TRADING  OVERSEAS

www.tradingoverseas.com

 

Bimesterly Issue – Year I – Number 2 – May/June 2004

 

Page 1

 

Caramuru, each and every grain

 

A warehouse that manufactures and sells grains in bulk was inaugurated on Caramuru Street, Maringa (North of the state of Parana) on the 12^th of March, 1964. Múcio de Souza Resende, born in Santa Juliana, a small city in Triangulo Mineiro (in the state of Minas Gerais), created this business. He unintentionally started one more Brazilian entrepreneurship, based on the mind and courage of a negotiator whose intuition guided his actions.

Forty years later, one demand reinforced the group operations: the import of 10 locomotives and 300 railway wagons, which cost US$10 million, used to transport grains harvested in Central Brazil and export them through Santos Harbor, in Sao Paulo seaside. Five locomotives and 100 wagons have already ridden Ferronorte railroad. Initially, the cargo is shipped through the Paranaíba River’s ravines, connected to the hidrovia Parana-Tiete. A result of that small warehouse in Maringa is an enormous unit of Caramuru Group in the city of Sao Simao (Goias).

Mucio’s sons, Cesar and Alberto, run the group whose income increases every year: R$1.2 billion in 2002, R $1.5 billion in 2003, and expected R$2 billion this year. Caramuru Group is the largest national soy bean processor, with a capacity of 1.2 million tons. As a corn processor, it produces nearly 450 thousand tons a year. In the commercialization of soy beans (still considering companies of national capital), Maggi Group – run by the present governor of Mato Grosso, Blairo Maggi - is the only company that overcomes this number. Moreover, Caramuru Group is the only sunflower oil processor in the country. The sunflower is planted in the intercrop of soy: “We ourselves stimulate the agricultures to take advantage of the area and time unused”, the vice-president of the management council, Cesar, informs.

As any person born in Minas Gerais, 57-year-old Cesar expresses his pried and optimism in a discreet manner: “We are aware we must always be ahead and cautious, in order to avoid retrocession. We exported US$ 180 million last year and we expect to be close to US$ 300 million this year”.

The group’s largest boom occurred with the inauguration of the industrial unit in Itumbiara (Goias), when they began to buy crops to process and export from Central Brazil. The amount of money required to construct this unit came from another export, corn bran, which Europe used to buy without restrictions in the 60’s. “That was a great business of ours that helped us a lot. We went ahead”, Cesar states. Cesar was born in Uberlandia, raised in Maringa, and he majored in Accounting in Sao Paulo.

           

(to be continued at page 3)

 

Page 3

 

The investments made in the processing of soy oil were another step towards new perspectives to the group. At present, its export portfolio includes more than 90% of soy, grain and bran. Europe is the main buyer of soy while South-America is the main importer of corn flour (ground corn, pre-cooked corn flour and corn bran).

            Lecithin and canola participate in two interesting stories and outstand in the Caramuru group’s business. Canola seed (canola is a yellow-flowered plant almost as beautiful as sunflower) is imported from Canada and distributed to Central Brazil farmers with the group’s support, so as to obtain a quite valued grain in the production of edible oil. “We even finance the farmers, also providing all due technical support, because this grain is higher priced if compared to others. We highly bet on canola”, Cesar explains.

            Lecithin is a soy sub-product and corresponds to 0.6% of the grain. It is very used in the production of bread, ice cream, cookies and chocolate. “Lecithin has its commercialization guaranteed: the whole production is sold beforehand”, Cesar affirms. "However, our first attempt did not work because we entered the market at the wrong moment and failed. The buyers anticipate their purchases and they buy for the whole year", he explained.

            The market is not steady but always in evolution. The plastic bottle packaging, for instance, is under deep improvement. It substitutes the can, presently cut out for flavored edible oils (with fine herbs, garlic, onion, etc), especially in foreign countries. Caramuru Group follows this same path: "research, reading, frequent attendance to nourishment fairs, in short, information. That is what we need to continue in the competition", Cesar guarantees.

            The experiences do not work many times. The group itself realized it had a full turn before coming to the Sinha brand (this brand embraces the entire line of products), bought from a bakery in the state of Espirito Santo. "We tried Caramuru and it was not a hit, then we tried Inca and neither was it a hit. Sinha fit our objectives", Cesar says.

