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A Study to Identify Key Sectors of Opportunity for Atlantic Canadian Firms in Brazil

2011

To Be Canada Inc

Tuesday, May 03, 2011

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Disclaimer

This report provides an overview and guideline information and must not be relied on to cover

specific situations. Application of the guideline will depend upon the individual circumstances

for which professional advice must be obtained before making decisions, acting or refraining

from acting on any of the information in this publication. We could offer our readers with help

on how to apply the guidelines set out in this publication to their specific circumstances. No

responsibility will be accepted for any liability or loss occurred to any person or entity acting or

refraining from action as a result of any information in this document.

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Executive Summary

This report has been prepared for, The Canada-Atlantic Provinces Agreement on International

Business Development (IBDA). The Governments of Newfoundland and Labrador, Nova Scotia,

New Brunswick and Prince Edward Island are highly cognizant of changing dimensions of the

global economy and are looking growing trade with newer economies. Atlantic Canadian

businesses are also looking at expanding their operations and providing services to markets

beyond developed economies such as the United States. Since Brazil is one such market, a

study was conducted to identify the potential available to Atlantic Canadian businesses to

export to Brazil in the nine identified sectors:

1. Information and communications

technologies

2. Environmental technologies

3. Oil and gas equipment and services

4. Life sciences and biotechnology

5. Ocean technology

6. Aerospace, defense and security

7. Mining

8. Education

9. Food/ Seafood

This report was created after reviewing vast amount of literature and information; relevant and

useful articles were studied with a goal to provide companies with information in a user-

friendly and succinct manner.

The secondary research was supplemented and validated by primary research that included

interviewing key stakeholders and business owners in Atlantic Canada and Brazil who provided

valuable insights into the selected sectors and the Brazilian market. Refer to Appendix “A” for

list of managers interviewed during primary research.

The findings of this study validate the potential in the Brazilian market and possible

opportunities available to Atlantic Canadian organizations in each of the indentified sectors.

Information and Communications Technologies

Atlantic Canadian firms have strength in and opportunities exist in the Brazilian market to

provide technologies for the banking sector; security and privacy software and technology;

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internet and data security; eLearning and distance education technology; and gaming and

mobile applications

Environmental Technologies

Atlantic Canadian sector strengths aligned to opportunities in the Brazilian market include

water and wastewater treatment and water management technologies; equipment, machinery

and technologies related to recycling of garbage and waste materials; site remediation systems;

and technologies related to renewable energies. There are various projects in this sector

funded by the Brazilian government as well as governments of other countries such as the US,

UK and Canada. Moreover, Brazil also receives funding from the IDB and World Bank for

environment sustainability initiatives.

Oil and Gas Equipment and Services

There are tremendous opportunities for Atlantic Canadian companies to supply equipment and

services to the OGES sector in Brazil with both domestic and foreign oil and gas operators.

However, many of these opportunities are with Petrobras and include Exploration and

Production (E&P) critical equipment; critical services for E&P activities; and downstream

segment (refineries, etc) critical equipment and services. Other opportunities in this sector are

training and education services and innovative technologies related to the oil and gas sector.

Life Sciences and Biotechnology

Given Atlantic Canada’s pioneering innovation there may be opportunities available for

technology transfer specifically for the generic drug market and those related to tree

improvement and "green technologies for forest pest protection. Nutraceuticals are also in high

demand in the Brazilian market. There is a shortage of skilled workforce in the biotechnology

industry providing opportunities for training and educational services.

Ocean Technology

Many of the opportunities available in the ocean technologies industry in Brazil are aligned to

the strengths of Atlantic Canadian companies. These include acoustic systems and equipments,

imaging and simulation, marine communications, instrumentation and information systems.

Atlantic Canada’s reputation and expertise in the ocean technologies sectors provides it with

opportunities to collaborate with the public and private sectors for technology transfers.

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Aerospace, Defense and Security

There are many opportunities in the Aerospace, Defense and Security sector in Brazil and many

of these demands can be met by Atlantic Canadian firms. This sector has two prominent

opportunities; the first is in the parts, components and maintenance and repair overhaul for

civil and military aircrafts. The second is providing technology, equipment and parts for internal

security.

Mining

The presence of many Canadian companies in Brazil as well as Vale’s sites in Newfoundland and

Labrador offer many opportunities to leverage local relationships in order to enter the Brazilian

market. In addition to equipment, services and software there are opportunities for Atlantic

Companies currently working in support of local mining projects.

Education

The opportunities in the Brazilian education market include, English language courses, higher

education, vocational and executive training and distance learning. There is also a need for

contemporary curriculum design and content creation, technologies for eLearning and virtual

classrooms. Atlantic Canadian firms not only have strengths in higher education, English courses

and distance learning but they are also highly respected globally and provide value for money.

Food/ Seafood

Atlantic Canadian companies can look for opportunities in the food market segments that are

expected to grow in Brazil in the future. Some of the products that could be exported are

potatoes, vegetables and fish (the salt fish market is growing in Brazil particularly Atlantic Cod).

Furthermore, the report provides Atlantic Canadian business leaders with information on

establishing and conducting business in Brazil and includes information on the Brazilian tax

structure, import regulations and logistics, import programs, licensed custom brokers,

government incentives, and foreign operation costs evaluation.

Finally, the document provides critical information such as a list of professionals that can be

contacted for services in Brazil, information on trade fairs and other useful information for

business leaders exploring opportunities in Brazil.

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Contents

Executive Summary ......................................................................................................................... iii List of Tables ................................................................................................................................... xi List of Figures ................................................................................................................................. xii 1. Brazil – An Overview .............................................................................................................. 1

1.1 Administrative Divisions ................................................................................................... 1 1.2 Economic Overview .......................................................................................................... 1 1.3 Trade Relations ................................................................................................................. 2 1.4 Brazil’s 2011 Index of Economic Freedom ....................................................................... 2 1.5 Cultural Facts .................................................................................................................... 3

2. Canada - Brazil Relations ......................................................................................................... 5 3. Atlantic Canadian Export Capabilities ..................................................................................... 6 4. Information and Communications Technologies .................................................................... 9

4.1 Introduction...................................................................................................................... 9 4.2 Subsectors ........................................................................................................................ 9 4.3 Global Context .................................................................................................................. 9 4.4 The Brazilian ICT Sector ................................................................................................. 10 4.5 Macroeconomic Environment ........................................................................................ 11 4.6 SWOT Analysis ................................................................................................................ 13 4.7 Key Business Opportunities in Brazil .............................................................................. 14

4.7.1 Brazilian Industry Perspective ................................................................................. 15 4.8 The Atlantic Canadian ICT Sector ................................................................................... 16

4.8.1 Atlantic Canadian Industry Perspective .................................................................. 17 4.9 Recommendations and Market Entry Strategies ........................................................... 18

5. Environmental Technologies ................................................................................................ 20 5.1 Introduction.................................................................................................................... 20 5.2 Subsectors ...................................................................................................................... 20 5.3 Global Context ................................................................................................................ 21 5.4 The Brazilian Environmental Technologies Sector ......................................................... 21 5.5 Macroeconomic Environment ........................................................................................ 24 5.6 SWOT Analysis ................................................................................................................ 26 5.7 Key Business Opportunities in Brazil .............................................................................. 27

5.7.1 Brazilian Industry Perspective ................................................................................. 28 5.8 The Atlantic Canadian Environmental Technologies Sector .......................................... 29


6. Oil and Gas Equipment and Services .................................................................................... 32

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6.1 Introduction.................................................................................................................... 32 6.2 Subsectors ...................................................................................................................... 32 6.3 Global Context ................................................................................................................ 32 6.4 The Brazilian Oil and Gas Sector .................................................................................... 33 6.5 Macroeconomic Environment ........................................................................................ 35 6.6 SWOT Analysis ................................................................................................................ 36 6.7 Key Business Opportunities in Brazil .............................................................................. 37

6.7.1 Brazilian Industry Perspective ................................................................................. 38 6.8 The Atlantic Canadian Oil and Gas Sector ...................................................................... 39


7. Life Sciences and Biotechnology ........................................................................................... 42 7.1 Introduction.................................................................................................................... 42 7.2 Subsectors ...................................................................................................................... 42 7.3 Global Context ................................................................................................................ 42 7.4 The Brazilian Life Sciences and Biotechnology Sector ................................................... 43 7.5 Macroeconomic Environment ........................................................................................ 45 7.6 SWOT Analysis ................................................................................................................ 47 7.7 Key Business Opportunities in Brazil .............................................................................. 48

7.7.1 Brazilian Industry Perspective ................................................................................. 48 7.8 The Atlantic Canadian Life Sciences and Biotechnology Sector..................................... 49


8. Ocean Technology ................................................................................................................. 52 8.1 Introduction.................................................................................................................... 52 8.2 Subsectors ...................................................................................................................... 52 8.3 Global Market ................................................................................................................. 52 8.4 The Brazilian Ocean Technology Sector ......................................................................... 53 8.5 Macroeconomic Environment ........................................................................................ 56 8.6 SWOT Analysis ................................................................................................................ 57 8.7 Key Business Opportunities in Brazil .............................................................................. 58

8.7.1 Brazilian Industry Perspective ................................................................................. 59 8.8 The Atlantic Canadian Ocean Technology Sector .......................................................... 59


9. Aerospace, Defense and Security ......................................................................................... 62 9.1 Introduction.................................................................................................................... 62 9.2 Subsectors ...................................................................................................................... 62

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9.3 Global Context ................................................................................................................ 62 9.4 The Brazilian Aerospace, Defense and Security Sector .................................................. 63 9.5 Macroeconomic Environment ........................................................................................ 65 9.6 SWOT Analysis ................................................................................................................ 66 9.7 Key Opportunities in the Brazilian Market ..................................................................... 67

9.7.1 Brazilian Industry Perspective ................................................................................. 67 9.8 The Atlantic Canadian Aerospace, Defense and Security Sector ................................... 68


10. Mining ................................................................................................................................ 71 10.1 Introduction ................................................................................................................ 71 10.2 Subsectors................................................................................................................... 71 10.3 Global Market ............................................................................................................. 72 10.4 The Brazilian Mining Sector ........................................................................................ 72 10.5 Macroeconomic Environment .................................................................................... 75 10.6 SWOT Analysis ............................................................................................................ 77 10.7 Key Business Opportunities in Brazil .......................................................................... 78

10.7.1 Brazilian Industry Perspective ................................................................................. 79 10.8 The Atlantic Canadian Mining Sector ......................................................................... 79

10.8.2 Atlantic Canadian Industry Perspective .................................................................. 81 10.9 Recommendations and Market Entry Strategies ....................................................... 81

11. Education Sector ................................................................................................................ 83 11.1 Introduction ................................................................................................................ 83 11.2 Subsectors................................................................................................................... 83 11.3 Global Context ............................................................................................................ 84 11.4 The Brazilian Education Sector ................................................................................... 84 11.5 Macroeconomic Environment .................................................................................... 86 11.6 SWOT Analysis ............................................................................................................ 88 11.7 Key Opportunities in the Brazilian Market ................................................................. 89

11.7.1 Brazilian Industry Perspective ................................................................................. 90 11.8 The Atlantic Canadian Education Sector .................................................................... 90

11.8.1 Atlantic Canadian Industry Perspective .................................................................. 91 11.9 Recommendations and Market Entry Strategies ....................................................... 92

12. Food and Seafood .............................................................................................................. 93 12.1 Introduction ................................................................................................................ 93 12.2 Subsectors................................................................................................................... 93 12.3 Global Context ............................................................................................................ 93 12.4 Brazilian Context ......................................................................................................... 94

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12.5 Macroeconomic Environment .................................................................................... 96 12.6 SWOT Analysis ............................................................................................................ 98 12.7 Key Business Opportunities in Brazil .......................................................................... 99

12.7.1 Brazilian Industry Perspective ............................................................................... 100 12.8 The Atlantic Canadian Food and Seafood Sector ..................................................... 101

12.8.1 Atlantic Canadian Industry Perspective ................................................................ 102 12.9 Recommendations and Market Entry Strategies ..................................................... 102

13. Experiences in the Brazilian Market ................................................................................ 104 13.1 Canadian Export Experience ..................................................................................... 105 13.2 Challenges of Entering the Brazilian Market ............................................................ 107 13.3 Best Practices of Entering the Brazilian Market ....................................................... 108

14. Establishing and Conducting Business in Brazil ............................................................... 109 14.1 Establishing a Company in Brazil .............................................................................. 109 14.2 "Doing Business 2011: Making a Difference for Entrepreneurs" ............................. 110 14.3 Government Agencies .............................................................................................. 112 14.4 Tax Structure............................................................................................................. 113

14.4.1 Corporate .............................................................................................................. 113 14.4.2 Federal, State and Municipal Taxes ...................................................................... 113 14.4.7 Payroll Tax and Deductions ................................................................................... 117

14.5 Import Regulations & Logistics ................................................................................. 118 14.5.1 Import Tariffs ........................................................................................................ 119 14.5.2 Foreign Cable and Satellite ................................................................................... 119 14.5.3 Duties .................................................................................................................... 120

14.6 Electronic Commerce ............................................................................................... 122 14.7 Industrial Property .................................................................................................... 122 14.8 Dispute Resolution ................................................................................................... 122 14.9 Common Transportation Modes .............................................................................. 123 14.10 Import Programs ....................................................................................................... 124

14.10.2 Bonded Warehouse ........................................................................................... 126 14.11 Licensed Custom Brokers ......................................................................................... 126 14.12 Shipment Accounting, Reporting & Storage ............................................................. 127 14.13 Government Incentives ............................................................................................ 132

14.13.1 Corporate Investments ..................................................................................... 132 14.13.2 Training .............................................................................................................. 137

14.14 Foreign Operation Costs Evaluation ......................................................................... 138 14.14.1 Interest Rates .................................................................................................... 138 14.14.2 Land and Building Tax ....................................................................................... 139 14.14.3 Premise - Commercial Rent / Cost of Land ....................................................... 139

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14.14.4 Wages Skilled/ Unskilled Trade Labor ............................................................... 139 14.14.5 Wages Professional Management Labor .......................................................... 142 14.14.6 Working Capital ................................................................................................. 146 14.14.7 Transportation Costs ......................................................................................... 146 14.14.8 Insurance (Business) .......................................................................................... 147 14.14.9 Office Expenses ................................................................................................. 148

14.15 Depreciation ............................................................................................................. 149 14.16 Professional Fees ...................................................................................................... 149 14.17 Advertising ................................................................................................................ 150 14.18 Budgeting .................................................................................................................. 153

14.18.1 Financial Ratios by Industry / Sector ................................................................. 153 15. Contact Information of Professional Service Providers ................................................... 158 Appendices .................................................................................................................................. 160

Appendix "A" – List of Companies Interviewed for Primary Research ................................... 161 Sector Overview Atlantic Canada ....................................................................................... 161 Sector Overview Brazil ........................................................................................................ 162 Canadian Firms with Experience in the Brazilian Market ................................................... 163

Appendix "B" - 2011 Index of Economic Freedom ................................................................. 164 Appendix "C" – Atlantic Canadian Exports to Brazil ............................................................... 168 Appendix "D" – The Canadian Environmental Goods Model ................................................. 170 Appendix "E" - Oil reserves1, per location (onshore and off shore), by State – 2000-2009 .. 171 Appendix “F” - Best Prospects for Foreign Suppliers with Petrobras ..................................... 172 Appendix “G” - Sales of Consumer Health Products by Sector .............................................. 174 Appendix "H" – Canada’s Ocean Technology Sectors ............................................................ 175 Appendix “I”– Starting a Business in Brazil ............................................................................. 176 Appendix “J”– List of Companies Used for IRR Calculations .................................................. 178

Bibliography ................................................................................................................................ 181 Endnotes ..................................................................................................................................... 201

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List of Tables

Table 1: Brazil's Trade Relations ..................................................................................................... 2 Table 2: Brazil - 2011 World Economic Index ................................................................................. 3 Table 3: Market Values of the 13 largest green economies ......................................................... 21 Table 4: Brazil's Environmental Goods & Services ........................................................................ 25 Table 5: NAICS Classification for Mining ....................................................................................... 71 Table 6: Major Companies and their Planned Investments ......................................................... 75 Table 7: 2009 - Mineral Production by Province and Territory .................................................... 80 Table 8: Trading Across Borders ................................................................................................. 112 Table 9: Federal Taxes in Brazil ................................................................................................... 114 Table 10: State Taxes in Brazil .................................................................................................... 115 Table 11: Municipal Taxes in Brazil ............................................................................................. 115 Table 12: Income Tax Levels in Brazil.......................................................................................... 117 Table 13: Social Security Contributions ...................................................................................... 118 Table 14: PIS and COFINS Taxes ................................................................................................. 120 Table 15: What to include in import applications ...................................................................... 125 Table 16: Tax Incentives in Free Trade Zone of MANUAS .......................................................... 133 Table 17: Regional Incentives for the North and Northeast Region ........................................... 134 Table 18: Technological Innovation Incentive (R&D) ................................................................. 135 Table 19: Special Regime for the Oil and Gas Industry ............................................................... 135 Table 20: Special Regime for Infrastructure Development ........................................................ 136 Table 21: Manufacture of IT and Automation Equipments ........................................................ 136 Table 22: Benefits for employees in the Brazilian market .......................................................... 145 Table 23: Types of Insurance ...................................................................................................... 147 Table 24: Return on Equity, ROE (percent) ................................................................................. 153 Table 25: Return on Assets, ROA (percent) ................................................................................ 154 Table 26: Sector Specific Financial Ratios - Average ................................................................... 156 Table 27: Sector Specific Financial Ratios - Range ...................................................................... 157

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List of Figures

Figure 1: Canada - Brazil Trade Balance .......................................................................................... 5 Figure 2: Top 10 Country Exports in 2010 ...................................................................................... 6 Figure 3: Atlantic Canada's Top 10 Export Industries ..................................................................... 7 Figure 4: Atlantic Canada - Brazil Trade Balance ............................................................................ 7 Figure 5: Global ICT Developments 2000 - 2010 .......................................................................... 10 Figure 6: Percentage of Life Science Companies in Brazil by Sector. ........................................... 43 Figure 7: Global Marine Industry - 2000 ....................................................................................... 52 Figure 8: 2008 - Top Ten Mining Countries .................................................................................. 72 Figure 9: Brazil's Main Substances Exported ................................................................................ 73 Figure 10: Ease of Doing Business - Global Rank ........................................................................ 111 Figure 11: Median Salaries by City ............................................................................................. 143 Figure 12: Median Salaries by Industry....................................................................................... 143 Figure 13: Median Salaries by Job .............................................................................................. 144

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1. Brazil – An Overview1 2

Brazil is also known as the Federative Republic of Brazil and República Federativa do Brasil or

Brasil in Portuguese. Brazil is located in Eastern South America, bordering the Atlantic Ocean

and covers a total area of 8.5 million square kilometers. It is a federal republic and its capital is

Brasilia. Portuguese is the official and most widely spoken language. Other less common

languages include Spanish, German, Italian, Japanese, English, and various minor Amerindian

languages. The standard time zone is GMT -3 hours and daylight saving time (1hr begins third

Sunday in October; ends third Sunday in February). Eight-seven percent of its total population

(201 million) is based in urban areas. Brazil’s currency is the Real (R$) and the conversion rate is

1 Canadian dollar ($) = 1.7 Brazil Real (R$).3

1.1 Administrative Divisions

Brazil has 26 states and 1 federal district*

Acre Maranhao Rio de Janeiro

Alagoas Mato Grosso Rio Grande do Norte

Amapa Mato Grosso do Sul Rio Grande do Sul

Amazonas Minas Gerais Rondonia

Bahia Para Roraima

Ceara Paraiba Santa Catarina

Distrito Federal* Parana Sao Paulo

Espirito Santo Pernambuco Sergipe

Goias Piaui Tocantins

1.2 Economic Overview

Brazil is the largest economy in South American and has enhanced its macroeconomic stability

over the last decade. Much of its growth is fueled by the extensive growth in the agricultural,

mining, manufacturing and services sectors. It was one of the first countries in the developing

markets to recover from the recession. Export recovery enhanced GDP growth in 2010

supported by consumer and investor confidence. Foreign investors are attracted to the

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Brazilian market because of its strong growth and high interest rates. This led to inflation of the

currency and has prompted the government to raise certain taxes on foreign investments.

1.3 Trade Relations

An overview of Brazil’s trade relations are provided in Table 1: Brazil's Trade Relations.

Table 1: Brazil's Trade Relations

Exports Imports

Value (2010 est.) US$199.7 billion US$187.7 billion

Commodities • Transport equipment

• Iron ore

• Soybeans

• Footwear

• Coffee

• Autos

• Machinery

• Electrical and transport equipment

• Chemical products

• Oil

• Automotive parts

• Electronics

Trading Partners

(2009)

• China - 12.49 percent

• US - 10.5 percent

• Argentina - 8.4 percent,

• Netherlands - 5.39 percent,

• Germany - 4.05 percent

• US - 16.12 percent

• China - 12.61 percent

• Argentina - 8.77 percent

• Germany 7.65 percent

• Japan 4.3 percent

1.4 Brazil’s 2011 Index of Economic Freedom4

The Index of economic freedom examines three fundamental principles of economic

freedom—empowerment of the individual, non-discrimination, and open competition. Brazil’s

economic freedom score is 56.3, making its economy the 113th freest in the 2011 Index. Its

score is 0.7 point better than last year as a result of improvements in investment freedom and

trade freedom. Brazil is ranked 21st out of 29 countries in the South and Central

America/Caribbean region, and its overall score is below the regional and world averages. An

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overview of Brazil’s scores of each dimension are provided in Table 2: Brazil - 2011 World

Economic Index

Table 2: Brazil - 2011 World Economic Index

Economic Dimensions Score Change

Business Freedom 54.3 – 0.2

Trade Freedom 69.8 0.6

Fiscal Freedom 69 0.6

Government Spending 49.6 – 0.7

Monetary Freedom 75.9 0.1

Investment Freedom 50 5

Financial Freedom 50 no change

Property Rights 50 no change

Freedom from Corruption 37 2

Labor Freedom 57.8 0.3

For a detailed explanation on each of these scores refer to Appendix "B"

1.5 Cultural Facts5

Brazilian was very friendly when communicating with others, eye contact is expected and

physical contact is accepted regardless of gender or relationship. Brazilians display their

emotions openly however; it is not acceptable to display anger or to reprimand people publicly

- especially in the workplace.

Although Brazilians tend to be informal, business attire is preferable for both men and women.

Bosses are generally addressed as Mr. or Mrs. (pronounced seng-or; seng-ora). Colleagues

should initially be addressed formally too unless they indicate that using first names is

appropriate.

Punctuality is expected when arriving for work. However, meetings may start 10 to 40 minutes

late. Time is seen as a sequence of events rather than chunks of hours or minutes – therefore if

a previous meeting is delayed it will impact the next one. There is flexibility of deadlines

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depending on the circumstances. However, if delays are expected these must be discussed with

the relevant authorities at the earliest.

Decisions are generally made at the top-levels of management. Employees at lower levels are

assigned tasks and expected to comply with instructions. Regulations are very well defined and

acquiescence is expected. Creativity or deviation from past reports or project designs is usually

neither expected nor appreciated.

Religion is not a significant factor in the workplace. However, class plays a big part in Brazilian

society and the respect you receive could vary depending on the class you belong. Class

differences are less prominent in the workplace unless there is a huge disparity of class

between peers which could affect communication flow. Gender can sometimes be an issue

especially in the inlands or along the northeast cost. Women are sometimes not taken seriously

as equals.

Building personal relationship with colleagues or clients before getting to business is essential

as Brazil is a very social country. Personal relationships (connections or favors) can be very

handy when certain projects are being threatened by bureaucracy; a request from one friend to

another will help cross many hurdles that official communications are unable to resolve.

Family relationships are important and personal relationships are created when clients or

colleagues invite families to socialize with each other. Favors and preferential treatment are

expected when personal relationships are established with colleagues, clients or employees.

However, this is not the same as corruption or bribery. Preferential treatment is also received

by those that come from a higher social class or those that are related to an influential family.

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2. Canada - Brazil Relations

Canada and Brazil have enjoyed a cordial bilateral relationship over the years and have signed

numerous agreements, treaties and memorandums of understanding. In November 2008, a

Framework Agreement for Cooperation on Science, Technology and Innovation was signed to

enhance bilateral cooperation in matchmaking activities, and improve industry-to-industry and

industry-to-university collaboration on Research & Development. There have also been

Memorandums of Understandings related to health, labour and sustainable development of

metal and mineral.6

See Figure 1 for Canada and Brazil’s Trade Balance from 2006 to 2010

Figure 1: Canada - Brazil Trade Balance

Source: Industry Canada Trade Data Online

In 2010, Canada’s bilateral merchandise trade with Brazil was almost $5.85 billion. Canadian

merchandise exports to Brazil increased by 62 percent to $2.57 billion. Canadian merchandise

imports from Brazil were close to $3.3 billion in 2010.7 The chart above shows a trend in which

the Canadian Exports have been rising steadily from 2006 expect in 2009 (due to the recession).

However, 2010 figures indicate a rebound to pre-recession levels. Similarly, the negative trade

balance has been declining. These trends are positive and indicate a possibility that more

products and services being exported from Canada to Brazil in the future.

$1.33 $1.51

$2.58 $1.60

$2.57 $3.41 $3.36

$2.69 $2.58 $3.29

-$2.08 -$1.85

-$0.11 -$0.98 -$0.72

-$3.00 -$2.00 -$1.00

$-$1.00 $2.00 $3.00 $4.00

2006 2007 2008 2009 2010

Canada - Brazil Trade Balance in Billions

Total Exports Total Imports Trade Balance

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3. Atlantic Canadian Export Capabilities

Atlantic Canada withstood the global recession and has seen some recovery in 2010. Atlantic

Canada’s total exports for 2010 were $27 billion a 14 percent increase from 2009. As expected,

the United States (US) is the largest importer of Atlantic Canadian products and services;

importing almost 78 percent ($21 Billion) of total exports. Considering that developing

countries such as Brazil, Russia, India and China (BRIC) have shown a sustained growth in

international trade volume, it could be beneficial to invest time and effort in developing exports

to these countries. See Figure 2 for Atlantic Canada’s Top 10 export locations

Figure 2: Top 10 Country Exports in 2010

Atlantic Canada has specific export strengths especially in Petroleum refineries and oil and gas

extraction. Atlantic Canada’s top ten exports in 2010 are illustrated in Figure 3

79%

3%

3%

1% 1%

1%1%

1%1%

0% 9%

Export Percentage in 2010 - Top 10 Countries United States (U.S.)

China

Germany

Netherlands

United Kingdom (U.K.)

Japan

Spain

India

Italy (includes Vatican City State)

France (incl. Monaco, French Antilles)Others

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Figure 3: Atlantic Canada's Top 10 Export Industries

To learn about the Top 25 Industry exports from Atlantic Canada to Brazil for the past five (5) years refer to Appendix “C”.

Exports from Atlantic Canada to Brazil have been increasing from 2006, except in 2009. These

trends are positive and indicate a possibility of more products and services being exported from

Atlantic Canada to Brazil. It is important to note that imports from Brazil in 2010 have jumped

exponentially causing a negative trade balance of $ 442 million. However, this is due to imports

of Crude Petroleum Oils and Oils Obtained from Bituminous Minerals (almost $ 549 million).

See Figure 4 for Atlantic Canada and Brazil’s Trade Balance.

Figure 4: Atlantic Canada - Brazil Trade Balance

-2 4 6 8

10 12 14

Atlantic Canada Top 10 Exports Industries (CAD Billions)

2008

2009

2010

$117 $106 $130 $63 $165

$44 $52 $53 $70

$607

$72 $54 $77

-$7

-$442 -$600 -$400 -$200

$-$200 $400 $600 $800

2006 2007 2008 2009 2010

Atlantic Canada - Brazil Trade Balance in Millions

Total Exports Total Imports Trade Balance

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Sectors Overview in Brazil

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4. Information and Communications Technologies

4.1 Introduction

The Information and Communication Technologies (ICT) Sector has had varying definitions and

subsectors inclusions over the years. However, in the Canadian context, the ICT sector is

defined as the combination of manufacturing and services industries, which electronically

capture, transmit and display data and information.8

4.2 Subsectors

Prominent subsectors in the ICT Sector within Canada are:9

ICT Manufacturing

• Commercial and Service Industry Machinery Manufacturing

• Computer and Peripheral Equipment Manufacturing

• Telephone Apparatus Manufacturing (Wired Communications Equipment)

• Radio and Television Broadcasting and Wireless Communications Equipment

Manufacturing

• Audio and Video Equipment Manufacturing

• Semiconductor and Other Electronic Component Manufacturing

• Navigational, Measuring, Medical and Control Instruments Manufacturing

• Communication and Energy Wire and Cable Manufacturing

ICT Services

• Software Publishers

• Communications Services

• Data Processing, Hosting and Related Services

• Computer Systems Design and Related Services

4.3 Global Context

The global Information Technology (IT) market reached US$ 1.3 trillion in 2007. 10 According to

the initial statistical findings of ABIBEE [Brazilian Electrical and Electronics Industry Association],

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the recent global financial crisis has contributed to the decline of worldwide revenues by 9

percent in the global ICT sector in 2009.11

ICT trends across the globe are similar to those in the Americas. Mobile subscriptions have

overtaken fixed telephone line, which continue to decline. Surprising, mobile phone

penetration in developing countries is much higher than that of developed countries. There is

also an uptake in the adoption of broadband although not at the same pace as mobile cellular

technology.12

The Global ICT Development trends from 2000 – 2010 are illustrated in Figure 5

Figure 5: Global ICT Developments 2000 - 2010

4.4 The Brazilian ICT Sector13 14 15

Latin America’s largest IT market is in Brazil with over 45 percent of the total investments in the

region. Business Monitor International expects Brazil’s ICT sector to grow at over 11 percent for

the period 2008-2013.

In 2007, almost 2 percent of Brazil’s GDP (US$ 24 billion) was invested in information

technology; about half this amount (US$ 12.5 billion) was invested in computer hardware, US$

8.5 billion in IT Services and US$ 3 billion in computer software. The growth in the IT sector has

0

10

20

30

40

50

60

70

80

90

100

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010*

Per 1

00 in

habi

tant

s

Global ICT Developments, 2000-2010*

Mobile cellular telephone subscriptions

Internet users

Fixed telephone lines

Mobile broadband subscriptions

Fixed broadband subscriptions

*EstimatesSource: international Telecom Union

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been supported by Brazil’s economic stability; strong local currency and the ease with which

loans are accessible.

Spending in Brazil’s mature IT market is divided evenly between software, hardware and

services. The southeast region accounts for almost 60 percent of the expenditure whereas the

northeast region accounts for only 8.3 percent. Government incentives have been responsible

for the rapid growth and prosperity of the southern region especially the state of Parana.

Small and medium companies represent 42 percent of the private investment in the sector and

an increasing demand for hardware and services solutions is stimulating the development of

the market. The domestic consumption of PCs, printers, digital cameras and mobile phones

represents more than 20 percent of the Latin American market.

The banking sector in Brazil has provided many business opportunities for the telecom services,

IT and security providers. Banks are projected to continue to increase their IT spending and in

2007, the financial sector accounted for around 20 percent of national IT spending. Moreover,

the banking sector is expected to invest heavily in infrastructure such as ATMs, branches, back-

office systems, technology investment and telecom expenses. Other sectors are also likely to

benefit from new technologies such as digital certification, wireless LAN and mobile data

transmission.

The 2014 FIFA World Cup and 2016 Olympic Games are expected to be a catalyst for large

investments in many sectors especially infrastructure which, in turn, is likely to benefit the IT

sector as well.

Software and Services are estimated to grow at an annual rate of 10 percent. Broadband

subscribers are expected to increase to 22 million over the next five years which would

represent a 10 percent penetration by 2013.

4.5 Macroeconomic Environment

4.5.1 Political

Procurement of information technology goods are governed by Decree 1070 (1994), which

provides preferential treatment to locally produced computer products. Moreover, the rules

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surrounding pricing and technology are complex and non transparent. In order for foreign

investors to participate in contracts funded by multilateral development bankrolls they must

have an established legal presence in Brazil.16

4.5.2 Economic17

The Brazilian government is spending heavily in ICT especially upgrades to government

departments and e-governance. ICT is a large strategic focus in the Growth Acceleration Plan

and government spending is likely to increase to US$ 23 billion by 2013. Between January and

July 2009 the government had already spent about US$ 1 billion on ICT.

Austrade’s website reports that the Brazilian government has revised its high tariff rates and

aligned its current rates to the GATT (General Agreement on Tariffs and Trade) which makes the

Brazilian ICT sector more attractive and accessible to foreign investors. Some of the principal

duties and taxes identified by Austrade include:

• Federal Import Tax – most data communications equipment have import duties ranging

from zero to 20 percent, some other equipment as high as 40 percent.

• IPI Industrial Products Tax – a Federal Excise Tax levied on most domestic and imported

manufactured goods. The current tax ranges from 10-34 percent.

• ICMS Tax on Merchandise Circulation and Services – a State Government value added

tax applicable to both imports and domestic products and rendered services. The ICMS

tax on imports is assessed ad valorem (according to value) on the cost, insurance and

freight (CIF) value plus the Federal Import Tax plus IPI.

In 2009, an agreement was signed through which close to 10,000 IT programmers would be

trained and was expected to support over 100,000 jobs in the domestic software and services

industry and an additional US$ 1 billion in revenue by 2010.

4.5.3 Socio Cultural18

There has been a marked increase in the usage of computers and the internet for personal and

commercial purposes. As of 2008, Brazil reported more than 67 million internet users (up from

5 million in 2000). Business-to-business (B2B) e-commerce increased 10 percent from 2004 to

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2006 (9 percent to 19 percent), and business-to-consumer (B2C) sales increased approximately

4 percent in the same period (2.9 percent to 7.45 percent). The value of B2B transactions

amounted to R$ 267.6 billion in 2005, a 37 percent increase from 2004.19

4.5.4 Technological

In the education sector the one-computer-per-student program is to be implemented

supported by a US$ 50 million funding from Brazil’s central bank. These funds are expected to

help public schools buy low-cost portable computers as well as support infrastructure costs.

The Brazilian government encourages investment in R & D and education in the ICT sector and

has developed several ICT Clusters and Technology Parks.20

Brazil is a very strong proponent of 'open source' software and the Brazilian government and

state-run enterprises are increasing their support for open source and free software like Linux

and phasing out the use of Windows. The government believes this will save money in the long

run as well as support local developers.21 A draft decree that would obligate federal

department to change over to open source software has been under consideration and has

received strong support from both the previous Brazilian President Lula and current President

Dilma Rousseff.22

4.6 SWOT Analysis23

4.6.1 Strengths

Brazil is the largest markets in Latin America and also one of the fastest growing. The

government has been investing heavily in the ICT sector and includes investment in computer

hardware, IT services and computer software. Government incentives have also been

responsible for the rapid growth of this sector. Domestic consumption of ICT goods and services

are high and represent more than 20 percent of the Latin American market. Requirements of

the banking industry and the upcoming games have further fuelled the growth of this sector.

Retail channels are expanding due to the growing consumer segment fuelled by affordability.

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Furthermore, there is a federal plan to equip all elementary schools with computers indicating

plenty of room for expansion.

The mobile market is robust and benefits from healthy competition from domestic and

international players. Lucrative contracts are being won as fixed-line and mobile operators seek

to keep ahead of each other through investment and new services.

4.6.2 Weaknesses

The PC penetration rate in Brazil is less than 25 percent and these numbers need to be

improved in order for the industry to grow.

There is also a lack of educated professionals in the IT segment as compared to developed

countries and there is estimated to be a shortage of 17,000 trained professionals. Moreover,

the predominant language in Brazil is Portuguese and therefore all software products and

services need to be customized to meet local needs.

The Brazilian government’s affinity to 'open source' software may become an impediment for

companies that have strengths with Microsoft technology.

4.6.3 Threats

One of the major threats to the ICT industry is damage to infrastructure due to security

concerns. Another significant threat comes from illegal and pirated software and counterfeit

computers and notebooks. The gray market for computer hardware in Brazil reduced from 50

percent to 46.4 percent in 2007 whereas software piracy reduced by 1 percent to reach 59

percent. However, these are significantly large percentages and pose a serious threat to the

sector.24

4.7 Key Business Opportunities in Brazil

There are several opportunities in the rural markets in the telecommunication, broadband,

cable, and IPTV segments. New technologies such as triple-play and quad-play are becoming

increasingly popular. In December 2007, 3G licenses were auctioned and there are

opportunities to provide mobile services to areas that are not currently connected.

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Brazil also has huge communication market potential, with particular focus on the mobile

segment, with the three largest mobile operators owned by foreign investors. The country

already has 143 million mobile phone subscribers and the market continues to show strong

growth. Moreover, several fixed lines and broadband operators are also owned by international

telecom companies.

There are also several opportunities for IT, telecom services and security providers in the

banking industry. As cited by Austrade, the Research and Markets analyst firm reports, "Given

their huge infrastructure and wide portfolio in terms of branches, ATMs, back-office systems,

and Internet, the banking sector accounts for the largest share of total technology investment

and telecom expenses". The financial industry is also expected to invest in new technologies

such as IP-based solutions, digital certification and signature, wireless LAN, and mobile data

transmission. Banking security applications are also in great demand given the growth of online

banking.25

4.7.1 Brazilian Industry Perspective

According to stakeholders in the Brazilian market, the ICT market in Brazil is growing rapidly and

the Brazilian government encourages open source and local production of software. However,

the sector is mainly dominated by international companies and many Chinese companies are

establishing factories in Brazil. Brazilian law limits international participation in communication

and news companies to 20 percent foreign capital. This law could to be reviewed in 2011.

