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J
The Jai GroupBusiness Services for the BRICs Economies
Increasing ( or sustaining, without Diesel) Indian market share of Brazilian trade
November 22, 2012
Final Summary Report
J
The Jai GroupBusiness Services for the BRICs Economies
PROJECT FLOW
Identification of Key Sectors Detailing Selected Sector Potential
Activities
Deliverables
• Top Down, data intensive, quantitative analysis of Key Sectors Identified in Trade Industry, vision document with respect to Brazil
• Empirical Analysis of current Brazilian Trade and Investment with other countries to spot opportunities
• Economic Factor Analysis, to identify deeper trade patterns that have still not occurred
• Strategic assessment of sectors where trade is happening today to determine an index of saturation
• Analysis of PTA between India and Brazil• Scenario Analysis
• Market sizing of potential trade and investment
• Strategic analysis of• Current Competitors and their strategy (who is Brazil
Importing these products from currently ? For instance)• Why India stands a chance ? What are the sources of
India’s competitive advantage ?• Barriers to entry and ways to overcome them• Incentives offered by the government• Type of companies that can address these segments, with
examples from India.
• Prioritization of Sectors
• Fact based defensible short list of sectors and a clear rationale on why they are better than others to focus in the India-Brazil Corridor
• Business case for each sector identifying key challenges and potential
Source: Jai Group Analysis.
The project looked at which sectors are worth betting on in the India- Brazil corridor to improve trade and investment
2
J
The Jai GroupBusiness Services for the BRICs Economies
AGENDA
• Executive Summary
• Indo Brazil Trade Today
• Sourcing From India
• Sourcing From Brazil
• Services Imports
• Investment Study
• Strategies for Trade Promotion for the Consulate
J
The Jai GroupBusiness Services for the BRICs Economies
EXECUTIVE SUMMARY (1/6)• Brazilian imports are growing at a steady clip over the last decade though three year CAGR ( ~ 9.36 % p.a.) is more modest
• Indian exports to Brazil are growing twice as faster than overall Brazil imports whether over the long term or the short term
• India is focusing on a limited variety of items and currently has a respectable share in a limited set of items. Many of these items are small volume items and growth potential is limited beyond a point
• To achieve growth India must:
• Focus on larger volume items
• Achieve significant share in as many items as possible
• Consolidate items where it already has significant share
• We have identified three groups of products for the consulate to focus on
• Group A are products where India has a significant competitive advantage and ease of entry is relatively higher, either due to regulatory or market barriers being lesser
• Group B are products where growth potential is limited due to either, already high market share, despite huge competitive advantage or where while growth potential is high and India can make some headway, there are not major competitive advantages for India
• Group C are products where there is neither growth potential nor major competitive advantage
• We recommend the consulate to focus promotional efforts on Group A products for biggest bang for the buck and to a limited extent on those products in group B where growth potential is high. No money should be spent on Group C products
India needs to focus on a larger basket of products to achieve top 5 position among Brazilian imports
4
J
The Jai GroupBusiness Services for the BRICs Economies
EXECUTIVE SUMMARY (2/6)
5
Area Status Examples Why ? Potential beneficiaries
Key issues Next Steps
Goods exports
Petroleum, Organic chemicals, Yarn , some steel products India has significant positions in areas where it has no competitive advantage ( Petroleum) or products where share of Brazilian import basket for that product is small
1. Tractor Parts
2. Bags and Trunks
3. Heat treatment machinery
4. Valves and Taps and Boiler fittings
5. Electrical equipment and components
6. Insecticides
7. Sulphates
1. These occupy a large share of current Brazilian imports and are growing
2. India today exports them to other countries
3. Currently Brazil is importing them from high cost geographies that are distant ( Europe, Japan)
4. Local manufacturing in strategic locations within Brazil , a high ROI opportunity
Kirloskar brothers, Crompton Greaves, EMCO transformers, Kalpataru, Welspun Gujarat, Pricol, Shanti Gears, Motherson, Mahindra & Mahindra, Tata Motors, Royal Enfield, Jaishree insulators
India has a neutral image on manufacturingSome local assembly, distribution required, financing needed in some areas, brand building needed
1. Establish India Brand as an engineering powerhouse, alternate to low quality China and high cost Europe
2. Establish financing package with BNDES for project supply
3. Actively pursue a partnership/ local manufacturing approach as it eases the difficulties of sourcing from India, if led by a Local
4. Tie up with states, especially in the North East where a new manufacturing hub is opening up and no one is present yet
5. Work with customs/ ministry of commerce to facilitate the supply chains
6. Set up web based mechanisms of collecting feedback and distinguishing who is a credible and not so credible importer/ agency
In goods exports, India needs to push engineering and chemicals in a big way
J
The Jai GroupBusiness Services for the BRICs Economies
EXECUTIVE SUMMARY ( 3/6)
6
Area Status Ideal Focus
Opportunity Potential Beneficiaries
Key Issues Next Steps
Services Exports
IT services, but miniscule
Shipping , Tourism, Engineering, IT services, E-learning
1. Brazil is a big consumer of Tourism and Shipping
2. Brazil currently faces a huge shortage of engineering and IT talent but is importing the unemployed from Europe at high prices
Punj Lloyd, Tata Consulting Engineers, SITA Travels, Jet Airways, India Tourism Development Corporation
India is seen widely as a strategic competitor globally, and local industry wants to block India out
1. Through a widely publicized economic benefits study through a well reputed economist / agency, start a National debate on the merits of engaging with India in service imports
2. Promote Joint Ventures between Indian and Brazilian companies
3. Promote India as a main stream destination for tourism, by emphasizing the new infrastructure ( airports and hotels) and nature spots
4. Promote courses on India together with Airlines
5. Tie up with large trade houses for contracting shipping services and insurance of Indian origin, where possible in Asia, and mandatorily when cargo is destined for India
Despite an acknowledged bottleneck on engineers to support its infrastructure boom, India does not export services to Brazil, because, it does not shape a public debate in a country that is unaware of benefits / paranoid about jobs
J
The Jai GroupBusiness Services for the BRICs Economies
EXECUTIVE SUMMARY ( 4/6)
7
Area Status Ideal Focus
Opportunity Potential Beneficiaries
Key Issues What steps should India take?
