Brazil Hopes to Sell Cargo Jet to Sweden

(Reuters) – Brazil is hoping to sell its upcoming KC-390 military cargo plane to Sweden as part of a $4.5 billion deal to buy 36 Gripen fighter jets made by Swedish company Saab AB.

The Brazilian Air Force said on Thursday that offsets in the Saab offer included the intention of the Swedish government to buy KC-390s, adding to signs of interest in the new cargo jet beyond Brazil’s traditional Latin American market.

The KC-390 under development by Brazilian planemaker Embraer is meant to be a cheaper, more efficient challenger for Lockheed Martin’s C130J Super Hercules.

Embraer’s new jet is set for its first flight by the end of the year and has received early commitments for orders from Brazil, Argentina, Colombia and Chile. In Europe, Portugal and the Czech Republic are also involved in the KC-390 project as industrial partners and eventual clients.

So far, 60 of the new cargo jets have been requested. Embraer sees a market for more than 700 planes in the segment worth more than $50 billion over the next 10 years. Read the whole story here.

 

Brazil’s Economy Better than Expected

The Wall Street Journal – Brazil’s economy accelerated in the fourth quarter of the year but growth remains fickle as key parts of the economy continue to sputter.

The growth suggests Latin America’s largest economy was in better shape than had been expected, after preliminary data from the Central Bank of Brazil had indicated that the economy may have flirted with a recession in the second half of the year.

Although the economy continues to underperform, signs of expansion may ease some of the gloominess that have made bankers and economists increasingly negative about the prospects for 2014.

“I think this result will halt the downward revisions to forecasts for the Brazilian economy this year by economists,” said Flavio Serrano, an economist at BES Investimento in São Paulo. Investments increased during the quarter, whereas many economists had expected a decline, while industry had been expected to contract further, he said.

In annualized terms, the economy grew 2.75% in the fourth quarter, according to Mr. Serrano.  Read the whole story here.

 

 

The Rio Times reports that the Brazilian Federal Reserve has introduced a solution for the temporary entry of goods for the FIFA World Cup in June and the 2016 Olympics. Items entering the country needed for international sporting events such as production equipment and sporting gear will now have a simplified import admission system that will allow companies to forgo import taxes and ultimately save time.

Under the new rule, goods will go through a warehouse customs procedure and be admitted only for the duration of the specific events. This system will remain in place for future major exhibitions, fairs, and conferences.

In a statement, the Receita Federal (Brazil’s Internal Revenue Service) explained that the change was possible because the government agency considered the locations of the international events as temporary customs precincts. Importation to Brazil is widely considered expensive, partly due to taxes and fees along with the length of time it takes, which on average, currently takes approximately thirteen days to reach customs.

Read the story here.

 

 

The EU is Brazil’s biggest trade partner – ahead of even China and the US.  Deutsche Welle reports that Brazil’s once positive trade balance with the EU has recently tumbled from a surplus of $3.3 billion (2.4 billion euros) in 2011 to a deficit of $7.1 billion in 2013. Additionally, trade volume over 2012 to 2013 sank from $37.4 billion to $33 billion.The initial conversation between Brazil’s President Dilma Rousseff, European Council President Herman Van Rompuy and European Commission President Jose Manuel Barroso apparently went well. After their first meeting on Monday, Rousseff told reporters, “For the first time, we’re close to an agreement.”

She was referring to negotiations on a shared free trade deal sought by both sides for years. But there are more than just import and export considerations at stake. Both delegations announced talks would take place about financing an internet cable to run directly between Europe and Brazil.  The Mercosur/EU free trade talks are expected to begin March 21st 
of this year.

The EU and Brazil first discussed reducing trade barriers in 1999. Although Brazil has been one of the EU’s strategic partners since 2007, little more than a declaration of intent has come about – the discrepancies were too large between Brazil’s import tariffs and European agricultural subsidies.  Read the entire story here. 

 

Brazilian sugar mills make almost half the world’s sugar exports.  The Washington Post reports that sugar millers in Brazil are urging India to end a subsidy program on expectation it will cause them to lose as much as $1 billion this year as prices decline.

India, the largest sugar producer after Brazil, is offering to subsidize 4 million metric tons of exports in the next two years and granting interest-free loans to mills to help them pay debt to growers.

Sugar, which has plunged 40 percent since early 2011, may drop between 7 percent and 12 percent on average this year because of India’s aid to producers, Leao de Sousa, executive director at Brazilian sugar industry group Unica, said by telephone.

Unica is in talks with Brazil’s government to seek to build a case against the subsidies at the World Trade Organization, Sousa said after Unica posted a joint statement with Australian producers urging the end of India’s program.

“It’s a very worrisome situation because the sugar industry already faces a delicate moment in Brazil due to low sugar prices,” Sousa said. “We’re working to make the government aware of the extent of the problem.”   Read the whole story here. 

 

Brazil Curbs Spending

On Thursday, The Wall Street Journal reported that Brazil plans to curb spending in order to regain confidence of the markets, avoid a credit-rating cut and help the central bank fight inflation.

