Trade & Export Middle East - Country Focus - Brazil by Trade Export

country

FOCUS

BRAZIL

arAB BRAZILIAN CHAMBER OF COMMERCE

BILATERAL TRADE

FOOD BUYERS EVENT

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FOCUS INTERVIEW

Developing partnerships Aparna Shivpuri Arya got talking to Michel Alaby, Director General, The Arab Brazilian Chamber of Commerce (ABCC), to know his thoughts on Brazil’s relations with the Middle East and what plans does the ABCC has to promote these ties.

We are working on diversifying our products, other than food. We have good opportunities in building material, cosmetics, furniture, auto parts to name a few.

What are the products and services both the countries trade in?

Brazil is a traditional exporter of food products to the Arab countries, however in the last years, exports of machinery, vehicles and airplanes took an important place on the list. The Arab countries’ exports to Brazil are mainly composed of fossil fuels, fertilizers and chemical products for the plastic and rubber industries. There are potential possibilities for export to Brazil of some Arab products, like: olive oil, dates, olives, handcraft, garlic powder and onion, among others.

lease give us some details about Brazil and Middle East trade relations.

The Brazilian – Arab countries relationship have been strengthened in the past 15 years. Since 2003, the first official visit of a Brazilian President to the region, trade increased 360%. Brazil is the most important trade partner for Middle eastern countries in Latin America. For Brazil, the largest trade numbers happen with Saudi Arabia, Egypt, Algeria, Morocco and the UAE. It is not incorrect to say that, in trade terms, the economies of these countries are complementary, not competitive. Through a strategic angle, exports and imports lack of diversification, as they are concentrated in a few items 40

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each. Furthermore, there are Brazilian investments in Arab Countries and Arab investments in Brazil. The current trade between Brazil and Arab Countries have reached USD 25.09 billion in 2011. The Brazilian exports reached USD 15.11 billion and the imports USD 9.98 billion. In 2012, from January to April, the total current trade reached USD 7.67 billion, with Brazilian exports of 4.25 billion and imports USD 3.42 billion. The relationship is in a very good shape. With UAE we have an ethusiatastic and important relationship. We participate in the trade shows and we also receive a lot of businessmen from there. This year we plan to have two delegations in November to Dubai and our relationship is growing.

What is the role of the ABCC in promoting bilateral relations?

The Chamber’s objective is to consolidate and develop partnerships, create business opportunities and mainly gather Brazilians and Arabs, so as to improve information flow and knowledge exchanges among them. As a member of the General Union of Arab Chambers of Commerce, Industry & Agriculture, the Arab Brazilian Chamber of Commerce is officially recognised in Brazil as the legitimate representative of the trade interests of the Arab League states in Brazil. With a new structure, created to offer prompt information to all its members, the Chamber relies on a specialised team focused on the Brazilian and Arab markets, constantly searching for social-economic data and trade opportunities.

We work through such events, together with the Brazilian government and the Dubai Chamber of Commerce and nowadays we have also started engaging with Dubai Exports. But we need to improve and give more opportunities to the Brazilian businessman- there is a proverb – excellent is the enemy of the good. We need to have more services to help the Brazilian and Arab businessmen. We also help Arab businessmen who want to invest,trade, or find good and reliable suppliers and companies or start a joint venture.

If you were to get to talk to the Middle East companies, how would you encourage them to invest in Brazil. What reasons would you give them for doing business with Brazil? Brazil is a growing economic and a regional leader by nature. Political and financial stability is a green light for

What challenges to Brazilian companies face in doing business in the Middle East? Some business sectors complain that maritime freight lines are very few, so the logistics must be improved. The distance has been shortened because we have three major airlines connecting Turkey, Qatar and the UAE directly to Sao Paulo and Rio de Janeiro, with daily flights. Businessmen may find the language an obstacle, but we are aware that this issue is becoming a thing of the past. Also, there needs to be an effort to cultivate a relationship. For example, some Brazilian companies asked us about JAFZA and we gave them all the details and who they need to talk to and we advised JAFZA that some Brazilian companies will be coming to you. But investment is not a short term question; you need to cultivate the relationship. It will not be done with one trip. Also, culture is different- you need to understand the culture. The distance

investors, and natural resources are present in huge amounts. The protection of foreign investments is taken very seriously in Brazil. Global events, such as the World Cup and Olympics will take place in Brazil, creating countless opportunities for several sectors. You need to give businesses some sectors they want – and then they will invest. For example, real estate, shopping malls, sugar refineries, meat, corn are some sectors where there can be joint ventures. So you need to show the business opportunities so that there can be marriage between the investor and the market. Usually Arab companies use a local partner as it is more easy and more comfortable for them.

can sometimes be a hindrance but now we have Emirates and Qatar Airways and Etihad will be starting in 2013.

