TRADING  OVERSEAS

www.tradingoverseas.com

 

Bimesterly Issue – Year I – Number 1 – March/April 2004

 

Page 1

 

The Success that Results from Work

 

 

The history of Battistella’s Conglomerate involves the professional life of Emilio Florentino Battistella, who was born in a family of Italian immigrants in the State of Rio Grande do Sul. Today Emilio is 90 years old, but has an incredibly lucid mind, as still holds the belief that success results from hard work.

After leaving a business partnership he had with his brothers in a lumber company in Tangará, State of Santa Catarina, Emilio decided to travel through the southern region with his trademark curiosity and the will to succeed. He considered that the sale of his participation in the company, which gave him monthly installments, was a type of retirement, so he felt free to research and look for new business opportunities. 

It was raining hard when he arrived in Lages, a city in the State of Santa Catarina. The roads were very muddy badly kept, which caused his car to break down, requiring services at a  garage. Such fact held Emilio in Lages for a full week, during which he found out that pasture lands in that area were much more valuable than pine covered lands. This information was enough to give him the idea to start a new business, also involving a saw-mill. This took place in 1949.

His first concern was something which today is very common: logistics – although at that time this word was not pronounced by anyone.

Thus, he bought some trucks that would take two days (five hours today) to transport 10 tons of cargo to Itajaí seaport. He associated with a navigation company which owned three ships, and made a deal with this company that granted him the right to 50% of the total load of the ships. Therefore he guaranteed regular transport of his lumber products from that seaport in Santa Catarina, to the three major trade centers in Brazil: Sao Paulo, by means of the Santos seaport, Rio de Janeiro and Recife.

Soon after the Brazilian government began the construction of the new federal capital – Brasilia. He heard that the contractors were considering transporting lumber from the State of Paraná to the construction site in the middle of the country by Air Force aircrafts. Emilio thought that the idea was absurd, and presented a proposal to the contractors: he would deliver the lumber by trucks, on a daily basis. He only needed to know when they wanted to start receiving the lumber. They said they needed the wood  within 30 days. A week and a half before the deadline, Emilio started an unusual expedition. He sent about 20 to 50 trucks every day, involving fantastic logistics. Each truck took 9 days to cover the distance. When they arrived in Central Plateau, heavy machines pulled them, because there were no roads. The fifteen 20 ton trucks (Scania) that he had bought forced him to build a garage in order to fix such trucks after each trip to Brasilia. The result was that he became a Scania dealer. “Our garage was better than those that were run by traditional dealers,” proudly claims his son, Odelir, 58, President of the conglomerate and of Abimci, Brazilian Association of Processed Wood Industry. “Wood and dealerships are our largest fields of business,” says Odelir.

 

Expansion

            In a country where growth is inevitable, companies led by entrepreneurs must expand. This was how the two Battistella companies generated the Battistella Conglomerate, by expanding into several business sectors, such as consortiums, productions of mechanical parts, energy, pre-fab houses, electronic displays for engines, foreign trade, and transportation, generating two thousand jobs, and an income totaling US$ 150 million. It was considered by Valor Econômico as one of the 200 largest conglomerates within the country in 2002.

 

Exportation

            Since the 50s’ Argentina has imported wood from Battistella. Once, during a visit to the importers, Emilio was informed that they were expecting a devaluation of the peso, therefore were buying all the wood that could store in their warehouses. Their  reasoning was that when the value of the peso would fall, they would have plenty of wood in storage, and would make a much greater profit. 

(to be continued at page 3)

Page 3

            However, Emilio observed, this maneuver would also cause a suspension of orders from Brazil, because the purpose of the importers was to seek a raise in price. The Brazilian exporters sold everything they could to the Argentine importers, but not Emilio Battistella. When the orders from Brasilia were being poured into the market by means of public bidding, Emilio was the only one who could supply the demand, since he had been careful to hold and guarantee his stock.

