong points

ão Paulo has the largest per capita income in the country, R$ 22.6 thousand a year, while the national average stands at R$ 17.9 thousand. High income generates a strong and diversified consumer market and encourages people to increase their schooling, which tends to produce more qualified labor. The high per capita income is, therefore, a strong point and the main business differential of the city, according to the executives. Seven of the ten people interviewed by Análise Editorial claimed that the offer of trained labor was the city’s main attraction for business. When asked what the main reason was for a company to set up or continue in São Paulo, the answer of the interviewees was unequivocal: 80% pointed out that it was because the city is the main financial hub of Latin America. The city also stands out for being the center of an efficient logistics system, which makes access to clients and suppliers easier. And, without doubt, São Paulo’s consumer market also merits attention. While the consumption of luxury articles and services places the city on par with great cities such as New York and London, the consumer development of the C, D and E classes opens up a new market of thousands of new buyers.

Infrastructure and social The advantages of São Paulo

74% 65% 60%

Qualified labor

55% 55%

Communication Income perHigh education Logistics capita level

The city Why be in São Paulo?

80% 80% 71% 60% 52% Financial hub

Close to clients

Consumption Networking center

Close to suppliers

Paulo Kakinoff, president of Audi Brasil

comparison with other metropolises, “InSão Paulo will have the best operating and labor costs over the next decade ”

www.analise.com

São Paulo OUTLOOK

SPTuris

LUZ STATION An architectural landmark of the city, entirely remodeled and which today shelters the Portuguese Language Museum, opened in 2006: in its first three years it received more than 1.6 million visitors

S達o Paulo OUTLOOK

www.analise.com

perspective

Challenges

WHAT NEEDS TO IMPROVE

hen thinking of the challenges that São Paulo has to face, the security issue is what comes to mind first. It is one of the biggest challenges, however, the top executives of companies based in Paulo city placed it in fifth in the list made from the survey. Eight out of every ten executives interviewed, claimed that the greatest challenge faced by the city and the strongest reason that could force them to move their business elsewhere would be the difficulty to circulate. The mobility problem is truly one of the biggest issues of this city, which is one of the largest in the world. The other three items arise primarily from the city’s economic progress over the past twenty years. In the opinion of the interviewees, the rising cost of labor, services available and property prices are practically the same in the consideration of the factors that could weigh against the city when the question is where to set up the business. The infrastructure, event venues and the quality of the hotel network currently meet the demand of the executives, however, they still require improvements and expansion. They are pointed out as essential items for the city’s growth, besides making networking more efficient, one of São Paulo’s strong points.

Infrastructure and social The challenges of São Paulo

17 %

35%

Urban transport

Infrastructure for events

27%

21 %

Hotel network

Medical services

The business Why be in other Brazilian cities?

82%

Traffic and mobility

70% 63% 62% 52%

Service costs

Labor costs

Price of real estate

Security

Manoel Horácio Francisco da Silva, president of Banco Fator

The most important point for “ São Paulo’s development is the professionalization of its labor ”

www.analise.com

São Paulo OUTLOOK

perspective

Comparison

DEVELOPED CITIES

n comparison with large cities of developed countries, São Paulo city stands out mostly in terms of its gastronomy, entertainment and tourism sectors. Out of the 200 executives interviewed, more than half mentioned São Paulo’s restaurants as one of its advantages in relation to developed cities. The city has the most diversified gastronomy in the world, in addition to offering quality hotel services. In the hotel area, it is on par with the most developed cities in the world. Even with the increase in labor in São Paulo over the past years, the city’s job market is still registering lower wages than those of other cities which are benchmarks in the business world. According to the executives interviewed, the cost and offer of manual labor in the city is considered to be an advantage. In comparison with developed cities, São Paulo still needs to improve the quality of security, mobility and communication infrastructure, mainly in relation to broadband and data networks. These areas are currently the target of investments and improvement actions on behalf of the public administration and the private sector, and are expected to grow significantly in the next decade.

The advantages In what is the city best?

57%

Restaurants

45% 39% 37% 37%

Offer of properties

Cost of labor

Labor offer

Hotel network

The disadvantages In what is the city worst? Security

Transport

79% 75%

Broadband

Data network

R&D

48% 39% 38%

Chieko Aoki, president of Blue Tree Hotels

São Paulo’s consumer market is made up of “ people in synch with innovations, demanding and ready to spend high amounts ”

São Paulo OUTLOOK

www.analise.com

perspective

Comparison

CITIES IN DEVELOPMENT

n the comparison with cities in development, considering mainly large cities of other BRIC countries, such as Mumbai, Moscow and Shanghai, the executives interviewed considered gastronomy (75%) and the high standard of the hotel network (64%) as the highlights of São Paulo city. The city also appears in the lead in the provision of medical and legal services. The most well equipped hospitals and the main law firms of Brazil are located in São Paulo city. In the legal field, the city also offers the services of foreign firms, such as Baker & McKenzie, Clifford Chance LLP, Linklaters, and Thompson & Knight, which have branches in the city. In labor and real estate matters, São Paulo loses to cities that are its direct competitors. The cost that is considered competitive in relation to developed cities is pointed out as being high if compared with the other important developing cities of the world. Security and mobility are also items that, according to the executives interviewed, affect the city negatively in the comparison with other developing countries.

The advantages In what is the city best?

75%

Restaurants

64% 57% 56% 56%

Hotel network

Medical Infrastructure Legal services for events services

The disadvantages In what is the city worst? Security

Transport

49% 42%

Cost of labor

Purchase of Rental of real estate real estate

32% 31% 30%

Humberto Gómez, president of Bridgestone Latam and Brasil

Brazil will grow even more in “ upcoming years and São Paulo has the infrastructure to support this growth ”

www.analise.com

São Paulo OUTLOOK

Eduardo Nicolau/AE

SÉ CATHEDRAL The largest church in São Paulo and one of the five largest neo-gothical temples of the world, the cathedral was reopened in 2002, after three years of remodeling, and is the geographical center of the city

São Paulo OUTLOOK

www.analise.com

perspective

São Paulo’s Future

THE CITY IN 10 YEARS

ão Paulo will continue to be the business capital of Latin America for a very long time. Almost three fourths of the executives interviewed stated that most of the companies that operate in Brazil will continue to base their head offices and decision-making centers in the city in the next ten years. São Paulo’s economic profile as a service provider and a generator of business has been consolidated. In 1970, the capital city accounted for more than 70% of the industrial GDP of São Paulo state. Currently, almost nine out of every ten reais of São Paulo’s economy derives from the service and commerce sector. One of the main highlights is the financial sector. The São Paulo Stock Exchange is one of the largest stock exchanges in the world in market value and the capital city of São Paulo concentrates more than 60% of the country’s banking activities. In the opinion of 34% of those interviewed, the production base of their business in the city will tend to reduce or remain the same over the next ten years. If we add the 26% who believe that the production base issue does not apply to their business, 60% of the interviewees did not consider São Paulo’s productive base to increase. In other words, São Paulo city’s economy registers a standard of change similar to that of large developed cities.

Head office In 10 years, will your head office be in São Paulo?

Probably no

Don’t know

17 %

55%

Yes

17%

Probably yes

Production base In 10 years, will your head office in São Paulo have...

12%

Same weight

Will tend to disappear

20 %

40%

Less weight

More weight

26 %

Not applicable

Leonel Andrade, president of Credicard

will stand out among the global “São Paulo metropolises as a service provider, mainly in the financial sector ”

www.analise.com

São Paulo OUTLOOK

perspective

São Paulo’s Future

BUSINESS ENVIRONMENT

ut of the 200 executives interviewed, practically all were unanimous about São Paulo city’s consolidation as a center of intelligence and as the main city of the region over the next ten years. This indicates that it is a city of less importance for industrial production and more relevant for decision making. It is the obvious center to service the operation base of large local and foreign corporate groups in Latin America. The city, however, will not grow only in importance for those who wish to do business in Latin America. In the opinion of three out of four of the entrepreneurs interviewed, São Paulo’s business environment will also improve over the next ten years. The improvement of the city’s infrastructure and logistics and communication, the reduction of red tape, the simplification of taxation, the consistency of regulatory milestones, fiscal inspection and Justice will also have a hand in this. All these factors are expected to make São Paulo a city that is more connected with the global corporate environment and, consequently, more appealing in terms of opportunities and new business.

Relevance In 10 years, São Paulo will continue to be the hub of Latin America

2 %

Don’t know

2 %

96 %

Yes

Business environment In 10 years, the environment in São Paulo will be...

13 %

Worse

75%

Better

12 %

The same

Ricardo Bastos, VP of legal matters of Johnson & Johnson

Efficiency in communication and “ improvement of IT services are the most important points for the city’s future ”

São Paulo OUTLOOK

www.analise.com

perspective

São Paulo’s Future

LABOR AND SERVICES

hen asked what could be improved in São Paulo city in terms of the labor offered and the business support services, the interviewees agreed in only one point. To 75% of them, the qualification of São Paulo’s laborers is the matter that needs to change the most over the next ten years. To 15% of the executives interviewed, an increase in the offer of workers would be welcome and only one out of ten pointed out that the cost of labor could drop over the next decade. In relation to the city’s business support services, the opinions of the interviewees were quite balanced with a division between the five items presented as possible targets for improvement in the ten-year period. In other words, considering the city’s event infrastructure, the hotel network, the IT services, the research and scientific development structure, and restaurants, there is nothing that needs to change much. All items, however, deserve to be improved, according to the executives interviewed, so that São Paulo can fully occupy its role as the international hub of business generation.

Labor In 10 years, what must be improved

10 % Cost

75 %

Qualification

15 % Offer

Business support In 10 years, what must be improved

20%

Infrastructure for events

17% 15% 15% 13% Hotel IT services network

R&D

Restaurants

Horacio Lafer Piva, counselor of Klabin

One of the main characteristics of “São Paulo city is its ease to accept cultural diversity ”

www.analise.com

São Paulo OUTLOOK

Jefferson Pancieri/SPTuris

MUNICIPAL THEATER A landmark of the city inspired on the Opera of Paris and currently home to the Municipal Symphonic Orchestra, the Experimental Repertoire Orchestra, the City’s Ballet, the String Quartet of the City, and the São Paulo Chorus

São Paulo OUTLOOK

www.analise.com

perspective

São Paulo’s Future

INFRASTRUCTURE

elecommunication services have great penetration in São Paulo. There are more connected mobile phone lines than inhabitants. This proportion is technically measured by an index called teledensity. In the case of São Paulo, the mobile teledensity is 109, which means that there are 109 active lines for every 100 people in the state. Even having more mobile phones than people, the telephony market still has plenty of space to grow. Substantial improvements are expected to expand the offer of cutting-edge services. Four out of every ten executives claimed that the broadband and data transmission services are the segments that are expected to develop more over the next decade. São Paulo concentrates 60% of the commercial properties in Brazil Even so, almost half of the executives interviewed pointed out that the offer of real estate is the item in this market that should most improve over the next ten years. From the price standpoint, however, the opinions are more contained. Only 16% believe that acquisition or rental costs need to improve, that is, lower prices for those who wish to buy or rent property.

Telecommunications In 10 years, what must be improved

20%

Networking

40%

Broadband

Data network

Real estate In 10 years, what must be improved

47 %

16 %

Offers

Cost of acquisition

16%

21%

Rental costs

Launches

Miguel Abuhab, president of NeoGrid

São Paulo’s highlight is the consumer “market, which grows more than that of cities such as London and New York ”

www.analise.com

São Paulo OUTLOOK

perspective

São Paulo’s Future

BUSINESS FUTURE

he vocation of São Paulo city as an aggregator of corporate intelligence and the base for the headquarters of companies operating in Brazil and Latin America is unquestionable. Out of the 200 executives interviewed, 89% claim that the city will have more company decision-making centers in the next decade. Currently, the municipality concentrates around 65% of the multinational headquarters that operate in Brazil, in addition to 61% of the head offices of banks operating in the Brazilian market. More than 90% of those interviewed indicated that the city will expand its profile as a service provider, mainly in relation to business support activities. That means that more and better financial and banking, publicity and advertising, information technology and legal services will be available in the city. The numbers corroborate the opinions of the executives. In 2009, 4% less industrial-oriented companies were registered in the city than in 2000. Concurrently, the number of service providers rose 43% in the same period, jumping from 214 thousand to 305 thousand companies in operation in the city.

Services In 10 years, São Paulo will expand its profile as a service provider

3 %

Don’t know

94 % Yes

3 %

Intelligence center In 10 years, São Paulo will aggregate even more company decision-making centers

4 % No

89 % Yes

Don’t know

Luiz Antônio Mameri, president of Odebrecht for Latam

São Paulo city, in the next decade, will “ be a center of corporate excellence aimed at innovation and creativity ”

São Paulo OUTLOOK

www.analise.com

perspective

São Paulo’s Future

CITY’S FUTURE

f the opinion of most of the interviewees becomes a reality, São Paulo city, in ten years, will be more expensive from the standpoint of housing, as well as business. The expansion process unfolding in São Paulo is a result of better quality services and a more solid business support structure in relation to the average of other cities. The rise in costs ends up being a natural result of this process, likewise to that which has occurred in other corporate centers in developed countries, such as New York and London. One of Sao Paulo’s greatest challenges is public security. It is one of the main concerns of the entrepreneurs and the population in general but the executives interviewed showed optimism. Almost four out of every ten see São Paulo as a safer city in the next ten years. The number of those who claim that security will not increase in the city is 24%. However, a good part of those interviewed (37%) were more wary and preferred not to share their opinion. The statistics are on the optimist’s side. Between 2000 and 2009, for example, the number of homicides dropped 77% in the capital and last year registered a total of 11 occurrences for every 100 thousand inhabitants.

Cost In 10 years, São Paulo will be a more expensive city

6 %

3 %

Don’t know

Cheaper

17 %

74 %

The same

Yes

Security In 10 years, São Paulo will be a safer city

24 % No

39 % Yes

37 %

Don’t know

Denise Nader Porcelli, VP of legal matters of Rhodia

São Paulo has a fast-paced consumer “ market and is increasingly gaining more credibility to attract investments ”

www.analise.com

São Paulo OUTLOOK

S辿rgio Castro/AE

S達o Paulo Museum of art (MASP) The building is an icon of S達o Paulo and the museum, with its 8,000 works of art, is a cultural reference and one of the most frequented places in the city, with more than 50 thousand visitors per month

S達o Paulo OUTLOOK

www.analise.com

perspective

São Paulo’s Future

MOBILITY

he difficulty to transit in the city, pointed out by the executives interviewed as the city’s main disadvantage in comparison with other large centers, remains an incognito for the future. Over three out of every ten interviewees said that mobility will increase in São Paulo over the next ten years. Practically half (49%) do not think it will change. The item that led 32% of the interviewees to believe that the city’s traffic will flow better is the increase of public transport. For 57% of the executives, this is the best solution to improve the city’s mobility. In the passenger transport area, São Paulo has made a series of investments that are expected to fulfill these expectations. Considering the investments in the subway, city train and bus area, the projects at the beginning of 2010 accounted for R$ 20 billion. At any rate, they all agree that getting cars off the streets is the most efficient way to improve traffic flow. Therefore, measures to restrict the circulation of passenger cars and cargo vehicles in the downtown regions of the city, as well as encouraging the habit to set up virtual meetings, will have to be increased for the city to flow better.

Mobility In 10 years, São Paulo will be a more mobile city

19 %

Don’t know

49 % No

32 % Yes

Growth In 10 years, what factors will aid in improving this mobility

16 %

11 %

Traffic restrictions

Less cargo vehicles

16 %

57 %

Communication improvements

Public transport

Marcos Próspero, VP of human capital of Walmart Brasil

The quality of services in São Paulo “ is one of the best in the world and the city has a high rate of investment return ”

www.analise.com

São Paulo OUTLOOK

MOBILITY AND INFRASTRUCTURE The main airports, ports and cities in Brazil are located in the surroundings of São Paulo. See the most important points of the infrastructure that make the city the most connected in Latin America

International Airport of Campinas (Viracopos)

CAMPINAS

3.4 million 192 thousand tons

1.06 million $

427 km

 Toll highway ovi

a P res

ide

a er gu an es nt

AnhangueraBandeirantes System

Rod

R$ 27 bln (US$ 15 bln)

International Airport of Congonhas

13.7 million 29.3 thousand tons

nte Cas te l

t on A yr

Branco

a - C enn

to in

Ayrton Senna-Carvalho Pinto System 135 km

 Toll highway

SÃO PAULO Anchieta-Imigrantes System

R$ 320 bln (US$ 161 bln)

Presidente Castello Branco Expressway 302 km

 Toll highway

International Airport of Guarulhos (Cumbica)

es ant Imigr

i e t a c h A n

11 million

176 km

 Toll highway

21.7 million 352 thousand tons Port of Santos 76 million tons

 Public administration

Port of São Sebastião 50 million tons

 Public administration

RJ Rio de Janeiro

SP São Paulo

ATLANTIC OCEAN

RJ D

t r a

Presidente Dutra Expressway 402 km

 Toll highway

RIO DE JANEIRO 6.2 million $

R$ 140 bln (US$ 80 bln)

REFERENCE $

Population GDP Passengers in 2009 Cargo in 2009 Extension

Sources: The population data is from the Brazilian Geography and Statistics Bureau (IBGE) and refers to 2009. The airport information is from the Brazilian Airport Infrastructure Company (Infraero) and refers to 2009. The port information is from the Brazilian Waterway Transport Agency (Antaq) and refers to 2009. The roadway information is from concessionaire companies. The GDP information is from the Brazilian Geography and Statistics Bureau (IBGE) and refers to 2007

illustration/Cássio Bittencourt

RICHARD ZUPPA/AE

Markets and

opportunities

Cyclists competing in the male category of the IX America Cup for Cycling, edition 2009, held at the Interlagos racetrack in the southern side of S達o Paulo city, which also hosts the Formula 1 race

In the following pages is an analysis of the main investment opportunities that S達o Paulo has to offer

The increase in offer of upscale commercial properties Cultural diversity and the growing consumer market Structure for events and the incentive for business tourism

J. F. Diorio/AE

OPPORTUNITIES OPPORTUNITIES

Visitors looking at the “OSGEMEOS – Vertigem” exhibition of the Brazilian Art Museum at the Armando Álvares Penteado Foundation, which shelters 3 thousand Brazilian and foreign artworks

promising markets

See here some of the best investment opportunities of the city, why they are attractive and how to enter these markets 40

São Paulo OUTLOOK

www.analise.com

OPPORTUNITIES

s in most developing cities, São Paulo concentrates investment opportunities and prospects of rapid growth over the next decade. Besides being one of the capital cities of the BRIC countries, it is Latin America’s main business hub and a gateway for the important Brazilian consumer market which expands its purchasing power annually. If, on one side, São Paulo is similar to cities such as Shanghai, Mumbai and Johannesburg, on the other it has a few characteristics that make it stand out in terms of market development and existing opportunities. The capital city’s development, at the beginning, was driven by industry. Currently, it is the services sector that fuels the city’s economy. The city accounted, in 2009, for more than 50% of the Gross Domestic Product (GDP) for services in all of São Paulo state, which is the largest in the country. Considering only medical and healthcare services, 71% of the revenue from these operations is generated by the city, according to data from the Seade Foundation, a data analysis system linked to the state government. In addition to health services, other areas are gaining prominence in the city and offering a high standard of skilled and qualified labor able to compete with developed centers, such as New York and London. São Paulo-based law firms, advertising agencies and information technology service providers (TI) all fall under this category. One of the highlights is the financial and banking service sector. The city is home to the São Paulo Stock Exchange (BM&FBovespa), one of the five largest stock exchanges in the world in market value terms and the sixth in trades. The city also concentrates around 60% of all banking activities in Brazil and a resource management network that manages around US$ 500 billion. These and other sectors represent a double advantage to foreign investors. The first is that, the investors who dewww.analise.com

cide to set up in the city, can count on a high-grade service support center to help deal with the Brazilian markets, as can also use the city as a base to explore other markets in Brazil and Latin America. The second is that, with the expectation of an increment in investments in São Paulo and in Brazil, the demand for all these services grows and creates even more opportunities. The city is currently home to the head offices of some of the main foreign law firms, is the Latin American base of IT and software companies, such as Microsoft, IBM and Intel, and is where the main multinational investment banks, such as Goldman Sachs, Merril Lynch and Crédit Suisse, have set up their main offices in the country.

Consumer market and 2014 World Cup On the following pages, the reader will find the analyses of several areas that offer clear investment opportunities in the city of São Paulo and in Brazil, either due to service demand in the city, to the increasing consumer market or to the specific characteristics of each sector, which make the capital city attractive. A few points merit emphasis because they include several of the opportunities presented and point to a growth trend in São Paulo over the next decade. The mobility of the social classes, which stems from a heated job market, the creation and formalization of jobs and the stable economic environment, has begun to change Brazil, mainly São Paulo, over the past few years. The growth in average income as a result of the economic boom is causing low income families to increase their purchasing power, reaching higher levels of consumption. Between the years of 2005 and 2009, the share of the B and C income classes in Brazil’s overall consumption, for example, increased from 61% to 66%. During the same period, average family income rose 21% in São Paulo city. The increase in purchasing power creates new demands and fuels

preexisting ones, favoring the entry of new entrepreneurs in several areas. Under this aspect, the highlights are the telecommunications segment, mainly mobile and data services, banking services and gastronomy. These areas also have a prominent role in some of the most important sporting events in the world. The city will be one of the hosts of the 2014 World Cup, held in Brazil, with the prospect of attracting a wide range of investments, estimated to draw in over US$ 100 billion. The expectation is that the event will generate a demand in the real estate, construction, publicity and advertising and tourism markets, as well as other opportunities mostly aimed at service areas. Also considering the Formula 1 and Formula Indy races, which are held annually in São Paulo, and the Olympics of 2016, which will be held in the neighboring state of Rio de Janeiro, the sports event sector is expected to strongly aid the development of new business opportunities in the city over the next years. 0

INDEX 44

Resource management

Bank services

Real estate market

Legal services

Business tourism

Publicity

Telecommunication

Information technology

Healthcare

Renewable energy

Sports

Culture

Gastronomy

Fashion São Paulo OUTLOOK

the motor of Brazil

he largest Brazilian city is also located in the country’s largest state, responsible for more than 33% of GDP. In addition to its economic importance, São Paulo is also home to around 40 million inhabitants, more than 20% of the population of Brazil. The most significant companies throughout its 645 municipalities are from the auto making, aeronautical and pharmaceutical industries.

Bandeiras monument, in São Paulo, in honor of the colonizers of the country

São Paulo OUTLOOK

www.analise.com

marcos hirakawa/SPTURIS

São PAulo em Números

US$

47 bln

were exported in 2009 by the state, 31% of Brazil’s total sales

www.analise.com

51%

of bank and insurance services GDP in is in the state

3 mln

immigrants, from 70 different countries, live in the state

250

thousand km2 is the total area of the state, larger than the UK

São Paulo OUTLOOK

OPPORTUNITIES

Resource management

Virtuous cycle of new investments Experts predict a new investment cycle that should raise US$ 30 billion in a decade for Brazilian banks

investment bank headquarters in Brazil and almost 70% of the foreign institutions, including JP Morgan, Morgan Stanley, Merrill Lynch and Goldman Sachs. The expectation is that by 2014 the total capital committed by private equity funds will reach 3.5% of the country’s GDP, in he private banking sector in Brazil line with the global average, and reach a total is concentrated around 130 thouof US$ 70 billion. The role of capital markets sand families with an equity of R$ in this growth is very significant, considering 400 billion invested in the counthat in a period of five years until 2009, almost try and another US$ 150 billion 40 IPOs (Initial Public Offerings) of compainvested abroad, according to the nies that had private equity funds as partners analysts’ predictions. After Brazil’s step up to Investment Grade status in 2008, the country be- were held at the São Paulo Stock Exchange. In line with this perspective, the São Paulo gan to represent an important source of opportuStock Exchange, in nity to foreign investors. partnership with the In 2009, the private eqBrazilian Association uity industry (funds that Private Equity in GDP of Financial and Capital invest in privately-held Share in GDP in Brazil Market Entities (Ascompanies) in Brazil hit 2.2% an all-time record with a 2.2% sociação Brasileira das Entidades dos Mercados total committed capital of Financeiro e de Capitais US$ 34 billion, 50% less 1.7 - Anbima) and the Brathan in 2007 and almost zilian Bank Federation six times more than the 1.2 (Federação Brasileira de amount registered in 2004. Out of the total, Bancos - Febraban) – all around 58% belongs based in São Paulo - an2000 2009 to foreign investors. nounced at the beginning The participation of of 2010 the creation of private equities in Brazilian mergers and acBrasil Investimentos & Negócios (Brain). quisitions is still no more than 10%. Therefore, The purpose of the initiative is to consolithere is a great expectation that this market date the country as an international investwill grow. In the US, for example, where the ment and business hub for Latin America. The industry is in a more mature stage, the share purpose of the project is for transactions with is 30%. Experts estimate that a large investBrazilian assets, which today take place in ment cycle will be set off in the next years. London and New York, to be done in Brazil. Tourism, energy and real estate are the arSources: Brazilian Association of Private Equity and Venture Capital (Abvcap), Brazilian eas that should most attract this market. Capital and Financial Markets Association (Anbima), Brazilian Bank Association São Paulo city is home to more than 60% of (Febraban), Getúlio Vargas Foundation (FGV), PricewaterhouseCoopers and Deloitte

São Paulo OUTLOOK

www.analise.com

opportuniTIES

Bank services

Online banking and new clients Investments in online services and products for the C, D and E classes are niches that are expected to grow

he Brazilian retail banking market is headed by four main institutions: state-owned Banco do Brasil and local private-sector companies ItaúUnibanco and Bradesco, in addition to Spanish-owned Santander. Together, these banks are responsible for more than 75% of the country’s branches, 62% of the total deposits and, in total, represent more than half of the net profit of the Brazilian banking system. The participation of foreign banks, such as Santander, in the country has grown over the past five years. Among the multinational institutions operating in Brazil are HSBC and Citibank, which stood among the ten largest in the country in 2009. Even though the bank industry is already flourishing, it continues to grow: the number of bank and savings accounts more than doubled in the past ten years. The average bank transaction value rose around 30%, the same as the percentage of transactions made using a credit card. Brazilians are using the internet and the bank network more every year. The operations in these service channels rose 25% and 14.5%, respectively, in 2008. The transactions made via internet banking added up to R$ 8 billion and those in bank networks amounted to R$ 2.3 billion. In total, the banking system accounted for R$ 44 billion in transactions in 2008, up 7%. IT investments have also grown not only to expand the mobility of the operations but also to enhance the security of the bank systems. There is another banking wave appearing due www.analise.com

to the increase in income and purchasing power of the low-income classes. Out of the total amount of bank account holders, 72% are from the C, D and E class. In relation to credit card holders, the panorama is similar – out of every 100 users, 60 belong to the C class and 22 to the D and E class. The increase in the number of accounts and the use of banking services is significant, since 50% of the economically active population does not yet have a bank account. Sources: Central Bank of Brazil, Febraban, KPMG, Deloitte, Data Folha/Data Popular

