Feeds:
Posts
Comments

JBSJBS spreads its wings
By Cluck, moo, oink, ka-ching – The Economist

UNLESS you work with quadrupeds, it may have escaped your notice that a Brazilian company, JBS, is about to become the world’s largest
processor of meat. Its recent acquisition of Pilgrim’s Pride, a big
chicken processor in America and Mexico, and a pending merger with
Bertin, another Brazilian firm, will soon give it bigger sales than
Tyson Foods, the American firm that currently claims the top spot.
Other Brazilian names–Vale in mining, Embraer in aviation, Petrobras
in oil–may be more famous. But JBS is now the second-largest
private-sector company in Brazil by sales, after Vale. And a large
majority of its sales come from outside the country.

This is a stunning transformation for a business that began life in
Goias state 56 years ago with a slaughterhouse that could butcher just
five cattle a day. Its founder, Jose Batista Sobrinho, used to carry
sides of beef on his back to market, according to a friend. The
expanded firm will slaughter more than 140,000 animals a day and employ 129,000 people. Mr Batista’s three sons still control and run the
company, although 49% of it is publicly traded.

The mixture of family control and rapid expansion is unusual in
Brazilian agriculture. Many cattle-ranchers operate in the informal
economy and lots of slaughterhouses do not pay taxes, making the
industry difficult to consolidate. As in other parts of the world,
family-run agricultural firms in Brazil tend to focus on keeping things
intact for the next generation rather than betting the farm.

JBS has behaved differently, bringing in professional management and
expanding through ambitious acquisitions from an early stage. Some say
the company has been too aggressive. It was fined 15m reais ($8.4m) in 2007 for anti-competitive behaviour by Brazil’s antitrust regulator,
although it recently improved its image by agreeing to forgo buying
cows raised on deforested land.

GADOAn international shopping spree has brought the company big operations in Argentina, Italy, Mexico, America and Australia. But none of the company’s previous buys compares in size to its purchase in 2007 of Swift, the third-biggest processor of beef and pork in America and the biggest processor of beef in Australia. With it came a lesson in the politicking that can hamper big foreign acquisitions.

The Ranchers-Cattlemen Action Legal Fund lobbied against JBS before the antitrust committee of America’s Senate, warning of price-gouging of farmers and anti-competitive behaviour, and got a sympathetic hearing. But in the end American regulators approved JBS’s purchase of Swift, just as they approved the Pilgrim’s Pride transaction in mid-October.

Part of the resistance to JBS in America has come from the
distinctively Brazilian way in which the firm is financed. Brazil’s
national development bank, BNDES, has a mandate to promote the
international expansion of Brazilian companies, among other things. It
is funded by a compulsory levy paid by companies and public-sector
bodies on each worker they employ. BNDES bought 13% of JBS’s stock in 2007 as part of a capital-raising that allowed it to buy Swift. It also
provides long-term loans to the company. One way around the
public-relations problem this creates is to buy struggling companies
like Pilgrim’s Pride, which JBS is rescuing from bankruptcy.

A far bigger problem for JBS is how to integrate all its new operations
into a coherent beast. This will be a big test for the Batista brothers
and for Brazil’s tropical brand of capitalism, which mixes family
control with traded stock, and finance from state-run banks with
foreign acquisitions. Brazilian companies in other industries are
watching how JBS gets on and plotting similar moves themselves.

Vale is a Brazilian pioneering mining company that is present all over the world. The result of its work can be found in most things from cars to mobile phones, household appliances, computers and construction components.

Vale has caught my attention because it has created the Vale Foundation, an institution that develops social programs to contribute to strengthen regional populations while respecting local cultural identities.

The Vale Foundation, together with other non-governmental organizations, local governments and private companies search for ways to improve the quality of life of the communities wherever they are present. “Rede que Vale” (Vale Network – promotes the development of small business enterprise, through management training and access to loans and capital) is one of these programs and you can check it by clicking here.

