Cashing in on an energy boom - KOSO Kent Introl
Valve manufacturers KOSO Kent Introl (KKI) have a decade of exporting its products to Brazil’s growing oil and gas industry. The firm has recently signed a five-year agency agreement with RTS Valvulas of São Paulo. The business is currently appointing its own Brazilian Area Business Manager and is registering its own company in Brazil.
After selling indirectly into the Brazilian market for ten years, the firm began its own direct sales around two and a half years ago, hoping to capitalise on the country’s rapidly growing offshore oil and gas industry.
“One major factor in Brazil now is the demand for local content in certain projects,” explains Mark Harris, the company’s area business manager for Brazil. “A supplier now has to achieve up to 75 per cent local manufacture using local labour and we have to address that as a factor in doing business in Brazil. We’re hoping to ramp up local content, and utilize the Brazilian supply chain.”
Mr Harris, who has visited the country more than a dozen times over the past two years, believes it is imperative for exporters to have a presence on the ground to operate successfully. And he stresses the importance of spending time, effort and money to secure a foothold in the country.
“You have to be in it to win it. Any UK company wishing to go over there has to commit itself not only financially but also for the long term. But it’s a very exciting and dynamic market.”
He also stresses that for the oil and gas sector in particular, the demands on UK companies are extremely high in terms of product approvals and qualifications. High levels of bureaucracy can also be involved.
“Companies going in fresh to this sector can expect to invest long-term effort and money understanding the market and what they need for accreditation,” he adds. “They have to build strong relationships before they can consider winning business over there.”
However, Brazil’s currency, the real, has faced mixed fortunes. In 2011 it fell 11 per cent against the US dollar, contrasting sharply with the 5 per cent and 34 per cent gains it saw in 2010 and 2009. The real is now worth more than twice what it was a decade ago.
Its size alone makes it a force to be reckoned with. With a population of around 190 million people, Brazil is frequently described as a continent within a continent. You can fit the whole of Western Europe into Brazil and still have room to spare. Indeed, the state of São Paulo alone is about the same size as the UK.
These days Brazil has a wide-ranging and increasingly sophisticated industrial base along with growing numbers of consumers with significant purchasing power. The good news for British firms is that if you’ve got a product or service which is attractive elsewhere in world markets, then the chances are it will also sell well in Brazil.
Shoppers and businesses have both acquired a taste for high quality goods and value for money. Brazil has achieved high standards in scientific research and has substantial human capital.
Brazil’s economy has been steadily opening up since the 1990s with a rolling programme of de-regulation and privatisation, presenting a growing range of opportunities. It is now outpacing those of the US and Western Europe and has managed to escape from a traditional cycle of boom and bust weighed down by foreign debt and hyper-inflation.
Brazil has a long history of exporting its agricultural produce. Although it has been home to such multinational giants as Siemens, Fiat, VW and Ericsson for some considerable time, it is only fairly recently that the country has begun to export manufactured and industrial goods to the rest of the world.
This new-found stability has given Brazil the largest economy anywhere in Latin America, representing more than half of the region’s GDP.
Yet tapping into Brazil also means getting access to Mercosul, the Latin American equivalent of the European Union (which also includes Paraguay, Uruguay, Argentina and Venezuela), with a combined population of a quarter of a billion people.
Many analysts believe it has the potential to be one of the world’s most dominant economies by the middle of the century.
The country is capitalising on its sporting pedigree with high profile events. Brazil will host the 2014 football World Cup and Rio de Janeiro will host the 2016 summer Olympic Games.
Once characterised by widespread poverty, Brazil has gone some way towards plugging the wealth gap. Over the past ten years the poorest 50 per cent have seen their incomes grow by more than two-thirds.
Britain has long-standing trading links with Brazil extending back more than two centuries. The country remains by far the UK’s most important South American trading partner. In 2010 bilateral trade between the two countries was worth almost £5 billion. Britain is also one of the main investors in Brazil.
Despite this there is persuasive evidence that many firms in the UK are not aware either of the size of the country or the plethora of opportunities which exist across all sectors.