If Middle Eastern companies want to set up a branch or office in Brazil, how should they go about it? What legal, financial and business support services does the government offer? The Brazilian Government has a one-stopshop agency for investors, the Apex - Brasil (www.apexbrasil.com.br/portal). This public organisation works very closely with the Arab Brazilian Chamber of Commerce in the Middle East region. Apex Brasil’s actions in many Arab countries are fruitful and their structure is well defined to help foreign investors. For

Michel Alaby, Director General, The Arab Brazilian Chamber of Commerce

advisory, all the largest global firms have offices in Brazil, such as PriceWaterhouse, KPMG, Delloite and Ernst & Young.

Which sectors hold the most promise for the Middle Eastern businesses?

With the discovery of the so called “pre-salt” oil basin and the large experience Middle eastern companies have in this field, it becomes an attractive opportunity. The non-oil energy presents a good possibility for the Arab investor. Agribusiness is also a very interesting sector for those companies, as they have a serious concern on the food security. Brazilian food producers are looking for partners, local or foreigners, in order to expand their capacities. The shopping malls, real estates, hotel and resorts can be a profitable opportunity for Arab companies, to invest in a market of 200 million inhabitants.

Are there any bilateral trade or investment agreements, MoUs between both the countries?

The Mercosur Trade block (where Brazil is a founding member together with Argentina, Uruguay and Paraguay), signed Frame Free Trade Agreements with Palestine and Egypt, which need to undergo Congresses approvals. There are negotiations with Gulf Cooperation Council, Morocco, UAE and Jordan, in the same format, but they are currently on hold. AUG - SEPT 2012

FOCUS BILATERAL TRADE

Go Brazil! Brazil, though very far, geographically, is slowly becoming one of the closest trading partner of the Arab region. With its diverse natural resources and the variety and quality of products offered, it is eager to build ties with the region. One of Brazil’s most important sector is food products-especially beef and chicken. Aparna Shivpuri Arya brings you a detailed analysis of the bilateral trade relations, with a special emphasis on the food sector.

razil has the largest Arab community outside the Arab region, with approximately 12 million Arabs based in the country. As we can see from the graphs, KSA, Egypt and the UAE are the top three markets for exports in 2011, for Brazil. Ten years ago Brazil was totally focused on the US and Europe but then it changed gradually and Brazil started showing interest in the Middle Eastern countries and started to promote ties and build trade relations. Brazil has a very diversified range of exporting sectors, however more than half of the exports to the Arab region comprise of meat, sugar and iron ore. Trade between the Arab world and Brazil showed a surplus in favour of Brazil. KSA has been the top destination for Brazilian exports so far. Brazil is UAE’s fourth largest trading partner. Ther are around 25 major Brazilian companies in the UAE. Brazil’s trade and tourism will be given a boost with the FIFA World Cup 2014 and the Olympics in 2016.

Exports from the Arab region to Brazil 2011

Exports to the Arab region (2011)

Brazilian exports to the Arab region stood at USD 15.5 billion in 2011, whereas the imports stood at USD 9.99 billion. KSA is one of the major trading partners of Brazil in the region.

Brazilian Exports (January-December)

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Sugar and meat were the top two products exported to the Arab region from Brazil, while minerals and fertilizers topped the list of exports from the Arab region.

There is potential for exporting machinery, cosmetics, jewellry and many other products from Brazil. However, sometimes the obstacle is that Brazil is a huge market, so when local companies are looking to expand, they focus only on the national market. Secondly, language can also be barrier, but that is changing gradually with the present generation being interested in foreign languages.

Brazilian Imports (January-December)

Brazilian food exports to the Arab region

Food sector is one of the major area of international trade between the Arab region and Brazil. Due to water shortage and a lack of arable land in the UAE and Qatar, these countries need to import almost 90% of their food requirements. Their dependence on food imports is expected to increase rapidly due to population growth, increased per capita income and a resulting increase in per capita consumption. According to the Economist Intelligence Unit (EIU), the UAE’s food imports are expected to reach USD 5.5 billion in 2015, up from USD 3.6 billion in 2010. Qatar’s food imports are also expected to increase, reaching USD 2.1 billion in 2015, up from USD 1.3 billion in 2010. This provides the syngery for bilateral trade. Brazil has the world’s largest livestock herd and is the largest exporter of beef.