            At once he won ten public biddings; in addition, he was able to dictate the internal price, and thus guaranteed nine more public biddings. And without further orders from Argentina, the other lumber companies were stuck in the market, without any power of negotiation.

            Ten years later, in the 60’s, the company entered the European market, exporting araucaria boards. At that time CCM, which belonged to IBDF, was the department that controlled the external sales of wood. Later on the company started to export to the United States of America, a completely different market.

            In the 70’s the Battistella Conglomerate became interested in participating in the National Plan for Cellulose and Paper, which could count with the financial support of BNDES, and so entered into a partnership with a Swedish group. One of the requirements for the feasibility of this business endeavor, was that the company would have to have its own supply of raw materials. Emilio Battistella went to Sweden to find out more about the business partner. In Sweden he found out that there it would take two years for a tree seedling to be ready to be planted, and one hundred years for the same tree to be ready to be cut down. On the other hand, he also knew that in Brazil such a seedling would be ready to be planted within 4 months, and that it would take it only 20 years to be ready to be cut. Therefore, the best business was to develop such trees here in Brazil through a foresting project.

            However, Emilio gave up this project, due to problems caused by the Union of Swedish lumber workers, who were concerned that such an investment in Brazil would cause the reduction of employment in Sweden.

            At that moment the president of the conglomerate, Odelir Battistella, noticed that “business with wood demanded considerable changes. At that time another type of pine wood became an option, but demanded more processing than araucaria. While the latter costs US$500 per cubic meter, pine would vary from US$100 to US$200. We also felt another difference at that point - North Americans do not like to get involved in business operations involving great distances. They want the merchandise readily available in their stores, that’s all.”

            That was when Westchester entered into scene. Our business relations started on a study on the possibilities involved in the North American market, and Battistella’s capacity and interest in such. “In the beginning we thought of creating an office in the United States of America, in order to reduce the distance between the seller and the buyer. Moreover, the exporter must follow up the entire process, from departure to arrival in the US, including documentation, and so on,” says Odelir Battistella.

            “We made and remade the calculations and concluded that although such procedures were very important, the cost related to benefit wasn’t justifiable. The investment would be too great”, he says.

            This situation exemplifies the support that may be offered by Westchester. Due to its structure, Westchester practically becomes a branch of the client in the United States of America. Westchester gets involved in the entire process, from shipment in Brazil to delivery of the merchandise at the stores of the importer. One of the four storage warehouses managed by Westchester within the United States of America is currently storing Battistella’s products. Every week the exporter here in Brazil receives a very detailed report on the stock and the sales abroad. “Our concern is to sell wood. We know how to do it. The rest of the process involved is Westchester’s responsibility,” states Battistella. “We don’t have to worry about the fact that we use metric here and they use inches there. This is the main advantage; we don’t have to worry about each stage of sales, such as legal, juridical and financial procedures.”

            The lumber area represents the major sector in Battistella Conglomerate businesses, followed by the Scania dealership, car sales, vehicles consortium, and real state property, as well as other segments. Concerning sales, exportation represents 60% of the revenues, sub-divided into 70% to Europe, and 30% to the United States of America, over the past three years with Westchester.

 

BATTISTELLA CONGLOMERATE
Logo	Battistella Adminitracao e Participacoes S/A – APABA
	Battistella Industria e Comercio Ltda
	Modo Battistella Reflorestamento S/A - MOBASA
	Florestal Battistella S/A – FOBASA
	Battistella Trading S/A – International Commerce
	Itapoa Terminais Portuarios S/A
	Cotrasa Comercio Transportes e Veiculos Ltda
	Ediba Eletro Diesel Battistella Ltda
	Battistella Administradora de Consorcios SC Ltda
	Abadir Distribuidora e Importadora de Rolamentos e Pecas Ltda.
	Maquigeral  Industria e Comercio Ltda.

 

 

Page 2

A True Story

(left column)

 

Inexperience resulting in losses.