São Paulo OUTLOOK

opportuniTIES

Real estate market

Demand for new neighborhoods Middle class property, offices and convenience shopping centers are the best opportunities until 2020

consumer market has also been rising. Caixa Econômica Federal (CEF), a public bank and the largest financer of real estate in the country granted R$ 47 billion in real estate loans in 2009, the highest in its history. The amount he real estate market in São Paulo, is double that of 2008 and almost ten times between 2006 and 2008, was livmore than that loaned in 2003 in all of Brazil. ing in a state of euphoria: almost Lastly, the city also has a large amount of 100 thousand new residential areas free for the construction of new buildand commercial units were sold, ings. The greatest opportunities lie in industrial maintaining an annual average neighborhoods close to the city’s center, where of over 30 thousand. The promising outlook there are vast tracts of land and areas occupied of the sector will continue in the next decade by obsolete warehouses, for example. On the but with a different profile. This sharp growth other hand, neighborhoods located further away was mostly driven are increasing their by the offer of highvalue and attracting Growth of office buildings end real estate – with consumers with higher prices of over R$ 500 purchasing power. New units and price per m2 in the city thousand - in the secThere is another im135% Units 130% tor of shopping malls portant niche as yet and hypermarkets. unexplored in these 90 As such, these niches regions: that of midare now saturated level office buildings 45 and the construction and small convenience Price 82% companies and deshopping centers, of velopers that operaround two thousand ate in the capital city m2, that offer pharma2005 2009 are now setting their cies, bank branches sights on the low-end and supermarkets to and mid-level residential apartments. meet the demand of the neighborhoods. In this market range, three other factors conSão Paulo-based real estate companies also verge to assure the expectations for a good rehave the capacity to service other markets turn. In line with what happened in the country, in the southeast region, which account for the population of São Paulo had a jump in inthe highest housing deficits in Brazil. Citcome in the past decade with a significant pories nearby, such as Santos and Campinas, tion moving from the D and E class to a higher are also expected to continue expanding. level. At the end of 2009, 70% of the city’s Sources: Secovi-SP, Civil Construction Industry Union in São Paulo State (SindusCon), inhabitants occupied the A, B and C classes. Brazilian Equity Studies Company (Embraesp), Getúlio Vargas Foundation (FGV), entrepreneurs and consultants of the sector In addition, the availability of credit for this

São Paulo OUTLOOK

www.analise.com

opportuniTIES

Legal services

Understanding how to invest The demand for legal services is growing after the consolidation of Brazil in the international scenario

n the 1990s, Brazil’s economy was radically restructured. Almost 50 large companies, until then controlled by the State, were turned over to private groups. Since then, the expansion of foreign investments, the growth of the country as one of the more important players in international agroindustry and, more recently, the mapping of important oil and gas reserves, have consolidated the international stature of the country. Such scenario affected the demand for legal services, a vital requirement for the increasing and complex interactions among the participants of this economic dynamic. In São Paulo city, where the most traditional law firms are based and around half of the Corporate Law offices, this is an important market. The rising interest of foreign lawyers to operate in Brazil is apparent by their increasing presence. Foreign offices such as English-owned Linklaters and US-owned Baker & Mckenzie invested in the country through an association with local companies and have established their head office in the city of São Paulo. Others, such as Clifford Chance and Shearman & Sterling structured their own benches, also in the capital city, to operate as consultants in international law. Foreign lawyers and companies interested in operating in Brazil are obligated to enter into cooperation agreements with Brazilian firms, given that the practice of law in the country is exclusive to those registered in the Brazilian Bar Association (Ordem dos Advogados do Brasil - OAB). www.analise.com

The opportunities for an increase in foreign investments in the legal service sector refer mainly to meeting local demand, notably for multinational companies that operate in Brazil. Over the next years, new opportunities will appear, especially in relation to bids for the implementation of the infrastructure needed for the World Cup in 2014 and the Olympics in 2016, which will certainly count on the participation of international companies. According to estimates of the Análise Law yearbook, the 100 largest lawyer benches in Brazil account for around R$ 2 billion a year, of which 54 are based in São Paulo. Sources: São Paulo Bar Association (OAB-SP) and Law Firm Duarte Garcia, Caselli Guimarães e Terra Advogados

GLOBAL business center

Eletroelectronics

The companies on this page are just a few of the multinational corporations with headquarters in S達o Paulo. Around 65% of all foreign capital enterprises that have operations in Brazil are located in the city Automotive

Financial

S達o Paulo OUTLOOK

Food industry

www.analise.com

IT and hardware Energy

Consumer goods Agribusiness

Advertising

Chemical

Pharmaceutical

Clothing

www.analise.com

S達o Paulo OUTLOOK

opportuniTIES

Business tourism

Important and upcoming sector and Radisson, have a traditional spot in the sector and they compete for clientele alongside Brazilian personalized boutique-hotels such as Fasano, Emiliano and Unique. Even during the financial crisis of 2008 and 2009, the hotel ão Paulo hosts 75% of the business sector in São Paulo had reason to celebrate: fairs held in Brazil. They total 90 it ended 2009 with an occupancy rate of over thousand events and almost 4 mil60%, up 12.3% over that registered in 2004. lion visitors, among exhibitors and Experts of the sector claim that foreign combuyers, more than the number of panies are prospecting the São Paulo market, inhabitants of Berlin, the German not only to take part in it but also to organize capital. These events account for around R$ 2.9 their own fairs in the city. As such, they would billion in business a year involving 32 thousand be following the footsteps of giants, such as exhibiting companies and creAnglo-Dutch Reed Exhibiate approximately 500 thoutions, which in 2007 acquired In the top ten sand direct and indirect jobs. Alcantara Machado, the largInternational events in 2008 São Paulo holds the title of est Brazilian group of the rk Country Events the greatest destination for insector, and German-owned ternational events in the AmeriNürnbergMesse, which in 1 United States 507 cas and is 12th in the world, 2009 announced the acquisi2 Germany 402 ahead of cities, such as Madrid tion of Nielsen Business Media 3 Spain 347 and Sydney, according to the Brasil of the Nielsen group. ranking of the International London-based United Busi4 France 334 Congress & Convention Asness Media Limited (UBM), 5 England 322 sociation (ICCA) in 2008. The the first to enter the market, has 6 Italy 296 city’s growth in the past years been in Brazil since the 90s. 7 Brazil 254 is impressive. Between 2003 Entrepreneurs and consuland 2008, São Paulo climbed tants claim that there are op8 Japan 247 68 places among the cities of portunities for investments in 9 Canada 231 the list and the number of ininfrastructure in São Paulo. 10 Holland 227 ternational events grew almost There is a strong demand for seven times, reaching 75. new large and medium-sized Business tourism predominates in the city exhibition areas, for the offer of technology and and was the reason for the trip of 56% of telephony services within the pavilions and in the tourists in 2009. Events were the reathe niche of machinery and equipment, such as son for the trip of another 22%, while 10% cranes, mechanical stairs and special stages. came to the capital city for leisure. Sources: Brazilian Hotel Industry Association (Abih), Brazilian Equity Studies Company Large international hotel chains, such as Hyatt, (Embraesp), São Paulo Convention & Visitors Bureau, Brazilian Union of Fair Organizers (Ubrafe) and ExpoSystems Hilton, Marriott, Renaissance, Sofitel, Meliá

The city, one of the largest in the world for fairs and events, offers good opportunities for foreign capital

São Paulo OUTLOOK

www.analise.com

opportuniTIES

Publicity

Expectation of record results São Paulo’s advertising market, which grew even during the international crisis, prepares itself for the World Cup and the Olympics

razil is the apple of the eye of global advertising and São Paulo is the capital of this market. In 2009, while still under the effects of the global economic slump, investments in advertising in the country rose 4% while the global average plunged around 10%. From the purchase and production of space, this segment accounted for R$ 31 billion in 2009 and an all-time record of 8.5% is expected for 2010. According to data from the Brazilian Advertising Agencies Association (Associação Brasileira de Agências de Publicidade - Abap), São Paulo-based companies account for more than 60% of the total sales of the publicity sector in Brazil. The universe of marketing services, includ-

ing, promotion, retail and events, among others, sold R$ 26 billion in 2009 and expects a 15% growth in 2010. These results will continue in the two-digit range until 2016, due to the countless communication actions needed for the World Cup and the Olympics. Both mega events will bring companies and investments pouring into Brazil and the city of São Paulo is expected to receive at least 30% of these funds. The internet is excellent for showing the unexplored potential of São Paulo and Brazil in this area. It accounts for only 4.3% of the local publicity pie, against a global average of 12.6%. Brazilian users are the world’s users that spend most time online (almost 72 hours a month) even though the web only reaches 35% of the population. The recent arrival of large digital companies, such as R/ GA and Razorfish, combined with smaller local operations, illustrate these opportunities. Sources: Promotional Marketing Association (Ampro), Brazilian Publicity Agency Association (Abap), Projeto Inter-Meios and Results International

opportuniTIES

Telecommunication

Consumer market awaits services band market, has been losing space to mobile internet, which grew 82% in 2009 in the country. The services market is also a niche that is steadily growing. Among the markets that have begun to emerge is the virtual carrier, a product that combines specific applications and razil, along with its BRIC partners content and is attracting the interest of foreign and the United States, is among investor groups. This service can be offered the five countries in the world remotely through broadband but this will rewith the largest number of mobile quire that suppliers find solutions for WiFi, phones. The country has 177 milBluetooth, mobile devices and applications. lion mobile lines and a density of Additionally, the tendency for mobile phone almost 92 devices for every 100 inhabitants. In applications and other São Paulo state, this mobile platforms is to number rises to 109 cell become increasingly phones for every group more regionalized. This of 100 inhabitants. Internet in BRIC will require investThe vast population Users per 100 inhabitants ments in the production contingent with acof local content with cess to a mobile phone an eye on the city’s gives the impression of culture, language and saturation, but actually, the expressions used the Brazilian market in the region in quesis still one of the least tion. São Paulo tends to explored among the concentrate the producdeveloping countries. Consultants point tion of this content to Brazil Russia China India out that the local avthe Brazilian market. erage is high due The sector is to a large number strictly regulated in of people using more than one line. The data the country and access to new telecommuniindicates, at the same time, the existence of cation spectrums, for example, is only posa wide range of unexplored users, and a tensible through participation in concession aucdency for high consumption by Brazilians. tions for the operation of public services. As It is not only voice communication that has such, the fastest and easiest way to enter the been growing. Data exchange is also moving country is by establishing partnerships with forward at a fast pace. New broadband conneccompanies already set up in the country. tions grew to two-digit figures in 2009, including the offers of the fixed and mobile network. DSL access, responsible for almost 80% of the broad- Sources: National Telecommunications Agency (Anatel) and PromonLogicalis

São Paulo’s citizens are among the heaviest Internet and mobile telephone users but the sector still lacks services

37.5

22.2

4.3

São Paulo OUTLOOK

www.analise.com

opportuniTIES

Information technology

Ready to supply the foreign market The city of São Paulo is expected to increase its stake in the outsourcing sector of business processes

razil has been a heavy user of information technology and Business Process Outsourcing (IT-BPO) for almost 60 years and one of the pioneers in the use of computer development. In some sectors, the country is at the forefront. Brazilian banks, for example, are among the most computerized on the planet. Elections for executive and legislative positions are fully computerized. And federal government entities are also among those that use the most computer technology worldwide. São Paulo has a prominent role in this scenario. It has the most qualified labor in Brazil in the IT area, the best universities and a constellation of small companies

Sources: Brazilian Association of Computer Technology Companies (Brasscom) and International Data Corporation (IDC)

that are home to the most creative minds. According to data from the Brazilian Geography and Statistics Bureau (Instituto Brasileiro de Geografia e Estatística – IBGE), 66% of the professionals and 65% of the country’s sales in the sector derive from the Southeast region. São Paulo headquarters multinationals, such as Microsoft, IBM and Intel, in addition to large Brazilian companies, such as Totvs. Over the next decade, experts claim that the greatest opportunities should emerge in projects for the export of services and solutions. Currently, India predominates with around 60% of this market of US$ 100 billion a year, but the perception of corporate consumers is that this concentration in a single region can be prejudicial to business. In this environment, Brazil and São Paulo city are competitive options. And the country is prepared for this new demand. The target for 2010 is to increase IT-BPO exports from US$ 2.2 billion in 2009 to US$ 3.5 billion, up 37%.

opportuniTIES

Healthcare

International route for medical tourism The city has a highly developed health infrastructure and has attractive prices for foreign patients

eigners came to the country for medical treatment in the past years. There are few Brazilian companies that operate in the medical tourism sector. The best entry way for potential investors is to become ão Paulo is the hub of Brazilian associated to those who already take part in medicine and one of the main this market in São Paulo. After all, they have production fronts for science, already mapped all the service suppliers and technology and medical services in know the ins and outs of the business. Latin America. Medical tourism, A study from 2008 evaluates medical treatment defined as the treatment of patients costs in Brazil as being between 40% and 50% outside their place of residence, is one of the of the amounts spent in the United States. The sectors of São Paulo’s economy that offers the hospital structure, able to absorb medical tourism best opportunities for new investments, having in the city of São Paulo, is comprised of around in view short-term return. 12 large-scale hospitals The global health tourwith the installed capaciism market is attractive: ty of at least 500 beds per Profile of medical tourist in 2008, it was estimated unit, as well as, a quality Reason for visit in 2008 at US$ 60 billion. In hotel infrastructure and 2010, it is expected to cutting edge equipment. 12% Pharmacy reach US$ 100 billion. Out of these, seven are Brazil ranks as a global accredited by Joint Complayer in this business mission International 17% segment. São Paulo is (JCI). In Brazil, there are 52 % Dental General the flagship of this mar20 hospitals accredited Health ket in the country. The by JCI, which places the city is recognized as country in fourth place an international-level in the global ranking. 19% Beauty medical hub in cardiOne of these accredology, bariatric surited establishments, the gery, plastic surgery, orthopedics, assisted Hospital do Coração (HCor) registered in 2009 reproduction, beauty treatment and lastan increase of 40% in the number of medigeneration diagnostic imaging methods. cal consultations for foreigners, in comparison Data from the Brazilian Tourism Ministry with the previous year. The hospital estimates a indicates that the foreigner that comes to Bragrowth of 50% in this business segment in 2010. zil for health reasons is the tourist who stays the longest in the country (around 22 days) Sources: National Social and Economic Development Bank (BNDES), Deloitte Center with an average expense of US$ 120 a day. for Medical Solutions, Tourism Ministry, Development, Industry & International Trade Ministry and Sphera International Approximately, 200 thousand for-

São Paulo OUTLOOK

www.analise.com

opportuniTIES

Renewable energy

Technological and consumption center Sao Paulo’s energy sector will only tend to grow in technology, as well as in consumption of equipment

razil is the largest producer and consumer of renewable energy and biofuels. It grows sugarcane and produces alcohol based on sugarcane bagasse since the end of the 16th century and uses ethanol as a vehicle fuel on a large scale since the 70s. São Paulo state, in turn, is a large ethanol producer. Despite most of the mills being located in the interior of the state, the head offices of the companies and the center of intelligence of the sector are located in the capital city. With the worldwide increase of environmental restrictions, there is a clear tendency for investments to rise in the renewable energy sector in the country. Those who have the technology or are interested in investing to produce

fuel or cogenerate electrical power will have many opportunities in the next decade. In 2008 and 2009, hefty foreign capital investments were made to build hydroelectric plants, wind farms and complexes for the production of ethanol and biodiesel, for example. In addition to its direct participation in fuel and energy production, the city of São Paulo is also a hub of research and innovation in the field of renewable energy, ethanol, biodiesel and other sources. The marketing experience of São Paulo city in the production and sale of biofuels is also unprecedented in the world. Equipment manufacturers are another category that will find good opportunities in the city over the next decade. One of the municipal laws has made it mandatory to install solar heating in all new buildings in the city, for example.

Sources: Global Trends in Sustainable Energy Investment of the UN, National Electrical Power Agency (Aneel) and Enercons Consultoria em Energia

Intelligence and logistics

Worker oversees the loading of a container in the Santos port

S達o Paulo OUTLOOK

www.analise.com

S達o PAulo in numbers

US$

6 bln

is its position in the Brazilian exporter city ranking

of Brazilian exports come from the metropolitan region

80 km

is the distance to Santos, the largest port in the country

Jonne Roriz/AE

were exported by the city of S達o Paulo in 2009

1st

www.analise.com

S達o Paulo OUTLOOK

opportuniTIES

Sports

Demand for infrastructure and marketing World Cup, Olympics and other large sporting events will make the market boil in the next decade

projected is a public-private partnership estimated at up to R$ 300 million. Another famous Brazilian team, Palmeiras, approved in 2008 the remodeling of its stadium and Parque Antartica did the same for a multipurpose arena worth R$ 300 million in a partnership with construction he World Cup of 2014 and the company WTorre. In addition to the construction Olympics of 2016: both events and management of these spaces, the promotion bring together the myriad of opportunities that the sports segments and marketing of large football clubs is an open opportunity if considering that the passion for offers to Brazil, and naturally to São Paulo, over the next years. The the teams is still very little explored. São Paulo Football Club was the most profitable in Brazil sports industry accounts for around 3% of Brain 2009, with a total revzil’s GDP or R$ 94 bilenue of US$ 90 million. lion. Since the city of São The soccer business Clubs such as Spain’s Paulo accounts for more Real Madrid, for examthan 12% of the national Past and projection of revenue in Brazil ple, reach a figure above economy, it can be estimated that the capital city US$ 3,2 bln 275% US$ 570 million a year. The business potenaccounts for R$ 11 biltial is also great among lion a year from all activ- 2,4 olympic sports, in parities related to the sports ticular because the games industry, which still lacks 1,6 of 2016 will assure poprofessionalization. sitions for Brazil in all It is inevitable to give competitions and the emphasis to soccer, 2003 2014 which represents 65% training and qualification of sports activities in process of these athletes Brazil. São Paulo is home to three of the most demands investments. São Paulo is home to one acclaimed Brazilian teams; it is the host city for of the main Brazilian clubs for athlete training, the World Cup and may be the sports host of the the Pinheiros club. It is possible to operate in this Olympics, which will be held in the neighboring sector without partners; however a partner with state of Rio de Janeiro. Therefore, the city has knowledge of the culture and local dynamics an immediate need to modernize its stadiums. will doubtlessly speed up and simplify this proThe Morumbi stadium, of the São Paulo Football cess. There are plenty of sports marketing comClub, is in the process of adapting itself to Fifa’s panies with enough credibility and operational requirements and the Pacaembu stadium, a pubcapacity to offer assistance and partnerships. lic stadium that belongs to the city, is negotiating Sources: Municipal Sports, Leisure and Recreation Department, Brazilian Sports its formal concession to Corinthians, another of Marketing Institute, J. Cocco, University Escola Superior de Propaganda e Marketing the country’s great teams. The business model (ESPM), Traffic and Cheil

São Paulo OUTLOOK

www.analise.com

opportuniTIES

Culture

Art and entertainment boom The city has the demand, a developed cultural market and several projects in search of financing

ão Paulo’s promotion of culture is one of the main attractions for tourists. It is estimated that the city accounts for R$ 17 billion a year in this market. The city is the sure-fire destination of all and any foreign cultural attraction, including large musicals and performances. Many of the main shows are held in stadiums, parking lots and at the Anhembi complex and there is a demand for spaces that can accommodate from 8 thousand to 20 thousand people. One of the large consolidated events and one of the most successful initiatives of São Paulo is Cultural Week, which offers 24 hours of free entertainment in the streets and cul-

tural areas of the city. The Week accounts for more than R$ 100 million per edition. The city also offers the Portuguese Language Museum, one of the most visited in South America. Thanks to the increase in consumer potential of the middle class in the past years, cultural spaces such as Oca, the Art Museum of São Paulo (Museu de Arte de São Paulo - Masp) and the State Art Gallery (Pinacoteca do Estado) have been developing projects of high impact that have proven to be very successful public-wise. The increase in income has also contributed to the market of musicals in the city, which now attracts Broadway productions, in addition to groups, such as Cirque du Soleil. The business environment is very fragmented, which makes for highly recommendable local partners. Cultural production is sustained by private initiative, which sponsors projects through tax exemptions. Sources: University Escola Superior de Propaganda e Marketing (ESPM), São Paulo Turismo, São Paulo Conventions & Visitors Bureau, Culture Ministry

opportuniTIES

Gastronomy

The leap in restaurant meals The increasing trend to eat out is expected to boost even more the demand for these food services

the local reality but also the type of service. In addition to fast food and basic meal services, São Paulo is the city with the greatest variety of cuisine and gastronomical options in the world. The city concentrates some of the world’s ão Paulo has around 11 milbest restaurants and most acclaimed chefs and lion inhabitants and almost 13 also offers the ideal environment for investments thousand restaurants. The city is in upscale restaurants, from the standpoint of among the greatest in the world public consumer, as well as of labor available. in amount of establishments that The global ranking of the Top 100 Eating Expeserve meals but this does not mean riences created by London’s The Times ranks the that the market has had enough. Actually, the São Paulo restaurants D.O.M. in 24th place and prospects are that demand will increase rapidly. Fasano in 83rd place, according to the 2009 list. Over the past four years, the number of city In regard to food, the Brazilian legislation is inhabitants that eat out one of the strictest and has reached the two-digit has very rigid sanitary Meals eaten out figure, hitting 50%. Currules in comparison with rently, the Brazilian has other markets. And, in Eating outside the home in food expenses an average of four meals São Paulo where the 27 % 27 a day, and at least one consumers are more of them is outside the demanding, the inspec26 home. Over the next four tion is usually very meyears, the trend is that ticulous. It is necessary this average will move to frequently show the 25 up to two meals, creatinspectors that the operaing a surge in the detional processes of the mand for food services. kitchen meet the rules 2003 2010 Investments are of handling, conservapromising but require tion and cleanliness. a good deal of planning. Some U.S. chains Consultants point out that the increasthat set up in São Paulo in the past – Arby’s ing concern in health is expected to direct and KFC – had a negative experience. Simthe gastronomy sector in the next decade. ply reproducing that which is offered in their This trend is already confirmed with the countries of origin is a mistake which can be rapid expansion of healthy diets, which fatal to the business. In this case, the most registered a global increase of almost ten recommended is to contract a consulting firm times that registered in the past 10 years. or startup operations in partnership with local entrepreneurs. It is necessary to adapt not Sources: Brazilian Gastronomy, Board and Tourism Association, (Abresi), Anhembi Morumbi University and ECD Food Service only the flavors and textures of the plates to

São Paulo OUTLOOK

www.analise.com

opportuniTIES

Fashion

High fashion for the low-income market The sector offers investment options in low-end clothing retail and continues to be one of the global fashion centers

rom the catwalks of São Paulo Fashion Week, Latin America’s largest fashion event, to the increasing low-end fashion market, the city brings together the best and most important stylists, models, sponsors, textile manufacturers, universities and technicians in the country. The main opportunities for investors lie in retail and the development of lines and tendencies. The retail segment has been successful in the past few years, driven by the increase in average purchasing power of the São Paulo citizen. Department store chains, such as Dutch-owned C&A, invest in the establishment of partner-

ships with models and stylists and promotes its own line for the low and middle class. On the other hand, the market for luxury products and names is also growing, with the presence of all the main international brands in the country. Experts point out that the best opportunities to gain clients is at a mid-level consumer stage, where the consumer does not buy articles considered to be luxury products but also does not buy at department stores. Another segment that can be explored is specific clothing, such as clothes for golf players, for example, a sport that grows around 18% a year in Brazil. The logistics, to supply the entire Brazilian market, and the knowledge of more efficient suppliers are essential towards establishing prominence in São Paulo’s market. Sources: Brazilian Clothing Association (Abravest), Santa Marcelina Fashion College and São Paulo Fashion Week

INTERNATIONAL CONNECTION G ERM ANY Berlin

U NITED KIN G D O M

10 hrs 40 9,471 km +3 hrs

London 10 hrs 40 9 ,471 km +3 hrs New York 8 hrs 40 7 ,652 km -1 hr

U N I T E D S TAT E S Miami 7 hrs 20 6,548 km -2 hrs

MEXI CO Mexico City 8 hrs 20 7,421 km -3 hrs

CO LO M B I A Bogota 4 hrs 50 4 ,312 km -2 hrs

BR AZIL

C H I LE

São Paulo

SOUTH A F RI C A

Santiago 3 hrs 2 ,587 km -1 hr

Buenos Aires 1 hr 50 1 ,675 km 0 hr

ARG ENTINA

Air Mobility Daily averages of the São Paulo airports

1,100 flights • 200 international • 144 direct 96,500 passengers • 23,000 international

The two Sao Paulo-based airports offer on average 200 international flights a day, 114 of which are direct flights. See how long it takes to travel from São Paulo to the main capitals of the world REFERENCE Flight time Distance Time difference in relation to São Paulo Moscow

RU S S I A

13 hrs 20 11 ,789 km +7 hrs

Peking

CHINA

Mumbai 15 hrs 30 13,771 km +8 hrs

INDIA

J APAN Tokyo

23 hrs 15 17,685 km +11 hrs

21 hrs 18 ,528 km +12 hrs

S O U TH KO REA Seoul 20 hrs 40 18 ,336 km +12 hrs

AU S TR ALIA Johannesburg 8h20 7,442 km +5h

Sydney 15 hrs 13,379 km +13 hrs

Source: The airport data is from the Brazilian Airport Infrastructure Company (Infraero) and refers to 2009. The flight time refers to an estimate of flight duration for a direct plane flight, at an average speed of 800 km/h. The time zone is based on Brasília time, which is three hours behind Greenwich Mean Time. The amount of flights and passengers is based on the sum of averages of the Airport of Guarulhos (Cumbica) and the International Airport of Congonhas, considering the data of 2009

Challenges

filipe araĂşjo/AE

Traffic jam on 23 de Maio avenue, which connects the north and south regions of São Paulo city, improving the traffic flow, is one of the major problems to be solved – currently the city has more than 6 million vehicles

In the following pages is an analysis of the main challenges that São Paulo has to overcome

The main difficulties and the projects to improve locomotion Investments and measures needed to guarantee the citizen’s safety The disorderly growth and territorial expansion of the city

saúde CHALLENGES

CITY OF SOLUTIONS São Paulo faces the challenges of a growing metropolis and articulates programs and actions to attack these problems head on

he challenges that a metropolis like São Paulo has to face daily are not few. To find solutions for the city’s problems it is necessary to map each obstacle, verifying its true scale so that long-term measures can be adopted. In many cases, the city can learn from the history of other metropolises. Many of the challenges shown on the next pages can be classified as “growth pains.” The population boom that occurred from 1970 to 1990 placed São Paulo in the position of third largest

Jonne Roriz/AE

The Viaduto do Chá region, which was once the most beautiful area in the city, in addition to Vale do Anhangabaú and the Municipal Theater downtown are a must for the 11.3 million tourists that visit São Paulo

CHALLENGES

urban agglomeration in the world, according to a projection of the United Nations Organization (UN) for 2010. Ten years after this population surge stabilized, the city is struggling to solve issues such as hindered mobility due to a total fleet of almost seven million vehicles and 14.5 million trips made daily in public transportation. This is an issue faced by cities, such as New York and London, which have already adopted successful measures, but continue to look for more solutions to improve the quality of life of their inhabitants. The 11 million inhabitants of the municipality and almost 20 million in the metropolitan region demand an expansion in housing, public services (access to treated water and sewage network, electrical power, street and collective area lighting, trash collection, to mention only a few), healthcare services and dozens of other points involved mostly in the structuring of public policies. Under this scope, the city of São Paulo has a kind of guide of challenges to overcome. The initiative was included in law at the beginning of 2008 and establishes that all city managements must present a target plan and keep the population informed of the progression of the indicators. The initiative is inspired on models of management by results implemented in the cities of Bogotá in Colombia; Barcelona in Spain; Minneapolis in the US; and Sydney in Australia. It uses as reference the concepts of efficacy, efficiency and effectiveness adopted by the United Nations Development Program (UNDP) and of the World Bank for the evaluation of public policies. The program currently in course, named “Agenda 2012: Target Program for the City of São Paulo” is based on six large activity areas: 1) City of Rights seeks to promote the universalization of public services and improve its quality; 2) Sustainable City is aimed at harmonizing the search for better quality of life with the reduction of environmental impacts generated by urban activities; 3) Creative City creates incentives for cultural and www.analise.com

sports activities, tourism, preservation of historical sites and the recovery of public spaces; 4) City of Opportunities is aimed at increasing the generation of jobs and businesses, increasing the qualification of labor and promoting the decentralization of productive activities; 5) Efficient City seeks to assure speed, transparency and fiscal responsibility to municipal policies through innovative management methods; and 6) Inclusive City seeks to lessen the inequality between the city’s regions through the creation of public policies. In all, the program includes 223 targets whose progress can be followed by the population.

