It’s the largest country in South America with a growing middle-class consumer base – and, in the next four years, will be home to two of the biggest sporting occasions in the world. The opportunities in Brazil are huge and varied, yet Brazil’s complicated geography and poor infrastructure can make this a challenging environment for business.

The eyes of the world are on Brazil. To some extent, they always have been. This is carnival country with an attractive, dynamic and flamboyant spirit; but now it’s been remodeled as a land of opportunity, optimism, creativity, innovation – and sport. As a result, it’s currently being watched with a mixture of curiosity, intense interest and excitement.

In part, Brazil’s new centre-stage eminence has been fueled by its recent enviable growth. After being hit by the worldwide financial crisis in 2008, it began a spectacular recovery and, in 2010, its Gross Domestic Product (GDP) grew by 7.5%.

As its BRIC status underlines, Brazil is one of the fastest emerging markets on the planet and the sixth largest economy in the world in US$ terms (source: Euromonitor). Although the Brazilian economy has faltered in 2011 and 2012, international firms are queuing up to do business there,such as car manufacturers, pharma players and technology companies. Brazil also has US$ 350 billion of international reserves, inflation is under control and its domestic market remains strong. For 2013, economic growth is expected to accelerate to 4.5% (Source: Latin Focus Consensus Forecast January 2012 and BMI Retail Report, Q2 2012)

Another reason for Brazil’s popularity is the Brazilian people. They are famously warm, friendly and welcoming – and there are 194 million of them, albeit unevenly distributed, with the three most heavily populated states all in the southeast of the country. In fact, Brazil is the most populous country in the world after China, India, the United States and Indonesia (although, according to current projections, Pakistan will overtake Brazil as the fifth most populous country by 2015). That friendly face can’t be under-estimated. It’s a pleasant place to do business.

WELFARE PROGRAM

Despite its positive future prospects, there are present-day challenges for Brazil to overcome – and poverty is one of them. This is still, in part, a poor country. In 2003, government figures suggested that 20 million Brazilians were living in extreme poverty; yet income equality has declined and, in 2011, that figure had fallen to 16 million.

The government is intent on tackling the problem with a comprehensive national poverty alleviation plan called ‘Brasil Sem Miséria’, launched in June 2011. In June 2012, it launched a welfare program aimed at poor families with children under six in an attempt to reduce the extreme poverty total by a further 40%. In a speech she gave in April, Brazilian President Dilma Rousseff – described recently by Forbes magazine as the world᾽s third most powerful woman – said that the country had sustained its economic growth while reducing social inequality. “In the past they said it wasn’t possible to grow and redistribute income at the same time,” she said. “All of us, as a society, have moved beyond that idea.” As the poverty gap has closed, people with spending power have emerged, creating opportunities for companies offering goods and services. This, then, is a nation with a growing middle-class consumer base.

Yet the final reason why Brazil has become a global focus may be the most potent one of all. Brazil loves a good party and, in the next four years, will host not one but two of the biggest sporting events in the world: The World Cup in 2014 and the 2016 Olympics in Rio. As a result, Brazil is currently in preparation mode.

INFRASTRUCTURE IMPROVEMENTS

Infrastructure will be key to World Cup and Olympic delivery success, yet Brazil’s rail network is old and its road network is poor. Its many airports and sea ports also need modernizing and expanding. In August, the Government announced an ambitious R$ 133bn (US$ 66bn) of infrastructure concessions to spur private-sector investment in the country᾽s roads and railways. R$ 91bn of the total amount is earmarked for the construction of 12 railways, while the remaining R$ 42 billion will go towards the construction or expansion of nine roads. More than half of the investment will occur within five years, with the remainder over 25 years. A stimulus package aimed at ports and airports is to be announced in the near future.

“This is the main topic in every newspaper and magazine right now,” says Mauricio Nogueira, Head of Customer Business Development Latin America, DHL Supply Chain. “The government mindset is changing. It is going to outsource to private companies in order to upgrade and administer ports and airports and do away with bureaucracy. The government has already brought in private companies to manage the roads – but the main bottleneck today is ports and airports.”