 

            A company here in Brazil defined as its strategy that it would enter the North American market. With little experience in foreign trade, it activated a logistics operator.

            The target market was the south of Florida and the company has already negotiated the sales and merchandise delivery dates with the client.

            The contracted operator, who also lacked experience, failed in the middle of the operation, and shipped the merchandise to New York by mistake. Then they decided to transport the merchandise to Florida by truck, which would further delay the process. Moreover, the products hadn’t yet been duly regulated at the Federal Drug Administration (FDA).

            At this point Westchester was called to control the operation. One of our agents took the load to a Westchester warehouse and accelerated the liberation process at the FDA. He also had the merchandise repacked according to North America market regulations, and finally delivered the merchandise to the client within the deadline.

Questions and contact with TRADING OVERSEAS:  Avenida das Americas, 3333 suite 1216, Rio de Janeiro, RJ 22631-003 Brazil  Phone +55(21)2431-1165 Fax +55 (21) 2432-8358

e-mail: editors@tradingoverseas.com

Trading Overseas is a publication from WESTCHESTER INTERNATIONAL – USA

Director Responsible: Aloysio Vasconcellos

Design Graphic: Renato Pereira

Print service: Print Paper

 

 

Page 2 (right column)

United States

Brazilian Market in the USA.

 

            There’s growing interest by businessmen in the market represented by Brazilians living in the United States, which today is a population that generates US$ 34 billion/year, an amount which is equivalent to the Internal Gross Product of the State of Paraná. All sectors of the economy have found areas for expansion within this millionaire market, which is eager for Brazilian products.

            It has been hard to evaluate the real size of such market, especially because most Brazilians living in the US do so illegally. And since they do not consider themselves Hispanic, they are left out of the census (the last census took place in 2001). It is estimated that this market consists of 1.8 million people, and that out of this number, 60% are fixed residents. The other 40% moves around the country constantly, searching for seasonal labor opportunities. The average annual income is US$24 thousand dollars.

            The population is distributed specially in the areas around New York, New Jersey, Massachusetts, South Florida and California. There are smaller concentrations of Brazilians in Texas and in Georgia.

 

European Union

New Rules for VAT Invoicing

By Robert Walton*

 

            It is extremely important that anyone exporting to Europe understands well the VAT system (Value Added Tax), implemented by the European Union, which establishes that each entity which is part of a production chain subtract the product/service sales tax and deduct the pertaining tax in the received supplies. 

            In the past, the recovery of the VAT required the interested parties, usually traders, to get involved with different rules in each country in the European Union, pertaining to the details to be included in the invoicing. However, as of January 1^st of the current year, traders and other interested parties must observe only one set of rules in relation to the invoicing preparation. Such legislation has met the expectations of the market, and shall certainly facilitate the handling of documentation, thus reducing administrative costs.

            The new regulations number a list of items that must be included in all invoices: issuance date, invoice number, name and address of seller and buyer, description of merchandise or services, applicable VAT tax, and amount due related to VAT.

            Additionally, the new rules allow trades some freedom in terms of choice of place and method to file such invoices. Such rules apply to all cases in which the issuance of invoice is compulsory for the purpose of VAT, including sellers operating in the same country or countries, as well as export operations outside the European Union. Such rules do not apply to imports originating from outside the European Union, since such imports are ruled by the traditional customs regulations.

 

Elections

(box)

 

            We are all concerned about the position of the Bush Administration, with its constant obsession of permanent war against terrorism; nevertheless, the position of John Kerry, Bush’s opponent, should also make us concerned, due to the fact that he is trying to attract voters by signaling with some limited but profound reforms which would affect us. On the one hand Kerry denounces the economical-administrative excesses of the current administration; on the other, however, he is not clear on how he plans to manage, if elected, a war that is becoming more and more expensive, violent and bloody.