Known challenges The challenges presented ahead reflect the main points raised by entrepreneurs, executives and public administrators, interviewed by Análise Editorial and questioned in relation to the aspects that most require attention in the city. The matters referred to are seen as possible barriers for the establishment of new businesses and include topics related to the economic and social development of the city. In a few cases, however, some incorrect impressions of the city must be cleared up. Currently, São Paulo has a Human Development Index (HDI) of 0.841, according to the indicator developed by the UN. In South America, only the city of Santiago in Chile surpasses the São Paulo index. In the more central districts of the municipality, the index reaches rates above 0.96, equal to the IDH of Norway, the highest in the world. This data is merely used to illustrate that, if on one side São Paulo faces problems that reflect its size, the municipality has also already put in place successful solutions. Issues such as public safety, informal employment, contraband and the recovery of the downtown area have been the targets of solid actions and of discussions between the public power and community entities for years. And these discussions have already borne fruit. What São Paulo faces now is the task

of staying on the path of improvement, professionalizing its management even further and seeking solutions inside and outside its borders.

International recognition The attention that São Paulo city and Brazil have received over the past years, as the target of foreign investments among the BRIC economies, also fuels the urgency to solve problems and face challenges. One of the catalysts within this context is certainly the World Soccer Cup of 2014, of which São Paulo will be the host city. As such, some challenges have become more urgent, given that the capital city needs to develop specific projects to improve its infrastructure. One of them is to modernize the city’s airport structure. Infraero, the Brazilian state entity in charge of this sector, has already developed plans to modernize the three airports that serve the city: Congonhas, Guarulhos in the metropolitan region and Viracopos in neighboring Campinas. Another project under discussion is a high-speed train linking São Paulo to the city of Rio de Janeiro. The following pages will point out these challenges and what is objectively 0 being done to overcome them.

INDEX 68

Mobility

Employment

Vertical Organization

Housing

Security

Downtown

Tax load

Red Tape

Intellectual Property

Environmental management São Paulo OUTLOOK

CHALLENGES

Mobility

Traffic solutions São Paulo has adopted measures to deal with one of the main problems of large cities: the difficulty to move from one place to another

ikewise to New York, London and Tokyo, São Paulo faces the challenge of managing a mass of more than 11 million inhabitants and 5 million passenger vehicles that travel through the city every day. It is estimated that, on average, São Paulo’s citizens spend a total of two to three hours commuting. The average congestion peak in the city in 2009 was 108 km, which represents almost 10% of the monitored streets. Currently, the most important measure adopted was the vehicle rotation system, which restricts the transit of 20% of the fleet within the expanded downtown area during rush hour. Similar measures are used for cargo and private passenger transport vehicles.

One of the solutions found to increase mobility in the past decade was the phenomenon of motorcycle couriers. At the beginning of 2010, the city had around 200 thousand such professionals. Construction projects to widen the streets and traffic reengineering in the city have also been adopted to overcome the traffic problem. The largest roadway project of the last few years was the expansion of the Marginal Tietê, São Paulo’s main expressway. The opening of the southern stretch of the Mário Covas beltway in 2010 also promises to alleviate the traffic flow. This project connects some of the main roadways that cross the city, preventing cargo vehicles from circulating within the city limits, and is expected to reduce by 15% the congestion indexes. Current investments in public transport amount to R$ 20 billion to expand the subway, city train lines and the bus fleet. One of the main targets is to quadruple the railway network from 60 km in 2007 to 240 km by the end of 2010. Source: Traffic Engineering Company (CET)

CHALLENGES

Employment

Job market in transition London’s was close to 10% and neighboring Buenos Aires registered a rate of 8.5%. But the panorama is of growth. Thanks to the vigor of the local economy, the unemployment rate has steady declined since ão Paulo city has undergone a pro- 2003, when it reached almost 20%. Informal jobs, a global phenomenon that acfound transformation in the past counts for half of the world’s workers, also plays thirty years. The former manufacan important role. Even after the recovery of turing complex has fallen by the the occupation indexes caused by the economic wayside and the city has consoligrowth and the rapid increase of formal jobs, dated itself as the country’s main the contingent of informal workers of the city financial center, positioning itself as a service is high, around 11% at the beginning of 2010 or provider and a prominent commercial center. approximately 1 milSince this is a relalion people. Additiontively new process, the ally, half of the 1.6 agents that gravitated Unemployment drop million self-employed around the former modprofessionals operate el have not yet been In the metropolitan region of São Paulo in the informal sector. able to fully adapt to 19.5% Clandestine comthis profile change. Part merce is the main of them have moved on 17 destination of the inand are now working in formal workers. The the services sector. Ancity’s government has other part has ended up 14.5 in the informal sector. 12% around 20 thousand On the contrary registered street ven12 to that which ocdors but the estimates 2003 2010 curred in the 70s, indicate more than 80 The 2010 rate refers to the month of February when industrial jobs thousand people inpredominated in the volved in clandestine city, the most recent numbers in 2010 point to commerce in the city. City government is the services sector, which accounts for 54% of attempting to regularize this situation. the job positions in the metropolitan region. The regulations consists of registering the In comparison with other large cities, the street vendors and restricting their activities unemployment rate of the metropolitan reto certain areas. Those who are registered can gion of São Paulo, which reached almost benefit from a microcredit program to help 14% of the active population in 2009, is them transition into the formal economy. still too high. New York, for example, ended Sources: Organization for Cooperation and Economic Development (OCDE) and the City Government of São Paulo the year with an index slightly above 8%,

São Paulo is undergoing a process of adapting former industrial labor to the services sector, which grows annually

www.analise.com

São Paulo OUTLOOK

CHALLENGES

Vertical Organization

The planning needed to grow Intense vertical organization has created distortions that should be dealt with in the city’s Director Plan

density levels claim that vertical organization in excess is prejudicial to the city. As such, the most suitable coefficient value for the regions of São Paulo continues to be under debate. Since the creation of the law in 1972, several instruments were used to promote the better he vertical organization process use of space in the city, such as Urban Operaand the rise in density level in São tions. Through these, the companies pay to be Paulo city began around 1910 and allowed to exceed the construction restriction in 1940 took on a more residential and the funds are invested by city government character, expanding to neighborin infrastructure for neighborhoods, includhoods adjacent to the center. The ing roadway work and sanitation. In 2010, first São Paulo zoning law, which enforced rules there were four operations in progress and and limits on the use of soil, came into effect in another four are planned to start this year. 1972. The regulation set forth a coefficient for Many of these instruments were made official use, a number that multiplied by the lot area, in 2001 with the publicaindicates the maximum tion of the City Statute, amount of square meters but the expectation is that can be built on the Compared skyline that faster progress will site, adding all floors. Amount of buildings in each city be made after the reviThe rising density level, sion of the Director Plan however, was concenof the city, predicted to trated in the downtown occur in 2012. The tararea and most of the get is that São Paulo, city, around 86%, had a like other big cities, will maximum coefficient of 2, which is considered incorporate the concept low. For comparison of creating cities within purposes, in New York the city. As such, the real New York Mexico city Shanghai São Paulo or Chicago, which are estate and urban strucalso known for their ture will allow for more vertical organization, the maximum coefsuitable density levels, enabling more housing ficients reach 20 in downtown regions. options and allowing the inhabitants to shorten According to experts, the restriction has not their commuting time. Therefore, the mobiltaken into account the infrastructure potential ity and housing problems, the reversal of urof the areas or the saturation of the roadway ban degradation and the exodus of inhabitants system, favoring a less rational occupation of from the downtown area will be addressed. the city, which could stand for higher density and vertical structuring levels in certain areas. Sources: Architecture and Urban Planning College of the University of São Paulo, Nossa São Paulo Movement, Viva o Centro Association and the City Government of São Paulo On the other hand, those who defend lower

5,817

São Paulo OUTLOOK

609

399

377

www.analise.com

Housing

Organization of urban areas The occupation of precarious areas challenges the public power to improve the quality of life of the population

he fast pace of growth of the population and the constant expansion beyond the territorial limits is a characteristic of developing cities. São Paulo city’s population grew from the 1970s up to the mid-1990s. Due to the high mortality rates and an intense immigration process, mainly from the northeast region of Brazil, the city’s population practically doubled in a period of 40 years, reaching the level of more than 10 million inhabitants. The chaotic growth of the city, mainly in the suburbs, generated areas with high density levels but lacking infrastructure. Currently, the city deals with the challenge of urbanizing these www.analise.com

areas and creating basic services such as sanitation, water and an adequate electrical power network. An estimate from 2008 shows that around 12% of homes in São Paulo are located in regions known as “favelas” (slums), which do not even offer minimal infrastructure. In addition to the lack of basic conditions for the dwellers, the situation causes environmental problems particularly in relation to the contamination of water sources. This is the case of the Billings lake, which produces 11% of the public water supply of the metropolitan region of São Paulo and supplies around 1.8 million people. One million people live in the surroundings of the basin and most do not have a proper infrastructure to collect and treat water. To overcome this challenge, city government implemented programs that comprise building infrastructure, such as creating roads and pavements, implementing water and sewage networks, constructing squares and sports courts, in addition to giving the population access to public services and equipment, such as schools, health clinics and public transport. Between 2005 and 2008, these programs benefitted almost 50 thousand families, including slum dwellers and those living in irregular housing developments. At the beginning of 2010, there were projects in progress in 81 areas that will benefit around another 60 thousand families. Sources: City Housing Department of São Paulo and Nossa São Paulo Movement

São Paulo OUTLOOK

The security industry

Car bulletproofing body shop in S達o Paulo

S達o Paulo OUTLOOK

www.analise.com

free stock

222

companies specialized in security operate in the capital

71%

of the clients are entrepreneurs or executives and 67% are men

www.analise.com

106,000 9,000 trained bodyguards work in the city of S達o Paulo

armored cars were registered in S達o Paulo in 2009

S達o Paulo OUTLOOK

Monomo/XXXXXXXX

S達o PAulo in numbers

CHALLENGES

Security

Development to fight violence ity, an excess of uncontrolled firearms of the authorities and a sudden transformation in the demographic profile of the city, with the unplanned duplication of the population over the past decade. In addition to the recovery ão Paulo underwent a process of growth in Brazil and mainly in São Paulo, similar to that which affected other singular measures were successful, such New York in the years of the as the national disarmament campaign which economic slump from 1980 to took 500 thousand weapons off the streets. mid-1990. During this period, the To achieve these positive results hefty investcity watched its violence indexes ments in technology were made. In 2008 and climb and reach the mark of 38 homicides for 2009 alone, São Paulo state invested R$ 160 every 100 thousand inhabitants per year, higher million in innovative measures. One of them is than Colombia’s rate. the Criminal InformaSão Paulo, like New tion System (Sistema de York, which overcame its Drop in homicides Informações Criminais problem, has been steadi- Amount of homicides in the city per year – Infocrim), a databank ly showing improvefor criminal reports 5,500 ments in this area over that allows the police the past 15 years. As of to create maps for the 4,000 2000, the city registered patrolling of areas with a drop of 77% in the higher crime rates. The number of homicides, other is a network of 2,500 reaching the level of 11 102 cameras placed -77 % for every 100 thousand in problematic points 1,000 inhabitants in 2009, simin the city. Simple 2000 2009 ilar to that of Mexico. solutions such as an The drop was 70% during increase in commuthe same period for the entire state of São Paulo. nity police have also been important. For comparison purposes, New York city regisThe measures taken and the indexes show tered 2.6 thousand homicides a year and indexes that the city of São Paulo should continue to above 14 for every 100 thousand inhabitants progress in this area. In a few neighborhoods, in the 90s. Currently, the city registers around such as Perdizes on the western side of the five homicides per 100 thousand inhabitants. city, the average of homicides registered is The improvement in security was mostly due already the same as that in Stockholm, Sweto the economic and social progress and investden, which is three for every 100 thousand. ments in monitoring systems, which lead to a higher degree of punishment. High crime rates Source: City Urban Security Department of São Paulo were largely a reflex of low economic activ-

The drop in violence in the city is a reflex of economic recovery and disarmament programs

São Paulo OUTLOOK

www.analise.com

CHALLENGES

Downtown

On the way to recovery The downtown area of São Paulo will undergo a radical process of change in the next decade on the path to rehabilitation

owntown São Paulo underwent a process of degradation at the end of 90s which it is only recovering from now. Twenty years ago, the offices and corporations that used to occupy the region began to migrate to new business centers located at other points of the city. The avenues Brigadeiro Faria Lima, Engenheiro Luiz Carlos Berrini and Presidente Juscelino Kubitschek, as well as Paulista avenue itself are a few examples. The downtown region lost its commercial appeal and the price of the square meter took a dive. During this process, crime rates rose and properties degraded. The recovery of the downtown area has been a topic of discussion by the community and the public administration for more than a decade. One of the most important measures is the New Light (Nova Luz) project, which plans to remodel around 2.3 million square meters. In addition to creating new housing and pub-

lic equipment options, the projects intends to preserve the existing architecture while continuing to respect and encourage the economic appeal of the region. Santa Efigênia street, known for its electronic equipment stores, is an example. The project predicts the concession of tax incentives to attract companies from the technological sector to the area. The public power has invested in the creation of cultural sites in the downtown area of the city and has already concluded a few interventions, such as transforming the old Júlio Prestes train station into the Sala São Paulo, one of the most modern concert halls in the world. The neighboring Luz station, an example of English architecture in the city, was remodeled and now, in addition to city trains, houses the Portuguese Language Museum. The complex also offers the Luz garden and the State Art Gallery, a benchmark of visual arts in the city. The creation of the Music School complex in the Luz neighborhood and plays set up in Roosevelt square by independent theater groups have also breathed new life into the region. São Paulo’s cultural affairs have gained ground in the downtown region due to logistic advantages, low rent, large human concentration and easy access. Sources: City Government of São Paulo and Vivo o Centro Association

www.analise.com

São Paulo OUTLOOK

CHALLENGES

Tax load

A needed reform Project plans to rationalize collection, simplify tax structure and fight evasion and double taxation

razil has one of the most complex tax structures in the world. It includes 61 taxes and contributions, in addition to around 95 accessory obligations for companies. The tax treatment for companies changes according to the size of its business, the nature of its operations and the region where it is based. The tax load in 2009 reached 35% of GDP and most of it goes to the Federal Government, which charges taxes on industrial products (the IPI tax), financial transactions (the IOF tax), rural activities in addition to income tax and federal contributions. Part of the collection is divided among the state and the city. Even so, they also charge

taxes. The states charge the merchandise and services tax (the ICMS tax) and taxes for long-distance transports, communication, power and the ownership of vehicles and machines. The cities receive taxes basically from city properties and service provisions. The country is looking for a solution to the problem through a tax reform, which aims at rationalizing collection, simplifying the tax structure and fighting tax evasion, double taxing and ending the tax war between the states and cities. The reform intends also to reduce taxes on labor, in an attempt to encourage formal employment, reduce the pension contribution of companies, from 20% to 14% on the gross salary. The conflicts surrounding the approval of the project are great and the debate at National Congress has lasted already two decades but most believe that the project in question will be voted on in 2011. Source: Brazilian Tax Planning Institute (IBPT)

CHALLENGES

Red Tape

Less obstacles for growth Entities have begun to adopt technology and simplification to reduce waiting periods and eliminate stages of the bureaucratic process

opment, such as Russia.In the past two years, São Paulo’s mayor office adopted measures to speed up the regularization of companies. Since 2008, business work permits can be obtained via the internet for businesses, such as drugstores, snack bars or hairdressers, that are he opening of a company in Braset up in buildings for less than five years. zil is a slow and complex proProgress has also been made nationwide. In cess. The national average in labor relations, the main change until now was 2009 was 20 days. In São Paulo introduced in 2010: temporary employment concity, this term varies from 25 tracts can now be renewed for up to six months to 30 days. In comparison with and through the Internet. In the past, this renewal countries such as the US, which is an avercould drag out for 45 days. Another target is cusage of six days, or Australia, where it is postoms bureaucracy. The federal government plans sible to open a company in two days, the delay to introduce computer technology and integrate and the excess of rules create a challenge. all the port operations The delay in the process of the country in order is due largely to the fact for cargo to be cleared that it is necessary to reg- Weight of bureaucracy electronically. The first ister and send informaAverage days to open a company port to be entirely intetion to federal, state and grated will be the port city entities. The states, of Santos, the largest in in charge of starting the Brazil and the expectaprocess, also contribute tion is that by the end of to the delay. Each one 2010, the system will be of the states has its own legislation, which makes available for all public it difficult to standardports of the country. ize the processes and Bureaucracy also Russia Chile Brazil USA Australia exchange information. affects the judicial Despite the yet consystem. Debt collecsiderable amount of bureaucracy, the situation tion via judicial means can last three years or has been steadily improving. In 2005, the avmore, which drives up costs around 20%, as erage time to open a company was 152 days, a means of protection against default. Under according to data from the World Bank, five this scope, the gradual implementation of an times more than the maximum period in São electronic process in the next years, that is, the Paulo city in 2009. Additionally, São Paulo end of the use of paper in procedural transacalready has levels well under the global avertions, should cut this waiting period by half. age, which is 57 days, and if compared to other countries in Latin America and those in develSources: Brazilian Support Service for Micro and Small Companies (Sebrae) and World Bank

www.analise.com

São Paulo OUTLOOK

CHALLENGES

Intellectual Property

The fight against piracy São Paulo is investing in monitoring and education to fight piracy and the improper use of intellectual property

2008 were not original or licensed. This index is still high if compared with the world average of 41%, but well below the indexes of other BRIC countries, in which the lowest index is 68% and the highest over 80%. wo factors hinder the protection of These high indexes are being lowered in the intellectual property in Brazil and country and in the city of São Paulo. In 2008, in São Paulo city: the consumpBrazil registered the seizure of 1.6 million boottion of clandestine products and leg software CDs, a 5% increase in comparison the federal government’s decision with 2007. In 2009, after an increase in the to withdraw the patents of medicamonitoring process, the seizures dropped to 1.1 tions to drive their price down in the country. million units, which represents a shrink in the The withdrawal of patents is an issue involvblack market. The use of illegal software also ing the pharmaceutical industry in the specific dropped. The index was 64% in 2005, six percircumstance of the fight against Aids. Despite centage points above that registered in 2008. the precedent having Brazil is not a prooccurred, it is an isolated ducer but a consumer gesture, that does not of clandestine products. Illegal software have the support of the Therefore, the FedUse of pirated programs in 2008 private sector and which eral Revenue service will hardly be of greater and federal entities have % importance than it is now. been hiked up inspec% % The consumption tion at ports, airports and % of bootleg products, % frontiers since 2004. however, which is a The city government global trend, is accenof São Paulo adhered in tuated in Brazil due to 2009 to the piracy comthe limited income of bat program launched China India Russia Brazil World the Brazilian as comby the Justice Ministry. pared with developed In addition to represseconomies. Estimates indicate that piracy acing illegal trade, the program aims at educating counts for US$ 500 billion a year worldwide. the population and creating economic incenIn Brazil, according to the Justice Mintives for the development of legalized meristry, the amount is around US$ 38 billion chandise. The Ministry’s expectation is that dollars a year (R$ 65 billion). It is estithe program will help to modernize the secmated that the city of São Paulo alone loses tor’s legislation, including a stricter classificamore than R$ 30 billion due to piracy. tion for crimes of forgery and contraband. In the software area, for example, 58% Sources: Brazilian Software House Association (Abes), Business Software Alliance (BSA) of the computer programs in the country in and the International Data Corporation (IDC) and the Justice Ministry

São Paulo OUTLOOK

www.analise.com

CHALLENGES

Environmental management

Sanitation and recycling The management of water and an increase in waste recycling are the city’s targets in the next decade

he greatest challenge of environmental management in São Paulo is a topic that concerns the world: the preservation of water resources. Protecting water sources, avoiding silt up and cleaning up its main rivers are the primary points of this task. The most complex problem is the recovery of the Tietê and Pinheiros rivers and the Billings lake, one of the most important water sources of the city. A program to reduce local sewage waste and the residue of 1,250 companies located in the area of the Tietê basin in the metropolitan region is being implemented since 1992. Concurrently, a plan to control industrial pollution was also introduced. Until 2000, practically all companies had put in place the control systems required. The construction work required US$ 2.5 billion over the past 25 years. The results show that the measures taken

www.analise.com

until now are a move in the right direction. The capacity of sewage collection in the river basin in the metropolitan region has risen since 1995 from 66% to 84%. Sewage treatment increased from 24% to 70%. As in every large city, the air quality is also unsatisfactory, mainly due to the large vehicle fleet. The city government has also created a vehicular inspection program that includes all types of vehicles. In 2010, the expectation is that close to 4 million vehicles will be inspected. An important target for the next decade is the expansion of selective trash collection and recycling in the city. In 2009, selective trash collection was still limited to only 1% of the trash produced. In all, 7% of the recyclable trash was collected, against 50% in Japan and 11% in the US. The city’s government is investing in new recycling stations and plans to reach 61 by the end of 2010 with a total of 400 tons recycled a day, expanding selective collection to around 2.3% of the trash produced. Sources: Cetesb, Sabesp, Environmental Department of São Paulo State and the Nature and Environment Department of the City

São Paulo OUTLOOK

JONNE RORIZ/AE

Developing cities

Detail of the interior of the Ibirapuera Auditorium, located in the park of the same name in the southern region of the city, shelters the institute that maintains the Auditorium School with the objective of revealing new talent

In the following pages is an analysis of the main emerging cities and their vocations

What is an emerging economy and where are the worldâ&#x20AC;&#x2122;s largest located Economic vocation and size of these developing cities The next countries to stand out in the global economic scenario

Ho New/Reuters

saúde EMERGING EMERGINGCITIES CITIES

Like the shore of the Huang Pu river, which shelters the new financial district of Shanghai, Faria Lima avenue is home to the most sophisticated office buildings in Sao Paulo, where the square meter reaches US$ 80

THE CAPITALS OF DEVELOPMENT Large metropolises are the decision-making and business hubs that shape the economies of emerging countries 82

São Paulo OUTLOOK

www.analise.com

EMERGING CITIES

he importance of emerging economies in the global economic scenario reached a new level in the decade of 2000. The countries that have characteristics such as plentiful and qualified labor, increasing production and export levels, rising Gross Domestic Product (GDP) and a fast-paced process of narrowing the gap between social classes, are responsible for more than half of the wealth generated worldwide today. The term emerging, coined by analysts of the World Bank in the 80s, has become a label to describe a series of economic groups. Among which BRIC, formed by Brazil, Russia, India and China, the region known as Eastern Europe, including Poland and Turkey, among others; Latin American countries which have gained importance in the past decade, such as, Mexico, Chile and Colombia; in addition to African nations, and some of those in the Middle east and in southeast Asia. The influence of these countries on market tendencies over the next decades are expected to change the map of global economic power. A recent indicator, which was released in April 2010, was when the World Bank announced that it planned to change its decision-making structure to give more power to emerging countries which, even though they account for

a little more than 50% of global GDP, still hold only 44% of the votes in the institution.

The cities The GDP weight of developing countries is impressive and it is the metropolises and large cities that shape the economic progress of these nations. They concentrate people in quantity and quality, decision-making centers and, consequently, the most business. The global growth engine of the emerging counties is in their cities, where the markets are connected to the rest of the world. The data shown on the next pages will highlight these characteristics and point out where the economic and population importance and the vocations of a few of the main cities in these conditions are located. This emerging city map does not only describe only cities located in countries in development but in locations identified as being in rapid growth and that compete for investments within this profile. In the comparison with São Paulo, for example, the US city of Miami is a competitor in the factor of attracting multinational headquarters with operations in Latin America. In relation to Dublin in Ireland, there are similar opportunities in the information technology (IT) and software market.

GDP of Brazil and the developed world 7 6 5 4 3 2 1 0 -1 -2

Seasonal percentage growth of GDP per year

Brazil

6% 4 2 0

United States

England

2000

Japan

European Union

2008 www.analise.com

These cities are those that most attract investments, exert influence and are the center of new ideas and market trends in decades to come. The progress is clear. A study drawn up by credit card operator, MasterCard, shows that Shanghai is already among the 25 cities that most affect global economy. The city climbed eight positions in the 2008 ranking, the largest gain of all the cities analyzed in the list headed by London. Research also shows that Los Angeles was left out of the ten first cities in the ranking, remaining only the cities of New York and Chicago to represent North America in this group, also an indicator of change in the centers of global influence.

The next on the list Alongside the BRIC block, other groups of emerging markets have already begun to stand out as the next candidates to take over the leadership in the growth of wealth generation. Some of the most cited economies to occupy the place of countries such as China and India, which maintained GDP growth levels of around 8% a year during the first decades of 2000 and fueled global economy, are Mexico, South Korea, Turkey, Poland, Indonesia, Saudi Arabia, Taiwan, Iran, Argentina and Thailand. These ten economies together, in GDP terms, registered US$ 5.6 trillion in 2008, according to the World Monetary Fund (WMF). This amount is higher than the GDP of Japan or China and equals the third largest economy in the planet, behind the European Union and Estados the UnitedUnidos States. This perspective is not a threat to the BRIC Inglaterra countries but an indicator of a more balanced environment Japão of capital distrifrom the standpoint bution in the world. The expectation União Europeia is that this trend will strengthen the Brasil ties between the developing countries and the so-called South-South trade, creating new paths for the growth of their economies, which does not necessarily need to be directly linked to developed nations. 0

São Paulo OUTLOOK

Emerging CITIES The size and vocation of the 15 main emerging cities of the world

IRE L AND Dublin

1.1 mln $ US$ 61 bln IT services Financial services Pharmaceutical industry Trained labor

UNIT ED STAT ES

Miami

M E X I CO Mexico City

8.8 mln $ US$ 390 bln Auto Industry Appliances Industry International Trade Leisure tourism

2.4 mln $ US$ 292 bln Financial services Real estate market International Trade Center aimed at Latin America

COLOM B IA Bogota

7.4 mln $ US$ 100 bln Leisure tourism Civil construction Educational center International Trade

B R AZI L

São Paulo

C H IL E Santiago

5 mln $ US$ 120 bln Financial services International Trade Concentrates head offices of multinationals High quality of life

Buenos Aires

ARGENTIN A

11 mln $ US$ 320 bln Financial services Legal services Business tourism Intelligence center of Latin America

3 mln $ US$ 362 bln Real estate sector Civil construction Cultural services Leisure tourism

10.6 mln $ US$ 321 bln Financial services Real estate market Energy services Educational center

12.6 mln $ US$ 166 bln Real estate market Industrial center Logistics center Cultural and political center of China

REFERENCE Population $

GDP

R USSIA Moscow

9.6 mln $ US$ 291 bln Auto Industry Indústria eletroeletrônica Intellectual capital Trained labor

Peking Seoul

S O UTH KO REA

C HIN A Shanghai

IND IA

16.4 mln $ US$ 233 bln Financial services International Trade Intelligence center of China Largest city in the world

Mumbai Bangalore

13.8 mln $ US$ 209 bln Financial services Entertainment industry Healthcare services Second largest city in the world

Singapore

5.6 mln $ US$ 215 bln Capitals market International Trade Leisure tourism High quality of life

5.4 mln $ US$ 69 bln IT and software services Telecommunication services Educational center Engineering services Johannesburg

S OU T H AFRICA

3.9 mln $ US$ 110 bln Base industry Financial services Leisure tourism Mining

Sources: The GDP and population information derives from official government data of the places surveyed. The economy sectors were researched in studies such as, Cities of Opportunity; of PriceWaterHouseCoopers in 2010 City Development Strategies of UN-Habitat, United Nations Development Programme (UNDP)

Financial

In the following pages is an analysis of what S達o Paulo has to offer in the financial and banking service sectors

At its debut in the S達o Paulo Stock Exchange, on November 30, 2007, the shares of BM&F appreciated 25%, exceeding the initial estimates; this IPO raised R$ 6 billion and enabled the Stock Exchange to break trading records

The importance of the S達o Paulo Stock Exchange and its expectations

The main national and foreign banks based in the city

EDUARDO NICOLAU/AE

Growth of the private equity sector and investment banks

Paulo Whitaker/REUTERS

FINANCIAL sa炭de FINANCIALMARKET MARKET

The S達o Paulo Stock Exchange held the largest initial public offering in its history in October 2009 involving more than US$ eight billion for a total of 600 million shares offered by Santander Brasil

CONSOLIDATED financial center S達o Paulo, a financial center of global standards, should lead the growth of the sector in the next decade 88

S達o Paulo OUTLOOK

www.analise.com

FINANCIAL MARKET

ão Paulo city is a financial power, home to the São Paulo Stock Exchange (BM&FBovespa), which is among the five largest in the world and the second largest in the Americas, as well as, leader in Latin America. Even under the effects of the international economic crisis, the investment banks in operation in the country, which include giant international corporations, such as JP Morgan, Morgan Stanley, Merrill Lynch and Credit Suisse, have continued to grow over the past years and foresee that Sao Paulo will be one of the main markets for expansion in the next decade. The forecasts of retail banks are also optimistic. Brazil’s economic progress has created a new consumer market for bank services, which is on the rise. The country’s main banks follow the trend with new investments, as a result of a series of mergers and acquisitions that have consolidated the sector in the past few years.

