Brazil's non-traditional regions offer attractive business opportunities

Business America, August, 1996 by Paulo Mendes

As a result of Brazil's prospects for continued economic growth over the next few years, the U.S. Government has developed special initiatives to help U.S. companies establish stronger bilateral commercial ties with Brazil. A prime example is the U.S.-Brazil Business Development Council, or the BDC; it is a mixed private and public sector forum that is developing a program of activities to facilitate bilateral commerce and investment. One of the objectives of the BDC is to develop U.S. business links with non-traditional economic areas in Brazil. To accomplish these objectives, the Commerce Department is organizing a business development trade mission to two Brazilian states -- Parana and Rondonia. Both states present a number of commercial opportunities that greatly differ between the two states. Below is an overview of investment and/or export opportunities in each state.

State of Parana

The state is strategically located in Latin America's most industrialized region, including Sao Paulo. It provides easy access to other MERCOSUR countries -- i.e., Argentina, Paraguay and Uruguay. Combined, MERCOSUR countries have a population of more than 200 million and a GNP close to US$1 trillion. Best prospects for U.S. companies include the following sectors:

Energy /Electricity.

Approximately 25 percent of Brazil's electricity is generated in Parana, mainly through the world's largest hydroelectric power plant, Itaipu. However, due to the rapid increase in the consumer market for electrical energy, there is a growing need for private producers. It is projected that the state's installed capacity of 12,744,000 kVa will be exhausted in 1998. Approximately US$2 billion will be invested by the year 2000.

Energy /Natural Gas. South America's vast untapped gas reserves will play a critical role in the South American energy sector. Its development is a top priority in Brazil. The 3,700 Km Bolivia-Brazil Gas Pipeline includes a pipeline from Santa Cruz (Bolivia) to Campinas (Brazil), extending to Sao Paulo, Rio de Janeiro, Belo Horizonte, and Parana's capital Curitiba. These lines will eventually link Brazil to a 9,650 Km continental gas pipeline grid. Another large project relates to a 2,090 Km gas pipeline from Argentina to Brazil which is currently under consideration.

Telecommunications & High Technology. The state's telecommunication company, TELEPAR, is considered a leader in its field. Highly skilled labor coupled with R&D support from the state's universities has turned Parana into a center of state-of-the-art companies utilizing cutting-edge technology. Development in this sector involves implementation of an optical fiber network and expansion of mobile and rural telephone services.

Transportation. The current administration envisions a railroad corridor linking the Atlantic and Pacific oceans. The state of Parana is the only region in South America that offers "East-West" rail service. In order to make such an East-West rail network efficient and competitive, the state government will improve other related infrastructure areas such as ports, airports and roads. Once the East-West railroad is completed, the transportation infrastructure in Parana will provide foreign and domestic businesses access to a greater consumer market by opening up an economical and efficient gateway to the MERCOSUR countries (Argentina, Uruguay and Paraguay) and facilitate commerce with Southeast Asian countries. Construction of the railroad line in the western region of the state is a priority.

State of Rondonia

Rondonia is located in the northwestern region of Brazil between the Amazon and Bolivia. It is today what California was in the 19th century -- a land of opportunity. More recently, the state has been spotlighted by the Brazil-Bolivia Natural Gas Pipeline -- a $2 billion project. Opportunities in Rondonia are associated with its natural resources and the need for infrastructure development which will provide the basis for the region's future progress and growth. The sectors that are more promising for U.S. exports or investment are outlined below.

Mining. Historically, development in Rondonia has been associated with the exploitation of its natural resources. Currently, the state government is trying to create a rational structure to adequately explore the state's mining resources; plans include the privatization of the Companhia de Mineracao de Rondonia (Rondonia's Mining Company). Tin ore is the most important mineral -- 1993 production was approximately 14,000 tons. The Bom Futuro mine, located in the state of Rondonia, is said to be the largest in the world. The state also has substantial gold reserves.

Energy. The state and the region lack appropriate electricity supply and distribution. Porto Velho (State of Rondonia's capital) and nearby Rio Branco (State of Acre's capital) depend on electricity generated by plants powered by diesel, natural gas, and hydropower. There are plans for the construction of gas-powered thermoelectric stations to supply electricity to the states of Acre, Amazonas, and Rondonia as early as 1997. The gas supply may come from Urucu and Jurua, which are located approximately 250 miles from Porto Velho, or from Bolivia.