Tuesday, September 29, 2009

Production Lines and Factories Moving to Brazil

Brazilian newspaper O Estado de Sao Paulo reports that the current economic crisis has sparked a global trend towards relocating production lines or even entire factories from abroad to Brazil. The Brazilian Ministry of Development, Industry and Foreign Trade said yesterday that about 50 companies have requested government permission to bring their machines to the country.

Applications for imports were made by various sectors such as food, textile, chemical, furniture and mining. The origin of the production lines varies: United States, Canada, France, Portugal, Germany, United Kingdom.

Many of the requests came from manufacturers of auto parts, a sector in which the performance of the Brazilian market is much better than the rest of the world.

With the drop in demand in the U.S. and Europe, multinational companies were left with excess capacity there. The crisis also led to the failure of companies, creating opportunities for Brazilian companies to buy machines used abroad for a fraction of the price of new.

"It is better to produce here and export to the U.S.. And with the crisis, part of the production that went to American customers is now in Brazil," said the vice president of industrial Coteminas, Pedro Bastos. Among the advantages of bringing the production to Brazil are the quality of cotton, the lower cost of labor, and proximity to the controlling group. He says the crisis has made the transfers more complicated, because it meant loss of jobs for Americans.

The list of companies that are betting on Brazil included multinationals like Nestle and Motorola. According to the vice president, mobility, Eduardo Stefano, tax incentives and high import costs were the reasons to produce locally. He also said that Brazil is lacking in broadband technology. A

Nestlé brought from Mexico a complete line for manufacturing and bottling of mineral water.

The "import" of machinery and factories is controversial. The investment is always welcome, because it increases production and create jobs. But by allowing the entry of used machines, the government may discourage internal capital investments. The transfer of production lines has led to complaints by manufacturers of machinery. "We run the risk of scrapping the Brazilian industry. The sector of capital goods is not out of the crisis," said Nelson Deduque, director of the foreign market of the Brazilian Machinery Manufacturers Association (Abimaq).

The companies argue that import a production line used can reduce up to 80% the cost of investment. This allows companies to medium and small size also increase production.

"The potential of the Brazilian market is large, but to be competitive you have to run here. Moreover, the impact of the crisis was most violent in Europe," said the owner of the Portuguese furniture maker Iduna.

Stumble Upon Toolbar

No comments:

Financial TV

Blog Archive

// adding Google analytics