Capitals market and São Paulo Stock Exchange (BM&FBovespa) BM&FBovespa lists companies and funds, trades stock, securities and derivatives contracts. Its structure places it among the five largest and the expectation is that it will become the second largest stock exchange by 2012. It will only be second to the US CME Group, the largest and most diversified of all stock exchanges. By the end of March 2010, 469 companies were listed in the São Paulo stock exchange. Out of which, 159 companies incorporated the different levels of corporate governance, that meet the strictest criteria of transparency in information to shareholders. Together, these companies accounted for more than 75% of spot trades in the first quarter of 2010, represented 71% of the financial volume of R$ 127 billion in the period, and almost 68% of the market value of the exchange. In 2009, BM&FBovespa’s market value hit R$ 2.3 trillion, based on the 385 traded companies - 64% above www.analise.com

the R$ 1.4 trillion represented by the 393 companies listed in the previous year. Despite the lack of global liquidity, São Paulo’s stock exchange carried out the greatest initial public offer (IPO) in its history and broke the world record of all stock exchanges by trading in October R$ 14 billion (more than US$ 8 billion) for a total of 600 million shares offered by Santander Brasil. Before the Spanish bank, the brand belonged to the China State Construction Engineering which obtained US$ 7.35 billion. BM&FBovespa has also broken its own records in trade volume with R$ 81.75 million. The balance of the foreign investments reached US$ 26 billion. The foreign investors were also responsible for 66% of the total of R$ 46 billion raised by 24 companies, plus six IPOs and 18 follow-ons, held in 2009.

The São Paulo Stock Exchange, in 2009, broke its trading record with a total of 82 million transactions Between 2005 and 2009, 115 companies went public on the São Paulo exchange. Until mid-April 2010, six new companies were capitalized through the capitals market. The amount of companies listed in BM&FBovespa increases rapidly, which helps to reinforce Sao Paulo’s position as a regional hub of the financial and capitals market. Until the middle of this year, the Brazilian stock exchange is expected to considerably expand the trading of Brazilian Depositary Receipts (BDRs) of large US companies, which will occur through financial institutions. With this initiative, a greater number of Brazilian companies, which still use the New York Stock Exchange (Nyse) to obtain, through American Depositary Receipts (ADRs), more liquidity and visibility in the eyes of the foreign investor, may begin to

Mergers and acquisitions Banks by operations in 1st quarter of 2010 rk Bank and HQ

Total

US$ bln

1 BTG (RJ)

10,8

2 JP Morgan (SP)

8,0

3 Deutsche Bank (SP)

6,6

4 Credit Suisse (SP)

6,0

5 Morgan Stanley (SP)

5,8

6 Santander (SP)

5,0

7 Bradesco (SP)

4,5

8 Estáter (SP)

4,2

9 Bank of America

1,7

0,8

10 Citibank (SP)

concentrate their trades in Brazil. A total of 34 Brazilian companies trade ADRs of level 2 and 3, which must meet the strict requirements of the US Sarbanes-Oxley corporate law. This group includes giants such Petrobrás, Vale, Itaú Unibanco and Santander Brasil, which account for a trading volume that is second only to US companies traded on New York’s trading floor. In February of this year, BM&FBovespa increased its partnership with the CME Group, the largest stock exchange in the world. The partnership is aimed at developing a new electronic trading platform to integrate all the segments traded by the stock exchange by the end of 2011. The startup of the operation of a platform for the international distribution of stock prices traded on the Brazilian stock exchange is scheduled to take place in the second half of 2010 in partnership with Nasdaq OMX. In addition, the São Paulo stock exchange has entered into an agreement with the Stock Exchange of Chile, through which it will develop a connectivity network. Similar agreements are in course with the stock exchanges of Colombia, Peru, Mexico and Argentina.

São Paulo OUTLOOK

FINANCIAL MARKET

Homebrokers and financing While working towards extending its boundaries beyond the limits of Brazil, BM&FBovespa is also planning, in an ambitious move, to boost the share of individual investors in its total trades. Part of this project is to, for example, expand the number of individual accounts that trade with the institution from the current 58 thousand to five million by 2015. In 2009, the total volume traded in Home Broker was R$ 468 billion and the average monthly volume increased from R$ 27.5 billion to R$ 39 billion. The monthly average trading volume rose from R$ 2.9 million in 2008 to R$ 4.1 million. The development of the capital markets among the Brazilians is also based on the existence of clear

regulatory milestones and a solid regulatory foundation well known among the institutional and foreign investors. This significant increase in trades, through home brokers, points towards the probability that this market’s operations will intensify, due to the increase in number of investors, as well as of companies, that are more liable to use the stock exchange as a financial instrument. Therefore, the World Cup in 2014 and the Olympics, two years later, in Brazil should strongly impact the Brazilian economy and, therefore, the capitals market. The Brazilian Base Industry and Infrastruture Association (Associação Brasileira da Infraestrutura e Indústria de Base - Abdib) estimated that by 2014, the investments needed for urban transport, ports, air-

ports, electrical energy, communication, sanitation, security, health and hotel management will require R$ 110 billion. Additionally, the Growth Acceleration Program (Programa de Aceleração do Crescimento - PAC) of the federal government plans to invest R$ 583 billion in the infrastructure area over the next five years. In total, these figures add up to US$ 350 billion (around R$ 650 billion).

Rapid growth of investment banks The presence of investment banks in São Paulo corresponds to their economic and financial importance in Brazil. A total of 10 out of the 16 banks that operate in the country, among which all the international groups, are

Werther Santana/AE

Consumer looking at product at electronics store in São Paulo: an increase in the income of the population has affected the growth of consumption trends and led retail sales to exceed market expectations

São Paulo OUTLOOK

www.analise.com

FINANCIAL MARKET

headquartered in the city, such as US’s JP Morgan, Morgan Stanley, Merrill Lynch and Goldman Sachs, Switzerland’s Credit Suisse, England’s Rothschild, Germany’s Deutsche Bank and Spain’s Santander. This powerful industry competes in a heated market, which this year, should account for US$ 1.3 billion from support services to merger and acquisition operations and the issuance of public shares. This amount is 30% higher than that registered in 2009. The economic stability and the investment grade granted by the three largest risk rating agencies, Standard & Poor’s, Fitch and Moody’s, has increased the competition between investment banks in Brazil. The players, including the foreign ones, are strengthening their operations, fighting for professionals and, in a few cases, expanding their physical setup in order to grab a larger slice of the Paulo market. Morgan Stanley, for example, has been increasing its structure of experts since 2008. Goldman Sachs is doing the same and has given the whole team the mission of doubling the operation in Brazil by 2013. JP Morgan doubled its market share in 2009 and is expanding its physical setup on Faria Lima avenue. Santander, besides issuing its own shares, those of Visanet, a company of electronic payment means renamed Cielo of which it is one of the shareholders,

took part in another 10 issuances of shares at BM&FBovespa in 2009. In the first two months of 2010 alone, 98 merger and acquisition operations took place, according to PricewaterhouseCoopers. The trades were headed by local groups (70%), and of these, 49% resulted in the acquisition of company control. The consulting firm expects Brazil, in 2010, to surpass the 721 trades made in 2007, the year that registered the largest trading volume since 2002, when the company started the survey. Other sectors also stood out at the beginning of this year. The sugar and alcohol sector, for example, is undergoing a consolidation process and attracting local and foreign investors. One of the highlights in this sector was the joint venture of Dutch-owned Shell and Brazilian-owned Cosan, which reached the approximate figure of US$ 12 billion. In the financial sector, the highlights were the acquisition of 25 insurance brokers by Gulf Capital Partners and a few partnerships, such as the agreement between Banco do Brasil and Bradesco Seguros.

Private Equity grows in Brazil The private equity fund industry was hit hard in all emerging countries in 2009. It shrank in the Middle East and North Africa (84%), in Central and East Europe (71%), in Asia (60%) and

in Latin America and the Caribbean (50%), according to data of Emerging Markets Private Equity Association (Empea). In Brazil, however, private equity funds registered an excellent performance. In 2009, these funds invested US$ 34 billion, five times more than the US$ 6 billion in 2004. Their share jumped from 1% to 2.2% of GDP in a period of five years and registered an increase of 26% as compared with the previous year. Despite this considerable growth in such a short period of time, Brazil is still under the international averages of the sector, which is 3.5% of GDP. According to Empea, Brazil will attract more investors than any other emerging country over the next two years and the expectation is that the country will reach 3.5% of GDP by 2014, when the managers of private equities expect to have US$ 70 billion to invest.

The management of fortunes Brazil has 131 thousand millionaires, according to data from investment bank Merrill Lynch related to 2008. In Bradesco bank accounts alone, one of the largest local banks, the amount registered at the beginning of 2010 was 200 thousand. In this niche, Brazil is the center of attention of banks due to its favorable scenario, which includes IPOs, a lower inter-

São Paulo’s financial market Bank concentration

Above average

Stock exchange at home

Share of bank headquarters in Brazil

Nominal value increase in 2009

Yearly average volume of home broker

61%

São Paulo

83%

38 R$ million

44% 23% 22% 39%

Other Brazilian cities

www.analise.com

Ibovespa

Nasdaq

1.850%

19%

S&P 500 FTSE 100 Dow Jones

2000

2009

São Paulo OUTLOOK

Keiny Andrade/AE

FINANCIAL MARKET

Retail banks register a total of 81 million bank accounts held by around 40 million individuals, who are increasing their usage of electronic payment means, such as debit cards, every day est rate environment, an increase in mergers and acquisitions and the proliferation and growth of mediumsized companies. The expectation for 2010 is that private banking in Brazil will grow at least 15%, which is extremely attractive to a sector whose profitability in the management of fortunes dropped significantly in 2008 and 2009 due to investor’s turning to more secure assets. Nowadays, almost all large banks are reevaluating their strategies and increasing their teams to grow and compete for the leadership of this market, currently headed by Itaú Unibanco, which manages R$ 110 billion and expects to end 2010 with a growth of 22.5%. The prospects of growth have led foreign banks, such as US-owned Bank of America, Merrill Lynch, JP Morgan, Morgan Stanley, BNY Mellon and Royal Bank of

São Paulo OUTLOOK

Canada, to strengthen or create this area in Brazil.

Mergers fuel large banks São Paul, the financial capital of Brazil, registers superlative numbers in the banking sector. São Paulo concentrates 54% of the banks that operate in the country, sheltering 61% of the 139 multiple-purpose banks and 66% of commercial banks. In addition to investment banks, the city is also home to financing institutions for automakers, such as US-owned General Motors and Ford; German-owned Volkswagen and Mercedez-Benz; and Japanese-owned Toyota and Honda. The city groups 36% of the 2.5 thousand bank branches of the state, the wealthiest in the country, and almost 21% of the total 120 thousand that exist in Brazil.

Due to these characteristics, São Paulo was the stage of recent business that consolidated the sector. After Santander acquired ABN-Amro in the Netherlands, the Spanish bank merged in Brazil with the Real bank, which was owned by ABN-Amro. This operation took place in October 2007. After that came many operations that merged the public institutions of Banco do Brasil and Nossa Caixa, and private banks Itaú and Unibanco. While the integration of the acquired institutions is in progress, Banco do Brasil, Itaú and Santander prepare themselves to service consumers and companies by expanding their respective network of bank branches, ATMs, in addition to restructuring, expanding and training their service teams, in particular in the universe of companies that comprise the so-called middle market. www.analise.com

FINANCIAL MARKET

This is the first move of the largest Brazilian bank, as of July, according to its owns projections, to start competing in equal conditions for the high-income public of Bradesco and Itaú, which have for a long time been the leaders in São Paulo. Among other initiatives, the institution has already created new products, increased its contracts with law firms and wants to use its synergies with other areas, in particular in the wholesale and capital markets area, to attract clients from the top of the social-economic pyramid. It has also been investing in its internationalization process after the recent acquisition of Banco da Patagonia in Argentina. Santander in 2010 plans to open 180 new branches in the country, of which 60 will be located in São Paulo. Itaú plans to open 150 new branches in Brazil and Bradesco intends to expand its network with another 250 new branches. HSBC, the sixth largest in Brazil, is following the same path. Its network will receive another 130 units, mainly in the capital cities of the southeast region of the country, where the bank is stronger.

Economic growth and the C class The Brazilian retail bank market registers a total of 81 million bank accounts held by around 40 million individuals, according to an estimate of PricewaterhouseCoopers, equal to approximately 40% of the economically active population of the country comprised of 99.5 million people. The economic growth of the past years has introduced a new consumer into this market. The C class, in 2009, increased its share in the total Brazilian population from 45% to 49%, or almost 93 million people, and has become the main market for new users of bank services. The estimate is that in the next five years, this area gained 30 million consumers, of which 8 million were added to the group between 2008 and 2009. This share of the population suffered less from the financial crisis set off in 2008. Its income www.analise.com

increased and it caused the sales of the retail sector, as well as of businesses that sell vehicles, spare parts and construction material, to surpass the market’s expectation and to continue to fuel industrial production.

The low-income population has become the main market of new users for bank services With the growth forecasts of the Brazilian economy, the tendency is for the new C class consumers to continue to grow in the country, mainly in São Paulo, the city that offers the best opportunities for social mobility. In 2010, the International Finances Institute (Instituto de Finanças Internacionais - IFF) estimates that Brazil

will grow 5.4%, higher than the 4.8% predicted for Latin America. In mid April, a survey by the Central Bank of Brazil made with 100 of the largest financial institutions in the country showed an expectation of growth of 5.6% in the Brazilian economy. A survey made by JP Morgan is even more optimistic. It showed that, depending on the behavior of the basic interest rates and cost control by the Brazilian government, this growth can reach 7% this year. This progress should also expand credit availability, which will further encourage these consumers. The Central Bank of Brazil expects the total amount of credit to be granted by the financial system to increase 20% as compared with 2009. The estimate is in line with that predicted by the financial institutions which, on average, indicate an increase of around 20% to 25% for individuals and legal entities. 0

HOW IT WORKS

he regulation and supervision of the Brazilian financial system is carried out through three regulatory entities: the National Monetary Council (Conselho Monetário Nacional CMN), the National Private Insurance Council (Conselho Nacional de Seguros Privados - CNSP) and the Complementary Pension Management Council (Conselho de Gestão da Previdência Complementar - CGPC). They operate in the market through the Central Bank of Brazil (BC), the Securities & Exchange Commission (Comissão de Valores Mobiliários - CVM), the Private Insurance Department (Superintendência de Seguros Privados Susep) and the Complementary Pension Department (Secretaria de Previdência Complementar - SPC). Understand the role of each one of these entities in the Brazilian financial market.

The BC, linked to CMN, supervises financial institutions that hold cash deposits, exchange banks and other intermediate financers and administrators of third-party funds.

●

CVM, also linked to CMN, oversees the operatonis of the commodities and future exchanges and the stock exchanges.

●

Susep, the supervisory arm of CNSP, oversees Brazil Reinsurance (Brasil Ressuguros – IRB), the insurance companies, the capitalization entities and open entities of complementary pension.

●

SPC is linked to CGPC and inspects the closed complementary pension entities known as pension funds.

●

São Paulo OUTLOOK

trading center

Quotes panel at the S達o Paulo-based stock exchange

S達o Paulo OUTLOOK

www.analise.com

Ricardo Lisboa/AE

S達o PAulo in numbers

2.3 tri

was the market value of the S達o Paulo Exchange at the end of 2009

1.3 tri

83%

was the total value was the of stocks traded appreciation of the at the exchange Ibovespa index during the year in 2009

www.analise.com

42%

was the increase in volume traded by home brokers in 2009

S達o Paulo OUTLOOK

Real estate In the following pages is an analysis of what the real estate market of S達o Paulo and its companies have to offer

View of Paulista avenue in the downtown region of S達o Paulo, which is one of the symbols of the city and a must-see for tourists: in addition to its economic vocation, it offers a rich variety of cultural programs

Opportunities for those who wish to settle down in S達o Paulo

Price per square meter of prime commercial real estate

KEINY ANDRADE/AE

The position of the real estate sector during the global economic crisis

ANTôNIO MILENA/AE

REAL saúde REALESTATE ESTATEMARKET MARKET

The Faria Lima avenue region is home to the largest and most sophisticated corporate buildings in the city and has recently included the head offices of investment Banks and other financial companies

GROWTH IN Profits São Paulo’s real estate market has grown steadily in the past few years, creating opportunities for investments and options for those who wish to settle in the city 98

São Paulo OUTLOOK

www.analise.com

REAL ESTATE MARKET

ão Paulo’s real estate market has shown to be significantly solid since 2008 when it, despite the economic crisis that slashed prices all over the world, continued to grow. São Paulo, of all the capital cities of the BRIC countries, was the only one whose office building rentals continued to rise. The city began to recover rapidly in 2009 and started to register the same amount of residential and commercial launches of two years prior. In the real estate credit area, the result was even more impressive. The main public bank in charge of loans in this niche doubled its volume of concessions in 2009 as compared with the previous year and almost ten times in comparison with 2003. Measures put into place by the federal government, among which, a tax cut for construction materials and the introduction of popular housing projects, also helped to boost the sector.

Crisis did not affect prices The financial crisis that shook the world showed that São Paulo’s real estate market was quite solid since it was the less affected by the crisis than the markets in Peking, Mumbai and Moscow. In Moscow, for example, the price of real estate dropped more than 60% since the beginning of 2008, São Paulo, however, endured, despite having higher prices. At the peak of the financial crisis, the behavior of corporate rentals in the city registered the best performance of the main business centers of BRIC countries. The average values receded slightly in the fourth quarter of 2008, but began again to rise in 2009, closing the year above the references that were registered at the start of the crisis. The price per square meter continued to climb, due mostly to the scarcity of land able to harbor buildings with floors of 800 square meters, required by upscale offices. In 2009, the average price per square meter of useful area stood at US$ 3.7 thousand, up 60% in relation to the US$ 2.1 thouwww.analise.com

sand charged in 2005, according to data from the Brazilian Equity Studies Company (Empresa Brasileira de Estudos do Patrimônio – Embraesp).

The 4th most profitable market in the Americas São Paulo did not have to cut its real estate and rental prices in order to the ride the wave of the global real estate crisis. The average US$ 55 per square meter for the rental of top-of-the-line offices places the city in fourth among the most profitable markets in the Americas. This average, obtained from a survey by Cushman & Wakefield, carried out in 132 cities of 63 countries in the past quarter of 2009, includes expenses with maintenance fees and city taxes and was influenced by the behavior of exchange rates.

In the next five years, the offer for offices has grown 40% in the city The list is headed by New York (US$ 94) and includes, among other cities, Miami, in the fifth position (US$ 49), Buenos Aires (US$ 31), Mexico city (US$ 27) and Santiago in Chile (US$ 24). However, the price per square meter charged for offices in São Paulo can reach US$ 80 if the building is located on Faria Lima avenue. This avenue, which has the largest and most sophisticated corporate buildings in the city, comparable to New York, Tokyo and Hong Kong, is home to investment banks and other financial companies.

60% of commercial properties in Brazil São Paulo accounts for 60% of the total office space in Brazil and, in comparison with other global business capitals, has an enormous potential of growth and offers many opportunities in the high-standard corporate market. It is estimated that over the next five

years, the offer of office spaces will increase around 40%, keeping it attractive to institutional and foreign investors, who have invested, reinvested and made new funding contributions since 1999, due to the profitability obtained and the growth prospects of the Brazilian economy and of São Paulo. In the first quarter of 2010, the office space inventory in the capital city was 2.5 million square meters, equal to 27% of the 9.5 million square meters available. In 2009, 23 new office buildings were delivered in São Paulo and 27 in the previous year. The dispute for space is heated. In 2007, for example, almost all such buildings were rented prior to their delivery. The new inventory projected for 2010 is up to 200 thousand square meters and the expectation is that around 70% of this space will be rented by the end of the year. The vacancy rate, percentage of vacant offices in relation to total inventory, in São Paulo is expected to revolve around 9%, under the point of equilibrium which varies between 12% and 15%.

Residential sector continues to grow in 2009 Anxiety in relation to the world crisis caused little change in the residential real estate market in São Paulo city in 2009. Sales hit almost 36 thousand units and grew 9% as compared with 2008, returning to the same levels of 2007. During the same period, construction companies delivered 329 new apartment buildings and residential condos, adding 30.1 thousand units to the São Paulo market. By the end of 2010, the volume of launches and sales is expected to grow, respectively 10% and 5%. In addition to single and sector measures, the sum of a few factors, that became consolidated throughout this decade, contributed towards regaining the trust of the sector agents and the consumers: the economic stability of the country, the growth of the consumer’s effective purchasing power, the improvement of regulatory mile-

São Paulo OUTLOOK

REAL ESTATE MARKET

stones, in particular in the area of fiduciary transfer, and the increase in local credit offer on behalf of the financial institutions, which jumped from R$ 4.9 billion in December 2005 to R$ 34 billion in 2009, according to Central Bank data. The measures adopted by the federal government, among which, a reduction of taxes charged on the purchase of construction material and the announcement of the “Minha Casa, Minha Vida” (My Home, My Life) program aimed at giving the low-income population access to housing options, also helped to maintain the sector’s upward trend.

Change in profile of new apartments Paulo’s residential real estate market was marked by a recent change in profile. The rekindling of business, in the first half of 2009, caused a tendency that had already been seen in 2008: a significant drop in the production of upscale properties with four or more bedrooms, which flooded the market in 2007 and 2006. In these two years, launches with this profile totaled 282 enterprises, exceeding the total amount offered in the city throughout the 1990s. In 2009, however, the total amount of new high-standard buildings shrank 60% to give room to smaller properties and those more

quickly absorbed by the market. Throughout 1980 and 1990, the strong demand for luxury properties was not met by the modest production. And, at the beginning of this decade, local demand was incremented by the arrival of multinationals that set up shop in São Paulo, increasing the demand for luxury and high luxury models, whose prices can vary from US$ 1.5 million to US$ 3.5 million in the trendier districts of the city such as Vila Nova Conceição, Itaim Bibi, Ibirapuera and part of Morumbi. This change in the market was caused by two phenomena that occurred in the social classes. A growth of the C class, which through public initiatives, began to acquire their own homes, and a drop in the purchasing power of the middle and high class who were most affected by the global financial crisis. Therefore, the real estate profile changed to medium-standard properties, without the significant drop in high-standard launches that occurred last year causing the civil construction sector, and with it, the real estate market, to lose ground in the city of São Paulo and in Brazil. A study carried out by the Getúlio Vargas Foundation and by SindusconSão Paulo, an entity that represents the construction companies in the state of São Paulo, forecasts that the GDP of civil construction will grow 8.8% in

2010, well above the 5.5% projected for the national GDP. The residential real estate sector, according to the entity, is among those that will receive the most public and private funds.

Real estate credit prospects One of the factors that has been fueling the Brazilian real estate market is the increase of credit for the sector, which has been rising impressively. And the prospects are that the volume of real estate credit will continue to rise. The Caixa Econômica Federal (CEF), a public bank aimed at the economic and social development of the country, granted R$ 47 billion in real estate loans alone in 2009, the highest in its history. And the forecast for 2010 is even greater: R$ 60 billion The 2009 amount was 102 % higher than that in 2008 and 9.4 times greater than that disbursed in 2003. As such, the federal institution accounted for more than 70% of all the funding for this area. But the private institutions have a lot of space to grow and do not run a risk similar to that which led to the creation of the US real estate bubble, mainly due to the Central Bank’s control over the financial institutions. In Brazil, excluding CEF’s share, real estate credit represents only 4.3% of total credit operations. It is 24% in England and 37% in the United States. 0

São Paulo’s real estate market Rental prices around the world 158

Residential recovery

Monthly value per m2 in dollars

Units sold and price per m2

2nd quarter of 2008 4th quarter of 2009 60

58 28

Moscow

100

São Paulo

São Paulo OUTLOOK

Peking

56%

Units

50%

55 38

Price per m2

25 Mumbai

2005

2009

www.analise.com

Germano Luders/Exame

The significant increase in credit availability has assured plenty of work for construction workers: the Caixa Econômica Federal bank alone granted R$ 47 billion in real estate loans in 2009

HOW IT WORKS

he real estate market in São Paulo has three large players: developers, real estate administrators and construction companies. The administrators, also called real estate brokers, comprise an extremely fragmented segment and are in charge of brokering the purchase, sale and rental of property. There are thousands of brokers in São Paulo. A few large-scale ones operate in the city, the state and throughout the country. Some of the largest also operate as developers and construction companies. There are companies that are exclusively dedicated to construction.

www.analise.com

685 companies operated in all enterprises launched in São Paulo in 2009: 281 developers, 168 brokers and 236 builders

●

21 construction companies are listed in the São Paulo stock exchange (BM&FBovespa), all in the Novo Mercado, the strictest in corporate governance rules ●

●11 corporations, aimed at the commercial exploration of shopping malls and real estate brokers, are traded at the São Paulo Stock Exchange, ten of which under the Novo Mercado, with strict governance rules

●23 was the total number of merger and acquisition operations of developers, construction companies and brokers of the real estate market the ocurred in Brazil in 2009 ●Around 9,000 is the number of construction companies associated to the Civil Construction Union of São Paulo state (Sindicato da Indústria da Construção Civil do Estado de São Paulo SindusCon-SP), the largest in its category in Latin America

São Paulo OUTLOOK

101

Living in S達o Paulo

Models of building displayed at a real estate fair in Anhembi, northern side of the city

S達o Paulo OUTLOOK

www.analise.com

M叩RCIO FERNANDES/AE

S達o PAulo in numbers

US$

days is the average time for an apartment to remain vacant

www.analise.com

3.5 mln

is the price of a 300 m2 penthouse in S達o Paulo

US$

3,600

is the average rent of a high-end apartment in the city

56%

of upscale buildings are in the Moema and Jardins neighborhoods

S達o Paulo OUTLOOK

under underConstruction Construction

S達o Paulo OUTLOOK

www.analise.com

under Construction

CONSTANT RENOVATION Amidst the construction of office towers, new shopping malls, the vertical structuring of residential districts and the expansion of subway lines, São Paulo city is undergoing a full-blown expansion process. In addition to traditional Paulista avenue, the regions of Faria Lima and Funchal are becoming office centers, generating new demands and opportunities in the real estate market Photos Claudio Rossi

Workers on the job at the construction site of an office building on Brigadeiro Faria Lima avenue in the southern region of the city. The region, which is known for having the most expensive rent rates in São Paulo, is one of the new office complexes of the city

www.analise.com

São Paulo OUTLOOK

105

under Construction

Largo da Batata, in the southern region, is one of the districts that is being remodeled due to the expansion of the subway. The square shelters the new Faria Lima station and a bus depot Detail of the entrance of the future Faria Lima station of Line 4 - Yellow of the São Paulo Metro. The new stations are equipped with smart gates, air humidifiers and mechanisms for the collection of rain wate

The construction work of the Pinheiros station of Line 4 – Yellow, São Paulo Metro. The expansion plan includes 11 new stations, which will be ready in 2012, with investments of R$ 21 billion

106

São Paulo OUTLOOK

www.analise.com

under Construction

www.analise.com

S達o Paulo OUTLOOK

under Construction

S達o Paulo OUTLOOK

www.analise.com

under Construction

The structure of the new JK Iguatemi shopping mall on Juscelino Kubitschek avenue, southern region of the city. This 33,000 m² mall will offer 240 stores aimed at luxury products and three office towers

www.analise.com

São Paulo OUTLOOK

under Construction

110

S達o Paulo OUTLOOK

www.analise.com

under Construction

Excavators at a construction site on Funchal street, on the south side of the city. This region, which has incorporated part of the city’s financial center, received over 190 modern office buildings in the past two decades

Residential building under construction in the neighborhood of Campo Belo, southern region of the city. The region, traditionally made up of houses, is one of the many districts in São Paulo that is undergoing an intense vertical structuring process

www.analise.com

São Paulo OUTLOOK

111

Law practice In the following pages is an analysis of what S達o Paulo has to offer in the legal and law firm sectors

Formal session held at the Palace of Justice in downtown S達o Paulo city: the building designed by architect Ramos de Azevedo is considered to be a historical monument of architectural value and cultural interest

Largest firms in Latin America in number of lawyers Universities that most award law degrees in the country

JONNE RORIZ/AE

The city corresponds to 20% of the arbitration chambers of Brazil

Clรกudio Rossi/free stock

LEGAL SERVICES

Library of the law firm of Souza Cescon, in number of firms, the estimate is that out of the 70% of 13.4 thousand local law firms in the state, half are headquartered in the capital city

LEGAL SERVICES

CUTTING-EDGE LAW practice With 14% of the country’s lawyers, São Paulo relies on quality legal assistance equal to that of large international legal markets

ão Paulo, which is the birthplace of the local legal culture (it was in São Paulo that the first two Law courses were set up in the country) currently has 14% of the country’s lawyers, operating in all sectors, to take care of the interests of individuals, as well as of companies. The result is a highly specialized legal market which has actively participated in large economic operations in Brazil, assisting foreign companies based in the country and offering services that are on par with those of large global cities.