Sourcing from Brazil
Semi precious stones, Sugar, some iron ore
Wood Pulp/ Celulose, Pig Iron, Petroleum, pulses,
1. India is currently importing wood and cellulose from other countries, whose environmental practices are not sustainable and/or volumes are not sufficient.
2. India could become a net iron ore importer as its steel industry grows.
3. Indian agriculture is suffering the impact of reducing land, stagnant productivity and dropping water table
Aditya Birla, JK Group, Tata Steel, Jindal Steel, several small steel mills, India’s vegetarian protein consumers, Sugar companies, NMDC
1. Iron ore, is a big players game, railway constraints are easing, but port is becoming a bottleneck
2. Many of these commodities are still not an urgent items
1. Set up a sourcing cell in the consulate to help Indian investors who want to source from Brazil
2. Work with agencies in the mining and agricultural ministries, to identify a list of opportunities for investment in Brazil
3. Think about involving Public Sector of India in port infrastructure investments in Brazil as it is likely to be a big bottleneck
4. Develop a strategic partnership with Petrobras , by tying to objectives in goods exports
5. Create transaction platforms for commodities such as sugar and ethanol where sellers and buyers are fragmented and informal/ integrate commodity exchanges
Except for Oil, no Governmental focus for strategic sourcing from Brazil, lack of bargaining power , lack of capital clout to obtain access through investment in infrastructure and absence of transparent platform s deters sourcing efforts
J
The Jai GroupBusiness Services for the BRICs Economies
EXECUTIVE SUMMARY (5/6)
8
Area Status Ideal Focus
Opportunity Potential Beneficiaries
Issues Next Steps
Partnering with Brazil
Not much with Private sector
Several, Construction projects in AfricaInnovation partnershipsStar Alliance Opportunities, Building Brands and distribution channels together, collaborating in the seed industry, urbanization know-how
1. Allows India to articulate a more inclusive vision that increased Brazilian trust levels
2. Geographical complementarity
3. New surplus funds due to natural discoveries but not enough PhDs
4. Lack of vertical integration in many commodities resulting in low value addition
5. Interest in BRICS economies by overseas investors
6. Complementary know-how ( seeds: rice + wheat versus orange, soy and cane) , urbanization technologies
Indian construction companies working in Africa, Indian investment banks, service providers,Indian Pharma companies, Indian seed companies
1. India sees Brazil as a market only and little merit in partnerships ( whatever these guys can do, we can do better )
2. Brazilians see Indians as competitors come to rob their jobs, leading to suspicion even at highest levels of private sector and public sector
3. Beneficiaries of such mutual mis trust and dis respect are rich countries
4. Prevents India from achieving full potential in trade
5. Like Jack Welch of GE obtained significant in roads in to Indian market by furthering Indian ambitions, India can achieve a lot in Brazil by being seen as facilitating Brazilian private sector ambitions where possible
1. Sensitivity training for Indian Managers
2. Create a media relations strategy that would talk/ write about these themes in the media
3. Promote work-shops, webinars4. Start discussions on a joint
innovation fund with the Brazilian Government to fund joint R& D projects
5. Create a mechanism for periodic collaboration for areas where both countries are large commodity exporters such as coffee + tea, cashews, granite, leather products, sugar etc
6. Create a common data base together with National statistical agencies of market data on various sectors, for example:
a. Economic Classesb. Urban Development
7. Start the process of integrating the commodity exchanges
A conscious partnering strategy, in areas where Brazil is seeking advantage, will increase comfort levels to facilitate exports to Brazil in other areas
J
The Jai GroupBusiness Services for the BRICs Economies
EXECUTIVE SUMMARY ( 6/6)
9
China Strategy
What ?Potential
answer by India
What ? Why ?
Scale
China engages Brazil on a large scale as a marketIt has impact on entire country, through iron ore, Soy, power project
FocusInstead of spreading thin, India can create a special partnership with one state per region,.
At the state level India can become a big enough player as a market and a source of investment
Competitive Capital
China invests in large projects of infrastructure in Brazil, disarming Brazilian resistance to Chinese imports
Smart Capital
Establish a India- Brazil joint innovation fund, Participate in joint innovation projects with Brazilians, innovation is a pet theme for Brazil
While India will invest in resources, India can never match Chinese infrastructure investments, but it can fund joint innovation
Cost
China has not succeeded in building brands in Brazil except in high-tech ( Huawei) or Consumer Durables ( Car)
Brand
Establish an India Brand fund to promote whole product categories from India such as tea, ayurvediccosmetics, basmati rice, snacks, apparel, tourism etc. through showrooms, kiosks, select magazine advertisements
India has greater soft power through culture and being a democracy, this power can be channeled in to and consolidated as a brand, brand building as a country is good when the exporter is small and the product category is where India has strengths
China is a good benchmark to aspire to for India, but achieving Chinese performance would require a different set of levers
J
The Jai GroupBusiness Services for the BRICs Economies
AGENDA
• Executive Summary
• Indo Brazil Trade Today
