Small businesses account for 40 pct of jobs created in Brazil

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Small businesses were responsible for some 40 percent of the 15 million new jobs created in Brazil between 2001 and 2011, with 95 percent of the firms in full compliance with all labor laws, a government report said.

The report, “Voices of the New Middle Class,” was prepared by the Institute of Applied Economic Research, or IPEA, an agency of the Office of the President.

Small businesses account for 39 percent of the wages paid in Brazil, an example of their “extraordinary strength,” the report said.

Small businesses have helped reduce poverty in Brazil, a country where nearly 40 million people have been pulled out of poverty in the past 12 years, Marcelo Neri, head of the Strategic Affairs Secretariat and IPEA, said.

The phenomenon continued in 2012, when “35 percent of people climbed the social ladder, while just 14 percent fell,” despite the country’s sluggish 0.90 percent economic growth rate, Neri said.

Brazil had about 6 million micro and small enterprises at the end of last year, official figures show.

The government defines a micro enterprise in the industrial sector as a firm that has up to 19 employees, while small enterprises are those that employ between 20 and 99 workers.

In the retail and service sectors, micro enterprises are those with up to nine employees, while small enterprises are defined as those employing between nine and 49 people.

Source: Global Post

Nike’s massive opportunities in China and Brazil

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The athletic footwear company seems poised to see continued margin expansion and the return of profitability. 

The tide may have turned for Nike. The athletic footwear company seems poised to see continued margin expansion and the return of profitability in China over the next year.

Emboldened by recent success, management appears confident in the strength of its brand and its capacity to raise prices. Nike also has a double whammy of an opportunity in Brazil, with the coming World Cup in 2014 and the Olympics in 2016. The stock currently trades around $60 a share, but it could top $80 if things go their way, according to UBS ‘ equity research team.

Nike has zigzagged over the past year, its stock falling precipitously and surging dramatically on any indication that margins were set to either expand or compress. After its latest earnings report, where the company revealed margin expansion for the first time in two years, Wall Street has once again gone bullish.

In a thorough note released Monday, UBS’ Michael Binetti made the case for buying the stock, expecting solid returns over the next two years. After meeting with management, Binetti spoke of a “very optimistic top line outlook from the company over the next few years,” pointing at “a deep innovation pipeline in premium footwear.”

Nike appears better positioned than its rivals to raise prices, which have essentially remained stuck in a “deflationary environment for a decade.” Recent earnings releases reveal management has been experimenting with price increases, and these have worked, according to Binetti. “We think the company has renewed confidence in its pricing power, particularly with its pinnacle/most innovative products,” explained the analyst.

That point is key. Nike should be able to deliver approximately a 3% increase in year-over-year prices over the next few years, which should help gross margin improve. With materials and labor costs set to continue rising, Nike’s management is ready to tackle the problem head on. The company has been innovating with lower cost methods of production (they are even testing 3D printed soles) and is “investing heavily to be the first to market with lower cost sourcing options.”

At the same time, growth should return to China, where Nike has been trying to get its act together over the past several quarters. They have stopped inefficient unit growth, even closing stores, and are investing to improve distribution, IT capabilities and their factory outlet system. In their fiscal third quarter, the company revealed future orders returned to positive growth and grow margin increased. Nike is setting itself up for a return to double-digit growth in China, possibly by the end of fiscal 2014, Binetti said.

This leads to Nike’s other major opportunity: Brazil. The largest Latin American economy will host two of the world’s major sporting events over the next few years. Nike will be able to capitalize on its strength in soccer during the 2014 Fifa World Cup, and then target audiences across a variety of sports during the 2016 Olympics in Rio.

Shares in Nike have done well in 2013. The stock is up nearly 18% this year, just above Under Armor and well ahead Foot Locker, which has traded roughly flat. The company named after the Greek goddess of victory could see its earnings per share grow up to 23% in an ideal situation, taking its shares north of $80 in 12 months, according to Binetti.

Source: MSN Money

In Brazil, two crops are better than one

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Double cropping—planting two crops in a field in the same year— improves schools, helps advance public sanitation, raises median income, and creates jobs in rural Brazil.

New research focuses on the state of Mato Grosso, the epicenter of an agricultural revolution that has made Brazil one of the world’s top producers of soybeans, corn, cotton, and other staple crops.

That Brazil has become an agricultural powerhouse over the last decade or so is clear. What has been less clear is who is reaping the economic rewards of that agricultural intensification—average Brazilians or wealthy landowners and outside investors.

Results of a new study suggest double cropping is associated with development that improves well-being for average rural Brazilians.

Agricultural and economic data from the last decade, show that in municípios (counties) where double cropping is common, gross domestic product and median per capita income are both substantially higher.

Double cropping is also associated with higher quality schools and better public sanitation, says Leah VanWey, associate professor of sociology at Brown University.

“We looked at two indicators of private goods and two indicators of public goods,” she says. “Overall, we find this really nice pattern of impacts on development associated with double cropping. These benefits seem to be widespread through the population.”