With the advent of privacy, anti-piracy and anti spamming policies Brazilian consumers are

looking for services that protect their privacy. Internet companies are now developing products

and services to offer content such as news, music, videos, photos, statistics, games and

applications for users.

There are many opportunities available in the sector, such as hardware and software

production. Canadian expertise could be used in games, content and film production, mobile

application and software development. Canada is known as a good game developer and a huge

video content producer. These companies could be great exporters for Brazilian portals.

Canadian expertise can also be applicable in the creation of software for the communication

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sector. Aspects like intellectual assets, with experience in global technology projects, could

improve the sector and Brazil could import the expertise to create more efficient software.

Currently Brazilian companies import from the US because of lower costs and proximity to the

Brazilian market. Some imports are also sourced from Asia, however these imports are not

regular and the Asian companies that export tend to vary. Products or equipments that are

imported are usually not made in Brazil. Moreover, the price of imported Asian products and

equipment tend to be less expensive.

Business leaders in the Brazilian ICT sector believe that the best way for Canadian companies to

participate in this sector would be through partnerships and technology transfers.

4.8 The Atlantic Canadian ICT Sector

The Atlantic Provinces Economic Council (APEC) reported in 2010 that Atlantic Canada's ICT

industry grew nearly twice as fast as the overall economy between 2003 and 2008, contributing

an estimated $2.65 billion to Atlantic Canada's GDP in 2008. Furthermore, the region’s ICT

industry employs over 32,000 individuals in over 2,000 firms. About 70 percent of the ICT

employees work in urban areas such as Halifax, Saint John, Moncton, Fredericton, St. John’s and

Charlottetown.

BellAliant, Eastlink and Rogers lead the telecommunication sector with almost 30 percent of all

ICT employees in the Atlantic region. Longtail Studios and HB Studios are involved in software

development and Keane, Research in Motion and Innovatia provide ICT services. Nautel and

Rutter are the largest ICT manufacturers in the region. 26

Atlantic Canadian companies in the ICT sector perform various services such as security, e-

learning, IT services, multimedia, geomatics, advanced technology and business solutions.

Telecommunications infrastructures in Atlantic Canada are world class with 100 percent digital

telecommunication network, high-speed digital links, broadband networks, and mobile and

marine communications.

Advanced research and development by universities, research institutes and the business world

enhance the competiveness of the industry. CGI Group Inc. Canada’s largest IT firm is

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headquartered in Moncton, New Brunswick and the University of New Brunswick’s Computer

Science Department is a national leader in IT and advanced software research.27

Charlottetown, PEI currently has five companies classified under the Entertainment Software

Industry and has strong support from the provincial government. The University of PEI is now

offering a video game programming specialization and a digital art program. One of the largest

companies in this sector is Other Ocean Interactive.28

ACOA cites an Industry Canada report which states that, "From 1997 to 2004, the ICT industry in

Atlantic Canada experienced an 11 percent Compounded Annual Growth Rate (CAGR) in

exports and a 9.4 percent CAGR in employment in software and computer services. The highly

skilled labour force has one of the lowest rates of turnover and absenteeism in North

America."29

4.8.1 Atlantic Canadian Industry Perspective

Business leaders interviewed in the ICT industry in Atlantic Canada believe Nova Scotia Business

Inc has been promoting this sector greatly and has announced many investments in the sector.

There has been a lot of consolidation with demand increasing across North America and the ICT

industry is growing at nearly double the rate of the Canadian economy. New data privacy rules

that apply to electronic records of individuals have driven this demand. Canada was a leader in

this field, but the US, Israel and a few others have taken over recently.

Exports include software and intellectual property, internet and information security,

hardware, e-learning, gaming, and media and other web related services. Importers include the

rest of North America especially the US, the UK, Australia, New Zealand, South America, the

European Union (EU), China, other Asian countries, and a small amount from Africa.

Competitive advantages in this industry include effectiveness and marketing support, talent

stability, low turnover and a slight positive cost differential. Companies have the resources they

need, are certified in Microsoft technology and are considered niche or specialty players.

Some of the disadvantages include tax incentive programs in Atlantic Canada as they are not

internationally significant. New Brunswick offers 15 percent whereas the Scientific Research

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and Experimental Development (SRED) tax credits in the US are 35 percent and in the UK 100-

125 percent.

Some of the companies interviewed do export data, maritime and port securities whereas

others have been reluctant to consider Brazil as an export destination because of the language

barrier, cost of developing the market, logistical distances and need to develop local partners.

Those that do have experience were introduced by Newfoundland Association of Technology

Industries (NATI) and Department of Foreign Affairs and International Trade Canada (DFAIT),

Canadian embassies and consulates, and Atlantic Canada Opportunities Agency (ACOA).

Companies may be interested in outsourcing opportunities or targeted business initiatives.

They believe there is a huge demand for modernization and would like the government to make

more strategic investments. Some believe that promotion of services and services providers or

export consultants who can help them with exports is as important as the funding provided.

4.9 Recommendations and Market Entry Strategies

Atlantic Canadian firms have strength in and opportunities exist in the Brazilian market in the

following segments:

• Telecommunications - mobile telephony, fixed lines and broadband especially the rural

markets that are relatively untouched. The Cable and IPTV markets are also lucrative

and growing.

• Software & security services – especially in the banking and retail sectors.

• Computer hardware and networking infrastructure in the education industry.

However, Atlantic Canadian companies should be selective in the opportunities they choose to

pursue in this sector. There are high investments needed in infrastructure, knowledge of

Portuguese is a requirement for software and content, the government prefers open source

software and finally, the piracy and counterfeit market are highly prevalent. Despite these

concerns, Atlantic Canadian companies could explore specific opportunities in these niche

segments:

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• Technologies for the Banking sector

• Security and Privacy software and technology

• Internet and data security

• eLearning and distance education technology

• Gaming and mobile applications

A long term perspective is important to succeed in the Brazilian market and companies must

not expect results immediately. Atlantic Canadian firms will need to establish local presence

either through resident partners or a subsidiary. Although establishing a local office is

preferred, firms may also be able to appoint local agents, distributors or representatives. Local

partners can be identified through matchmaking services and trade missions.

Trade events are an excellent avenue to meet key Brazilian stakeholders in the ICT sector.

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5. Environmental Technologies

5.1 Introduction

The environmental technology sector or "green economy" has seen increased awareness and

focus in recent years as people, governments and companies have begun to implement

sustainable business practices30. This shift has come from increased social awareness of our

effect on the environment as well as the continued strain on finite resources worldwide.

Environmental technology, also called green-tech or clean-tech, is not clearly defined and

encompasses many sectors. The two most traditionally used categories when classifying green-

tech is “end-of pipe” (EOP) and “cleaner” technologies. EOP refers to technology which makes

existing technology more environmentally friendly, whereas cleaner technologies are focused

on creating a new way of doing something which is more energy or environmentally efficient.

For this report the focus will be on the sectors in the green-economy where either type of

technology exists.31 Traditionally, as green markets mature there is a shift from EOP

investments to clean technology.

5.2 Subsectors

The Environmental sector is a complex industry which includes a wide range of products,

services and applications. To define and categorize this sector the report will use an

international definition which was developed with Statistics Canada’s Environmental Division.32

The model divides activities into two different headings: Environmental Protection and

Resource Management. The model also includes a section for those goods and services which

fall under both categories. Refer to Appendix "D" to view an illustration of the model.

Within each segment of the environmental sector, there are sub-sectors:

Environmental Protection – Protection of ambient air and climate, water protection, treatment,

supply and conservation, waste management, remediation, protection of biodiversity and

landscape, noise and vibration abatement, and other environmental protection services.

Resource Management – Management of natural resources, management of energy resources,

and other environmental resource management activities.

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Combined Environmental Protection/Resource Management – Environmental education and

training, environmental policy and legislation, environmental research and development (or

eco-innovation), environmental health and safety, environmental communications and public

awareness, and other environmental services.33

5.3 Global Context

The Global market value for the green economy is estimated to be worth almost US$ 5.2

trillion.34 The environmental sector fared quite well overall through the recent downturn as it

was the focus of many countries’ stimulus plans. The environmental market continues to

outgrow the market with the largest percentage of activity being in the alternative fuels and

energy sector35. It is estimated that by 2020 the market for providing clean and renewable

energy alone could reach 1.9 trillion.36 See Table 3 for Global Market values of green

economies.

Table 3: Market Values of the 13 largest green economies

5.4 The Brazilian Environmental Technologies Sector

The U.S. Department Of Commerce reports, "Environmental experts estimate that Brazil’s

environmental technologies market (including equipment, engineering / consulting services,

CountryMarket Value (US $ Billions)

% Global Total

1. United States 1,050$ 20.612. China 686$ 13.473. Japan 319$ 6.264. India 319$ 6.255. Germany 214$ 4.186. United Kingdom 178$ 3.507. France 155$ 3.048. Spain 137$ 2.739. Italy 135$ 2.6910. Brazil 131$ 2.6111. Russian Federation 127$ 2.5312. Mexico 91$ 1.8113. Canada 89$ 1.78Source: (The Globe Foundation, 2010)

Market values of the 13 largest green economies

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instrumentation, construction and clean up services) is roughly estimated at US$ 9 billion, of

which US$ 5.2 billion is related to the water and wastewater subsector; solid waste

management at US$ 3.4 billion and air pollution control at US$ 0.6 billion."37

Brazil is a world-wide leader in some environmental technologies (e.g. Bio-energy) yet

comparatively weaker in other areas (smart grid, water, wastewater, power distribution).

Prominent subsectors in the environment technologies market in Brazil include:

5.4.1 Water

In January 2007, the Brazilian Government signed the National Sanitation Bill which outlines the

federal policy for water and wastewater in Brazil. The Government has set itself a target to

providing the entire population with water and wastewater services by 2030. It is estimated

that in order to reach that goal the Brazilian government will have to invest US$ 5 billion a year

for the next 20 years.38 Currently, 61 percent of rural areas do not have water or wastewater

services, compared to 7.5 percent in urban areas. Traditionally, this sector has been state run

but it is expected that by 2017 the participation of private companies will have increased to 30

percent from 6.5 percent in 2008.39

5.4.2 Waste

It has been estimated that 43 percent of the 47 million tonnes of waste that Brazil produces

annually is not disposed of properly. In the urban areas estimates show that almost 50 percent

of this waste is generated from the construction of houses and infrastructure. Brazil does have

an established waste program and is the largest recycler of aluminum in the world. Despite this

there are opportunities for growth in this area. After 20 years of debate, in March of 2010

Brazil’s chamber of deputies approved a national waste policy bill “Omnibus Waste Policy”. It is

expected that this bill will boost investments from both the private and public sector.40

Brazil’s current infrastructure and facilities are inadequate to handle the 3 million tonnes of

hazardous waste it produces each year. This waste is mainly produced in the south and south-

east and is cost prohibitive to destroy.41

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Brazil estimates it has over 15,000 contaminated land sites. Recent legislation approved by the

state of Sao Paulo along with the construction boom has driven the demand to convert these

contaminated sites into usable land.42

5.4.3 Energy - Ethanol

Brazil is considered the most effective producer of ethanol in the world and 50 percent of the

fuel used in Brazilian vehicles is composed of ethanol.43 Total investments in this sector are

expected to double by 2013 reaching US$ 33 billion. The Brazilian government is pushing to

make ethanol a global commodity and foreign investment in this sector is predicted to grow

from 7 percent in 2007 to 12 percent in 2013.44

5.4.4 Energy - Power Generation

Brazil receives over 80 percent of their energy through hydro and, in a 10 year energy plan

released in 2009 – 2010, the government laid out its plans to continue focusing renewable

energy specifically wind, biomass and hydro. Brazil is expected to expand its nuclear power

generation which currently account for a little over 3 percent of total output. This has the

benefit of being able to utilize the large uranium mineral reserves that Brazil possesses.45

Most power generation facilities are located far from the demand and the energy lost during

transmission can be up to 16 percent of total demand. It is expected that the transmission grid

will grow by almost 40 percent in the next 10 years, not including improvements in

infrastructure, security, and efficiencies.46

5.4.5 Air Emissions Reduction

This category covers both engine and vehicle emissions as well as pollution mitigation control

for industrial and manufacturing capabilities. In the major cities vehicle emission accounts for

62 percent of air pollution and the countryside has seen an increase in emissions because of

increased industrialization and harmful agricultural processes. The state of Sao Paulo recently

set a target to reduce Green House Gas (GHG) emissions by 20 percent by 2020. Brazil lacks

expertise in air quality and almost all technology used to monitor and clean the air comes from

outside the country.47

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5.4.6 Clean Development Mechanism (CDM)

As a non-Annex 1 member of the Kyoto Accord, emission reduction projects in Brazil fall under

the CDM. This allows countries with emission reduction targets to implement an emission

reduction project in a developing country, in this case Brazil, and receive Certified Emission

Reduction (CER) credits to be counted towards their own emission targets.48 Presently, Brazil

ranks third in the world among countries with annual GHG emissions. In 2008, Brazil had over

165 different projects registered with the CDM and another 438 ongoing projects.49 Total value

of all projects directly related to the CDM is estimated to be worth US$ 118 billion.


5.5.1 Political

There are many government initiatives in this sector. In 2007, the Brazilian Government signed

the “Growth Acceleration Program” (PAC), a US$ 325.7 billion program for projects focused on

logistics, energy and social infrastructure. The government has already made commitments to

bring the water and wastewater infrastructure in the host cities up to FIFA standards before

2014.50 The government is also working towards making ethanol a global commodity.

Additionally, the government has set targets to reduce GHG by 20 percent in Sao Paulo by

2020.

Brazil has a fairly modern and advanced environmental regulation framework and although

improving, enforcement of these laws is still an issue.51 Regulators relevant to this sector

include:52

• National Agency of for Petroleum, Natural Gas and Biofeuls (Agência Nacional do

Petróleo, Gás Natural e Biocombustíveis - ANP)

• Federal Water Regulatory Agency (Agência Nacional de Águas – ANA)

• Brazilian Institute of Environment and Renewable Natural Resources (Instituto Brasileiro

do Meio Ambiente e dos Recursos Naturais Renováveis - IBAMA)

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5.5.2 Economic

The government’s commitment to investing in the environmental sector means it is poised to

be a key driver of the country’s economic growth. Brazil is ranked as the 10th largest green

economy in the world with a market value of US$131 billion. Overall the Environmental

industry is expected to grow by 10 percent in the next five years.53It is estimated that 50

percent of Brazil’s environmental sector investments are focused on upgrading the water and

solid waste infrastructure.54 See Table 4 for Brazil’s Environmental Goods and Services

Table 4: Brazil's Environmental Goods & Services

An estimate of the potential business opportunities for foreign owned companies in the

environmental sector is US$ 10 billion; primarily focused in the Water, Solid Waste, Energy

Efficiency and Air Pollution Control.55

5.5.3 Socio-cultural

There is limited awareness about environmental sustainability in developing nations such as

Brazil. However, there have been some initiatives undertaken by the government and the

private sector such as the GHG protocol program that involves large businesses, the Brazilian

environment industry, the Brazilian Council for Sustainable Development, and Fundação Getúlio

Vargas, along with World Resources Institute and the World Business Council on Sustainable

Development to increase awareness of climate change and environmental concerns. 56 There is

also an initiative funded by the Canada Climate Change Development Fund (CCCDF), to support

International Council for Local Environmental Initiatives (ICLEI) and create awareness about

climate change and measuring community greenhouse gas (GHG) emissions.57 The entire

industry is expected to grow over the next few years helped along by the requirements for the

2014 FIFA World Cup and the 2016 Olympic Games

Brazil's Environmental Goods & Services: %Water 25.3%Solid Waste 22.2%Energy Efficiency 19.5%Air Emissions Reduction 10.5%

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5.5.4 Technology

Eighty percent of the country’s energy is created through Hydro. Brazil is a world-wide leader in

bio-fuel technologies (biofuel/ethanol production).58 It has a strong recycling program and the

world’s most efficient recycler of aluminum. Brazil also has a large potential to capitalize on

wind energy and is one of the three largest suppliers of Uranium (fuel for future nuclear plants).

5.6 SWOT Analysis

5.6.1 Strengths

Brazil in the 10th largest green economy in the world and there are many initiatives undertaken

through public, private and international investments in the various subsectors. There are also

initiatives being undertaken because of the Koyoto agreement for CDM. Brazil has an advanced

environmental regulation framework which sets a strong foundation for an improved green

economy. The upcoming games are further expected to accelerate growth in this sector.

5.6.2 Weaknesses

According to a news broadcast by the World Bank in March 2009, over the last 30 year there

has been substantial damage to Brazil Amazon forests, and each year about 19,000 km2 (7,500

sq miles) are cut down. Ensuring that natural resources are used sustainably has been difficult

for Brazil. The broadcast further states, "Economic forces, poor agricultural practices, weak

property rights, and poor regulatory enforcement have combined to produce these worrying

results. Deforestation is impacting the climate, soil erosion, and biodiversity. Seventy percent

of Brazil’s CO2 emissions come from deforestation and change of land use."59

Brazil’s current infrastructure and facilities are insufficient to manage the large amount of

waste that it produces each year resulting in over 15,000 contaminated land sites.

5.6.3 Threats

According to the OECD Trade and Environment Working Paper, the government gives

preference to domestically produced goods and services and is not a signatory to the

plurilateral Agreement on Government Procurement of the World Trade Organization (WTO).

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This allows Brazil to use a different standard than those used by signatories. The report further

states, "Although a 1993 law requires major procurement at all government levels to be open

to competitive bidding and awarded to the lowest bidder, with no distinction between Brazilian

and foreign enterprises, in case of a tie for low bid preference may be given to a Brazilian firm.

International bidding is required for most procurement which involves international

development bank funding."60

Although environmental legislation in Brazil is fairly advanced, these policies are not always

properly implemented or enforced.61


In order to fund the Integrated Solid Waste Management and Carbon Finance Project, Brazil has

received a US$50 million loan from the World Bank Group. The World Bank website states, "The

objective of the project is to improve the treatment and final disposal of municipal solid waste

while: (a) supporting (i) the closing of open dumps and the implementation of modern and

environmentally safe landfills or alternatives to waste disposal; (ii) improved municipal solid

waste management practices; (iii) reduction of poverty among waste pickers; and (iv) increased

private sector participation in solid waste service provision; and (b) strengthening Caixa

Economica Federal's capacity to manage carbon finance projects".62

Currently some of the best opportunities for companies looking to enter the Brazilian

environmental sector are in:

Water and Wastewater – Measurement, control and monitoring technologies; sludge

treatment, leakage detection control, odor removal processes, flow meters (micro/macro

measurements), pipe cleaning, pipe joints and flow control products, automated technology for

wastewater/underground water, industrial effluent, equipment and services for water reuse in

industrial processes and UV systems for water disinfection.6364

Energy – Waste to energy solutions, ethanol, wind, nuclear, hydro, transmission and

distribution (including automated systems and smart grid).65

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Waste – Solid waste treatment and recycling, odor control equipment, landfill gas emissions

monitoring technologies, etc. Solutions for remediation of contaminated land including: project

management, risk assessment, monitoring strategies, etc.

Air Quality – There are opportunities for air monitoring NOX/VOC control equipment and

emissions monitoring and control.66

Climate Control Mechanisms – Currently Brazil has over 400 different CDM projects directly

related to climate control initiatives. Outside of these projects, there are opportunities in

project design, carbon management and trading and low carbon technologies and

verification.67


According to business leaders in the environment industry in Brazil, the recycling market is one

of the focus areas within the environment sector in Brazil. As concern with recycling products

has increased in recent years the sector has been growing. The Brazilian recycling sector

employs around 200,000 people. Even though Brazil is considered a world leader in recycling

there is a perception that the sector is stagnant in the country.

Brazil has policies for waste management that only solve the final destination problem but not

selective collection, which is currently implemented by companies. Selective collection needs to

be improved as the number of Brazilian companies who provide this service has not increased

much in recent years.

Opportunities available in this sector include recycling of textiles, packaging, bottles, bags, tires

and recyclable packaging for food, vegetables and clothes. According to the partners of a

recycling company, the machines and equipment for recycling could be improved and garbage

collection and separation could be more organized and efficient. Currently, machinery is

imported from USA, Sweden and China and lower prices are a key factor. Canadian companies

could also have the opportunity to provide expertise to help develop recycling machines.

The best way for international companies to do business in this sector is through local

partnership, joint ventures or technology transfers.

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5.8 The Atlantic Canadian Environmental Technologies Sector68

Between 1995 and 2002, the environmental industry in Atlantic Canada has seen an increase of

87 percent in revenues and has had higher growth rates than the national employment

averages and number of active companies in the field. In 2004, Industry Canada valued Atlantic

Canada’s environmental market at $1.5 billion annually and had 821 environment companies

exporting their products and services internationally.

Atlantic Canada has pioneered many new innovations in the environmental sector such as

Canada’s first fully integrated waste management facility; a breakthrough mobile

environmental cleanup unit; biodegradable peat moss-based oil absorbents; and software that

simulate environmental management scenarios. These innovations and the ability to provide

integrated environmental and economic solutions have provided Atlantic Canada with the

much needed edge to export its products and solutions across the globe. Some of the examples

reported in ACOA’s industry profile for the environmental industries include:

• New Brunswick - recognized for its expertise with wastewater (organic waste from pulp

and paper, pharmaceuticals, food processing and potable water).

• Nova Scotia – has achieved some of the highest diversion rates in solid waste

management (at 50 percent) in the world.

• Prince Edward Island - recognized for its expertise in wind energy, as well as for solid

waste management planning and systems development.

• Newfoundland and Labrador - recognized for its expertise in oil spill contingency

planning, oil spill response and remediation.

Traditionally Atlantic Canada has enjoyed a strong reputation in the environmental sector.

Some specific areas of strength and expertise in Atlantic Canada include:

• Air monitoring services and technology • Engineering consulting

• Geomatics • Hydro

• Instrumentation • Marine environmental services

• Offshore wind • Oil spill contingency planning and response

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• Remediation • Solid waste management

• Tidal • Water and wastewater treatment

• Water resource management • Wind


Atlantic Canadian business leaders in the environmental sector felt that there has been a lot of

activity in environmental sustainability and environmental management planning. There was a

draft legislation for the wastewater and fisheries and clean water act and contaminated sites

regulations regarding clean-up criteria for impacted properties. There are also several

government stimulus funding programs along with investments in alternative energy sources,

and soil and ground water remediation. Companies in this industry have seen some

consolidation and in order to grow, export markets are being targeted. Currently, exports

include waste management and master-planning, consulting services from engineers and

scientists, h-back systems, and soil and groundwater remedial design. These products and

services are mostly exported to North America, the Caribbean, Saudi Arabia, Bermuda, Turkey,

Haiti and Peru. Competitive advantages of the industry include the Atlantic Canadian workforce

and work ethic, the low cost of living, leading to privately owned structures and economies of

scale.

Not many Atlantic Canadian companies have had experience in Brazil. There has been some

work done with mines, but not substantial. One of the companies interviewed, got its

opportunity in Brazil because the World Bank was lending to these operations and then hired

them to assess environmental issues for liability and risk. Some companies are wary of investing

in Brazil because of the perceived risks due to poor ethics in the South American markets. Most

companies would be interested in doing more work in Brazil if the opportunities were well

suited to the goals of the company. For a company willing to take some risk, Brazil would be

very attractive because the North American market is saturated. Interests expressed include

opportunities related to water and wastewater, professional engineering services, solid waste

management because of the rudimentary standards and policies in Brazil, mine closures and,

the petroleum industry due to their capacity to invest and resulting higher margins. There are

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also opportunities in products and services that are on the downturn in North America because

those are on the upturn in Brazil.



following segments:

• Water and wastewater treatment and water management technologies such as

advanced water treatment (filtration), and water loss prevention. There is also

increased demand for specialized consulting services and waste treatment technologies.

• There is also need for equipment, machinery and technologies related to recycling of

garbage and waste materials.

• Site remediation systems for the over 15,000 contaminated land sites in Brazil

• There is also a need for technologies related to renewable energies specially wind

energy and biomass.

There are various projects in this sector that are funded by the Brazilian government as well as

governments of other countries such as the US, UK and Canada. Moreover, Brazil also receives

funding from the IDB and World Bank for environment sustainability initiatives. Atlantic

Canadian companies exploring opportunities in this sector could identify specific projects and

determine the procurement authority and process. Detailed information on working on projects

funded by the World Bank and IADB can be found on their website.69

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6. Oil and Gas Equipment and Services

6.1 Introduction

The Oil and Gas Equipment and Services (OEGS) industry is an important part of the Oil and Gas

Industry and looks at extraction equipment, drilling technologies and maintenance systems.70

6.2 Subsectors

Industry Canada classifies the OGES industry into two main sectors and further into sub-

sectors:71

Services Sector: Geophysical Prospecting, Contract Drilling, Pumping, Pipeline Services, Field

Processing, Transportation, Engineering, Geomatics, Marketing, and Other Services

Manufacturing Sector: Drilling Equipment, Drilling Consumables, Pipeline Equipment, Storage,

and Oil Sands Equipment

6.3 Global Context

6.3.1 Oil and Gas

The Oil and Gas industry has been one of the most lucrative industries over the last hundred

years. The global crude oil market shrank by 40.6 percent in 2009 to a value of US$1,358.2

billion. In 2014, the global crude oil market is forecast to have a value of US$2,159.2 billion, an

increase of 59 percent since 2009. On a volume basis the global crude oil market shrank by 3.3

percent in 2009 to reach a volume of 22.9 billion barrels. In 2014, the global crude oil market is

forecast to have a volume of 25.4 billion barrels, an increase of 10.9 percent since 2009. The

Americas account for 42.6 percent of the global crude oil market value.72

The oil industry consists of state owned and international oil companies, with the most

powerful and lucrative companies being the state owned organizations in the Middle East. The

giants of the industry include Saudi Aramco, National Iranian Oil Company (NIOC) and Qatar

Petroleum. “The six largest international oil companies only account for approximately three

percent of the world’s total output, with ExxonMobil’s oil reserves [accounting] for less than

one percent of the world’s total.”73 As of 2009, the top ten international petroleum producing

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companies were (according to sales, in billions): Royal Dutch Shell (Netherlands) – US$ 458,

ExxonMobil (United States) – US$ 425, British Petroleum (United Kingdom) – US$ 361, Chevron

(United States) – US$ 255, Total (France) – US $223, ENI (Italy) – US$ 158, Synopec-China

Petroleum (China) – US$154, PetroChina (China) – US$114, Gazprom (Russia) – US$97, and

Petrobras-Petroleo Brasil (Brazil) – US$ 92.74

6.3.2 OGES in Canada75

In 2010, Industry Canada estimated that the OEGS industry accounted for about $80.7 billion in

revenue and employed about 230,000 people within the two main subsectors. Although every

province participates in this industry Western and Atlantic Canada play a larger role.

Small and Medium sized Enterprises (SMEs) are prominent in the OGES industry with about

2,300 enterprises operating across the various sub-sectors. These enterprises represent all

aspects of the value chain in the industry and provide manufacturing and services mainly to

larger corporations. The industry serves both the domestic and international markets which

include the US followed by Russia, the United Kingdom, Australia, the Middle East, China, Asia,

and South America.

6.4 The Brazilian Oil and Gas Sector

The National Petroleum Agency (ANP) is responsible for issuing exploration and production

licenses and ensuring compliance with relevant regulations. Recent legislation concerning pre-

salt exploration and production has changed the operating environment. The term ‘pre-salt’

refers to “a group of rocks located in the marine portions of most of the Brazilian coast, with

potential for the generation and accumulation of oil.”76

Most oil production in Brazil comes from the South-eastern region, mainly in the Rio de Janeiro

and Espírito Santo states. More than 90 percent of Brazil’s oil production is offshore in very

deep water and mostly consists of heavy grades. There are five fields in the Campos Basin

(Marlim, Marlim Sul, Marlim Leste, Roncador, and Barracuda) that account for more than half

of Brazil’s crude oil production. These Petrobras-operated fields each produce between

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100,000 and 400,000 barrels per day.77 Refer to Appendix “E” for Proven Oil reserves (onshore

and offshore) by State – 2000 -2009.

Exploration and Production (E&P) activities in Brazil are carried out by 72 groups of which 36

are foreign companies.78 Brazil has approximately 12.9 billion barrels of oil reserves in 2011

(second largest in South America behind Venezuela).79 Brazil is also one of the fastest growing

oil producers in the world. It currently possesses 1.9 million barrels per day of crude oil refining

capacity spread amongst 13 refineries (11 operated by Petrobras, the largest being the

360,000-barrel per day Paulinia refinery in Sao Paulo).80 The offshore Campos and Santos

Basins, located off of the country’s southeast coast, hold the vast majority of Brazil’s proven

reserves.81

Petrobras is state owned and the most dominant player in the industry (it holds strategic

positions in the up-stream, mid-stream and down-stream sectors). It held a monopoly in the

country until 1997, when the government opened up the sector. Other companies in the

industry include Royal Dutch Shell, Chevron, Repsol, Anadarko, Devon, Statoil and the BG

Group.82 Petrobras plans to increase its Brazilian refining capacity to more than three million

barrels per day by 2020. Under the company’s 2010-2014 business plan, Petrobras will build

five additional refineries to meet this goal.”83 The Brazilian oil company OGX is expected to

start producing in the Campos Basin in 2011. Brazil is the second largest producer of ethanol in

the world behind the US.84

There are several Industry Sectors for Oil and Gas in Brazil. This includes biofuels

manufacturing, the extraction of crude petroleum, natural gas extraction, oil and gas industry

regulation, oil refining, and petroleum and petroleum products wholesalers. In 2009, oil

production exceeded oil consumption. Brazil is predicted to be a net exporter of oil through

2012, and crude oil exports are expected to increase. Brazil also imports some crude oil to

meet the demand of its refinery fleet. 85

The US Commercial Service reports, "The 2010 estimate for Brazil’s oil and gas equipment and

services market is US$ 65.7 billion. Of that amount, US$ 17.4 billion is imported with about US$

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8.7 billion coming from the US. These figures do not include operational expenses, which would

add approximately 40 percent to the market."86


6.5.1 Political

The National Petroleum Agency in Brazil (Agência Nacional do Petróleo - ANP) is responsible for

issuing exploration and production licenses and ensuring compliance with relevant regulations,

which controls competition in the country.

The regulatory framework for pre-salt reserves was approved in 2010 and contains four primary

legislations.87

• A new agency, Petrosol was created to administer new pre-salt production.

• In exchange for larger ownership shares the government would be permitted to

capitalize Petrobras by giving it 5 billion barrels of unlicensed pre-salt reserves.

• A new development fund to manage government revenues from pre-salt oil was

established.

• A new production sharing agreement (PSA) system for pre-salt reserves was set up.

Brazil is expected to hold an eleventh auction round for exploration blocks in 2011 but only

after the debate over royalty distribution among Brazilian states is completed.

High tariffs aimed at protecting domestic manufacturers were changed to match General

Agreement on Tariffs and Trade (GATT) levels. All import taxes and some state taxes could be

exempted due a special tax regime that relate to the oil and gas sector.

6.5.2 Economic

As of April 03, 2011, the price of crude oil is US $ 107.94 per barrel.88 In recent years, the price

of oil has passed US $100 per barrel, but could continue to rise and surpass current levels with

the uncertainty in the Middle East. The OPEC nations also control the price of oil by the

amount of oil that they produce and ship. An increase in production would decrease the price,

whereas a decrease in production would increase the price (if all other factors remain the

same).

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6.5.3 Socio Cultural

A constant threat to the world oil industry is the risk of natural disasters and man-made

disasters. An example would be the Deepwater BP oil crisis in the Gulf of Mexico in 2010. A

similar disaster by any oil company in the future will lead to economic, environmental and

financial disaster. Any company that has to deal with the cleanup of an oil spill will receive a

backlash from the public, especially from environmental groups.

6.5.4 Technological

More than US$4.5 billion in R & D is expected to be spent by Petrobras by 2016. Petrobras has

tied up with Brazilian universities and will collaborate on research and development projects to

overcome challenges faced during deep sea drilling and advance ultra-deepwater oil

production.89

6.6 SWOT Analysis

6.6.1 Strengths

Non-OPEC countries have contributed to the global increase in oil production over the last year,

and Brazil is among the leaders in this category. Brazil is expected to have approximately 12.9

billion barrels of oil reserves in 2011 and is predicted to be a net exporter through the year

2012.90 The OGES part in Brazil is large and was estimated to be US$65.7 billion in 2010. Since

1997, the sector has been opened up by the government and is no longer a monopolistic

market. This has resulted in large international players setting up base in Brazil. Besides a rich

reserve of oil and gas, Brazil is also the second largest producer of ethanol in the world.

6.6.2 Weaknesses

With the National Petroleum Agency in Brazil (ANP) in charge of issuing exploration and

production licenses, the increased bureaucracy could hamper possible growth and limit the

number of new players in Brazil.

All potential foreign suppliers need to have a local partner or subsidiary which is registered and

filed under local requirements in order to supply to local companies. Several criteria such as

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economic-financial position, assessment of technical qualifications and adherence to specified

ethical practice are of prime importance to be selected.91

6.6.3 Threats

The Brazilian oil reserve is located offshore (in deepwater), at depths of more than 7,000

meters. Oil drilling at such depths is a concern because there is a risk of another BP Deepwater

disaster, leading to environmental and economic consequences.

Current companies operating in Brazil only have a contract with the Brazilian government for 34

years, including the exploratory phase and the production phase of the projects. The maximum

period for oil production is 27 years. It is unknown if a company can apply for another contract

when the current one expires. In addition, the government receives a cut of the profits from

the oil company.92


Petrobras, Brazil’s largest oil company plans to invest US$ 224 billion over the next five years.

These investments are directly associated with the pre-salt discoveries and will represent many

opportunities for Canadian companies seeking to invest in Brazil.93 Moreover, Petrobras won

the majority of the concessions from the auctions held in 2008. Therefore, a majority of the

opportunities in the OGES sector are in offering services to Petrobras.

Brazil will be holding pre-salt auction for Oil and Gas blocks later this year. This would provide

an opportunity for partnerships to be forged with the companies that win those contract(s).

The US Commercial Service reports that the following opportunities are open to foreign

operators:94

Longer-term equipment and service procurement and operational expense needs from

all oil companies (Petrobras and others) could exceed one trillion dollars through 2020 as

the "Tupi" and other pre-salt fields are developed. For its expanded exploration and

production activities, Petrobras plans to contract about 300 new vessels (e.g. oil drilling

and production platforms, ships, platform support boats, and very large crude oil

carriers.) Other equipment and component purchase forecasts for 2010-2014 include:

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• Pumps (centrifugue, alternative, dosing, etc) 18,300 units

• Compressors (rotating, centrifugue, turbo-compressor, alternative, etc) 3,200 units

• Valves (sphere, retention, globe, and others) 834,000 units

• Heat exchangers (including surface condensers) 3,900 units

• Bolts 8 million units

• Gaskets 660,000 units

• Forged components 15,000 tons

• Casted/smelted materials 70,000 tons

(Source: 6th Annual ONIP Meeting)

Refer to Appendix “F” for a comprehensive list of equipment and service requirements by

Petrobras.


The oil and gas sector has grown tremendously in Brazil, mainly in Rio de Janeiro, especially

because of the pre-salt discoveries. Available opportunities include the pre salt, investment in

shipyards and sales to Petrobras. Although there are several foreign companies in this sector at

the production level, the oil and gas sector revolves mainly around Petrobras. However, in the

accessories and equipment sector there are fewer foreign companies. Petrobras imports

certain parts and equipment from other countries because it is difficult to find them in Brazil.

Many companies have established departments to purchase parts and equipment in the US

(Houston) and Scotland. One of the representatives interviewed noted that equipment sold to

Petrobras must have the best quality.

Currently, there are many jobs available but few qualified employees to fill vacant positions in

Brazil, so the workforce needs to be better trained and equipment technologies need to be

improved. In the oil and gas equipment and accessories sector companies import raw material,

machines and accessories such as equipment connection, high pressure hoses, usually from

China because of the lower price.

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There are several opportunities available due to the massive ongoing investments. Brazil lacks

new technologies in the oil and gas equipment and accessories sector. So a company that

acquires a different technology may be able to add value to its products or even reduce its

production costs.

Canadian expertise can be applicable to reduce production costs by bringing in new

technologies and equipments. Canadian expertise could also be useful in the training of the

labor force and also in machinery development. The easiest way to participate in the sector

would be through partnership or joint venture.

6.8 The Atlantic Canadian Oil and Gas Sector95

The energy sector in Atlantic Canada has been growing. The oil and gas industry is one of the

strongest components of the energy sector and expects the annual growth output to reach 15

percent over the next decade. There are three major oil and gas development projects

underway in this region. 96 There are four oil refineries in Atlantic Canada: the Irving Oil Refinery

in Saint John, New Brunswick; the Imperial Oil Refinery in Dartmouth, Nova Scotia; the North

Atlantic in Newfoundland and Labrador; and the Point Tupper Fractionation Plant in Point

Tupper, Nova Scotia.

The region is also a world leader in energy production, export and research. Atlantic Canada has

topnotch researchers and research facilities, high quality business and transportation

infrastructure, low business and energy costs and well-educated workers. The industry is

supported by several companies involved in research and development, drilling, and marine

remote sensing. Other areas of strength include manufacturing of PVC solid floatation, oil

containment booms, oil storage tanks, berms, silt barriers and curtains, permanent rubber

booms, and oil spill response equipments. There is also expertise in production of radio and

data acquisition products for global customers in research, military, and search and rescue.

Atlantic Canada has also developed international niche markets in oceanography, meteorology,

defense, oil and gas and coastal environments and has developed state-of-the-art data

acquisition and telemetry systems for severe environments.