• Sourcing From India
• Sourcing From Brazil
• Services Imports
• Investment Study
• Strategies for Trade Promotion for the Consulate
J
The Jai GroupBusiness Services for the BRICs Economies
GROSS DOMESTIC PRODUCT EVOLUTION
CAGR**: 8%
PURCHASE POWER PARITY IN USD TRILLION IN BRAZIL
* PPP rate equalizes the purchasing power of different currencies in their home countries for a given basket of goods.. Using a PPP basis is arguably more useful when comparing differences in living standards on the whole between nations because PPP takes into account the relative cost of living and the inflation rates of different countries, rather than just a nominal gross domestic product.** Compound annual growth rate.Source: Central Bank of Brazil
Brazilian economy is growing steadily and rapidly …
Highlights
• Brazil is benefiting from deep reforms from the 90’s that consolidated democracy, privatized state-controlled companies, and integrated the local markets/industries into the global economy
• Brazil is ranked number 9th as an economy in PPP terms. Nominal GDP is USD 2.4 trillion which puts Brazil in the 10th position
• Only China, India, Japan, and US have grown faster over the last century
• Economy is pushed by increase in population and particularly investments in infrastructure in selected industries which will create a demand for connectivity
• biofuels, oil & gas• wood pulp, agribusiness• real estate, credit markets• energy transmission
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
1.2 1.3 1.3 1.41.5
1.61.7
1.82.0 2.0
2.2
2.4
11
J
The Jai GroupBusiness Services for the BRICs Economies
MACROECONOMIC INDICATORS
CAGR**: 8%
PURCHASE POWER PARITY IN USD TRILLION IN BRAZIL
* PPP rate equalizes the purchasing power of different currencies in their home countries for a given basket of goods.. Using a PPP basis is arguably more useful when comparing differences in living standards on the whole between nations because PPP takes into account the relative cost of living and the inflation rates of different countries, rather than just a nominal gross domestic product. Brazil is ranked number 9th as an economy in PPP terms. Nominal GDP is USD 1.6 trillion which puts Brazil in the 10th position. Only China, India, Japan, and the US have grown at higher pace over the last hundred years** Compound annual growth rate. *** Annualized 12 month moving average.Source: Central Bank of Brazil
… and all major macroeconomic indicators seem positive
2000 2005 2010 2011
1.2
1.6
2.2
2.4
… and trading more … … and despite the appreciation of
the exchange rate, reserves are
growing …
… as the economy becomes stable
1996
1998
2000
2002
2004
2006
2008
2010
2011
0
50000
100000
150000
200000
250000
Dollar reserves in December 2011 reached USD 354 bi
-5%
0%
5%
10%
15%
20%
25%
30%
35%
2002 2004 2006 2011
Interest Rate
Inflation Rate** (IGPM)Exchange R$/US$
Imports
2003 2004 2005 2006 2007 2008 2009 2010 2011
0
50
100
150
200
250
300
350
400
0
0.5
1
1.5
2
2.5
3
3.5
Reserves US$
2008
Brazil is growing …
12
USD Trillions
J
The Jai GroupBusiness Services for the BRICs Economies
INVESTMENT TRENDS
Brazil was even the first preferred investment destination in the world a couple of years ago ……
Bloomberg provides a quarterly insight into how business men perceive markets for FDI*.
1o 2o3o 4o
Brazil
China
India
US
OCTOBER, 2010
* Poll is carried out among investors, analysts, and traders. Source: Bloomberg, BACEN (Central Bank of Brazil), Link Investimentos
FDI* (USD billion)FDI Destination Ranking
Favorable macroeconomic conditions
• Credit is growing
• Interest rate lowering
Growing demand
• Growing population with rising income and huge
housing deficit
• Emerging Middle Class
Growing supply
• Specific investment-heavy projects
• World cup (2014)
• Olympic Games (2016)
• Government-led programs and state-controlled
company investments
• Luz para Todos (Energy)
• Minha Casa Minha Vida (Housing)
• PAC (Civil Infrastructure)
• Petrobras oil platforms
• Private sector investments, specially in agro
commodities and logistics
forecastevolution
Driving forces
31% of the investment goes to heavily regulated industry (Electrical, Transport, Metallurgy, Mining, and Telecom)
13
J
The Jai GroupBusiness Services for the BRICs Economies
India’s Trade Balance 2011
SWITZER-LAND
CHINA P RP
SAUDI ARAB
AUS-TRALIA
NIGERIA KUWAIT IRAQ IRAN QATAR KOREA RP GERMANY INDONE-SIA
JAPAN SOUTH AFRICA
MALAYSIA BELGIUM ITALY HONG KONG
FRANCE U ARAB EMTS
U K BRAZIL SINGA-PORE
U S A NETHER-LAND
Trade Balance -24.1 -23.9 -15.2 -9.1 -8.5 -8.4 -8.3 -8.2 -6.4 -6.3 -5.1 -3.7 -3.4 -3.2 -2.6 -2.3 0.3 0.9 1.4 1.6 1.7 2.7 3.2 5.5 5.9
-23.5
-18.5
-13.5
-8.5
-3.5
1.5
6.5
-24.1 -23.9
-15.2
-9.1-8.5 -8.4 -8.3 -8.2
-6.4 -6.3-5.1
-3.7 -3.4 -3.2-2.6 -2.3
0.30.9 1.4 1.6 1.7
2.7 3.2
5.5 5.9
US $ Bn
Source : MDIC, DGFT, Jai Group Analysis
Brazil is one of the few large countries with whom India runs a goods trade surplus
Country With Economy >= $1 Trillion and Population >= 100 Mn 14
J
The Jai GroupBusiness Services for the BRICs Economies
BRAZIL TRADE WITH INDIA AND WORLD
15
Indo-Brazilian trade has grown significantly in the last decade, more than double of overall Brazil trade
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20110
1
2
3
4
5
6
7
8
9
10
Total Brazilian Imports v/s Exports (India) 2000-2011
Export Import
US$
Bill
ion
32.6%
27.7%
20002001
20022003
20042005
20062007
20082009
20102011
0
100
200
300
400
500
600
Total Brazilian Imports v/s Exports (World) 2000-2011
Export Import
US$
Bill
ion
13.5%
14.9%
No of Items
74 74 73 73 78 79 76 79 79 78 80 84
Overall
Share(%)
0.5 1 1.2 1 0.9 1.6 1.6 1.8 2.1 1.7 2.3 2.7
Source : MDIC, DGFT, Jai Group Analysis
J
The Jai GroupBusiness Services for the BRICs Economies
