LETTER FROM SÃO PAULO THE LATIN AMERICAN
POWERHOUSE H
OMEto the 2014World Cup, the 2016 Olympic Games, some of the world’s largest oil reserves and the world’s largest public offering, Brazil is experiencing an eco- nomic boom fitting for its place as the premier initial in the heralded BRIC nations.
Officially the Federative Republic of Brazil, it is the world’s fifth
largest country, both by geographical area and by population. Following a marginal drop in growth in 2009, GDP growth rebounded robustly as the eighth largest economy in the world grew 7.7pc in 2010 and is forecast to grow a further 4.5pc in 2011. The ‘B’ boasts some of the world’s largest companies such as Vale,
the biggest producer of iron ore; AB InBev, the biggest brewer; oil producer Petrobras; andMarcopolo, a big producer of bus bodies. I moved to São Paulo in 2008, following a two and a half year
stint working in leveraged finance at AIB in Frankfurt, Germany. As the credit market was feeling the wrath of the global financial crisis, and my then Brazilian girlfriend (now wife) Juliana had already relocated to São Paulo, I also decided to relocate here in search of new experiences. After moving, I started with PwC, Corporate Finance, São Paulo, which has given me exposure and first-hand experience in the fast-evolving Brazilian financial market. São Paulo exemplifies the expression ‘concrete jungle’ perfectly.
Vast and loud, it is the largest city in Brazil, the largest city in the southern hemisphere and the world's seventh largest metropolitan area. With a population of over 11 million people, it’s hard to articu- late just how chaotic São Paulo can be. One visible example is the traffic. Both a sign of a strong economy (about 1.3 million cars were added to the streets in 2010), and a lack of adequate infrastructure, the city crawls along during peak traffic times. While some people may expect the city to fall apart under the
strain of the vast numbers, the proverbial glue that holds it all together is the tenacious personality of the average local ‘Paulistano’. Whether the bus breaks down, the streets are flooded or there is a
38 UCD BUSINESS CONNECTIONS
The future for the Latin American tiger that is Brazil appears bright, says Leo Hughes (BComm 06)
power outage, the people amble along. Although those in São Paulo are renowned for their hard work
ethic, it is common to see both the casual pedestrian and a busy busi- nessman enjoying a ‘cafezinho’ after lunch, as the average lunch break often runs over an hour and a half. In the evenings, the city offers the best of national and international food and entertainment. One can be caught off guard at the cultural diversity that São
Paulo offers because it is possible to feel you are in many different countries as you travel through the different neighbourhoods. The reason is that São Paulo is home to the largest Japanese population outside of Japan. The city's Italian influence is also very strong, while large Christian, Arab and Jewish communities are also well repre- sented in all levels of society. Economically, São Paulo is fundamental to the Brazilian economy,
as the city represents 15pc of the national GDP (up to 45pc if one considers the entire state), and is home to the largest stock exchange in the world – the BM&F Bovespa. The city, originally the home to some of the most important coffee-growing families in the country, has since become a centre for commerce and financial services. Almost every major corporate and financial player is represented in the city. From an investing perspective, business risks are present: exam-
ples include a highly-valued currency that is continuing to lose inter- national competitiveness whilst weighing down the trade-weighted exchange rate and boosting consumer costs; a growing current account deficit; low comparative international savings levels; the ever-rising need to improve infrastructure; as well as low organic innovation and mediocre education levels. But there are plenty of positive macro and micro conditions to mitigate these risks, includ- ing rising incomes, lower unemployment, an Asian-driven commod- ity boom, and gigantic oil discoveries. Both on the political and social side Brazil has made some very positive progress, reducing unemployment and attempting to breach the gulf between the rich and the poor. On 1 January 2011, Dilma Rousseff from the democratic socialist PT party, became Brazil’s first female president, demonstrating the country’s evolving culture. The future for this Latin American tiger seems bright as political instability appears to be a thing of the past and the local culture has proved accommodating for foreign companies and investors. Reflecting on the most adventurous move ofmy career, I feel con-
fident that I made the right choice both professionally and personal- ly, as I meet more ‘gringos’ daily and come into contact with inter- national companies and funds seeking their share in Brazil’s boom.
Leo Hughes is consultor senior at PwC in São Paulo.
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