Brazil in Crisis – Time to Invest?
Currently, most news about Brazil does not inspire much confidence among investors. However, there might be interesting investment prospects even in times like these. At a conference in Zurich, international experts presented their assessment of the economic situation in Brazil.
On 6 June 2016, the ZHAW School of Management and Law (SML) were joined by Switzerland Global Enterprise and Walder Wyss Attorneys at Law in a conference on a current investment case involving Brazil. The panel discussion was conducted during which speakers concluded that political uncertainty, low market prices, need of capital, and cheap currency rates present a unique opportunity for companies planning to enter Brazil. Half of the 200 million Brazilians belong to the middle class. They are well-educated and ready to spend their money on cosmetics, clothing, consumer products, and education. Furthermore, Brazilians are world champions in using social media.
New Economic-Political Priorities
After a welcome address by SML Vice Dean Daniel Seelhofer, the conference started with a keynote speech by Counselor César Paiva of the Embassy of Brazil in Berne on the latest political developments in Brazil. The new Brazilian Foreign Minister, José Serra, has set new priorities regarding the currently lacking Free Trade Agreement and other international agreements which could lead to growing trade and improved productivity in Brazil. Minister Phillippe Nell, Head of the Americas Division at the Swiss State Secretariat for Economic Affairs (SECO) discussed the strong trading, economic, and scientific partnership between the two countries as well as current developments in the area of free trade negotiations. Tatiana Campos of the Swiss Business Hub Brazil in São Paulo reported a steady flow of FDIs into Brazil. In 2015, foreign companies purchased a record number of Brazilian companies amounting to almost 400 transactions. She remarked that not all industries are equally affected by the crisis. Especially infrastructure, renewable energy, and the health sector have been enjoying steady growth. She also gave participants useful advice about important aspects of investing in Brazil and concluded by claiming that Brazil is never as bad, or as trilling, as the public may believe. Ronny Siev of the SML Center for Business in the Americas explained that anticyclical investment is an effective way to achieve larger gains. The current crisis has resulted in continuously falling asset and currency prices, and the point of maximum opportunity in the investment cycle in Brazil may be just around the corner.
A Case Study on Straumann
Venture capitalist Michael Bornhäusser recently invested in Brazilian companies active in e-commerce, second-hand mobile phones, and higher education. He sees future opportunities in sectors such as advertising and social media. Swiss attorney Stephan Neidhardt of Walder Wyss Attorneys at Law discussed different ways for Swiss companies investing in Brazil to deal with legal and fiscal implications. He was followed by fellow attorney Ronaldo Veirano from Rio de Janeiro, founder of his own law firm, Veirano Advogados. He described the positive outcome of Operation Car Wash, a criminal investigation which led to the prosecution of offenders for money-laundering, bribery, and corruption in all parts of society and which will reduce corruption in the near future. He also explained that the new interim government consists of experts that are capable of bringing Brazil back on the growth track. Hans Aebi, long time CEO of Straumann in Brazil, told participants how, in 1996, his company entered the market with the highest density of dentists in the world through a distributor, then opened a subsidiary in 2001 and concluded a major acquisition in 2015. The merged firm has managed to obtain the largest share of the Brazilian dental implant market, importing from Switzerland as well as exporting worldwide.
Family Businesses for Sale
Telmo Schoeler, a highly experienced M&A consultant and founder of Strategos in São Paulo, explained why most companies in Brazil are family-owned. The second and third generation often does not manage to grow the company further. This is why many such companies are on sale or in dire need of equity capital – a great opportunity for foreign investors willing to take over a majority stake. He gave participants some insight into the Brazilian company DNA and made valuable recommendations for possible M&As and direct investments. Peter Qvist-Sørensen, Head of the Center for Business in the Americas, elaborated on strategic action and leadership in a company during a crisis and the usage of pre-defined milestones and exit strategies. He concluded that mixing Swiss precision and ethics with Brazilian agility and creativity could be effective in benefitting both the Brazilian subsidiary and the Swiss headquarters. The panel discussion was followed by a networking reception. Some of the speakers and participants continued their discussions over bilateral dinners. This event not only provided participants with useful input but also with valuable new contacts.