Brazil

Face to face with technology's human side

"When we established our first Brazilian medical sales company in the 1970s, Japanese companies didn't have the international presence they enjoy today," Tetsuo Takano, president of Toshiba Medical do Brasil, said. "Less volatile markets like the U.S. and Europe were difficult to break into. Many companies like us found it easier to come to Brazil and begin development here."

But an easy entrance does not guarantee an easy ride, Takano continued, "We knew that Brazil was going to be an attractive market for us, [but] we also knew it was going to be a challenging one. This is still a difficult business environment - but we have learned to accept the trials that the market puts us through."

In the 1990s, Brazil was seized with a sense of optimism as it opened its markets and brought its inflation and foreign debt problems under control. For Toshiba Medical, these changes came at just the right time and the company was flexible enough to take full advantage of the new opportunities they brought.

"When the market was closed, local production was key. So we concentrated on creating niche markets for our Brazilian products," explained Takano. "Liberalization allowed us to take the next step and to shift our focus to other areas like sales and the manufacturing of groundbreaking products."

This period of optimism was marred by two major currency devaluations in the space of three years. But the medical equipment market survived, and in 2001 Takano and Toshiba Medical were rewarded for their perseverance with a big order from the Brazilian Ministries of Health and Education. Today, many Brazilian mothers see their babies for the first time on the screens of Toshiba Medical's ultrasound machines.

Local production is the key

Similar stories can be found in all sectors of the economy, and there is ample proof that Japanese companies are indeed succeeding. Many are now expanding their businesses and finding the means to overcome such typically Brazilian challenges as the topsy-turvy exchange rate. For example, Ebara - the Japanese pump and motor manufacturer - expects to double its Brazilian turnover in the next three years.

Norio Shintani, president of Ebara's Brazilian branch, explained, "We are investing heavily to increase our production levels and expand our Brazilian product line. Traditionally we focused on four-inch diameter water pumps in the Brazilian market. But these were imported from Italy. The pressures of high import costs and fluctuating exchange rates convinced us that a new approach is needed. We have decided to manufacture the pumps here instead."

Ebara President Norio Shintani

Shintani's ambitions for the company don't stop there. He also plans to further increase the export of products manufactured in Brazil. "In the future we hope to produce small motors and to increase our export business in the small sewage pump sector. We are also looking to expand our sales in North America. Currently we only produce explosion-proof motors for the U.S., but we are working to manufacture pumps for this market as well."

With regard to markets outside the Americas, Shintani said, "In association with our Japanese colleagues, we are studying the feasibility of sewage pump and motor production for the Asian market."

Partnerships and a concern for the environment

These Brazilian success stories refute the common assumption that Brazil is an impossible market. According to Akira Hashimoto, president of the electronic component manufacturer Alps do Brasil, success here depends on a variety of factors that need to be considered individually, "Positive contributions to the community, strong localized operations and solid cooperative relationships for the environment are important. These are conducive to success even on a global level."

"At Alps, we place great importance on having a global perspective in all facets of management. We believe in building stronger partnerships with customers, countries, and regions throughout the world," Hashimoto continued.

When Alps arrived in Brazil in 1973, as a subsidiary of Alps Electric, the Brazilian electronics industry was in dire need of component manufacturers. "The Brazilian government was desperate to attract industries in the technology sector in order to stimulate the country's electronics industry," Hashimoto said.

"But companies here did not produce the components that were needed. Alps was one of the many firms that decided to invest in Brazil during this time, and despite the challenges we have never regretted our decision," he said.

Elegance in the center of Sao Paolo

Other Japanese companies are here to stay, at least if the grandeur of the office buildings is anything to judge by. The towering edifice that houses Fuji Film's South American headquarters is proof of the firm's long-term ambitions for Brazil. The luxurious building sits in the middle of the bustling Sao Paulo city center and is also home to the Fuji House of Photography, a cultural space dedicated to photographic art.

Fuji Film takes its cultural center very seriously and the lectures, workshops, courses, and expositions held here are very well frequented. There is even a public library with the largest collection of photographic works in the country.

All this seems fitting for one of the pioneers of Japanese investment in Brazil. Created in 1958, Fuji Film do Brazil was the first Fuji Film subsidiary to be established outside Japan. Forty-three years and two manufacturing plants later, this branch of the Japanese multinational has mastered the image-acquiring process and has become the strategic supply center for the whole of Latin America.

Masami Okada, the Brazilian subsidiary's president, is adamant that there is only one way to achieve success in this market, "Unless you manufacture your products in Brazil, you will not be able to compete with local prices due to the high taxation laws on imported goods."

"This is why we chose to establish our plants here. With this local manufacturing base we are able to produce enough developing chemicals, photographic films, paper and equipment for the whole of the Brazilian market."

Fuji Film is not an isolated case. Many Japanese investors are now growing in confidence. However, they sometimes need the services of other entities with a more global perspective to assist them in channeling this enthusiasm.

Promoting Brazilan-Japanese business partnerships

The "sogo shosha" - general trading companies - have been helping Japanese and Brazilian firms to complete trade exchanges between the two countries for over half a century. Takao Omae, president of trading giant Mitsui Brasileira, believes that a local presence is vital for success. "The current trend is to concentrate on a global standard, but we feel it is equally important to accumulate local knowledge," he said. "Every country has its own business culture, so while we think in international terms, we act on a local basis."
Mitsui Brasileira President Takao Omae

"In Brazil we have very strong regional expertise in a variety of sectors as well as strong relationships with our customers and the government," he said.

The sheer scope of Mitsui's activities in Brazil is impressive. The company is involved in sectors as diverse as metals, transportation, electronics, foodstuffs, telecommunications and logistics. It has contributed much to the revitalization of aging Brazilian infrastructure; 60 percent of profits are generated in machinery related activities.

Mitsui's experience in the Brazilian market has allowed it to forge strategic alliances with some of the biggest names in Brazil. Companhia Vale Rio Doce, Petrobras and Telemar are all customers.

These alliances, however, are not only trading based. Omae explained that Mitsui has also entered into partnerships with some of its Brazilian customers, "With CVRD for example, besides our traditional iron ore trading business, we are developing joint ventures in the transportation logistics and e-business sectors. We aim to take full advantage of our core competencies by becoming a full-service trading and industrial development enterprise," he said.

And according to Omae, many opportunities have yet to be fully exploited on the Brazilian market. "I see great new possibilities for us, not only in our machinery related business but also in sectors related to mining resources such as iron ore, non-ferrous metal and petroleum," he said.

The rewards are there for those who are prepared to take the time to learn about the Brazilian market. In terms of natural resources this is one of the richest countries in the world and Brazil's 170 million consumers are becoming more and more familiar with foreign products. It is a ripe market for any smart entrepreneur.

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