Some facts about Brazil Third largest producer of fruits:

• 1st in orange production (largest production of orange juice); • 1st papaya production; • 2nd in bananas production;

World’s second largest producer of grains; • 1st in soybean oil exports; Largest producer and exporter of green coffee; Second largest producer of organic foods;

Brazil has been very proactive in supporting The Brazilian Trade and Investment Promotion Agency (Apex-Brasil) is responsible for attracting foreign direct investments to Brazil, mainly to the segments of oil and gas, aerospace industries, environmental solutions (renewable energy and solid waste treatment), semiconductor industries, tourism-related real estate developments, bioscience, and venture capital & private equity (VCPE) transactions. Apex-Brasil assists the foreign investor throughout the entire investment process in Brazil. The Middle East is a key market to trade promotion actions designed to foster Brazilian exports of goods and services. For that reason, ApexBrasil operates a Business Support Center in Dubai, assisting Brazilian companies willing to do business with local buyers. The Business Support Center is also a reference for Arab investors willing to allocate resources in Brazil, especially in the aforementioned segments. As part of highlighting the trade opportunities, Trade and Export Middle East, covered the Food Buyers Event which was organised by the Arab Brazil Chamber of Commerce in Sao Paulo in July. * The graphs and charts have been taken from the ABCC

Source: Arab Brazil Chamber of Commerce, http://www.ccab.org.br/infobiz-online/en/ general-data/brazil.aspx

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FOCUS Event

The art of matchmaking In order to promote international business opportunities between the food sector in Brazil and the retail chains in the Arab region, the Arab Brazilian Chamber of Commerce (ABCC) organised a Food Buyers Event in Sao Paulo in July. Aparna Shivpuri Arya brings you exclusive coverage of the event.

he event was organised by the ABCC in collaboration with Apex - Brasil, from the 9th-14th of July 2012. Ten big supermarket and retail chains from the Arab region were present at the event. The list included• Choitrams,UAE • Spinneys, UAE • EMKE Group -Lulu,UAE • Federal Foods, UAE 44

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• International Centre Group for Food Stuffs, Kuwait • Barakat International, UAE • The Sultan Centre, Kuwait • Al Yasra Foods, Bahrain • Sons of Hamed Y Alessa Co, Kuwait • Babasons, Bahrain

The Arab Brazilian Chamber of Commerce is the sole Chamber of Commerce in Brazil

officially recognised by the General Union of Chambers of Commerce, Industry and Agriculture for Arab Countries. Founded in 1952, it strongly fosters trade, tourism, cultural and trade relation between Brazil and the Arab Nations. On the first day of the event, the buyers from the Arab region were given a brief overview of the food sector in Brazil and the role of the ABCC in promoting trade.

On the 10th and 11th of July, business matchmaking sessions were held between the companies of both the sides. The ABCC had set up work stations for all the supermarket chains from the Arab world and each Brazilian company was given approximately half an hour to discuss their product. The enthusiasm in the Brazilian companies was palpable, with over 60 companies vying for the buyers’ attention. Flavio Silva, from Marfrig, one of the biggest exporters of beef to the Middle East, highlighted the importance of the Middle East market for them. He said that Lebanon, KSA and the UAE were their biggest markets. Talking about this event, he stated “We believe that retailers have a lot of influence, and that is why we are trying to tie up with them through this event. We would like to do direct trading.” Other participants were also quick to point out that, this event is helping them build a close relationship with the retailers in the Arab world, which has been difficult to build. “We understand the culture of the Middle East, where it is not only about price, but also about building a relationship,” said Flavio. The two-year old coffee company Café Fazenda Caeté wants to enter the Arab market with an exclusive product. “Our product is one-of-a-kind in the world; we hold the patent for it. It is grounded and roasted coffee, only it is an infusion, like a tea. It’s a convenient coffee for people who live alone, who need to be practical,“ explained Commercial Director Fernando Costa. The São Paulo-based trading company Energy, which exports sugar, one of the top export products, from Brazil already sells to all of the Arab countries, and has come to the matchmaking rounds looking for new deals. Priscila Ruiz, of trading company Argofruta, hoped to find an importer for her products in the Middle East. “We want to find a company that will buy from Argofruta and sell to [end] consumers. My company exports fruits- limes, mangoes, grapes and nowadays we export these kinds of fruits to Europe and Canada. We cannot export to a lot of countries, since the shelf life is short. We are interested

in the Arab countries, because we got to know that Brazil is exporting a lot of fruits to the Arab region, especially KSA and the region is interested in receiving fruits, for hotels and so forth.” Talking to Eduardo Abud from Cafe Canecao, highlighted that the opportunity this event has given them is very important for them. And they are open to any country in the region. The business matchmaking sessions continued the whole day from 9:00am-6:00pm for two days, with the same number of companies turning up the next day as well. This went to show the eagerness of the Brazilian companies to trade with the Arab world. Suresh Kumar from Barakat, UAE, said he is very optimistic about Brazil. “We are into expanding our operations in the entire

