Brazil quickly becoming a player in the global economy

By Juan Forero
Washington Post Foreign Service
Tuesday, September 21, 2010; 3:22 AM

IN PUERTO TIROL, ARGENTINA For a glimpse of booming Brazil's international aspirations, look no further than a two-year-old high-tech denim factory here in one of Argentina's poorest provinces.

The plant's owners, the Delfino family, launched their Santana textiles business in Brazil in 1963 with a line of hammocks. Content at first to expand at home, they retooled along the way, manufacturing denim for the lucrative jeans market and opening four factories in Brazil.

Then in 2008, Santana's chief executive, Raimundo Delfino Filho, set his sights abroad, opening the plant in this town in Argentina's far north Chaco province. Now, the firm is building a larger factory in south Texas.

Santana's moves reflect an expansionary push in recent years among entrepreneurs in Brazil, which is rapidly becoming one of the more important investors in Latin America and is making its presence felt as far away as the United States, Africa and Europe.

"Santana is a company with big plans," said Delfino's nephew, Igor Perdigao, 28, who speaks three languages and runs the factory here in Puerto Tirol. "With our four plants in Brazil, the plant in Argentina and the investment in Texas, our idea is to be the leader in the denim jean market in the Americas in 10 years."

Perdigao attributed the firm's success in part to the confidence inspired in Brazilian entrepreneurs by President Luiz Inacio Lula da Silva's government, which in the past eight years oversaw an expansion that gave Brazil the world's eighth-largest economy. On Oct. 3, a presidential election will be held, and opinion polls show that Lula's handpicked candidate, Dilma Rousseff, is expected to win.

In the early part of the past decade, Brazil's foreign investments averaged $700 million annually, said Luis Alfonso Lima, president of the Brazilian Center for the Study of Transnational Companies and Globalization in Sao Paulo. Then, from 2004 to 2008, Brazilian investment abroad shot up to $14 billion a year on average, Lima said, and is on track to surpass $20 billion this year.

"Brazil wants to be a world player," said Bernardo Kosacoff, a former U.N. economist who heads a Buenos Aires think tank. "And today, to be a world player you need a strategy of internationalization, in addition to having a potent domestic market."

Although Brazil's foreign investments remain a fraction of what U.S. companies post abroad, Brazil is challenging the United States in some of the bigger Latin American economies, such as Venezuela, Chile and Argentina. And it is solidifying itself as a leader in other nations, such as Angola, which like Brazil had been a Portuguese colony.

In 2008, U.S. companies had 25 times as much global investment as Brazil. But with nearly $130 billion invested abroad, Brazil was ahead of other countries with large, robust economies and international pretensions, among them India and South Korea.

The companies making big investments include Petrobras, the Brazilian oil behemoth that operates in nearly 20 countries, and airline manufacturer Embraer, which is assembling aircraft in China. Vale, a huge mining company, operates throughout Latin America, and construction giant Odebrecht has big projects across Africa. Gerdau, a Sao Paulo-based steelmaker, buys and revamps outdated plants as far away as the United States and Spain.

Federico Trujillo, director of the Argentine-Brazilian Chamber of Commerce in Buenos Aires, said Brazilian companies were once considered plodding and inefficient. Trujillo, a lawyer who works with transnational companies, said those companies slowly evolved as Brazil's economy stabilized, credit became readily available and the country's managerial class professionalized.

"Nowadays, Brazilian companies are considered like companies anywhere in the world, even with advantages," Trujillo said. Among those advantages are access to easy credit from Brazil's development bank and the growing value of the nation's currency (the real), which benefits Brazilians who invest abroad.

Perhaps the strongest sector for Brazil's investments and clout is food. In 2007, JBS Friboi bought Swift, the U.S. beef and pork processor then based in Greeley, Colo., for $1.4 billion. With other investments in Argentina, Britain, Egypt, Russia and Chile, Friboi controls 50 percent of the world's meat processing, according to a report by the U.N.'s Economic Commission on Latin America and the Caribbean.

"Brazil is the biggest meat producer; it has the biggest meat processors in the world, which it bought in Argentina and all over the world," Trujillo said. "No one could have predicted this 15 years ago."

Brazil's strength in the agro sector is particularly noticeable in Argentina, and it is not just in meat processing. Brazilian companies have invested heavily in the high-tech aspects of the food industry, such as biotechnology and software used by agro-businesses.

Brazil's share of foreign investments in Argentina increased from 9 percent in 2003 to 25 percent as of 2007, said Dante Sica, director of ABECEB, a Buenos Aires consultant that helps Brazilian companies invest here. "The Brazilians aren't here on a shopping spree, just looking to buy cheap," he said. "They are looking for platforms, to produce in Argentina and sell in Brazil."

Perdigao said Santana, the textile maker, certainly saw Chaco as a platform. The state government provided incentives, and Argentine President Cristina Fernandez de Kirchner attended the inauguration of the plant in May 2008.

The Santana board, which includes Perdigao's mother, Veronica Maria Rocha, the board vice president, was particularly drawn to Chaco's geography. "It's close to many countries: Chile, Bolivia, Paraguay, Uruguay and Brazil," Perdigao said. "We see it as a big platform for exporting to those countries."

The company has invested $40 million in Chaco and expects to spend an additional $30 million before beginning to export its fabric in 2012. The biggest investments Santana is planning, though, are in Edinburg, Tex., not far from Mexico.

While the factory in Chaco has more than 300 workers, the Texas plant will have 800, and Santana plans to spend $180 million. It is not lost on Perdigao that U.S. textile plants have, in recent decades, closed in droves, only to reopen in developing countries where wages are lower.

"We're going against the current in the United States, I know," he said. "We have to go to the United States of America because it's the biggest market."

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