COUNTRY VALUE (US$ Bn) SHARE (%)
1. China 44.3 172. United States 25.8 103. Argentina 22.7 94. Netherlands 13.6 55. Japan 9.4 46. Germany 9.1 47. Italy 5.4 28. Chile 5.4 29. United Kingdom
5.2 210. South Korea 4.6
2
18. India 3.2 1
Major Markets for Brazilian Exports in 2011
Total Brazil Exports(2011)
US$ 256 Bn
India Still a Minority Trade Partner, but with an export share of 2.7% , looks all set to meet target of USD 15 B in 2015, just going with the flow
16
Major Supplier Markets to Brazil in 2011 (Imports)
COUNTRY VALUE (US$ Bn) SHARE (%)
1. United States 33.9 15
2. China 32.7 14
3. Argentina 16.9 7
4. Germany 15.2 7
5. South Korea 10.1 4
6. Nigeria 8.3 4
7. Japan 7.8 3
8. Italy 6.2 3
9. India 6.1 3
10. France 5.4 2
11. Mexico 5.1 2
Total Brazil Imports(2011)
US$ 226 Bn
Source : MDIC, DGFT, Jai Group Analysis
J
The Jai GroupBusiness Services for the BRICs Economies
COUNTRY VALUE (US$ Bn)
SHARE (%)
1. China 44.3 17
2. United States 25.8 10
3. Argentina 22.7 9
4. Netherlands 13.6 5
5. Japan 9.4 4
6. Germany 9.1 4
7. Italy 5.4 2
8. Chile 5.4 2
9. United Kingdom 5.2 2
10. South Korea 4.6 2
18. India 3.2 1
Major Markets for Brazilian Exports in 2011
Total Brazil Exports(2011)
US$ 256 Bn
However If Diesel is pulled out, India market share falls significantly
17
Major Supplier Markets to Brazil in 2011 (Imports)
COUNTRY VALUE (US$ Bn)
SHARE (%)
1. United States 33.9 15
2. China 32.7 14
3. Argentina 16.9 7
4. Germany 15.2 7
5. South Korea 10.1 4
6. Nigeria 8.3 4
7. Japan 7.8 3
8. Italy 6.2 3
9. France 5.4 2
10. Mexico 5.1 2
21. India 2.6 1
Total Brazil Imports(2011)
US$ 226 Bn
Source : MDIC, DGFT, Jai Group Analysis
11.CHILE 4.6
12.CANADA 3.6
13. TAIWAN 3.5
14. UNITED KINGDOM 3.4
15. SPAIN 3.3
16. ALGERIA 3.1
17. SAUDI ARABIA 3.1
18. RUSSIAN FEDERATION 2.9
19. BOLIVIA 2.9
20.SWITZERLAND 2.8
J
The Jai GroupBusiness Services for the BRICs Economies
INDIA BRAZIL TRADE EVOLUTION 2011- 2015
2011 2012 ytd 20150
2
4
6
8
10
12
Exports
Exports without Diesel
Imports
Indian exports as a % of total Brazilian imports
18
Diesel has already started declining, despite non-diesel Indian exports share up slightly in 2012, 2015 trade target: USD 15 Bi ( export target USD 9.7 Bn) , requires a huge jump by India, assuming Diesel will continue to fall
1.2%1.2%
2.7%2.7%
%%
2.4%2.4%
1.3%1.3%
Projections
??
USD B
We have assumed that the trade target will be split in to exports and imports in the same ratio as 2011.
Export Target 2015:
USD 9.7 Bn
Export Target 2015:
USD 9.7 Bn
J
The Jai GroupBusiness Services for the BRICs Economies
AGENDA
• Executive Summary
• Indo Brazil Trade Today
• Sourcing From India
• Sourcing From Brazil
• Services Imports
• Investment Study
• Strategies for Trade Promotion for the Consulate
J
The Jai GroupBusiness Services for the BRICs Economies
20
# of Items at HS 2 Level World Brazil
India Export 98 84
India Import 98 75
Net Export 21/50 41
Net Import 19/48 43
Brazil Net Importer 50
Brazil Net Exporter 48
# of Items at HS 2 Level World India
Brazil Export 97 75
Brazil Import 96 84
Net Export 48 40
Net Import 49 35
India and Brazil already trade in a lot of products, and in most of them there is no conflict
Source: MDIC, DGFT, Jai Group Analysis
J
The Jai GroupBusiness Services for the BRICs Economies
Brazil’s Import Basket for 2011
21
27, Min
eral
fuels
84, Nucle
ar re
acto
rs, boile
rs,
85, Elec
trica
l mac
hiner
y
87,Veh
icles
other
than
railw
ay
29,Org
anic
chem
icals
31,Ferti
liser
s
39,Plas
tics an
d article
s ther
eof
30,Phar
mac
eutica
l pro
ducts
90,Optica
l instr
umen
ts
40,Rubber
article
s
72,Iron an
d stee
l
38,Misc
chem
ical p
roduct
s
73,Arti
cles o
f iron or s
teel
74,Copper
and ar
ticles t
hereo
f88,A
ircra
ft parts
10,Cer
eals
28,Inorg
anic
chem
icals
48,Pap
er an
d paper
board
76,Alu
min
ium
article
s
26,Ore
s, sla
g and as
h
22,Bev
erag
es, s
pirits
and vi
negar
54,Man
-mad
e filam
ents
32,Tannin
g ext
ract
s
3,Fish
and cr
ustace
ans
25,Salt;
sulp
hur
15,Anim
al or v
eget
able
fats
62,Arti
cles o
f appar
el
86,Rail
way an
d parts
52,Cotton
55,Man
-mad
e sta
ple fibre
s
0
5
10
15
20
25
30
35
40
4542
34
26
23
9 9 86 6
54 4 4 3 3 2 2 2 2 1 1 1 1 1 1 1 1 1 1 1
US $
Bn
Source: MDIC, DGFT, Jai Group Analysis
Products for Which Brazil is a Net Importer and India is Net Exporter
No Exports By IndiaNo Exports By India Brazil Net Importer and India Is Significant Exporter i.e > US$1BnBrazil Net Importer and India Is Significant Exporter i.e > US$1Bn
India hardly present in key Brazilian imports, even where India is a significant or Net exporter to Rest of World
17178888909047473232535331312727303010210232326060262619191616774545232325253434494914142020
303053531616
4141
3030
2727
4949
India Share > 3% of total
Brazilian Imports
CAGR % (2009-11)of Brazilian Imports
from the World
CAGR % (2009-11)of Brazilian Imports
from the World
J
The Jai GroupBusiness Services for the BRICs Economies
TOTAL PRODUCTS TRADED AND SHARE OF KEY TRADED ITEMS
22
China US Germany France Italy India Japan South Korea Mexico0
10
20
30
40
50
60
70
80
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
7166
4438 36
2117 16 13
72%
93%
69%
50%
25% 27%
53%
66%
17%No
of It
ems
whe
re B
razi
lian
Impo
rts
>=3%
Cumulative Share of Product W
here Brazilian Im
ports >=3%
Total No of Items Traded
92 96 95 95 92 84 82 80 81
Average Share in Brazil’s Import
Basket of Products with >=3% Share
1% 1% 2% 1% 1% 1% 3% 4% 1%
Source : MDIC, DGFT, Jai Group Analysis
To become a top 5 exporter to Brazil, India needs significant share in larger items like South Korea or achieve respectable share in lots of items like China
J
The Jai GroupBusiness Services for the BRICs Economies
DIVISION OF BRAZIL IMPORTS BY INDIA SHARE
Is Brazil importing/
India exporting to
other countries ?
