Brazil business interest for Portugal

10.11.2011 By: Transfer Latin Business Consultancy based on Agentschap NL

In 2006 Brazilian aircraft manufacturer Embraer announced that it was looking for a partner in Europe for the construction of large metallic parts for aircraft, such as wings, and composite materials for tailpieces. The manufacturer chose Portugal and decided to build two plants in Évora (100 km east of Lisbon), worth € 148 million. Embraer CEO Luiz Fernando Fuchs concluded that “Portugal is the right place to develop new aircraft projects”, which fits perfectly within Embraer's globalization strategy. The industrial expansion seems to be logical because Europe represents one of the most important industrial markets. In these first industrial units in Europe wings and tailpieces will be made for exports, and other new plants are planned in China and the US. Despite of the history that Brazil and Portugal share, there seems to be a renewed mutual focus.

Remarkable is a similar Brazilian interest in the European market and especially in Portugal concerning the assets market. In attempt to reduce the budget deficit and foreign debt, Portugal started selling state-owned assets with the hope to raise € 5 billion from privatizations in coming years and to attract investors. When it started to sell stakes in electric company ‘Energias de Portugal SA’ (EDP.LB) and ‘Rede Electrica Nacional SA’, which operates the country's electric grid and gas pipeline network, Brazilian companies indeed gave an immediate reaction. Brazil's Centrais Eletricas Brasileiras SA (EBR, ELET6.BR) and Companhia Energetica de Minas Gerais (CIG, CMIG4.BR) for example placed bids on the stake in EDP.

According to Portuguese Prime Minister Pedro Passos Coelho this Latin American interest is a positive development for the country’s future, because the interference of the Brazilians on their market makes the process more competitive and dynamic. He is convinced that “Brazil can help Portugal by strengthening the strategic alliances between companies in the two countries, which can spur investment and help the Portuguese economy grow”. Also former president Luiz Inacio Lula da Silva last September urged companies in his country to consider business opportunities in Portugal. Among others he mentioned investments in flag carrier TAP Air Portugal and a naval shipyard in the northern part of Portugal.

Today both countries profit from this mutual interest and the aviation sector in particular. In order to sustain and further develop the competencies of its Portuguese plants (centres of excellence) in composite materials, Embraer continues its work with local Portuguese organizations, including potential suppliers, research centres and universities. This facility represents an estimated total investment of € 48 million, which is fully integrated with Embraer’s long-term planning and budget, and is consistent with the company’s economic and financial projections.

Last summer the Portuguese journal Expresso announced another possible cooperation agreement between Embraer and the Portuguese government on the one hand and with several business groups on the other hand. Topic is the design of a new Brazilian military / civil transport aircraft, the KC390. The prototype has to be completed in 2014-2015 and should be taken into production by 2018, the year in which the widely used Lockheed C-130 Hercules aircraft models are to be replaced. Embraer is already looking for partners in Europe and wants to receive the latest know-how in this market. Despite of the fact that some companies have already been contracted of chosen in the project, this business agreement creates opportunities for other European companies active in the aviation sector.

Moreover also neighbour Spain will invest € 3,7 billion in the period 2010-2014 in its aviation sector, according to an announcement of La Razón in June 2011. The Spanish Minister of Industry, Miquel Sebastián, confirmed this at the French aviation trade fair ‘Le Bourget’.

Although economically Southern Europe does not seem to do very well at a first glance, these countries appear to be very interesting for emerging economies oversee and certainly also for the northern part of Europe. Might you be interested in discovering the opportunities? Please contact us for more information.