São Paulo’s legal market São Paulo shelters around 82 thousand lawyers and accounts for 14% of all acting professionals in Brazil. Throughout the country, there are more than 617 thousand lawyers, of which 222 thousand are located in the state of São Paulo. Rio de Janeiro state has, according to the ranking, half the amount of professionals that São Paulo has. In number of firms, the estimate is that 70% of the 13.4 thousand national www.analise.com

benches are located in the state, half headquartered in the capital city. São Paulo also concentrates the highest amount of firms specialized in Corporate Law: There are 900 benches in the state and 450 of them in the capital. The city offers legal services on par with those available in large markets such as New York and London, but the structure of the firms is different. In the United States and Europe there are megabenches with up to three thousand professionals, the Brazilian offices most renowned in Corporate Law have a more economic structure, with around 40 benches comprised of more than 100 professionals, half of them based in São Paulo, and around 15 more comprised of 200 lawyers. In order to supply this market, the city of São Paulo also concentrates the highest number of Law courses in the country. The city offers 36 universities, some of which are very traditional: São Paulo University (Universidade de São Paulo - USP), the Catholic University (Pontifícia Universidade Católica - PUC-SP) and Mackenzie Presbyterian University. Approximately 6 thousand bachelor´s degrees are awarded every year.

Recognition of Brazilian firms Within the context of Latin America, the recognition of the Brazilian legal market is a highlight, as shown in the publication Latin Lawyer, with the largest law firms in the region.

The largest in Latin America By number of lawyers in 2010 RK Firm and HQ

Lawyers

1 Siqueira Castro (SP)

454

2 Tozzini Freire (SP)

365

3 Machado, Meyer (SP)

339

4 Pinheiro Neto (SP)

337

5 Marval, O’Farrel (Argent.)

325

6 Demarest & Almeida (SP)

274

7 Barbosa, Müssnich (SP)

249

8 Veirano Advogados (RJ)

207

9 Matos Filho (SP)

197

10 Muniz R. Pérez (Peru)

182

Source: Latin Lawyer

São Paulo OUTLOOK

115

LEGAL SERVICES

The institution, which monitors the Latin American legal markets, points out that eight of the ten first places are Brazilians and all have operations in the city of São Paulo and five have more than one head office in the city. São Paulo’s legal market has assisted and actively participated in large economic operations in the past few years and has been more prominent than international foreign law firms. In 2009, after the increase in mergers and acquisitions in emerging countries, Latin America was the stage of several negotiations that involved different countries and amounted to more than US$ 100 billion. In the ranking of law firms that had a role in merger and acquisition operations effectively carried out in Latin America, five out of the first ten places are Brazilian and they assisted in 134 operations, out of a total of 250 that included the collaboration of legal benches. According to the Análise Law 500 yearbook – the most important reference publication in the Brazilian legal market – 62% of the 133 law firms most respected by the largest Brazilian companies are located in São Paulo. A total of 56% of the 238 lawyers pointed out as the most able in their respective areas earned their Law degrees in universities located in the metropolitan region of São Paulo and 70% operate in the city.

Growth in professionalization and specialization

Increase of legal structure in companies

São Paulo-based firms registered a jump in quality since the 90s and have currently established a mature market with a wide range of services. The development and professionalization of the legal market in the corporate area began after the economic commercial opening of Brazil.

The rise in number of new companies setting up in Brazil is causing clear changes in the local legal market, changes which are not occurring only with law firms. In São Paulo city, where the largest local companies are headquartered and around 63% of the multinationals are based in the country, an internalization process of legal services is taking place. According to consulting firm Michael Page, which works with the recruitment of professionals in the legal area, the demand for lawyers to fill board and management positions in companies grew 45% in 2009. Of the total demand, 60% was in São Paulo.

62% of the 133 most admired law firms have headquarters in São Paulo Currently, the market is highly developed and offers specialized professionals in more than 50 business areas including niches such as oil and gas, telecommunications, biotechnology and arbitration. The market’s growth also attracted acclaimed global law and consulting firms to the country. São Paulo is home to 12 of these benches and most work in partnership with local firms. Among them are benches like Clifford Chance LLP, Linklaters, Baker & McKenzie, Thompson & Knight, Shearman & Sterling LLP and Albright Stonebridge.

São Paulo law practice Concentration of offices

Growth of arbitration

Among Corporate Law benches

Value negotiated in the city's chambers

50%

435 R$ mln

800%

São Paulo 305

170

50%

Other Brazilian cities

116

São Paulo OUTLOOK

2006

2009

The arbitration market São Paulo has legal services to meet the representation needs of companies in the arbitration process, regulated in the country through a specific law since 1996. Since then, the application of arbitration has grown significantly in the country. São Paulo city currently accounts for 20% of the total of 250 arbitration courts in operation in the country according to the estimates of the National Mediation and Arbitration Institutes Council (Conselho Nacional das Instituições de Mediação e Arbitragem - Conima) From 2005 to 2009, 191 procedures were under the responsibility of the São Paulo-based courts. The values under discussion in the three São Paulo-based courts totaled R$ 2.9 billion, 62% of the total R$ 7.7 billion accounted for by the five main Brazilian courts. In the international scenario, São Paulo city is considered, together with Mexico City, as the main arbitration center in Latin America and is included in the International Court of Arbitration. In addition to Brazil being the first in the ranking of Latin America in number of parties that require arbitration by CCI, it occupied 9th place in the ranking that comprises all the countries, in 2008. 0 www.analise.com

paulo liebert/ae

The Largo São Francisco Law university is the birthplace of the country’s legal culture, with one of the first law courses of the country: currently, 6,000 law students graduate every year in the city

HOW IT WORKS

he Brazilian legal system is formed by five main groups that deal with different subjects and are based on their own court organization structure. The highest court in the country is the Supreme Court (Supremo Tribunal Federal – STF) which is primarily dedicated to issues related to constitutionality.

controlled companies and self-governing federal entities The Labor Justice, part of the Federal system, deals with conflicts among workers and employers. Its last instance is the Labor High Court (Tribunal Superior do Trabalho - TST)

●

The Electoral Justice, part of the Federal system, is responsible for elections in all spheres and candidates in the country. Its last instance is the Electoral High Court (Tribunal Superior Eleitoral - TSE)

●

The Federal Justice, which has two instances, is responsible for matters pertaining to the whole country mainly in lawsuits that involve the federal government, government ●

www.analise.com

The Military Justice, part of the Federal system, deals exclusively with matters related to military crimes. Its last instance is the Military High Court (Superior Tribunal Militar - STM)

●

The State Justice, with two instances, is dedicated to all matters not covered by the federal system

●

The Brazilian Court of Appeals (Superior Tribunal de Justiça - STJ) is the last instance for all matters not related to constitutionality

●

São Paulo OUTLOOK

117

concentration of professionals

S達o Paulo Justice Court in session in the downtown region of the city

S達o Paulo OUTLOOK

www.analise.com

DANIELA SMANIA/TJSP

São PAulo in Numbers

university Law courses are available in São Paulo

www.analise.com

6,000

bachelor’s degrees are awarded every year in São Paulo

82,000 4,700 lawyers are registered and can work in the city

headquarters law firms are set up in the city of São Paulo

São Paulo OUTLOOK

PAULO WHITAKER/REUTERS

Participants of Campus Party 2008 test software that can play music through the objects displayed on the screen; this one-week event gathered more than 3 thousand internet users in its first year in S達o Paulo

Telecom

In the following pages is an analysis of what S達o Paulo has to offer in the telecommunications and IT sectors One of the highest teledensities in the world

Growth in usage of mobile technology and broadband

The leap in Internet users and wireless connections

Delfim Martins/Pulsar

Telecommunications and networks

Scene of Paulista avenue: the city account for 24% of the mobile accesses of Brazil, 33% of the landlines, 40% of the broadband service subscribers and 99.8% of the population serviced by telephony

Telecommunications and networks

CONNECTED CITY São Paulo is surprising due to the incredible surge in new internet users and the high density of mobile phones

he telecommunication service structure of São Paulo, one of its main competitive edges, integrates the city to the rest of the world with quality and speed. Most of its metropolitan region offers a complete range of services for mobile phones, landlines and broadband. In terms of internet connection, Brazil registered 10.8 million IP addresses in 2009. In the city, the web is in frank expansion and registers the highest global growth figure, 7.3% a year. Broadband access in the country rose at an even more surprising rate: From 2008 to 2009, it increased 82%.

torola, LG Eletronics, among dozens of others. São Paulo, which is the region of most economic importance in Brazil, is also responsible for most of the growth in the sector over the past few years. According to the 2010 edition of Connectivity Scorecard, a report drawn up by the London Business School, Brazil and, in particular São Paulo, occupies sixth place among the developing countries which most use Information Technology and Communications (ITC), ahead of China and India. In the area of technology use by the government, Brazil has one of the best global performances, including in comparison with developed nations.

São Paulo’s importance in telephone and IT

Mobile communication breaks records

São Paulo makes quite an impression in concentration of services and the use of telecommunication technologies. The city accounts for 24% of mobile accesses in Brazil, 33% of landlines, includes 40% of the broadband service subscribers and 99.8% of the population is makes use of telephone services, in addition to being home to the largest telecommunication equipment companies in Brazil. The city is home to IBM, Nokia, Samsung, Mo-

In April of 2010, there were 177 million mobile phones in operation in Brazil, against 41 million landlines. Within Brazil, São Paulo state only loses to the Federal District when referring to the teledensity of mobile lines. Brasilia has 161 devices for every one hundred inhabitants. In São Paulo state, there are more than 45 million mobile phones, more than one for every inhabitant, or 109 devices for every one hundred people. The mobile

www.analise.com

teledensity in the city of São Paulo is 120 for every hundred inhabitants. Just for comparison purposes, Paris has 89 lines for every one hundred city dwellers and London, 121. In the projections of the Brazilian Telecommunications Agency (Agência Nacional de Telecomunicações - Anatel), the number of landlines in service in Brazil will increase to an average

The most connected Evaluation of IT use, from 0 to 10 RK Country

Evaluation

1 Malaysia

7.14

2 South Africa

6.18

3 Chile

6.18

4 Argentina

5.90

5 Russia

5.82

6 Brazil

5.32

7 Turkey

5.09

8 Mexico

5.00

17 China

3.14

21 India

1.82 Source: London Business School

São Paulo OUTLOOK

123

Telecommunications and networks

of 1.5 million over the next six years. This amount is similar to the amount that the mobile telephone markets usually grows in a single month. Vivo, one of the main mobile telephony carriers in Brazil, estimates that by 2012, the number of mobile phones in the country will surpass 200 million, which means that, on average, every Brazilian will have his own mobile phone.

Focus on mobile content Surveys drawn up by the carriers show a strong interest of the customers to migrate to third-generation equipment. In a single year, according to data from Anatel, the number of 3G terminals skyrocketed in the country, going from 2.1 million in December 2008 to 6.9 million in December 2009. São Paulo accounts for more than 1 million. A survey made in 2010 by Morgan Stanley about the mobile telephony market shows the production of mobile internet videos as the main demand in upcoming years. Currently, the resource already accounts for 69% of the traffic of mobile data in the world. In Brazil’s case, the sale of ring tones alone for mobile telephony should generate R$ 300 million this year. And the numbers of the telephony carriers in Brazil have confirmed that the users have begun to use the mobile device more often for purposes other than voice. In a few cases, such as those of carriers Vivo and TIM, data transmission already represents around 10% of total service revenue.

migration to mobile phones. Despite not expecting a significant increase in the sale of landlines, the companies that operate in the city - Telefônica, Embratel and CTBC– look for opportunities among the low-income consumers. They offer, for example, packages for controlled use – landlines that work with prepaid cards or that block calls after the bill reaches a certain amount.

Data transmission accounts for 10% of the service revenue of telephony carriers Broadband in frank expansion A study of consulting firm IDC Brasil shows that in 2009 more than 3 million new broadband connections were sold in the country, resulting in a total of 15 million accesses, up 82% over the figure of the previous year. Access via DSL (Digital Subscriber Line) still predominates in the market but is losing its hegemony. Broadband has used aggressive price strategies to increase its share. And it has paid off. The government wants to encourage this inclusion movement with the implementation of plans to create incentives for the

offer of broadband to the low-income population. In 2009, Brazil had 10.8 million IPs, according to the quarterly The State of the Internet Report, released by US company Akamai. The internet protocol is the address of each computer or device connected to the global network. The US, for example, has almost 120 million IPs, more than double that of the second place occupant, which is China with 49 million, and eleven times more than Brazil. But it is in Brazil that the highest growth index occurs in number of IP addresses: 7.3% in the last quarter of 2009, surpassing China, which is in second place with 6.3%. São Paulo state also accounts for 45% of the registrations for domain in Brazil, according to the Brazilian Managing Internet Committee (Comitê Gestor da Internet no Brasil - CGI)

Cloud computing and outsourcing New internet services and applications are transforming many traditional business models. Cloud computing (a model where processing, storage and software is placed somewhere on the internet and accessed remotely, via internet) is an example of this. With the introduction into the market, the carriers can leverage their networks and offer even more advantages to their subscribers by creating new

São Paulo connectivity

New panorama for landlines

Broadband

BRIC Mobile teledensity

With more than 5 million installed lines, São Paulo has the largest telephony network in the country. To give an idea of its importance, Telefônica, a leading company in the offer of these accesses in the state of São Paulo informed that 13.7% of the US$ 77 billion in annual revenue of its controller, Spanish-owned Telefónica, derives from this operation. The segment, however, has been stable since 2006, and the cause lies in the

Share of users in the country

Mobile line per 100 inhabitants

124

São Paulo OUTLOOK

40%

150

Russia 143

105

Brazil 91

São Paulo

China 56

60%

Other Brazilian cities

India 43

20 2007

2009

www.analise.com

Telecommunications and networks

value-added services and experiences to integrate the industry’s content and applications. Companies such as IBM, Microsoft, Cisco and HP are also investing in this area in Brazil. Cloud computing and the rise in the offer of voice and data services has expanded the telecommunication complex within companies and also the complexity with which these assets are managed. Several telecommunication companies already have their eye on the business opportunities created by this sector. British Telecom (BT), for example, offers in Brazil services for resource management for multinationals such as Unilever, Ambev, Nestlé and Fiat. Telefônica, on the other hand, offers tailored IT solutions for companies such as those for the Carrefour group. 0

HOW IT WORKS

n 1998, the National Telecommunications Agency (Agência Nacional de Telecomunicações - Anatel) was created, a self-governing federal entity responsible for managing the telecommunication system in Brazil. Its attributions include creating policies for the sector, certifying products according to Anatel standards, controlling economic infringements of companies, overseeing consumer rights. In the public service, the tariffs are regulated by Anatel and the market governs the regulations of the private and mobile telephony sector.

● 3 companies operate the fixed telephony in the city: Telefônica, Embratel and CTBC ● 4 companies offer mobile telephony services in São Paulo: Claro, TIM Celular, Vivo and Oi. ● 5 million is the approximate number of landlines installed in the city ● 3 companies offer broadband services in the city, two of them combined with cable television services: Net São Paulo, TVA and Telefônica

Paulo Whitaker/Reuters

Giant screens at the Soccer Museum: video production for mobile internet today accounts for 69% of all the traffic of mobile data in the world, and the demand is expected to increase over the next years

Apple’s iPhone 3G on display at a mobile phone store

Wireless expansion A

São Paulo OUTLOOK

www.analise.com

Filipe Ara炭jo/AE

S達o PAulo in numbers

1.2

mobile phones per inhabitant is the average in S達o Paulo city

www.analise.com

24%

of mobile accesses in Brazil occur in the city

1.2 mln

mobile phones are sold every month in Brazil

4 mln

3G lines were sold in the country in 2009

S達o Paulo OUTLOOK

Mobility

In the following pages is an analysis of the scale of the transport network system of S達o Paulo city

Users walking to the SĂŠ station in downtown SĂŁo Paulo, where two city subway lines converge, with the capacity to accommodate 100 thousand passengers per hour at peak time

The size of one of the largest taxi and helicopter fleets in the world

How the public transportation structure in the city works

PAULO WHITAKER/REUTERS

Main construction projects and strategies to alleviate traffic in the city

Mรกrcio Fernandses/AE

MOBILITY MOBILITY

Workers at the Alstom train and subway factory in Sรฃo Paulo: the investment of R$ 16 billion from 2006 to 2010 in railway transport is the best bet to improve the city's mobility

MOBILITY

THE CITY THAT NEVER stops With solid investments and actions, São Paulo faces the challenges of mobility in one of the largest cities in the world

he capital city of São Paulo state has a considerable public transport network, one of the largest taxi and helicopter fleets in the world, in addition to modern airports and intermodal systems to assure its competitive edge and fuel business and exports. The city, which is Brazil’s largest producer and consumer, relies on a vast locomotion and logistics infrastructure. In a country that depends mostly on road transport, São Paulo lies in the confluence of the main roadways of the country.

Gigantic fleet Only a gigantic fleet of vehicles can service the largest city in Latin America. In February 2010, São Paulo registered 6.8 million vehicles, including all categories. If considering just automobiles, there are five million. This number equals almost the entire fleet of neighboring Argentina and is much larger than that of much more populated cities, such as Mexico city and Tokyo, which in total have respectively five million and 3.7 million vehicles. São Paulo’s taxi fleet is also based www.analise.com

on the size of the city. In December 2009, the city had 32 thousand licensed taxis, only less than New York with 48 thousand service vehicles. The most recent circulation data available shows that around 78 thousand taxi trips are made in the city a day. If the land transport numbers are surprising, those of air mobility are no different. São Paulo city shelters the second largest helicopter fleet in the world, second only to New York. São Paulo state has 542 helicopters, practically half the fleet of the entire country. Most of them, 432, operate in the capital, according to data from the Brazilian General Aviation Association (Associação Brasileira de Aviação Geral - Abag.) Until 2004, the city occupied third place with Tokyo in the lead.

Investments and public transport In order to absorb this immense volume of vehicles, several state and municipal government projects are under way Among which the construction of the Mario Covas Beltway. Extending over 170 km, this beltway has the strategic role of relieving traffic by forc-

ing trucks and heavy vehicles away from the city’s downtown area and providing access to most of the roads that cross the city. However, investments in railway transport are the best bet for improving the city’s mobility. From 2007 to 2010, investments summed R$ 16 billion for the subway and the São Paulo

Largest subway networks In passengers transported per year RK City

Passengers (bln)

1 Tokyo

3.2

2 Moscow

2.4

3 Seoul

2.1

4 New York

1.6

5 Peking

1.5

6 Mexico City

1.4

7 Paris

1.4

8 Hong Kong

1.3

9 Shanghai

1.3

17 São Paulo

0.97 Source: São Paulo's Metro

São Paulo OUTLOOK

131

MOBILITY

Metropolitan Train Company (Companhia Paulista de Trens Metropolitanos - CPTM). The modernization and expansion of the subway will increase the São Paulo network from 61.3 km to 84 km in 2010. By the end of the year, São Paulo will have the 23rd largest subway in the world, in extension of lines, with 84 km. London is the leader with 415 km. In the subway classification of number of passengers transported annually, the São Paulo system is in 17th place, with 974 million users in 2009. First place is occupied by Tokyo, which transports more than three billion people a year. Another challenge for the city’s administrators is the expansion of the urban bus lines. Between 2007 and 2009, the municipal government acquired around five thousand new buses and microbuses to increase its fleet of 15 thousand vehicles. According to city hall, more than R$ 1 billion was invested by the system’s concessionaires on this expansion.

Concentration of air transport The metropolitan region of São Paulo houses two of the airports with the highest passenger volume in the country: the International Airport of Congonhas, in the capital, and the International Airport of São Paulo, in the neighboring city of Guarulhos. In

2009, over 34 million passengers were transported by both, equal to 30% of Brazil’s total airport transport. The number of passengers is similar to that of airports in Orlando (35 million) and Miami (35 million) in the US, Rome (35 million) and Gatwick in London (34 million).

In February 2010, the city of São Paulo registered a total of 6.8 million vehicles The International Airport of São Paulo also stands out in cargo transport, as well as the International Airport of Viracopos in Campinas, 99 km from the capital. In 2009, both terminals accounted for 49% of all the cargo transport of the country with respectively 352 thousand and 192 thousand tons. Since 2004, São Paulo became the only city in the world to have a control center for helicopter flight, which works in the tower of the Congonhas Airport in the southern region of the city. The Campo de Marte airport in the northern district registers the most helicopter traffic in the city. A total of 240 landings and takeoffs a day, on average, totaling 7 thousand a month. This does not consider landings and

São Paulo transport Heavyweight fleet

Motorcycle couriers

Private vehicles in millions

Average of daily motorcycle trips

6.8 5

400 thousand

3.7

Mexico City

132

São Paulo OUTLOOK

Tokyo

223%

300

100 1987

Cargo transport options Throughout the country, cargo is transported mostly by road. Therefore, the proximity to the main roadways of the country is a favorable point in São Paulo’s capital. Among them are: Anhanguera and Bandeirantes highways – which provide access to the northern part of the state, Minas Gerais and the midwest of the country –, the Presidente Dutra Expressway and the Ayrton Senna-Carvalho Pinto system, which reaches the region of Paraíba Valley, the northern coast and Rio de Janeiro, and the Anchieta-Imigrantes System, which links the city to the Port of Santos. In 2008, Santos Port, located 80 km from downtown São Paulo, transported around 81 million tons of cargo. The railway network of the state is managed by concessionaires MRS MRS Logística S.A. and América Latina Logística (ALL) The companies connect the producing states of São Paulo, Minas Gerais, Bahia, Sergipe, Goiás, Mato Grosso and Mato Grosso do Sul to the ports of Santos in São Paulo, Itaguaí and Guaíba in Rio de Janeiro MRS Logística operates the São Paulo-Rio de Janeiro corridor in the region of greatest industrial concentration in the country, and accounts for the transport of the greatest volume of steel, mining and coal products, soybean and soy meal.

Local solutions

200

São Paulo

takeoffs from private helicopter points around the city. Approximately 50 helicopters take off from Congonhas Airport every day.

2007

As in every large metropolis, São Paulo faces problems caused by the huge amount of vehicles, such as traffic jams and not enough parking space in public areas. To solve the latter, city government regulates the time in which the drivers can park their cars by adopting a ticket system, called Zona Sul, in some streets of the city. For the approximate price of US$ 2, the owner of the vehicle can park for www.analise.com

alex silva/ae

MOBILITY

Congonhas airport (photo), located in the southern region of São Paulo, received, together with the International Airport of São Paulo in Guarulhos, 34 million passengers in 2009 two hours. In order to organize the traffic, the city has adopted a strong inspection system carried out electronically and through traffic wardens and inspectors. The city also uses, since 1997, a rotation system. Depending on the license plate number, once a week, between 7 am and 10 am and between 5 pm and 8 pm, the car is not allowed to transit within the city’s expanded downto wn area. A phenomena that emerged to bypass Sao Paulo’s traffic was a service motorcycle fleet that enables the speedy transport of cargo and documents. By the end of 2009, the city had a fleet of around 200 thousand motorcycles. The total fleet of motorcycles licensed in the city, including private vehicles, also grew significantly. A total of 820 thousand motorcycles are on the streets, twice as much as in 2000. 0 www.analise.com

HOW IT WORKS

ublic transport in the capital is divided into bus lines, managed by city government, and railway lines, including subways and trains, managed by state government. These three public transport means are the most used by São Paulo’s citizens followed by private passenger transport and automobiles and motorcycles. 61 km of subway, divided into 4 lines and 56 metro stations

● By end of 2012, the subway’s expansion plan is expected to include another 20 km

261 km of railway lines link 22 cities in the metropolitan region of São Paulo

●

89 train stations which transport a daily average of 2.15 million passengers

●

15 thousand buses circulate daily in the city in more than 1.3 thousand routes

●

3.3 million passengers are transported on average on business days by the subway

●

8 million people are transported daily by bus in the capital

São Paulo OUTLOOK

133

São Paulo’s fleet

São PAulo IN NUMBERS

5 mln

automobiles circulate in the city, one for every two inhabitants

32,000 licensed taxis circulate daily in the city

542 helicopters have licenses to fly in the state, 432 are located in the city

200,000 couriers provide services for the city on motorcycles A

São Paulo OUTLOOK

www.analise.com

Ho New /Reuters

Freestyle soccer players practice at a helicopter landing pad in S達o Paulo

www.analise.com

S達o Paulo OUTLOOK

Exercise lab of Hospital das Clínicas of the Medical College of São Paulo University, one of the main medical centers of the country – among the 120 benchmark hospitals of Brazil, 32% are located in São Paulo

Healthcare In the following pages is an analysis of what São Paulo has to offer in the medical and healthcare sectors The structure and expertise of the city that most transplants organs

Universities that educate the most qualified doctors in Brazil

TIAGO QUEIROZ/AE

São Paulo’s main hospitals, accredited by international entities

Healthcare

Prostate surgery performed with the help of the Da Vinci robot at the Albert Einstein Hospital, the first one outside the US to receive the seal of Joint Commission International (JCI)

Sﾃグ PAULO HEALTHCARE GROWS In the past decade, Sﾃ｣o Paulo city grew in amount of doctors and hospitals and in service quality 138

Sﾃ｣o Paulo OUTLOOK

www.analise.com

Ricardo Correa/Exame

Healthcare

ão Paulo’s healthcare and medical service system has steadily progressed in the past decade, increasing its structure in terms of the number of doctors, hospitals and specialized clinics, as well as in the quality of its services. One of the best examples is that the city can now boast the title of global benchmark in organ transplants and donations. More organs are transplanted in São Paulo city than in any city in the United States. www.analise.com

In 10 years, 31% more doctors One of the main feats of São Paulo’s healthcare system over the past decade was to maintain a high level of training and introduction of new doctors into the market. In 2009, the city hit the mark of 4.3 active doctors for every one thousand inhabitants, according to data from the Regional Medicine Council of São Paulo state (Conselho Regional de Medicina do Estado de São Paulo - Cremesp). This means that there is one doctor for every group of 232 city dwellers. This index is more than four times greater than that recommended by the World Health Organization (WHO), which is a minimum of one doctor for every group of one thousand inhabitants. Between 2000 and 2009, while the population of São Paulo grew around 5% to more than 11 million, the number of doctors grew six times as quickly: 31%. This is because São Paulo attracts the most qualified labor in Brazil. Out of the 101 thousand doctors that work in the 645 cities in São Paulo state, 38% earned their medical degrees in other Brazilian states. Half of this group operates in the city of São Paulo, which registers an index three times greater than the overall Brazilian average, which is 1.8 professionals per one thousand inhabitants. According to the Análise Saúde 2009 yearbook – a publication that is a benchmark in the medical area in Brazil – of the 120 hospitals that are considered as references in Brazil, 32% are located in São Paulo. If considering the more than 2.2 thousand doctors that stand out, 38% earned their medical degrees in the metropolitan region. The survey gathers the opinions of 3 thousand of the most prominent doctors in the country.