India market share above 3 % or above ?
# of products = 20
# of Products= 64
# of Products = 12
# of products = 2
Products with > 15 % = 4
Products with 3-15 % share = 16
Live Animals, Meat, Dairy, Fruits, Cocoa, Malts, Vinegar, Prep of cereal, Pulp of wood, Ships/Boats
Project goods, Miscellaneous Articles
Yes
No
No
Yes
No
Yes
Currently Traded between India and Brazil ?
Current Indian trade performance achieved through a significant share in a limited basket of goods in Brazil
Source: Jai Group Analysis
Plastics, Fertilizers, Inorganic Chemicals, Furniture, Suitcases, Iron Steel, Footwear
14Items
84 Items
23
J
The Jai GroupBusiness Services for the BRICs Economies
Missing Commodities of Previous Slide Explained
24
2 Level HS Codes 01 to 99
Code 77 is reserved for classification of future commodities
99-1 = 98 total
Brazil does not trade 98,99 which are misc articles of waste, samples and other returned articles
98 - 2 = 96 total
96 Commodities
84 Traded 12 Not Traded
Source : Jai Group Analysis
J
The Jai GroupBusiness Services for the BRICs Economies
DIVISION OF BRAZIL IMPORTS BY SIZE OF IMPORTS AND INDIA SHARE
25
Brazils Imports From the World
>1Bn 500-900Mn 100-500Mn <100Mn No of Items
India's Exports to the World
>10Bn (3) 71 (Pearls) - - 4
1-10Bn (19) (5) (4) (3) 31
<1Bn (2) (7) (5) (5) 19
<300Mn -
20(veg/fruit prep) (2)
67(feathers/ human hair) 4
No of Items 24 14 11 9 58
No Of Items India Share >3%
4 5 2 82%
Overall Share in the Category
4% 1% 10%
India holds significant share in small and relatively insignificant items in Brazil import basket
Source : MDIC, DGFT, Jai Group Analysis
Detail Back upDetail Back up
J
The Jai GroupBusiness Services for the BRICs Economies
THREE WAYS
Focus on few large import items to achieve significant market share
Focus on few large import items to achieve significant market share
Broad strategy on many commodities to achieve 3 % share in many
Broad strategy on many commodities to achieve 3 % share in many
Up Brazil Market Share
•Polyester Filament Yarn•Organic Chemicals•Pharmaceuticals
•Which are the items Brazilian imports are being dominated by ?
Dominate current products where India has significant share
Dominate current products where India has significant share
Three ways to increase market- share, we have focused on new items
•What to Eliminate from a large set of items ?
26
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The Jai GroupBusiness Services for the BRICs Economies
China
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20110
5
10
15
20
25
30
35Total Exports to Brazil 2000-2011
US$
Bill
ion 34.8%
No of Items With Share >=
3%33 39 44 46 52 56 58 62 66 67 70 71
No of Items 91 91 92 89 91 91 93 93 93 93 93 92
Overall Share(%)
2.2 2.4 3.3. 4.4. 6 7.3 8.7 10.5 11.6 12.4 14.0 14.5
Going forward, India could follow Chinese strategy of a broad based attack, which could potentially be ambitious ……
Source : MDIC, DGFT, Jai Group Analysis 27
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The Jai GroupBusiness Services for the BRICs Economies
South Korea
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20110
2
4
6
8
10
12Total Exports to Brazil 2000-2011
US$
Bill
ion 19.3%
No of Items With Share >
3%17 18 14 11 14 11 15 15 15 14 18 16
No of Items 80 80 81 76 80 79 79 78 77 83 82 80
Overall Share(%)
2.6 2.8 2.2 2.2 2.7 3.1 3.4 2.8 3.1 3.8 4.6 4.5
Or south Korean strategy of focusing on large import items from Brazil
Source : MDIC, DGFT, Jai Group Analysis 28
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The Jai GroupBusiness Services for the BRICs Economies 29
The Filtering Process Explained
• Brazil does not trade 98 and 99
• 77 is reserved for future classification
• 12 Items Not Traded With India
• 26 Items India is a small exporter <300Mn to the World
• 20 Items removed • Petroleum and other where India
cannot compete• Items for which Brazil is actually a
net exporter • Items where Brazils Imports from
world are less than 15% of India’s exports to the world.