The government will freeze 44 billion Brazilian reais (US$17.9 billion) already budgeted for spending this year, Finance Minister Guido Mantega said. The government also plans to use a primary surplus of 99 billion reais to pay down the public debt.

The announcement was closely watched by analysts looking for signs of fiscal discipline after two consecutive years in which the government had to resort to accounting maneuvers to meet its targets.  Read the whole story here.

Growing Warehouses attract Investors

Bloomberg reports that a surge in online shopping is straining Brazil’s warehouse capacity, spurring the push for wider distribution networks.  Companies like Arezzo Industria & Comercio SA, Walmart.com,  and B2W Cia Digital are expanding their warehouse capacities.  This has caused foreign investors to be interested in the market.  Prologis, based in San Francisco, joined Brazil’s Cyrela Commercial Properties SA in building warehouses to lease to Walmart.com and others. Singapore’s Global Logistic Properties is increasing the size of its existing distribution centers by almost 100 percent, and Australia’s Goodman Group is adding four sites in Rio de Janeiro and Sao Paulo.

“Five years ago, we started with one distribution center here in Barueri, and realized we needed to expand,” Flavio Dias, president of Wal Mart Store Inc.’s Brazilian online sales, said in a telephone interview. “Given the size of Brazil, distribution needs to be more regionalized than centralized.”

Due to the rising middle class, Brazilians consumers are migrating to the internet as computers reach more households.  According to Forrester Research Inc., online revenue is set to grow 20 percent this year to 34.7 billion reais ($15.3 billion).

International Fashion Chains arrive in Brazil

Despite the challenges, Business of Fashion reports that popular North American fashion companies like Topshop, Gap and Forever 21 have set their sights on the Brazilian fashion market. Since 2012, Topshop has opened three additional stores in the country and plans to open two to three new stores each year for the foreseeable future. Forever 21 will open its first store at Morumbi Shopping in São Paulo this month and plans to expand to open six total stores in Brazil in 2014, while Gap, which first arrived in Brazil in September 2013, promises three more stores for the first semester of 2014. According to market sources, H&M is also thought to be eyeing a Brazil launch in 2014.

These new players will face competition from firms already rooted in the Brazilian market, including C&A, the first international apparel chain to arrive in Brazil. since 1976, its 260 stores have become the largest fashion retailer in the country.

“We know Brazilian women very deeply. Their preferences, tastes, necessities and shopping habits are in our DNA. It’s an expertise we gained with time and lots of research,” said Paulo Correa, vice president of sales at C&A Brazil.

The market is also populated with indigenous low-cost apparel giants like Lojas Riachuelo, Lojas Renner and Lojas Marisa. “We have 212 stores in Brazil,” Flavio Rocha, president of Riachuelo, the largest apparel retailer in Brazil, told BoF. “Last year, we opened 43 new stores, a record for us and we will double our number of stores in four years,” he added. Riachuelo produces most of its many collections in Brazil and is involved in every step of the supply chain, from design to logistics, production and distribution.

“We are prepared to fight a good fight with international competitors. Being local plays in our favour. The global players will have to face several challenges,” Rocha said. “First, there is the hemisphere difference. São Paulo is usually the first store in the Southern Hemisphere for those brands and this generates a serious problem with seasonality. They have the need to create a different collection for very few stores to sell with no scale.”

But despite strong local competition, international apparel players have still been well received. We found a niche that was still unexplored in the local market. Our clients feel finally someone is offering this edgier styles they can find when they travel,”said Daniela Valadão, brand manager for Topshop in Brazil.

 

AAK Invests in Brazil

AarhusKarlshamn (AAK) is one of the world’s leading producers of high value-added speciality vegetable oils and fats solutions. These oils and fats solutions are characterized by a high level of technological content and innovation. AAK`s solutions are used as substitute for butter-fat and cocoa butter, trans-free and low saturated solutions but also addressing other needs of our customers.

Businesswire reports that AAK will initiate construction of a new speciality and semi-speciality edible oils factory in Jundiai, São Paulo, Brazil.

“There is a large potential for AAK in the Brazilian market. It is the world´s 7th largest economy and a number of our global customers already have significant presence. Currently AAK has a well established Chocolate & Confectionery business supplying out of our factory in Montevideo, Uruguay. However, pursuing our global growth strategy, AAK needs to be present with production capability also in Brazil. This new factory is an integral part of AAKtion, and adds presence in a growth market which is identified as strategically important”, says Arne Frank, President and CEO, AAK Group.

The investment is expected to be approximately SEK 400 million over a two-year period. The start-up of the new factory is planned for the latter part of 2015 and fully utilized it will increase AAK´s total capacity by 100,000 to 120,000 MT.

EMBRAER GETS PURCHASE ORDER FROM INDIA

Brazil’s Embraer has received a a purchase order from Air Costa, a startup airline in India, for 50 E-Jet E2 passenger planes in a contract valued at $2.94 billion.  Air Costa also has an option to order an additional 50 planes, which, if exercised, would swell the size of the potential order to $5.88 billion, Embraer said.  The order makes Air Costa the first customer for the E-Jet E2 planes in India, with the delivery of the first E190-E2 plane scheduled in 2018. The E195-E2 plane would be used commercially in 2019.