“The Brazilian marketplace as a whole is expanding very rapidly,” said Bill Scroggie, managing director of South America for Penske Logistics. “Brazil boasted economic growth rates of 7.5 percent in 2010. In addition, Brazil has a huge emerging middle class who now has purchasing power, increasing the demand for consumer staples such as cars, electronics and clothing. We’ve seen an increased demand from companies looking for logistics services to serve their growing businesses.”
With Brazil’s recent economic boom, Penske obtained new and additional business with a pair of global electronics and appliance corporations, and a leading multi-national office equipment manufacturer.
In September 2010, Penske opened a new distribution center in the city of Manaus to service Whirlpool, enabling Penske to tap into an important industrial-free trade zone. Penske has also launched a dedicated warehouse with another customer in Recife – the largest city in Northeastern Brazil. This hub is within 496 miles (800 km.) of eight state capitals. Manaus has seen a huge expansion of the middle class and has experienced ample economic growth created by new construction and new jobs.
“Northeast Brazil has historically been a poorer region, but the purchasing power of the emerging middle class has greatly increased the standard of living,” Scroggie said. Penske Logistics has operated in Brazil since 1998.
Penske in Brazil achieved an 11 percent growth in revenue over 2009 and increased its staff by 20 percent to accommodate the business wins.
Scroggie also attributes Brazil’s budding economy to:
- Brazil has energy independence through ethanol, bio-diesel and hydroelectric plants. Forty-six percent of Brazil’s resources are renewable, compared to the 12 percent global average. Energy company Petrobras recently discovered one of the largest offshore oil deposits off the coast of Brazil. When fully operational, this deposit will make Brazil the world’s fifth largest oil exporter.
- Financial stability and controlled inflation.
- Investments, both domestic and international, in the country through building new plants and warehouses have resulted in Brazil’s unemployment rate being at a historic low at approximately 6.2 percent.
Scroggie shares that with a host of benefits come a few challenges when conducting business, including Brazil’s:
- Complex tax and legal system – Each Brazilian state adheres to different sets of tax laws that makes shipping goods from one state to another more complicated.
- High real interest rate – The country has one of the world’s highest real interest rates with 10.75 percent. In comparison, real rates in the United States are 2.5 percent.
- Education system – Without investing in education, the country may not be able to generate a qualified workforce to meet the expanding economy.
According to economists, Brazil is expected to experience a growth rate of 4-5 percent through 2016, especially as the country prepares to host the 2014 FIFA World Cup and the 2016 Summer Olympics.
“To support these major world events, Brazil is resolving infrastructure issues by making improvements to roads, rails and airports,” Scroggie said. “The investments in infrastructure will create many high-quality jobs to further drive demand for goods and services, and, therefore, drive more logistics opportunities for Brazil.”
Need help doing business in Brazil? Penske Logistics can help. Contact us.
By Kandace Wertz
Editor’s note: Effective January 2011, Bill Scroggie will return to the United States as senior vice president of the Central region. Paulo Sarti will become the new managing director of South America.