Under the African sun.

Author:Ogier, Thierry
Position:INVESTMENTS: BRAZIL IN AFRICA
 
FREE EXCERPT

Brazilian firms have increased their presence in Africa. In the process, they have seen heaven and hell. Where are the opportunities for other Multilatinas?

Brazilian companies have made headway in Africa with the active support of former President Luiz Inacio Lula da Silva, who frequently visited the continent when he was in power between 2003 and 2012, and with the diplomatic support of Itamaraty, the Brazilian external affairs ministry that has opened numerous embassies south of the Sahara in recent years.

For sure, Brazil's presence in mineral-rich Africa can hardly compare with that of China, whose banks have already set up shop in the fast growing region. And the African adventure has not come without some bumps on the way, or even upsets. Vale, for instance, the world's largest iron ore producer, just decided to halt its huge investment in the West African state of Guinea only months after describing the Simandou project as one of the biggest reserves of iron ore on the planet. But there have been some incredible success stories, and Brazil has started to become relevant in business terms. Activities now range from commodities to cosmetics.

Africa will continue to provide fertile ground for Brazilian businesses in many areas. Take trade, usually a good measure of one country's involvement with another. It shot up from a mere $4.3 billion in 2002 to $27.6 billion in 2011. Africa's share of Brazilian trade is still relatively small (around 5 percent), but it has been growing. "The funding deficit is a great challenge," said Luciano Coutinho, president of the Brazilian Development Bank (Bndes). But the powerful Bndes has been flexing its export financing muscle. African loans barely amounted to $150 million five years ago, compared with $550 million last year. Loans from January to November of 2012 hit $561 million, and according to Bndes officials, the portfolio is increasing. "This is in line with the interest of Brazilian companies in the continent, especially in lusophone Africa."This is especially true for civil engineering corporations, due to reconstruction opportunities in various (post conflict) countries. "Those firms tend to use Brazilian equipment and brands, so other companies from other sectors also follow suit and achieve some notoriety in Africa, too," said Luciene Machado, foreign trade director at the Bndes in Rio.

Investments have soared. Longtime business partners in Africa like Odebrecht are familiar with such...

To continue reading

FREE SIGN UP