Middle East. We’ll be having a processing plant, for meat, seafood and poultry. As part of the expansion, I have come here to see, what we can bring in terms of meat, beef, lamb and also fruits. I have met a lot of suppliers and some of them will be able to give me support in beef and lamb.” Talking about challenges Suresh said that there are no such big challenges except that UAE is a small market and competition gets tough. So there is a price war. Sandeep Khimnani, from Choitrams added freight and lead time to the challenges. Sandeep Khimnani, from Choitrams was full of praise for the ABCC for organising this event and getting a good mix of industries. “We have met diverse industries. As a group, for us, Brazil, other than meat and sugar is an unexplored territory and we want to see how

There is great potential for expansion for Brazilian products in the Arab world. It is estimated that the halal market has represented approximately USD 2 trillion dollars in the last few years in the areas of food, cosmetics and other products.

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FOCUS Event

we can find other products. Agriculture is Brazil’s strength and we are looking around to see potential and then based on those” Talking about their experience in this event, Naraynan Raman and Narayan Swami, from EMKE Group, were very optimistic about the Brazilian products. “The event has been very productive and very well-managed and we have got some good offers. We will now study the market and then we will get in touch with them. Chicken and beef products are doing very well in the Middle East. Actually all the products from Brazil are well known in the market. Sugar is also an important

beef exports have grown by 11% from 2010 to 2011. Egypt is the largest importer of Brazilian beef (40%), followed by KSA (15%), Libya (7%) and the UAE (4%). To meet the requirements of the Arab countries, all the products are halalcertified, and all the companies have to get a halal certification and Brazil is the largest halal exporter in the world. However, as of now the average price of beef is down because of the financial crisis, since demand has fallen. According to Ricardo Santin, UBAEF, in 2011, the total exports of poultry from Brazil were USD 8.8 billion and this sector

In 2011, approximately 69.8 % of the meat produce was consumed by the domestic market, while 30.2% was exported. Brazil is the third largest producer of meat after the US and China. 36% of the foreign exports is to the Middle East market- with KSA (16%) leading the pack.

commodity, just like coffee. Brazilian products are value for money and they never compromise on quality. The ABCC is also closely involved, especially with halal issues.” Khushi Gurbani, from Babasons, Bahrain, said that his main purpose for coming here was to explore new commodities and this trip has helped him in understanding the Brazilian market. He was also optimistic about finding a couple of clients to moving to direct supply rather than agents. On the 12th of July, the delegation met up with the Brazilian Exporter and Producer Association for Chicken Sector (UBABEF) and the Brazilian Exporter Association for the Beef Sector (ABIEC). Beef and chicken are one of the major exports from Brazil to the rest of the world. According to Dr. Antônio Camardelli, ABIEC, Brazil is the third largest producer of beef after the US and China. 36% of the foreign exports are to the Arab region, with Egypt and KSA leading the pack. Russia is the largest client for natural meat and Brazilian 46

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employs 3.5 million people. In 2011, approximately 69.8 % of the poultry produce was consumed by the domestic market, while 30.2% was exported. KSA again is the main importer in the Arab region (16%) followed by the UAE (5%). The price of chicken is determined by the price of soya bean and corn and therefore it is difficult to predict the price of chicken products. On the morning of the 13th, the delegation visited the premises of FAMBRAS (Federation of Muslims Associations in Brasil) and the meat packing company Marfrig. FAMBRAS is the most important Islamic entity in Brazil and is responsible for supervision and certification of Halal for all products as per the Islamic law. FAMBRAS has initiated a “Standard Halal Brasil” project to standardise the halal process to ensure that rules are followed and there is more transparency. There is great potential for expansion for Brazilian products in the Arab world.

It is estimated that the halal market has represented approximately USD 2 trillion dollars in the last few years in the areas of food, cosmetics and other products. As production and exports increased, FAMBRAS created the Brazilian Islamic Centre for Halal foodstuff, which became responsible for application of the halal concept and the production system in Brazil. The group’s final appointment, this Friday afternoon, was a meeting with ABCC’s CEO Michel Alaby, at the organisation’s headquarters. Alaby spoke to each of the delegation members about their opinions on the visit, and asked for suggestions for eventual improvements in the future. The general assessment was positive, and the businessmen left Brazil with an optimistic outlook of turning the contacts made with suppliers into actual deals.