Brazil – A Bigger Economy than India

Samantha Kumarasinghe

Brazil is the seventh largest economy in the world with a GDP of US$ 2.43 Trillion, well ahead of India whose GDP is US$ 1.95 Trillion, based on official exchange rate. The land mass of the country is almost three times bigger than India, with world’s greatest natural rain forest; the Amazon. (source: CIA world fact book)

A market ignored by Sri Lanka

Sri Lankan exports to Brazil stood at a mere USD 31 million in the year 2011. When questioned, why Sri Lankan businessmen do not explore this massive market, often the reply is “that it is too far, for us to travel”. It is true that it is far, but the same businessmen who think Brazil is too far travel many times an year to USA looking or begging for business despite the fact that USA is as far or even further. The other reason given is that Brazil is not a safe place to travel, which I can now say is mainly bad media publicity of the West than actual fact. However, it is common sense that we need to be careful when travelling in foreign cities be it Bangkok, Delhi, Paris, Amsterdam or New York.

Brazil had been a Portuguese colony from 1500AD till they became an independent country in 1822. Since then, it has had its hard times and from 1980 Brazil faced an uncontrollable inflation problem that made people lose confidence in their currency. According to ‘tradingeconomics.com’, in April 1990 the inflation in Brazil rose to a staggering 6,821%. However, the country battled it successfully and brought down the inflation to 1.65% by December 1998. With this success story, the present currency ‘Brazilian Reals’(BRL) was introduced. In the year 2012 inflation in Brazil was around 5% and in March 2013 it was 6.59%, as per the above source. Today, Brazil is a major economic force in the world with a population of 201 million people and a per capita income of US$ 12,000.

Motivated by my interest to travel the world and to see potential markets that do not demand a “pound of flesh” from our country in reciprocity, I took a reconnaissance visit to Brazil in March this year. Lasantha, a captain of Sri Lankan Airlines was my travel partner on this interesting tour.

I knew some Brazilian businessmen from Sao Paulo and Rio de Janeiro who had studied with me in the USA on a business management programme and they were my only contacts in the whole of Brazil, a country with 201 Million people. What I knew about them was that they were very nice and friendly guys running their own businesses in Brazil.

Sao Paulo

My first landing in Brazil was in São Paulo, which is the business capital with a population of about 20 million people. The population in Brazil is a wide cross section from Blacks to Whites, including people with the same complexion as us; Sri Lankans. We could easily mix with them if we could speak Portuguese, the national language of Brazil. The fact that they all speak Portuguese as the common language seems to be a reason for very good ethnic harmony among all communities in the country.

There are many common words in Portuguese and Sinhala that made me feel comfortable when travelling in this beautiful and friendly country.

When planning my visit to Brazil, I heard many warnings from people on the safety of tourists in the country. I was concerned of this fact but after arriving in Sao Paulo I realized that I was over cautioned about the security situation in Brazil. It was just like another busy multi ethnic city with many restaurants and bars. It was pretty safe and I would say even safer than a city like Paris in that aspect. Of course one should be careful not to walk into unsafe situations wearing flashy things such as expensive watches and jewelry.

The first thing I noticed was the friendliness of the people though most of them found it difficult to communicate in English. However, I met some people who operated small wayside boutiques who could speak English and who were kind enough to close their small shop or ask a friend close by, to look after it till they came with us to go 20-30 meters to show us a place that we were looking for. That reminded me of kind and hospitable Sri Lankan villagers in our country.

Brazil as you may know, is the world’s largest producer of Ethanol. In 2012 Brazil produced 22,700 million litres of Ethanol and used 20,000 million litres of it as fuel for motor vehicles. In the same year they have produced 2,700 million litres of Bio-Diesel.

It was a pleasing sight to see fuel stations having Ethanol, Gasoline and Bio Diesel side by side. Motorists could decide whether to use Ethanol or Gasoline based on the daily price of the two products. I noticed that the cost of Ethanol and Gasoline in Brazil was higher than in Sri Lanka, may be due to higher taxes. In Brazil, car engines are modified to use ethanol, gasoline or a mix at any time motorists need to do so.

