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 A new survey released this Monday, December 3, by the Columbia Program on International Investment (CPII) and the Brazil-based Fundação Dom Cabral (FDC) in New York reveals that Brazil's top multinational enterprises (MNEs) have made the country the second largest outward investor among developing countries in terms of foreign direct investment (FDI) outflows in 2006.
Among the survey's main findings:
- Brazil's Top 20 multinationals have US$ 56 billion assets abroad, equivalent to over half of the country's outward FDI stock.
- The Top 20 produce and sell goods and services worth approximately US$ 30 billion and employ 77,000 persons abroad.
- About half focus on their region, Latin America, where they are represented in the relative largest number of countries.
- The multinationalization of Brazilian firms has risen rapidly during the past few years, fueled primarily by natural resource firms; these firms account for about two-thirds of the foreign assets of the Top 20.
CVRD leads the MNE ranking list, which also includes many industrial groups, heavy construction companies and some high-tech groups like EMBRAER and Itautec.
- Despite the concentrated nature of outward FDI from Brazil, a growing number of firms, including many small and medium-sized enterprises, are becoming multinationals.
"This is an extraordinary performance by the leading Brazilian multinationals - and it raises real managerial challenges for them, namely how to manage this process and the international production networks that are the result, and at the same time contribute to a more sustainable world," says Emerson de Almeida, President of FDC.
Adds Karl P. Sauvant, Executive Director of the Columbia Program on International Investment, "Brazilian firms, led by CVRD, are becoming important players in the world FDI market."
Fundação Dom Cabral, a leading international executive and company development center, and the Columbia Program on International Investment, a joint undertaking of the Columbia Law School and The Earth Institute at Columbia University, collaborated on this ranking of Brazilian MNEs.
The exercise is part of a global effort to rank emerging market MNEs, with the results for Russia, China, Hong Kong (China) and South Africa to be released soon.
Top 20
The foreign assets held by Brazilian multinationals more than doubled between 2005 and 2006, signaling the take-off of Brazilian multinationals. This growth was due in part to CVRD's US$ 18 billion acquisition of Inco (Canada) in 2006.
Increasingly also, the financing of foreign expansion can draw on global pools of capital, with eight of the top ten multinationals listed on both the New York Stock Exchange and the São Paulo Stock Exchange (BOVESPA).
As a percentage of total assets, the foreign assets of the Top 20 range from 1% to 46%, with only two having more than US$ 10 billion in foreign assets. For the group as a whole, foreign assets were 20% of total assets in 2006, compared to 12% in 2005 (this increase is mostly due to CVRD's acquisition of Inco).
This compares to 33% for the 100 largest multinationals from developing countries in 2005 - indicating that Brazilian multinationals still have a considerable way to go to catch up with the average of their (especially Asian) competitors.
In line with the increase in assets, the foreign employment of the Top 20 almost doubled from 2005 to 2006. Three (led by Odebrecht) have more than 10,000 employees abroad. The average of foreign employment to total employment for the Top 20 is 19% (compared to 39% for the largest 100 MNEs from developing countries).
Some two-thirds of foreign employment is located in Latin America. All of the Top 20's CEOs are Brazilian. Five out of the 157 board members of the Top 20 are non-Brazilian (3%). Surprisingly, eight of the Top 20 say that they have Spanish and/or English as an official language, in addition to Portuguese.
The distribution by industry shows a great concentration in the natural resources sector, with two companies (CVRD and Petrobras) representing more than two-thirds of the foreign assets of the Top 20.
A second group, composed of companies manufacturing industrial products, accounts for more than 19%. Brazilian MNEs that assemble finished goods and service companies represent each around 6%, leaving less than 1% for the only company in the consumer business (Natura).
The production and hence foreign sales by foreign affiliates, at US$ 30 billion, represent about one-sixth of their total sales. Six have production and hence sales of over US$ 1 billion abroad, and one (Petrobras) over US$ 10 billion. Foreign sales rose by 14% in 2006, which was half as fast as assets.
The foreign sales and hence production of the Top 20 were the equivalent of about one-fifth of the country's exports in 2006, making FDI increasingly more important for Brazil in terms of delivering goods and services to foreign markets.
If the exports of the parent firms of the Top 20 (not including Petrobras and Natura, due to lack of data) are added to the production and sales of their foreign affiliates, the total is US$ 42 billion, for a 44% ratio of international vs. total sales. This ratio is already in line with the data reported by UNCTAD for the largest 100 MNEs from developing countries (43%).
If Brazilian multinationals were ranked according to the Transnationality Index, the list would be led by Gerdau, CVRD and Sabo. Many firms consist of course of various divisions, with each having a different degree of multinationality.