            That is the appropriate moment to have the support of a third person, an expert in the market, who knows the commercial characteristics of other countries. "That is why we hired Westchester International: to guide us into the North-American market, our next step, which we little know about. We are on our way there, working with the support of Westchester", Cesar announces.

            The production of biotech-free goods distinguishes the company, which launched the first and only transgenic-free soy oil in the Brazilian market, another characteristic of Sinhá products, the businessman guarantees. Caramuru Group hired SGS to make the analysis and Genetic ID to auditor this analysis, in order to let the consumers secure. Cesar explains the group completely tracks the process, from planting to refining.

            "That's very important", he says. "We can assure our clients there is no genetically modified raw-material in our products as we control the entire process, from planting to industrializing. We perfectly know that any product eliminates the transgenic part after the first industrial process (even before refining), then, we need to control the whole process".

  Today Caramuru Group has 2.2 thousand employees, spread through the states of Goias, Parana, Pernambuco, Ceara, and Sao Paulo. In Itumbiara, Sao Simao, Apucarana, Petrolina and Fortaleza, 230 thousand tons of corn and soy oils are refined; and soon, canola oil. The group's office is in Sao Paulo's capital.

 

Page 2 (left column)

Real Case

Gaps in exporting

 

            A decorative panel company that has always dreamed of exporting has the opportunity to expand its business to the international market through a client in the United States (US). The company begins to urgently export over the Easy Export, provided by the Brazilian Postal Service, which offers solutions to those who wish to export up to US$ 10 thousand in goods, and it is normally used to send samples and low priced products as it limits cargo per shipment to only 5 kg.

            After some shipments, Easy Export could not provide all the support needed, due to the larger demand in the US, which increased the exports. The company feels it is necessary to monitor its operations, as well as its operational control, management stock and sales. Moreover, the transit-time – from setting the cargo until delivering – was long.

            In order not to lose its share in the market, the company had to stock in the US and contract an international consulting, which began to manage its operations through operational, financial and management reports. Companies that intend to enter the international market must select their target market over marketing analysis and research.

For any further information, contact us at TRADING OVERSEAS:  Av. 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

Responsible Director: Aloysio Vasconcellos

Design Graphic: Renato Pereira, Rio de Janeiro.

Print service: ADOIS Grafica e Editora, Rio de Janeiro.

 

Page 2 (right column)

 

Brazilian opportunities in the American market

 

 

Brazil continues to show signs of its strength in the United States (US). A recent research states that Brazilian citizens who live in the US have sent US$5.2 billion to Brazil in 2003. This reassures that Latin-American immigrants maintain the highest level of commitment to their families, left behind in this Herculean effort of surviving in a foreign country.

Mexico is on top of this list, sending US$ 13.266 billion home. However, if the Brazilian population (1.7 million people, approximately) is compared to the 23 million Mexicans in the US, the volume of Brazilian remittance per capita is quite higher.

The service market to – “this Brazil in the US” – is still incipient and deserves full attention from Brazilian businesspeople. In response to this stimulation, some investments are already on the way. Recently, the opening of an English Course under the flag of Wizard Group, an all-you-can-eat barbecue restaurant that belongs to a Brazilian grill room  going international (Montana Grill Group, which has well known singers Chitaozinho and Xororo as partners) and a real state system of credit to sell real property in Brazil have been announced in Florida by Group Verdi, from Sao Paulo.

 

 

The enlargement of the European Union

By Robert Walton*

 

The European Union (EU) became the world’s largest single market after the joining of ten new countries on the 1^st of May. The EU’s surface area increased 34% and its population embraces 105 million more people.   The ten new countries are: Cyprus (South part), Czech Republic, Estonia, Latvia, Lithuania, Malta, Poland, Hungary, Slovakia, and Slovenia. This enlargement creates a unique common market with almost 500 million people.

The new countries have not adopted euro as their currency even though many of them intend to, as soon as their economies satisfy the rigid criteria the former members of the EU stipulated. Among the advantages enjoyed after the integration lies the possibility of wider access to Western Europe as well as to the enormous consuming capacity of its citizens. Moreover, new technologies and foreign investments will be injected into the new countries due to cheaper skilled labor. Alongside, the EU will provide 21,75 billion euros between 2004 and 2006 to assist and support them on the first stages of this new phase in their social and economic lives.