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Since 1998, Atlantic Canada's oil and gas exports have increased by 580 percent, to just over

$12.6 billion in 2009. The value of oil and gas exports currently accounts for more than 60

percent of the total value of the region's top 10 exports. Some of the industry's biggest players

are active in Atlantic Canada, including ExxonMobil Canada, Husky Energy, Suncor Energy, BP

Canada Energy, Chevron Canada Resources and Shell Canada.


Some Atlantic Canadian business leaders perceive that the oil and gas sector hasn’t really been

growing, and it could in fact be declining. However, there have been some positive oil and gas

policies relating to blast resistance lately. Exports include oil, gas, educational services, metal

fabrications, and blast resistant tents. Export is a large factor in the industry and importers

include Brazil, Trinidad, the USA, Mexico, Israel, and Europe. The Atlantic Canadian advantages

include being known for Canadian and Nova Scotian education, training, good service, and

workability. Other advantages include strict regulations which have led to a good track record

and being more economical than other alternatives.

Most companies have had experience in Brazil. Some work with underwater wire and rope

cleaning and fixing. However, some companies have the perceptions that in the past there were

issues around getting paid, corruption, regulations not being in place, and it being near

impossible to get access to Petrobras. It took years to break in to the market. These stories tend

to discourage others from trying. Although things seem to have improved lately, the larger

players tend to be more successful. Those that have experience got their opportunities through

trade missions, and through ACOA. Experience from trade shows indicates that Brazilians are

inclined to say positive things, but were unwilling to work towards win-win partnerships. Most

companies would be very interested in Brazil, especially since the pre-salt discovery. Interests

include safety products and services, cleaning, pipes, drill bits and distribution.


There are tremendous opportunities to supply products and services to the OGES sector in

Brazil with both domestic and foreign oil and gas operators. However, many of these

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opportunities are with Petrobras. A comprehensive list of these opportunities has been

provided in Appendix “F”.

In order to supply to Petrobras, Atlantic Canadian firms must become fully aware of their

procurement guidelines. Petrobras provides suppliers with an online system to register as

goods and service suppliers. Both potential and existing companies can gain information about

the legal, economical, technical, managerial and Health, Safety and Environment (HSE)

requirements that must be adhered to in order to become a supplier to Petrobras. A detailed

guide can be found on their website.97

Other opportunities in the sector that Atlantic Canadian companies can explore are training and

education services and innovative technologies related to the oil and gas sector.

It is also important to note that in order to be considered as a supplier to any of the oil and gas

companies in Brazil, Atlantic Canadian companies will need to establish local presence that

conform to Brazilian requirements. The ANP would need to be consulted by companies looking

to expand operations in the country. There is a fairly elaborate process that international

companies need to follow in order to enter the Brazilian energy market, specifically the oil and

gas industry. More information can be found on the ANP website.98

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7. Life Sciences and Biotechnology

7.1 Introduction

The Life Sciences industry has been characterized by advances and improvements in technology

and R&D processes thus intensifying market competition and fuel extensive efforts in successful

innovation. Simultaneously, consumer demand and shifting demographics are exerting greater

pressure to fulfill the promise of efficient and accessible innovative healthcare solutions.99

7.2 Subsectors

The Life Sciences sector includes companies in the fields of biotechnology, pharmaceuticals,

biomedical technologies, life systems technologies, nutraceuticals, food processing,

environmental, biomedical devices, and organizations which are involved in the various stages

of research, development, technology transfer and commercialization.100

"Biotechnology is sometimes not considered a distinct sector but more a collection of

technologies that enhance the discovery and development of new medicines, and diagnosing

and treating patients more effectively."101 IBIS World’s definition of the sector, “Biotechnology

is also the application of science and technology to living organisms as well as parts, products

and models thereof, to alter living or non-living materials for the production of knowledge and

biotechnology products and services. The definition of biotechnology as used by the US Census

Bureau and the National Science Foundation is - the application of molecular and cellular

processes to solve problems, conduct research, and create goods and services.”102

7.3 Global Context

In 2007, the global biotechnology market generated total revenues of US$171.8 billion -

compound annual growth rate (CAGR) of 10.7 percent for the period spanning 2003–07. 103 In

2009, the market grew by 4 percent to US$ 200.9 billion. In 2014, the global biotechnology

market is forecasted to have a value of US$ 318.4 billion, an increase of 58.5 percent from

2009. At 66.2 percent of the market's total value Medical and Healthcare is the largest segment

of the global biotechnology market. Currently, 48.4 percent of the global biotechnology market

value is represented by the Americas.104 The global biotechnology market has grown across the

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world over the last seven year. However, with many patents expected to expire in the near

future and increasing competition the market is expected to decline for the next few years.105

According to Industry Canada, "In 2005, the number of Canadian biotechnology companies

grew to a total of 532, an increase of 9 percent since 2003. According to E&Y, Canada continued

to have the second highest number of biotechnology companies in the world demonstrating a

supportive business climate and Canada’s commitment to growing this vital sector. In 2005,

biotechnology company revenues were $4.2 billion, a 9 percent increase over 2003

revenues."106

7.4 The Brazilian Life Sciences and Biotechnology Sector

7.4.1 Biotechnology

Biotechnology companies in Brazil are sub-divided into seven sectors: Human and Animal

health, Agriculture, Reagents, Bioenergy, Environment, and Mixed. Human health and

agriculture, represents almost 50 percent of the industry’s activity and represent Brazil’s

research expertise and competitive edge. 107 See Figure 6 for the breakup of Life Sciences

companies by sector.

Figure 6: Percentage of Life Science Companies in Brazil by Sector.

Fundação Biominas reports that, "Almost one third of Brazilian life science companies are

exporters, reporting sales of US$ 48.4 million in 2008. The most common destination was Latin

31%

18%16%

14%

9%

8%4%

Life Science Companies By Sector (%)

Human Health

Agriculture

Reagents

Animal Health

Mixed

Enivornment

Bioenergy

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America (33.3 percent), followed by Europe (26.7 percent) and USA/Canada (17.8 percent).

Moreover, 56 percent of the non-exporters plan to enter the international market in the next

couple of years." 108

According to a UK Trade and Investment report, "In 2010, Brazil had approximately 350

biotechnology companies, with an estimated annual turnover of £2.6 billion ( US$4.2 billion)

[representing 1.5 percent of Brazil's GDP] and employed around 28,000 people. Brazil is

internationally recognized for its biotechnology advances, including genomics, cell therapies

(stem cell research), phytotherapics and vaccines."109 Brazil has over 1,200 patents registered

through the large stem cell research it undertook. Further, in 2009, Brazil was the second

largest user of genetically modified crops (soy, corn and cotton). 110

7.4.2 Health equipment

In 2008, Brazil was one of the top five producers of dental and medical equipments with a

market value of US$ 5.3 billion. In the same year, Brazil exported US$ 580 million worth of

health equipments. This health equipment market caters to over 500,000 hospital beds in 8,200

hospitals and 800 specialized hospitals as well as 7,500 diagnostic units.111

7.4.3 Pharmaceuticals

The Pharmaceuticals sector in Brazil has been growing at the rate of 8 – 10 percent annually

and was valued at approximately US$ 7 billion. However, the generic drug market has been

growing much faster (20 percent annually). Euromonitor International estimated a growth of

30 percent in the consumer healthcare market from 2009 -2014. Refer to Appendix “G” for

sales of consumer health products by Sector. Brazil is one of the leaders in development of

generic medicines. It is has also made strides in research and development and holds several

patents for basic health, HIV and cancer combative drugs.112

7.4.4 Vitamins, Nutraceuticals and Phytotherapics

The value of the vitamins and nutraceuticals market is approximately £250 million ($400

million) and is growing at 20 percent each year. "According to the Brazilian Association for

Complementary Medicine (ABMC), this can be related to three main factors: the valorization of

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quality of life, the low cost of the products and the scientific studies corroborating its efficacy.

Brazilian women are the main consumers of vitamins and nutraceuticals, representing 75

percent of the market."113


7.5.1 Political

The Biotechnologies market in Brazil has been booming in part due to new regulatory

incentives and funds that companies are receiving. In 2007, The National Policy for

Biotechnology – a decree supporting the development of biotechnology in Brazil was signed by

President da Silva (Lula). The objective of the decree was to improve collaboration between the

government, universities and private sector and to develop Brazil into a Biotechnology leader

over the next 15 years. An investment of approximately US$ 5.0 billion is expected over the

next decade and is being spent towards encouraging as many as double the start-up companies

and the development of 20 new PHD programs. Fundação Biominas reports, "The goal is to

encourage biotechnological applications in five different fields: human health, food security,

animal health, industrial products and environmental quality. [Sixty-eight] percent of all

Brazilian life science companies benefit from public policies, demonstrating the relevance of

governmental support. The companies benefit mainly from grants (48.4 percent), but facilitated

credit (9.5 percent) and tax exemption (5.3 percent) are also available incentives."114

7.5.2 Economic

The Federal Government Industrial, Technological and Foreign Trade Policy (PINTEC) is

supported by the Brazilian Ministry of Science and Technology and has been instrumental in

developing many strategic projects that support research, development and innovation. Some

examples reported by Fundação Biominas include: 115

• Since 2001 the Biotechnology Sectoral Fund has been investing expressive resources in

the organization of genome networks and biotechnological projects relevant to

agriculture (germplasm banks, culture collection) and health (phytomedicines and

biopharmaceuticals).

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• The Brazilian Innovation Agency (FINEP), which provides grants, i.e. non-reimbursable

funds, and loans to support every stage and dimension of the scientific and technological

development cycle, invested US$ 1 billion in 2007, and US$1.5 billion in 2008 on the

development of innovative products and processes.

• Recently, FINEP has created new instruments to support nascent high-tech firms. The

Inovar Project, supported by the Inter-American Development Bank (IDB), will promote

new venture capital funds in Brazil. The First Innovative Company Program (PRIME) was

launched to encourage the creation of more than 6,000 innovative companies in the

country from 2009 to 2011.

• Another instrument in place is the Program for supporting research in enterprises

(PAPPE), a program to provide research grants to individuals in small companies, similar

to the Small Business Innovation Research Program (SBIR), in the US.


A Financial Times special report about genetically modified (GMO) crops states that there has

been a lot of controversy about GMO crops over the years and consumers have had reservation

about consuming genetically engineered or cloned for food, dairy and meat production. Despite

these fears biotech plants have been extensively used in US and other developing nations.

Despite this GM crops abundantly grown in Brazil and the report further states, "the US

accounts for almost half the world’s GM planting (64m hectares), followed by Brazil (21.4m ha)

and Argentina (21.3m ha)."116

7.5.4 Technological

Technology advancement in the biotechnology sector is extremely important and involves

supplementary focuses such as robotic technologies, electronic medical records and

information technology in hospital management systems. An investment in Information

Technology worth about £32 million ( US$51 million) is expected by 20 large healthcare

organizations in Brazil in an attempt to meet regulations set by the government’s healthcare

regulator ANS (National Agency for Supplementary Healthcare). 117

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7.6 SWOT Analysis

7.6.1 Strengths

There is a high amount of international interest in the Brazilian market. Multinational

pharmaceutical companies are looking at options to acquire local generic pharmaceutical firms.

However, with the extensive investment by the Brazilian government in the biotechnology

industry, local companies themselves are looking at the potential to export and grow both

domestically and internationally. These factors make the Brazilian biotechnology industry

attractive for foreign investors as do the stability of Brazil’s economy, better access to

medicines for the population and governmental policies regarding healthcare. 118

7.6.2 Weakness

Despite Brazil’s attempt and extensive effort to raise expertise in the biotech industry, the

current education and training levels of the workforce is likely to place a severe dampener on

the progress that Brazil hopes to achieve. Also, it has become increasingly difficult for the

private sector to attract qualified workforce and match the incentives provided by the public

sector. Even with changes in the government legislation that support innovative research and

development with public funding these factors are likely to adversely affect the industry.119

7.6.3 Threats

Patent laws and governmental bureaucracies associated with them sometimes deter

multinationals from introducing new products to the Brazilian market. Patent applications for a

drug could take well over seven years for The National Health Surveillance Agency (Agência

Nacional de Vigilância Sanitária – ANVISA) to process. In some instances even when patents are

approved there could be a possibility that they may be withheld by ANVISA on grounds of

public access. Most of these regulatory concerns tend to stem from the fact that ANVISA

regulators have limited experience in product development and manufacturing. Ethics approval

for clinical trials, biosafety and biodiversity regulations are stringent and cause significant

hardship and delays for companies. 120 There is an estimate that about 18,000 pharmaceutical

patents are currently pending for approval. Another threat is the cascading tax method applied

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to the manufactured goods in Brazil which affect several industries. However, the government

is expected to reduce these taxes so as to make drugs more affordable to the Brazilian

population. 121


The Brazilian pharmaceutical market represents several opportunities as the size of the market

is large and is expected to continue growing as the government lowers taxes on these products.

Most of the raw materials used in production of generic drugs in Brazil are imported (about 85

percent). Further, the generic drug market is expected to expand due to the expiry of several

drug patents in 2010. There is also a major demand for equipment and services required for

building of pharmaceutical plants. This has led to multinational companies acquiring local

laboratories and creating a strong presence in Brazil.122

There is a huge demand for health products in Brazil of which the three largest are cough, cold

and allergy medication, analgesics, and vitamins and dietary supplements (neutraceuticals).123


Stakeholders in the Brazilian biotechnology sector believe that the sector is developing with an

expected growth of 15 percent especially for drug companies. However, the life sciences and

biotechnology industry does not have sufficient numbers of qualified work force.

Companies interviewed currently imports raw material, from USA, France, Germany and China

because of the high quality products at competitive prices. However, these companies did not

import any products from Canada.

There are many available opportunities, such as generic medications, cleaning products,

genetics and microbiology. Brazil could import modern machinery to produce cleaning

products. Canadian companies could participate in biotechnology sector through joint ventures,

partnership and technology transfers.

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7.8 The Atlantic Canadian Life Sciences and Biotechnology Sector

The four Atlantic Provinces are leaders in the biotechnology industry. Newfoundland and

Labrador is recognized internationally for its expertise in marine biology. Nova Scotia’s life

sciences industry is a global leader in human health, medical diagnostics and marine sciences.

Prince Edward Island and New Brunswick are at the forefront of global research in agricultural

biotechnology124

7.8.1 Regional Profile

Newfoundland and Labrador

Newfoundland and Labrador has developed a niche of expertise in marine biotechnology and

human genomics. Local biotechnology companies have proven success in areas such as fish

growth, pharmaceutical products, vaccine delivery systems, diagnostic testing and DNA

research.

BioteCanada provides the following regional overview of the other Atlantic Canadian

provinces:125

Prince Edward Island

Prince Edward Island’s Bioscience Cluster is a leading center for bioactives based research,

product development and commercialization for human, animal and fish health and nutrition.

PEI has established an outstanding collaborative environment of business, research, academia

and government organizations working together to build a strong bioscience-based economic

sector in PEI.

Nova Scotia

Nova Scotia is home to more than 50 life sciences companies with close to 500 products

competing globally. In addition to those already in the marketplace, industry has a rich pipeline

with more than 300 products at various stages of development.

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New Brunswick

New Brunswick’s strong R&D and knowledge assets, coupled with abundant forestry,

agriculture, and marine resources, are spawning an innovative bio-industry cluster. With

plentiful forestland and proximity to the sea, New Brunswick is a world leader in tree

improvement and the development of "green" technologies for forest pest protection, as well as

a global leader in the development of "green" fish therapies, fish brood stock and new species

for aquaculture.


The life science industry is holding steady, but at a higher rate than the rest of the economy,

and it has weathered the recession well with smaller companies leveraging their resources into

research. It is seen positively by most governments and PEI is developing truly helpful policies

to support this sector.

Exports include technical expertise, bio-pesticides, diagnostics, health products, healthier food,

drugs, botanical extracts, medical devices, and nutritional supplements. Importers include

Europe especially Germany and France, other provinces, South America, China, Asia, a small

amount for Africa, and a large amount for the US. Advantages include a good research and

development environment, lower cost of doing business with a favorable tax regime, good

work force, better products, and being niche or specialty players.

Most companies interviewed did not have experience in the Brazilian market, but know that it

holds promise. Brazil did not seem to be affected by the American recession. Many have

identified Brazil as a potential market; however there are deterrents to doing business in Brazil

due to the complexity of its fast paced populous cities. Moreover, focusing on Brazil would

mean that higher priority markets like the US would need to be set aside.. Introductions to the

Brazilian market have been made by NATI, DFAIT, Canadian embassies, consulates, and ACOA.

Many companies would be interested in doing business with Brazil. They know the country has

money to spend, but language barriers are a concern. Companies also realize that a good

trusted partner is important because it can be very hard getting into any foreign market.

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Government incentives and efforts would also have to be sector driven and not generic. There

is massive biomass potential, and it could be a captive market for things like diagnostics for

cancer because Brazil may have limited resources in that area. Distribution would also be an

area of interest, if the distributor was well trusted.



following segments:

• Despite the regulatory obstacles the generic drug market in Brazil is large and growing.

Brazilian companies are looking for expertise and advanced technologies to improve

their efficiencies. Given Atlantic Canada’s pioneering innovation there may be

opportunities available for technology transfer.

• There is also a shortage of skilled workforce in the biotechnology industry providing

opportunities for training and educational services.

• Nutraceuticals are in high demand in the Brazilian market. However, regulations

procedure established by ANVISA need to be followed in order to import Nutraceuticals

to Brazil.

• Almost one-fifth of the life science sector is focused on agriculture, there are

opportunities for Atlantic Canadian companies to transfer technology related to tree

improvement and "green technologies for forest pest protection".

Detailed guidelines on petitions, required documents, registration application processes, import

of products, company operation authorization, and payment of sanitary surveillance inspection

fees can be requested via email ([email protected]) from the ANVISA website.126

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8. Ocean Technology

8.1 Introduction

The Ocean Technology Sector is a broad area which encompasses many different industries and

focus areas. Government of Canada breaks Canada’s Ocean Technology Sector into eight

sectors: Aquaculture, Defense and Security, Education and Training, Fisheries, Marine

Recreation, Marine Transportation, Ocean Observation and Science and Offshore Energy.127

8.2 Subsectors

Industry Canada has identified 71 subsectors listed under Ocean Technologies. Refer to

Appendix "H" for a list of the subsectors.

8.3 Global Market

In 2000, the global marine industries market was estimated to be valued at US$ 1,084 billion. In

this sector the biggest contributors are oil and gas, shipping and naval expenditures.128 See

Figure 7 for the Global Marine Industry

Figure 7: Global Marine Industry - 2000

300234

22586

6938

3222

19171513

83111

0 50 100 150 200 250 300 350

Offshore Oil & Gas ProductionShipping RevenuesNaval Expenditure

Oil & Gas ExpenditureSubmarine Telecoms Revenues

Leisure Boating RevenuesShipbuilding

Aquaculture ProductionR&D

Marine ServicesMarine EquipmentPort ManagementSubmarine Cables

Education & TrainingOcean Survey

MineralsUnderwater Vehicles

Global Marine Industries $US billion (2000)

Total Worldwide Market$US 1,084 billion

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Although this market is dominated by these key sectors many of the smaller sectors (Ocean

surveys, underwater vehicles, etc.) are vital to the success of these larger sectors. The global

market for ocean observation systems was estimated at approximately US$1.8 billion in 2006

and was expected to grow to US$2.2 billion by 2011.129Countries prominent in this sector

include the US, France, Germany, Norway, Japan, Sweden, the Netherlands, Denmark and the

United Kingdom. International opportunities increase due to environmental awareness as well

as regulatory obligations across coastal regions.130

8.4 The Brazilian Ocean Technology Sector

The Brazilian Ocean Technology sector is divided differently than in Canada. Generally ship and

platform building are tracked separately to Ocean Observation Systems and Naval defense

shipbuilding.

The shipbuilding industry has seen a huge boom and the Brazilian government made this one of

the focuses of its economic development plan. Most of the growth is driven by the oil and gas

sector and Brazil is now constructing some of the largest most advanced supertankers in the

world. In addition to these tankers, the oil industry, along with government initiatives has

created a huge market for other types and sizes of vessels. In addition, to the 56,112

employees working presently in the shipyards, another 28,000 are employed in the Marine

Leisure Industry. There are 13 new shipyards being built in Pernambuco, Bahia, Alagoas, Rio

Grande do Sul, São Paulo, Rio de Janeiro and Espírito Santo. In a few years, when these

shipyards start operating, there will be a total of 50 medium and large sized shipyards in Brazil,

as 37 are already in operation now.131 At present, Brazil has one of the highest levels of

demand for new ships in the world and has the fourth largest number of orders totaling US$ 4.7

billion.132 Despite this demand, Brazil has a modest participation in the total number of ships

being built in the world (269 in Brazil vs. 7,500 worldwide). 133

Large players in the segment include Transocean, Pride, Noble, Seadrill, Sevan, Modec, BW

Offshore and Teekay. Additionally, international market leaders such as Samsung Heavy

Industries, Hyundai Heavy Industries, Atlantico Sul (ATL), Daewoo, Maua Jurong, STX and the

Chinese shipbuilding giant Cosco (CSSC) are also setting up operations in Brazil. Although,

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Brazil’s demand for new ships is high, the government is positioning Brazil to be a shipbuilding

nation and endeavors to build ships domestically. In order to fulfill local content policies

international companies need to partner with Brazilian shipbuilders or investors.134

This focus on shipbuilding and maritime vessels is supported by the government’s plans to

expand their navy by investing US$ 250 billion dollars over the next 30 years.135 This booming

shipbuilding industry is causing growing pains and the current infrastructure, including docks

and repair yards, are inadequate to handle these new strains.136 The Brazilian shipbuilding

industry has its poles distributed in several states regions of Brazil (Amazonas, Pará, Ceará,

Pernambuco, Sergipe, Bahia, Espirito Santo, Rio de Janeiro, Sao Paulo, Santa Catarina and Rio

Grande do Sul). The core technologies are installed in Rio de Janeiro and Sao Paulo. The most

important shipbuilding clusters in Brazil are: Rio de Janeiro, Pernambuco and Rio Grande do Sul.

Currently, Pernambuco is leading in the number or orders in the market.137

Other areas of growth have been Ocean Observation systems for Oil and Gas Exploration as

well as Ocean current and weather tracking.138 Brazil has also begun to invest in offshore

renewable energy including wave/tidal power and offshore wind farms.139140

8.4.1 Defense

In order of priority, the near-term projects are the submarine program, including 20

conventionally powered subs and six nuclear-powered units;141 a patrol vessel program of three

different classes: 500 tons, 200 tons and an 1,800-ton Ocean Patrol Vessel (OPV); a new fleet

tanker (AOR); an Escort Frigate program of three ships at about 6,000 tons each; and a Multi-

Purpose Ship (LPH) of about 20,000 tons.142

8.4.2 Acoustic Systems and Equipment

Brazil’s expanding offshore oil industry along with the recent events in the Gulf are driving the

demand for more stringent control and monitoring systems. Acoustic sensors which can act as

secondary Blowout Preventers (BOP) in case of emergencies are already "recommended" for all

deep sea operations in Brazil. At this time, Norway is the only other country which requires

these devices on deep sea drilling platforms. Recently a Texas company, DTC International,

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won a contract to supply these types of sensors for operations on several of Brazil’s drilling

platforms.143

Modern weather and tide monitoring buoys are currently being used in Brazil and the country

has taken the lead role in the Quickly Integrated Joint Observing Team (QUIJOTE); a program to

monitor and predict changes in the coastal zone of the South Western Atlantic.144 AXYS

Technologies based out of Sidney, BC recently delivered three oceanographic and

meteorological data collection buoys to the Brazil Navy Hydrographic Center.145

8.4.3 Imaging

In addition to the new navigation and radar systems required for the upgraded navy, Brazil’s Oil

and Gas industry and research institutions are in need of modern equipment that will allow for

accurate imaging and identifying in deep sea conditions.146

8.4.4 Offshore Energy

Brazil has begun to explore offshore energy options and in the north there is the potential to

utilize the tides as an energy source and the southeastern coastline offers opportunities to

harness wave energy.147 The Brazilian government has just signed a contract that will see

(additional) onshore and offshore wind farms become operational by January 2013.148

8.4.5 Marine Communications

The Brazilian market will need upgraded communication systems for their new ships and ports.

Recently the Brazilian Government awarded a contract to upgrade the existing national Marine

Communication System.149

8.4.6 Instrumentation and information systems

The ability to not only collect the information but also to be able to use this data is in high

demand. It has been identified that environmental agencies, meteorological services, harbor

authorities, civil protection, research organizations and fisheries departments all are in need of

these systems.150

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8.4.7 Platforms and vehicles

Deep sea platform services including drilling and support activities will be in high demand. 95

percent of Brazil’s goods are shipped by sea and as Brazil continues to grow the current

shipping and dock infrastructure is in need of improvement. Many private companies (most

notably Vale) have invested heavily into upgrading these shipping and dock capabilities.151

Driven by the oil and gas industry Brazil has begun to invest heavily in their ship building

capabilities. At the end of 2010 there were 269 projects (19 platforms) underway at Brazilian

shipyards.152 The “Merchant Shipping Fund” (FGCN) is a government program designed to free

up capital for shipbuilders in Brazil and before 2014 it is expected that it will help invest US$ 17

billion into the Brazilian ship making industry.153154

8.4.8 Various Services

The oil and gas industry is estimated to spend US$3.1 billion in ocean research. Brazil has a long

list of sites that companies would like mapped and the requirements of these companies

continue to expand. A current integrated metocean or seabed stability study associated with

well abandonment involves ships, stationary buoys, coastal stations, cores, geophysical lines,

lab testing, reports and modeling. While costs vary with market dynamics, a typical 21 day

cruise is in the range of US$0.5 to US$0.75 million.155


8.5.1 Political

Deregulation of the oil industry has attracted many investors and been a boom for the marine

and ocean industry. Brazil has by far the largest military budget in the region which is focused

on protecting their natural resources (mining, oil and gas). This includes a nuclear submarine

program. There is increased environmental awareness and regulations. Some of the

legislations currently being developed are:

1. Well abandonment procedures

2. Oil spill procedure and reporting

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3. Criteria to combat oil spillage

4. A national environmental licensing system156

Brazil has taken the lead role in the Quickly Integrated Joint Observing Team (QUIJOTE)

program to monitor and predict changes in the coastal zone of the South Western Atlantic.

8.5.2 Economic

The shipbuilding, offshore oil and naval industry is booming and is supported by the

Shipbuilding Guarantee Fund (FGCN) – Government program which is expected to see an

additional US$ 17 billion of capital injected into the Brazilian shipbuilding industry. The

shipbuilding industry in Brazil has positively impacted its trade balances by directly lowered

currency outflows for payment of shipbuilding at foreign shipyards as well freight payments.157

Further, the annual funding through the Merchant Marine Fund (FMM) increased from R$ 305

million in 2001 to R$ 2.6 billion in 2009.158


There is increased environmental awareness and presence on the global stage. There has been

an increasing level of pride and a willingness to exert influence on the global stage. The

shipbuilding industry contributed to the generating direct and indirect job opportunities and for

developing new technologies.

8.5.4 Technological

The massive increase of Exploration and Production (E&P) in Brazil, especially in deep-water is

giving rise to a new subsea equipment and technology industry in Brazil.159 Outdated docks and

ship repair yard infrastructure and technology needs enhancement.

8.6 SWOT Analysis

8.6.1 Strengths

The strong oil and gas sector in Brazil has resulted in large investments in the ocean

technologies sector. Government initiatives and policies have fuelled growth in defense,

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acoustic systems and equipment, offshore energy, marine communication, information

systems, deep sea platform and vehicles and research.

8.6.2 Weaknesses

The growth of the ship building industry is hindered by the current infrastructure. Docks and

repair yards need overhaul and upgrades to meet the current demands. There is a lack of

qualified workforce to meet the growing demands of the sector.

8.6.3 Threat

According to International Maritime Organization (IMO) estimates, world shipping is

responsible for about 3 percent of global CO2 emissions. Emissions from shipping are predicted

to triple by 2050.160 In order to protect climate and reduce emissions there are likely to be

stringent regulations which could threaten the shipping industry.


This is an extremely important market area for Atlantic Canada and for Brazil. The Ocean

Technology sector supports one of the strongest drivers to the Brazilian economy (oil and gas)

and has benefited from numerous government programs, including the FGCN. In addition, the

government’s recent focus on expanding the navy has helped create numerous opportunities

for foreign investors and companies.

The largest opportunities come from technologies and services directly supporting mining, oil

and gas or naval shipbuilding operations. Outside of these key areas there are strong

investment opportunities for modern environmental imaging, tracking and measurement

systems. Government and industry in Brazil have also identified the need to modernize and

expand the ports and associated infrastructure.

Some of the current equipment that is being imported by Brazil for Offshore Supply Vessels

includes:

• Propellants

• Controlled Pitch Propeller

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• Water and Oil Separator - 0.5M3/H, P=2BAR (Class)

• Waste Treatment System for living quarters

• Hydraulic Control Unit

• Tow Bar

• Offshore Cranes

• Firefighting System (FI-FI)

• Telecommunication and Safety Systems161


Stakeholders in the industry believe that the trend is positive with increasing investments due

to the discovery of pre-salts. The industry will continue to grow at least until 2020. The industry

is of vital importance to the Brazilian economy because of its magnitude and breadth. Brazilian

companies are also growing tremendously because of government incentives. There are many

subsidiaries of international companies with stock capacity in Brazil. The sector is dominated by

several players such as SMD, Schilling Robotics, Sonardyne, Oceaneering, and Tritech. A large

part of this industry works with imported materials which mostly includes large equipment not

manufactured in Brazil due to lack of technology and skilled labour. Most of the imports are

sourced from the UK; however imports also come from the US, Canada, Mexico, Italy, France,

Norway, and South Africa. Advanced technology and competitive prices allow these companies

to compete in the Brazilian market. The company interviewed has experience importing from a

Canadian company called Focal Technologies (now called MOOG) based in Dartmouth, NS.

Establishing a partnership is the best way to enter the Brazilian market in this segment.

8.8 The Atlantic Canadian Ocean Technology Sector

The Ocean Technology Sector is extremely strong and diverse with approximately 140 listed

companies. These firms operate in areas such as fishery technology, satellite technology,

electronic navigation, acoustic and radar equipment, oceanography research, ship/boat

building and the oil and gas sector.162163 Canada enjoys a strong international reputation and is

known for its leading edge technology and expertise in Ocean Technologies. Atlantic Canada is

home to a wide range of scientific and engineering expertise in this field, from ocean mapping

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and charting to cold water engineering and geophysical surveying. Some of the world’s most

modern naval vessels and their integrated electronic systems have been designed and built in

this region. Atlantic Canadian companies are also designing and installing some of the most

advanced integrated ocean surveillance systems in the world. Canada is recognized

internationally as a leader in marine industries, including specialized areas such as cold water

technology.164


According to business leaders in the Ocean Technology sector, the industry is doubling every

five years, and it remained relative untouched by the recession. Many companies are looking

for business internationally because of new benefits like funding for research and design that

are aligned to university research. Exports include nautical charting services like chart

conversion through international standards, nautical recording systems which are regulated by

the International Maritime Organization (IMO), radar technology, hooks, electrical equipment,

knowledge and concentration work, remodeling, simulations, maritime and port security, ocean

sensing, and harsh-weather environment and arctic systems. Current importers include New

Zealand, the US, Australia, Brazil, South America, the EU, Africa, Europe, Asia, India, Norway,

Russia, China, Korea, Scandinavia, Korea and other Canadian provinces. Some of the

competitive advantages include technical expertise, location and ability to deal with adverse

climatic conditions, university engineering and research, an understanding of the industry,

being niche players, and ownership of scarce resources.

Some of the companies interviewed had experience with Brazil while others did not. Those that

had experience with Brazil exported nautical recorders for commercial ships, and oil spill

management systems with radar technology components. However, these companies have

faced problems with getting visas and with shipping restrictions. Introductions were made by

personal connections, NATI, DFAIT, embassies, consulates, and ACOA. Their work with larger

clients has not led them to Brazil. The only opportunities they had were indirect work with a

company that has connections in Brazil. The companies that are not in Brazil would probably

be interested if the effort was specifically sector driven and if barriers such as application

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process and language could be worked around. Interests include navigational work like is done

in New Zealand, commercial marine electronics, maritime and port security.


Many of the opportunities available in the ocean technologies industry in Brazil are aligned to

the strengths of Atlantic Canadian companies. These include acoustic systems and equipments,

imaging and simulation, marine communications, instrumentation and information systems.

Atlantic Canada’s reputation and expertise in the ocean technologies sectors provides it with

opportunities to collaborate with the public and private sectors for technology transfers. A

route into the Brazilian market could be through large domestic and multinational companies

that have procured contract for shipbuilding, platform building, and other services.

The two largest trade shows for the Ocean Technologies sector are the Offshore Technology

Conference and Navalshore (shipbuilding/platform). It is recommended that those Atlantic

Canadian companies involved in Ocean Technology and are interested in entering the Brazilian

market should attend one or both of these shows.

Offshore Technology Conference-Brasil October 4–6, 2011 Rio de Janeiro, Brazil www.otcbrasil.org

Navalshore 2011 August 3-5, 2011 Centro de Convenções Rio de Janeiro - RJ – Brazil http://www.transportweekly.com/pages/en/news/articles/74795/

http://www.otcbrasil.org/

http://www.transportweekly.com/pages/en/news/articles/74795/

http://www.transportweekly.com/pages/en/news/articles/74795/

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9. Aerospace, Defense and Security

9.1 Introduction

The Aerospace & Defense (A&D) sector is defined as revenues earned by manufacturers from

civil and military aerospace and defense procurements which include equipment, parts, and

maintenance (EPM).165

9.2 Subsectors

The Brazilian market consists of five subsectors: Commercial and Executive Aviation, Defense

Systems, Maintenance, Repair and Overhaul (MRO), Helicopter Manufacturing, and Parts

Manufacturing.

9.3 Global Context

The global aerospace industry appears to be rebounding based on stronger global economic

activity, increased passenger and cargo traffic, and the beginning of airline capacity expansion.

New aircraft orders have declined over the last couple of years, but the industry still has an

order backlog of approximately seven years because there have been fewer contract

cancellations than expected (the overall industry cancellation rate was three percent). In 2010,

many airlines began to increase capacity, which has not occurred since 2008. Year over year,

global airline capacity has increased approximately six percent. New orders and deliveries of

commercial planes have increased, with this demand leading Boeing and Airbus to increase

production rates.166

The report by Deloitte on the global Manufacturing industry, Compass 2010 indicates that the

global aerospace and defense (A&D) industry is showing positive signs as orders for new

commercial aircraft increased to over 800 units in 2010. There have also been orders for

business jets along with requirements for innovative technologies in cyber security, intelligence,

surveillance, reconnaissance, remotely piloted vehicles, and data fusion which are expected to

drive demand for defense companies.167

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9.4 The Brazilian Aerospace, Defense and Security Sector

9.4.1 Aerospace

The Brazilian Aerospace Industry is the largest in the Southern Hemisphere. With the second

largest fleet of executive aircraft and the third largest fleet of helicopters and light aircraft,

Brazil is also the fifth biggest aerospace market in the world.168 The National Agency of Civil

Aviation reported that economic growth in Brazil has increased demand in the aviation market.

The leading domestic airline TAM Airline controls a little less than half (45.4 percent) of the

market share, followed by Gol Linhas Aereas, who lost market share in 2009 (fell to 41 percent

from about 42.4 percent). In 2009, other smaller airlines such as WebJet and Azul saw their

combined market share grow to 13 percent169.

Moreover, Brazil has become one of the fastest growing suppliers in the aerospace industry

over the last ten years, with most growth occurring in the export of regional aircrafts.170 In

2007, the export of regional aircraft accounted for 75 percent of total exports. At the same

time, 65 percent of total imports to Brazil involved the aircraft parts and 20 percent for smaller

sized aircrafts. The US and the EU are Brazil’s main trading partners - in 2007, the US and the

European Union accounted for approximately 90 percent of total imports to Brazil, while

approximately 60 percent of the Brazilian exports were destined for either one of the two

regions. A large portion of exports were sent to Canada. The Brazilian aerospace sector had a

total of 28 companies operating in 2006 and their revenues accounted for around 1.9 percent

of the total GDP in 2007.171

The Aerospace industry is dominated by Embraer, the fourth largest commercial airline

manufacturer in the world, and its suppliers. Additional players in the Brazilian market include

Ambra Solutions, A.S. Avionics Services, BrasCopter, Giovanni Passarella, Friuli, Finetornos,

Flight Solutions, Flight technologies Iacit, Gyrofly, Lanmar, INBRAAEROSPACE, Rastreal, Vectra

Technology, Globo Usinagem and Winnstal. Some foreign companies exist in the market, such

as Latecoere (France), Aernnova (Spain), Sobraer (Sonaca Group-Belgium), Pilkington Aero-

space (UK) and Gamesa (Spain). Nieva (owned by Embraer) manufactures light aircraft, and

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Aeromot produces small parts for the Eurocopter in South America. Helibras assembles the

Eurocopter for the South American market.172

9.4.2 Defense

The Defense Sector is likely to be enhanced by the “National Defense Strategy (END)”, which

was approved by the Brazilian presidency in December 2008. This program includes a budget of

R$ 2.26 billion to purchase new equipment and airplanes. Today, most purchases in this

segment are still made abroad, but the Brazilian industry will benefit from technology transfer

agreements.173 In January 2011, Embraer create a defense and security division aimed at

meeting government demands for public safety and critical infrastructure protection (C4ISR-

command, control, communications, computers, intelligence, surveillance and reconnaissance).

Further, the defense and security business was expected to reach annual revenues of US$1.5-

1.8 by 2016. 174

9.4.3 Security175

Safety and security for individuals and property in Brazil is a cause of great concern for the

Brazilian government and its citizens. It is estimated that a car hijacking occurs once every two

hours in the city of Sao Paulo and more than 300,000 cars are stolen in Brazil each year.