Meanwhile, intensification to single-crop fields from pasture with low stocking rates was not associated with development gains, probably because double cropping is more labor intensive, which creates jobs, and more lucrative, which creates more tax revenue that can be invested in public goods. That was evidenced by a case study of two counties within Mato Grosso that was part of this new research.

“The community with the most double cropping also has a soy processing plant that employs thousands of workers as well as complementary poultry and swine raising and processing,” VanWey says. “In the long run there isn’t much money in just growing things and selling them, but processing allows the local area and workers to retain more of the per-unit cost of the final product.”

The findings are published in an issue of Philosophical Transactions of the Royal Society B that focuses on agricultural development in Brazil.

Mato Grosso has drawn much attention from scholars in recent years. It is not only the heart of Brazil’s agricultural production but also sits on the border of the nation’s cerrada (savanna) biome and the Amazon rainforest biome. Some evidence over the last decade suggests that even as agricultural production in the state has increased, deforestation in the Amazon region has slowed. For that reason, the state is seen by many as a model for agricultural development that minimizes harm to the environment.

To understand how land use is associated with economic development, VanWey teamed with John Mustard, professor of geological sciences and Stephanie Spera, Mustard’s graduate student who used imaging from NASA’s Terra satellite to track land use changes in Mato Grosso from 2000 to 2011.

Universal gains

They captured satellite images of the region every 16 days for a year, looking for peaks in the greenness of the fields followed by a rapid loss of greenness, indicating the ripening and subsequent harvesting of a crop. Two peaks in greenness in the same year is an indicator that a field is double-cropped. Images were recorded from 2000 to 2001, and again from 2010 to 2011, to see how usage had changed over the decade. Substantial increases were found in both single- and double-cropped fields.

VanWey then matched those data to local economic data and found that intensification to single-crop fields from pasture had no effect on economic variables. Double cropping, however, was associated with strong gains. For example, where double cropping was common, median income was substantially higher.

According to VanWey’s calculations, median income for citizens of Mato Grosso would be decreased from 346 Brazilian reals per month (about $190) to 144 reals without the effects of double cropping. On the other hand, if all areas double cropped, monthly income would increase to 459 reals.

“(Double cropping) increases median incomes in an entire county, not just among people working in agriculture,” VanWey says. “So I’m arguing that it’s going to have these effects on the entire economy by providing employment that’s related to the agriculture.”

The positive association with public goods such as schools was strong as well. For that analysis, VanWey looked at a 10-point quality assessment scale used by the Brazilian government. She calculated that if all areas of Mato Grosso double cropped, scores on the assessment for public schools would increase from an average of 4.2 to 5.4.

The increases in measures of both personal wealth and public goods suggest widespread economic development associated with double cropping, VanWey concludes. However she’s not yet ready to advocate for public policy steps like blanket subsidies for double cropping. More research needs to be done, to find out why double cropping thrives in some places but not others.

Funding for the research came from NASA, the National Institutes of Health, and Brown University’s Environmental Change Initiative.

Source: Futurity.org

How does UK see the Brazilian businesses?

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Cable in Brazil to promote UK firms

The Business Secretary is visiting Brazil this week to promote the UK’s aerospace industry and try to help British firms win contracts.

Vince Cable will stress the business opportunities ahead of the next World Cup and Olympics, which are both being held in Brazil.

The minister said: “Brazil is one of the fastest-growing economies in the world and I want to make sure British companies are aware of the opportunities. On my second trip to Brazil since becoming Business Secretary I will promote the UK aerospace sector, which has potential for more growth.

“It’s vital that businesses showcase our world-class capability to manufacturers in markets like Brazil so we can take advantage of new opportunities and get more jobs in the UK.

“The upcoming World Cup and Olympics in Brazil also offer around £4 billion worth of export business that British companies are best placed to win, not least because of our experience of delivering a successful London 2012.”

The Business Secretary will be accompanied by a delegation of UK businesses during the three-day visit.

Source: Express & Star

How to find good business opportunities in Brazil?

new_business_in_brazil Setting Up a New Business in Brazil

Good entrepreneurs know that great business opportunities can be found anywhere and the most ambitious will travel or innovate to get into markets that might not necessarily be local to them. With this in mind, it is no surprise that many people are looking to the small business mecca that is Brazil for their start-up ventures.

Brazil and the Small Business

The Brazilian economy has been steadily growing for the last few years and part of the reason for that is a thriving small business community. Small to medium sized enterprises make up 85% of all businesses in Brazil, which may come as a surprise to people who wholly associate Brazilian business with massive corporate industries like gas or drilling. So why are small businesses flourishing?

Low Taxes

The tax system in Brazil is complicated and you will almost definitely need to hire a local accountant to sort yourself out; that is the bad news. The good news is that the effort is worth it because, when you are settled, you can reap the benefits of some incredibly low small business taxes; think around 16-20% annually not including tax free dividends.