Businesspeople must realize that the new members of the EU now receive the same treatment the other members do in relation to the flow of goods. Companies in or outside the EU will benefit from a wide union. A gathering of commercial rules, management procedures and tariffs will spread throughout the whole United European market. Such legal and economic reality will quite simplify the transactions  and circulation of goods within Europe. A natural loosening of customs and border control will certainly be noted, thus making easier the flow of goods between countries. The result will certainly be a reduction in the transportation costs. In the present system, it is not uncommon to wait up to 24 hours to unload a truck on the borders of the EU and the new countries. Export business to the new countries will find better tariff conditions, since these countries used to charge their common external tariff above the 3.6% in average, practiced by the European Union.

 

Page 4

Opinion

 

FTAA: “I believe a decision will be made by November”

Interview with Cristobal Orozco*

 

 

How do you see the Free Trade Area of the Americas (FTAA) issue at the moment?

Since the last ten years, this subject has been under permanent talks between Brazil and the United States. First, we must admit that both Brazil and the United States are protectionist countries. I am no longer the American ambassador in this country, thus, I can speak with absolute impartiality.

 

What are the major issues faced?

            The lobby of agriculture and steel is rather powerful in the United States. These are both sectors, for instance, where Brazil is strongly competitive. It is possible that President Bush do not want to lose any political support in this election year in the United States. Throughout his mandate, 3 million jobs have disappeared. Intellectual property rights, services, governmental purchases and investments are also issues that raise intense debate.

 

According to records, the resistance towards an agreement does not only come from governments or corporate representatives. Is that correct?

It is correct. Non-governmental organizations in the United States - many of them of Hispanic background - are against agreements at the FTAA because they fear even greater job losses.  Today North-American enterprises have their call-centers in foreign countries. India is one of these countries, where they teach English with regional accents to facilitate the attendants’ services. Another NGO’s complaint is the “job export”, a hedge for large companies in relation to wage costs.

 

Does the gap between costs and markets in Brazil and the United States cause difficulties towards an agreement?

It surely causes difficulties. However, former President Fernando Henrique Cardoso started to shorten this distance. The inflation rate has decreased and the Real has promoted a significant increase in the purchasing power. Besides, he has created the Regulatory Agencies, which are of main importance to strengthen the market. These institutions, however, must become stronger so as to defend the population’s interests. Obviously, the macroeconomic numbers need to improve even more, expanding the middle class and diminishing poverty. Such trade agreement is able to provide this development.

 

Could some Brazilian regions, considering some economic characteristics, be damaged from a trade agreement such as FTAA agreement?

            That is also correct, although this situation already exists before the agreement. In Mexico, the Northern area of the country developed while the Southern did not. That is where Chiapas is. However, Mexico used to export US$ 20 billion before NAFTA (North American Free Trade Agreement), which turned into US$ 200 billion afterwards. It is necessary to have in mind that an agreement implies exchanges. If Paraguay is able to produce cheaper goods compared to Brazilian, there is no reason to produce them here. In this case, however, it is important to observe what will happen in the Triple Border since there would be no place for smuggling.

 

Why does the United States wish to discuss the agricultural issue at the World Trade Organization (WTO) and not at FTAA?

It would be harmful for the United States, considering its relation to the European Union and Japan, to discuss these issues at FTAA. For the same reason, the US cannot grant the same advantages in the agricultural sector,  to Central-American and the Caribbean countries, that will extend to  Brazil.

 

Have we reached an everlasting impasse?

            No, I suppose we will reach an agreement that may not be wide. It may be through a group of countries or some specific products. The Brazilian industry sector complains about how stagnant the negotiations are as a result of the government intransigence towards agriculture. If on one hand Brazilians are to solve this internal conflict, on the other, they judge some initiatives as pressure. The United States has tried to force the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD) not to lend money to countries against the Iraq war. Meanwhile, Brazil deepens the negotiations with the European Union, where the trades are slightly higher in comparison to the US, however, equally significant. The US also negotiates with Central-America and the Caribbean, and so on.

 

Can an agreement allow foreign intervention into a country’s legislations?

            This issue needs to be well conducted. Mexico had to indemnify a Canadian enterprise as a result of the legislation change. Olivio Dutra changed some rules when he was the governor of Rio Grande do Sul and lost Ford’s investment. The investment remained in Brazil; however, it could have left the country.

 

Will the existing commercial relations suffer any alterations if Brazil and the US do not reach an agreement?

            I believe the businesspeople and the negotiators will not stop trading if the governments do not get along. The commercial trade relation is far beyond that.

 

 

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