• For which we then did a 4 level study
96 Items Traded By Brazil
38 HS2 Level Commodities
Source : Jai Group Analysis
84 58
Both strategies require some kind of focus, and we started a filtering process to identify key items
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The Jai GroupBusiness Services for the BRICs Economies
Out of the 58 we removed the below 20 because :
30
HS Code Description Comments
9 COFFEE, TEA, MATE AND SPICES. Too Small Imports by Brazil
10 CEREALS. No - Brazil mainly import from Argentina
17 SUGARS AND SUGAR CONFECTIONERY. Distance to much + India unlikely to do sugar exports
23 RESIDUES AND WASTE FROM THE FOOD INDUSTRIES; PREPARED ANIMAL FODER. Brazil is a small importer
24 TOBACCO AND MANUFACTURED TOBACCO SUBSTITUTES. Brazil is a small importer
27 MINERAL FUELS, MINERAL OILS AND PRODUCTS OF THEIR DISTILLATION; BITUMINOUS SUBSTANCES India will not be able to compete
40 RUBBER AND ARTICLES THEREOF. Distance / Mostly Exports are local
41 RAW HIDES AND SKINS (OTHER THAN FURSKINS) AND LEATHER Brazil is a small importer
48 PAPER AND PAPERBOARD; ARTICLES OF PAPER PULP, OF PAPER OR OF PAPERBOARD. India doesn’t have much paper, India net Importer
50 SILK Brazil is a small importer
52 COTTON. Brazil is exporter
53 OTHER VEGETABLE TEXTILE FIBRES; PAPER YARN AND WOVEN FABRICS OF PAPER YARN. Brazil is a small importer
57 CARPETS AND OTHER TEXTILE FLOOR COVERINGS. Brazil is a small importer
63 OTHER MADE UP TEXTILE ARTICLES; SETS; WORN CLOTHING AND WORN TEXTILE ARTICLES; RAGS Brazil is a small importer
69 CERAMIC PRODUCTS. Brazil is Net exporter
70 GLASS AND GLASSWARE. Energy is required for glass
71 NATURAL OR CULTURED PEARLS,PRECIOUS OR SEMIPRECIOUS STONES,PRE.METALS, Brazil is net exporter
72,73 Iron Steel and Iron Steel Articles India Growth probability low, India Net importer
74 COPPER AND ARTICLES THEREOF. India itself has shortage of copper + distance barrier
76 ALUMINIUM AND ARTICLES THEREOF. Al requires electricity - India energy cost are high, India net Importer
Source : Jai Group Analysis
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The Jai GroupBusiness Services for the BRICs Economies
4 Level Short listing Reasons
• We removed– Commodities where Brazil is a net exporter– Commodities that have share less than 15% share in exports currently reaching America (6-
9000 mile radius)– Commodities where India has exports to world less than 150 Mn– Clothes and apparel(61,62) as a sector since Brazil is protective of the industry – as it is job
generating, except t-shirts– Commodities whose value of imports by Brazil is less than 15% of India’s total Exports.– Items where Brazils current sources are >=150Mn from Latin America and Mercosul– Filtered items which were primarily exported by countries which may have technical or
distance advantage over India.• Internal Jai Analysis on Probability and Unlikelihood of certain articles and sectors.
31Source : Jai Group Analysis
For the 38 HS2 Level code we listed all possible 4 level HS codes and filtered them once more
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The Jai GroupBusiness Services for the BRICs Economies
Sourcing From India
32Source : Jai Group Analysis
We identified 46 items that can power Indian exports to Brazil over the next three years
Total Imp From India – US $ 6 Bn
High Potential for further growth Moderate Potential for further growth
Top 10 Imports From India(US $ 4.2 Bn)
3004, Medicaments8708, Parts and Accessories of Motor Vehicle2933, Heterocyclic Compounds3902, Polymers of Propylene
High Imports But Low Potential Because Indian share already 20-25% :2710, Petroleum5402,Synthetic Filament2704, Coke of Coal2934, Nucleic Acids5509, Yarn5205, Cotton Yarn
Currently traded large value (Total, Brazilian Imports), but low
Indian market share
3808, Insecticides8419, Plant and Lab machinery4202, Trunks suitcases3921, Plastic Plates, Film, Sheets, Film
3204, Synthetic Organic Coloring Matter8502, Eletric Gensets5510, Yarn of artificial fibres8504 Electrical Transformers8536, Electrical Apparatus for protecting circuits8481, Taps and Cocks8421, Centrifuges3811, Antiknock Preparations8532, Capacitors9032, Automatic Regulating 3824, Binders for Foundry8535, Electrical apparaturs for protecting circuits
Currently Traded Small Value(Total Brazilian Imports) <US
$ 200 Mn
2833, Sulphates and Alums5503, Synthetic Staple Fibres Not Carded Combed6109, Tshirts8547, Insulating Fitting for Electrical3303, Perfumes and Toilet water9001, Optical Fibres4901, Printed Books9608, Ballpoint Pens9404, Mattress supports8204, Hand Operated Spanners8205, Hand Tools,
1302, Vegetable Saps and extracts9405, Lamps and Lighting including Searchlights3823, Industrial Mono Carboxlyic Acids
Future Items
3924, Plastic Tableware3212, Pigments for Paints3302, Mixtures of Odiferous Substances8803, Parts of Helicopter
8484, Gaskets and similar9603, Brooms, brushes, hand operated sweepers3002, Human Blood for therapeutic
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The Jai GroupBusiness Services for the BRICs Economies
Sourcing From India (Reasoning)
33
High Potential for further growth Low Potential for further growth
Top 10 Imports From India•High Growth >15%•India Share Low t< 15%
•Low Growth <15%•India Share High Already >15%
Currently traded•High Growth >15%•India Share Low <15%•India to America Share > 15%
•Low Growth <15%•India Share Already High >15%•India to America Share < 15%
Future Large Value
•Imports by Brazil Greater than US $ 200Mn•India Share Low < 15%•India Share to US Significant•Also products that are almost zero in terms of value
exported to Brazil.