By John Fitzpatrick

Sky-high interest rates are as much a feature of Brazilian life as samba, football and television soap operas and the media constantly reminds us that they are the highest in the world. Well this particular soap opera may be coming to an end with the Central Bank decision on March 11 to slash the base rate by 1.5% to 11.25%. This sudden change would never have occurred had it not been for the international financial crisis. Of course, the rate is still meteoric by international standards and does not reflect the real rate charged by banks but the signs point to further cuts and some analysts are predicting interest rates of less than 10% by the second half of this year. While some economists and sectors have hailed the move, others have been critical and say it was still not enough to prevent Brazil entering a recession this year. To mark the prospect of single-digit rates, which I must confess I had almost never expected to see, Brazil Political and Business Comment and Gringoes.com present the views of a number of economists and business and political leaders.

“The risk still exists of the currency depreciation being passed on in prices which would lead the Central Bank to put its foot on the brake. We are facing a crisis of confidence in which the banks and consumers are becoming more conservative in granting credit regardless of the level of interest rates.”
Mailson da Nobrega, former finance minister and partner of Tendências Consultoria Integrada

“It is reasonable to expect a new cut but the Copom does not want to commit itself to any size. It will need to assess the effects of what it has been doing. What could affect the interruption of the downward trend would be higher inflation. Inflation is expected to come to between 0.34% and 0.35% this month but if it were to reach 0.5% this could be alarming although it is unlikely. At the same time, the Central Bank could show some concern over the recovery in industrial production although this is also unlikely. The rise of the dollar could also have an influence if it reaches R$2.60 in the short term. This would lead to a pass-on effect on prices but the chances of an increase happening now are very small.”
Alexandre Schwartsmann, former Central Bank director and chief economist of Banco Santander

“Interest rates of 11.25 p.a. are still extremely high. Brazil needs a Selic rate of 8% at the maximum. As long as it does not fall to this level we will remain on the wrong path. Industry will start performing much better on the day interest rates reach 7% to 8%. The Central Bank should be acting to achieve this.”
Paulo Skaf, chairman of the Federation of Industries of São Paulo State (FIESP)

“This fall will benefit the consumer who will have a greater volume of credit at lower interest rates as the financial institutions have already announced lower rates. Companies will also gain as they will have a greater supply of credit for investment. Even the government will gain as it will pay less interest on the public debt and have resources available for investment. If the rate falls to a single-digit level in the second half of the year this will be extremely promising for the consumer and the Brazilian credit market as it will boost growth and encourage individuals who are ready to buy and lend although at a lower level,”
Adalberto Savioli, chairman of the National Association of Credit, Financing and Investment Association.

“The next Copom decisions will depend on how the inflation and activity figures perform but these should not prevent new adjustments in the Selic rate. We do not believe the cycle of interest rates cuts will end with today’s announcement. It is extremely likely that the Selic rate will reach a single-digit level by the middle of this year and be maintained to the end of 2009. In principle, we expect the total adjustment will take the rate to 9.75% at the end of the process although we also consider that it may even slightly lower.”
Silvio Campos Neto, chief economist, Banco Schahin

“The Central Bank was braver than usual but its approach will not be enough to rescue the economy from sudden death. I have been critical of the Central Bank for its timidity in reducing the Selic rate in 2006 and 2007 but I can see that since the crisis exploded it has acted in an austere, serious way faced with the danger of the higher dollar being passed on in prices.”
Paulo Rabello de Castro, chairman, RC Consultores

“I think the cut in the Selic rate should have been greater but the fact that the decision was unanimous shows that the members of the Copom are now much closer to reality.”
Marcelo Ribeiro, strategist, Pentágono Asset Management

“This acceleration of the cut in interest rates is still not fast enough for the current moment. The Central Bank is still showing that it is not following the right course to prevent a recession.”
Armando Monteiro Neto, chairman of the National Confederation of Industry and member of the House of Representatives

“The unfeeling technocrats of the Copom have lost a great opportunity to loosen the rope strangling the productive sector which creates employment and income. Unfortunately, once again the government is leaning towards the speculators.”
Paulo Pereira da Silva, chairman of the Força Sindical labor union federation

“The Central Bank took an attitude which was compatible with the sharp downward movement in economic activity we have seen in recent months. At the same time, market expectations for inflation continue to decline and there is still a chance of gasoline prices being cut which would bring an added relief to the indices. A bigger cut of 2% would have come as a surprise and been better received by the market but it might have brought undesirable effects on the interest rate futures curve.”
Rubens Sardenberg, chief economist, the Brazilian Bankers Association

“In principle, we expect the Copom to cut the Selic rate by 150 basis points in April and make a further cut of 100 basis points in July which would take the level to 8.75%. However, we do not rule out the need for new cuts depending on how the external crisis develops and the Brazilian economy performs in the coming months.”
Maristella Ansanelli, chief economist, Banco Fibra

Note: these comments are edited translations from the economists themselves and the following newspapers: Estado de S. Paulo, Folha de S. Paulo, Valor Economico and Gazeta Mercantil.