Affordable Online Advertising

PPC (Pay Per Click) is very cheap in Brazil with the average CPC (Cost per Click) coming in at around USD $0.18. When you compare this to Australia at USD $0.95, Canada USD $0.59 or the United Kingdom USD $0.75 you can see the savings that can be made. Advertising on social media is cheap too. Facebook adverts can cost as little as 5 US cents a click.

E-Commerce

There are 180 million people in Brazil and more than 40% of them are online. The Brazilian people have really embraced social media and e-commerce, so combine this with the fact that online advertising is incredibly affordable and you have great potential in Brazil for an online venture.

It is important to know a few things about Brazilian web culture though. If you are selling a product to Brazilian consumers then you must be aware that your website will need to be in fluent, not computer translated, Portuguese if it is to be trusted.  Also, Brazilians are accustomed to interest free payment plans and often make large purchases based on their monthly budget as opposed to what funds they have available in their savings or on their credit cards.

Linked-In is massively popular in the Brazilian SME community so I would recommend scouring the profiles of businesses in a similar niche to your start-up to get some pointers.

Where to Set Up

When it comes to Brazil and business there are, really, only two places you should be considering: Sao Paulo and Rio de Janeiro. Sao Paulo is Brazil’s business hub and this is where most head offices are located. That said, Rio also has a thriving small business community and is perhaps the more tourist friendly of the two major cities. Rio also has the advantage of being located on the coast. So consider who your business will appeal to before picking a location.

Brazil is a country that is growing in international stature and economic clout and this is making it crammed full of opportunity for entrepreneurs who can spot a gap in the market. If you think you have an idea that will work in this sun drenched and beautiful country then there has never been a better time to set up in Brazil.

Source: Kevin Ball – Go about Business 

 

Global Logistic Properties Ltd. investing in Brazil?

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Global Logistic Properties to Invest BRL1 Billion to Expand Brazil Operations

Global Logistic Properties Ltd. (GBTZY, MC0.SG), which paid about 3 billion Brazilian reais ($1.5 billion) last year to become one of the country’s leading operators of logistics real estate, expects to invest at least BRL1 billion in the next two years to expand its business in Latin America’s biggest economy, Chairman Jeffrey Schwartz said Tuesday.

GLP last year bought 35 properties from Hemisferio Sul Investimentos, a Brazil-based real estate private-equity firm, giving GLP about 1.1 million square meters of warehouses and distribution centers in Brazil. This year, GLP plans to spend about BRL1 billion to start construction on an additional 1 million square meters, with completion of those projects expected during the next four years, Mr. Schwartz said in an interview at GLP’s Brazilian headquarters in Sao Paulo.

The company is also studying other opportunities, which could increase investment beyond BRL1 billion, Mr. Schwartz said.

Despite disappointing economic growth last year–gross domestic product expanded just 0.9% in 2012–Brazil is still a promising market, he said.

“We’re not here to flip these properties like a private-equity firm,” he said. “We’re building our business for the next 20 years, looking at Brazil’s young demographic, its good natural resources like oil and gas, but also water and agriculture. We’d like to take advantage of the slowdown to gain some market share.”

GLP expects domestic consumer spending–especially the rise of e-commerce–to drive demand for the company’s properties, most of which are centered in the state of Sao Paulo. The HSI purchase included assets in states in Brazil’s northeast, home to the fastest-growing economy in the country, and the center-west, Brazil’s agricultural frontier, which enjoys some of the highest per-capita wages in the country. Still, GLP plans to focus on Sao Paulo and Rio de Janeiro because that is where consumer markets are most developed, Mr. Schwartz said.

The dearth of good properties in Brazil means GLP’s expansion will likely be in greenfield projects, he said. Brazil has about 1/16th of the 1.4 billion square meters of logistics properties that are available in the U.S., Mr. Schwartz said. Cutting that difference to half–that is, expanding the area of logistics properties eightfold–in the next two decades is “feasible,” Mr. Schwartz said, but the government will have to take steps to ensure that happens.

The country needs to simplify its entangling bureaucracy and complicated tax code going forward, Mr. Schwartz said. Also, Brazil’s credit market needs to be more fully developed, he added, to lower the cost of real estate development.

“This is the worst debt market we’ve ever seen,” said Mr. Schwartz, who has founded and expanded logistics businesses in the U.S., Europe, and Asia. “There’s very little bank lending for real estate. It’s not readily available, unlike in other large economies.”

Although Mr. Schwartz praised moves by Brazil President Dilma Rousseff to hand over operation of some of the country’s railroads, highways, ports and airports to private operators, he said the government can do more by expanding Brazil’s credit market than via incentives meant to stimulate infrastructure investment.

GLP may seek out local investment partners in Brazil, but in the short term the company is in a comfortable position financially, Mr. Schwartz said. GLP is sitting on about $2 billion in cash, and with wealthy backers–the company has joint ventures with the Canada Pension Plan Investment Board, China Investment Corp., and the Government of Singapore Investment Corp.–it doesn’t see any problems in carrying out its investment plan, he said.

Source: Fox Business