ECONOMY: Portuguese Firms Have Growing Presence in Brazil

By Mario de Queiroz Reprint | | Print |

Mario de Queiroz

LISBON, Apr 17 2003 (IPS) - Brazil has ”invaded” Portugal with its soap operas for over a quarter century, and with more than 60,000 immigrants, whose presence is strongly felt in the day-to-day life of the Portuguese, who often hear, for example, a Brazilian accent among employees of shops and restaurants.

But Portugal has launched a sort of ”counter-attack”, becoming the third largest foreign investor in Brazil, after the United States and Spain, since 1999.

When he became prime minister in 1995, the then-secretary general of the Socialist Party, Antonio Guterres, recognised that Brazil was Portugal’s top foreign priority, not only due to the strong historical ties between the two countries and to a shared language and culture, but also in the field of investment.

That view still holds true for Portuguese firms, and for the man who succeeded Guterres in 2002, conservative Prime Minister José Manuel Durao Barroso.

There is a consensus among politicians, economists and business leaders in this country on Brazil’s importance to enabling Portugal to expand its economic ties to other parts of Latin America.

A total of 1.3 million Portuguese were living in Brazil in 1995, a significant number in relation to the Portuguese population of 10 million, but not with respect to Brazil’s population of 170 million.

After Guterres’ triumph, direct Portuguese investment in Brazil, which was the biggest territory in the once vast empire ruled from Lisbon, grew by leaps and bounds, with both countries offering incentives.

Some 250 large, medium and small companies had set up shop in Latin America’s giant by 1999 – a number that has grown to nearly 400 today.

According to Portugal’s office on international economic relations, nearly 30 billion dollars were invested by Portuguese firms in Brazil in 1999 and 2000, the years when the flow of investment peaked.

The biggest investors in Brazil were large companies like Portugal Telecom, Electricidade de Portugal, Cimentos de Portugal, Brisa Auto Estradas (freeways) de Portugal, Sociedade Nacional de Estratificados (SONAE), Cerveja Cintra and Aguas de Portugal.

For Brazilians, the stereotypes of the Portuguese as owners of bakeries and restaurants, taxi drivers or hotel receptionists began to shift.

Portugal Telecom controls half of all cell-phones in Brazil, in association with Telefónica de España, and hold shares in firms like Banco-Net, PT-Innovaçao Brasil and the web portal UOL/Zip. The telecommunications giant has invested a total of 6.2 billion dollars in Brazil, more than any other Portuguese company.

It is followed by Electricidade de Portugal, which has invested 2.1 billion dollars in Brazil since it first got involved in that market in 1997. Its main activities are carried out in association with Chile’s Chilectra in Sao Paulo, Brazil’s largest city.

It also distributes electricity through companies in which it holds a controlling share, like Bandeirante, CERJ, Escelsa, Enersul, EDP-Lageado, Fafen Energia, Enerpeixe, Enercouto, Emperendimento Hidroeléctrico de Couto e Magalhaes, Enertrade and Energest.

Cimentos de Portugal has invested 1.04 billion dollars since 1997, and holds controlling shares in Cimpor-Brasil, Companhia de Cimentos do Brasil, Cimentos Atol and Companhia Paraiba de Cimentos Portlano.

SONAE’s presence in Brazil is seen in the Real and El Dorado supermarket chains, and in the Penha, França, Metropole, Patio Brasil, Tivoli Shopping, Parque Dom Pedro, Boavista Shopping and Tafisa Brasil shopping centres, in which the business group, owned by tycoon Belmiro de Azevedo, has invested a total of 974 million dollars.

The Cerveja Cintra group invested 208 million dollars in the Cervejarias Cintra breweries, Restaurantes Romanic and the Terra Ouro real estate firm, while Brisa Auto Estradas de Portugal has invested 135 million dollars in the Companhia de Concessoes Redoviarias.

At a more modest, but still significant, level is the 43 million dollar investment by Aguas de Portugal, which holds controlling stakes in Aguas do Brasil, Empresa Brasileira das Aguas Livres and Serviços Públicos de Agua e Esgotos.

The strong Portuguese presence in Brazil is especially noteworthy given the disparity in the size of the two countries’ populations and the fact that Portugal is the least developed country in the European Union (EU) and has a territory nearly 100 times smaller than Brazil’s 8.8 million square kms.

Since 2001, the amount of capital invested in Brazil has declined, although the number of Portuguese companies doing business there has expanded to nearly 400.

The downturn in the sheer amount of capital invested is due to the fact that ”most Brazilian companies have already been privatised,” Professor Francisco Chaves, an economist with the Observatory of Portuguese Companies in Brazil, pointed out to IPS.

But ”business there is not going badly at all,” and Portugal’s large companies ”drew small and medium firms along with them, which otherwise would not have been able to gain a foothold in Brazil,” such as tourism and construction businesses, tanneries, and firms in the services and equipment sales sectors, he noted.

”The 400 national companies active in that market currently represent 15 percent of Portugal’s Gross Domestic Product, and offer 50,000 jobs,” said Chaves.

In 2002, investment flows once again failed to rally to the 1999-2000 levels, as the business decisions by Portuguese firms were affected by the uncertainty as to what the administration of Brazil’s new president, Luiz Inácio ”Lula” da Silva of the leftist Workers’ Party, would look like.

But investors’ jitters were calmed by positive statements about Lula expressed by former Portuguese president Mario Soares (1986- 1996) and others, and the fruits of the restored investor confidence have been seen this year.

Antonio Sousa Cintra, the head of Cerveja Cintra, said last week that ”Lula has surprised the business community in a positive sense,” and investors are no longer worried about him, but about the likely future depreciation of the real, Brazil’s local currency.

That attitude is shared by de Azevedo, who said he has seen ”positive signals in the first few months of 2003” for his business endeavours in Brazil, ”as expressed in macroeconomic indicators and a greater sense of optimism on the part of the Brazilian populace.”