Certified hospitals in São Paulo The seven institutions accredited by Joint Commission International (JCI) Hospital do Coração Doctors 933 • Beds 260 (40 in ICU) Treatments 985,461 • Surgeries 4,643 Accredited in 2007 • Founded in 1967

Hospital Israelita Albert Einstein Doctors 6,000 • Beds 530 (32 in ICU) Treatments 186,058 • Surgeries 29,316 Accredited in 1999 • Founded in 1955

Hospital Sírio Libanês Doctors 2,961 • Beds 333 (72 in ICU) Treatments 273,496 • Surgeries 15,398 Accredited in 2007 • Founded in 1921

Hospital Samaritano Doctors 1,300 • Beds 200 (49 in ICU) Treatments 148,000 • Surgeries 11,000 Accredited in 1894 • Founded in 2004

Hospital Alemão Oswaldo Cruz Doctors 4,756 • Beds 273 (34 in ICU) Treatments 250,000 • Surgeries 15,700 Accredited in 1897 • Founded in 2009

Clínica PRONEP Doctors 20 • Beds Treatments 29,500 • Surgeries Accredited in 2007 • Founded in 1992

Broad hospital structure São Paulo city has a structure comprised of 204 hospitals surrounded by 10 thousand clinics that offer services in more than 50 specialties and clinical treatment and elective surgeries. In order to give a better idea of the size of

Amil Total Care Berrini Doctors 21 • Beds Treatments 18,173 • Surgeries Accredited in 2005 • Founded in 2000 Treatments and surgeries refer to a one year period

São Paulo OUTLOOK

139

Healthcare

this system, there are 154 hospitals for general patient care in the city, more than double the existing structure in New York city, comprised of 62 institutions, for example. São Paulo also has 14 day hospitals, which perform low and medium-complexity surgical interventions that do not require an overnight stay. In Brazil, the day hospital concept is relatively new, but it is a popular concept worldwide. In the US for example, around 75% of surgical interventions occur in day hospitals. This model enables general hospitals to dedicate more time to complex procedures and emergency cases. In all, the city has 33.2 thousand hospital beds, of which around 9.5 thousand are surgical. This means that there are three hospital beds for every one thousand inhabitants, an index that is 20% above that recommended by WHO of 2.5 beds per group of one thousand inhabitants. And, by the end of 2010, the expectation is that another 1,800 beds will be added.

age registered in Spain, the highest in comparison with other countries, of 35 donations per one million inhabitants. From January to October, the city registered an average of 39.4 donors for every one million inhabitants. São Paulo city also holds the record in amount of organ transplant operations performed. In 2009, 2,216 procedures were performed, almost 15% more than the 1,939 operations performed in all of New York state. In total, São Paulo registered 5,668 surgeries in 2009, considering procedures involving organs, cells and tissue. This represents a little over 13% of all operations performed in Brazil. Brazil has the largest public-private

São Paulo is the world leader in donation of organs: 35 for every one million inhabitants

World organ transplant center

transplant system in the world, which has enabled the performance of almost 43 thousand procedures in 2009. In total, there are 1,380 medical teams authorized to perform transplants in the country, and a total of 548 healthcare establishments accredited in the National Transplant System created in 1997. The system’s efficiency has en-

The doctors and healthcare institutions in São Paulo city have, over the past few years, developed an unprecedented level of expertise in one of the most complex healthcare fields: organ transplant. In 2009, the city reached the position of global leader in number of donations, exceeding the aver-

São Paulo healthcare Organ transplant

Growth in number of doctors

Share of city in surgeries

Growth in relation to population

37%

São Paulo

30%

Doctors 31%

20 10

63%

Other Brazilian cities

140

São Paulo OUTLOOK

2001

Population 5% 2009

abled it to make an unprecedented leap in the city of São Paulo. In a period of only four years – between 2006 and 2009 – the number of donations performed in the city more than doubled.

International recognition of quality In addition to maintaining a healthcare system with a significant number of doctors and institutions. São Paulo also offers quality medical services accredited by international entities. The city is the sixth city in number of hospitals accredited by the Joint Commission International (JCI), the most important entity of the sector, which, since 1994, certifies service quality standards of healthcare institutions. JCI evaluates hospitals in 80 countries, with the exception of the US, Canada and England, which are accredited by The Joint Commission. In 1999, the Israelite Albert Einstein hospital was the first institution outside the US to receive the JCI certificate. Ten years later, another six São Paulo hospitals are on the list. In Brazil, there are 20 hospitals accredited by JCI, which places the country in fourth place in the ranking, behind Turkey, the Arab Emirates and Saudi Arabia.

Diagnostic imaging medicine is being consolidated More than 17 thousand clinical analysis labs operated in Brazil in 2008, according to the National Sanitary Vigilance Agency (Agência Nacional de Vigilância Sanitária - Anvisa). The sector employs around 150 thousand people and, in 2007, through the Single Healthcare System (Sistema Único de Saúde – SUS), 370 million lab procedures were performed in the country. This sector has been going through a consolidation process since the end of 1990 with a series of mergers and acquisitions. São Paulo is home to two of the largest companies of the sector: Diagnósticos da América (Dasa) and Fleury, both listed in the São Paulo Stock Exchange. 0 www.analise.com

Antônio Milena/AE

Newborns at the nursery of the Pro Matre maternity in the downtown region of São Paulo: between 2000 and 2009, Sao Paulo’s population grew 5% and the number of doctors increased six times as fast

HOW IT WORKS

ão Paulo’s, as well as Brazil’s, healthcare system is based on a structure that offers public and private services to the population. The objective of SUS (which stands for Singular Health System in portuguese) is to offer free medical care for the whole population. The most common way to access the private system is through a healthcare plan. These plans, offered by companies throughout the country, offer different levels of access to private services for a monthly fee.

www.analise.com

● São Paulo has more than one thousand SUS units ● 26 million medical consultations were made in 2009 through SUS in the city

● 58% of the population of the city of São Paulo have a health plan ● 41%, on average, of the population in Brazilian capitals have a healthcare plan

● 36% was the increase in amount of consultations made through SUS between 2004 and 2009

● 16% of São Paulo citizens have exclusive plans with dental care coverage

250,000 people are hospitalized every year, on average, in public hospitals in the city

● 1,103 healthcare plan businesses operate in São Paulo state

●

São Paulo OUTLOOK

141

Patrícia Santos/AE

Imported patients A

São Paulo OUTLOOK

www.analise.com

Computerized CAT scan at Campo Limpo hospital in the southern region of S達o Paulo

S達o PAulo in numbers

18%

of hotel guests stay in the city of S達o Paulo for health reasons

45,000

foreigners come to Brazil for medical treatment every year

www.analise.com

5 mln people in the world travel to other countries for medical treatment

22 days

is the average stay of the tourist that comes to Brazil for medical reasons

S達o Paulo OUTLOOK

JOSÉ LUIS DA CONCEIÇÃO/AE

The Estação Art Gallery organizes popular exhibitions, such as “Andy Warhol, Mr. America,” and is located in the downtown region, object of the Nova Luz Project, which plans on revitalizing 2.25 million square meters

Events

In the following pages is an analysis of what São Paulo has to offer in the tourism, event and fair sectors The main sporting, cultural and business events

Preparations for the World Soccer Cup in 2014

One of the most diversified gastronomic scenes in the world

EVENTS saúde EVENTS

AN EVENT EVERY SIX MINUTES São Paulo is the main city in Latin America and the 12th in the world for business events, besides having a vast structure for sports, culture and leisure

Week, one of the important events in global fashion, and will be one of the host cities for the 2014 World Cup. The city, which has an impressive hotel network, also stands out for its vast array of cultural and gastronomic options. All of this assures 24 hours of activity for even the most demanding tourist.

Business tourism center The largest economic-financial center in Brazil must have a business tourism and event market to match. São Paulo accounts for 75% of the 245 international events that take place in Brazil, which ranks it first in Latin

Tiago Queiroz/AE

ão Paulo city hosts more than 90 thousand events every year. The only city in the world where it is possible to watch the Formula 1 and Formula Indy races, also offers a business fair every three days, São Paulo Fashion

Skater Pedro Barros during the finals of the international skating championship held at the Sambódromo of Anhembi in the northern region: São Paulo accounts for 75% of the 245 international events held in Brazil

146

São Paulo OUTLOOK

www.analise.com

EVENTS

America and 12th in the worldwide city ranking, according to the International Congress and Convention Association (ICCA). The International Automobile Fair, São Paulo Fashion Week, Adventure Sports Fair and Francal fashion and footwear fair are only a few of them. This market accounts for about R$ 2.4 billion a year in revenue for the city. In the domestic business fair market, the city accounts for more than 112 events, 66% of the country’s total. The numbers of the sector, according to the Brazilian Fair Organizers Union (União Brasileira dos Promotores de Feiras – Ubrafe), point to a revenue generation of R$ 3.4 billion in 2009, with São Paulo city’s share at 85.3%: R$ 2.9 billion in revenue. In total, including all types of events: congresses, conventions, fairs, international shows and other cultural initiatives, São Paulo has one event every six minutes. Among the city’s attractions are the availability of convention centers and areas for largescale events. Around R$ 700 million, which represents one fourth of the total revenue earned from international fairs in 2009, was the result of rental investments. All signs point towards the city‘s growth in this sector. Through the offer of infrastructure – from airports to event performance areas – and the growing services segment, as well as the hotel and restaurant network and professionals, São Paulo is expected to grab a greater slice of the international market. In 2002, the capital city held 15 international business events according to ICCA and, in six years, it increased this number by fivefold, ahead of cities, such as Tokyo, London and Buenos Aires. Among the main events in the city, the medical area is the most prominent. In 2008, this sector accounted for 27% of the more than one thousand events registered by São Paulo Turismo linked to city government. Technology and communication follows with 18.5% and technical and scientific events with 6%. www.analise.com

The visitor’s profile

Hotel structure

In 2009, the city received 11.3 million tourists, up 3% in relation to the previous year and 20% in relation to 2005. Out of the total, 9.7 million were Brazilians and 1.6 million were foreigners. The decline in tourists from the international market in 2009, caused mainly by the global economic crisis, was offset by an internal growth of 4.3%, which resulted in an increment of 200 thousand visitors. The expenses of these tourists, such as board, meals, purchases and leisure earned R$ 8.5 billion for the city. While the stay of international tourists in São Paulo registered an average of 5.3 days with disbursements of 2 thousand to 5 thousand reais, the stay of tourists from within Brazil averaged 3.3 days. In this case, the expenses varied between 1.6 thousand and 3.5 thousand reais. Regardless of origin, it is the business tourist that predominates in the São Paulo market. More than 56% of those that visited the city in 2009 came for business. The events justified the trip of 22% of them, while 10% came to Sao Paulo for leisure. Since the city of São Paulo is recognized as an academic and scientific complex, 452 thousand tourists came to the city to study.

The hotel sector in São Paulo with an insurmountable offer in relation to any other Brazilian city is well placed among the main global tourist centers. The city has more than 410 hotels and 42 thousand rooms available. The average occupancy rate in 2009 was 62%, up seven percentage points over 2004. With average daily rates of around R$ 197 and an occupancy demand aimed at midscale hotels (69%), competition is heated, preventing greater increases in hotel rates. São Paulo’s offer, however, is in line with demand, in terms of quantity, as well as quality even in relation to other guest ranges: the economic category currently represents 24% of the market and the luxury one, 7%. The main international hotel networks are located in the city. Most of the foreign tourists prefer to stay at luxury hotels and the international chains, such as Hyatt, Hilton, Marriott, Sofitel, Radisson, compete with sophisticated Brazilian establishments that have gained international recognition, such as Fasano, Emiliano and Unique. Around 50% of the occupancy of luxury hotels in the city is accounted for by foreign tourists, while in the midscale range, they represent 8.2% and in the economic range, 3.7%.

São Paulo tourism Business tourist

Evolution of visitors

Reasons that bring people to the city

In million of tourists in the city National International

10% 11%

10.7 11.0 11,3 10.2 9.4

Others

Leisure

79%

Business and events

8.0

8.7

9.1

9.3

9.7

1.4

1.5

1.6

1.7

1.6

2005

2006

2007

2008

2009

São Paulo OUTLOOK

147

EVENTS

The largest public The diversified profile of São Paulo, economic as well as cultural, spurs the growth of the tourism event market on several fronts. The International Automobile Fair and São Paulo Fashion Week are two traditional events. In the first, the new trends of the automobile sector are displayed. It is the most popular fair in the city, averaging 650 thousand visitors, of which 200 thousand come from outside the city, and it is the fourth event in the tourist attraction ranking. São Paulo Fashion Week is also a very important event in the international scenario. This event, which allows spectators to see firsthand the opening collections of designers from around the country, brings together 100 thousand people, 16% of them tourists. Due to the relevance of this event, São Paulo was included in the ranking drawn up by the Global Language Monitor as one of the “Top 10 Fashion Capitals of the World,” occupying eighth place. In the cultural area, the city also has high-power events. São Paulo’s International Book Biennale attracts 730 thousand participants, of which 240

International events Ranking by number of events in 2008 rk City and country

Events

1 Paris (France)

139

2 Vienna (Austria)

139

3 Barcelona (Spain)

136

4 Singapore (Singapore)

118

5 Berlin (Germany)

100

6 Budapest (Hungary)

7 Amsterdam (Holland)

8 Stockholm (Sweden)

9 Seoul (South Korea)

10 São Paulo (Brazil)

Source: International Congress and Convention Association (ICCA)

148

São Paulo OUTLOOK

thousand are tourists, and accounts for a revenue of R$ 92 million. São Paulo’s International Arts Biennale generates around R$ 120 million per edition and attracts on average 530 thousand visitors, one fifth of which are tourists. To assure the exhibition of new national film productions alongside the greatest names in world cinema, the International Film Fair in its most recent edition gathered 200 thousand spectators, who contributed R$ 30 million to the city’s economy.

São Paulo has 12,500 restaurants offering 52 types of cuisine One of the city’s newest initiatives in this sector is Cultural Week, which for 24 consecutive hours transforms the city into a stage with more than 800 open-air and onstage attractions. The event, which debuted in 2005, is already attracting 300 thousand tourists and raises R$ 90 million. São Paulo is also the stage of the LGBT Pride Parade, whose first edition was in 1997 and is now the largest one of its kind in the world drawing a public of 3.5 million, of which 400 thousand are tourists. The event generated around R$ 190 million in the 2009 edition.

Sporting events São Paulo’s love for cars is such that the city is the only one in the world that hosts the two greatest global car racing events every year: The Formula 1 Brazilian Grand Prix and the São Paulo Indy 300. The first is already a traditional date in Sao Paulo’s calendar: every November attentions turn to the Interlagos race track, which welcomes 85 thousand tourists, representing 60% of the total public of the event. The race generates the city’s greatest economic activity: R$ 230 million spent during this three-day event. The fans of this sport also wel-

comed the Formula Indy in 2010 on the streets of São Paulo. In 2010, the race was given a fixed date in the city’s calendar, the month of March. The estimate is that the first edition raked in R$ 126 million for São Paulo’s economy, attracting a public of 50 thousand people, among which 14 thousand were tourists. With some of the largest soccer teams in the country, five stadiums and the Soccer Museum, São Paulo is one of the twelve cities that will host the 2014 World Soccer Cup at the Morumbi stadium. The city is among the competitors to host the World Cup opening ceremony.

World capital of gastronomy If the tourists main reason to visit São Paulo is business and events, many end up staying longer and even extending their stay to see more of the city. The capital city of São Paulo offers more than 12.5 thousand restaurants with 52 different types of cuisine in addition to 15 thousand bars. One of the most traditional dishes is the pizza, served in more than 1,500 pizzerias in the city. Among the many options, two stand as a result of their inclusion in the global ranking of Top 100 Eating Experiences created by London’s The Times. The restaurants D.O.M. in 24th place and Fasano in 83rd place, according to the 2009 list.

Entertainment and culture São Paulo’s cultural and entertainment industry offers 319 cinemas, 280 theaters, 294 show and concert halls, including 184 nightclubs. With more than 600 plays a year. The city is also stage to international productions, specially Broadway shows, and recently received shows such as “Phantom of the Opera”, “Cats”, and Cirque du Soleil. It is also common, while visiting the city of São Paulo, to discover that concerts featuring international music are in town. Among a few of those who have graced the São Paulo stage www.analise.com

José Patrício/AE

EVENTS

Competitors in the first lap of the Gran Prix in São Paulo, held at São Paulo’s Jockey Club in the southern region of the city: this traditional event attracts thousands of tourists to the city in the past years are Madonna, Elton John, B.B. King and U2. In the classical music area, the City Ballet and Symphonic Orchestra of São Paulo State (Osesp) are known worldwide for their quality presentations. The city is also stage to frequent presentations of modern dance companies and other groups. The city also has 110 museums. The Art Museum of São Paulo (Masp), which besides being sheltered in a modern building with the widest free space between four pillars in the world, includes in its collection the works of Monet, Renoir, Van Gogh, in addition to the works of the most acclaimed Brazilian artists. 0 www.analise.com

HOW IT WORKS

ão Paulo’s cultural life stands out in the international scenario and the city offers cinemas, shows, restaurants and nightclubs to satisfy the most discerning tastes.

● 319 cinemas, 280 theaters, 294 show and concert halls comprise the cultural life of São Paulo

● 12.5 thousand restaurants offering 52 types of cuisine

● 64 parks and green areas in the city offer various type of leisure activities for the visitors

● 1.5 thousand pizzerias, 500 barbecue grills and 250 Japanese restaurants are set up in the city

● 600 plays are set up on average every year in the city

● 110 themed museums around the city are at the disposal of tourists

São Paulo OUTLOOK

149

free stock

Maximum occupancy A

S達o Paulo OUTLOOK

www.analise.com

S達o PAulo in numbers

410

hotels and 42,000 apartments are available in the city

62%

was the average occupancy rate of hotels and flats in 2009

50%

of the occupancy of luxury hotels is due to international tourists

197

was the average daily rate of a hotel room in the city in 2009

Unique Hotel, on Brigadeiro Luiz Ant担nio avenue, southern region of S達o Paulo www.analise.com

S達o Paulo OUTLOOK

Tiago Queiroz/AE

calendar calendar

S達o Paulo OUTLOOK

www.analise.com

calendar

BUSINESS ANd LEISURE CAPITAL The capital city of São Paulo is the hub of cultural, sporting and entertainment events in Latin America, in addition to being the 12th in the world in number of international fairs and business meetings. See below a few of the main events that occur periodically in the city.

São Paulo Fashion Week www.spfw.com.br

Created in 1996, SPFW has become a benchmark and is one of the main fashion weeks in the world, alongside Paris, Milan, London and New York. In 2009, each of the two editions of the event received around 100,000 visitors.

Periodicity Every six months Date January and June

www.analise.com

São Paulo OUTLOOK

153

Cesar HABERT PACIORNIK/ANÁLISE

calendar

São Paulo OUTLOOK

www.analise.com

Jefferson Pancieri/SPTuris

calendar

CarnIval IN São Paulo www.spturis.com/carnaval

aUTOMOBILE FAIR www.salaodoautomovel.com.br Latin America’s largest and most important auto industry fair held its 26th edition in 2010. The event, which displays sports cars, passenger and concept cars, receives around 650 thousand visitors per edition.

Carnival is the most famous popular festival in Brazil and attracts tourists from around the world. In São Paulo, the event is marked by two days of samba school parades with themed and luxurious presentations. In 2010, the festival received 35,000 tourists, of which 20% were foreigners.

Periodicity Annual Date February and March

Periodicity Biannual Date October and November

www.analise.com

São Paulo OUTLOOK

155

Maurício Lima/AFP Photo

calendar

Show Circuit www.cidadedesaopaulo.com São Paulo is a must for international musicians and offers dozens of show places and a presentation structure that can accommodate up to 70 thousand spectators. In the past years, the city welcomed artists such as Madonna (photo), Elton John, B.B. King. and Beyoncé.

FORMULA 1 AND FORMULA INDY www.gpbrasil.com www.saopauloindy300.com.br

Periodicity Annual Date March (F-Indy) and November (F-1)

Periodicity All year 156

São Paulo OUTLOOK

www.analise.com

calendar

Rickey Rogers/REUTERS

S達o Paulo is the only city in the world that hosts the races of the two main international car racing championships. Since 1972, the Interlagos racing track hosts the Formula 1 race and in 2010 the city debuted the Sao Paulo Indy 300

Marcelo Maragni/Foto Arena

www.analise.com

S達o Paulo OUTLOOK

J. F. Diorio/AE

calendar

S達o Paulo OUTLOOK

www.analise.com

calendar

Classical Music Circuit

Theater and shows

www.salasaopaulo.art.br

www.cidadedesaopaulo.com

The city offers classical music concerts almost every day of the year. The main concert hall, Sala São Paulo, is the birthplace of the Symphonic Orchestra of São Paulo state, which is conducted by the maestro Yan Pascal Tortelier (photo).

With 280 theaters and playhouses, the city of São Paulo has an active local theater production in addition to staging huge international plays,such as Broadway’s Cats, Les Misérables, The Phantom of the Opera and Beauty and the Beast and world-famous Cirque du Soleil (photo).

Periodicity All year

Paulo Liebert/AE

Periodicity All year

www.analise.com

São Paulo OUTLOOK

calendar

Soccer and sports www.copa2014.org.br

São Paulo is home to two of the main Brazilian stadiums and, in 2014, will be one of the cities to host the World Cup of Brazil. In addition to being home of three of the main Brazilian soccer teams, the city will also be the stage of local and international volley and judo championships and is one of the traditional centers for the training of swimmers and Olympic gymnasts.

Periodicity All year 160

São Paulo OUTLOOK

www.analise.com

free stock

calendar

www.analise.com

S達o Paulo OUTLOOK

161

MÁRCIO FERNANDES/AE

calendar

São Paulo OUTLOOK

www.analise.com

calendar

Business Fairs

www.anhembi.com.br

São Paulo includes 75% of the Brazilian business market and in 2010, the city is expected to receive 112 large events with 28 thousand exhibitors and a public of almost 4 million visitors. The photo shows a footwear fair at Anhembi.

www.paradasp.org.br The LGBT Pride Parade in São Paulo debuted in 1997 and grew to become the largest event of its kind in the world. In the 2009 edition, the parade attracted around 3.5 million people, of which 400,000 were tourists from Brazil and other countries.

Periodicity Annual Date June

Valéria Gonçalvez/AE

Periodicity All year

Gay Pride Parade

www.analise.com

São Paulo OUTLOOK

dining in Sﾃグ PAULO

pizza out of the oven at Esperanﾃｧa pizzeria in downtown Sﾃ｣o Paulo

Sﾃ｣o Paulo OUTLOOK

www.analise.com

São PAulo IN NUMBERS

US$

is the average cost of a meal in the metropolitan region

US$

is the average cost of a meal in the city of São Paulo

92% of gastronomical tourists approve of São Paulo’s restaurants

59%

Agliberto Lima/AE

of the tourists in general approve of São Paulo’s restaurants

www.analise.com

São Paulo OUTLOOK

Population CLAYTON DE SOUZA/AE

Lively party during the celebration of the Chinese New Year in the district of Liberdade in São Paulo in January 2009: the end of the Chinese rat year coincided with the anniversary of São Paulo

In the following pages is an analysis of the characteristics of São Paulo’s population

The indicators of population and profile of Brazil’s community Different and cultural ethnicities that comprise São Paulo’s population Improvement of income levels and quality of life in the city

free stock

POPULATION POPULATION

The child mortality rate in the metropolitan region shrank: from 15.79 deaths in every 1,000 newborns in 2000 to 12.48 in 2009, while the Brazilian average is of 23.59 deaths per one thousand births

S達o Paulo OUTLOOK

www.analise.com

POPULATION

DIVERSITY AND QUALIFICATION The profile of São Paulo’s population is extremely varied, which creates a wide array of talents, vocations and consumers

ão Paulo and its metropolitan region form the third largest urban agglomeration in the world, according to estimates of the United Nations for 2010. This quantity is translated not only in numbers but in population diversity, with a broad group in the productive range, with good education and a predominance of B and C class families with high purchasing power. As the economic and financial center, São Paulo has become a city of executives and decision makers. The metropolis concentrates 37% of medium-level executives in local companies, within a universe of 106 Brazilian cities. The share of São Paulo professionals in this total in Brazilbased multinational companies represents 53%.

Change in the population’s profile The 11 million inhabitants of the capital city represent 5.7% of the total population of Brazil and 26% of São Paulo state. If taking into considering the 38 surrounding cities, the largest www.analise.com

city in the country forms the so-called metropolitan region, which totals almost 20 million people. Since the 1950s, the age pattern of Paulo’s population has shown a maturity trend. The share of elderly citizens in the population’s total has doubled and the number of youngsters under 15 years of age has dropped 5%.

4 million inhabitants were not born in the city, which is home to 70 ethnicities The average age of São Paulo’s inhabitants has increased in six years, from 27 to 33 years of age. Half of the populational contingent is around 32 years of age. In relation to the elderly, inhabitants over 60, represent 11% of the population. This change in the population pyramid is a reflex of the city’s development and the resulting improvement of social conditions, which raise life expectancy at birth. Data from the Brazilian Geography and Statistics Bureau

(Instituto Brasileiro de Geografia e Estatística – IBGE) for 2008 indicates that the life expectancy of the Brazilian is 72.86 years while that in Sao Paulo state is 74.5, the same as São Paulo city’s, an increase of almost five years in relation to the index of 69.13 registered in 1991.The global average, according to the UN, is 67.2. The significant drop in child mortality, related to the death of children under one year of age, also plays a part in this average. The rate that considers the number of deaths in one thousand newborns, dropped from 26.03 in 1991, to 15.79 in 2000 and in 2008, reached 11.99 in São Paulo city. In the past year, the metropolitan region of the city registered 12.48 and the state, 12.56. Brazil’s average is 22.80 deaths per one thousand births, ahead of emerging cities such as Mumbai in India and Mexico City in Mexico. The former registered 34.57 in 2006 and the latter 24.41 in 2000, according to local entities. On the other hand, the cities of developed countries reveal an average half that of the São Paulo average, New York registered 5.4 for the period from 2001 to 2007 and London registered 5.6 in 2002.