Moreover, according to a 2007 United Nations report, about 10 percent of Brazil’s GDP was

spent on combating increased violent activities.

The annual sales for security equipment and services was estimated at about US$24 billion and

is expected to grow steadily by 15-20 percent annually. The market for electronic security

equipment alone was estimated at US$ 1.5 billion. About 50 percent of the security equipments

in Brazilian market are imported. The US supplies about 50 percent of the total import, whereas

Israel, Korea and Japan provide the rest (each about 10-15 percent of the import market).

One of the largest consumer of electronic security systems are expected to be financial

institutions who are interested in enhancing the security levels in banks. There is an increased

interest in biometric systems and an approximate demand of US$1 billion in security equipment

and services per year. The Brazilian government is also expected to increase spending on high-

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tech security systems to ensure foolproof security measures for the 2014 World Cup and 2016

Olympics.


9.5.1 Political

Foreign Direct investment in domestic airline companies is limited to a maximum of 20 percent

by the Brazilian government. The Aerospace Industries Association of Brazil (AIAB) – is the

national trade association that represents the Brazilian aerospace industries, and its members

are involved in every stage of aeronautic, space and defense activities (including design,

manufacturing, sales, customer support, and MRO services). The AIAB is also a member of

ICCAIA – the International Coordinating Council of Aerospace Industries Associations.176

Although, it seems that the trade dispute between Brazil and Canada over the use of illegal

WTO export subsidies may be forgotten there is a possibility of disagreements coming up in the

future.

9.5.2 Economic

The airline industry has needed to increase its spending on security over the last ten years,

especially since September 11, 2001. The impact of these costs have been passed down to the

consumer in increased taxes, airport and luggage fees, and in the overall cost of a ticket. A

terrorist threat or attack will always impact the airline industry seriously, and an automatic

decline in ridership will occur. This has become the new reality, and airlines will always have to

account for this possibility in its contingency plans.


Terrorist threats and attacks will deter passengers from flying, and they will be more likely to

make alternate travel arrangements. In addition, when the global economy goes through a

downturn, people will not look to spend on airline tickets when there are cheaper options

available. With the trend toward greener technology, consumers are very aware of what

companies are doing to reduce emissions and becoming ‘greener’ companies. If the public

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believes that a company is not doing all it can to become more environmentally friendly, then

that airline will ultimately suffer in public opinion and financially.

9.5.4 Technological

In the aerospace and defense industry, the government is constantly investing in research and

development to provide new technologies in aerospace design and in defense technology.

According to the US Department of State, "In May of 2008 Brazil published the Productive

Development Policy which encourages technological innovations and new investment

opportunities in the country. It sets targets for investment spending to reach 21 percent of GDP

and private investment in R&D to reach 0.64 percent of GDP by 2010. It also sets goals to

increase Brazil’s share of exports to 1.25 percent of the global total and increase the number of

small export businesses."177

9.6 SWOT Analysis

9.6.1 Strengths

As previously mentioned, Brazil is a leader in aerospace industry and the fifth largest aerospace

market in the world. Embraer is one of the largest commercial airplane manufacturers and has

45 percent of the regional market of 30-60 seat airplanes and is world leader in commercial jets

up to 120 seats178. Belgium, Chile, China, France, Germany, Italy, Japan, Spain, Sweden, United

Kingdom and the US have strong partnerships with Brazil in the Aerospace sector.179

9.6.2 Weaknesses

There is a requirement and a plan to upgrade security measures in the country, however, the

government has certain budget constraints. Large organizations like Embraer are looking at

financial solutions such as public private partnerships. Although, some Brazilian companies

have some capabilities to counter security concerns in Brazil these are not adequate and

require support from technologically capable foreign firms. 180

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9.6.3 Threats

Some of the inherent threats to the aerospace markets, which are also likely to affect the

Brazilian aerospace industry, are the rising cost of fuel, security threats and terrorism. In 2007,

the US and European Union accounted for 60 percent of Brazilian exports and the slow

recovery of their economies could hamper the export prospects of the industry.

9.7 Key Opportunities in the Brazilian Market

The aerospace industry in Brazil is growing rapidly and presents many opportunities for

suppliers of airline parts and components. The aeronautical segment offers opportunities such

as parts and components for airplanes, helicopters, structural segments, engines, on board

systems and equipment, and air traffic control systems. There is also scope to provide services

for maintenance, repair and overhaul (MRO) to civil and military aircrafts.181 The aeronautics

maintenance market is expected to grow, and expansion is expected through the coming years.

In the security sector there are opportunities for companies to supply access control, closed

circuit televisions (CCTVs), alarm systems, surveillance technology, drug and explosive

detectors, metal detectors, fire prevention and detection systems, cellular telephone blockers,

biometrics, and home security equipment.182


Stakeholders in the Brazilian aerospace and security sector reported that, the Brazilian security

sector is becoming increasingly competitive and is growing every year. Several areas in Brazil

require electronic protection equipment. There are currently over 100 equipment

manufacturers and a wide range of distributors and integrators. Available opportunities

include: installation of security equipments such as cameras, alarms and electric fences, image

monitoring and computer security. The production of camera tracking and wireless alarms also

needs enhancement. The company interviewed imports cameras and alarms from Canada

because of the quality. Canadian expertise could be used in the development of digital and

wireless security systems.

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The aerospace industry shows strong expansion in various sectors. However, it does require a

revamp in some government policies to adapt to the existing structure with strong growth and

more expected in the future. When it comes to manufacturing, Embraer aircraft is known

across the world and maintains a strong position in the market. Other strong players in the

market include TAM Airlines and Gol Air Transport.

There is a high import component to this market which includes aircraft parts, material support,

flights etc. Most imports come from the US, Canada and Europe and tend to be priced

reasonably. Bombardier is a known importer in this segment. The best way to enter the market

is through Joint Ventures and Partnerships.

9.8 The Atlantic Canadian Aerospace, Defense and Security Sector

The aerospace and defense industry in Atlantic Canada is growing in international repute, has

strong support from provincial and federal governments and is home to many industry leaders

such as General Dynamics, Honeywell, Pratt & Whitney and IMP. The industry has four business

parks which focus on aerospace and defense, research and development facilities and there are

four international airports in Atlantic Canada. Over the last few years, companies operating in

this sector have increased exports of products and services such as aircraft component parts

and aviation IT systems to advanced aerospace and defense training programs. Canadian

aerospace firms are global market leaders in the manufacture and maintenance of regional

aircraft, business jets, commercial helicopters, small gas turbine engines, flight simulation,

landing gear and space applications. In 2010, the aerospace product and parts manufacturing

industry exported $838,131 worth of products to Brazil.183

Atlantic Canadian firms have a high standard of performance on the ISO and AS quality

certification programs. These programs are recognized as the international standard for quality

management and the benchmark against which supplier relationships are measured. Each of

Atlantic Canada’s four provinces offers a variety of solutions for the aerospace and defense

industry, which would be an added value to Brazilian firms.

Atlantic Canada also has world class training facilities and post secondary institutes which have

been instrumental in producing highly qualified professionals in the region. This has also

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increased employment rates in the region which has led to the growth in the number of

aerospace engineers in Atlantic Canada outpacing the national average ( up by 137 percent in

recent years), and employment growth for aircraft technicians, mechanics and inspectors is 142

percent double the national average.


Stakeholders in the Atlantic Canadian aerospace and security sector reported that, the

aerospace and defense sector is growing slightly with the economic recovery. It has been

identified as a target for growth by the Atlantic Canadian governments because traditional

markets have declined. Exports from Atlantic Canada include research and design, aircraft

parts, wiring systems, leading edge flat fair empennage, maintenance and overhaul equipment,

and software. Importers include the US, Europe, Asia, South Africa, South America, Ireland,

Britain, and other provinces. Advantages include qualified and stable workforce with high level

of expertise and excellent levels of education, competitive costs, infrastructure, low turnover,

and internal workers being able to contribute to the industry instead of contracting out.

Some companies have experience with Brazil and know that there is no tax for exporting in this

industry. Some have gone to trade shows but discussions weren’t deep enough to explore any

real opportunities; preliminary meetings were good except for language barriers. There seems

to be a huge investment expectation that companies aren’t interested in, especially if they are

given the impression that Brazilian companies do not want to work towards win-win

arrangements. Those that did go to Brazil knew that Embraer is headquartered there, and some

got their opportunity from the Newfoundland and Labrador government while exploring

markets and attending trade shows. Motivations to export to Brazil include: need for

technologically advanced products, distance to Embraer being similar to traveling to Vancouver,

and the growth of the oil and gas industry. Barriers include: language, rules and regulations,

taxes, large investment of money, and having to be patient to find a partner and a good

location. Export interests include new aircraft programs, defense programs, new products,

partners in technology, new large market exposure, working with Embraer to provide services

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to the manufacturers and other workers, more intense trade shows with prequalified

companies and secondary meetings included, and sponsorship programs.


There are many opportunities in the Aerospace, Defense and Security sector in Brazil and many

of these demands can be met by Atlantic Canadian firms. There is tremendous scope to

increase exports in the future. This sector has two prominent opportunities; the first is in the

parts, components and maintenance and repair overhaul for civil and military aircrafts. The

second is in providing technology and parts for internal security. Atlantic Canada currently has

export capabilities to provide services for research and design, manufacturing aircraft parts,

wiring systems, flat fair empennage, maintenance and overhaul equipment and software.

Companies seeking opportunities in the Brazilian aerospace, defense and security sector can

participate in exhibitions and trade fairs such as 'Latin America Aero & Defense International

Exhibition & Conferences on Aerospace & Defense Technology' and the 'Intersecurity Expo-

Brazil'. Companies can collaboratively approach the ministry of defense and large organizations

such as Embraer to obtain contracts. Also, there may be opportunities to partner with strategic

local suppliers who are already experienced and established in the industry.

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10. Mining

10.1 Introduction

The mining industry comprises establishments primarily engaged in, or providing support

services for, mining beneficiating or otherwise preparing metallic and non-metallic minerals,

including coal.184

The companies providing supporting goods and services can be divided into those that identify

themselves as mining support/service companies and those that support the mining industry

but do not list themselves as being involved in the mining industry.

10.2 Subsectors

Table 5 provides the NAICS classification for mining and the related industries falls under

several categories but doesn’t include companies not primarily engaged in mining or mining

support activities.

Table 5: NAICS Classification for Mining

NAICS Category

Definition185 186

212187 Primarily engaged in mining, beneficiating or otherwise preparing metallic and non-metallic minerals, including coal. (e.g. 212222 - Silver Ore Mining)

2131188 Primarily engaged in providing support services, on a contract or fee basis, required for the mining and quarrying of minerals and for the extraction of oil and gas. (e.g. 213113 - Support for Coal Mining)

333131 Manufacturing underground mining machinery and equipment, such as coal breakers, mining cars, core drills, coal cutters, rock drills and/or manufacturing mineral beneficiating machinery and equipment used in surface or underground mines

417220 Establishments primarily engaged in wholesaling new and used mining, oil and gas well equipment, and petroleum refinery machinery, equipment, supplies and parts

423810 Primarily in the wholesale distribution of construction, mining, and logging machinery and equipment.

532412 Primarily engaged in renting or leasing heavy equipment without operators that may be used for construction, mining, or forestry, such as bulldozers, earthmoving equipment, well-drilling machinery and equipment, or cranes.

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10.3 Global Market

Mining companies saw moderate growth in 2010, and the forecast for 2011 is strong as global

demand for base and precious metals continues to climb. In 2009, mining companies saw

revenues of US$ 325 billion which was hurt by low commodity prices worldwide.189

A rise in demand, from the developing world in particular, has made performance improvement

and cost savings key challenges within the industry. The rise of resource nationalism is of major

concern to global mining companies and taxation has become an issue at the forefront of CEOs'

minds. Mining companies are also contending with a shortage of skilled workers, particularly in

developing markets. Improving safety and reducing the environmental impact will be ongoing

goals for the mining industry. “Low-carbon” production of minerals will become increasingly

important in the years to come.190See Figure 8 for the Top Ten Mining Companies in 2008

Figure 8: 2008 - Top Ten Mining Countries

10.4 The Brazilian Mining Sector

Brazil has long been one of the major mining nations and in 2008 was listed as the 4th largest

mining nation, ahead of Canada at 6th position.191 The Brazilian mining sector has traditionally

182

129

64

26

21

21

20

19

18

3

China

USA

Australia

Brazil

South Africa

Canada

Russia

India

Chile

Colombia

2008 Top Ten Mining Countries as Measured by Mining GDP (US$ billions)

Brazil is the 4th largest mining country in the world.Source: SACEA

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been known for its iron ore production; it is the 2nd largest producer in the world and accounts

for 82.6 percent of Brazil’s mineral exports. See Figure 9 for Brazil’s Mining Exports

Figure 9: Brazil's Main Substances Exported

In addition to iron ore Brazil is a leading supplier of many other minerals. A listing of some of

these minerals, along with their ranking as a world producer are: Niobium 1st, Manganese 2nd,

Tantalite 2nd, Aluminum (Bauxite) 2nd, Chrysotile 3rd, Magnesite 3rd, Graphite 3rd, Vermiculite

4th, Kaolin 5th, Tin 5th, Ornamental Rocks 6th and Phosphate 6th.192

In 2008, the Mining and Mineral Transformation industries contributed US$ 77 billion dollars to

the Brazilian economy, which is approximately 5.76 percent of their total GDP. This number

dropped in 2009 to approximately US$ 56 billion, including the US$ 26 billion directly

contributed through the act of mining, but there is expected to be an increase of 20 percent for

2010. Overall, it is expected that US$ 50 billion will be invested into the mining sector from

2010 to 2014. 193

The majority of these investments are to be focused on iron ore, bauxite, aluminum, copper

and gold extraction. The production of iron ore as well as nickel is expected to rise dramatically

until 2013. In addition, as the importance of lithium grows there an increase in the extraction of

this mineral is expected in the coming years.194

81.8%

5.1%4.4% 3.5%

1.3%

1.0% 0.8%0.8%0.6% 0.7%

Principal products exported during 2010

Iron Ore, 81.8%

Gold, 5.1%

Niobium, 4.4%

Copper, 3.5%

Silicon, 1.3%

Manganese, 1%

Kaolin, 0.8%

Aluminum (Bauxite), 0.8%

Granite, 0.6%

Others, 0.7%2010 estimated exports US$ 26 billion, Source: IBRAM

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Brazil’s soils are poor in potash and nutrients and currently; Brazil imports 90 percent of its

potash, is the world’s fastest growing consumer, the world’s 4th largest user and the 2nd largest

importer of potash globally. Estimates have Brazilian growers spending US$ 4.5 billion in

potash during 2008 and that many farmers began purchasing lower levels of fertilizer

concentrations because of the increased market prices. This is driving an interest in Potash or

potash substitutes. One example is ThermoPotash which from early testing appears to be a

viable substitute for Potash. This mineral is currently being tested and explored by Amazon

Mining in the western region of Minas Gerais and the mine is expected to be operational by

2014.195

In Brazil, 73 percent of the mining companies are owned by small sized companies, 22.2

percent by medium sized companies and 4.8 percent are operated by larger companies. Of the

2,600 mines currently in Brazil 98 percent of them operate as open pit sites.196

The overall mineral potential of Brazil is relatively untapped and at this time only 30 percent of

the country has been studied for its mineral content. The Brazilian government through their

“Plano Mineral 2030” intends to double mineral production in the next 20 years. The majority

of this growth will be focused on iron ore where Brazil plans to reach a million tons of ore per

year by 2030 (150 percent above current production numbers).197

Despite most mines being owned by smaller to mid-size companies in Brazil there are a few

larger interests operating out of Brazil. The first and most recognized is Vale, formerly CVRD.

Vale invested US$ 13 billion in 2010 and plans on investing an additional US$ 24 billion in 2011.

Between 2010 and 2012 Vale is expected to be working on 18 different projects in Brazil with all

of them focused on investments aimed at improving equipment, transportation infrastructure

and water capturing. Vale is responsible for 50 percent of Brazil’s mineral output based on

value and is the country’s largest consumer of electricity. A list of major companies and their

planned investments are listed in Table 6. In addition to these companies other major Brazilian

mining companies are AngloAmerican, Votorantim/Metais, AngloGold Ashanti, Mineraҫão Rio

do Norte, Alcoa, Mineraҫão Lapa Vermelha. 198

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Table 6: Major Companies and their Planned Investments

Company Investment Notes

Vale/Inco US$ 37 billion Multiple locations

CSN

(Companhia Siderúrgica Nacional)

Increase production to 40

Mt/year

Mine: Casa de Pedra

Samarco Double Iron Ore pellet

production

Samarco Alegria

Complex

MMX Increase production to 46

Mt/year (Iron Ore)

Serra Azul and Bom

Sucesso projects

Alunorte Increase production from 4.4 Mt

to 6.3 Mt of Aluminum per year

Largest Aluminum

producer in Brazil

Source: IBRAM/Duarte


10.5.1 Political

Brazil is one of the largest mineral producers in the world; however, mining companies

operating in Brazil face some of the largest tax burdens in the world. For companies mining

Bauxite, Coal, Kaolin, Copper, Phosphate, Potassium, Manganese, Gold or Zinc; they pay the

highest or second highest tax loads when compared to other countries; and for iron ore Brazil

has the third highest tax structure in the world.199

The Brazilian government has instituted Plano Mineral 2030 which plans to double Brazil’s

mineral production in 20 years. Brazil’s minister of mines and energy has spoken out about a

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need for a new approach to mining that would allow regulatory bodies to be more agile and

protect the interests of the home market and its workers.200

In the past, Brazil has suffered from environmental damage due to poorly monitored mining

operators. More recently it has been noted by mining companies that the environmental and

permitting processes/standards in Brazil have become increasingly rigorous and more

complex.201202

The organization and industry associations relevant to this sector include: 203

• The Brazilian Mining Institute –IBRAM

• The Brazilian Aluminum Association- ABAL

• The Brazilian Gems & Jewellery Trade Association – IBGM

• Agency for the development of the Brazilian Mineral Sector - ADIMB

10.5.2 Economic

The mining industry is a huge part of the Brazilian economy and is the major reason for their

overall positive trade balance with other nations. The recent economic slowdown saw the

industry slow-down but it is expected to recover to near economic pre slowdown production

levels by the start of 2011. The mining industry is sensitive to commodity pricing and therefore

has a certain amount of volatility. In addition, products like aluminum are extremely energy

intensive and require access to cheap energy, in this case hydroelectric. Of the US$ 56 billion

contributed to the Brazilian GDP only half of this came from the direct mining of the minerals

from the earth with the other half coming from those industries supplying material or services

to the mining companies.204

The market for machinery in Brazil is rather restricted as most large manufacturer’s already

have operations in Brazil. Most mines are open pit and the Brazilian market for underground

mining is relatively small.205

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According to Jaguar Mining, a Canadian Gold Company, Brazil is a pro-mining country because

of its strong mineral resources, infrastructure, commitment to sustained mining and respect for

the environment.206

10.5.4 Technological

Brazilian companies and the government are now actively looking to diversify the sources for

services and equipment suppliers. In addition, Brazil has recognized that much of its

environmental and transportation infrastructure is in need of improvement and Vale is leading

the way with over US$ 37 billion of investments planned for rail, transportation and water-

capturing in 2010 and 2011. 207 208

10.6 SWOT Analysis

10.6.1 Strengths

The mining industry anticipates that US$28 billion will be invested on equipment alone in Brazil

during the next four years. Demand for Brazil's abundant minerals, notably iron ore and bauxite

have been increasing faster than the historic rate over the past five years, largely due to the

rapid growth of the Chinese economy. With demand stronger than supply, the price of iron ore

has quadrupled in the past five years. Ore can now be placed at ports for a quarter of its sale

price.

Just prior to its privatization in 1997, leading mining company Vale acquired the assets of

several other important ore producers. As a result, it was responsible for 90 percent of the 245

million tonnes of ore exported from Brazil in 2006, 50 percent more than five years previous,

which generated export earnings of almost US$9 billion. Vale plans to increase ore output by 50

percent in the next four years, in an attempt to keep pace with demand which is now increasing

by 10 to 11 percent each year, four times the average of the past 25 years.209

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10.6.2 Weaknesses

The mining sector in Brazil has one of the top three highest tax burdens. Over a period of 1996

to 2006 the tax burden increased from 25.16 percent to 35.06 percent or an increase of about

40 percent.210 Any downturn, especially in large economies will adversely affect this sector.

Also, open pit mining adversely affects the environment and requires large investments in

sustainable mining and rehabilitation of the area.

10.6.3 Threats

There is a lot of competition in the mining equipment industry with over 240 international and

50 domestic equipment suppliers servicing the mining industry in Brazil (2006 data). There are

high duties on mining equipment and machinery. Moreover, bureaucracy and regulations slow

down the process.211 The strength of the global economy also has a direct impact on the

demand of commodities and in turn the mining sector.


According to the US Commerce Service the market for turnkey machines has been described as

fairly limited as most major manufacturers already have facilities in Brazil. In fact, some of these

multi-national companies even export their machines from Brazil. This is in part due to the

large import levied on products imported by sea (25 percent). Among the companies already in

Brazil are Caterpillar, Volvo, Case New Holland, Cummins, Ingersoll Rand, Metso, Atlas Copco,

Sandvik, Siemens, Alston, Scania, ABB, 3M, Liebherr and GE.212 Opportunities do exist to supply

or partner with these companies.

Products and services identified as being in demand include earth-movers, belt conveyors,

crushers/grinders, laboratory instruments, drill pieces, carriers/loaders, management and

controlling software, and security devices.

Further, mining companies in Brazil are likely to invest in:

• Equipment: sample analysis mining laboratory equipment, drilling equipment, earth

movers, crushers/grinders, security devices and environmental control equipment.

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• Services: drilling, exploration, airborne geophysics, contract mining and engineering

services, materials handling and environmental management.

• Software: management and controlling, mining, exploration and geophysics. 213 214


The Brazilian mining segment has a share of more than US$40 billion in 2009 and continues to

grow. There are more than 5,000 mines in Brazil. Developing technologies to overcome

distance and infrastructure problems related to transportation and environmental preservation

projects are an important part of industry investment. The federal government has created the

National Mining Plan which predicts investments of around US$ 350 billion over the next 20

years in the Brazilian mining industry.

The mining sector is growing in Brazil with gold being the most valued. Gold mining companies

have had an improved performance after the international financial crisis of 2008. The trend is

to increase the profitability of mining gold. Mining opportunities in this sector include gold,

iron, magnum, uranium, potash and etc. Some of the strong international players in the market

include Barrick Gold Corporation, Anglo Gold Ashanti, Freepor Mc Moran, and Newmont Mining

whereas Vale and Kinross Brasil are strong national players. The company imports coal from

France (Pica Coureevoie) and steel balls from Chile (Moly Copy or Andean Mining).

The easiest way to participate in the sector would be through partnership or joint venture.

10.8 The Atlantic Canadian Mining Sector

From a national perspective Canada is a leader in environmental mining practices and Atlantic

Canadian companies are well respected in these areas.215 In each of the provinces there are

companies with a wide variety of technical and environmental expertise, depending on the

projects they are involved in. Three of the provinces have reserves and active mineral projects

that are currently being mined and explored in Brazil.

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10.8.1 Provincial

In Newfoundland and Labrador the largest values of mineral shipments (in order) are iron ore,

nickel, copper, and zinc. All of these mineral are currently being mined in Brazil (in particular

iron ore) and several of the largest mines currently being developed in this area are owned by

Vale.216

Nova Scotia is well known for its gypsum mines but other areas of production include salt,

crushed stone, coal, gold, zinc and other commodities and minerals. Nova Scotia supplies 80

percent of Canada’s gypsum and is the most productive provider of gypsum globally. Part of

this is due to the efficient processing of waste created through another mining operation (The

Scotia Zinc Project).217 Northern New Brunswick is rich in lead zinc and copper and southern

New Brunswick has high yields in potash.218 See Table 7 for Mineral Production in Atlantic

Provinces

Table 7: 2009 - Mineral Production by Province and Territory

2009 Mineral Production by Province and Territory

($000) Province Metallics Nonmetallics Coal Total Percent of

Production

Newfoundland and Labrador

2,244,081.5 45,714.6 - 2,289,796.1 7.1%

Prince Edward Island

- 3,386.0 - 3,386.0 0.0%

Nova Scotia - 380,082.0 - 380,082.0 1.2% New Brunswick 749,602.7 x x 1,090,375.2 3.4% Source: (Natural Resources Canada, 2010)

x : Confidential

There are not a great number of companies in Atlantic Canada that are listed as mining or

mining support companies. It is calculated that 441 different suppliers, services and

organizations were involved in the creating of the Ekati Mine, the first operational diamond

mine in Canada.219 In Atlantic Canada right now there are numerous companies and groups

working with and supplying to the mining industry yet don’t identify themselves as being part

of this industry, yet have the capabilities and skills that the Brazilian market is looking for.

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The mining sector is increasing in size even during the downturn. There have been investments

in product infrastructure to produce machinery like crushing and screening units. There is $185

billion in currently active projects across North America. Some of the companies interviewed

struggle with local recognition and would like to diversify. Exports include limestone, dolomite,

road-building aggregates, other construction aggregates, coal, gold, and fabricated machinery

and equipment. Products are exported to China, Brazil, Venezuela, USA, Trinidad, Argentina,

Chile, Australia, Columbia, Africa, Europe and Mexico. Other provinces and drill companies from

South America and the USA also work with companies in Atlantic Canada. Competitive

advantages include material quality, maritime location, and ability to provide integrated high

value products with more advanced manufacturing. Disadvantages include the small population

and a mindset that people do not want mining in their own backyard that causes localized high

prices.

Some companies have had good experiences in Brazil with no major problems besides the

normal logistics involved with travelling anywhere. Engineering services seem to be in great

demand. Opportunities came through personal contacts. Some mining companies are very

efficient without exploring South America and a lot of companies are looking for more

exposure, but smaller companies are unable to afford the investment in infrastructure. They

are aware that Brazil is a BRIC and is developing faster than in the West, but most are not sure

where areas with potential are likely to be. Interests include contract manufacturing, processed

equipment and joint ventures, and exporting high valued manufacturing products such as

pressure vessel and process modules.


The Atlantic Canadian mining sector is quite diverse with each province mining different

minerals. The presence of so many Canadian companies in Brazil along with Vale’s sites in

Newfoundland and Labrador offer many opportunities to leverage local relationships to help

enter the Brazilian market.

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In addition to equipment, services and software there are opportunities for other Atlantic

Companies currently working in support of local mining projects, particularly those that are

already working with Vale or Canadian companies established in Brazil. There are no

restrictions to importing mining equipment in Brazil and the best way to enter this market is to

partner with local representatives or agents as most equipment is sold directly to the end user

and there are very few wholesale distributors.220 However, companies must be mindful of the

high competition within the Brazilian Market as almost 90% of Brazil’s demand is supplied by

local suppliers.

Considering that most sales are made directly to end users strong after sales support and

service should be emphasized. Moreover, there is a need to customize products to ensure that

are compatible to the Brazilian terrain and environment. The procurement process for large

mining companies is mainly centralized. Procurement by small and medium sized companies

also tends to be centralized however there is a possibility that certain purchase decision are

made at individual mines. In some case, mining contractors also play the role of project

managers and could be responsible for the tendering process and technical evaluations;

however, the final buying decision is made by the mining company.221

The biggest trade show for the mining industry in Brazil is the bi-annual Exposibram, which for

2011 will be taking place September 26-29 in Belo Horizante.222

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11. Education Sector

11.1 Introduction

The NAICS definition of the education sector includes establishments primarily engaged in

providing instruction and training in a wide variety of subjects. These establishments may be

privately owned and operated, either for profit or not, or they may be publicly owned and

operated.223

11.2 Subsectors224

According to the NAICS, the education sector is classified into the following subsectors:

• Elementary and Secondary Schools (NAICS 6111) – Comprises of establishments primarily engaged in basic preparatory education which ordinarily constitutes kindergarten through 12th grade and includes school boards and school districts.

• Community Colleges and C.E.G.E.P.s (NAICS 6112) – Comprises of establishments primarily engaged in providing academic, or academic and technical, courses and granting associate degrees, certificates or diplomas that are below the university level.

• Universities (NAICS 6113) – Comprises establishments primarily engaged in providing academic courses and granting degrees at baccalaureate or graduate levels.

• Business Schools and Computer and Management Training (NAICS 6114) - Comprises of establishments primarily engaged in providing courses in office procedures and secretarial and stenographic skills; conducting training in all phases of computer activities and offering an array of short-duration courses and seminars for management and professional development.

• Technical and Trade Schools (NAICS 6115) – Comprises of establishments primarily engaged in providing vocational and technical training in a variety of technical subjects and trades. The training often leads to non-academic certification. Vocational correspondence schools are also included.

• Other Schools and Instruction (NAICS 6116) – Comprises of establishments primarily engaged in providing instruction in the fine arts; athletics and sports; languages; and other instruction (except academic, business, computer, management, and technical and trade instruction); and providing services, such as tutoring and exam preparation.

• Educational Support Services (NAICS 6117) – Comprises of establishments providing non-instructional services that support educational processes or systems.

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11.3 Global Context

According to UNESCO’s Institute of Statistics, Governments of the world invested the equivalent

of Purchasing Power Parities (PPP) US$ 2.46 trillion in education in 2004 (or 1.97 trillion if

converted into U.S. dollars on the basis of market exchange rates). This represents 4.4 percent

of global GDP in PPP US$. This number reflects only public education expenditure and not

private investments.225

According to the Education Industry Association (EIA), "education is a rapidly expanding

business in the US and many countries. It is quickly becoming a US$1 trillion industry,

representing 10 percent of U.S. gross domestic product, and is second in size to the health care

industry. In the US, federal and state expenditures for education exceed US$750 billion."226

Despite the economic downturn, the education industry is one of the fastest growing sectors

worldwide and has seen increased demand in foreign education, e-learning and test

preparation markets. In 2007-08, the US represented 60 percent of the global market and

Europe accounted for about 15 percent.227

11.4 The Brazilian Education Sector

There is a lot of potential in the Brazilian educational sector and Brazil has become the 5th

largest education market in the world with about 70 million students. About 93 percent of the

students are enrolled in basic education and 7 percent in undergraduate and graduate schools.

A large majority of Brazilian students attend public schools and less than 20 percent of students

attend private schools. The annual higher education institution requirement is expected to

grow at a CAGR of over 33 percent from 2011-2013. Both public and private players are

expected to benefit from the growth in the sector as enrollment levels in primary and high

schools increase.228 229

11.4.1 Role of Public and Private Sector

Education industry in Brazil is structured into public and private sectors. 230

Public Sector: The responsibility for public education is primarily divided as follows:

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o Pre-primary and primary education – The municipalities, the states, and the federal district

o Secondary education – The states, and the federal district for those matters that lie within their purview

o Vocational and technical education – The states and the federal government o Higher education – The federal government

Private Sector: The private sector can be involved at all educational levels, upon government’s

approval and evaluation.

The private sector plays a dominant role in the education sector and foreign direct investment

is also prominent in Brazil as the government encourages the participation of the private sector

in higher education.231

The Brazilian government also recognizes distance learning programs and blended programs

that combine distant learning and traditional formats to make up for the shortage of teachers it

faces.232

11.4.2 Higher Education

In 2009, approximately 2,180 Brazilians were in Canada to study233. Scholarships are available

to Brazilian students and since 2007, about 100 Brazilian students received scholarships to

study in Canadian universities. The Brazilian Association of Canadian Studies (ABECAN)

established since 1991 includes 15 Canadian Studies centers throughout Brazil and has over 500

members. This has contributed to Canada becoming the most popular destination for

Brazilians.234 Estimates by the Canada Education Centre (CEC) for 2008 had indicated that

English as a Second Language (ESL) programs were the most popular and represented 34

percent of the Brazilian students, followed closely by graduate programs (33 percent),

undergraduate (13 percent), FSL (9 percent), college, technical and CEGEP (8 percent) and high

school (3 percent) programs.235 The popularity of ESL programs stems from the fact that the

ability to communicate in English is considered a competitive edge within the job market and

has almost become a prerequisite to be considered for a good job.

Education fairs are used as a prominent recruitment strategy in Brazil and an important one is

the ExpoBELTA organized by Brazilian Education & Language Travel Association (BELTA) every

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March.236 Other significant fairs include the EXPO road shows organized by FPP Edu-Media237

and the Salão do Estudante Fairs student education fairs by BMI.238

11.4.3 Executive Education and workplace training

Executive Education and workplace training is extremely important in the corporate world.

Companies such as Petrobras and Embraer are providing employees with on-the-job training

and educational classes. Business leaders have found it difficult to find qualified workers and

are working with educational institutes to customize specific programs based on their needs.239

In Sao Paulo alone there are 10,000 companies and organizations that run in-house and out-of-

house training programs. 240


11.5.1 Political

In October 2010, Brazil and Canada signed a memorandum of understanding (MOU) on higher

education which is likely to create greater synergies among universities in both countries

encouraging academic activities such as research collaboration, student exchanges and short-

term awards. Paulo Cordeiro de Andrade Pinto, Ambassador of Brazil to Canada said “[The

MOU] complements the agreement on science, technology and innovation that entered into

force in April 2010. We now have the framework to support Canadian and Brazilian scientists,

professors and students in pursuing their endeavours to benefit our societies.” Further, “The

MOU builds on a number of other bilateral instruments of cooperation, including the Canada-

Brazil Framework Agreement for Cooperation on Science, Technology and Innovation, which

was signed in November 2008”.241

According to Brazilian Law (9,394/96), all diplomas issued by foreign universities are to be

certified by Brazilian public universities who offer equivalent courses. International reciprocity

agreements are also respected. However, some educators and government groups in Brazil are

not in favor of foreign investments in the country’s educational sector.242

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11.5.2 Economic

In Brazil, education is regarded as a means to raising and sustaining a higher socio-economic

status. However, many Brazilians are unable to afford higher education as it is fairly expensive.

Depending on family status, about 0.8 percent to 5.2 percent of household income is spent on

education compared to a national average of 3.4 percent. Family spend on education also

varies on geographic regions - from 2.3 percent of household income in the North to around 4.7

percent in the Southeast.243

Educational fees in Brazil are usually paid monthly and it may be difficult for Brazilians to invest

fees for the entire year at one time. Scholarships, credit and flexible payment plans will need to

be offered in order to boost recruitment.244


Brazil has literacy levels of 88.6 percent.245 There are some elements of inequality in the

Brazilian education system. On one hand Brazil has a progressive system and on the other hand

basic literacy levels of the general population have been questioned as there is a lack of

professionally qualified workforce in the labour market.

For foreign education, agents, education advisors and consultants play an important role and

provide students with all information required about living and studying in a foreign country.

According to a US Commercial Service report, "Agents’ success in Brazil has a lot to do with the

professionalization of this type of service and also the perception of security that it provides to

parents and students. The Brazilian culture is very family-oriented and it is neither easy nor

natural, as it may be in some European cultures, for a 16 year-old teenager to spend six months

or one year away from their homes. That is normally a tense process that the agent can help

alleviate considerably."246


The government is committed to the federal plan to equip all elementary schools with

computers. This should dramatically enhance the educational experience in school and provide

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students with access to the latest information. Moreover, distance education and eLearning

are becoming an integral part of the education system both in schools and vocational training.

A 2007 report by UNESCO (World Data on Education) reports, "In 2003, the Ministry of

Education launched the Digital Interactive TV Escola with 100 percent Brazilian low-cost

technology. This is a distance-learning instrument that brings the media together by satellite. A

pilot project was inaugurated in seven Brazilian states: Acre, Amazonas, Ceará, Espírito Santo,

Goiás, Mato Grosso do Sul, and Rio Grande do Sul. TV Escola provides 15 hours of high-quality

educational program, re-transmitting videos from Brazil and the rest of the world. The

programs are repeated to give schools different times to record the program. On weekends the

Open School goes on air – a special selection that aims to meet the interests and needs of the

community."247

11.6 SWOT Analysis

11.6.1 Strengths

There is tremendous need for higher education services in Brazil. The government encourages

private players and is very open to foreign investment in the educational sector. Many

Brazilians are seeking to learn English to enhance their professional prospects in Brazil. By 2004,

the number of higher education enrolments had grown by 100 percent and quality of education

had improved

11.6.2 Weakness

Despite the improvements in the quality and standard education in Brazil, this sector has many

challenges for the government as well as the corporate world. There is a lack of qualified

workforce to take up high-tech jobs. Mr. Renato da Fonseca, managing executive of the

National Confederation of Industry (CNI), recently said “Our crucial problem is education. The

Asians changed their educational standards and are now benefiting from this. Correcting the

problem takes two decades, but it can be our great opportunity”.

There is also a lack of qualified teachers who teach English in the public education system. The

English programs taught in schools do not have advanced curriculum and most students who

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learn English, learn the language superficially with little or no ability to actually speak or write

fluently.248 According to UNESCO, the historical Brazilian student mobility ratio is around 1

percent, considerably lower than that of other emerging economies. Although market experts

strongly believe this ratio will increase in coming years, this will depend on strong initiatives

and investments (e.g. in scholarships).249

11.6.3 Threats

A proposal first introduced in 2003 to prohibit foreign capital from entering private education

institutions in Brazil was recently reintroduced into the agenda of the Committee on Education

and Culture of the Chamber of Deputies. 250 The depreciation in the Brazilian Real has increased

the cost of foreign education for Brazilians making it less affordable.

11.7 Key Opportunities in the Brazilian Market

There are many opportunities for the private sector in the Brazilian education sector both

within Brazil and in their home countries. Popular courses include English language courses,

vocational, master and management courses. The government of Brazil is very interested in

implementing distance learning and virtual classrooms, especially in the rural areas.