An example is Odebrecht, whose overall index is 27%; however, if its petrochemical side, Braskem, is excluded from the total and Odebrecht Construction is taken by itself, the company's Transnationality Index is 57%, the highest in the list.
The foreign affiliates of the Top 20 have a wide geographic spread. Together, the Top 20 are present in 51 countries. On average, they were present in about three host countries, led by Votorantim, Camargo Correa, Odebrecht and Weg, which each is present in 12 countries outside of Brazil.
If one calculates the number of host countries in which a Brazilian multinational is located in a given region as a percentage of all host countries in which it is located (times 100), one arrives at the Regionality Index. It shows that about half of the Top 20 have most of their activities in Latin America, with a few giving special attention to Europe and Asia. In other words, in line with firms from other outward FDI countries, most Brazilian multinationals are regional firms.
The Whole Picture
The data on the Top 20 need to be seen in the context of Brazil's total inward and outward FDI flows. For the first time since official statistics have become available, outward flows in 2006 (US$ 28 billion) were higher than inward flows (US$ 19 billion), although this is not likely to become a pattern in the near future.
Still, both types of flows are forecasted to stay at relatively high levels. This made Brazil the second most important outward investor among developing countries (after Hong Kong (China)) in terms of FDI outflows in 2006, and the top outward investor in Latin America.
A good part of these flows took the form of mergers and acquisitions (M&As), but greenfield investments were also quite important.
By the end of 2006, Brazil had accumulated an OFDI stock of US$ 108, making it the third largest outward investor among developing countries (after Hong Kong (China) and Singapore). According to Brazil's Central Bank, in 2005 most of this investment was in financial services (49%), followed by professional services (36%) and petrochemicals and energy (4%). The lion's share is located in Latin America and the Caribbean (56%), followed by Europe (36%) and North America (7%).
Brazil's outward FDI is being undertaken by 885 multinationals headquartered in Brazil, showing that, apart from the firms captured in the ranking, there are many small and medium-sized Brazilian firms that are beginning their efforts to become competitive in foreign markets.
The results of this survey will be analyzed during the international seminar "Consolidação Regional e Expansão Global das Empresas Multinacionais Latino-Americanas", São Paulo to be held at the Hotel Transamérica on December 6 and 7.
Researchers from the International Business Center (FDC) and the Columbia Program on International Investment responsible for the ranking, and executives from the ranked companies, will participate as panelists during the seminar.
In a special roundtable, they will discuss the main issues and challenges related to the internationalization strategies of Brazilian MNEs.
The Project
The FDC-CPII 2007 Ranking of Brazilian Multinational Enterprises was conducted in the framework of the Emerging Markets Global Players Project, a collaborative effort led by the Columbia Program on International Investment.
It brings together researchers on FDI from leading institutions in emerging markets to generate annual ranking lists of emerging market MNEs. The next rankings will be released for Russia by SKOLKOVO Moscow School of Management; China and Hong Kong (China) by Fudan University; and South Africa by University of Pretoria.
Given the importance of the international expansion of companies from BRIC countries, CPII, FDC, Fudan University, the Indian School of Business and SKOLKOVO Moscow School of Management will organize a series of conferences dedicated to that phenomenon. The first Five Diamond conference will take place in New York City on April 28-29, 2008.
The Involved
Fundação Dom Cabral is an international executive and company development center aligned with the most current management technologies. Receiving over 20,000 executives in its programs annually, FDC has been placed among the 20 best business schools in the world by the Financial Times executive education ranking in 2007.
The Columbia Program on International Investment (CPII), headed by Dr. Karl P. Sauvant, is a joint undertaking of the Columbia Law School and The Earth Institute at Columbia University. It seeks to be a leader on issues related to FDI in the global economy.
The CPII focuses on the analysis and teaching of the implications of FDI for public policy and international investment law. Its objectives are to analyze important topical policy-oriented issues related to FDI, develop and disseminate practical approaches and solutions, and provide students with a challenging learning environment.
Table 1.