John Fitzpatrick 2009

John Fitzpatrick is a Scottish writer and consultant with long experience of Brazil. He is based in São Paulo and runs his own company Celtic Comunicaçõess. This article originally appeared on his site http://www.brazilpoliticalcomment.com.br. He can be contacted at jf@celt.com.br.

butchery Inae Riveras
CHICAGO (Reuters) – At the tender age of 18, when other teenagers dream about
getting a car, Wesley Batista was handed a meat-packing plant to manage. Some 20 years later, the 38-year-old Brazilian runs the U.S. operations of the world’s largest beef producer, Brazil’s JBS  beef group. Like his brother, Joesley, the chief executive officer of JBS, the meat business was in Wesley’s blood.
Both dropped out of college and learned their trade early, following in the footsteps
of their father, Jose Batista Sobrinho, who grew the empire from a butcher shop.
The family-controlled company, based in Brazil’s financial capital Sao Paulo, surprised analysts last year by announcing plans for some major international acquisitions.
The deals included National Beef Packing Co LLC and the beef unit of Smithfield Foods Inc, both in the United States, and the Australian-based Tasman Group.
JBS announced last week it was abandoning plans to buy National Beef, the No. 4
U.S. beef producer, after the Justice Department said some of its plants would have
to be sold. That acquisition would have made it the No. 1 U.S. beef processor, a
jump from its current rank of No. 3.
The company, largely unknown outside of Brazil until a few years ago, originated in
the early 1950s when the elder Batista started buying cows in Goias state in central
Brazil and selling them to meat-packers.
In 1957, he saw an opportunity with the planned construction of Brazil’s new capital
of Brasilia and set up one of the first regional slaughterhouses, with an initial
capacity of just 25 to 30 animals a day.
Starting in the 1980s, JBS aggressively acquired rivals and set up a national chain of plants that reduced sanitary risks and cut reliance on local suppliers, said Jose Vicente Ferraz, technical director at AgraFNP consultancy in Sao Paulo.

brazil_getty_136521s1Times are tough, so is it worth emigrating? Kate Hughes looks at possible exit strategies

Brazil has an immature and developing market and isn’t exposed to the kind of debts that developed Western countries have suffered from.
The interest on your savings is minuscule, your pension pot has been hammered, and the value of your house is plunging. You might be made redundant – and, to cap it all, we’ve had the coldest winter in 30 years. In short, life in Britain isn’t looking great. This may be a worldwide wipeout, too, but there could be a few safer, if not entirely safe, havens to run to with what’s left of your wealth.
“Very few places have not been affected by the downturn,” says Oliver Watson, regional managing director of international recruitment consultant Michael Page. “But if you are looking for an overseas opportunity, look for a sound gross domestic product [GDP, a country’s input and output] and an economy linked to natural resources. Brazil won’t see stellar growth over the next year, but it should be steady. It has an immature and developing market and isn’t exposed to the kind of debts that developed Western countries have suffered from.”
So far, Brazil has weathered the downturn better than most, but low demand for its exportable products means that the South American country will not escape unscathed. The most up-to-date GDP figures show continued strong growth, but they only go to the end of September last year, and business confidence in Brazil is at a six-year low. Brazil’s economy is taking a hit, but the downturn here may be less severe.

From Reuters (Tais Fuoco)

* Q4 net income jumps to 215.5 mln reais vs 26.2 mln

* 2008 profit 389.7 million reais vs loss 99.8 mln

* Sees Brazil’s wireless market continuing to expand

* Seen “a small growth” in January

Brazil’s largest mobile phone company Vivo Participacoes (VIVO4.SA)(VIV.N) said on Friday its fourth-quarter profit surged nearly ten-fold because of a sharp increase in new users and as it kept costs in check.

The company’s chief executive Roberto Lima said the profit surge in the fourth quarter was due to changes in its subscriber and pre-paid telephony offers and “very rigorous” cost controls, as it renegotiated contracts with suppliers.