There is a substantial population of the Brazilian market that attends private school and Atlantic

Canadian educational institutes can compete with domestic and international institutes from

US, UK and Australia if the costs are similar and if they are able to provide students with

scholarships and grants.

With over 5,000 English schools operated in Brazil under the franchise system and even more

independent ones and about two million students who attend English classes in these private

language schools, there are many opportunities available in the English language segment.251

The result of a research conducted by BELTA during ExpoBelta, showed that Canada, the US and

United Kingdom tied for the public's preference of education location, with 40 percent votes

each, whereas Australia came close with 38 percent and Spain with 26 percent preference. The

highest demand was for language courses (63 percent of students). However, interest has

grown for higher study and specialized courses chosen by about 32 percent of students,

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Masters (18 percent of students), MBA (13 percent of students). In the study students could

select more than one option. 252

The US Commercial Service guide states that over 88,000 Brazilian students studied abroad in

2007. The UK was the most preferred destination followed by US; however, an informal survey

indicates that Canada is the most attractive country to study in, especially for Intensive English

programs. 253


Stakeholders in the Brazilian education sector reiterated that, institutes providing English

courses in Brazil are highly competitive and the potential is expanding. The 2016 Olympic

Games and the 2014 World Cup has increased the number of students interested in learning

English. Additionally, oil and gas companies have been investing in English courses for their

employees. English schools in Brazil are also improving and modernizing their services to better

serve students. Opportunities are available for executive courses, virtual classes and adult

classes for students that need to learn English in a short time. The areas of distance education,

virtual classes and blended learning need to be strengthened in Brazil. Currently, English

courses such as Cultura Inglesa, Ibeu, Brittania, Yazigi, CCAA, Wizard, and Fisk dominate the

sector. Educational books, CDs and support materials are imported from England and USA

because of their superior quality. Brazil could also be interested in importing technological

products to enhance virtual classrooms, interactive whiteboards and software.

11.8 The Atlantic Canadian Education Sector

Members of the Education and Training sectors of New Brunswick, Nova Scotia, Prince Edward

Island and Newfoundland and Labrador are willing to collaborate on possible international

opportunities. There is also funding available through the IDBA to assist Atlantic Canadian

businesses enter, explore and succeed in international markets. 254

Nova Scotia has 11 universities, 13 community college campuses despite having a population of

less than 1 million people – "more, per capita, than anywhere else in Canada". The province is

gaining recognition and respect as it engages with the international community and showcases

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its expertise. There are opportunities to bid on international development projects with

organizations such as the World Bank and the Caribbean Development Bank.255

According to an article by Arupa Tesolin, educational exports are an area of huge opportunities

to Atlantic Canadian firms. There is a demand for and great respect for Canadian educational

products across the globe. Popular exports include curriculum development, textbooks and

education resources, and Canadian schools operating in remote areas and in other countries.

There is also a scope for e-learning and blended learning capabilities emerging among

universities and K-12. 256


According to stakeholders in the Atlantic Canadian education sector, the government is making

significant investments into education in terms of primary, secondary and post-secondary

schools. In terms of international student recruitment, people tend to seek out education

during recessions. Students are much more mobile now and are seeking international

opportunities. In Atlantic Canada, institutions have had growth in international enrolment and

this is expected to continue. In terms of international contract training, this is a US$2 trillion

industry worldwide. Governments in other countries are seeking to develop their workforce by

importing expertise from other countries to train their trainers. There has been dramatic

growth in educational services as more countries are becoming more aware of how essential

education is for their technological and intellectual progress. The Department of Education and

Training receives support from the Atlantic Council to collaborate with other countries and

regions from an Atlantic Canadian perspective on initiatives such as addressing literacy rates.

Currently, exports include education and training services such as international student

recruitment, and contract training. Importers of these services include the Middle East, mainly

Abu Dhabi, the Caribbean, Trinidad, St. Lucia, and the Barbados. Competitive advantages

include an educated population, accessibility to post-secondary education, the Canadian brand

being associated with high quality and receiving substantial capital from the provinces.

Institutes have recruited students from Brazil to Nova Scotia. Sometimes Brazilians have trouble

getting study permits, but generally Brazil is a small but good market to source from. Brazilian

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opportunities are received by identifying prospects through onsite agents. Members of

EduNova are interested in diversifying and Brazil is certainly a market of interest. They typically

travel to Brazil a couple times per year. Other companies would be interested in Brazil as well,

however, in order to decide if it is a feasible market they would like to know whether contract

opportunities are available, if knowledge of Portuguese is essential or are English speaking

consultants competitive. There are also questions regarding ease of delivering a contract and

laws regarding repatriation of profit back to Canada.


The opportunities in the Brazilian education market include, English language courses, higher

education, vocational and executive training and distance learning. There is also a need for

contemporary curriculum design and content creation, technologies for eLearning and virtual

classrooms. Atlantic Canadian firms not only have strengths in higher education, English courses

and distance learning but they are also highly respected globally and provide value for money.

The 2014 World Cup and 2016 Olympics have increased the demand for English courses among

Brazilians. This present a clear and immediate opportunity for institutes offering these courses.

Agents and education fairs are the primary source for institutes to recruit Brazilian students for

various types of courses. Canadians institutes interested in attracting Brazilian students will

need to adapt their fee payment structure to make it more flexible.

There is also a possibility for institutes to offer vocational, English and distance learning courses

to large companies who want to enhance the skills, knowledge and language abilities of their

employees. In order to contact key stakeholders in the Brazilian industry, institutes could

contract agents and participate in trade missions.

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12. Food and Seafood

12.1 Introduction

The Food and Agriculture Organization (FAO) predicts that in order to meet demand the world

production of food will need to “increase by [approximately] 70 per cent by 2050 as the world

population expands to 9.1 billion people from about 6.8 billion in 2010.”257

12.2 Subsectors

The Food and Beverage Industry is the largest global business, with food subsectors in

agriculture, seafood, food processing, wholesale and distribution, and retail. The Beverage

industry can be broken down into soft drinks, bottled water and juices, and alcoholic (including

beer, wine, and spirits). The major players in the global market include Nestle, Pepsico,

Unilever, Kraft, Dupont, Dole Food Company, JBS SA and General Mills.258

12.3 Global Context

As of 2007, the global packaged foods industry was “valued at US $1.6 trillion. Meanwhile, the

World Bank [values] the food agriculture sector at approximately ten percent of global GDP (or

US$4.8 trillion).”259 According to the FAO, the global seafood market was worth approximately

US$400 billion as of 2006.260

Emerging nations such as China, India, Brazil and Russia (the BRIC nations) are becoming

wealthier, and are changing their eating habits. In particular, they're buying more packaged

foods and consuming more meat. Companies like Wal-Mart and Carrefour have been

expanding and building more supermarkets around the world. As a result, there is a ‘double

benefit’ of population growth and increased standards of living, which add up to growth in

modern retailing.

With the growing populations and consumer demands in emerging markets, there is an

opportunity for food and beverage companies to export products or set up operations to help

meet the needs of this rapidly expanding consumer base.261 A key opportunity is to follow the

consumer base, and there is a strong and growing consumer base in the Asia-Pacific, Central

and South American regions. Private labels and healthy lifestyle products are key food

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categories to pursue and have become more popular recently as consumers seek cheaper food

options and opportunities to eat at home. “Wellness or healthy lifestyle foods are a significant

global trend, as the growing number of middle-class and affluent consumers in emerging

markets are looking to healthy choices in food products as the next step in their purchasing

evolution.”262

12.4 Brazilian Context

“The 2010 sales revenue in Brazil's food industry is expected to grow by 10 percent from its

total of R$ 291.6 billion in 2009.”263

In the food industry, Brazil’s main product is beef and meat production. The drink sector

focuses on soft drinks, bottled water and beer. The Mass Grocery Retail (MGR) industry

includes supermarkets, discount stores, cash and carry, hypermarkets (supercentres),

electronics and home appliances. On the supply side, agriculture production is anticipated to

grow, while on the demand side there are two very distinct consumer bases: one small, wealthy

base of consumers (with purchasing power similar to those in the US) and a larger base with

much lower purchasing power. “Brazil has a highly positive food and drink trade balance thanks

to the country’s highly developed agricultural sector. Brazil is the world’s largest exporter of

coffee, soybean, poultry, beef, orange juice and sugar."264

China is currently the largest trading partner of Brazil and there are also various trade

agreements that Brazil has signed with other countries.

In 2010, Brazil moved to 5th place in global retail value from 8th place with a value of US$105

billion and had grown by 44 percent since 2005. Brazil has a large agricultural capacity and

supplies the food industry with exceptional quality raw material and ingredients at affordable

prices. "Manufacturers are able to tap into a domestic consumer base that accounts for half of

all consumers in South America and this alone makes Brazil a [preferred] hub for Latin America

and an excellent platform for new product development in the region."265

Multinational packaged foods players like Nestlé, Unilever, Bunge International and Danone

view Brazil as an important market for growth in the near future. Currently, Nestlé, Danone

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and Kraft have been established in Brazil for over half a century. Hershey and General Mills

have entered the country more recently. New entrants to the Brazilian market that are

recognized in developed markets have found it difficult to gain market share for their products

because Brazilians tend to be more comfortable with established brands, multinationals and

small local companies that they can identify with – established multinationals because of their

long-standing presence, small local companies because of a price advantage. New entrants

must display patience in order to gain consumer trust and build long-term profits. 266

The packaged food market has witnessed significant mergers and acquisitions involving Sadia

and Perdigão, Marfrig and Seara, General Mills and Laticínios Condessa, and JBS and Bertin.

These transactions have strengthened the players in several packaged foods sectors, such as

ready meals, chilled processed foods and frozen processed foods. As a result there is likely to

be an anticipated pressure on retailers and on the consolidation of various distribution

categories. Packaged food in Brazil is set to continue to grow over the next five years as the

affluence level continues to increase, thus increasing the purchasing power of the lower class.

Existing multinationals plan to target the lower income consumers in the future, as it is

currently the largest market in Brazil.267

In 2010, Brazil’s export of seafood was projected at US$152 million, over 50 percent decrease

from 2007. The biggest importers of Brazilian seafood are the US (37 percent), Spain (21

percent), France (20 percent), followed by Japan and Portugal. Shrimps, lobsters and frozen fish

such as croaker and red porgy are the main species exported. In the same year, Brazil had a

negative trade balance of US$790 million in fishery products and imported US$936 million

worth of seafood which is an increase of 67 percent from 2007. The main species imported

were sardines, hake and cod (the most expensive and accounted for 43 percent of the import

value).268

Brazzil Magazine reported in 2009 that Brazil was expected to increase its seafood production

by 40 percent by 2011. The then Brazilian President Lula da Silva had approved a bill forming

the Special Secretariat of Aquaculture and Fisheries (SEAP) and appointed its first minister. This

has marked the onset of consolidation in this sector in Brazil. "Although Brazil has 7,300

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kilometers of coastline and some of the world’s largest rivers, the country’s seafood production

amounts to less than 1 million metric tons, one-quarter of which comes from aquaculture."

Moreover, this ministry is also expected to promote seafood consumption within Brazil as the

per capita consumption of seafood in Brazil is much lower (9 kilograms annually) than the

industry standard of 15 kilograms.269


12.5.1 Political

The consumer sector is expected to take a leading role in driving economic growth, mainly

because of the rise of the middle class and the increasingly positive outlook of the large, low-

income population (which is supported by government policies to assist and raise this section of

society out of poverty). "Between 2009 and 2015, per capita consumption is forecast to grow

by 47 percent (nominal growth rate in local currency terms). With the size of the Brazilian

population forecast to increase by 5 percent over the same period, total food consumption is

expected to grow by 52 percent." Food consumption as a percentage of GDP is forecast to grow

10.31 percent in 2011, 10.36 percent in 2012, 10.44 percent in 2013 and 10.57 percent in 2014

and 2015. 270

Food and drink importers have to follow various long and complicated regulatory requirements

such as providing advance copies of invoices, company registration and certificates of product

testing. There have also been increases in production of meat that has been assisted by

government credit programs as well as high investments in animal genetics, improved pasture

and management practices. 271

The Ministry of Health (MS) or Ministry of Agriculture, Livestock, and Food Supply (MAPA) must

approve all items prior to shipment. Moreover, imports of poultry and beef are banned and

products containing ingredients derived from biotech commodities are severely restricted.272

In 2008, Peru and Brazil created a strategic alliance to jointly promote and market arapaima, a

South American tropical freshwater fish. One of the objectives of this alliance was to, “involve

government, the private sector and local communities and seek to establish an environmentally

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profitable bio-trade that aims to boost production of this fish without harming the

environment."273

12.5.2 Economic

Marcos Molina, president of Marfrig Alimentos (the second largest meat processor and

producer of beef, broilers and pork in Brazil), recently indicated that the company was unable

to fill 3,000 jobs in its plants because of a shortage in competent staff and laborers in the

Brazilian market. Unemployment in Brazil has reached a low of 6.1 percent in 2010, and is

expected to drop in the months ahead. The competition for labour in Brazil has lead to a rise in

inflation in 2010 (short supply of labour leads to increased salaries). In addition, most of the

country's attention is focused on the infrastructure development for the 2014 World Cup and

the 2016 Summer Olympics; as a result the country is preparing to promote investment into

sectors that traditionally benefit from sporting events (i.e., beer, soft drinks, retail).274


As consumers become more health conscious there has been an increasing trend towards

healthier options and organic foods. There is also an increasing demand for healthy and

functional foods with high-value ingredients in Brazil, and Brazilian importers are looking for

high-end products and well-known brands, as well as imports with packaging, status and

innovation.275


The "Real Plan" implemented during the 1990s was instrumental in the globalization process

and many trade agreements were formed at the time. This made it necessary for the domestic

players to invest in the latest technology in order to remain competitive and has resulted in the

production of high-value products and an increase in overall product quality. There are

estimated to be about 45,000 food-processing companies, including major multinationals in

Brazil. The ability to preserve and freeze foods for longer periods has also had a significant

impact on the food sector reducing food wastage. 276

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12.6 SWOT Analysis

12.6.1 Strengths

Sales revenue in the food industry was expected to grow in 2010. There is also an anticipated

increase in demand for Brazilian goods from China (Brazil’s biggest trading partner) in the near

future. The Brazilian economy is expected to grow by approximately 5.3 percent between 2011

and 2014, and it possesses a strong political system at the moment. Supermarkets are a strong

segment of the Mass Grocery Retail sector, and an emerging middle class means more

customers to appeal to and sell to.

12.6.2 Weaknesses

An increasing world population means that there will be an increase in demand for food in the

future, thus increasing food prices. New entrants to the Brazilian market that are established in

developed markets have found it difficult to gain a foothold in the country because Brazilians

tend to be more comfortable with established brands, multinationals and small local companies

that they can identify with.

There are considerable pressures on prices and margins in the Brazilian food sector mainly due

to tough competition. Business Monitor International reports that costs in Brazil are being

driven up by the logistical conditions in Brazil and the relatively expensive transportation and

distribution.

12.6.3 Threats

The global economy is slowly recovering, and there remains a threat of slow growth over the

next couple of years. The global demand for food is likely to increase in the coming years, which

has led to inflationary prices on the world scene. With the anticipated increase in the world

population to approximately 9 billion in the coming years, there is an underlying pressure on

the food industry to meet this demand. However, the unpredictability of natural events like

droughts and floods will lead to further uncertainty of supply and increased prices.

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Brazilian importers are looking for high-end products and well-known brands to introduce to

the market, and these companies would be interested in strong brands that can sell a certain

style and innovation. The packaged food industry in Brazil is an opportunity to gain a foothold

in that country and to enter the remaining Latin American markets. With the Brazilian

population and food market expecting to grow in the next four to five years, there may be an

opportunity to enter the Mass Grocery Retail sector (it is expected to grow by 45 percent

between 2009 and 2015). The convenience, discount and hypermarket type stores may provide

a foreign competitor opportunity to enter the market.

The Brazilian market is mainly a beef and meat eating, and does not have a large seafood

market. However, Brazil's imports of sardines, hake and cod were worth US$ 936 million in

2010.

There is also a small but emerging healthy lifestyle products and food market in Brazil that is

growing. A Trade Commissioner Service’s report on the Agriculture Sector Profile in Brazil

identified that,277

"Organic foods, functional 'better for you' foods and naturally healthy foods are

expected to increase in sales over the next five years with a growth rate ranging from 20

percent for ready meals and as high as 120 percent for snack bars. As a result of the

increase in population age, the busier lifestyles and increasing demand for healthier

foods, there are consumption trends for purchasing more 'light' foods and healthy snack

foods. Opportunities in segments of baby food, bakery, canned/preserved products

confectionery, dairy, dried processed food, frozen processed food, ice cream, meal

replacement, noodles, oil & fats, pasta, ready meals, sauces, dressings, snack bars, soup,

spreads, and sweet and savoury snacks all represent a potential niche for Canadian

ingredients, technologies or as niche specific item."

Further, a report by the Agri-Food Trade Service on opportunities in the Brazilian food market

identifies the following priority areas:278

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20442 Meat of Sheep, Cuts with Bone In, Nesoi, Frozen; 30212 Salmon, Pacific, Atlantic & Danube, with Bones, Frozen; 30322 Atlantic and Danube Salmon with Bones, Frozen; 30559 Fish, Dried, Whether or Not Salted but Not Smoked Nesoi; 80222 Hazelnuts or Filberts, Fresh or Dried Shelled; 80820 Pears and Quinces, Fresh; 80940 Plums, Prunes and Sloes, Fresh; 130239 Mucilage & Thickener Wether or Not Modified, from Vegetable Products Nesoi; 200520 Potatoes Prepared or Preserved, Other than by Vinegar or Acetic Acid, Not Frozen; 220410 Sparkling Wine of Fresh Grapes.


The Brazilian food and drink sector is growing very fast. In the drink sector the market could be

strengthened and in the food sector kitchen equipment and cooking machinery needs

improvement. Energy drink companies import cans and "taurine", which is the main ingredient

to produce energetic drinks from Malaysia, because it is the only country that produces a 250ml

can. The energetic drink industry grew by 363 percent from 2009 to 2010. The government

provides tax benefit and the IPI (federal excise tax on the manufacturing of good) rate was

reduced by 27 percent to R$48 cents per gallon produced. Without this benefit the energetic

market would not have survived. RedBull and Coca-Cola (Burn Energetic) dominate the sector.

Food companies import cooking machines and kitchen equipments from the US and Italy

because these countries offer highly efficient and modern products. The companies

interviewed did not have experience with Canadian companies exporting any products or

services in their segment of the food and drink sector. According to a partner in an energy drink

company, the best way for a Canadian company to participate in this sector would be through

JV or partnerships. However, the easiest way for a Canadian company to participate in the

Brazilian market would be through technology transfers.

Another aspect of the Brazilian food sector, which is growing fast, is the "away from home"

segment. The growth has been three times more than GDP. The food sector in Brazil is evolving

and equipment and products are being modernized. The food sector in Brazil is already strong

and the market continues to grow. Brazilian companies are becoming stronger, but for many of

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them it is still difficult to compete with foreign companies. Food service is a huge opportunity in

this sector. Food service’s companies prepare food based on buyer's needs and facilitate and

improve food sales in restaurants. Fast Food is also an important available opportunity in the

sector. Kitchen equipment and cooking machinery need upgrades. Domestic companies that

dominate the sector are: Spoleto, Vivenda do Camarao Usina das Massas.

12.8 The Atlantic Canadian Food and Seafood Sector279280

The agriculture industry in Atlantic Canada exports its potatoes, apples, carrots, cauliflower,

corn, chanterelle mushrooms, fiddlehead greens and maple sugar. Cranberries are planted and

harvested for the production of condiments and juices, and the climate is suited to grape

growing for wine. In addition, Atlantic Canada is the wild blueberry capital of the world. The

blueberry is known for its health benefits and antioxidant properties, and it gets processed into

Kosher-certified wines.

The region also exports frozen foods globally. Atlantic Canada’s excellent transportation

infrastructure (air, sea and land) continues to support the fisheries and aquaculture industry as

it develops innovative harvesting, processing and conservation technologies. Atlantic Canada

has four international airports and two major container ports (Halifax and Saint John) for

exports.

The Seafood Industry in Atlantic Canada is recognized internationally for its quality, leadership

and innovation. It accounts for the vast majority of Canada’s rich variety of harvested and

processed groundfish, shellfish, and pelagic products exported worldwide. It is the world’s

leading producer of canned sardines and the leading exporter of fresh lobster. It exports crab,

lobster, herring, frozen fish and fillets, shrimp, halibut, salted fish, scallops and mackerel. It is

an industry leader in new packaging techniques that can extend the shelf life of fresh seafood

products for up to 10 days. The industry is placing greater emphasis on value-added products

such as hors d’oeuvres, pâtés and frozen fish entrées. The Atlantic Seafood Industry is

developing markets for non-traditional and under-utilized species, and applying new

technologies to a growing aquaculture industry (farmed seafood). It is also targeting niche

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markets worldwide with specialized products such as sea urchins, Irish moss and frozen herring

roe.


The food industry is growing only slightly each year. The recession in US is improving and this

means Atlantic Canadian exports are also improving. The Gulf oil spill ruined the reputation of

seafood in that region and this may be a good opportunity for Atlantic Canadian companies to

offer their services. There have been severe restrictions on exports of Russian potato and grains

and all these reasons have increased the demand for Atlantic Canadian fish and potato stocks.

Fish and potatoes make up a large market share of the food industry. The domestic market in

Atlantic Canada is very small, so for decades exporting has been essential. Other exports

include fruits, vegetables, and meat. Traditional importers have been the US and central

Canada. Other importers include the EU and Japan - depending on the value of the products it is

sometimes more affordable to transport shipments by air. Competitive advantages include:

having large quantities of high quality food, the lower supply in other countries due to labor,

water or other concerns. The Atlantic Canadian brand is also associated with food safety,

quality, the association with Anne of Green Gables, and exporting experience also increase the

reputation of products from Atlantic Canada.

The companies interviewed did not have much experience with Brazil. However, there was

awareness that Brazil is flourishing and that it should be targeted, as transportation costs

should not be a concern. Most companies would be interested in Brazil, especially seafood

companies. Meat may not be an area of large exports to Brazil as it is domestically produced in

Brazil and exported in large quantities. Export interests include sales and joint ventures and

possibly processed products or drinks like juice.


Atlantic Canadian companies can look for opportunities in the food market segments that are

expected to grow in Brazil in the future. It is important to note that imported products are

usually not price competitive in the Brazilian market as compared to those produced in Latin

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America due to the tax benefits that available to MERCOSUL countries.281 Therefore, the best

approach would be to find premium market segments that have a small market share currently

but are expected to grow in time. Atlantic Canadian companies can establish themselves by

developing a brand that represents quality and is easily recognizable in the Brazilian Market.

Some of the products that could be exported are potatoes, vegetables and fish (the salt fish

market is growing in Brazil particularly Atlantic Cod).

In order for Atlantic Canadian products to succeed in the Brazilian market, marketing and

branding must consider the language and culture of Brazil. For Example, Atlantic Cod is

commonly known as "Bacalhau" and is considered a top quality fish in the Brazilian market.

Atlantic Canadian exporters should be aware of the slow progress in the Brazilian market due to

bureaucracy. An agent is required to facilitate export processes.282

The Food Ingredients South America Trade Show

Venue: Expo Center Norte

Country: Sao Paulo, Brazil

Start Date: 18-SEP-12 End Date: 20-SEP-12

Industry: Agriculture & Forestry

http://fi-southamerica.ingredientsnetwork.com/

http://fi-southamerica.ingredientsnetwork.com/

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13. Experiences in the Brazilian Market

Please note that this part of the report (Section 13) is based on primary research and represents

the experiences of some Canadian Businesses in Brazil. These statements are their opinions and

perceptions of the Brazilian market and must not be relied upon as facts.

Canadian companies actively export to Brazil in various sectors; of which the most popular are

the ICT and mining sectors. Other popular sectors include oil and gas equipment services,

aerospace, defense and security, and environmental technologies.

Exports from the information and communication industry include software such as timesheet

management, geographic applications for marketing tools, incident reporting and

telecommunication products.

Some companies in the educational sector have set up franchises for language schools outside

of Canada and provide English language instruction, university preparation classes, teachers’

training and foundation year programs. Other services from the education sector include

certified multilingual services in over 60 languages like verbal education, consulting, global

marketing, written translations, spoken interpretations, and education for the food, film and

environmental industries.

Exports from the mining industry include minerals, metals, power, mining equipment, new

mine consumables, Electric Arc Furnace (EAF) lance tips for steelmaking and other consolidated

goods. Canadian exporters have also set up refineries, power plants, and infrastructure in Brazil

as well as provide environmental management, remediation and planning.

The oil and gas equipment industry exports oil and gas purification systems, power and data

transmission systems and other engineering products to Brazil. Exporters from the aerospace,

defense and security industry send commercial antennae and airport radar antenna.

Exporters from the environmental industry send custom equipments.

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13.1 Canadian Export Experience

Most Canadian companies actively exporting to Brazil also export globally across all continents

and have office locations ranging from 40 to 130 countries. Some specific regions mentioned by

those interviewed included the Middle East, East Asia, most of Europe, North America, and

Latin America. Countries where Canadian companies are actively exporting include: Argentina,

Australia, China, Columbia, Germany, India, Japan, Korea, Mexico, Norway, Saudi Arabia,

Singapore, Sweden, Syria, Switzerland, Taiwan, United Arab Emirates, the United States of

America, the United Kingdom, and Turkey.

Despite the competition there is high potential in the export markets – in fact one of the

companies operating in the ICT industry has been able to achieve 85 percent market share in

the Latin American market.

Brazil is a target market for many Canadian companies due to its growth potential as an

emerging economy. As one of the fastest developing countries in the world and the largest

economy in South America, it is strong and is doing very well for itself. However, in order to be

successful it is important to build strategic and strong alliances within the country.

Brazil’s oil and gas offshore industry is expanding and is a potential market for companies

interested in the steel, mining and telecommunications industry. One of the companies

exporting computer systems has found immense success within Brazil’s hydrograph community

which is very open to imports of specialized products in navigation and marine activities. The

Brazilian navy has been a strategic client for them for over 10 years. However, it would be very

difficult to be successful without a reliable local partner or office location.

The upcoming World Cup and Olympic events has everyone excited and there is expected to be

an increase in demand for many products and services over the next few years. However, the

demand for imports from Canada to Brazil has been varied and depends on the industry within

which the company operates or sometimes on the strategy of the individual company itself.

The ICT industry has had mixed response from the Brazilian market; while some have not seen

much growth or demand others find that demand has been steadily increasing. This growth was

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attributed to their long-term as well as personal relationships with clients. On the whole,

companies find that bilateral relationships in the Brazilian market have been beneficial to both

parties and their clients are glad to have access to the most advanced technology in world.

Most companies say there has been very small or static growth. This is blamed on the cyclicality

of the industry and the higher value of the products, even though they feel like manufacturers

are in limited supply.

The education sector in Brazil is highly competitive especially now that the cost advantage on a

lower Canadian dollar to the American dollar no longer exists. Cost advantage and high quality

are no longer the only competitive edge and Canadian institutes have to work harder to come

up with innovative products and services that appeal to Brazilians. Overall Brazilians seem to

enjoy living in Canada rather than other places in North America and they also tend to be a

good source for word of mouth promotion for Canadian education.

The mining industry has seen a tremendous increase in growth and demand in the recent years.

However, there are also some constraints with importing products to Brazil particularly in the

mining sector – companies are sometimes forced to send as much product as possible at a time

rather than many smaller shipments. Furthermore, over 100 percent in import taxes are often

charged for these products. There is a tendency for Brazil to be highly protective of its

indigenous companies and will import only those products that are in great demand but are not

locally available.

The trend for exports in the marine and oil and gas industry seems to be varied with some

companies experiencing more interests in imports than in other industries. There is also a

recent trend of importers from the aerospace, defense and security sectors seeking partners by

contacting Atlantic Canadian companies through their website.

In the environmental technologies industry there has been a trend to work in partnership with

US companies. One of the companies interviewed was invited by an American company to be

the environmental auditor and made significant contributions to the Bolivia to Brazil pipeline

project. There has also been an increase in requests from Brazil’s geological society seeking

technology transfers.

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13.2 Challenges of Entering the Brazilian Market

Some of the common challenges that are faced by Canadian exporters include:

13.2.1 Language and Local Customs

Brazil is the only Latin American country that has Portuguese as its local language and not

Spanish. Although English is becoming more popular lately it is not widely spoken across the

country and most business is conducted in Portuguese. One of the software development firms

suspects that its limited success in the Brazilian market is due to the fact that their software is

currently available only in English.

13.2.2 Technological Advancement:

Some companies that experimented with online sales have not had the success they hoped for

and have attributed this to the lower levels of technologically advancement in Brazil as

compared to Canada.

13.2.3 Import Duties and Regulations:

Some companies have found the importing structure pretty closed due to complex bureaucracy

and taxing systems. Import regulations have taxes for certain products at about 120 percent on

average. Obtaining an import certificate is essential and sometimes it seems more advisable to

export larger quantities at one time rather than to export more number of times. Import

regulations are more supportive of local companies. Also, Brazil offers more perks if products

are assembled or manufactured domestically rather than imported. All these factors are

compounded by high import duties which create a price barrier make it more difficult for

Brazilian companies to import products from outside Brazil. Setting up operation in Brazil can

be expensive and cost inefficient.

13.2.4 Business Structure

Most companies have found that it is impossible to work in Brazil without some sort of local

presence or a local partner. The local partner needs to be reliable and have sufficient

knowledge about cultural nuances, local customs as well as legal and procedural regulations.

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Another difficultly that companies often face is repatriating money out of Brazil. Besides the

typical visa and language issues, the delivery time from North America to Brazil is relatively

long.

13.3 Best Practices of Entering the Brazilian Market

To be successful in Brazil it is imperative to have local operations or have a tie-up with a local

partner. Partnering with a good representative that knows the people, policies and procedures

needed is the fastest way to get a foothold in any country.

However, it is also important to ensure that business control is determined at the onset of the

relationship to ensure that mismanagement of capital does not take place. There have been

instances when local partners have tied with companies only to gain additional capital.

If local offices are set up, it is best to hire locally in order to minimize a negative impact on

operations. Reliable and knowledgeable local employees will know who to talk to and get

appropriate paperwork done in order to imports products. In order to do business in Brazil,

companies must understand the language, cultural nuances and understand how social issues,

the economy and politics can affect their efforts. There are also instances of corruption that

may only be bypassed through bribes. There have been instances when just one incorrectly

placed additional screw in a consignment will cause delays and possible rejection of the entire

import process.

Overall, flexibility of the registration procedures and customizing programs to fit the needs of

the market will help in the medium and long-term to win more business in Brazil. Another key

factor to success is specializing in products or services that are not easily available locally. Last

but not the least, patience and building strong relationships with customers will bring long term

success.

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14. Establishing and Conducting Business in Brazil

Establishing a business in Brazil involves its own unique processes, procedures and costs. A

thorough understanding of these factors allows a company to plan well and ensure that they

are prepared.

14.1 Establishing a Company in Brazil283

14.1.1 Types of companies

Under the Brazilian law various types of enterprises may be established in Brazil. These include

the following seven types284:

• Non-profit company (Sociedade simples)

• General partnership (Sociedade em nome coletivo)

• Limited partnership (Sociedade em comandita simples)

• Limited partnership by shares (Sociedade em comandita por ações)

• Overt/covert partnership (Sociedade em conta de participação)

• Limited Liability company (Sociedade limitada / Ltda.)

• Corporation (Sociedade anônima / S.A.)

Foreign businesses most frequently use Corporations (S.A.) or Limited Liability Companies (LLC.)

while establishing subsidiaries and joint ventures. As in Canada this provides limited liability for

individuals and treats the company as a legal entity separate from its owners.

It is also possible to establish other forms of corporation such as "consortia or special types of

partnership". However, these do not have a legal status and the "parties or owners have

individual rights and obligations for the common benefit of the group. These contractual

structures are usually adopted to meet specific purposes or for non-corporate businesses."

General Partnerships which placed unlimited liability for the partners were also popular

because of tax benefits. They are less popular now than in the past as these benefits have now

been extended to other forms of corporations.

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14.1.2 Restrictions on foreign investment285

Prior Government permission is required for foreign investment in sectors related to healthcare

or health products, postal and telegraph services, nuclear power, domestic flights, sanitation,

road transport, aerospace industries, banks and financial institutions, mining companies, oil

refineries, and maritime.

14.1.3 Acquisition of properties286

Other than places that are considered to comprise Brazil’s national security individuals and

foreign entities that are registered with the Individual (CPF) or Corporate Taxpayers Registry

(CNPJ), have the same right as nationals to acquire properties.

Foreigners who are permanent residents, corporations permitted to operate in Brazil or

Brazilian corporations controlled by foreigners may be permitted to buy rural land under

certain conditions and limitations.

"Other foreign entities without authorization to operate in Brazil and foreigners without

permanent residence in the country can only acquire rural properties under the following

circumstances:

• Foreigners may acquire rural properties as inheritance

• Foreigners can buy land for a maximum of 50 agricultural modules. All purchases of land

between 3 and 50 modules are subject to prior approval from the National Institute for

Colonization and Agrarian Reform (INCRA);

• The purchase of more than one property with more than three agricultural modules is

subject to approval from INCRA. The purchase of properties with more than 20 rural

modules is subject to the approval of a plan of land use."

14.2 "Doing Business 2011: Making a Difference for Entrepreneurs"287

"Doing Business 2011: Making a Difference for Entrepreneurs" a recent report by the World

Bank and the International Finance Corporation ranked Brazil 127 out of 183 economies in the

ease of doing Business. "Doing Business provides a quantitative measure of regulations for

starting a business, dealing with construction permits, registering property, getting credit,

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protecting investors, paying taxes, trading across borders, enforcing contracts and closing a

business—as they apply to domestic small and medium-size enterprises. It also looks at

regulations on employing workers as well as a new measure on getting electricity."

See Figure 10 for a comparison of Brazil to global good practice economies as well as selected

economies

Figure 10: Ease of Doing Business - Global Rank

Starting a business in Brazil takes 120 days, versus an average of 56.7 days in Latin America and

Caribbean and compared to an average of 13.8 days in OECD nations. Refer to Appendix “I” to

read about the procedure, average time and cost required to start a Business in Brazil.

1 4 5 718

35 43

79

115127 134

020406080

100120140160

Sourced and adapted from: Doing Business 2011

Ease of Doing Business - Global Rank

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14.2.1 Trading Across Borders

Brazil is ranked 114 overall for Trading across Borders. See Table 8 for comparison of Trade time

and cost among Brazil, Latin America and Caribbean countries and OECD countries.

Table 8: Trading Across Borders

Indicator Brazil LAC OECD

Documents to export (number) 8 6.6 4.4

Time to export (days) 13 18 10.9

Cost to export (US$ per container) 1,790 1,228.30 1,058.70

Documents to import (number) 7 7.1 4.9

Time to import (days) 17 20.1 11.4

Cost to import (US$ per container) 1,730 1,487.90 1,106.30

14.3 Government Agencies

The main regulatory agencies regarding business activities are the following:288

1. The Central Bank (BACEN): Responsible for the execution of monetary policy, exchange

and controls, registration and control, and the regulation of banks and financial

institutions.

2. Securities Commission (CVM): Responsible for the securities markets and listed

companies.

3. Administrative Council for the Economic Defense (CADE): Responsible for investigating

and suppressing unfair business practice and antitrust monitoring.

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4. Foreign Trade Department (DECEX) of the bank of Brazil: Responsible for administration

of foreign trade and control of export and import licenses.

Considering the privatization of some public services implemented in the past few years, the

Brazilian Government created regulatory agencies with the administrative autonomy to

supervise and regulate specific activities. The various agencies include: 289

1. National Electricity Agency (ANEEL).

2. Telecommunication Services (ANATEL).

3. Health Services (ANS).

4. National Agency of Petroleum, Natural Gas and Biofuels (ANP)

14.4 Tax Structure

14.4.1 Corporate

The Corporate Tax rates for 2010 are 34 percent, consisting of a basic tax rate of 15 percent.

There is also a surtax of 10 percent for annual income of over R$ 240,000. An additional 9

percent is added for social contribution on net profits. Any Capital Gains incurred by companies

are added to the company’s regular income.290

Tax Deductions in Brazil are treated uniquely. Corporate losses are carried forward indefinitely,

with 30 percent of the current year’s taxable income set off against the future year’s loss.

Depreciation is deducted using the straight line method, and companies can claim different

amounts depending on the amount of work completed. Thin capitalization rules relating to

interest expenses have been in effect in Brazil since January 1, 2010.291

14.4.2 Federal, State and Municipal Taxes

There are many taxes that the Brazilian government levies on the public and on corporations at

the Federal, State and Municipal level.

14.4.3 Federal Taxes

Federal Taxes include the Import Tax (II), the Export Tax (IE), the Industrialized Products Tax

(IPI), the Credit Operations Tax (IOF), the Rural Property Tax (ITR), the Corporate Income Tax

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(IRPJ), the Social Contribution Tax on Profits (CSLL), the Federal Value-Added or Excise Tax on

Manufactured Goods (IPI), the Financial Transactions Tax(IOF), the Contribution for Intervening

in Economic Domain (CIDE), the Tax for Social Security Financing (COFINS) and the Profit

Participation Contribution Tax(PIS/PASEP), and the Employer Social Security Contributions Tax

(INSS).292 See Table 9 for a list of the Federal Taxes.