São Paulo OUTLOOK

169

POPULATION

Controlled growth Add to these indicators the drop in fertility rates, which arises mostly from two factors: improvements in healthcare quality with access to information about family planning and contraceptive methods and a change in the women’s profile accompanied by a trend seen in large financial economic centers where women give more importance to their careers and end up choosing to have children later and in lesser numbers. In 2009, the fertility rate was 56 newborns for each one thousand women at fertile age, between 15 and 49 years of age, well under that of 2000 when it stood at 66. São Paulo’s population continues to grow but at a slower pace. In the past years, the annual growth rate was 0.6%, practically half the rate of 1.1% registered in the 80s.

Quality of life on the rise With an improvement in the reconciliation between the structure and the population, São Paulo city has managed in the past ten years to balance out its income distribution better and, as a result, has reduced poverty. The Human Development Index (HDI) of the city is 0.841, higher than the overall Brazilian index of 0.813. São Paulo city’s index is far above

those of other emerging global centers, such as Mumbai in India, which in 2006 was 0.56. The only city in South America with a higher index than São Paulo city’s is Santiago in Chile with 0.912. The index of Buenos Aires in Argentina is 0.81. In the downtown areas of the city, the index reaches much higher levels, such as is the case of the neighborhoods of Moema and Pinheiros, with rates higher than 0.96. For the purpose of comparison, Norway, a country with the highest human development level in the world registers an index of 0.96 in the last data survey in 2007.

Improvement in income levels In 2000, 23% of São Paulo’s families had an average family income of R$ 600. In 2009, this share dropped to 12%. Part of the population moved to the C class, which includes homes with an average income of R$ 1.4 thousand and even more moved to a higher average income level, where the average income is R$ 2.3 thousand. At the beginning of the decade, this part of the population represented 18.7% of the homes, it is currently at 24.5%. In addition to this improvement in income, the number of inhabitants per home is lower. In 2009, the average was 3 inhabitants per family, in a total of 3.2 million homes.

Qualified professionals The profile of the contemporary São Paulo citizen - not too young nor too old, with greater purchasing power and with a budget available for consumption, in addition to a good educational level - makes it easier to find a job in the market. São Paulo concentrates 65% of the headquarters of Brazilian and multinational companies in the country since it is a financial and economic center, but it is also the city where the main professionals employed in these companies live and are educated. Within a globalized world, another interesting and significant observation is that the number of expatriates, executives that migrate from other countries, was reduced, according to consulting firm Michael Page, specialized in the recruitment of executives. The city’s professionals are considered qualified enough to occupy these positions. Even in cases where the foreign companies start up a project, the preference is to hire Brazilian executives.

Cultural and racial diversity The population of São Paulo is a mixture of diverse cultures. The city was built on a huge immigration of foreigners and consolidated itself with the arrival of migrants from other parts

São Paulo population Growth projection

Representativeness

Urban agglomeration in million inhabitants

Share in Brazilian population

10%

Metropolitan region of São Paulo

2010 2025

36,7 37,1 28,6 22,7

90%

Other Brazilian cities

170

São Paulo OUTLOOK

Tokyo

New Deli

20,3 21,7

São Paulo

25,8 20,1

Mumbai

www.analise.com

19,5 20,7

Mexico City

Monaliza Lins/AE

POPULATION

The share of elderly people in the city’s total population doubled and today the inhabitants of over 60, like this group enjoying the Agua Branca park, represent 11% of the population of the country and the state itself. From the end of the 19th century up to the middle of the past century, approximately 2.3 million immigrants arrived in the state, of which most stayed in the capital. Today, the city shelters the largest Japanese, Spanish, Portuguese and Lebanese population outside their country of origins. The Italian colony has turned the city into the third largest city in number of Italians in the world. After the drop in European and Asian immigration, mainly after the 50s, the city began to welcome more Brazilians from other regions of the country, mainly the northeast. In all, the city has more than 70 different ethnicities and cultures who together helped to build one of the largest multicultural and ecumenical cities in the world. This helps São Paulo to speak many languages, shortening the path of understanding with other nations, and making exchanges more frequent on many fronts: From the economic to the cultural. 0 www.analise.com

HOW IT WORKS

he population of São Paulo, around 11 million people according to 2009 estimates, has an age pyramid divided into: 24% from 0 to 14, 64% from 15 to 59 and 11% over 60. The majority are women, comprising 52% of the total due to the greater life expectancy of this sex. As such, this share increases within the range of those over 60 and reaches 61%. The inhabitants that reside in the urban area comprise 94% of the total and, among the city residents more than four million are not born in the city. 0.841 is the HDI of the São Paulo city according to the 2000 survey. In 1991, the index was 0.805.

●

11.99 is the child mortality rate, according to data from 2008; in 2000 the figure was 15.79 and in 1991, 26.03.

●

3.3 people is the average size of the family that lives in São Paulo city

●

78% of the homes in the city are headed by men

●

196 thousand foreigners live in the municipality

●

The racial breakdown of São Paulo city is whites (68%), browns (pardos) (25%), blacks (5.1), Asians (2%) and Native Brazilians (0.2%), according to the classification of IBGE

●

São Paulo OUTLOOK

171

Stable population

Consumers at a corridor in a shopping mall in the northern region of S達o Paulo

S達o Paulo OUTLOOK

www.analise.com

Ernesto Rodrigues/AE

S達o PAulo in numbers

0.6%

is the annual average growth of the population in the city

15%

was the drop in fertility rate in S達o Paulo in the last ten years

www.analise.com

24%

was the drop in child mortality rate in the last eight years

75.5

years of age is the life expectancy in the city of S達o Paulo

S達o Paulo OUTLOOK

DIVERSITY

www.analise.com

FAMILIES in SÃO PAULO In the following pages you will meet 16 families who contribute to the cultural diversity of this welcoming metropolis Photos Cláudio Gatti

Lebanon

Ahmad Ibraim Saad, who changed his name to Armando, arrived in the city in 1951

www.analise.com

DIVERSITY

he city of São Paulo is a melting pot of nationalities, ethnicities and cultures that influence the profile of its population. Beyond the approximately 200 thousand foreigners that live in the city, from more than 70 countries, most São Paulo citizens can trace their origins back to the immigrants of one or many nationalities. Today, the city shelters the largest Japanese, Spanish, Portuguese and Lebanese population outside their country of origins. The Italian colony is very prominent and has placed the city as the third largest in the world in Italian descendents. More recently, the city received the influx of Korean and Chinese immi-

grants, in addition to attracting people from neighboring countries, mostly Chile, Argentina and Bolivia. This environment contributes to a multicultural city, which speaks many languages and has a very particular professional profile with varied skills and resources. São Paulo’s ability to adapt and understand the needs of foreign clients is reflected in several sectors. This combination of factors can be seen in its gastronomical and hotel areas, for example, or in the services offered by São Paulo-based law offices. The result is that the labor in São Paulo is one of the most qualified to operate in business environments which make no differentiation between countries in the search for better markets and opportunities.

Immigrant's Profile Among the 200,000 foreigners in the city

40%

32%

Others

Portugal

10%

Spain

Japan

Italy

21% 4%

Naturalized

Bolívia

79%

Foreigners

India

Italy The Stippe family at their downtown cantina, founded in 1931 by Italian immigrant, Francesco Stippe

11%

São Paulo OUTLOOK

Guchi Kukreja and his wife Bani, from New Delhi, visited the city in 1998 and decided to stay

www.analise.com

DIVERSITY

south Korea In Sik Park and Mi Sook Lee, who met in S達o Paulo after their immigration from Seoul, with their children Julia, 2, Fernanda, 5, and Eric, 8

Nigeria Chibuzor Nwaike came to Brazil in 1983 and six years later married a Brazilian, Ana Paula. The photo shows the couple with their children, Sofia, 11, and Arthur, 9

S達o Paulo OUTLOOK

www.analise.com

Spain

The El Rocio Flamenco dance group of the SpanishBrazilian Society founded in 1898 in S達o Paulo

china Wei Chang King arrived in the city in 1991 with his wife and their son Bob Wei (right). Oscar Wei was born in S達o Paulo

PORTUGAL

Paula Almeida, who arrived in the city in 1976, with daughter Julia, at her pottery studio

S達o Paulo OUTLOOK

www.analise.com

Greece

Nicolas Papadimitropoulos, who came to the city in 1963, with his wife Ana Matheopoulus – daughter of Greek parents – and children Alexandra, 17, and Emmanouil, 15

France Jeanne Bourguignon was born in Versailles and arrived in São Paulo in 1964. In 2008, he opened a French wine importing company

Mexico Antonieta Pozas, who married a Brazilian in the Mexican city of Querétaro, came to São Paulo in 2006, with daughter Paulina

DIVERSITY

England Steve Wingrove, from Liverpool, came to S達o Paulo in 1996 and decided to stay. He married a Brazilian and has three children: Helena (left), Mel and Tommy

Japan Matriarch Haruko Arakaki, from Okinawa, arrived in the city in 1966. The photo also shows her daughter Maria Saito, and grandchildren Satoro and Yumi

S達o Paulo OUTLOOK

www.analise.com

Hungary Gyorgy Bernad came to São Paulo in 1988 with his parents, who were diplomats. The family decided to stay in the city and today manages an importer of Hungarian food products

Scotland Colin Pritchard was born in Edinburgh and came to São Paulo in 1990 as a bank executive. After his retirement, he opened an English language school with his wife, who is Brazilian

Bolivia Beatriz Cruz (left), Cirilo Santos, and her sisters Fabiana, Suely and Valéria Flores (in the front), from the Bolivian community of the district of Casa Verde in the northern region of the city

ED VIGGIANI/AE

Worker installing mobile fairing in the Legacy jet at the factory of Embraer in the suburbs of S達o Paulo: the company has already produced around 5 thousand jets, which currently fly in 88 countries in five continents

Research

and development In the following pages is an analysis of SĂŁo Pauloâ&#x20AC;&#x2122;s infrastructure in the area of public and private research The increase in scientific production and the positive expectations

The renowned universities in the city, technical and research centers

The creation of technological parks and other governmental projects

free stock

Research ResearchAND ANDDevelopment Development

Facilities of the lab of pharmaceutical industry, AchĂŠ, in the metropolitan region of SĂŁo Paulo: the city has approximately 3.4 thousand companies with programs aimed at innovation

Research AND Development

QUALITY SCIENCE In the past decade, the country has doubled its scientific production, mainly in São Paulo, and is working towards consolidating itself as one of the ten largest in research and development in the world

ão Paulo city is home to the most advanced research and development structure in Latin America, comprising distinguished universities, technical and educational centers, research groups and laboratories. The state’s scientific development is a combination of important government incentives and private-sector funding. In 2008, after the approval of São Paulo’s Innovation Law, a group of technological complexes known as the São Paulo Technological Complex System (Sistema Paulista de Parques Tecnológicos – SPTec) began to emerge. By the end of 2009, there were already 30 projects to implement these complexes, two of them in São Paulo city.

Scientific production on the rise São Paulo’s technological research and development system is the most advanced in the country, responsible for almost all its scientific production and 45% of Brazil’s doctorate degrees. Data from the Development, Industry and International Trade Minwww.analise.com

istry (Ministério do Desenvolvimento, Indústria e Comércio Exterior – MDIC) shows that São Paulo’s main universities account for practically all the scientific production of the country, which would represent almost 2% of the world’s total. This index is still small when compared to countries like the United States and England, which are responsible for 20% e 6% of global production, respectively, but it is already twice as much as the Brazilian percentage ten years ago. In amount of published articles, Brazil jumped from 20th to 14th place in the world from 1998 to 2008, producing more than 33 thousand documents a year. The country is now ahead of Russia, but continues to trail behind India and China in the ranking. In the qualitative analysis, however, the country ranks better than its BRIC partners. Out of all the documents published by Brazilian researchers in 2008, 31% was referred to in other scientific articles, as compared with India’s 28%, China’s 22% and Russia’s 19%. In terms of collaboration between scientists from different countries, Brazil also stands out. Around one third of the country’s production

was carried out in collaboration with international partners, slightly higher than Russia’s index and much higher than India’s and China’s, 21% and 16%, respectively. In the past decade, Brazilian scientific production tripled in size, mainly due to the research centers in São Paulo city.

The challenge to train researchers The main growth challenge faced by the research and development area in São Paulo is to increase scientist training. In 2009, the state had a 0.8% researcher average for every one thousand inhabitants, which is about three times lower than the percentages in countries such as Spain, Italy and Canada, which are among the ten biggest global producers of scientific know-how. The ratio between the amount of undergraduate students and the amount of inhabitants is 30% in São Paulo and 23% in Brazil, whereas the average in Spain, France and the United States is 55%. The country has already surpassed its Latin American neighbors, such as Mexico (20%) and Ar-

São Paulo OUTLOOK

191

Research AND Development

gentina (13%), but requires heavier investments in higher education to provide the market with young qualified professionals. The progress registered over the past years shows that São Paulo is on the right track. The amount of researchers in the state doubled between 1995 and 2008 to around 50 thousand professionals.

Funding sources São Paulo state has a research and development financing structure that is similar to those of developed countries, where most of the funds come from the private sector. In 2008, the money invested in the segment in São Paulo totaled R$ 13.5 billion, three times more than in 2000, according to surveys carried out by the São Paulo State Research Support Foundation (Fundação de Amparo à Pesquisa do Estado de São Paulo – Fapesp). Private companies contributed with R$ 9.5 billion, 62% of the total, while public state colleges with R$ 2.6 billion, representing around 17%. Development agencies, federal and state research institutions provided the remainder. Besides boosting its funding sources, São Paulo state registered a real increase in funds for scientific production in relation to its Gross Domestic Product (GDP). As of 2000, the in-

vestments represented around 1% of GDP, a number that rose to 1.52% in 2008. The goal is to reach the average of 2.3% of GDP registered in countries that are members of the Organization for Economic Cooperation and Development (OECD) by 2020.

São Paulo spent R$ 13.5 billion in 2008 on research and development Technological complexes São Paulo’s state government created the SPTec to aid and support technological complexes with the purpose of attracting investments and generating new companies aimed primarily at know-how and technology. The institutions that set up in SPTec areas may benefit from tax incentives and other enablers for scientific knowledge production. In 2010, São Paulo’s city government and the state government licensed SPTec’s first complex in São Paulo city, located in the eastern region. The complex – which will be home to research and learning institutions, labs, as well as business incubators and a

convention center – will be aimed at the segments of information technology and software, medicine, market and media intelligence and textiles. There are already 15 projects registered in the state, including this complex. The city’s second complex will be located in the western region and will be located near Latin America’s largest scientific and technological complex, including the University of São Paulo (Universidade de São Paulo – USP), the Technological Research Institute (Instituto de Pesquisas Tecnológicas – IPT) and the Butantan Institute – all linked to the state government –, as well as the Nuclear and Energetic Research Institute (Instituto de Pesquisas Energéticas e Nucleares – Ipen), linked to the Science and Technology Ministry.

Business incubators and innovative companies In parallel to the big projects and technological complexes in the city, São Paulo also has several smaller initiatives that help to disseminate scientific development and to speed up the financial return of investments in research and development. According to the Brazilian Geography and Statistics Bureau (Instituto Brasileiro de Geografia e Estatística – IBGE), there are around 3.4 thousand

São Paulo research in numbers Concentration of resources

Scientific production

Reference among the BRICs

Federal expenses for research scholarships

Share of articles by country worldwide

Articles cited in 2008, in million

28%

1,75%

Other Brazilian states

1,5

1,25

72%

São Paulo

192

São Paulo OUTLOOK

1 1998

2008

Brazil

India

www.analise.com

China

Russia

Paulo Whitaker/Reuters

Research AND Development

People taking advantage of the high-speed internet at Campus Party: this year, the city will gain a technological complex aimed at research in the sectors of information technology and software companies investing in innovative programs in the city. Among them, 66% are small companies that invest directly in practical applications for their research projects. In this sector, four areas account for over half the expenses: chemical products (16.6%), auto assembly (15.6%), electronic material and communication equipment (12.2%) and other transport equipment (11.9%). The first two have a large share in the net sales revenue of the state’s industry – 19.1% and 13.6%, respectively –, which confirms the influence of research expenses on sales efforts. As is common in most parts of the world, the companies themselves are responsible for most of the investments in research and development. In São Paulo, 86% of the expenses incurred by these activities correspond to private funds. This percentage is very close to that registered by the OCDE countries of 90%. 0 www.analise.com

HOW IT WORKS

ão Paulo hosts renowned universities and technical and educational centers, that offer high quality education and research opportunities. The main universities in São Paulo are responsible for almost all the scientific production in Brazil. In addition, the research and development area receives hefty investments from companies that rely on publicly-funded incentive projects. USP, Unesp and Unicamp, the three most important universities in Brazil for the production of know-how are located in São Paulo state

70 business incubators are operating in São Paulo state

●

50 thousand professional researchers work in São Paulo, 60% of them in the private sector

●

3,373 companies in São Paulo city have programs linked to innovation

●

45% of the PhDs in Brazil come from São Paulo city

●

2% of global scientific production is Brazilian, and almost all of it derives from São Paulo

●

São Paulo OUTLOOK

193

SEBASTIÃO MOREIRA/AE

Scientists’ profile A

São Paulo OUTLOOK

www.analise.com

Laboratory at USP’s biomedical science microbiology department

São PAulo in numbers

398,000 people worked with research and development in Brazil in 2008

13%

of the researchers in the country work fulltime in the private sector

www.analise.com

98%

was the growth of São Paulo researchers in 13 years

72%

of federal research grants are granted in São Paulo state

São Paulo OUTLOOK

EDUARDO NICOLAU/AE

Education In the following pages is an analysis of the quality of education and labor that S達o Paulo has to offer

Biology Lab of the Federal Technological Education Center, which tops the list of São Paulo’s public schools in the National High School Exam: technical schools stand out in Brazilian public education

Structure and quality of basic education and professional training The main public and private universities of the country are in the city Rising market of MBAs and post-graduate courses in São Paulo

Alexandre Battibugli/Abril

Education saúde Educationand andLabor Labor

Class at a higher education course at the Getúlio Vargas Foundation (FGV): in 2005, São Paulo offered approximately one thousand post-grad courses, in 2001 this number doubled to two thousand

São Paulo OUTLOOK

www.analise.com

Education and Labor

CONTINUING EDUCATION The city offers a solid structure for basic and technical education and is now developing undergraduate and specialty courses

he population’s training and training and education level have enabled São Paulo to occupy a prominent place in the domestic and foreign scenario. A high level of schooling creates a competitive edge in the business world since it is a decisive factor for the choice of city that will headquarter multinational companies. If compared to other countries worldwide, the average amount of schooling for an adult in Brazil, according to Unesco , is 11 years, which places the country in sixth place. Brazil stands behind USA (12), Norway (11.8), New Zealand (11.7), Canada (11.6) and Sweden (11.4). The situation is even better in São Paulo state which, according to the 2008 School Census of the Education Ministry (MEC), is the region with the lowest school dropout index – 0.8%. It also has the lowest failure rate (5.8%), considering that the average rates in Brazil are respectively 4.4% and 11.8%. In these areas, the indexes of education in São Paulo state are similar to those of countries that are members of the Organization www.analise.com

for Economic Cooperation and Development (OECD). In São Paulo city, MEC data shows that around 50% of its employed citizens have studied for 11 years or more, and 13% have university degrees. In other Brazilian regions, these indicators stand at around 41% and less than 10%, respectively.

Child education in expansion The city also holds a prominent position in child education. A total of 87% of teenagers between the ages of 15 and 17 are enrolled in a school, close to the Brazilian total of 82%. In São Paulo, however, 70% of these students are enrolled in high schools, which indicates that they are in the appropriate grade for their age. This index is close to the 80% mark registered by OECD countries, and far higher than the Brazilian average of 50%, according to data collected by the Institute of Applied Economic Research (Instituto de Pesquisa Econômica Aplicada – Ipea) and the National Home Sample Survey (Pesquisa Nacional por Amostra de Domicílios - Pnad). In order to meet this demand, many private schools have been opened

in the past ten years. Some of these schools, especially those aimed at college entry examinations, have grown rapidly and are now business chains, such as Colégio Objetivo, which has thousands of students throughout Brazil and a very entrepreneurial corporate outlook. Likewise, other groups have grown and created huge franchise networks that currently account for more than 30% of the educational market in Brazil: Pitágoras in Belo Horizonte, Positivo and Expoente in Paraná, COC and Anglo in São Paulo, and CEL, MV1 and GPI in Rio de Janeiro. In total, they account for over R$ 6 billion a year.

90,000 undergraduates a year São Paulo offers a vast top-grade university network. The city is home to two public federal universities, four public state universities and 142 private institutions. The University of São Paulo (Universidade de São Paulo – USP) is the most well known and is listed as one of the 200 best higher learning institutions in the world. British newspaper, The Times, ranked the São Paulo-

São Paulo OUTLOOK

199

Education and Labor

based institution in 175th place. Since its foundation in 1934, USP has been funded with federal money and has graduated 213 thousand students and awarded Master or Doctor degrees to another 89 thousand. Five of the ten private universities with the largest number of students are located in the city of São Paulo. Paulista University (Unip) tops the list with around 167 thousand students, followed by Nove de Julho University (Uninove), which has around 93 thousand students. These numbers include the campi in the capital city and in the metropolitan region. São Paulo universities graduate every year 90 thousand students, according to a survey by the National Institute of Study and Educational Research (Instituto Nacional de Estudos e Pesquisas Educacionais – Inep), associated to MEC.

Another popular educational choice in Brazil is technical learning. A large number of institutions with excellent infrastructure for professional training are based in São Paulo. The state offers 1,191 technical/professional high school-level education establishments – 35% of the country’s total, which enroll around 200 thousand students every year. In 2010, 21 new units will be opened, according to state government forecasts. The sector should also benefit from hefty federal investments. The govern-

ment’s budget for the sector increased 28% from 2009 to 2010, surpassing the mark of R$ 2 billion. The state government intends to invest R$ 1 billion this year, the same amount invested in 2009. The Paula Souza Center, for example, that manages high school-level Technical State Schools (Escolas Técnicas Estaduais – Etecs) and undergraduate-level Technology Colleges (Faculdades de Tecnologia – Fatecs), plans to open four new education units in 2010. São Paulo state invests in this area and reaches a proportion of 12% enrollments in technical institutions in relation to high schools, while the Brazilian average stands at 7%. In developed countries, this number is higher than 30%. The Etecs comprise 162 units throughout the state and educate 142 thousand students in 83 different areas of expertise in the industrial and agricultural segments and other services. On the other hand, the Fatec institutions include 32 thousand students in 45 different undergraduate courses in areas such as civil construction, mechanics, computers, information technology and tourism. According to a monitoring survey carried out by the Paula Souza Center, former students usually earn 2.2 minimum wages (between R$ 1,232 and R$ 1,276 a month). In the 2008 survey, the average was 1.8, in other words, up 22% inflation accrued 4% in this period.

Vacancies in universities

Years in school

University evolution

Share in the country's total

Average schooling of an adult

Vacancies by 1,000 inhabitants over 18 in São Paulo state

The leap in specialization The vast amount of college undergraduates generates an increasing demand for MBA, graduate and other specialized courses in the city, which has led to a sharp rise in the offer of these courses. In 2005, São Paulo offered approximately one thousand graduate courses; in 2010, this number doubled. If taking into consideration only the MBA courses, the city offers more than one thousand, according to

the National MBA Association (Associação Nacional de MBA – Anamba). According to the entity, one of the main reasons for this phenomenon is the impact that graduate studies have on salaries. A survey by the Getúlio Vargas Foundation (Fundação Getúlio Vargas – FGV) shows that each year of additional study represents an average increase of 15% in Brazilian wages.

The 179 higher learning institutions of the region award 90,000 degrees every year Solid structure for technical learning

São Paulo education

37%

São Paulo state

11.8

11.6

37.5

10.9

37.4

22.5

63%

Other Brazilian states

200

São Paulo OUTLOOK

EUA

Norway

Canada

Brazil

Australia

2001

2008

www.analise.com

Education and Labor

The students are usually contacted before graduating, which enables the employability level of former students to hit 73.7% – considering a margin of one year after graduation. Most of those employment relationships, 88%, are formal. The two main federal entities are the National Industrial Trainee Service (Serviço Nacional de Aprendizagem Industrial – Senai) and the National Commercial Trainee Service (Serviço Nacional de Aprendizagem Comercial - Senac). Senai operates in the industrial segment and offers training, assistance, research and support services in over 28 industrial areas in the country. Senac has a partnership with nearly five thousand organizations and offers quality study centers in various areas – in 2008, over one million students graduated and over 21 thousand entered the job market 0

HOW IT WORKS

he educational system in Brazil is divided into preschool, for children up to 3 years of age, elementary school comprised of nine years of study, and high school with another three years, in addition to undergraduate education. Preschools are under the responsibility of the city governments; elementary schools are managed part by the cities and part by the state governments; and high schools by the state only.

●3 thousand educational institutions comprise São Paulo city’s schooling network.

●1 million students, approximately, are enrolled in public city schools. ●6,600 schools comprise the network managed by the state government in São Paulo city. ●3,200 private schools are attended by around 643 thousand students in the city. ●Undergraduate studies are accounted for by 179 institutions, in the city and metropolitan region of São Paulo. In total, they educate 90,000 professionals a year.

Paulo Whitaker/Reuters

Students visiting the Portuguese Language Museum: the city offers 181 technical professional high-schools, 35% of the national total, which account for around 200 thousand students a year

www.analise.com

São Paulo OUTLOOK

Vidal Cavalcanti/AE

Focus on the market A

S達o Paulo OUTLOOK

www.analise.com

Classroom at Ibmec university in São Paulo in the southern region of the city

São PAulo in numbers

1,000

MBA courses are offered in the city of São Paulo

49%

of the best post graduate courses in Brazil are in the city

www.analise.com

97%

was the growth in post graduation courses in the last 5 years

200,000 students earn degrees from the state’s career training every year

São Paulo OUTLOOK

FILIPE ARAÚJO/AE

Supermarket in the southern region of Sao Paulo city uses cutting-edge technology, among which, electronic price labels and carts equipped with computers to disseminate high technology in retail

Income

In the following pages is an analysis of the income and purchasing power indicators of São Paulo city Tenth city in the world in generation of wealth

São Paulo represents more than 10% of Brazil’s GDP

The most well paid executives of Latin America

Income AND Purchasing Power

Packed supermarkets in the northern region of São Paulo; the city’s GDP is expected to grow 4.2% a year, until 2025, which is more than double that expected for developed cities such as New York and London

ONE OF THE TEN WEALTHIEST São Paulo accounts for 12% of the country’s GDP and is the world’s 10th urban agglomeration in wealth generation, ahead of Miami and Shanghai. It is expected to reach 6th place by 2025 206

São Paulo OUTLOOK

www.analise.com

Robson Fernandjes/AE

Income AND Purchasing Power

t is not hard to mistake São Paulo city with a country. In terms of wealth generation, it is no different. The city accounts for 12% of Brazil’s Gross Domestic Product (GDP) and 35% of São Paulo state’s GDP. In 2007, R$ 320 billion was generated. If the city were in fact a country, its GDP would be the fifth highest in South America and within the world’s top 50.

