Brazil and its Markets

Good morning everyone. In addition to Ambassador Ganem and Ms. Jennings, I’d also like to welcome you, on behalf of UPS, to our corporate headquarters.

I really enjoy this time of year because when you look out the giant picture window in our cafeteria you see the trees greening up and the flowers starting to bloom. 

It reminds me of perhaps the one enterprise in the state of Georgia that’s flat-out recession-proof. Anyone know what I’m referring to? 

A fellow golf-fan is awake! Thank you. That’s right -- The Augusta National Golf Club. Augusta National has opened its gates since 1934 to one week of commerce each calendar year – The Masters Tournament. The 76th Masters officially begins tomorrow. It’s now a global event that’s broadcast worldwide.

In this single week in April, Augusta National more than pays for all its annual operations- the members’ dues, a few green jackets, and a big chunk of Augusta Georgia’s annual economic development campaign. 

We’re talking sustainable global business model here!

Masters Week also raises spirits in the colder climates on the planet -- like my hometown of Chicago. It reminds us that a renewal of springtime is just around the corner.

Not a bad metaphor for 2009, wouldn’t you agree?

In fact, renewal and sustainability are two Masters attributes that might provide useful guideposts for today’s sessions. 

I’d like to comment briefly on those two themes applied to the Brazil and U.S. trade relationship.

Of course, we’re dealing with some great possibilities here. Brazil and the U.S. are among the world’s grand nations in size, diversity of cultures, and richness of natural resources. 

Brazil’s GDP is greater than all other South American countries combined.
And it’s been one of the fastest-growing Latin American economies over the past five years.

Until the recent economic slowdown, trade between the U.S. and Brazil was on an upswing. Exports from Brazil to the U.S. had grown by nearly 19 percent from 2007 to 2008, and imports into Brazil from the U.S. had been up by more than 33 percent.

This year, of course, it’s a much different story with Brazilian exports down nearly 30 percent in January. Yet, we know that even in much better times, the potential for Brazil and the U.S. to make each other stronger through trade has never been fully realized. 

UPS knows Brazil pretty well. We’ve been doing business there since l989. We now employ more than 3,300, run 20 operating centers for package and freight distribution, and have customs brokerage centers in 20 cities. We also provide trade financing through our UPS Capital Corporation office in Sao Paulo.

Yet, like many other companies doing business in Brazil, we know growth could move on a faster track. The good news about that is the significant upside potential. 

I believe Brazil is at an important crossroads. Its future comes down to how the nation’s leaders see the country’s competitive position in the world’s business community. And it comes down to making the tough choices to move the country in the right direction.

Recession notwithstanding, commerce is now a global undertaking. That’s not going away. Supply chains are multi-national. They take advantage of specialists and innovators anywhere and everywhere. 

If anything, all the supply chain volatility we saw last year – including toy product recalls early in the year, the oil price spikes of last summer, and of course, the credit crunch in the fall – have led to even more supply chain diversity. It’s all about increasing resiliency. 

Manufacturers and retailers are taking a long look at more multi-sourcing and near-sourcing options to reach their customer markets.

When global trade again picks up, Brazil could increase its competitive posture and that of its business community by reducing the taxes, regulation and customs bureaucracy now attendant with U.S.-Brazil trade.

To speed customs in Brazil, UPS has worked with Brazilian Customs Authorities to develop and test an electronic clearance system for express shipments. 

That’s a positive step. In my role overseeing UPS International operations, I’ve seen first hand how automated customs becomes a magnet for foreign direct investment.

Still another key to Brazil’s ability to achieve sustainable growth is addressing the cost of transportation. 

Today, transportation costs – in the form of congested ports, highways and airports – add to the cost of trade as much as tariffs.

Because of Brazil’s infrastructure challenges, it’s twice as expensive to import goods into Brazil as it is into the U.S.

But if that infrastructure gap could be narrowed, it could provide a huge boost to Brazilian businesses. One estimate shows that just a ten percent decrease in freight costs could boost imports by 50 percent. (Latinbusinesschronicle.com)

The good news is Brazil has formidable resources to bring to the infrastructure challenge. That includes world class engineering and construction firms.

Later this month, the Seventh Latin Leadership Conference will convene in Houston. This important gathering will delve into creating infrastructure partnership solutions that can open the arteries of commerce so key to Brazil’s future. 

So far, I’ve spoken of challenges. But we also see some great pent-up opportunity in the U.S. and Brazil trade relationship.

That opportunity lies in the mindset of the Brazilian business community.

For the past three years, UPS has created a window into the thinking of Latin America and Brazil’s small and mid-size business community through an annual survey we do called the Latin America Business Monitor. 

Results from this year’s Monitor were just released a couple weeks ago. 

We surveyed more than 900 of Latin America’s business decision makers, including more than 150 from Brazil. 

One thing we asked the survey participants to do was to prioritize key areas of their investment strategy over the next three years. 

Most every Latin American country singled out technology as an investment priority. But Brazil’s business leaders pointed to developing new products as a key initiative.

What does that say?

It tells me that Brazilian firms have an entrepreneurial bent. And that for them, innovation is top of mind. 

I know you have a session later that’s focused on renewable energy and green technologies. Nearly nine in ten of the Brazil leaders told us they anticipate they’ll be required to place more attention on environmental standards in the near future.

They’re looking for partners they can trust and who will help them become environmentally sustainable as well.

Finally, our study revealed that of those Latin American business leaders who now do no international business, Brazil’s business leaders show one of the highest inclinations in Latin America to enter the global market.

So imagine the growth possibilities of an entrepreneurial-minded Brazil business community with the added advantage of more streamlined trade?

We’re seeing some positive political signs. Brazil President Lula da Silva has been outspoken in the press in his warnings against protectionism. 

Last week’s Group of 20 Conference in London reinforced the world leaders’ commitment to trade.

Of course, I don’t imagine that the G-20 or the Georgia Tech Global Business Forum is going to solve all our challenges immediately.

But I do know we’ve assembled talented people today from Georgia Tech, the Atlanta-Brazilian Chamber, the consulate, and the Atlanta business community who can move the needle forward. 

To that end, I wish you a very enjoyable and productive day.

And speaking of talented and knowledgeable people, it’s now my privilege to introduce this morning’s keynote speaker.

As U.S. Deputy Assistant Secretary of Commerce, Walter Bastian is responsible for developing programs, policies, and strategies designed to strengthen the U.S. commercial position in the Western Hemisphere.

In this and previous roles, Mr. Bastian has led several initiatives to create business opportunities for U.S. firms in Latin America and the Caribbean.

He also recently received the prestigious Presidential Rank Award, which recognizes a commitment to excellence in public service.

Please join me in welcoming Walter Bastian.