Table 9: Federal Taxes in Brazil

Federal Tax Percentage

Import Tax (II) 0 – 35 percent

Export Tax (IE) 30 percent

Industrialized Products Tax (IPI) Based on the sales price when product leaves

industrial establishment, or upon import

Credit Operations Tax (IOF) Varies depending on the type of transaction

Rural Property Tax (ITR) 0.03 percent – 20 percent

Corporate Income Tax (IRPJ) 15 percent, with a surcharge of 10 percent on

companies earning over R$ 240,000 per year

Social Contribution Tax on Profits (CSLL) 15 percent for financial institutions, 9 percent for

other institutions

Federal Value-Added or Excise Tax on

Manufactured Goods (IPI)

0 percent - 335 percent, depending on type of

goods produced

Financial Transactions Tax (IOF) 0.0041 percent per day for credit transactions

within Brazil with an additional 0.38 percent on

foreign exchange

Contribution for Intervening in Economic

Domain (CIDE)

10 percent

Tax for Social Security Financing (COFINS)

and Profit Participation Contribution Tax

(PIS/PASEP)

COFINS: 3 percent - 7.6 percent;

PIS: 0.65 percent - 1.65 percent

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Federal Tax Percentage

Employer Social Security Contributions

(INSS)

Employer: 37.3 percent;

Employee: 7.65 percent - 11 percent

14.4.4 State Taxes

State Taxes include the Heritage and Donation Tax (ITCMS)/ ITCMD, the Circulation of Goods

and Services Tax (State VAT – ICMS), the Property of Vehicles Tax (IPVA) and the Value-Added

Tax on the circulation of goods and services Tax (ICMS). Table 10 below lists the State Taxes. 293

Table 10: State Taxes in Brazil

14.4.5 Municipal Taxes

Municipal Taxes consist of the Urban Property Tax (IPTU), the Transmission of Property Tax

(ITBI), the Services Tax (ISS), and the Real Estate Property and Real Estate Transfer Taxes. See

Table 11 for a list of Municipal Taxes. The Urban Property Tax is levied on the ownership or

possession of urban properties and is charged according to municipal laws. 294

Table 11: Municipal Taxes in Brazil

State Tax Percentage

Heritage and Donation Tax (ITCMS/ITCMD) 2 percent - 6 percent

Circulation of Goods and Services (State VAT –

ICMS)

17 percent - 19 percent; sometimes

higher, sometimes lower

Property of Vehicles Tax (IPVA) Usually over R$ 1,000 (annually)

Value-Added Tax on the Circulation of Goods and

Services (ICMS)

7 percent - 25 percent

MUNICIPAL TAX PERCENTAGES

Urban Property Tax (IPTU) Charged according to Municipal Laws

Transmission of Property Tax (ITBI) Up to 8 percent

Services Tax (ISS) 2 percent - 5 percent

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14.4.6 Foreign Companies in Brazil

Foreign companies are subject to Brazilian taxation if they carry out certain sales activities in

Brazil through agents or representatives that legally reside in the country and have the legal

means to bind the foreign seller, or through a domestic branch of a foreign seller. Basic income

taxes are levied on operating profits of a company that is chartered in Brazil (operating profits

are determined to be gross revenue minus: the cost of goods sold or services rendered, all

commercial, administrative, and operating expenses, and other charges, reserves and losses

authorized by law). Brazilian companies may opt to be taxed on actual or presumed income

(The Lucro Real method, based on actual annual or quarterly taxable income; or The Lucro

Presumido method, based on estimated or deemed taxable income).295

Expenses can be deducted if they are deemed necessary activities for the company. Each

company determines at the beginning of the fiscal year whether it will record its gains and

losses on obligations in foreign currencies via the accrual or cash accounting method. Losses

are classified as either ‘operational’ or ‘nonoperational.’ Non-operational losses are set off

against non-operational gains, and tax losses incurred in one fiscal year may be carried forward

indefinitely (limited to 30 percent of taxable income in each carry forward year). Losses cannot

be carried back to take advantage of tax recovery opportunities.296

Capital Gains Taxation is treated in the same manner as ordinary profits, subject to certain

restrictions pertaining to capital losses against ordinary profits. Any capital gains recognized by

non-residents are subject to a 15 percent withholding tax. If the non-resident lives in a country

deemed to be a tax haven (i.e., a country that taxes income at a rate lower than 20 percent),

the capital gains tax is increased to 25 percent. By comparison, Canadians are charged between

10 percent and 25 percent.297

In addition, foreigners are usually charged a 15 percent withholding tax and the 10 percent

CIDE on any royalty payments. The tax year in Brazil is the calendar year, and each tax has a

Real Estate Property Taxes 0.3 percent - 1 percent

Real Estate Transfer Taxes 2 percent - 6 percent

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specific due date. As in Canada, every business entity in Brazil (corporations, partnerships,

branches and agencies of companies based in Brazil) files an annual income tax return for the

previous calendar year. However the deadline for the submission of tax returns is June 30th (as

opposed to April 30th in Canada). Companies that submit their payments late are charged

interest and face other possible government penalties.298

14.4.7 Payroll Tax and Deductions

The domestic tax system is complex, which includes multiple cascading taxes and tax disputes

among various states, and it poses challenges to foreign companies operating in Brazil. Payroll

taxes are filed online and are approximately 8.8 percent, based on gross salaries. As of February

2010, Income Tax is paid according to each individual’s income level (as displayed in Table

12).299 The employer contributes 37.3 percent of the employee’s gross salary, which includes

28.8 percent for social security and 8.5 percent for a severance fund. The employee

contributes between 7.65 percent - 11 percent of his or her gross salary. The employee's

payment, which is capped, is based on a "contribution salary table" provided by the

government. Individuals pay a 15 percent tax on capital gains, and dividend income from local

companies is tax exempt.300

Table 12: Income Tax Levels in Brazil

Income Level

(In Brazilian Real)

Tax Rate

(In Percentage)

R$ 1 – R$ 17,208 No Tax Paid

R$ 17,209 – R$ 25,800 7.5

R$ 25,801 – R$ 34,392 15

R$ 34,393 – R$ 42,984 22.5

Over R$ 42,984 27.5

Non-Residents 27.5 (flat rate)

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In Brazil tax is deducted at source from the following payments to non-residents:

• Dividend - 0 percent

• Interest - 15 percent to 25 percent

• Royalties - 15 percent,

• Services -15 percent.

14.4.8 Social Security Contributions

Social Security contributions by the employer and the employee are subject to a ceiling defined

by law and outlined in Table 13.

Table 13: Social Security Contributions

14.5 Import Regulations & Logistics

The government levies tariffs on incoming products to be sold in the Brazilian market. With

Brazil currently a member of the MERCOSUL group of countries, there are certain tariffs that

are imposed on imports, which act in a similar fashion to the Canadian government’s tariffs

imposed on non-NAFTA countries for imported goods. Brazil also utilizes a simplified clearance

process on express deliveries. There is a merchant marine tax and a tax on each foreign film

released in the country. In addition, foreign cable and satellite providers are subject to taxes.

Contributor Percentage Contribution

Employer

Gross Salary 37.3 percent

Social Security 28.8 percent

Severance Fund 8.5 percent

Employee

Gross Salary 7.65 percent – 11 percent

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14.5.1 Import Tariffs

Brazil is a member of the MERCOSUL common market (which includes Argentina, Brazil,

Paraguay and Uruguay). MERCOSUL’s Common External Tariff (the CET, also known as the

import tariff) averages 11.5 percent, and ranges from 0 percent - 35 percent ad valorem, with

many country-specific exceptions. Each MERCOSUL country is able to charge a tariff on

imported products from outside the region, as long as the product travels through at least one

MERCOSUL member before the product reaches its final destination. In December 2009, Brazil

and the other MERCOSUL countries approved tariff increases to hundreds of products in the

CET, including dairy, textiles, bags, backpacks and suitcases. For many products, the tariff was

increased to the bound limit of 32 percent (the limit according to WTO rules).301

All express delivery goods that are imported to Brazil go through the Simplified Customs

Clearance process and are levied at 60 percent duty (maximum charges for these services are

US $10,000 for exports and US $3,000 for imports).302

A 25 percent merchant marine tax on long distance freight at Brazilian ports puts foreign

agricultural products at a competitive disadvantage to MERCOSUL products. Brazil applies a 60

percent flat import tax on most manufactured retail goods imported via mail and express

shipment by individuals that go through a simplified customs clearance procedure called RTS

(simplified tax regime). Goods with a value of over US $3,000 cannot be imported using this

regime.303

All importers and exporters must obtain a license and be duly registered with the Foreign Trade

Department (DECEX) of the Ministry of Development and the Industry and Foreign Commerce.

Several incentives encourage exporting by Brazilian companies, and there are usually no

restrictions on exports (except when exporting express shipments).304

14.5.2 Foreign Cable and Satellite

Foreign cable and satellite television programmers are subject to an 11 percent remittance tax.

This tax can be voided if the foreign programmer re-invests 3 percent of its remittances in

Brazilian audiovisual services. In addition, remittances to foreign producers of audiovisual

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works are subject to a 25 percent income withholding tax (the CONDECINE, or Contribution to

the Development of a National Film Industry). The CONDECINE tax is also levied on any foreign

video and audio advertising (Brazil requires that 100 percent of all films and television shows be

printed locally. Importation of color prints for the theatrical and television markets is

prohibited).305

Cable companies have a cap on foreign ownership of 49 percent, and any foreign company

must have its headquarters located in Brazil for at least the past 10 years.306

14.5.3 Duties

The Profit Participation Contribution Tax (PIS) and the Social Security Financing Tax (COFINS)

are specifically targeted at imported goods and services, and briefly outlined in Table 14. In

addition, there is a further description of the tax base on these imported goods and services.

Table 14: PIS and COFINS Taxes

As of May 2004 PIS and COFINS taxes were charged on imports of foreign products and services

(PIS-Imports and COFINS-Imports). These quasi-tax contributions are triggered by (a) the entry

of foreign goods in the Brazilian Territory, or (b) by payment, credit, delivery, use or remittance

of funds to foreign-based persons in consideration for services rendered.307 PIS and COFINS are

paid by:308

1. The importer (individual or legal entity that brings the goods into the Brazilian territory);

2. An individual or legal entity retaining services from a foreign-based resident; and

3. The service beneficiary, if the principal is also resident or domiciled abroad

Contributions Levied On

Triggered by: Services originating abroad that:

Entry of foreign goods, OR Are rendered in Brazil, OR

Payment, credit, delivery, use or remittance to

foreigners

Whose results are felt in Brazil

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The tax is charged when the goods are imported or upon the hiring of foreign services. PIS and

COFINS adopt the same rates as those charged under the non-cumulative taxation system, and

the taxes are due:309

1. On the date of registration of the Declaration of Import (DI) (in the case of imports of

goods)

2. On the date of payment, credit, delivery, use or remittance, for service imports or under

specific circumstances, and

3. On the date of expiration of the period of stay at a bonded warehouse.

Companies qualifying for the non-cumulative taxation regime include their contributions that

may translate into future credits set off against contributions levied on the income from the

sale of the respective goods and services in Brazil (based on the tax rate for the PIS-Imports and

COFINS-Imports). These credits apply to contributions on imports of goods intended for further

resale, or on the manufacture of goods or provision of services intended for sale.310

In addition, Brazil uses a system called "MERCOSUL Common Nomenclature" (NCM) to classify

import duties and taxation on products imported to the country. For example:311

1. NCM 38.12.2000 - Miscellaneous chemical products: import duty (14 percent), ICMS (18

percent), IPI (10 percent), PIS (1.65 percent), and COFINS (7.60 percent).

2. NCM 72.12.5010 -Iron and steel: import duty (2 percent), ICMS (18 percent), IPI (5

percent), PIS (1.65 percent), and COFINS (7.60 percent);

3. NCM 96.05.0000: Miscellaneous manufactured articles: import duty (18 percent), ICMS

(18 percent), IPI (10 percent), PIS (1.65 percent), and COFINS (7.60 percent)

4. NCM 84.01.2000: Nuclear reactors, boilers, machinery and mechanical appliances; parts

thereof: import duty (14 percent), ICMS (18 percent), IPI (0 percent), PIS (1.65 percent),

and COFINS (7.60 percent).

The most updated information on specific products categories can be downloaded from the

"Ministério do Desenvolvimento, Indústria e Comércio Exterior" website. [The page is in

Portuguese however, there is an excel file in English available at the bottom of the page].312

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14.6 Electronic Commerce

Electronic business and contracts are widely used in Brazil as the general legislation gives them

validity. Brazilian general legislation such as the Civil code, the Consumer Protection code, the

Commerce Protection Code, the Commercial Code, the Intellectual Property Legislation and

Copyright Legislation all protect electronic business.313

14.7 Industrial Property

The National Institute of Industrial Property (INPI) regulates matters relating to industrial

property (i.e., patents, trademarks, manufacturing processes, technology and know-how). All

licensed property and technology is required to be registered with INPI, in order to remit

royalties and fees abroad. The INPI will not approve licensing arrangements that restrict or

control a licensee’s exports because these provisions violate Brazil’s antitrust laws. An

application must be filed with the INPI to register technical assistance or a technology transfer

contract. The application covers a five year period, but could be extended for an additional five

years if more time is required to complete the technology transfer. The INPI rarely authorizes

an extension as long as five years, but it does permit extensions of less than five years. Any

royalty remittances require INPI certification and registration with the central bank.314

14.8 Dispute Resolution

Dispute Resolution in Brazil is very specific and protects the Brazilian market. There is specific

resolution that protects against monopolistic scenarios (i.e., collusion with competitors). The

Brazilian government also works in conjunction with other foreign government organizations in

order to reduce and eliminate anti-competitive behavior.

The Brazilian government has adopted summary proceedings in labour-related cases, and these

disputes are settled in one hearing. Preliminary conciliation committees consisting of employee

union representatives and employer associations are formed to hear disputes and resolve

matters in order to avoid and resolve arduous labour cases. If these matters end up in court,

they would likely last over a period of years. This conciliation process is employed to expedite

these issues.315

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14.9 Common Transportation Modes316

The National Department of Infrastructure and Transportation (NDIT) is the federal agency in

charge of implementing policy about roads, railways, waterways and ports.

14.9.1 Sea Transportation

Trade between the South American companies commonly occurs via sea and these routes cover

main ports in Venezuela, Colombia, Ecuador, Peru, Chile, Argentina, Uruguay and Brazil.

This means of transportation is preferred due to the large quantities of product that can be

shipped at a time thus decreasing freight costs. Lower freight costs are important as these costs

are included in customs value and import taxes are calculated based on these. The advantage of

using sea transport is that all types of perishable, fragile or hazardous good can be transported.

Transshipment is not required by freighters on these routes which saves a lot of time and

ensures timely deliveries. Ship owners in Brazil are represented by a network of agents

commonly known as maritime agent. These agents are located in capital cities and may

negotiate with traders and issue necessary documentation. Payments can be either collect or

prepaid and depend on the International Commercial terms agreed.

14.9.2 Air Transportation

Air transportation is generally used when time is of essence and there is urgency to transport

shipments. Naturally, this mode of transport is more expensive and costs depend on weight,

cubic meter or transported unit (container). Several air freight companies have strong

operations within Brazil as do courier companies who are permitted to carry small packages.

Fares can be negotiated with the airlines directly or through airfreight agent authorized by

them. Most airlines operators are members of the International Air Transport Association

(IATA) or the International Civil Aviation Organization (ICAO) and have established freight

charges which are required to be mentioned on the Airway Bill (AWB). However, other freight

carriers not associated with the international association may be more receptive to

negotiations as they are not required to maintain regular routes.

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14.9.3 Road Transportation

Most of the other South American countries share land borders with Brazil making road

transportation common mode of trade in Brazil. There are several land routes and specialized

companies that freight cargo between cities on the Pacific Coast and Brazil. Trade between the

MERCOSUL countries is simplified due to unified duties and cargo transportation among

members is authorized if freight companies provide authorities with the International Cargo

Declaration (MIC). Outposts of the Federal Revenue Service and Customs Administration, with

the Siscomex system are available at the border for clearance of goods. All companies that run

on the South American land route must be authorized based on the Agreement on

International Land Transportation – ATIT (signed by Latin American countries). The National

Agency for Land Transportation - ANTT is the regulatory body that supervises road

transportation in Brazil.

14.9.4 Railroad Transportation

The use of railroad for international cargo transportation is weak and limited to Argentina,

Paraguay and Bolivia. In 2008, Brazil had a network of almost 28,000 kilometers of tracks.

Freight capacity usually depends on the size of the wagons, traction power and composition of

the train and can carry up to 100 tons of cargo or containers. Freight may be charged on a per

ton basis or as a single freight in the form of a closed vehicle. The bill of lading used in rail

transportation is the International Rail Transport (TIF).

14.10 Import Programs

This Ministry reviews all applications for import, and the Importer’s information must be

included in full (including disclosure forms and the financial information for both the exporting

and importing firm). This license is valid for 60 days from the date of shipment, and cannot be

extended.317 Importers are advised that any goods imported into Brazil must be classified with

identification codes. Any mislabeling of goods will lead to fines being charged to the importing

firm. The certificate of origin is the most important document for importing as it contains the

corporation, the country of origin, and the legal basis for importing the product. What to

include in import applications is outlined in Table 15.

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Table 15: What to include in import applications

Each product imported must contain its technological description and/or ingredients, the unit

price of each item and the total value of the shipment, including weight and size. In addition,

the available payment options must be included in the shipment. All imports must include two

copies of the commercial invoice and the Bill of Lading.318

14.10.1 Carrier Programs

Every foreign exporter is responsible for applying for an import license (depending on the type

of product being exported) to the SECEX (Secretariat for Foreign Trade).319 The Siscomex

system (an integrated computer program that tracks all imports and exports and is meant to

facilitate trade) reduces the amount of documents needed for normal trade relations. Each

licensed importer can track its shipments in real time.320 Without a Siscomex account, trade

with Brazil can be very difficult. Importers and exporters are registered in the Siscomex at the

Registro de Exportadores e Importadores (REI) the first time they import or export goods. An

automatic or non-automatic license may be required to import products into Brazil. Most

products fall under the automatic license category. However, some products may require

approval from the ministries and other government agencies such as the National Petroleum

Agency (ANP), Brazilian Institute of Environment (IBAMA) and Ministry of Science and

Technology (MCT).

Information Included In Application

Importer’s information (including financials of both exporter and importer)

Disclosure forms

The certificate of origin

Full technological description and/or ingredients

The unit price of each item

The value of the shipment

Payment options

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14.10.2 Bonded Warehouse

Various companies in many Brazilian industries expect foreign companies to keep a large supply

of goods. Currently, there exists a ‘bonded warehouse regime’ (Entreposto Aduaneiro) that

provides logistical tools for stock management in Brazil. All imported goods can be placed in a

bonded warehouse for up to three years, but require annual permit renewals. While in storage

at these warehouses, the importers can provide functionality tests on the products for

customers and even label the goods. Various manufacturing activities are also available, from

assembly to re-packaging to maintenance and repair. Documentation for goods shipped to a

bonded warehouse is the same as for any other goods being imported. Goods that are stored

in bonded warehouses go through the same customs clearance as those goods directly

imported, however utilizing a bonded warehouse regime cuts down the time required to clear

the goods through customs (mainly because paperwork has been verified prior to shipment).

The more efficient bonded warehouses have their own bank branches and customs clearance

offices on the premises.321

14.11 Licensed Custom Brokers

According to International Trade Canada, there are several Brazilian freight forwarders,

customs brokers and shipping companies that are interested in conducting business with

Canada, as listed here (most companies have more than one office in Brazil):322

1. Logimasters – Masters in Logistics

2. Plus Brazil (import and export assistance)

3. Greenwich Agenciamento de Cargas Internacionais LTDA (Experience working with P&W

/ Embraer as well as Otis Elevators, Husky and Duracell exports from Canada to Brazil)

4. Grupo Unitrade (Specializes in customs clearance of samples and

accompanied/unaccompanied baggage. Can assist with transporting equipment for

trade fairs, seminars, or samples in the entry ports of Rio de Janeiro and São Paulo)

5. CTX Logistics LTDA (International Trade Operations and Logistics, handles imports and

exports international logistics as well as landing documentation routinely required by

Brazilian customs)

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6. Kuehne - Nagel Serviços Logisticos (Part of the KN group, with 27 offices in Canada)

7. Figwal Transportes Internacionais LTDA (in- and outbound Brazil door-to-door transport

operations, handles logistics by Air, Sea and Road charter flights and vessels, AOG

(Aircraft on Ground) spare parts operations, helicopters both by air and sea,

warehousing and distribution, live cargo, crosstrade operations, customs clearance)

There are other companies that specialize in this work, but the above companies have either

worked with Canadian companies in the past or expressed an interest in doing so. Additional

companies include Sam.A.Ro Transportes Internacionais (freight forwarder), Minas Trading –

Commercial Importadora Exportadora (freight forwarder), Hraifa Logistica Integrada Ltda

(freight forwarder), Unilog – Universal Logistics Services (air freight), and Cargofast Logistics Do

Brazil Ltda (freight forwarder).323

14.12 Shipment Accounting, Reporting & Storage324

According to Aeromar, a Brazilian shipping company, the following rules must be adhered to

when shipping to Brazil. It is extremely important to ensure compliance to all these laws related

to importing cargo through ports. This will ensure that costs are maintained and transit time is

kept to a minimum.

In Brazil, storage is usually charged based on the quantity of pallets at rate US$20.00 per pallet,

per month. The size of the pallet is around 120x100x100 cm. Storage is charged by the space it

occupies, however this price and type of storage is not for perishable cargo.

14.12.1 Master Bill of Landing (MBL) Consignee:

Freight is always prepaid, and Brazilian law does not accept master collect for Non Vessel

Operating Common Carrier (NVOCC) Shipments. Ocean freight on master B/L cannot be higher

than on House Bill of Landing (HB/L). Freight amounts must be displayed in figures and words;

“As Agreed/As Arranged” is Forbidden. It is important to remember the following information

when shipping via this route:

1. The consignee receives two (2) originals and six (6) copies (No Photocopies).

2. “Marks and Numbers” must correspond to marking on the cargo

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3. Port of loading must be identical as declared on the container manifest.

4. Pieces, Weight, and m3 must be identical as declared on the cargo manifest.

5. Total ocean freight must be lower than declared on house B/L, or lower than the total of

all freights declared on each house B/L.

6. Freight must always show the container number or part lot of the container number and

seal number independently whether it deals with LCL or FCL shipments.

7. When the Brazilian flag is required, it means that Brazilian customs requires a Brazilian

flag B/L (master B/L) and not only that cargo must be shipped on a Brazilian vessel.

Please note that the need to use the Brazilian flag is mainly for machines and when

cargo arrives, the consignee presents the Brazilian B/L to customs and gets the

exemption of Brazilian duties such as IPI, II.

14.12.2 House Bill of Landing

The Shipper and the Consignee is indicated as per the L/C (not the forwarder or the customs

broker). Parties must be notified as per the L/C (it is acceptable to notify the forwarder or the

customs broker as well). The ocean freight on the HB/L must be declared in the same currency

as on the master B/L; different currencies are not allowed by Brazilian central bank. When a

letter of credit requires a foreign currency, the equivalent value must be mentioned. For

example, if the master B/L DM currency in the B/L must be issued in US dollars, the shipper must

also mention the equivalent in the DM currency.

Brazilian authorities are not permitted to issue HB/L for “in transit cargo” to Paraguay,

Uruguay, or any other country. Only ocean freight, bunker surcharge and port congestion

surcharges can be sent or collected. All other freight on board (FOB) charges, such as inland

freight, THC, etc., must be collected from shippers. If sales terms are “ex-works,” charges must

not be added to freight charges. It must be shown separately on the HB/L, or a separate invoice

has to be produced.

The freight declared on the HB/L or the total freight for all HB/L must be higher than or equal to

the freight declared on the master B/L. The Port of loading declared on the HB/L must be

identical to that declared on the master B/L and the cargo manifest. The Place of Receipt field

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must be filled out if the cargo is to be received in a different location than the loading port

declared on the master B/L and the cargo manifest. The shipper must indicate the container

number, or the part lot of the container number, and sealed non-negotiable copies that are sent

to the NHO must be the same as the originals (with copies released to the shipper in proper

time). During loading, if there are any broken-down pallets in the container due to operational

problems on the shipper’s end, Brazilian authorities must be informed before the vessel arrives.

The HB/L must be dated as the master B/L; never date the HB/L after the master B/L. Brazilian

customs check each HB/L with the master B/L. As of July 3rd, 1997, customs authorities have to

issue another set of HB/L. Finally, Cash on Delivery (COD) shipments are not permitted to Brazil.

14.12.3 Cargo Manifest

A manifest must be issued for each shipment, must be typed, stamped, and signed in ink (no

photocopies or fax copies accepted). Any marks and numbers must be identical with markings

on any packages on the container. The quantities of packages and the weight must match with

the actual number of pieces/weight indicated on the container, and must be equal with the

pertinent HB/L. Each B/L has to show a unique B/L number in the respective field. In case of

saco, the company must distinguish individual shipment numbers with 1, 2, 3, etc. In case of a

split shipment B/L, charges are to be pro-rated and shown on the pertinent HB/L. The actual

port of loading must be identical with the Master B/L and the manifest.

14.12.4 Commercial Invoices

When received from shippers, the original copies must be sent with the shipping documents. In

case the shipper prefers to send to the consignee directly, this information must be indicated on

the distribution of documents (this will avoid being asked about each shipment by Brazilian

authorities). The shipper must keep copies of documents in its files, and not the originals. Only

when the consignee receives the original invoice can the cargo be cleared. Until this happens,

the warehouse and demurrage fees continue to run. Brazilian customs considers a form an

original when it is stamped and signed in ink.

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14.12.5 Import License (LI)

Prior authorization is required to import specific goods, and this authorization should be

received before shipment. This authorization is valid for 60 days and cannot be extended. If the

cargo is shipped before the import license was issued, the consignee will have to pay heavy fines

(30 percent on the CIF value). Without the import license number, product cannot be shipped or

received. One import license can be used for several partial shipments. When the import license

has expired, the consignee must provide a new license.

14.12.6 Co-Loader shipments

Import licenses serve as a statistical control of Brazilian customs authorities. Freight Forwarders

are not allowed to import in their name. To accept co-loads, the shipper offers its HB/L.

Otherwise, to accept the co-load, the company must issue a PPD sub-master to the shipping

company, but the co-loader must have an NVOCC register/license in Brazil. CO-COALOADING is

FORBIDDEN. If a shipper wants to co-load its HB/L with another licensed NVO operator, the

same rule applies - it must get a PPD Sub-Master B/L to the shipping company. It is important

to make sure this NVO is the one who issues the steam line B/L.

14.12.7 Documents – Distribution

The following documents must be provided as soon as the vessel leaves the port of origin:

1. Master (o) B/L: Two (2) – three (3) originals (signed) and six (6) copies (NO PHOTOCOPIES).

2. HB/L: Six (6) copies, of which three (3) copies must be signed in ink (NO PHOTOCOPIES).

3. Cargo manifest: Three (3) originals signed in ink.

4. Original invoice: Billing the shipping company the freight charges (for collect shipments).

5. Original credit note: Crediting the shipping company for the profit share.

6. All shipping documents must be dispatched by Courier directly to NHO (Note: Couriers may

take four (4) – five(5) business days to deliver documentation to the shipping company, but

sometimes it could take longer because Brazilian customs intervene by making random

checks. Do not send the documents via mail).

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7. **As of March 30th, 1997, it is necessary to present documents to Brazilian customs 48

hours before the vessel arrives. If the shipping company cannot present them, they will have

to pay fines. They need to receive the documents at least five (5) days before the vessels

arrival. **

8. Copies must be original form – photo or fax copies are not accepted by customs. Delay costs

are unpredictable (minimum US$ 250) and can reach prohibitive levels, as customs

calculates fines per the number of boxes in a container. The courier waybill number must be

mailed or faxed to the shipping company.

The Master B/L is to be issued by the carrier at origin and dated before vessel arrivals. The

“HB/L - Correction approved” stamps are not allowed with respect to consignee, ocean rate and

on board date. When freight charges must be corrected after the vessel’s arrival, the correction

letter must be made at origin and stamped by the local Brazilian consulate. The correction

approved stamps are not accepted for shipments with the final destination being the Rio de

Janeiro port because for these shipments it will be necessary to issue a new set of HB/L, with

same number. The correction letter must be dated before the vessel’s arrival. The correction

letter submitted to Brazilian customs after the vessel’s arrival requires 15 – 20 days to be

accepted. The consignee also has to pay fines for late payments of the merchant marine

renewal tax, and will be charged for the extra warehousing and demurrage fees for FCL

shipments. For any correction, including a letter of corrections will be accepted by Brazilian

authorities only up to 30 days after the vessel arrives.325

14.12.8 Fines

If documents are not available but submitted to Brazilian customs 24 hours before the vessel

arrives, a fine will be charged for which the origin sending station is responsible (for Customs:

4.84 – 9.30 UFIR per Volume, where 1 UFIR = US$ 0.60; for Sunaman: US$ 25.00 per shipment).

Custom Clearance Process

1. All consignees must provide a power of attorney to the customs broker. This document must

be registered at customs; this takes about 05–10 working days.

2. The broker must provide the customs with the following documents:

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• Original bill of lading already released by the forwarder

• Original commercial invoice

• Packing list

• Import declaration (issued by consignee’s customs broker at moment of customs

clearance)

3. All goods and documents will be checked by the customs. Goods will be checked for

quantities, weight and matched with descriptions provided on the documents.

4. The entire process is likely to take at least 7 working days.

14.13 Government Incentives326

In order to encourage foreign investment in Brazil, the government offers incentives that will

encourage entry into the Brazilian market and the expansion of its economy.

14.13.1 Corporate Investments

14.13.1.1 Ex Tarifario

In order to improve infrastructure and services in Brazil, the government economic policy

encourages investment in capital goods and the expansion and improvement of industrial

parks. In order to ensure that world-class technologies are used to achieve this goal the ex

tarifario incentive provides reduction of import taxes levied on the cost of machinery and

equipments not currently manufactured domestically. The Ministry of Development, Industry

and Foreign Trade (MDIC) considers all requests related to the “ex tarifario” and maintains an

updated list of products eligible under this rule. A temporary reduction of Import Tax (II)

varying from 0 percent to 2 percent may be applied to imports of capital assets and IT and

telecommunication goods not produced in Brazil. (Resolução CAMEX 35/2006)

14.13.1.2 ICMS Incentives on Import

Some states have instituted incentives such as the Development Fund of Port Activities

(FUNDAP) and the Programa Pró-Emprego. These incentives provide benefit for companies with

trade conducted through certain ports and airports or those that display "social or economic

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interest" in a state by increasing projects related to technological improvement, exports and

imports development. Examples include the State of Espírito Santo and Santa Catarina. Import

of goods through these incentives could reduce ICMS burdens by about 50 percent or could

even be deferred in some cases.

14.13.1.3 Free Trade Zone – MANAUS

The Manaus free-trade zone (ZFM) attracts industries and commerce to the Amazon region. All

imported foreign goods receive tax incentives, provided they are consumed within that zone or

are exported abroad. Sales or transfers of these goods to other areas of Brazil result in

payment of the previously exempt taxes. Foreign controlled subsidiaries may establish

assembly or manufacturing operations and enjoy the same benefits as local companies. Sales

from other parts of Brazil to the Manaus free-trade zone are also entitled to some tax benefits.

These fiscal benefits are applicable to specific areas of the Western Amazon region.327

The various tax incentives available in the region are listed in Table 16.328

Table 16: Tax Incentives in Free Trade Zone of MANUAS

Tax Incentive

IRPJ 75 percent reduction until 2013

PIS/COFINS reduction in certain cases

IPI Exemption or reduction of IPI on foreign products intended to be consumed

or manufactured in ZFM and on goods produced in the ZFM

Import tax (II) Reduction up to 88 percent of II on the importation of materials to be used on

manufacturing in ZFM

ICMS Tax refund (between 55 percent and 100 percent depending on the project)

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14.13.1.4 Regional Incentives for the North and Northeast Regions

The SUDAM (Superintendence for Development of the Amazon Region) and SUDENE

(Superintendence for Development of the Northeastern Region) were created to promote

development in the North and Northeast regions of Brazil.

The various tax incentives available in the region are listed in Table 17.329

Table 17: Regional Incentives for the North and Northeast Region

Tax Incentive

IRPJ 75 percent reduction for 10 years

PIS/COFINS Faster consumption of the credits (12 months)

Tax on Foreign Exchange

Transactions (IOF)

Exemption of IOF on the exchange transactions performed for

the payment of imported goods

AFRMM Exemption from the Merchant Marine Fee

14.13.1.5 Technological Innovation Incentive (R&D)

Research and Development tax incentives are available to companies who have incurred

expenses on activities related to "scientific and technological research and technological

innovation development". These incentives are expected to encourage new product

development and technological advancements in Brazil. There is no prior approval required

from regulatory authorities to receive benefits and projects are submitted to authorities after

the project is successfully completed. However, the choice of projects and how they are

presented to authorities can play a strong in influencing the approval process.

The various tax benefits available under this incentive are listed in Table 18.330

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Table 18: Technological Innovation Incentive (R&D)

Tax Incentive

IRPJ

Reduction of 60 to 80 percent of the amounts spent in

development of technology (in addition to the regular

deduction). These deductions also benefit other companies and

are not limited to technology focused companies.

IPI

Subject to certain conditions, 50 percent IPI reduction can be

received on equipment, instruments, accessories and parts

that meant for research and technological development

New machinery and equipment used in research activities and

technological development of technological innovation can also

benefit from the full accelerated depreciation applied on the

same year of purchase.

14.13.1.6 Special Regime for the Oil and Gas Industry

REPETRO – the Special Regime for the Oil and Gas Industry is a special import regulation for the

import of resources to be used on research activities and exploitation of petroleum and natural

gas. In order to qualify for REPETRO prior approval from tax authorities is required. The various

tax benefits available under this incentive are listed in Table 19.

Table 19: Special Regime for the Oil and Gas Industry

Tax Incentive

IPI Import of equipment is free of Import Tax, Excise Tax and social

contributions. Import Tax (II)

PIS / COFINS

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14.13.1.6.1 Special Regime for Infrastructure Development

REIDI – the Special Regime for Infrastructure Development applies to infrastructure

development such as transport, ports, energy, sanitation and irrigation. In order to qualify for

REIDI prior approval from tax authorities is required. The various tax benefits available under

this incentive are listed in Table 20.

Table 20: Special Regime for Infrastructure Development

Tax Incentive

PIS / COFINS

Exemption on the internal sale and import of machinery,

equipments and other building material as well as services used

in infrastructure projects. The exemption is applicable to the

entire supply chain of providers.

14.13.1.7 Manufacture of IT and Automation Equipments (Lei de Informática)

This tax benefit is provided for the business development or production of information

technology and automation equipments to be invested in research and development. In order

to qualify prior approval from tax authorities is required. The various tax benefits available

under this incentive are listed in Table 21.

Table 21: Manufacture of IT and Automation Equipments

Tax Incentive

IPI

80 percent reduction (until 2014)

75 percent reduction (until 2015);

70 percent reduction (until 2019, when it will be eliminated).

Midwest of Brazil and SUDAM / SUDENE area may provide

higher percentages of IPI reduction

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14.13.1.8 Miscellaneous Incentives

PADIS – Technological Development of Industry and Semiconductors is expected to promote

the development of semiconductors and specific equipments by granting 100 percent IRPJ

reduction on the sales of semiconductor electronic devices and information displays and the

reductions of Import Tax (II), IPI, PIS/COFINS in certain cases.

REPORTO – Modernization and Development of Brazilian Ports is expected to promote

investments in the recovery, modernization and development of Brazilian ports and railway

system. REPORTO grants exemption from or reduction of Import Tax (II), IPI, PIS/COFINS and

ICMS, in certain cases.

RETAERO – Special Tax Regime for the Brazilian Aeronautical Industry for companies that

manufacture components and equipment to be used in the maintenance, modernization, repair

and industrialization of specifics types of aircrafts. These companies could receive reduction of

IPI and PIS/COFINS.

REPES – Special Tax Regime for the Export of IT Services, provide companies with deferral of IPI,

PIS/COFINS for certain transactions.

RECAP – Special Tax Regime for the Acquisition of Goods by Export Companies, provide

companies with deferral of PIS/COFINS for certain transactions.

14.13.2 Training

The Brazilian government acknowledges that in order for the Brazilian economy to continue to

emerge as a global power, there needs to be investment in training and development over

various industries. In recent years, the government has committed to this training by focusing

on labour reform by allowing employees to take time off work to enroll in training courses. It

has also signed agreements with corporations to develop training centers in the information

technology industry (with Cadence Design Systems). The Ministry of Agrarian Development has

also committed to rural communities through its dedication to train workers and teach these

communities to share their knowledge and resources. The government is committed to

implementing labour reform to facilitate employer/employee relationships. As a result, a

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company may suspend the employment contract of a worker for two to five months, offering

the worker a retraining course. 331

Concerned by the limited supply of skilled labour in Brazil, 76 percent of companies invest in

training programs for its professionals. This is indicated by a study conducted by AMCHAM

(American Chamber of Commerce). In addition to training, 60 percent of companies subsidize

external courses to train their employees, while 40 percent develop partnerships with training

centers. "The study indicates a recovery of corporate investment in training. During the height

of the global crisis, [companies did not focus on training], and [it is] again [becoming] a

priority," explains executive director of AMCHAM, Gabriel Rico. Rico also discovered that 47

percent of businesses spend 5 percent to 10 percent of the time working with professional

trainers, while 12 percent of businesses indicated that they spend between 10 percent and 20

percent of the time with professionals. Only 5 percent of businesses spend over 20 percent of

the time training.332

Results from the survey indicate that for approximately 63 percent of companies, the priority is

the development of partnerships with educational institutions, while 43 percent of respondents

participated in training programs in conjunction with other companies. The survey also found

that 52 percent of responding companies consider training centers as appropriate [and

important] to the organization. However, 47 percent indicated that institutions are expensive

and totally inadequate.333

14.14 Foreign Operation Costs Evaluation

Foreign operating costs cover various aspects. In order to completely understand the costs

associated with operations, this section will discuss the various costs associated with business

such as land, rent, wages for skilled and unskilled labour, pensions, social assistance and other

associated benefits (i.e., vacation).