•Imports by Brazil Greater than Cutoff•Import Growth Not High•India Share High Already > 15%•India to US Limited
Future Small Value•Imports by Brazil Lesser than US $ 200 Mn•High Growth > 15%
•Imports by Brazil Lesser than Cutoff•Low Growth < 15%
Source : Jai Group Analysis
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The Jai GroupBusiness Services for the BRICs Economies
DESCRIPTION OF BARRIERS TO ENTRY
Regulatory Barriers
Reflect chemistry between Natura and the Potential Partner
Market Related Barriers
Describe adherence to strategic objectives of Natura
Key Success Factors
Image
Market Access
Protectionism
Phyto- sanitary Barriers
Brand Sensitivity
Country Image
Registration Time + Cost
Distribution Channels
Preference to Locals
Local Manufacturing a Pre-condition
We then evaluated ease of entry in to Brazil based on scoring difficulty of individual barriers
Categories Description of Attributes
Source: Jai Group Analysis
Import Duties
Technical Barriers
Market Concentration
1. Common External Tariff2. Technical standards that are rigorously
checked3. Barriers related to health and sanitary
conditions
4. How important is brand to sell in to Brazil ?
5. How important is country image and its impact on perceived quality ?
6. How long does registration with key customers such as Petrobras ?
7. How important is having an established distribution channel ?
8. How concentrated is the market ?
9. Are there strong Brazilian incumbents, who will increase protectionism if they are seriously threatened ?
10. Is there a specific preference for local manufacturing through credit / quotas ?
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The Jai GroupBusiness Services for the BRICs Economies
35
19% 15% 10 % 8%
20 % 11.8 10.4 8.7 8.0
10 % 9.9 8.5 6.7 6.0
0% 8.3 7.0 5.2 4.5
Even if the selected products other than Diesel grow at 25 %, if Diesel imports decline too rapidly, meeting export target will be unrealistic
Projected Indian share of Brazilian Diesel Imports ( 2015)
Projected Indian share of Brazilian Diesel Imports ( 2015)
Projected annual growth
Rate of Diesel imports ( 2012-2015)
Projected annual growth
Rate of Diesel imports ( 2012-2015)
TargetNot met
Met
Indian Exports to Brazil in 2015- USD bi
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The Jai GroupBusiness Services for the BRICs Economies
Sourcing From India
36
High Potential Moderate Potential
Top 10 with potential
3004 Medicaments 147 2934 Nucleic Acid 11
8708 Auto parts 162 5510, Yarn of artificial fibres 37
2933 Bulk Drugs and Heterocyclic compounds 54 3823, Industrial Mono Carboxlyic Acids 32
3902 Polymers of Propylene 46 3204, Synthetic Organic Coloring Matter 30
5402 Synthetic Filament 899405, Lamps and Lighting including Searchlights
30
8484, Gaskets and similar 305509 Synthetic Yarn 39
Top 10 that will decline in sales
2710 Diesel 37 * Cotton Yarn (10)Coke of Coal (43)
Some of the top 10 categories today hold potential, some do not
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The Jai GroupBusiness Services for the BRICs Economies
37
Total Imp From India – US $ 6 Bn
High Potential for further growth Moderate Potential for further growth
Currently traded large value (Total,
Brazilian Imports), but low Indian market share
4202, Trunks suitcases 62 A 32 5510, Yarn of artificial fibers 21 A 373921, Plastic Plates, Film, Sheets, Film 12 B 30 3204, Synthetic Organic Coloring Matter 22 A 308419, Plant and Lab machinery 63 B 26 3824, Binders for Foundry 11 B 283808, Insecticides 117 A 22 3811, Antiknock Preparations 11 C 27
8532, Capacitors 9 C 248421, Centrifuges 24 B 238502, Eletric Gensets 214 A 228504 Electrical Transformers 66 A 219032, Automatic regulating or controlling instruments and apparatus 48 B 198536, Electrical Apparatus for protecting circuits 83 B 188481, Taps and Cocks 152 B 18
Currently Traded Small
Value(Total Brazilian Imports)
<US $ 200 Mn
5503, Synthetic Staple Fibers Not Carded Combed 8 B 37 3823, Industrial Mono Carboxlyic Acids 2 C 324901, Printed Books 17 B 34 9405, Lamps and Lighting including Searchlights 18 B 309001, Optical Fibres 9 B 30 1302, Vegetable Saps and extracts 10 C 192833, Sulphates and Alums 11 B 278547, Insulating Fitting for Electrical 3 B 276109, Tshirts 32 B 248204, Hand Operated Spanners 9 B 218205, Hand Tools, 33 B 219608, Ballpoint Pens 11 C 19
3303, Perfumes and Toilet water 20 B 15
9404, Mattress supports 15 C 15
Future Items
3924, Plastic Tableware 41 B 9603, Brooms, brushes, hand operated sweepers 5 C8484, Gaskets and similar 13 B 30
3302, Mixtures of Odiferous Substances 7 B 33 3002, Human Blood products for therapeutic usage 61 A 273212, Pigments for Paints 5 B 30
As a result, we arranged each heading items in decreasing order of their ease of entry and grouped them in to A , B and C (Total Score =45) We did not score top 10 traded items
Sourcing From India
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The Jai GroupBusiness Services for the BRICs Economies
HS code Description2011 Brazil Exports
3 year CAGR ( 08-11) Expected Growth Rate
Expected Growth Rate (11-15) %
Current Indian Exports to Brazil
Current Market Share
Projected Market Share
Additional sales due to market growth
Sales due to increased market share
Expected annual Jump in 2015
8502
Electric Generating Sets and Rotary ( principally wind powered) Converters 918 55% 18,72% 66 7% 10% 65 149 214
8708
Parts and Accessories of Vehicles ( mainly tractor parts, gear boxes, suspension systems, brakes) 6318 8% 8,00% 96 2% 3% 76 86 162
8481
valves and similar appliances for pipes, boiler shells, tanks, vats 1193 8% 8,00% 10 1% 10% 4 149 152
3004Medicaments and Pharma 3490 10% 9,36% 105 3% 5% 45 102 147
3808Insecticides and Pesticides 1959 16% 9,36% 44 2% 5% 19 98 117