Heading towards becoming the 6th richest city in the world In terms of wealth generation, São Paulo city’s metropolitan region is currently the tenth wealthiest urban agglomeration in the world, ahead of Buenos Aires, Moscow, Hong Kong, www.analise.com

Miami, Shanghai and Mumbai. In 2008, the region’s GDP is expected to reach US$ 388 billion in purchasing power parity (PPP). Consulting firm PricewaterhouseCoopers projects that, in 2025, the agglomeration will reach sixth place, with US$ 782 billion, ahead of Paris, Osaka, Philadelphia and Mexico City. São Paulo’s progress is in line with the growth of emerging cities and the relocation of wealth generation from traditional to developing areas. In 2008, 39 cities in emerging countries were included in the world’s 100 largest cities in GDP. The estimate is for that number to rise to 48 by 2025. Everything indicates that São Paulo will continue to keep up with the pace of the country’s growth. While the average GDP variation in Latin American countries decreased by 2.9% from 2008 to 2009, according to the Economic Commission for Latin America and the Caribbean (Cepal) of the United Nations, in Brazil, the reduction was relatively lower: 0.2%. In the last quarter of 2009, the country’s economy was already showing signs of recovery with a 2% growth as compared with the prior three months. The projection for 2010 is that Brazil’s GDP will grow at least 4%. PricewaterhouseCoopers’ projections for São Paulo city are that São Paulo’s GDP will grow on average 4.2% a year until 2025. This index is twice as much as that expected for developed cities, such as New York, London, Tokyo and Paris, and higher than developing economies, such as Moscow and Mexico City.

The importance of São Paulo and the progress in services São Paulo city and its areas of influence are so nationally relevant that they account for 40% of industrial GDP and 56% of the service sector in São Paulo state, the most prominent in Brazil. São Paulo’s metropolitan region, comprised of 39 cities, is the sixth largest human grouping in the world and is heading towards third place with almost 20 million people in

2010 alone, according to United Nations (UN) projections. Despite still having an important role in the industrial area, the city’s main vocation has been aimed at the tertiary sector in the past couple of decades. At the end of 2009, there were 64 thousand companies in the city, as compared with 62 thousand in 2000, representing a growth of less than 4%. The expansion in the services sector was ten times greater in the same period, going from 214 thousand to 305 thousand companies, up 43% in ten years. The situation is the same with wealth generation. São Paulo city alone accounts for 26% of the state’s industrial GDP – R$ 59 billion of the total R$ 225 billion – but the servicerelated GDP in the city accounts for 40% of the country’s total, hitting the mark of R$ 209 billion.

The most well paid executives in Latin America Because of its economic prominence, São Paulo city is home to the most well paid executives in Latin America. The CEOs of large companies, with annual sales of over R$ 1 billion, earn between R$ 80 thousand to R$ 100 thousand a month, excluding variable benefits or gratuities. Most of the country’s large corporations are based in the city, where 65% of Brazil’s active multinationals are headquartered. In comparison to European countries and the USA, the CEOs’ wages in Brazil continue lower, however, if considering mid-level executives, the average in São Paulo city is currently higher. According to the Hay Group consulting firm, in comparison with economic and financial centers, such as New York and London, the wages in São Paulo are higher by up to 20%. This occurs because the executives who fit this profile in São Paulo have more responsibilities than those in New York and London, where there usually are more levels of authority than in Brazilian companies and this results in better remuneration. Furthermore, the demand for such profes-

São Paulo OUTLOOK

207

Income AND Purchasing Power

sionals has also grown in the city and the increase in job offers has raised the salaries. In the New York and London markets, there is greater availability for this kind of labor. Brazilian executives earn the sixth best salary in the world, according to a survey carried out by US human resource consulting firm, Mercer. The data shows that, on average, Brazilian financial directors earn US$ 161 thousand a year. The highest average salary in the category, US$ 249 thousand for US executives, is still 1.5 times higher. Brazil is preceded in the ranking by the United Kingdom (US$ 201 thousand), Canada (US$ 191 thousand), Germany (US$ 170 thousand) and Hong Kong (US$ 164 thousand).

families in the C and D economic levels. In the past years, income rose by 20% in this niche, and in 2009, the average domestic residential income stood from R$ 600 to R$ 1,400. The purchasing power figures also went up from R$ 113 billion to R$ 158 billion. The forecast is that the purchasing power of São Paulo city’s citizens will jump to R$ 211 billion in 2010.

Better income distribution

The policies to improve income distribution have increased the consumption of these classes, even in a crisis year such as 2009. Target Marketing’s data shows that the consumption level of the B and C class range has increased more than five percent, between 2005 and 2009, from 61% to 66% of the total. Concurrently, a considerable amount of D class families has crossed over to the middle class threshold. In Brazil, São Paulo city is the only one that has managed to reach what the UN considers a suitable standard according to the Gini coefficient, which measures inequality of income distri-

The income of São Paulo city’s workers is 26% higher than the Brazilian average. The average income in the country is R$ 1,494 a month and in São Paulo it can reach up to R$ 1,880, according to 2008 data. In São Paulo, the lowest wage level is higher than Brazil’s. The state’s minimum wage revolves around R$ 560 to R$ 580, since April 2010, against R$ 510, which is the country’s minimum wage level. More importantly, the remuneration for the lower-income population has been increasing, in particular among

The consumption potential of the C and D class rose to R$ 158 billion

bution in a city or country. The city registers an index of 0.45 in a scale that goes from 0 (absolute equality of income) to 1 (absolute inequality). São Paulo state has an index of 0.47, indicating a slightly higher inequality of income distribution in relation to the city, however, a significant jump from 1991, when the figure was 0.67. In Brazil, the index is 0.55. Out of all countries measured by the United Nations Development Program (UNDP), Norway has the best coefficient, 0.25, followed by Japan and Sweden with the same index. The coefficient of USA is 0.41, and the worst is held by Namibia, with an index of 0.74.

Credit should increase from 15% to 20% in 2010 The growth in purchasing power registered in the past years in the country is expected to influence the credit offer to individuals, as well as, companies. São Paulo is expected to outdo the rest of the country. The São Paulo Commercial Association (Associação Comercial de São Paulo – ACSP) estimates that this growth reaches 15% a year, increasing the consumption level to 7% in São Paulo city. The estimate from the Brazilian Bank Federation (Federação Brasileiro dos Bancos – Febraban) is even more optimistic: the credit offer to companies will increase over 20%

São Paulo income in numbers The weight of São Paulo

GDP on the rise

GDP projection in billion dollars

Share in Brazil’s GDP

2008

12%

São Paulo

2025

1.915 1.406 565

88%

Other Brazilian cities

208

São Paulo OUTLOOK

New York

821

London

782 388 São Paulo

692 233 Shanghai

594 209 Mumbai

www.analise.com

321

546

Moscow

Reinaldo Canato/AE

The São Paulo worker earns 26% more than the Brazilian average: in the city, the average is R$ 1,880 a month – in the country, it is R$ 1,494 –, which favors the consumption of electrical appliances in 2010. In 2009, the total amount of credit available reached 15% in the Brazilian market. Brazil’s total credit is approximately US$ 830 billion, according to the National Financial Executives’ Association (Associação Nacional dos Executivos de Finanças – Anefac), close to 47% of GDP. It is still low in comparison to developed economies, such as USA and Japan, which reach a credit availability of more than 100% of GDP. The growth pace picked up in the past years. From 2000 to 2005, credit in Brazil increased, but did not stray too far from the mark of 25% of GDP. With the favorable economic scenario and the expectation that the economic growth will continue, it almost doubled from 2005 to 2009 and the prospects are that it will continue to rise over the next decade. 0 www.analise.com

HOW IT WORKS

he employed contingent in São Paulo’s metropolitan region includes over four million people and most of it – around 70% – is from the socalled middle class, which has a monthly income between R$ 1,100 and R$ 4,800. Throughout the metropolitan region, there are around 4.7 million formally hired workers and another 1.6 million workers who are selfemployed. 26% is the average income gain of São Paulo city’s citizens in relation to Brazil’s index

●

The service sector provides the highest average income in the city: and average of R$ 1,447 a month

●

R$ 1,265 a month was the average income registered in the city of São Paulo in 2007 considering all sector of activity

●

R$ 560 is the lowest level of minimum wage in São Paulo, 10% above the national standard

●

27% of São Paulo’s inhabitants have an income between 1 or 2 minimum wages

●

São Paulo OUTLOOK

209

TIAGO QUEIROZ/AE

Soaring sales

S達o Paulo OUTLOOK

www.analise.com

Bustling 25 de Marco street in downtown São Paulo

São PAulo in numbers

21%

was the growth of family income from 2004 to 2008

70%

of São Paulo’s population is of the A, B and C income classes

12% was the unemployment rate in the city in 2010. In 2000, the rate was 17%

10 mln new consumers entered the Brazilian market in 2009

www.analise.com

São Paulo OUTLOOK

ANTﾃ年IO MILENA/AE

The main local and international designer stores are located mostly around Oscar Freire street in the western region of the city, one of the most luxurious in the world, and also located in the Iguatemi shopping mall and at Daslu

Consumption In the following pages is an analysis of the consumer potential of S達o Paulo city Growth of the shopping mall market in the city

Migration of lowincome families to the B and C class in Brazil

Growth of the luxury products and services market

Consumption Consumption

In 2009, more than US$ 4.2 billion was spent on the luxury market in the city, which offers designer stores, such as Vittorio Missoni, Chanel, Louis Vuitton, Diesel, Tiffany&Co and Bulgari, among others

214

S達o Paulo OUTLOOK

www.analise.com

Consumption

the new customers São Paulo has the largest consumer potential in Brazil and is progressing rapidly on two fronts: the luxury market and in the low-price segment

he population’s purchasing power and consumption level continued the same even during the global crisis in 2008 and 2009. The result is that in 2010, a 33% increment in the city’s level of consumption is expected and will account for 10% of Brazil’s total, with less than 6% of the population. São Paulo is expected to climb the ranks in the global city luxury markets in the next decade, ahead of cities in Europe and Asia which were hit hard by the economic crisis.

Concentration of buying power São Paulo city has the highest consumption level in Brazil. The expectation for 2010 is that every inhabitant of the city will spend a total of R$ 20 thousand, while the Brazilian overall average will stand at R$ 13 thousand per capita. In addition to this leading position, the city is also growing much faster than the rest of the country. At the end of 2010, the total consumption of Brazilians, including the acquisition of goods, food products, housing, taxes www.analise.com

and related expenses, is expected to top R$ 2 trillion. This amount represents a 22% growth as compared with 2009, however the projection for São Paulo city is much more significant, 33%. The city’s consumption should reach R$ 212 billion in 2010. This progress is relevant but the consumption power of the São Paulo citizen is still half the average of the New Yorker and the Londoner. Therefore, there is still a lot of room for growth and with the expectation of maintaining the economic growth, the forecast is that this difference should diminish in the next decade.

More consumers One of the main factors for the growth of São Paulo’s share in Brazilian consumption was the recent change of the population’s income profile and purchasing power. In the past five years, the number of households in the D and E income class dropped by almost half. In 2005, this range represented 22% of families that lived in the city, accounting for 5.6% of total consumption. In 2009, this index dropped to 12%

of total homes that accounted for 3% of consumption, and a large part of the families migrated to the B and C income classes, which increased their share from 68% to 78% of the total households. They accounted for 66% of the city’s consumption in the year.

The most luxurious streets In shopping districts worldwide in 2009 rk Place 1 Serrano Street 2 Fifth Avenue

City Madrid New York

3 Champs Elysees

Paris

4 Montenaoleone Street

Milan

5 Deira CityCenter

Dubai

6 Oxford Street

London

7 Parliament Road

Beirut

8 Jungfemstieg Av.

Hamburg

9 Oscar Freire Street

São Paulo

10 Liberdade Avenue

Lisbon

Source: Excellence Mystery Shopping International

São Paulo OUTLOOK

215

São Paulo shines in the luxury market In the next ten years, analysts claim that São Paulo will enter the list of the ten largest cities in the world due to the size of its luxury product and service market. In 2009, more than US$ 4.2 billion was spent in this niche in the city, according to estimates of MCF Consultoria e Conhecimento, an expert in this segment. This represents around 65% of the entire domestic market, but is still only around 1% of the 500 billion spent worldwide. Currently, São Paulo’s luxury market is one of the 40 largest behind Indian cities, Eastern Europe and equal to Mexico City, for example, which currently tops the Latin American list. The financial crisis hit the luxury market more in Europe, Japan, the US and China, than in Brazil and, therefore, São Paulo. The country jumped from a growth of 17% to 18% in 2009, as compared with the global average of 5%. The expectation for 2010 is that Brazil will grow around 12%, leading to sales of US$ 7.2 billion in the country and US$ 4.7 billion in São Paulo. In the US, luxury market sales came to a standstill, in Europe the growth surpassed 2%, in Japan it fell and in China it remained under 5%. This scenario should help to change the

makeup of the global luxury market, allowing São Paulo to reach a more prominent position.

to grow. In the US, for example, mall sales represent 70% of total retail, well above the 24% registered in Brazil.

Growing shopping malls

Availability of credit drives the market

Brazil’s promising consumption is triggering a clear increase in shopping mall investments. By 2012, the country is expected to house 100 new projects, of which 37 in Paulo state and at least ten in the city.

In 2010, the credit offer to individuals will rise 20% The investment expected in this period is expected to reach almost R$ 9 billion. In 2009, 77 enterprises were operating in the city of São Paulo, while in Brazil, according to the Brazilian Storeowners’ Association (Associação Brasileira de Lojistas de Shoppings - Alshop), this number reached 711. Brazil is the eighth country in the world in number of malls. It is not only the physical presence of the malls that is on the rise. Revenue from shopping malls in 2009 grew 6%, reaching R$ 76 billion, while the retail sector as a whole grew around 4%. And there is still a lot of space

São Paulo consumption São Paulo’s slice

GDP growth

Share in the country’s consumption

Growth projection from 2009 to 2025

10%

São Paulo

6.6% 6.3% 4.2%

3.2% 3.2% 1.8%

90%

Other Brazilian cities

216

São Paulo OUTLOOK

Shanghai Mumbai São Paulo Moscow London New York

In order to encourage the progress of consumption in Brazil and in São Paulo, the market has witnessed a surge in available credit. According to projections of the Brazilian Bank Federation (Brasileira de Bancos - Febraban), the offers targeted at individuals will rise 20%. In 2009, US$ 830 billion was offered in credit in the country, according to the National Finance Executives Association (Associação Nacional dos Executivos de Finanças - Anefac), around 47% of GDP. The credit to the end consumer alone represents around 15% of GDP, triple that registered in 2002. The fast-paced credit growth of the past few years is expected to continue and lead Brazil closer to the growth figures of developed countries, such as the US and Japan, and those in development such as China and South Korea, where credit exceeds 100% of GDP. The country, however, stands out in relation to other Latin American economies. Mexico has a ratio of 20% between credit and GDP and Argentina, 12.5%, for example.

The popular consumption phenomena On the low end of the market, popular consumption is also registering good results. The capital of São Paulo has, for example, the largest open-air shopping center in Latin America: 25 de Março street and its surroundings. This downtown region has a wide popular appeal, offering more than three thousand points of sale and receives 400 thousand people daily. The city has dozens of low-end retail and street centers specialized in a variety of products and segments. The commerce in the Brás and Bom Retiro districts, for example, is dedicated to women’s fashion and child wear with annual sales of more than R$ 2 bilwww.analise.com

on the previous page, clockwise: Evelson de Freitas/AE, Raul Júnior/Exame, Robson Fernandjes/AE, João Sal/VIP, Marcelo Barabani/AE, Leo Feltran/Veja, Jair Magri/Abril, Leo Feltran/Veja, stringer brasil/Reuters

Consumption

Paulo Whitaker/Reuters

Consumption

The crisis affected the luxury markets in Europe, Japan, the US and China, while in São Paulo, which also has a Ferrari car dealer, sales are expected to hit US$ 4.7 billion in the sector in 2010. lion. The bicentenary street of Santa Efigênia concentrates more than 500 stores over eight blocks dedicated to electronic and computer products. In all, there are 59 specialized streets in more than 50 segments. The growing buying power of the low income population is a niche that has received special attention in the past years. Today 46% of the C class, with an average family income of four minimum salaries, has a credit card or uses the credit system offered directly by retail chains, according to the Brazilian Credit Card and Service Company Association (Associação Brasileira das Empresas de Cartões de Crédito e Serviços - Abecs) 0 www.analise.com

HOW IT WORKS

ão Paulo is a all-around consumption center that offers a vast array of products and services, from the luxury market to the low-price market, in addition to the most varied shopping options, such as shopping malls, regions and streets that bring together dedicated stores, street fairs and open-air consumer centers.

240 thousand stores are located all around the city.

●

77 shopping malls, 11% of Brazil’s total, with around 9 thousand stores.

●

100 new shopping malls will be opened in the country in 2012, 37 in São Paulo state, and at least ten in the city.

●

145 luxury brands have stores in the city, such as Dior, Louis Vuitton, Cartier, Armani, Versace, Tiffany & Co., Chanel, Ferrari and Lamborghini.

●

São Paulo OUTLOOK

217

Luxury market

Executive jet fair in the southern region of S達o Paulo city

S達o Paulo OUTLOOK

www.analise.com

Paulo Whitaker/Reuters

S達o PAulo in numbers

9th

most luxurious street in the world, Oscar Freire, is in the city

12%

should be the growth of luxury consumption in the city of S達o Paulo

www.analise.com

US$ 4.7 bln will be the amount spent with luxury products in the city in 2010

65%

is the share of S達o Paulo in the Brazilian luxury market

S達o Paulo OUTLOOK

24 hours

THE CITY THAT NEVER SLEEPS São Paulo, like every other large metropolis, offers an array of entertainment and gastronomical options that extend far into the night. What differentiates the city is the diversity and the amount of options available every day of the week, 24 hours a day. The options, not only for leisure, include shopping, exercising, finding something to read and even trimming your dog. As such, São Paulo holds the title of the most 24 hour city in the world Photos Claudio Rossi

Dance floor of one of the more than 180 nightclubs of São Paulo city. For those who want to have fun, there are options for every day of the week that stay open until the sun rises 2:00 am

www.analise.com

São Paulo OUTLOOK

221

24 hours

The authentic French restaurant Paris 6, located in the southern region of the city, never closes its doors. The menu changes according to the time of day and includes meals from breakfast to dinner 2:00 am

222

S達o Paulo OUTLOOK

www.analise.com

24 hours

The US chain, McDonald’s, has 129 restaurants in São Paulo city, of which 30 stay open 24 hours. It is one of the more popular options for a fast meal in the early hours 12:30 am

Avanhandava street downtown bustles with the movement of people frequenting its upscale bars and restaurants. This street is a reference point for 24-hour cuisine

1:30 am

www.analise.com

São Paulo OUTLOOK

24 hours

The Pão de Açúcar supermarket chain is located in the southern region of the city. The company was the first in 1969 to keep its branches open 24 hours a day and 12:30 am 365 days of the year in São Paulo

The habit of shopping at night has become usual for the citizens of São Paulo

Initially meant to be available for emergency situations, 24-hr drugstores are now being frequented by people in search of perfumes and cosmetics during all hours of the night

224

São Paulo OUTLOOK

1:00 am

www.analise.com

24 hours

The hectic routine of São Paulo’s citizens has forced them to use all-night gyms to work out 11:30 pm

www.analise.com

A bookstore in the southern region of the city aimed at late nighters has extended its business hours to early morning

São Paulo OUTLOOK

12:30 am

Environmental

management In the following pages is an analysis of SĂŁo Pauloâ&#x20AC;&#x2122;s main environmental actions The main challenges of the city in the environmental area

Vehicular inspection wand selective trash collection indicators

MARCOS HIRAKAWA/SPTURIS

Aerial view of the Ibirapuera park region located in the southern region of the city: its project was developed by acclaimed architect Oscar Niemeyer in partnership with famous landscape artist Roberto Burle Marx

Marcio Fernandes/AE

ENVIRONMENTAL ENVIRONMENTALMANAGEMENT MANAGEMENT

All the vehicles in circulation in S達o Paulo undergo the Environmental Vehicular Inspection Program (in the photo, a car is being inspected and in 2009), 400 thousand vehicles did not pass the test

S達o Paulo OUTLOOK

www.analise.com

ENVIRONMENTAL MANAGEMENT

A STEP FORWARD With activities on several fronts and investments in renewable fuels, the city strives to conciliate development and environmental management

ão Paulo city is working towards reducing its environmental impact and the pollution caused by economic activities typical of large urban centers. Since 2005, the measures adopted by the city reduced by 20% the emissions of greenhouse effect gases and the expectation is that this index will continue to drop.  One of the main actions was the approval in 2009 of the Climate Change Policy in São Paulo city. The legislation sets forth targets for the reduction of pollution, gradual replacement of fossil fuel usage by the public transport vehicle fleet and is taking measures to improve the handling of waste and trash, in addition to targets for the expansion of selective collection in the city.

Clear targets and objective results The conciliation of economic development and environmental management is a contemporary challenge. It is no different for the city of São Paulo. The economic and financial center currently concentrates 20% of its GDP on industrial production and is home www.analise.com

to one of the largest vehicle fleets in the world. The city has already adopted a series of measures to fight environmentally-harmful effects and participates in pioneering initiatives to prevent climate change.   Most of the greenhouse effect gases derive, in an urban environment, from the burning of energy, mainly vehicles fuels, and trash itself. On these two fronts, the city has obtained excellent results in the past years and expects to cut by more than 30% the issuance of these gases by 2012. This target is established in a law approved in 2009.  The practices undertaken in São Paulo have been recognized internationally. The city takes part in the global direction of the International Council for Environmental Initiatives and is the only Latin American city in the executive committee of C-40, a group of large cities led by London and New York, articulated to neutralize global warming.  São Paulo accompanies the country in the improvement of environmental management policies. In the Living Green ranking of the Reader’s Digest, released in 2007, the city occupies 62nd place as the “greenest” city in the world. In first is Stockholm in Sweden, following mostly be developed

countries, São Paulo is ahead of economic centers such as Mumbai (70th), Shanghai (71st) and Peking (72nd).  The improvements are a consequence of measures adopted since the 1970s, when industrial growth intensified in large Brazilian cities. Two important measures were taken by the city: the rotation of vehicles and the selective trash program. The rotation, established in 1997, restricts the circulation of trucks and cars, according to the license plate number and the days of the week, at peak hours in the expanded downtown area of the capital. Selective trash collection, regulated in 2007, is carried out through a partnership between city entities, condominiums and trash collection co-ops. According to the Análise Environmental Management 2009 yearbook, a publication that details the environmental actions of around 700 of Brazil’s largest companies, São Paulo-based companies register indexes above the Brazilian average. A total of 57% of São Paulo-based companies have ISO 14001 certification, against an average of 50% in the country. Almost 42% of São Paulo-based companies have structured programs to optimize their use of water, as compared to the national average of 34%.

São Paulo OUTLOOK

229

ENVIRONMENTAL MANAGEMENT

Cutting back on air pollution As the biggest city in Brazil and the center of the third largest urban agglomeration in the world, São Paulo registers the highest air pollution levels in the country. However, the improvement of these indexes in the past two decades indicates a real effort to overcome the problem.  The reduction has been significant since 1995, when the metropolitan region of São Paulo registered 114 occurrences of violation of the acceptable carbon monoxide (CO) content in the air, and ten years later, in 2006, the number of occurrences dropped to seven, according to data from the Geography and Statistics Bureau (Instituto Brasileiro de Geografia e Estatística - IBGE). In the ranking made by consulting firm PricewaterhouseCoopers, that analyzes the performance of 21 cities, São Paulo appears in 11th place in the “air quality” variable, ahead of New York, Chicago, Santiago in Chile, Dubai, Mumbai, Shanghai, Hong Kong and Mexico city.

Vehicular inspection and renewable fuels In regard to air pollution from the private vehicle fleet, one of the main actions is the Environmental Inspection Program started up in 2008. As of

2010, all vehicles in circulation, more than six million, must undergo inspection. This legislation, which is in place in a similar form in 51 countries, determines that automobiles that do not undergo the procedure or do not meet the requirements cannot be licensed. In 2009, 400 thousand vehicles were taken out of circulation. The inspection became mandatory nationally in 2010.  The Climate Change Policy in the City of São Paulo is progressively reducing the use of fossil fuels in public transport, as of 2009, at least 10% a year. The target for 2017 is for all the city’s public transport buses to use only renewable fuels. Since 75% of the greenhouse effect gas emission originates from the use of energy, of which 90% derives from the use of oil, mainly to burn vehicle fuel, this point is one of the focal points of the measures adopted in the city.

City government sells carbon credits backed by this action. Two credit auctions have already taken place, totaling R$ 71 million. The funds are aimed at social environmental projects. This project is one of the five greatest control actions for greenhouse effect gas emitted by urban trash approved by the United Nations. Through it, Sao Paulo has city reduced by 20% its gas emissions from 2005 to 2008.  For the better management of trash in the landfills and the reuse of material with recycling potential, selective trash collection needs to improve. In 2009, out of the 96 city districts, 75 had selective trash collection. By 2012, the target is to extend this service to all of them. São Paulo generates an average of 17 thousand tons of trash a day, 10% of the country’s total. The estimate is that only 7% of the total that could be recycled is selectively collected.

Energy from trash and selective collection

Sewage treatment expands in the city

Urban trash is responsible for around one fourth of the total greenhouse effect gases in the city and, as such, this matter also receives special attention. Landfills have set up biogas mills, which collect methane gas, one of those responsible for the greenhouse effect, and transforms it into electrical power for 700 thousand inhabitants.

The basic sanitation indicators place São Paulo city on the same level as European countries. The city has already reached the water supply universalization target and now invests to increase the collection and treatment of sewage. The collection in the capital registers the same percentages as countries

São Paulo environmental management Basic sanitation

CO2 emissions

Recicling in the city

Population access to services

Emissions in billion metric tons in 2006

Volume of material collected in the city

95%

87% 6.1

Sewage collection

5.8

50 thousand tons

84%

Sewage treatment 45

1.6

1.5

Russia

India

1992

230

2015

São Paulo OUTLOOK

674%

China

USA

0.4 Brazil

2003

2008

www.analise.com

Paulo Whitaker/Reuters

Giant bottles draw attention to pollution in the Tietê river, object of one of the largest environmental projects in the world, which is expected to consume US$ 2.6 billion to reach 87% in collected sewage such as Italy and Spain (80%). In regard to sewage treatment, São Paulo, with 75%, is ahead of Spain, which services 59% of the population. United Kingdom and Germany have the best indexes of collection and treatment. 92% and 87%, respectively.  One of the main action fronts related to water in São Paulo is the Tietê Project. Since 1992, in an attempt to recover the most important river of the state, the Tietê river, one of the world’s largest environmental projects and the largest one in Brazil was put in place. Two of the three project stages have already been executed and the third (from 2009 to 2015) is in the negotiation phase. In all, the planned investment is US$ 2.6 billion to reach the levels of 87% of sewage collected and 84% treated. 0 www.analise.com

HOW IT WORKS

nvironmental management in São Paulo city requires the help of different entities, in city management, as well as state management, with specific competencies. Many services are outsourced and are under the responsibility of private companies.  The Municipal Nature and the Environment Department is in charge of the city’s environmental policy and inspects activities that involve environmental impact

●

All the companies setup in the State must receive a license from the Environmental Company of São Paulo State, linked to the State Environmental Department

●

The enterprises must check with city government to see if there is the need for a usage or soil occupation statement

●

The collection of home, selective and hospital waste is carried out in São Paulo by concessionaires

●

São Paulo OUTLOOK

231

Vehicular inspection

S達o Paulo OUTLOOK

www.analise.com

São Paulo in numbers

1.6 mln vehicles underwent inspection in 2009

of those that underwent inspection in 2009 did not pass

56%

of São Paulo’s fleet will be inspected in 2010

countries adopt similar vehicular inspection systems

Paulo Whitaker/Reuters

Activists pedal down Paulista avenue on World Car-free day

www.analise.com

São Paulo OUTLOOK

THE CITY OF Sﾃグ PAULO IS FULL OF ATTRACTIONS.

THE BEST OF ALL IS THE PEOPLE.

SÃO PAULO. ELECTED THE BEST TOURISTIC DESTINATION IN BRAZIL*

cityofsaopaulo.com

*Researches: Ministry of Tourism/Sebrae National/FGV and Award “The Best of Viagem e Turismo Magazine – Readers Choice.”