Brazilian Companies in Africa

In a sign of changing economic times Portuguese graduates are flocking to the booming economies of Angola and Mozambique to find work, very often ending up working for the increasing number of Brazilian firms which have expanded into Portuguese speaking Africa.  Portugal has until recently been a sought after destination for ambitious Angolan and Mozambican workers, but the recession in Europe and boom in Africa has reversed roles, so skilled Portuguese have headed to the former colonies, for many years looked down on as poor cousins, but now enjoying a resource boom.  While Chinese demand has been the driver behind much of this demand, Brazilian firms have also been taking an increasingly influential role in Africa.

The expanding Brazilian economy has led its companies into investing abroad and much of this capital is naturally going to Lusophone countries, where language and cultural ties make business much easier to do.  Brazilian companies have been particularly active in the infrastructure, oil and natural resource sector, the state oil company Petrobas is a significant player in the Angolan oil sector. Brazilian mining behemoth Vale has invested heavily in the Mozambican mining sector, including the biggest single investment, 1.7 Billion in the country in the Tete coal mine, topped off with the purchase of Metorex, a South African mining company.

Brazil’s status as an agri-business giant means that it is ideally placed to invest in Africa’s agriculture sector, one which has massive untapped potential, for example Brazil which has the world’s second largest ethanol industry has invested in a 2700 hectare farm and associated processing factory in Northern Ghana which aims to kickstart the biofuels industry and allow the country to develop a new fuel source and export crop.

In August 2011, a 5Y- KYR aircraft landed at Jomo Kenyatta airport marking a latest expansion of Brazilian jet maker Embraer, which has found a new market supplying the African market. In this case Kenyan Airways, which is expected to see rapid growth over the coming years as demand for air travel grows in a huge continent blighted by poor infrastructure. The company has had considerable success in selling its medium sized jets to the growing African aviation market providing serious competition to the giants Boeing and Airbus. Embraer President Frederico Curado is counting on the full implementation of the Yamoussoukro Decision  which would give carriers full access to multiple destinations, rather than the current semi-protectionist state of affairs, where some countries have continued their protectionist instincts while others have liberalised.

Brazil – Africa relations have been driven over the last decade by the energy of now ex-President Lula of Brazil who was a frequent visitor to the continent over his period in office. Lula used his personality and influence to charm African leaders, emphasising Brazil’s historic debt to the continent and the importance of South-South relations.  Trade boomed between the two increasing six fold from 2000 and is now worth around $25 billion in 2010. Direct investment has remained much smaller and nearly all focused in Angola, which is in sharp contrast to the broader based Chinese investment across the continent, although it is still heavily weighted to oil producing countries. Brazil has a national development bank BNDES, which supports Brazilian companies in Africa, and Banco do Brazil Banco do Brasil has announced plans to expand into the continent. However, for now it is difficult to see Brazil challenging China’s position as the continent’s main commercial partner, given China’s economic might and level of government engagement in the continent.



Categories: BRICS, China - Latin America, Company Case Studies, Kula Ring Trade Blog

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