14.14.1 Interest Rates

One relevant cost associated with doing business in Brazil is the interest rate. As of January

2011, interest rates in Brazil were around 11.25 percent.

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14.14.2 Land and Building Tax

The Urban Land and Building Tax (IPTU) is assessed on direct or beneficial ownership and

possession of urban properties. It corresponds to two different taxes: (a) a building tax levied

on direct or beneficial ownership and possession of real properties located in urban areas, and

(b) an urban land tax levied on direct or beneficial ownership and possession of land in urban

areas. It is determined annually on the assessed value of real property.334

14.14.3 Premise - Commercial Rent / Cost of Land

Office space in São Paulo is the most expensive in Latin America; however, other cities and

provinces may have space available at a lower cost. Increased rents in centralized areas have

been responsible for redevelopment of industrial property into commercial or mixed use.

Premium office space is also available at Alphaville (development outside São Paulo). Average

rents in Rio de Janeiro are R$ 138 m2 per month with total occupancy cost at R$ 158 m2 per

month whereas those in São Paulo are R$ 145 m2 per month with total occupancy cost at R$

165 m2 per month.335

The highest price per square meter in São Paulo is in the region of Morumbi (R$ 7,592), while

the one with the lowest values are in the village Carmoisine (R$ 2,187), in the West region east

of the capital. In Rio de Janeiro, Leblon has the highest value per square meter (R$ 12,051). On

the other hand, the region of Guadeloupe, in the North of the city, has the lowest value of (R$

819).

The cost of building in the South East of Brazil - Rio de Janeiro and Sao Paulo metropolitan area

is R$ 746 per square meter. The average cost of building in Brazil is R$ 702 per square meter.

14.14.4 Wages Skilled/ Unskilled Trade Labor

The 1988 constitution legalized unions, collective bargaining negotiations and the right to strike

in the private and public sectors. It also outlined overtime rates and provided for a monthly

minimum wage and the regulation of working hours. Labour entitlements include maternity

leave, vacation, worker’s compensation, social services, medical assistance and unemployment

benefits. Working Hours include a 44 hour work week and overtime pay of 50 percent of base

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pay. Around-the-clock operations are required to have six hour shifts, with overtime paid for

work beyond six hours. Minors (those under the age of 18) can work a maximum of 8 hours a

day, and most foreign and domestic firms have a working week of five 8-hour days. The cost of

labour is considered high because of the mandatory charges and taxes attached to

employment. Wages account for (at most) two-thirds of the total costs of hiring labour, and

annual negotiations normally set wage levels for industrial labour (which is adjusted annually

instead of monthly or semi-annually). States are allowed to raise the ‘minimum’ wage beyond

the federal level if they have the resources to do so. Any salary adjustments are determined via

negotiation between both parties. If the parties are unable to reach an agreement, they can

refer the dispute to a labour court for arbitration.336

With the recent government investment in post-secondary education, there has been an

increase in the amount of young people obtaining university degrees. However, its skilled

labour occupies a very small percentage of the population (8 percent - 10 percent), which

indicates that the majority of the workforce in Brazil is unskilled (approximately 90 percent).337

Minimum Wage in Brazil is R$ 540 (Around US$ 337)

Average wage in Rio de Janeiro: R$ 1,682

Rio de Janeiro: Minimum monthly wage varies from R$ 553 General Services (Cleaning,

Maintenance, etc) to R$ 1,484 for Technicians, Teachers etc.

Average Wage in Sao Paulo is R$ 1,637

Sao Paulo: Minimum monthly wage varies from R$ 560 General Services (Cleaning,

Maintenance, etc.) to R$ 1,484 for Technicians, Teachers and etc.

Besides Salaries there are other costs associated with labour.

14.14.4.1 Pensions

Pension value is based on an employee’s contributions during that person’s working life

(capped at R$ 3,416 for the 2010 tax year), and benefits are indexed to inflation.338

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14.14.4.2 Social Assistance

Employers contribute 8.5 percent of wages to each worker’s deferred salary account at the

Length of Service Guarantee Fund, 20 percent of an employee’s wages to the National Institute

for Social Security (INSS), and a maximum of 8.8 percent on other social security taxes.

Employees contribute 7.65 percent - 11 percent, depending on their salary categories. INSS

coverage includes medical and hospital assistance, and sick pay covers 91 percent of the

employee’s salary after 15 days of absence (sick pay is 100 percent for the first 15 days);

maternity benefits are up to one month’s minimum wage. All companies subject to the INSS

tax must also contribute 0.2 percent of payroll to the National Institute of Colonisation and

Agrarian Reform. An additional 0.6 percent wage tax is assessed to support the activities of

Small Business Administration.339

14.14.4.3 Other Benefits

Compulsory benefits add 50 percent to 80 percent to base wages of full time employees or

permanent contracts, and paid vacations of 30 calendar days are granted after a full year of

service with no more than six absences in that year. Employees have the right to work one-

third of their vacation period at double pay if they so choose. A bonus of one-third of one

month’s base pay is due at the time vacation is taken. Other paid vacations include national,

state, and local holidays, and a few days for the death of a relative and for marriage. Maternity

leave is mandatory for the first four months after giving birth for female employees, and male

employees receive paternity leave of five days (both paid by the Social Security Agency).

Employers have the option to offer an additional two months of maternity to female

employees, and deduct the amount paid for this period from its corporate income tax. A

mandatory bonus of one month’s pay (called the 14th salary) must be 50 percent paid by

November of each year, with remaining balance paid at year end.340

Employers are compelled to pay a Transportation subsidy to workers (for transport to and from

work or for subsidization of the transit expense by paying all such costs exceeding 6 percent of

an employee’s gross salary), and is tax deductable for employers. Companies pay into a

national subsidised savings program for workers (PIS), administered by the national savings

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bank system. Employers can set up a voluntary profit-sharing plan for its employees called the

Workers’ Individual Retirement Plan (PAIT) as a type of retirement fund.341

14.14.4.4 Termination of Employment

A worker under contract for a specific assignment or a fixed term (maximum of two years) may

be dismissed at the expiration of the contract without further employment liability. Any

employee terminated without cause is entitled to one-half of the balance of the contract due

over the remaining time of the contract. The employer is responsible to provide eight days

notice (or equivalent compensation) if the employee is paid weekly, or 30 days notice if the

employee is paid at longer intervals or has been employed more than one year. An employee

who resigns must give the same notice, and any unused vacation time must be paid upon leave.

Employers are required to contribute 8 percent of payroll into locked accounts (FGTS) that are

part of the severance pay system. If an employee is changing jobs by choice, the accumulated

balance is transferable. Employees may draw on the FGTS accounts for certain purposes such

as health emergencies or a down payment on a house. If an employer is found to have

unlawfully dismissed an employee, that worker is entitled to a 40 percent into his or her FGTS

account, and employers are fined an additional 10 percent.342

14.14.5 Wages Professional Management Labor

As mentioned above, the recent government investment in post-secondary education has

provided an opportunity for more people to obtain university degrees. Skilled labour (and

possibly professional management) occupies a very small percentage of the population (8

percent - 10 percent).343 Figure 11, Figure 12, and Figure 13 below provide the average salaries

in the Brazilian market. Salary are determined based on factors such as qualifications, skills,

experience and market demand.344 345

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Figure 11: Median Salaries by City

Figure 12: Median Salaries by Industry

102,627

85,234

54,00060,402

72,60678,112

70,818

0

20,000

40,000

60,000

80,000

100,000

120,000

São Paulo, São Paulo

Rio de Janeiro, Rio de Janeiro

Porto Alegre, Rio Grande Do

Sul

Curitiba, Parana

Belo Horizonte,

Minas Gerais

Campinas, São Paulo

Salvador, Bahia

Median Salaries by City (R$)

73,58860,738

85,817

120,000

99,933

61,44568,130

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

Median Salaries by Industry (R$)

144 | P a g e

Figure 13: Median Salaries by Job

14.14.5.1 Forms of Compensation and Aid

Compensation and aid is determined by the level of expertise of the individual and ability of the

corporation to pay, and includes:

1. Variable pay 2. Profit sharing and results (extra pay) 3. The 14th salary 4. The recognition program 5. The pension plan 6. Life insurance 7. Additional time for homework (for those enrolled in training courses) 8. The granting of stock options for all employees 9. Aid for rent (in transfer) 10. Loans for home ownership 11. Car financing (for purchases of automobiles) 12. Car-expenses & Parking 13. Transportation to and from the workplace (i.e., bus passes or service) 14. The sale of products manufactured by the company, discounted to aid parents of

exceptional children, to buy school materials and legal assistance

124,051

253,419

68,57894,340

134,454

81,384 70,750

0

50,000

100,000

150,000

200,000

250,000

300,000

Regional Sales

Manager

Country Manager, General

Operations

Mechanical Engineer

Project Manager,

Information Technology

(IT)

Information Technology

(IT) Manager

Sr. Software Engineer /

Developer / Programmer

Electrical Engineer

Median Salaries by Job (R$)

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14.14.5.2 Benefits

A list of corporate benefits is included in Table 22.

Table 22: Benefits for employees in the Brazilian market

BENEFITS INCLUDES

Health Sickness, medical, psychiatric and psychological care, coverage for

treatment of chemical dependency (i.e., drug or alcohol abuse),

homeopathy, infertility, therapy, acupuncture, medical check-ups, a

medical plan with free choices (including coverage to retirement),

health or dental coverage (including orthodontic appliances),

ambulatory aid, vision, discounts on the purchase and delivery of

drugs in the workplace, and gym memberships and spa treatments

(for executives).

Food Supermarket vouchers, free breakfasts and snacks provided by the

company, collective meals, and different menus for employees with

health concerns (i.e., diabetes and high cholesterol).

Education and

Development

Insurance education, scholarships, language courses, child

instruction, reimbursement for undergraduate and graduate

programs/courses, training courses including distance learning (via

CD-ROM), job rotation, career internships, career development

with foreign assignments, availability of a library and video library.

Other Family planning, assistance with household budgeting, job security,

pre-retirement support, etc.

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14.14.6 Working Capital

The National Bank for Social and Economic Development (BNDES) offers low-cost financing in

order to support the implementation, expansion, modernization or relocation of a plant,

including capital goods acquisition and associated working capital. 346

14.14.7 Transportation Costs

Approximate freight costs for ocean transport from Atlantic Canada to Rio de Janeiro is US

$2000 per container load (20 feet) and includes a transit time of about 13 days. Approximate

freight costs for air transport from Atlantic Canada to Rio de Janeiro is US $15 per kilogram and

includes a transit time of about 11 hours.347

14.14.7.1 Vehicles

Total cost of ownership of vehicles includes the following:348

Depreciation – affected by brand and model desirability, perceived quality, reliability

and used demand vs. availability

Fuel – fuel cost and consumption

Insurance – third party and comprehensive premiums

Service and maintenance costs – schedules, parts costs and labour times

Acquisition & finance – purchase price, interest and fees

Taxation – registration and recurrent taxation, dependant on CO2

Tyres – individual tyre cost and expected wear rates of tyres

According to Juris Way, online education system, “A truck 4X2 Toyota Hilux double cabin,

which costs R$ 73,766 in Brazil, is sold for 88,100 pesos for the "Argentine brothers", the

equivalent of U.S. $ 59,979. More luxurious, imported the Ford Edge is offered in the

Brazilian market for R$ 149,700, but in Mexico is sold for less than half the price: 364,000

pesos, or US $ 59,282. The reason for such difference in price - and that generates more

discussions between automakers and government - is the tax burden. In Brazil, Tax on

Industrialized Products (IPI), Tax on Circulation of Goods and Services (ICMS), Social

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Integration Program (PIS) and Contribution for the Financing of Social Security (COFINS)

represent on average 30.4 percent of value that comes to the Brazilian”.349

14.14.8 Insurance (Business)

Reputable insurance brokers in Brazil are helpful in recommending a business’ insurance needs,

and they can compare and negotiate deals between various insurance companies.

Table 23: Types of Insurance

Table 23 lists the main types of insurance: Vehicle Insurance, Personnel Insurance, Public

Liability Insurance, Building and content insurance. All vehicles must legally be insured to a

third party liability level. Third party insurance protects against claims made against the

insured for personal injuries and legal costs. Comprehensive vehicle insurance covers damages

caused to the car, and against injury, property damage, fire and theft.

Employers are required to provide accident or sickness coverage for their employees and self-

employed people need coverage through a private insurer. There are several forms of

insurance, including income protection, trauma, life and disability.

Public Liability Insurance is mandatory and protects against third parties for negligence, death,

injury, loss and damage of property, and economic or financial loss. Building and Contents

TYPE PROTECTED AGAINST

Vehicle Third party or comprehensive

Personnel Sickness, accident or illness,

income protection, trauma,

life, disability (self-employed

require private insurance)

Public Liability Compulsory for negligence,

death, injury, property damage,

financial

Building and Content Property and its contents

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Insurance protects property and contents against fire, water and other natural occurrences

(i.e., earthquakes, lightning, storms, explosions, burglary and theft).350

14.14.9 Office Expenses

Expenses can be deducted if they are deemed necessary activities for the company. Exchange

gains and losses on obligations in foreign currencies may be taxed on the accrual or cash basis,

according to the taxpayer’s choice for the calendar year.351

14.14.9.1 Telephone / Utility

The federal government negotiates the price of electricity and telephone services with

companies providing these services, and these prices are linked to the Telecommunications

Services Index (IST) and determined with other indices.

On average, Brazilians pay R$ 0.45 minute for local calls to mobile phones from the same

provider, but the price increases to R$ 1.00 when calling a number from a different provider.

Electricity prices change with the fluctuation of the exchange rate, because the energy

generated by the Itaipu dam (jointly-owned by the governments of Brazil and Paraguay) is

priced in US dollars. Tariff adjustments are also granted to electricity distributors. With the

appreciation of the Real against the US Dollar, electricity prices have been decreasing.352

AES Eletropaulo is the largest electricity distributor in Latin America. The main telephone

service providers in Brazil are Telefônica and Embratel, and they also provide broadband

internet and cable television services (as Rogers and Bell in Canada).353

Unit cost of electricity in Rio de Janeiro is about 0.32 R$/kWh and 0.30 R$/kWh in Sao Paulo.

The gas supplied in Sao Paulo is sold by tank (butijão), is distributed by private companies

(Ultragaz and Liquigas are the main providers), and most people exchange their empty tanks for

full tanks from company trucks.

Water in Sao Paulo State is mainly provided by the state-owned water utility company Sabesp.

Utility bills are distributed by mail and charged on a monthly basis. The most common payment

method for utility services is through the bank – either in person, online, or by direct debit.354

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14.15 Depreciation

Depreciation is deducted using the straight line method, and companies can claim different

amounts depending on the amount of work completed. For example, companies that produce

two shifts can claim 150 percent of the standard depreciation rates, while companies working

in three shifts are entitled to 200 percent of the standard rates. Companies involved in the

development of technical research can use accelerated depreciation for tax purposes (and

multinationals cannot consolidate for tax purposes).355

14.16 Professional Fees

There are professional from different fields that can be contracted/ employed in Brazil, and

below is an estimated breakdown of Legal, Architectural and Engineering fees in the country.

14.16.1.1 Legal Fees

Law firms prefer to charge for their services by the hour, whereas the legal departments of

corporations prefer to sign contracts with fixed prices in order to control their costs. In order to

maintain hourly billing (which accounts for a major share of revenue from the medium and

large firms) lawyers have agreed to establish a ceiling for their fees. A study conducted by

British consultancy LexisNexis Martindale-Hubbell, in partnership with the Brazilian Legal

Marketing firm Gonçalves and Gonçalves, found that nearly half (46 percent) of the general

counsels of 112 medium- and large-scale firms in the country prefer contracts with fixed

prices.356 For property and real estate purchases, it is advised that foreign purchasers use a

trusted Brazilian lawyer who is registered with the Brazilian Bar Association (OAB). Legal fees

are usually 1 percent - 2 percent of the purchase price.357

14.16.1.2 Architect Fees

The Institute of Architects of Brazil (IAB) and the Brazilian Association of Architecture (ASBEA)

recommend that services can be charged on percentage of spending on labour, or by fixed

value from a table that verify the amount of man hours needed to implement the project.

When utilizing the percentage formula, architects usually charge between 5 percent and 10

percent of time spent on the work. The percentage charged will vary depending on the size and

150 | P a g e

complexity of the project. Usually larger projects cost a lower percentage whereas the smaller

projects can easily exceed 10 percent.

Major newspapers regularly publish tables with price ranges per square foot charged by these

professionals. In this case the value of the charge does not depend on the time spent on the

project.

14.16.1.3 Engineering professional salaries

A recent study by the National Confederation of Industry indicates that only approximately

50,000 students major in engineering each year and about 150,000 professionals graduate each

year. This has lead to a shortage in the industry, and key stake holders are in the process of

determining how to solve the problem.358

"There is a huge drop in engineering education in Brazil," says Mario Sergio Salerno, professor

and coordinator of the Laboratory of Innovation Management at the Polytechnic School of USP,

and speaker of the congress Brazil Automation ISA 2010. "There are a large number of

registrations, about 460,000 per year, but few students graduate."359

A study at the beginning of this year by the Institute of Applied Economic Research (IPEA)

shows that by 2015, for every seven openings in the market, only two engineers will have the

experience to practice. The average salary for engineers in Brazil is as follows:360

• Masters or Doctorate level Engineers: R$ 6,938.39 per month

• Mechanical Engineers (undergraduates): R$ 5,576.49 per month

• Civil Engineers (undergraduates): R$ 5,476.85 per month361

14.17 Advertising

Media ownership is highly concentrated in Brazil. Home-grown conglomerates such as Globo,

Brazil's most-successful broadcaster, owns television and radio networks, newspapers and pay-

TV operations. Brazilian-made television programs are produced and aired around the world

and attract large audiences. Brazilian media companies provide digital television services, and

are determined to eliminate analogue television transmissions by 2016.362363

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14.17.1.1 The Press

Brazil has more than 465 daily newspapers, with nine exceeding 100,000 copies sold per day

(seven in the Rio-Sao Paulo region).364 The cost of advertising in Brazilian newspapers depends

on the advertisement, the number of lines to be used, and the type of advertisement. The cost

to advertise in Diarios Associados in 2010 included the following:365

1. Midia de Apoio (on web site)

a) Super Banner: R$ 46 (cost per thousand); R$ 38 (run of site); R$ 2,520 (run of

site lot)

b) Banner 2: R$ 25 (cost per thousand)

c) Rectangle: R$ 50 (cost per thousand)

d) Full Banner: R$ 43 (cost per thousand); R$ 36 (run of site); R$ 2,290 (run of

site lot)

e) Half Banner: R$ 25 (cost per thousand)

f) Square Button: R$ 35 (cost per thousand)

g) Wide Skyscraper: R$ 55 (cost per thousand)

2. Midia de Apoio (print advertisement)

a) Super Banner: R$ 61 (cost per thousand)

b) Side Seal: R$ 30 (cost per thousand)

c) Seal Offering: R$ 907

Circulation of the daily newspapers in Brazil continues to grow. The average circulation of daily

newspapers in Brazil has grown 69.4 percent in the last ten years, from 4.2 million to 7.2 million

copies sold. Some of the more popular publications/news agencies include:366

1. Dia: One of Rio de Janeiro’s daily newspapers

2. Correio Brazilense: The influential daily paper

3. Globo: Owned by Rio de Janeiro daily

4. Jornal do Brasil: Another Rio de Janeiro daily paper

5. Folha de Sao Paulo: Daily paper in Sao Paulo

6. Estado de Sao Paulo: Another daily paper in Sao Paulo

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14.17.1.2 Television

Television is a primary means of entertainment and information for most Brazilians, and

programming is available via open channels (provided free) or closed channels (through

subscriptions such as pay-per-view). In 2007, Brazil was introduced to digital television.

According to Anatel, a body was created in 1997 to regulate and supervise the

telecommunications sector. Some of the television networks in Brazil include:

1. TV Band: Commercial network operated by Grupo Bandeirantes

2. Rede Globo: Major commercial network operated by Globo

3. Sistema Brasileiro de Televisao (SBT): Major commercial network

4. TV Record: Major commercial network

5. NBR: Operated by state-run Radiobras

6. Rede TV: Commercial network

7. TV Cultura: Provide public, educational and cultural programs

The value of announcements on television depends on the advertisement location, the duration

of the advertisement, and the broadcast schedule. Thirty-second advertisements during peak

viewing hours for all the States in Brazil costs US$ 200,000. In Sao Paulo, the advertising costs

are approximately US$ 80,000. Advertisements transmitted in other states at off-peak hours

are usually cheaper.

14.17.1.3 Radio and News Agencies

The various radio stations and News Agencies in Brazil include:

1. Radio Nacional - FM and mediumwave (AM) network operated by state-run Radiobras

2. Globo Radio - commercial networks operated by Globo

3. Radio Eldorado - affiliated to O Estado de Sao Paulo newspaper

4. Radio Bandeirantes - network operated by Grupo Bandeirantes

5. Radio Cultura - public, cultural programmes

6. Agencia Brasil - state-owned

7. Agencia Estado - private, Sao Paulo-based

8. Agencia Globo – private367

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14.18 Budgeting

14.18.1 Financial Ratios by Industry / Sector

14.18.1.1 Return on Equity:

There is a wide range of Return on Equity (ROE) values in the chart below, and the high and low

values could be a result of a combination of factors. Low values could result from low income

or other factors affecting net income (i.e., amortization). On the other hand, ROE values that

are very high could be a result of strong revenues, or possibly from a lack in investing in

research and development. This would depend on the individual company, or it could be

considered an industry average. Ideally firms with higher ROE would have higher share prices,

but it order to determine this further, a more in-depth analysis of each industry and each

company would be required. Return on Equity for various sectors is provided in Table 24

Table 24: Return on Equity, ROE (percent)368

SECTOR RATIO Water and Sanitation 6.57

Food Sector 10.30 Automotive 4.62

Construction, Engineering and Real Estate 7.64 Consume 13.72

Electronics -1.10 Energy 8.63

Financial Institutions 76.68 Mining 16.38

Motor, Machines and Tools -43.20 Oil and gas 3.24

Pulp and Paper 10.73 Chemistry -0.14

Health 31.60 Services 5.14

Steel and metallurgy 10.84 Information Technology 25.79

Textile -16.31 Transport and Logistic 15.12

Retail 14.00 Average 8.92

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14.18.1.2 Return on Assets:

The risk return on assets (ROA) below indicates how predictable the return on assets is within a

given segment, similar to the measure of equity risk by their volatility (BODIE, KANE, Marcus,

2008). It is the average of a measure of variation of ROA of the companies comprising the

industry. 369 Return on Assests for various sectors is provided in Table 25

Table 25: Return on Assets, ROA (percent)370

SECTOR RATIO Water and Sanitation 3.10

Construction, Engineering and Real Estate 3.11 Food Sector 3.65

Mining 4.12 Pulp and Paper 5.31

Energy 5.35 Telecommunication 5.48

Automotive 6.30 Retail 6.51 Health 6.95

Oil and gas 7.47 Chemistry 7.58 Electronics 7.61

Services 8.23 Motors, Machinesand Tools 8.24

Financial Institutions 8.79 Textile 9.29

Steel Metallurgy 10.18 Consume 15.11

Information Technology 16.26 Transport and Logistic 19.57

Average 8.01

Sectors with lower ROA demonstrate more stable returns and little variation over time. Low

ROA values indicate that the profitability of that sector is more predictable, even if the ROA is

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designed to be lower or higher than other sectors. This also measures the ability of future

planning, and it becomes easier to predict scenarios. 371

In the year 2009,372 Brazilian companies listed on the stock exchange were valued at a market

capitalization rate of 74.3 percent of GDP (which equals US$ 1.1 trillion). As of December

2010,373 the country’s discount rate equaled 10.75 percent, its deposit rate was 9.89 percent,

and its lending rate was 39.70 percent. The country also maintained a savings rate of 7.60

percent and a T-bill rate of 10.96 percent.

14.18.1.3 Sector Specific Financial Ratios (Average and Range)

Prof. Aswath Damodaran - Professor of Finance at the Stern School of Business at New York

University has compiled an excel sheet for comparison of financial information ratios for

Brazilian companies across sectors. An indicative table with average and range information for

companies within a sector has been tabulated for quick reference. Refer to Appendix “J”

companies represented in each sector. For detailed information (company wise) the Excel sheet

can be downloaded from Prof. Damodaran’s website.

(http://pages.stern.nyu.edu/~adamodar/)

http://pages.stern.nyu.edu/~adamodar/

Page | 156

Table 26: Sector Specific Financial Ratios - Average

Sectors

Market

Debt to

capital

ratio

Market

Debt to

Equity

ratio

Current

PE

EV/

EBIT

EV/

EBIT

DA

EV/Inv

Capital

EV/

Sales

Return

on

Equity

(ROC or

ROIC)

Net

Profit

Margin

Pre-tax

Operatin

g Margin

Effectiv

e Tax

Rate

1 ICT 42.87% 86.08% 33.36 30.94 13.23 5.88 8.92 49.75% 70.49% (39.41%) 78.05% 49.22%

2 Environmental

Technologies

39.37% 78.09% 39.11 17.42 18.80 1.50 4.29 7.56% 10.80% 5.69% 17.18% 14.30%

3 OGES 12.67% 17.30% 1572.72 9.89 9.36 6.99 24.00 5.15% 3.52% (11.17%) (13.98%) 13.41%

4 Life Sciences and

Biotechnology

8.06% 9.45% 67.52 23.37 24.87 5.99 11.19 19.59% 61.18% (122.27%) (78.12%) 26.79%

5 Ocean Technology 10.66% 12.71% 38.12 17.00 11.37 2.72 87.77 4.81% 8.35% (1087.1%) (180.03%) 12.99%

6 Defense, Security

and Aerospace

38.42% 69.21% 11.01 17.21 13.40 1.72 1.30 14.67% 11.12% 4.72% 7.50% 15.45%

7 Mining 8.18% 10.85% 21.59 9.55 27.31 2.12 1.35 4.15% (23.06%) 14.65% 0.27% 6.54%

8 Education Sector 1.83% 1.90% 42.79 75.35 27.40 9.69 3.78 5.52% 23.03% 2.24% 4.89% 6.20%

9 Food/ Seafood 37.91% 83.02% 61.37 22.67 15.35 2.74 2.74 12.39% 17.98% 2.93% (6.66%) 16.18%

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Table 27: Sector Specific Financial Ratios - Range

Sectors

Market Debt to capital ratio

Market Debt to Equity ratio

Current PE

EV/ EBIT

EV/ EBITDA

EV/Inv Capital

EV/ Sales

Return on Equity

(ROC or ROIC)

Net Profit Margin

Pre-tax Operating Margin

Effective Tax Rate

1 ICT 0.00% - 81.82%

0.00% - 450.19%

7.40 - 76.42

2.76 - 269.11

2.45 - 32.34

0.56 - 29.91

0.32 - 124.96

2.96% - 322.55%

(54.61%) - 578.28%

(1,361.23%) - 55.84%

(26.06%) - 995.59%

0.00% - 42.54%

2 Environmental technologies 15.26% - 56.50%

18.01% - 129.88%

6.74 - 87.34

12.79 - 22.06

10.17 - 31.92

0.80 - 2.60

2.50 - 6.70

(11.14%) - 18.08%

5.50% - 17.05%

(13.45%) - 15.47%

13.90% - 20.34%

0.00% - 22.74%

3 OGES 0.00% - 37.47%

0.00% - 59.93%

5.31 - 6,252.11

9.62 - 10.34

7.24 - 11.94

1.24 - 17.23

0.33 - 111.45

(15.81%) - 21.06%

(22.10%) - 22.83%

82.46% - 25.81%

(110.90%) - 22.47%

0.00% - 39.94%

4 Life Sciences and Biotechnology

0.00% - 19.41%

0.00% - 24.09%

10.12 - 254.59

7.73 - 49.38

5.91 - 49.41

1.02 - 13.55

0.24 - 76.50

(3.16%) - 41.91%

(61.02%) - 191.01%

(1,151.86%) - 14.01%

(787.97%) - 23.14%

0.00% - 50.00%

5 Ocean Technology 0.00% - 17.48%

0.00% - 21.19%

15.47 - 76.12

12.33 - 20.08

5.41 - 16.85

2.54 - 3.03

1.36 - 275.05

(9.49%) - 18.39%

(7.38%) - 18.31%

(4,901.96%) - 13.70%

(660.78%) - 21.90%

0.00% - 50.00%

6 Defense, Security and Aerospace

26.56% - 54.39%

36.17% - 119.25%

8.26 - 14.41

12.57 - 20.35

9.16 - 19.58

1.55 - 2.00

1.00 - 1.58

10.36% - 22.97%

6.385 - 13.89%

1.65% - 6.68%

5.87% - 9.29%

0.00% - 45.93%

7 Mining 0.00% - 24.55%

0.00% - 32.54%

8.63 - 34.55

9.55 27.31 1.12 - 3.89

0.68 - 2.03

(34.41%) - 33.63%

(56.06%) - 17.75%

11.61% - 17.68%

(14.46%) - 15.00%

0.00% - 19.63%

8 Education Sector 0.06% - 5.12%

0.06% - 5.39%

23.26 - 70.51

25.44 - 157.60

19.39 - 35.08

4.63 - 16.21

2.03 - 5.83

(7.71%) - 14.83%

(4.13%) - 33.90%

(11.35%) - 8.77%

(2.27%) - 12.09

0.00% - 17.01%

9 Food/ Seafood 4.75% - 70.26%

4.99% - 236.29%

8.28 - 277.38

8.47 - 73.29

6.80 - 43.19

0.53 - 24.18

0.64 - 16.19

(55.52%) - 86.01%

(23.33%) - 126.96%

(60.49%) - 67.40%

(141.15%) - 38.42%

0.00% - 50.00%

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15. Contact Information of Professional Service Providers

Firm Name Contact person Services Fees Contact information Souza, Cescon, Barrieu & Flesch Advogados

Paulo Calil Franco Padis (Partner)

Legal services: Industrial and Intellectual Property; Estate Planning; Corporate Law, M&A and private Equity; Banking and structured Finance; Infrastructure and Project Finance; Capital Market; Tax Law; Litigation and Arbitration; Environmental Law; Agribusiness

Partner : US$480 to 550 Sr. Associate: US$360 to 420 Associate: US$300 to 330 Jr. Associate: US$ 220 to 240 Trainees: US$ 100 to 150

Rua:Funchal, 418 11 andar, 04551 060, Sao Paulo SP, Brasil T 55 11 3089 6141 F 55 11 3089 6565 [email protected] www.scbf.com.br

Domingues e Pinho Contadores

Joao Henrique Brum Domingues and Pinho Contadores

Accounting; Tax; Personnel; Financial Management; Paralegal; Document Management; Information Management; HR.

Around US$ 100 per hour

Email: [email protected] Tel: 55 21 3231-3735 Fax: 55 3231-3717 www.dpc.com.br

Zugno Duquia Advogados

Guilherme Ziegler Zugno Jorge Alberto Zugno Marcelo Soares Duquia (Partners)

Financial and Capital Market, Mergers and Acquisitions, Banking Law, Tax Law, Contracts, and Foreign Trade.

US$ 250 per hour Av. Taquara, 146, Cj 203 - Bairro Petrópolis, CEP 90460-210 - Porto Alegre - RS - Brasil Telephone: (55 51) 3061 8082 [email protected] www.zugnoduquia.com.br

Trench, Rossi and Watanabe

Gabrielle Galdino Securities; Corporate planning and restructuring; Shareholder and partner agreements; Corporate documents

Partners: R$900 Local partners: R$800 Consultants: R$800

Av. Rio Branco, 1, 19 floor, Sector B Centro, Rio de Janeiro RJ CEP 20090-003 Tel:(21) 2206-4985

mailto:[email protected]

http://www.scbf.com.br/


http://www.zugnoduquia.com.br/

159 | P a g e

Firm Name Contact person Services Fees Contact information to R$1090 Sr. Associates: R$480 to R$580 Jr. Associates: R$380 to R$470 Law Clerks: R$130 to R$170

Fax.: (21) 2206-4949 Cel.: (21) 7619-1898 www.trechrossiewtanabe.com.br [email protected]

Andre Texeira Law Office

Tiago Guerra Machado Tax Advisory; Administrative Tax Litigation; Judicial Tax Litigation; Corporate and Contract Advisory / Litigation

US$ 200 per hour Oil & Gas Law Alliance Av. Rio Branco, n? 89 901 Centro Rio de Janeiro RJ CEP 20040-004 Tel.:(21) 2203-0330 Fax.: (21) 2203-0331 Cel.: (21) 7619-1898 www.at.adv.br [email protected]

Bichara, Barata, Costa & Rocha

Luiz Gustavo A. S. Bichara Tax; Commercial; Social Security; Corporate; Banking; Labour; Civil; Environmental; Administrative and Constitutional; Real Estate Oil and Gas; International Trade and Antitrust

US$ 280 per hour Offices in Rio de Janeiro, São Paulo, Brasília, Vitória, Volta Redonda Tel: (55 21) 3231-8011 Fax: (55 21) 2224-5295 [email protected] www.bbcr.com.br

http://www.trechrossiewtanabe.com.br/



http://www.bbcr.com.br/

Page | 160

Appendices

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Appendix "A" – List of Companies Interviewed for Primary Research

Sector Overview Atlantic Canada

Firm Name Title 1. ADI Group Richard Smith Manager 2. Associated Manufacturing Mike Bowes Managing Director 3. Atlantic Food And Bev Processors

Assoc Don Newman Executive Director

4. Atlantic Minerals Chad Elliot Sales Manager 5. Bioatlantech John Argall Executive Director 6. Bionova/Origin Biomed Robert Cervelli Chairperson 7. Composites Atlantic Maurice Guitton President, CEO 8. Council Of Atlantic Ministers Of

Education And Training (CAMET) Rheal Poirier Secretary

9. Dynamic Air Shelters Harold Warner President 10. Edunova Ava Czapalay CEO 11. Enviro Sci Assoc Of Ns Darren Parker Office Manger 12. Food Technology Centre Yaw Dako Food Technologist 13. Geonet Technologies Mike Pearson CEO & Director Of Marketing 14. Mining Assoc Of NS Linda Deschenes Executive Director 15. NATI Gerard Duggan Director Of ICT 16. NATI Ron Taylor CEO 17. NATI Susan Hunt Director Of Ocean Tech 18. NB Aerospace And Defense Assoc David Innes President, CEO 19. NB Info Tech Council Larry Sampson CEO 20. Nicom IT Pat Dentrement Partner 21. OTANS Amanda White Manager, Events & Member

Services 22. Pathix Mike Power Director Of Sales 23. PF Collins Christine

Decoste Branch Manager

24. Rutter Technologies/NATI Gary Lovell Director Of Business Development And Innovation

25. Stantec Mark Flinn Environmental Engineer

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Sector Overview Brazil

Firm Name Title 1. SouthWest Aerospace Otavio Motta Administration 2. IFS Seguranca Eletronica Ltda Paulo Telles Partner 3. Acrux aerospace technology Oswaldo Barbosa Loureda President 4. Sociedade Brasileira Cultura

Inglesa Vania Furtado Manager of Corporate

Accounts 5. Jardim Escola Golfinho Amigo Marcia Cristina de Oliveira Educational Supervisor 6. Quatrum English School Bruno Marroti Director 7. Sanoplast Industria e Comercio de

Plastico Ltda Marco Antonio Angrisani CEO - Partner

8. Plastiovo Embalagens Ltda Carla Jaconi Director 9. PalmaPlan Agroindustria Ltda Alexandre Borba General Manager 10. Macaronni Alimentos e Massas

Ltda. Antonio Carlos Giordani Costa

Partner and Director

11. E+bros Participacao Ltda. Bruno Lopes Partner and Director 12. Terra Networks S.A ( Telefonica

S.A) Alexandre Biancamano Senior Product Manager

– Brazil and Latin America

13. Grupo Meta Telmo Costa CEO 14. Brisa Sociedade para o

Desenvolvimento da Informacao Vicente Macedo Filho Director of Project

management, Research and Development

15. Quimica dy Vitoria Ltda Getulio Fornari Director 16. Milipore Ind e Com LTDA José Carlos Perrot Costumer Service

Supervisor 17. Ecobac Biotecnologia LTDA Lucio Soares Commercial 18. Jacobina Mineracao E Comercio

LTDA Guilherme Cadar Lopes Tax Manager

19. Subsea 7 do Brasil Thiago Medeiros de Souza Manager - Procurement and Material

20. Conec-Rio Conexões e Peças Ltda. Marcus Mazza Director 21. Balg do Brasil Industrial Ltda. Bernardo Medina CFO

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Canadian Firms with Experience in the Brazilian Market

Firm Name Title 1. ASC Signal Corporation Chris Knowles Trade Compliance 2. Boart Longyear Canada Charlie Conroy Shipper/Exporter 3. Caris Alejandro Gerones Manager Of Operations In

Latin America 4. Enervac

Corporation Scott Allan Vice President

5. Environment Bio-Detection Products

Will Lush Operations Manager

6. International Language Institute

Chris Musial Marketing Director

7. Latin Access Patricia Diaz President 8. LCL Navigation Ltd Kim Ritchie Operations Manager 9. Les Enterprises Dovico

Entreprises Inc Carolyn Tancock International Sales

10. Moog Components Group Mike Glister Manager 11. PCI Geomatics Trevor Taylor Director Of Strategic Sales 12. PPM 2000 Inc Lenora Thomas Director Of Customer Service 13. Sinclair Technologies Martine Cardazo Director Of Sales 14. Tallman Bronze Company

Ltd Michael Strelbisky Executive Manager

15. Worleyparsons Bill Tompkins Technical Director Of Marketing

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Appendix "B" - 2011 Index of Economic Freedom374375

The Index of economic freedom examines three fundamental principles of economic

freedom—empowerment of the individual, non-discrimination, and open competition. The

following is the excerpt of Brazil’s 2011 score on all 10 dimensions of economic freedom. Please

note that this portion of the report is reproduced as is without any changes to language or

content as per the copyright notice for this material that allows copying, distributing, displaying

or performing the work but not altering, transforming, or building upon this work.