Amazonia

After enjoying the hospitality of my Brazilian friend in Sao Paulo and its friendly people for 3 days, I took a flight to the place that I was dreaming to see for many years. As a nature lover, I had watched many TV programmes on the Amazon River and the Amazon Jungle and I was extremely excited to be there. We took a 4 hour flight to Manaus, the Amazon city famous for the “meeting of the rivers” where black Rio de Negra or River de Negro meets the white Amazon river. Amazon is the largest river in the world and 20% of the world’s fresh water flows to the sea from the Amazon. During the flood season the Amazon river mouth expands to an unbelievable 325 kilo meters, which is broader than the entire width of Sri Lanka.

The taxi driver recommended by my friend in Sao Paulo was there to receive us at the Manaus airport with his English speaking guide. With their able guidance and great planning, we were able to go in the Amazon river to see the ‘meeting of the rivers’, catch Piranhas; the deadly fish, and also see the tribal people who live on the banks of Amazon.

We also travelled North of Manaus into the Amazonia, to swim in the Rio de Negra side of the Amazon jungle. The water of Rio de Negra is black in colour due to some types of leaves that fall into this river when it flows thousands of miles, slowly through the thick Amazon rain forest. Although it is somewhat risky to jump into the unknown black waters of Rio De Negra, it was an experience of a lifetime and it is believed that this black water has great healing power. Our hotel in Manaus was on the bank of Rio de Negra and the area around known as Ponte Negra, an attraction for both the locals and tourists to enjoy the evening, relaxing by the side of the river Negro. Manaus was such a safe place that I could walk around on the streets of Ponte Negra even around midnight.

Rio de Janeiro

This is the most popular tourist attraction in Brazil where we spent the last 3 days of the tour. Rio means river in Portuguese but there was no river in Rio de Janeiro. When the Portuguese first arrived to the country they saw the narrow mouth of the natural harbour as a river and they named it Rio de Janeiro. This city is famous for the large statue of the Christ and for the rock named the “Sugarloaf”. With 3 days in Rio and enjoying boat trips and a tour over the city in the helicopter of my Brazilian friend in Rio and a swim in the famous Copacabana beach, we completed our 10 day tour to Brazil.

Brazil also has a very profitable aircraft industry, Embraer which was started in 1969 as a Government owned Corporation with Brazilian developed technology. Today it is a public company, which has an annual revenue of US$ 6 Billion, selling aircrafts to European and many other airlines. They also have a joint venture in China, manufacturing aircrafts for the Chinese market.

My next attempt will be to set up an office in Brazil to develop business with this great country. The idea of this article is to encourage other Sri Lankan businessmen to explore possibilities of doing business with Brazil. Sri Lanka is wasting too much time going behind the mirage of 1.2 billion people market in India. There are inexperienced economic pundits of our country who write pages and pages to say that Sri Lanka will perish if we do not grow with India.

India has been successful for over a decade in showing us their market of 1.2 billion people, but almost all businessmen who have tried to enter the so called Indian market have become greatly frustrated due to Indian “non tariff barriers” and other State Government regulations that prevent them getting in to the said market. India on the other hand has entered the Sri Lankan market very successfully with exports of US$ 4,500 million for India, whilst Sri Lanka is struggling around US$ 550 million including exports of Indian companies operating in Sri Lanka.

One main problem is the buying power of the people, where more than 80% of Indian population is earning less than US$ 100 per month. Products made in Sri Lanka are obviously too expensive to this large sector of the Indian market.

It is ironic that China is the leading exporter to India when India is overly worried on Sri Lanka’s improving economic relations with China for infrastructure development. China is also the main trading partner of Brazil covering over 31% of Brazil’s total import and export trade. China and Brazil have recently signed an agreement to conduct bilateral trade in their national currencies that would involve a trade volume of over USD 80 billion by 2014.

As an experienced businessman, I would suggest readers to look at the given comparison between the two countries and take their efforts to Brazil; a country that has no hidden political agenda on Sri Lanka, and also a country of friendly people with good buying power. The Government of Sri Lanka has made a positive move by facilitating the opening of an Embassy of Brazil in Colombo, and it is up to the business community to make use of this great opportunity.