            In the commercial arena Kerry is also a matter of concern. Perhaps in order to justify the support that he has received from the main North American Labor Unions, he has made statements against outsourcing practices, specially those carried out in India and in other Asian countries, but also including favorite clients in Ireland and some other western countries.

            Emerging nations that see outsourcing as an intelligent form of rendering services and reducing some of their internal problems, such as unemployment, are somehow disturbed with the statements made by Kerry, when he says that, if elected, he will encourage, even with subsidies, the maintenance of employment in the USA, which is now exported by outsourcing – meaning the search and use of labor in other countries, often specialized, to perform services which effects are produced in the contracting country.

 

 

Page 4

Opinion

Westchester and the Management of Exportation

 

Westchester International was created on 1989 to fulfill a role that had not been filled by anyone, in the trade relationships between Brazil and the United States of America. It is a company of management of exportation operations, that is, it functions as an international department for companies which export products from Brazil to foreign countries. Its main shareholder is the businessman and lawyer Aloysio Vasconcellos, 59, who left his position at Citibank in New York 15 years ago in order to dedicate to this professional activity.

Westchester in not only a consulting company. “We are the international department of any exporter, whether medium or small, that may have the interest to export to the United States and that needs do create a structure to carry out such export operation,” explains Aloysio.

The innovative aspect of this operation pertains to the degree of involvement of Westchester in the external sales operation. “First of all, we carry out a study to verify the economic feasibility of the operation. It consists of a practical and objective research in order to find out if the product has a chance to make it into a foreign market”, says the president of Westchester.

This study involves the quality and price of the product, as well as which market (regional, for example) it can penetrate. It also involves the transportation, storage and distribution logistics, as well as the financial aspects (credit, financing, banking discounts), as the commercial aspects (choice of distributors who shall sell the product to the final importer), and juridical and taxation aspects, for the American legislation is quite demanding and complex.

“It also means”, says Aloysio, “that the Brazilian exporter becomes a true player in the North American market. If the exporter is interested, Westchester becomes his company in the United States, offering its entire structure in order to operate in that country. In addition, we offer the client a weekly managerial report pertaining to the entire operation, from shipping in Brazil, to the sale of products in the US”. In other words, the Brazilian exporter has full and direct control of the distribution channels, besides operating with lower financial costs, constant credit flow, independent from the financial climate pertaining to the relations between Brazil and the USA, and, in addition, away from the high interest rates applicable in Brazil.

Today, for instance, Westchester manages four distribution centers of Brazilian products stored in North American territory. “We do not have competitors,” guarantees Aloysio, “because we are the only ones offering a door-to-door operation which involves all the stages in the export operation. And all these services are offered at a very reasonable cost. We charge per hour worked. In average, Total/annual costs, including all the services offered by Westchester, are no more than the equivalent of 2% of the total value of the export operation by the company”, he affirms; trading companies, instead, cost from 4 to 10%.

Another difference offered by Westchester, mentions Aloysio: “With us the exporter becomes a salesperson, instead of a being “bought” (like when working with a trading)”.

Some experiences have shown the importance of a support such as the one provided by Westchester. In case a certain product presents some sort of defect, and result in its refusal by the importer, such product may be negotiated in the secondary market, by means of a reasonable discount by the exporter. Without the support of a structure such as the one provided by Westchester, the Brazilian exporter is forced to make great concessions to a middleman in the US in order to avoid total loss. “As we negotiate directly in the secondary market on behalf of our client, the exporter has the opportunity to make a new delivery of merchandise free from the initial defect, thus avoiding additional financial losses, and also being able to maintain the commercial relationship”, says Aloysio.

Plans for 2004 include the opening of an European office to follow up clients who wish to direct their sales to that continent, come up with creative credit options for export operations, and initiate a process to provide North American middle and small exporters the same structure to export their products to Brazil.

“We maintain a policy of transparency,” guarantees Aloysio; “We work with only one company in each sector in order to avoid conflict of interests.” 

 

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