With this move and others like it – such as tax harmonization plans for imported goods – the government seems to be removing barriers to business. In September, Brazil’s Minister of Finance, Guido Mantega, announced an increase in the number of industrial sectors to benefit from the payroll tax exemptions under the government’s ‘Brasil Maior’ program to encourage the reduction of labor costs and make enterprises more competitive. This is a political shift welcomed by many commentators who see a change in direction as a way to kick-start the stalled economy and for Brazil to fulfill its incredible potential.

“Brazil is dynamic,” says Cindy Haring, Country Manager DHL Global Forwarding Brazil. “It’s determined to grow and has the muscle to be a global player. There are some incredible things going on here in the fields of technology and development and agriculture, for example. It’s long been said that Brazil is the country of the future, but the question people have been asking is: ‘When is that future going to come?’ Well, it’s now. Brazil has a big, young population with a can-do attitude and it’s staking its place in the global economy – and long may it continue to do so.”

UNIQUE TERRAIN

DHL has been operating in Brazil since 1978 and has long experience of an environment that can be challenging, bureaucratic and complex. To begin with, it’s easy to forget that this is a country of enormous size, spanning three time zones. As the world’s fifth biggest nation, Brazil covers nearly half of the South American landmass and, in geographical terms, is larger than Western Europe – or slightly bigger than the US, excluding Alaska. It’s so big that Brazil shares a border with 10 Latin American countries – all of them, in other words, except Chile and Ecuador.

Then, of course, there’s the Amazon Rainforest, almost 60% of which is contained in Brazil, in the north. Having local people on the ground right across the country who understand this unique terrain and the pressures it can put on a company’s supply chain is vital.

For instance, to transport products from Manaus, the capital of the Amazonas region in the north, to Sao Paulo in the south, takes intricate logistical know-how. “It’s 15 days of transit time,” says Mauricio Nogueira. “We need to ship by boat using the Amazon river when the road runs out. It’s a very interesting logistics operation.”

DHL has an extensive partner network because of Brazil’s size and complexity, explains Joakim Thrane, Country Manager for DHL Express Brazil. “Some areas are undeveloped and difficult to get to,” he says, “so we have to fly in because the roads are poor or aren’t negotiable. Obviously, we rely on effective infrastructure for effective operations. But because DHL has been in Brazil for a long period of time, we have a great team here that knows how to get the best out of the country and to mitigate any ‘surprises’ so that the customer doesn’t feel the impact.”

EXPANDING FOOTPRINT

DHL has an extensive and expanding footprint in Brazil. For instance, it is by far the biggest logistics provider operating in the Free Trade Zone in Manaus. DHL Supply Chain offers comprehensive end-to-end services for every major industry with 40 distribution centers and 700,000 sq m of capacity. In August, DHL Global Forwarding opened a new Automotive Competence Center in São Paulo. The center bundles all the automotive activities of DHL for the local market, which become of major importance for the original equipment manufacturers and first-tier suppliers.

Yet the automotive industry is just one sector which is booming in the country, explains Cindy Haring, Country Manager DHL Global Forwarding Brazil. “Automotive, life sciences, consumer products, manufacturing, agriculture, mining and technology are all growth areas,” she points out. “Technology is interesting because various consumers in Brazil haven’t had access to certain technologies in the past; but now they can afford them, they don’t want to settle for the technologies that were around three years ago. They want the latest.

“The other big sector which is growing is oil and gas, and we have an industrial projects team dedicated to this at DHL. The energy sector is creating lots of opportunities for everyone involved. For the future, we’re making sure that we are where out customers are; and we’re moving to expand where they are expanding. We will continue to specialize in industrial sectors. With the growth of oil and gas we have experts on hand who understand the special needs, tools and processes of those industries.”

With all this movement and all this promise, it’s an exciting time to be in Brazil, says Joakim Thrane. “It’s a place of contradictions,” he says. “On the one hand Brazil is moving forward very quickly towards these big global sporting events that will soon be the focus of the world. On the other hand, there is complexity and bureaucracy here.

“But people are very creative in Brazil and in part that’s driven by necessity. You do need to come up with solutions quickly sometimes and that’s exciting and motivating – and it’s what’s great about being in the middle of an emerging market.” Tony Greenway