Introduction

Brazil’s economic freedom score is 56.3, making its economy the 113th freest in the 2011 Index.

Its score is 0.7 point better than last year as a result of improvements in investment freedom

and trade freedom. Brazil is ranked 21st out of 29 countries in the South and Central

America/Caribbean region, and its overall score is below the regional and world averages.

The Brazilian economy has been expanding with the help of booming commodity exports. Over

the past decade, economic growth has averaged around 4 percent, accompanied generally by

low inflation. Brazil has a large agricultural and industrial base, but a growing services sector

has accounted for over 60 percent of GDP in recent years. The global financial and economic

turmoil’s impact has been moderate.

The state’s role in the economy has been heavy and even increasing. However, the efficiency

and overall quality of government services remain poor despite high government spending as a

percentage of GDP. Barriers to entrepreneurial activity include burdensome taxes, inefficient

regulation, poor access to long-term financing, and a rigid labor market. The judicial system

remains vulnerable to political influence and corruption.

Background

Brazil’s democratic constitution dates from 1988. Workers’ Party President Luiz Inacio “Lula” da

Silva, elected in 2002 and re-elected in 2006, was constitutionally barred from seeking a third

term. In the October 2010 presidential elections, Lula’s hand-picked successor, Dilma Rousseff,

was elected Brazil’s first female president. Brazil has benefited from surging prices for its

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booming exports of commodities and weathered the global economic downturn in 2009 better

than many developed countries did. A stable currency has boosted living standards, and the

middle class is growing. Brazil is the world’s fifth-largest country. Its almost 200 million people

are heavily concentrated on the coast, where a dozen major metropolitan areas offer direct

access to the Atlantic Ocean.

Business Freedom 54.3 – 0.2

Despite some progress, organizing new investment and production remains cumbersome and

bureaucratic. It is costly and time-consuming to launch or close a business.

Trade Freedom 69.8 + 0.6

Brazil’s weighted average tariff rate was 7.6 percent in 2009. Import bans and restrictions,

market access barriers in services, high tariffs, border taxes and fees, restrictive regulatory and

licensing rules, subsidies, complex customs procedures, and problematic protection of

intellectual property rights add to the cost of trade. Fifteen points were deducted from Brazil’s

trade freedom score to account for non-tariff barriers.

Fiscal Freedom 69 + 0.6

Brazil’s top income tax rate is 27.5 percent. The standard corporate tax rate is 15 percent, but a

surtax of 10 percent and a 9 percent social contribution on net profit paid by most industries

bring the effective rate to 34 percent. Other taxes include a real estate transfer tax and a tax on

financial transactions. In the most recent year, overall tax revenue as a percentage of GDP was

34.4 percent.

Government Spending 49.6 – 0.7

In the most recent year, total government expenditures, including consumption and transfer

payments, held steady at 41 percent of GDP. Public debt is now below 40 percent of GDP.

Besides debt service, government spending is focused mainly on pensions, transfers to local

governments, and the bureaucracy. Additional planned stimulus spending will widen the overall

fiscal deficit. Tax and pension reform, abandoned during the global crisis, are back on the fiscal

agenda.

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Monetary Freedom 75.9 + 0.1

Inflation has been better controlled in recent years, averaging 5 percent between 2007 and

2009. Prudent fiscal and monetary policies are credited with helping Brazil to avoid the worst of

the global financial crisis of 2008 and 2009. Although such public services as railways,

telecommunications, and electricity have been privatized, regulatory agencies oversee prices.

The National Petroleum Agency fixes the wholesale price of fuel, and the government controls

airfares. Ten points were deducted from Brazil’s monetary freedom score to account for price

controls.

Investment Freedom 50 + 5.0

Foreign investors are granted national treatment, but foreign investment is restricted in several

industries. In general, Brazilian nationals must constitute at least two thirds of all employees

and receive at least two-thirds of total payroll in firms employing three or more persons.

Bureaucracy and administration are non-transparent, burdensome, complex, and subject to

corruption. Legal disputes can be time-consuming. There are few restrictions on foreign

exchange transactions. Foreign investors, upon registering their investments with the central

bank, may remit dividends, capital (including capital gains), and royalties.

The central bank regulates outward direct investment in some cases, including transfers and

remittances. Foreign investors must obtain specific authorization to purchase land along

borders.

Financial Freedom 50 no change

Brazil’s financial sector is diversified and competitive, but the state’s role remains considerable.

Public-sector commercial and development bank assets account for around 40 percent of the

financial system’s total assets. The two largest state-owned banks control about 25 percent of

total assets, and the government directs banks to channel loans to preferred sectors. Three of

the top 10 banks are now foreign-owned. Brazil’s insurance sector is now the region’s largest,

and the reinsurance market was opened to private sector competition in 2008. A Credit

Guarantee Fund was introduced in March 2009 to provide state guarantees on bank certificates

of deposit. Overall, the banking sector has withstood the global financial turmoil relatively well.

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Property Rights 50 no change

Contracts are generally considered secure, but Brazil’s judiciary is inefficient, subject to political

and economic influence, and lacks resources and staff training. Decisions can take years, and

judgments by the Supreme Federal Tribunal are not automatically binding on lower courts.

Protection of intellectual property rights has improved, but piracy of copyrighted material

persists.

Freedom from Corruption 37 + 2.0

Corruption is perceived as significant. Brazil ranks 75th out of 180 countries in Transparency

International’s Corruption Perceptions Index for 2009. Corruption can be an obstacle to

investment. Businesses bidding on government procurement contracts can encounter

corruption, which is also a problem in the lower courts.

Labor Freedom 57.8 + 0.3

Rigid and outmoded labor regulations undermine employment and productivity growth. The

non-salary cost of employing a worker is high, and dismissing a redundant employee can be

costly. Mandated benefits amplify overall labor costs. The informal sector remains sizeable.

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Appendix "C" – Atlantic Canadian Exports to Brazil

Listing of Export in Top 25 Industries in Millions

Industries 2006 2007 2008 2009 2010 21239 - Other Non-Metallic Mineral Mining and Quarrying

65.04 60.15 92.69 39.30 124.55

32212 - Paper Mills 43.36 34.33 16.99 7.20 20.20 32412 - Asphalt Paving, Roofing and Saturated Materials Manufacturing

0.00 0.00 0.00 0.00 2.45

21231 - Stone Mining and Quarrying 0.81 1.61 1.18 0.00 1.90 33149 - Non-Ferrous Metal (except Copper and Aluminum) Rolling, Drawing, Extruding and Alloying

0.00 0.00 0.00 2.55 1.83

32621 - Tire Manufacturing 2.28 4.05 8.51 1.68 1.68 33361 - Engine, Turbine and Power Transmission Equipment Manufacturing

0.01 0.02 0.03 1.49 1.06

33641 - Aerospace Product and Parts Manufacturing

0.00 0.00 0.00 0.70 0.84

11121 - Vegetable and Melon Farming 0.28 0.35 0.38 0.00 0.75 31171 - Seafood Product Preparation and Packaging

0.55 0.00 0.08 0.33 0.69

33999 - All Other Miscellaneous Manufacturing

0.39 0.74 0.88 0.02 0.65

11212 - Dairy Cattle and Milk Production 0.19 0.16 0.34 0.17 0.60 33451 - Navigational, Measuring, Medical and Control Instruments Manufacturing

0.08 0.39 0.55 0.25 0.58

33591 - Battery Manufacturing 0.00 0.00 0.00 0.00 0.56 33422 - Radio and Television Broadcasting and Wireless Communications Equipment Manufacturing

0.59 0.50 0.54 1.25 0.56

41812 - Recyclable Paper and Paperboard Wholesaler-Distributors

0.00 0.00 0.00 0.00 0.48

33313 - Mining and Oil and Gas Field Machinery Manufacturing

0.05 0.11 0.08 1.40 0.32

31141 - Frozen Food Manufacturing 0.09 0.20 0.33 0.27 0.31 33392 - Material Handling Equipment 0.33 0.21 0.13 0.78 0.28

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Manufacturing 33421 - Telephone Apparatus Manufacturing 0.05 0.00 0.00 0.02 0.26 33312 - Construction Machinery Manufacturing

0.00 0.01 0.03 0.12 0.20

32619 - Other Plastic Product Manufacturing 0.19 0.32 0.33 0.19 0.16 32519 - Other Basic Organic Chemical Manufacturing

0.00 0.00 0.00 0.10 0.15

32629 - Other Rubber Product Manufacturing

0.13 0.08 1.14 0.03 0.13

33631 - Motor Vehicle Gasoline Engine and Engine Parts Manufacturing

0.04 0.02 0.05 0.41 0.10

SUB-TOTAL 114.45 103.24 124.25

58.27 161.28

OTHERS 2.20 2.67 6.14 4.91 3.51 TOTAL (ALL INDUSTRIES) 116.65 105.92 130.3

9 63.19 164.79

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Appendix "D" – The Canadian Environmental Goods Model

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Appendix "E" - Oil reserves1, per location (onshore and off shore), by State –

2000-2009

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Appendix “F” - Best Prospects for Foreign Suppliers with Petrobras376

Petrobras considers the following critical equipment and services as best prospects for foreign

suppliers:

E&P critical equipment

• Production pipelines alloy coatings • Turbo compressors (6-10 Mw) • Polyester mooring cables • Mooring systems • Drilling pipelines • Electrical cables • Control systems for well control • Oil and gas metering systems • Offshore drilling rigs • Gravel packing • Drill bits • Steam generators (25-50 x 10 6 BTU/d); • Special sphere subsea valves • Subsea sensors for analysis of oil and grease traces in water • Gas turbines • Special steels (alloys, chrome, etc) to support sub-salt corrosion, and H2S

Critical services for E&P activities

• Drilling • Work over services • Flexible lines and umbilical laying services • Support to ROV vehicles • Support to mooring activities • Special vessels • Subsea interconnection services • Monitoring and inspection techniques for structural integrity of flexible risers

Downstream segment (refineries, etc) critical equipment and services

• HCC Reactors • Boiler works with special alloys (reactors, towers, pressure vessels) • Boilers

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• Heat exchangers working with H2S traces (ASTM A 387degree 11) • API pumps • Basic design services • Thermal power project design

Based on Petrobras 2008 Annual report, the US Commercial Service Brazil found that

Petrobras’s direct procurement amounted to US$ 45.2 billion - US$ 7 billion in goods and US$

38.2 billion in services. Procure from Brazilian suppliers increased by 8 percent over 2007 and

accounted for 78 percent in 2008. Foreign suppliers account for only 19.4 percent of the goods

and 22.5 percent of the services.

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Appendix “G” - Sales of Consumer Health Products by Sector

Page | 175

Appendix "H" – Canada’s Ocean Technology Sectors

Canada's Ocean Technology Sector

Aquaculture

Marine Transportation Education and Training Offshore Energy Equipment

Communications

Safety/Evacuation

Coastal Zone Management

Operations

Equipment

Underwater intervention Emergency Response Other

Industry Promotion

Equipment

Site Development

Information

Ocean Observation and Science Exploration

Instrumentation

Coastal Zone Management Industry Promotion Defence and Security Modeling and Forecasting Communications

Modeling and Forecasting

Communications

Naval Architecture

Data Fusion

Other Equipment

Navigation

Equipment

Production and Processing

Industry Promotion

Other

Hydrography

Renewables Marine Acoustics

Performance Evaluation Industry promotion

Safety/Evacuation

Military

Port Design

Instrumentation Modeling and Forecasting Port Management

Marine Acoustics

Fisheries

Port Security

Port Security

Modeling and Forecasting Harvesting Safety/Evacuation

Safety/Evacuation

Monitoring

Modeling and Forecasting

Search and Rescue

Search and Rescue

Ocean Mapping and Survey Monitoring Seismic Survey

Underwater Intervention Oceanography/Meteorology Other

Sovereignty

Vessel Monitoring

Other

Processing Surveillance

Seismic Survey

Vessel Monitoring

System Integration

Surveillance

Equipment

Underwater Intervention Navigation Source: http://ocean.cinmaps.ca/asset_map

Underwater Vehicles Underwater Vehicles

Page | 176

Appendix “I”– Starting a Business in Brazil

No. Procedure Time to

Complete Associated

Costs 1 Check company name with State Commercial

Registry Office 1 day R$ 9

2 Pay registration fees 1 day see following procedures

3 Register with the commercial board of the state where the main office is located and obtain identification number (NIRE)

1 day R$75 registration + R$50 (expediting fee)

4 Register for federal and state tax (Secretaria da Receita Federal do MinistÃ©rio da Fazenda, SRF/MF), obtain the CNPJ number, which also registers employees with the National Institute of Social Security (Instituto Nacional da Seguridade Social, INSS)

About 22 days (including inspection visit)

no charge

* 5 Receive state tax inspection 1 day (simultaneous with procedure 4)

no charge

6 Get the authorization to print receipts/invoices from the Secretaria da Fazenda Estadual

1 day no charge

* 7 Register with the Municipal Taxpayersâ€™ Registry (Secretaria Municipal de FinanÃ§as) of the City of SÃ£o Paulo

5 days ( Simultaneous with previous procedure)

no charge

* 8 Pay TFE to the Municipal Taxpayersâ€™ Registry 1 day (simultaneous with previous Procedure)

R$ 425.46 (for retailing business), may vary depending on business activity

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9 Get the authorization to print receipts/invoices from the Secretaria Municipal de FinanÃ§as

1 day no charge

10 Order receipts/invoices (notas fiscais) with CNPJ numbers from authorized printing companies

3 days R$ 600 (R$0.6 per page, assume printing 1000)

* 11 Apply to the municipality for an operations permit (auto de licenÃ§a de funcionamento)

90 days, simultaneous with previous procedure

no charge

* 12 Register the employees in the social integration program (Programa de IntegraÃ§Ã£o Social, PIS)

1 day, simultaneous with Procedure 10

no charge

* 13 Open a special fund for unemployment (FGTS) account in bank


no charge

* 14 Notify the Ministry of Labor (Cadastro Geral de empregados e desempregados, CAGED)


no charge

* 15 Registration with the Patronal Union and with the Employees Union.

5 days, simultaneous with Procedure 10

Annual fee to be paid depending on the Union.

* Takes place simultaneously with another procedure.

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Appendix “J”– List of Companies Used for IRR Calculations

Information and Communication Technology 1. Brazilian Telecommunications Corp. (BOVESPA:TELB4) 2. IGB Eletronica S.A. (BOVESPA:IGBR3) 3. Inepar Telecomunicacoes S.A. (BOVESPA:INET3) 4. DTCom- Direct to Company S.A. (BOVESPA:DTCY3) 5. Tec Toy S.A. (BOVESPA:TOYB4) 6. CSU Cardsystem S.A. (BOVESPA:CARD3) 7. Bematech SA (BOVESPA:BEMA3) 8. TIVIT Terceiriza�‹o de Tecnologia e Servi�os S.A. (BOVESPA:TVIT3) 9. Universo Online S.A. (BOVESPA:UOLL4) 10. Itautec S.A. - Grupo Itautec (BOVESPA:ITEC3) 11. Cielo SA (BOVESPA:CIEL3) 12. Positivo Inform‡tica S.A. (BOVESPA:POSI3) 13. Inepar S.A. Industria e Construcoes (BOVESPA:INEP4) 14. Redecard S.A. (BOVESPA:RDCD3) 15. B2W Companhia Global de Varejo S.A. (BOVESPA:BTOW3) 16. Net Servi�os de Comunica�‹o (BOVESPA:NETC4) 17. Tele Norte Celular Participa�›es S.A. (BOVESPA:TNCP4) 18. TIM Participacoes S.A. (BOVESPA:TCSL4) 19. Vivo Participacoes S.A. (BOVESPA:VIVO4) 20. Embratel Participacoes S.A. (BOVESPA:EBTP4) 21. Telecomunicacoes de Sao Paulo S.A. - TELESP (BOVESPA:TLPP4) 22. Brasil Telecom S.A. (BOVESPA:BRTO4) 23. Tele Norte Leste Participacoes S.A. (NYSE:TNE) 24. Telemar Norte Leste S.A. (BOVESPA:TMAR5)

Environmental Technologies

25. Fibria Celulose SA (BOVESPA:FIBR3) 26. Duratex SA (BOVESPA:DTEX3) 27. Suzano Papel e Celulose S.A. (BOVESPA:SUZB5)

Oil and Gas

28. Refinaria de Petroleos de Manguinhos (BOVESPA:RPMG4) 29. HRT Participa�›es em Petr—leo S.A. (BOVESPA:HRTP3) 30. Brasil Ecodiesel Industry (BOVESPA:ECOD3) 31. OSX Brasil S.A. (BOVESPA:OSXB3) 32. OGX Petr—leo e G‡s Participa�›es SA (BOVESPA:OGXP3) 33. Ultrapar Holdings Inc. (BOVESPA:UGPA4) 34. Petroleo Brasileiro (BOVESPA:PETR4)

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Life Sciences and Biotechnologies 35. Amil Participacoes SA (BOVESPA:AMIL3) 36. Biomm Sa (BOVESPA:BIOM4) 37. Dimed S.A. Distribuidora de Medicamentos (BOVESPA:PNVL4) 38. Cremer SA (BOVESPA:CREM3) 39. Fleury S/A (BOVESPA:FLRY3) 40. Tempo Participacoes SA (BOVESPA:TEMP3) 41. Odontoprev S.A. (BOVESPA:ODPV3) 42. Profarma Distribuidora De Produtos Farmaceuticos S/a. (BOVESPA:PFRM3) 43. Diagnosticos da America (BOVESPA:DASA3)

Ocean Technologies

44. Companhia Docas De Imbituba (BOVESPA:IMBI4) 45. Trevisa Investimentos (BOVESPA:LUXM4) 46. PortX Operacoes Portu‡rias S.A. (BOVESPA:PRTX3) 47. LLX Log’stica S.A. (BOVESPA:LLXL3) 48. Santos-Brasil Participacoes S.A. (BOVESPA:STBP11) 49. Wilson, Sons de Administracao e Comercio Ltda (BOVESPA:WSON11)

Aerospace, Defense and Security

50. Embraer SA (NYSE:ERJ) 51. GOL Linhas AŽreas Inteligentes S.A. (BOVESPA:GOLL4) 52. TAM S.A. (BOVESPA:TAMM4)

Mining

53. Paranapanema S.A. (BOVESPA:PMAM3) 54. Companhia De Ferro Ligas Da Bahia - Ferbasa. (BOVESPA:FESA4) 55. Talon Metals Corp. (TSX:TLO)

Education

56. Anhanguera Educacional Participacoes S.A. (BOVESPA:AEDU3) 57. Est‡cio Participa�›es S.A (BOVESPA:ESTC3) 58. Kroton Educacional S.A. (BOVESPA:KROT11) 59. Pearson Sistemas do Brasil SA (BOVESPA:SEBB11)

Food and Beverages

60. Minupar Participacoes S.A. (BOVESPA:MNPR3) 61. Marambaia Energia Renovavel Sa (BOVESPA:CTPC3) 62. Brazil Fast Food Corp. (OTCBB:BOBS) 63. Industrias J B Duarte SA (BOVESPA:JBDU4) 64. Rasip Agro Pastoril S. A. (BOVESPA:RSIP4) 65. Renar Macas S/a (BOVESPA:RNAR3) 66. Companhia Cacique de Cafe Soluvel (BOVESPA:CIQU4)

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67. BrasilAgro-Companhia Brasileira de Propriedades Agricolas (BOVESPA:AGRO3) 68. Companhia Iguacu de Cafe Soluvel (BOVESPA:IGUA6) 69. Usina Costa Pinto S.A.- Acucar e Alcool (BOVESPA:UCOP4) 70. SLC Agricola S.A. (BOVESPA:SLCE3) 71. M. Dias Branco S.A. Indœstria e ComŽrcio de Alimentos (BOVESPA:MDIA3) 72. Minerva S.A (BOVESPA:BEEF3) 73. Sao Martinho SA (BOVESPA:SMTO3) 74. Tereos Internacional S.A. (BOVESPA:TERI3) 75. Companhia de Bebidas Das Americas (AMBEV) (NYSE:ABV.C) 76. Cosan Ltd. (BOVESPA:CZLT11) 77. Marfrig Alimentos SA (BOVESPA:MRFG3) 78. Cosan S. A. Indœstria e ComŽrcio (BOVESPA:CSAN3) 79. BRF - Brasil Foods S.A. (BOVESPA:BRFS3) 80. JBS S.A. (BOVESPA:JBSS3)

Page | 181

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Endnotes

1 (Central Intelligence Agency, 2011) 2 (Ministry of External Relations) 3 Rate on Mon, 7 March, 2011 - http://fx-rate.net/CAD/BRL/ 4 (The Heritage Foundation & Wall Street Journal, 2011) 5 (Foreign Affairs and International Trade Canada, 2009) 6 (Governement of Canada, 2009) 7 (Industry Canada, 2011) 8 (Industry Canada, 2010) 9 (Industry Canada, 2010) 10 (Marega, 2008) 11 (Canadian Trade Commissioner Service, 2010) 12 (International Telecom Union, 2009) 13 (Invest in Brazil, 2010) 14 (Marega, 2008) 15 (Austrade, 2010) 16 (SICE, 2006) 17 (Austrade, 2010) 18 (Austrade, 2010) 19 (Ecommerce Journal, 2009) 20 (Pohl, 2010) 21 (Austrade, 2010) 22 (Furusho, 2011) 23 (Austrade, 2010) 24 (US Commercial Service Brazil, 2009) 25 (Austrade, 2010) 26 (APEC, 2010) 27 (Gambale, 2007) 28 (The Entertainment Software Association of Canada (ESAC), 2009) 29 (Atlantic Canada Opportunities Agency, 2009) 30 (González, 2009) 31 (Gonzalez, 2005) 32 (Environmental Careers Organization, 2010)

http://fx-rate.net/CAD/BRL/

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33 (Environmental Careers Organization, 2010) 34 (The Globe Foundation, 2010) 35 (Innovas Solutions Ltd., 2009) 36 (Worldwatch Institute, 2008) 37 (US Commercial Service, 2009) 38 (US Commercial Service, 2009) 39 (UK Trade & Investment (Env. & Water), 2010) 40 (US Commercial Service, 2009) 41 (UK Trade & Investment (Env. & Water), 2010) 42 (Canadian Trade Commissioner Service, 2010) 43 (US Commercial Service, 2009) 44 (Canadian Trade Commissioner Services, 2010) 45 (UK Trade & Investment (Power), 2010) 46 (UK Trade & Investment (Env. & Water), 2010) 47 (US Commercial Service, 2009) 48 (UNFCCC, 2006) 49 (UK Trade & Investment (Env. & Water), 2010) 50 (UK Trade & Investment (Env. & Water), 2010) 51 (Crawford C. , 2009) 52 (OECD, 2008) 53 (Canadian Trade Commissioner Service, 2010) 54 (UK Trade & Investment (Env. & Water), 2010) 55 (UK Trade & Investment (Env. & Water), 2010) 56 (Fransen, 2008) 57 (Canadian International Development Agency, 2007) 58 (Worldwatch Institute, 2008) 59 (The World Bank, 2009) 60 (Lucon & Fernandes Rei, 2006) 61 (U.S. Library of Congress, 1994) 62 (World Bank, 2010) 63 (UK Trade & Investment (Env. & Water), 2010) 64 (Canadian Trade Commissioner Service, 2010) 65 (UK Trade & Investment (Power), 2010) 66 (US Commercial Service, 2009)

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67 (UNFCCC, 2006) 68 (Atlantic Canada Opportunities Agency, 2008) 69 Guidelines for Procurement of World Bank funded projects http://bit.ly/ft8GdS | Guidelines for procurement of IDB Projects http://www.iadb.org/en/countries/brazil/brazil-and-the-idb,1002.html 70 (Industry Canada, 2010) 71 (Industry Canada, 2010) 72 (Datamonitor, 2010) 73 (Arabian Oil and Gas Staff, 2009) 74 (Arabian Oil and Gas Staff, 2009) 75 (Industry Canada, 2010) 76 (Pre-Salt, 2009) 77 (U.S. Energy Information Administration, 2011) 78 (Filho, Nelson Narciso, 2009) 79 (U.S. Energy Information Administration, 2011) 80 (U.S. Energy Information Administration, 2011) 81 (U.S. Energy Information Administration, 2011) 82 (U.S. Energy Information Administration, 2011) 83 (U.S. Energy Information Administration, 2011) 84 (U.S. Energy Information Administration, 2011) 85 (MBendi Information Services, 2011) 86 (US Commercial Service Brazil, 2011) 87 (U.S. Energy Information Administration, 2011) 88 (Oil-price.net, 2011) 89 (Invest in Brazil, 2011) 90 (U.S. Energy Information Administration, 2011) 91 (Austrade, 2010) 92 (Filho, Nelson Narciso, 2009) 93 (Foreign Affairs and International Trade Canada, 2011) 94 (US Commercial Service Brazil, 2011) 95 (Atlantic Canada Opportunities Agency, 2010) 96 (Oil Field Directory, 2009) 97 Petrobras Supplier Channel http://www.petrobras.com.br/en/supplier-channel/ 98 ANP Website (Portuguese) http://www.anp.gov.br/ 99 (Deloitte, 2007)

http://bit.ly/ft8GdS

http://www.iadb.org/en/countries/brazil/brazil-and-the-idb,1002.html

http://www.petrobras.com.br/en/supplier-channel/

http://www.anp.gov.br/

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100 (Calgary Technologies, 2006) 101 (PwC, 2010) 102 (IBISWorld, 2011) 103 (Datamonitor, 2009) 104 (Datamonitor, 2010) 105 (Datamonitor, 2009) 106 (Industry Canada, 2011) 107 (Fundação Biominas, 2007) 108 (Fundação Biominas, 2008) 109 (UK Trade and Investment, 2010) 110 (Brazilian Trade and Investment Promotion Agency, 2010) 111 (Brazilian Trade and Investment Promotion Agency, 2010) 112 (Brazilian Trade and Investment Promotion Agency, 2010) 113 (UK Trade and Investment, 2010) 114 (Fundação Biominas, 2008) 115 (Fundação Biominas, 2008) 116 (Cookson, 2010) 117 (UK Trade and Investment, 2010) 118 (UK Trade and Investment, 2010) 119 (Collins, 2008) 120 (Collins, 2008) 121 (U.S. Commercial Service, 2010) 122 (U.S. Commercial Service, 2010) 123 (Brazilian Trade and Investment Promotion Agency, 2010) 124 (Atlantic Canada Opportunities Agency, 2007) 125 (BioteCanada , 2011) 126 Website for ANVISA Services - http://bit.ly/anvisainportugese (Portuguese) 127 (Canadian Industry Mapping System, 2010) 128 (Westwood, 2004) 129 (Douglas Westwood, 2006) 130 (Industry Canada, 2011) 131 (SINAVAL, 2011) 132 (Business Monitor International, 2011) 133 (SINAVAL, 2011)

http://bit.ly/anvisainportugese

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134 (Paschoa, Brazil Shipbuilding: A Forecast, 2010) 135 (PoderNaval, 2009) 136 (Business Monitor International, 2011) 137 (SINAVAL, 2011) 138 (Cavalcante, 2007) 139 (Estefen, 2007) 140 (Iberdrola, 2010) 141 (Boyle, 2010) 142 (Cavas, 2009) 143 (DTC International, Inc., 2010) 144 (Douglas Westwood, 2006) 145 (AXYS, 2010) 146 (Douglas Westwood, 2006) 147 (Estefen, 2007) 148 (Iberdrola, 2010) 149 (ICS Electronics Ltd., 2010) 150 (Douglas Westwood, 2006) 151 (Duarte, 2010) 152 (SINAVAL, 2011) 153 (People's Daily Online, 2010) 154 (Augusto & Portes, 2008) 155 (Douglas Westwood, 2006) 156 (Douglas Westwood, 2006) 157 (da Cruz Nunes & da Silveira Lob, 2008) 158 (SINAVAL, 2011) 159 (Paschoa, Subsea Technology Development in Brazil - The Birth of a New Local Industry, 2010) 160 (World Ocean Review, 2010) 161 (UKTI, 2010) 162 (ACZISC Secretariat and Canmac Economics Ltd. (Vol.1), 2006) 163 The Canadian Ocean Technology Sector in Canada broken down into sectors and the corresponding companies http://ocean.cinmaps.ca/asset_map 164 (Atlantic Canada Opportunities Agencies, 2006) 165 (Datamonitor, 2010) 166 (Gomes, 2010)

http://ocean.cinmaps.ca/asset_map

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167 (Deloitte Touche Tohmatsu (DTT) , 2010) 168 (Yamashita, 2009) 169 (US Commercial Service Brazil, 2011) 170 (ECORYS Research and Consulting., 2009) 171 (ECORYS Research and Consulting., 2009) 172 (Yamashita, 2009) 173 (Yamashita, 2009) 174 (Warwick, 2011) 175 (U.S. Commercial Service, 2010) 176 (Yamashita, 2009) 177 (US Department of State, 2009) 178 (UK Trade and Investment, 2010) 179 (Swiss Business Hub Brazil, 2009) 180 (Warwick, 2011) 181 (Aerospace Industries Association of Brazil - AIAB, 2011) 182 (US Commercial Service Brazil, 2011) 183 (Industry Canada, 2011) 184 (Industry Canada, 2010) 185 (Industry Canada, 2010) 186 (U.S. Census Bureau, 2008) 187 In order to be concise this does not go into the separate categories of mining that these companies are segmented into. 188 At this level this group still contains companies primarily engaged in oil and gas exploration. A complete list of all the NAICS sub-categories can be found on the US Census Bureau web page. 189 (PWC, 2010) 190 (PWC, 2011) 191 (Baxter, 2010) 192 (IBRAM, 2011) 193 (IBRAM, 2011) 194 (IBRAM, 2011) 195 (Chadwick, 2010) 196 (IBRAM, 2011) 197 (Duarte, 2010) 198 (Duarte, 2010)

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199 (IBRAM, 2011) 200 (Feller, 2010) 201 (Chadwick, 2010) 202 (Feller, 2010) 203 (Swedish Trade Council, 2006) 204 (IBRAM, 2011) 205 (US Commercial Service, 2010) 206 (International Mining, 2006) 207 (IBRAM, 2011) 208 (Duarte, 2010) 209 (Oxford Analytica, 2007) 210 (IBRAM, 2011) 211 (Swedish Trade Council, 2006) 212 (US Commercial Service, 2010) 213 (Duarte, 2010) 214 (Feller, 2010) 215 (The Mining Association of Canada, 2009) 216 (Canadian Mining Magazine, 2008) 217 (Canadian Mining Magazine, 2008) 218 (Canadian Mining Magazine, 2008) 219 (National Resources Canada, 2000) 220 (Winner, 2010) 221 (Swedish Trade Council, 2006) 222 (Infomine, 2011) 223 (Industry Canada, 2010) 224 (Statistics Canada, 2010) 225 (Worldometers, 2009) 226 (Standards & Poor's, 2010) 227 (A&M Mind Power Solutions, 2011) 228 (RNCOS Industry Research Solutions, 2010) 229 (Rodrigues, 2009) 230 (UNESCO, 2010) 231 (Rodrigues, 2009) 232 (Davidson, 2004)

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233 (Citizenship and Immigration Canada, 2010) 234 (Governement of Canada, 2009) 235 (Canadian Trade Commissioner Service, 2010) 236 (Rodrigues, 2009) 237 (FPP Edu-Media, 2011) 238 (BMI Media, 2011) 239 (Downie, 2007) 240 http://static.globaltrade.net/files/pdf/20100921065037.pdf 241 (Foreign Affairs and International Trade Canada, 2010) 242 (The Globe Foundation, 2010) 243 (The Globe Foundation, 2010) 244 (Rodrigues, 2009) 245 (Central Intelligence Agency, 2011) 246 (Rodrigues, 2009) 247 (UNESCO - International Bureau of Education, 2006 - 07) 248 (Rodrigues, 2009) 249 (Canadian Trade Commissioner Service, 2010) 250 (The Globe Foundation, 2010) 251 (Rodrigues, 2009) 252 (Antunes, 2010) 253 (Rodrigues, 2009) 254 (Government of Canada, 2010) 255 (Canadian Trade Commissioner Service - Nova Scotia, 2011) 256 (Tesolin, 2004) 257 (Waldie, 2011) 258 (Business Monitor International, 2010) 259 (Murray, 2007) 260 (Murray, 2007) 261 (Kuh, 2010) 262 (Kuh, 2010) 263 (ReportLinker.com, 2010) 264 (Business Monitor International, 2010) 265 (Motta, 2011) 266 (Business Monitor International, 2010)

http://static.globaltrade.net/files/pdf/20100921065037.pdf

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267 (Motta, 2011) 268 (Santos, 2010) 269 (SeafoodSource staff , 2009) 270 (Business Monitor International, 2010) 271 (Business Monitor International, 2010) 272 (USDA Foreign Agriculture Service, 2009) 273 (Mackey, 2008) 274 (MercoPress, 2010) 275 (Kuh, 2010) 276 (Business Monitor International, 2010) 277 (Trade Commisioner Service, 2007) 278 (Agri-Food Trade Service, 2008) 279 (Atlantic Canada Opportunites Agency, 2005) 280 (Atlantic Canada Opportunites Agency, 2005) 281 (USDA Foreign Agriculture Service, 2009) 282 (Nova Scotia Department of Fisheries and Aquaculture, 2007) 283 (Brazilian Trade and Investment Promotion Agency, 2010) 284 (Nes, Should you Form a Ltda. or S.A. Company in Brazil?, 2010) 285 (PricewaterhouseCoopers, 2010) 286 (PricewaterhouseCoopers, 2010) 287 (World Bank and International Finance Corporation, 2011) 288 (PricewaterhouseCoopers, 2010) 289 (PricewaterhouseCoopers, 2010) 290 (Worldwide-Tax.com, 2010) 291 (Worldwide-Tax.com, 2010) 292 (Deloitte, 2010) 293 (PricewaterhouseCoopers, 2010) 294 (Deloitte, 2010) 295 (Deloitte, 2010) 296 (Deloitte, 2010) 297 (Deloitte, 2010) 298 (Deloitte, 2010) 299 (Worldwide-Tax.com, 2010) 300 (Worldwide-Tax.com, 2010)

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301 (Foreign Affairs and International Trade Canada, 2010) 302 (PricewaterhouseCoopers, 2010) 303 (Foreign Affairs and International Trade Canada, 2010) 304 (PricewaterhouseCoopers, 2010) 305 (MOFCOM, 2007) 306 (US Department of State, 2010) 307 (Deloitte, 2010) 308 (Deloitte, 2010) 309 (Deloitte, 2010) 310 (Deloitte, 2010) 311 (Brazil Business Network, 2011) 312 (Ministry of External Relations)" - 313 (Durval de, 2008) 314 (Deloitte, 2010) 315 (Deloitte, 2010) 316 (Brazil – Ministry of External Relations, 2007) 317 (Laposte Export Solutions, 2011) 318 (Laposte Export Solutions, 2011) 319 (Laposte Export Solutions, 2011) 320 (Laposte Export Solutions, 2011) 321 (Nes, Bonded Warehouse in Brazil, 2011) 322 (Foreign Affairs and International Trade Canada, 2011) 323 (Global Trade Net, 2011) 324 (Aeromar, 2010) 325 (Aeromar, 2010) 326 (Faria, 2010) 327 (PricewaterhouseCoopers, 2010) 328 (Faria, 2010) 329 (Faria, 2010) 330 (Faria, 2010) 331 (Szymanski, 2008) 332 (Administradores.com.br, 2010) 333 (Administradores.com.br, 2010) 334 (Sao Paulo Chamber of Commerce, 2003)

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335 (CB Richard Ellis, 2010) 336 (Deloitte, 2010) 337 (Marianna, 2007) 338 (Deloitte, 2010) 339 (Deloitte, 2010) 340 (Deloitte, 2010) 341 (Deloitte, 2010) 342 (Deloitte, 2010) 343 (Marianna, 2007) 344 (Guialog, 2011) 345 (PayScale, 2011) 346 (PricewaterhouseCoopers, 2010) 347 (Global Shipping Cost, 2009) 348 (JATO) 349 (Juris Way Online Education System) 350 (Startup Overseas, 2010) 351 (Deloitte, 2010) 352 (Investor Relations Group, 2008) 353 (Angloinfo Sao Paulo, 2011) 354 (Angloinfo Sao Paulo, 2011) 355 (Worldwide-Tax.com, 2010) 356 (Senges, 2011) 357 (Property Brazil Estate, 2011) 358 (Casaeimoveis, 2011) 359 (Casaeimoveis, 2011) 360 (Casaeimoveis, 2011) 361 (Mundovestibular, 2011) 362 (Midiainteressante, 2011) 363 (BBC, 2010) 364 (Portal Brazil, 2011) (Portal Brazil, 2011) 365 (UAI, 2010) 366 (UAI, 2010)

368 (Diego, 2010)

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369 (Diego, 2010) 370 (Diego, 2010) 371 (Diego, 2010) 372 (Principal Global Indicators, 2010) 373 (Principal Global Indicators, 2010) 374 (The Heritage Foundation & Wall Street Journal, 2011) 375 Copyright Notice - http://www.heritage.org/copyright 376 (US Commercial Service Brazil, 2011)

http://www.heritage.org/copyright