General economic situation of Brazil
Lula’s Government in Brazil, which ended on December 31, 2010, was characterized by low inflation, reduction of unemployment and constant records of the trade balance (Source: Guide to the Brazilian Market (Guida al Mercato Brasiliano) 2011 – ICE San Paolo). It encouraged exports, diversified investments made by the BNDES (National Bank for Economic and Social Development), stimulated microcredit policies, and expanded investments targeted to family-run farms through PRONAF (National Program to the Family Agriculture Strengthening). Compared to most of the major world economies, Brazil has been able to keep up with the world’s economic crisis, becoming the sixth world economy in 2011, displacing UK. Brazil’s economy , in fact, has grown by 7.5% in 2010, whereas that of the G7 grew only by 2.5%. In 2012, however, the GDP has grown only by 0.9%. Far below the expectations budgeted at the beginning of last year. In spite of the economic downturn, Brazil keeps growing, and today 53% of the population belongs to the middle class.
Growth in economic relations
Economic relations between Brazil and Italy are growing strongly, with Italy more and more looking towards the Brazilian market, a market that holds the world’s most interesting expansion perspectives. In the first six months of 2010, according to a dossier from ICE, Italy is the third European trade partner of Brazil, after Germany and France, and ninth in the general classification, with imports and exports in six months accounting for 4.093 billion USD (imports: 1.887 billions; exports: 2.206 billions). Approximately three quarters of Brazilian exports to Italy consist in raw materials and semi-finished products, whereas only a quarter is represented by finished products. The major products imported by Brazil are raw materials (especially iron), wood products (wood pulp), leather, coffee, semi-finished products and meat. Imports of goods from Italy are more concentrated on sectors in which the “Made in Italy” is traditionally established (tooling mechanics and other medium-tech products). The most sold are: equipment for tractors and vehicles, lubricants, ball valves, packaging machines, choppers, motor boats. The most significant sectors as for Italy’s penetration into the Brazilian market are again mechanics and medium-technologies. Well-established, although not as far as market potential allows, are all equipments related to agri-food, food and packaging industry. This area, hence, offers wide possibilities of commercial penetration. For many years now, Brazil has become an essential market for Italian firms with a strong inclination to exports, and one of the major target markets for Italian processing and packaging machines. To enter the Brazilian market, Italian companies not only must perfectly know the reference sector, but they must be informed also on the legal aspects related to the sale of machines and the formation of companies and partnerships with local partners; customs issues concerning heavy duties on imports of the Brazilian market; legislations and technical rules in force; financial issues related to payments; credit facilities; and so on. The best opportunities for Italian companies in Brazil, according to ICE, open up “when a strong link with the market can be established, either by means of direct investments, industrial cooperation agreements or joint-ventures, providing for the transfer of technology”. As for market and sector penetration practices, over the last few years new constraints were introduced to combat competition towards Brazilian companies. According to Brazilian laws, imports of used machines and equipment are allowed if no equivalent domestic production is available. For the same reason, the Department of Foreign Affairs and Trade controls all imports of new machines and equipment to establish if there is any similarity with domestic production.