FDC-CPII ranking of the top 20 Brazilian multinationals, in terms of foreign assets, 2006 (Millions of US$ )
Rank Name Industry
1 Companhia Vale do Rio Doce (CVRD) Mining & metals
2 Petrobras S.A. (Petroleo Brasileiro S.A.) Oil & gas
3 Gerdau S.A. Steel
4 EMBRAER - Empresa Brasileira de Aeronáutica S.A. Aviation
5 Votorantim Participações S.A. Diversified
6 Companhia Siderurgica Nacional (CSN) Steel
7 Camargo Corrêa S.A. Diversified
8 Odebrecht S.A. Construction & petrochemicals
9 Aracruz Celulose Pulp & paper
10 Weg S.A. Electro-mechanical
11 Marcopolo S.A. Transport
12 Andrade Gutierrez S.A. Diversified
13 Tigre S.A. Tubos e Conexões Construction
14 Usinas Siderúrgicas de Minas Gerais S.A.-Usiminas Steel
15 Natura Cosméticos S.A. Cosmetics
16 Itautec S.A. IT
17 America Latina Logistica S.A. Logistics
18 Ultrapar Participações S.A. Diversified
19 Sabó Indústria e Comércio de Autopeças Ltda. Automobile parts
20 Lupatech S.A. Electro-mechanical
Total foreign assets of the Top 20: 56,426
Source: FDC-CPII survey of Brazilian multinationals.
Half of the Top 20 are headquartered in Sao Paulo state. They are all privately held firms, except for Petrobras. CVRD and Petrobras, the top two (and both natural resource companies), together accounted for over two-thirds of the foreign assets of the Top 20; if the third ranking firm, Gerdau, is added, more than three-quarters of all the foreign assets of the Top 20 are accounted for.
Service
For more information see www.cpii.columbia.edu
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Brazil received a huge boost in its international image with its selection as the host of the 2016 Olympics, but it was really just the cherry on top of the overall recognition of the country's ascension to the ranks of one of the world's most important countries. Now, as it finally takes its place on the world scene, there has been a great deal of concern about what kind of image Brazil hopes to project, now that the world is really paying attention. 
The only good thing to say about the visit to Brazil of Iran's president, Mahmoud Ahmadinejad, on Monday November 23, is that it was mercifully short and lasted less than 24 hours. Ahmadinejad had his picture taken being hugged by president Luiz Inácio Lula da Silva who gave him a warm welcome and said Iran had every right to develop nuclear energy for peaceful purposes. 
The small, coastal town of Condé is located just a twenty minute's drive from João Pessoa, the capital of Paraíba. The Northeast of Brazil has historically been a place of encounter and mixing between peoples. For millenia groups of indigenous people fished, farmed, migrated and sometimes fought along this large, fertile area. 
The Brazilian diplo-MÁ-cia (bad diplomacy) carries on its accelerated course towards the non-acknowledgment of human rights, although sometimes it takes pleasure in saying that it does precisely the opposite. The visit of Iran's president, Mahmoud Ahmadinejad, is another example of a diplomatic omission that verges on hypocrisy. 
On July 4, 2006, representatives of Argentina, Brazil, Paraguay and Uruguay met in Caracas to sign the protocol for the entrance of Venezuela into the Southern Common Market (Mercosur). After two and a half years, the protocol was approved by the legislative bodies of Argentina and Uruguay, and as of now it may be only days away from being ratified by the continent's economic megalith, Brazil. 
Some sectors of the fight against AIDS have suggested that Thabo Mbeki, the former president of South Africa, committed genocide through his absence from the fight against the illness in his country throughout his two terms. 
One hundred and eleven years after Brazil abolished slavery, the number of workers deprived of their freedom is still huge. They raise cattle, produce charcoal, sugar cane or timber. Some of them, most undocumented Bolivians, work in basements of small apparel factories in São Paulo and other metropolis. 
On November 7, 2009 a few friends and I had an opportunity to take a look inside a Brazilian jail outside the city of Rio de Janeiro. We were able to take some amateur footage of our experience on video (see link below). It's no surprise, of course, that the typical Brazilian jail lacks some of the functionality of those in North America or Europe, but our experience that day was quite shocking. 
Depletion of the Amazon Rainforest is not a new concern facing environmentalists, biologists, ecologists, and a growing number of the Amazonian indigenous peoples. For decades they have feared for the fate of the world's most biologically diverse and species-rich hothouse. 
Geisy Arruda made history this week in Brazil, but for all the wrong reasons. What began as a poorly planned fashion statement has become a worldwide tale. Geisy decided to wear a pink mini-dress to her private college in São Paulo state, and after that, all hell broke loose.
To put things in perspective, the "small" FIRMS of my little country, at the end of 2005, had US$ 510 billion of foreign assets, generating
US$ 45 billion of....YEARLY PROFITS (not sales).......and 2'000'000 (yesssss 2 millions) of direct jobs in the countries the investments were made.
Source : 2005 annual report of the Swiss Central Bank.
Long long way to go, and many many more decades not years, before you even come close. And many generations away before you even come close if based on a per capita basis.
Enjoy !!!!!