Vivo, a joint venture of Portugal Telecom (PTC.LS) and Spain’s Telefonica (TEF.MC), said net income rose to 215.5 million reais ($94.1 million) from 26.2 million reais in the fourth-quarter of 2007.

For all of 2008, Vivo made a profit of 389.7 million reais, the best year since the company was formed in 2003, compared with losses of 99.8 million reais in 2007.

“Vivo had a few illnesses in its infancy but today it’s growth is healthy,” Lima said in an interview with Reuters.

Vivo added 2.668 million new mobile phone users in the fourth-quarter, bringing its total user base at the end of 2008 to 44.95 million people.

The jump in new wireless clients helped boost sales by 14 percent to 4.27 billion reais in the fourth quarter, Vivo said. Sales for all of 2008 totalled 15.8 billion reais.

Lima said the company’s growth could slow in 2009 but he believed Brazil’s wireless market would continue to expand.

“This is a sector that has been growing in the double digits since its creation. Even if it grows 10 percent, it’s still a fantastic rate,” he said, pointing out that any growth achieved was on the basis of an already large customer base.

He said the company had seen “a small growth” in January this year over the first month of 2008.

Earnings before interest, taxes, depreciation and amortization (EBITDA) rose 43 percent to 1.39 billion reais from 978.9 million in the final quarter of 2007.

EBITDA as a percentage of sales, a measure of profitability widely followed by analysts, jumped 6.6 percentage points to 32.7 percent in the fourth-quarter.

Spring Wireless has just established its U.S. headquarters in Seattle. The company is one of the fastest growing ventures in the mobile enterprise space and was originally founded in Sao Paulo, Brazil in 2001. It has operations across the Americas, Europe and Asia.

Brazilian investment in the USA

Brazilian investment in the USA

“We see great potential in the U.S. market, which has traditionally lagged behind Europe and Latin America in mobility. Spring Wireless has been at the forefront of the mobile explosion in markets outside of the U.S. and we’re excited to support our global customers operations in the U.S.,” said Marcelo Condé, Chief Executive Officer of Spring Wireless. “With more than 220 customers worldwide, we understand the needs of global companies. Our move into North America will help us better serve our U.S. customers and help us extend into new markets as we continue to expand our business globally.”

In August 2008, Goldman Sachs, New Enterprise Associates (NEA) and Brazilian investment firm, Ideiasnet, invested $66 million in Spring Wireless to fuel its worldwide expansion and help fund future acquisitions. In connection with the financing, Spring Wireless’ Board of Directors has grown to include Raheel Zia, vice president of Goldman Sachs Principal Investment Area, and Patrick Kerins, general partner at NEA.

In addition to its new Board members, Spring Wireless has also named a U.S. management team including Shakil Haroon, who will serve as Spring Wireless USA general manager. Prior to joining Spring Wireless, Haroon spent 10 years at software startups and more than 10 years in sales and management at Intel and Microsoft.

Additionally, Liron Shaked will serve as vice president of business development and corporate marketing and Kelly Malone will serve as vice president of sales for Spring Wireless USA. With more than 12 years of international experience in both corporate and startup environments, Shaked will oversee strategic alliances, global partnerships, channel development and global marketing initiatives for Spring Wireless. Malone, who prior to joining Spring Wireless led the Microsoft sales team responsible for supporting the development, marketing and sales of Motorola smart phones, rugged hand-held computers and set-top-boxes worldwide, will head up U.S. sales.

Spring Wireless has been called the largest and fastest growing company in the mobile enterprise space and was recently identified as a leader in the Gartner Magic Quadrant on Mobile Enterprise Application Platforms. Spring Wireless helps connect businesses, its employees and customers to the information they need, when they need it. The company offers a robust platform, prebuilt applications and critical services, enabling greater interoperability for customers than any of its competitors. It works with more than 180 devices, multiple operating systems and an array of common business applications.

As the single point of contact for its clients, Spring Wireless deploys and manages the devices, software and services companies require to go mobile, removing the need for global companies to seek out multiple vendors in different geographical areas. The company provides a complete solution with faster deployment times and lower total cost of ownership than traditional mobile providers, reducing deployment times by up to 50 percent and total cost of ownership by up to 35 percent in some cases.