>100 M of additional annual growth in exports possible
We evaluated each of these items individually and made reasonable assumptions to gauge potential ( I)
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The Jai GroupBusiness Services for the BRICs Economies
HS Code Description of commodity
2011 Brazil imports from World
CAGR ( 2008-2011)
Expected CAGR ( 2012-2015)
Current Indian Exports to Brazil
Current Indian Market Share of Commodity
Expected Market share 2015
Sales due to market growth
Sales due to share growth
Additional Exports in 2015
5402 Synthetic Filament 798 9% 9,00% 204 26% 26% 84 5 89
8536
Electrical Apparatus for Switching or Protecting Electrical Circuits ( principally less than 1000 volts) 1301 10% 9,36% 12 1% 5% 5 78 83
8504Electric Transformers ( Principally static converters) 1161 12% 12,00% 25 2% 5% 14 52 66
>50 M of additional growth in exports is possible
We evaluated each of these items individually and made reasonable assumptions to gauge potential ( II)
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The Jai GroupBusiness Services for the BRICs Economies
HS CodeDescription of commodity
2011 Brazil imports from World
CAGR ( 2008-2011)
Expected CAGR ( 2012-2015)
Current Indian Exports to Brazil
Current Indian Market Share of Commodity
Expected Market share 2015
Sales due to market growth
Sales due to share growth
Additional Exports in 2015
9032
Automatic Regulating and Controlling instruments and apparatus ( all kinds of process instrumentation) 913 3% 3,00% 3 0% 5% 0 48 48
3902 Propylene Polymers 519 12% 9,36% 65 15% 15% 46 - 46
3924
Tableware and other household articles and hygienic or toilet articles, of plastics. 86 25% 9,36% 0,3 0% 20% 0 41 41
2710 Diesel 16905 20% 10,00% 3244 19% 15% 1506 -1.469 37
8205
Keys and wrenches (including torque wrenches); interchangeable spanner sockets, with or without handles 80 21% 9,36% 1 1% 20% 0 32 33
6109 T-Shirts 107 61% 18,72% 7 7% 10% 7 25 322934 Nucleic Acid 475 3% 3,00% 114 24% 26% 14 11 25
>25 M in additional growth in annual exports in possible
We evaluated each of these items individually and made reasonable assumptions to gauge potential (III)
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The Jai GroupBusiness Services for the BRICs Economies
HS Code Description of commodity
2011 Brazil imports from World
CAGR ( 2008-2011)
Expected CAGR ( 2012-2015)
Current Indian Exports to Brazil
Current Indian Market Share of Commodity
Expected Market share 2015
Sales due to market growth
Sales due to share growth
Additional Exports in 2015
8421 Centrifuges for liquids and gases 839 5% 5,00% 7 1% 3% 2 22 24
3204 Synthetic Organic Coloring Matter 311 4% 4,00% 69 22% 25% 12 10 22
5510 Yarn of Artificial Staple Fibers 275 16% 9,36% 21 8% 10% 9 12 21
3303 Perfumes and Toilet Waters 117 24% 9,36% 4 3% 10% 2 18 20
9405 Lamps and fittings 181 22% 18,72% 2 1% 5% 2 16 18
4901 Printed booked 180 11% 9,36% 2 1% 7% 1 16 17
9404
Support for beds (somiês); mattresses, duvets, pillows, ottomans, pillows and the like, fitted with springs or stuffed or internally fitted with any material comprising these articles of rubber or plastics, whether or not covered. 60 37% 18,72% 4 7% 12% 4 11 15
8484 Gaskets and similar joints of Metal 171 27% 9,36% 0 0% 3% 0 13 13
3921Other plates, sheets, film, foil and strip, of plastics. 237 9% 9,00% 5 2% 5% 2 10 12
3824Prepared binders for foundry moulds or cores 475 5% 5,00% 6 1% 3% 1 10 11
2833 Sulphates; alums; peroxosulphates 186 8% 8,00% 7 4% 7% 3 8 11
<25 M in additional annual growth in Exports
We evaluated each of these items individually and made reasonable assumptions to gauge potential ( IV)
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The Jai GroupBusiness Services for the BRICs Economies
HS Code Description of commodity
2011 Brazil imports from
World
CAGR ( 2008-2011)
Expected CAGR
( 2012-2015)
Current Indian
Exports to Brazil
Current Indian Market Share of
Commodity
Expected Market
share 2015
Sales due to market growth
Sales due to share
growth
Additional Exports in
2015
8421Centrifuges for liquids and gases 839 5% 5,00% 7 1% 3% 2 22 24
3204Synthetic Organic Coloring Matter 311 4% 4,00% 69 22% 25% 12 10 225510Yarn of Artificial Staple Fibers 275 16% 9,36% 21 8% 10% 9 12 213303Perfumes and Toilet Waters 117 24% 9,36% 4 3% 10% 2 18 209405Lamps and fittings 181 22% 18,72% 2 1% 5% 2 16 184901Printed booked 180 11% 9,36% 2 1% 7% 1 16 17
9404
Support for beds (somiês); mattresses, duvets, pillows, ottomans, pillows and the like, fitted with springs or stuffed or internally fitted with any material comprising these articles of rubber or plastics, whether or not covered. 60 37% 18,72% 4 7% 12% 4 11 15
We evaluated each of these items individually and made reasonable assumptions to gauge potential ( V)
<25 M in additional annual growth in Exports
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The Jai GroupBusiness Services for the BRICs Economies
HS Code Description of commodity
2011 Brazil imports from World
CAGR ( 2008-2011)
Expected CAGR ( 2012-2015)
Current Indian Exports to Brazil
Current Indian Market Share of Commodity
Expected Market share 2015
Sales due to market growth
Sales due to share growth
Additional Exports in 2015
3811 Anti-knock preparations 222 12% 9,36% 6 3% 5% 3 8 11
1302 Juice and Vegetable Extract 87 4% 4,00% 10 12% 20% 2 8 10
8204 hand operated spanners 46 19% 9,36% 9 20% 25% 4 5 9
8532 Electrical Capacitors 286 6% 6,00% 2 1% 3% 1 8 9
9001Optical fibres and optical fibre bundles; optical fibre cables 114 21% 18,72% 3 3% 5% 3 6 9
5503
Synthetic staple fibers, not carded, combed or otherwise processed for spinning 127 9% 9,00% 5 4% 7% 2 5 8
3302Odorific Substances for making perfume and for food industry 119 21% 9,36% 0,2 0% 3% 0 7 7
9608 Pens and Pencils 63 12% 9,36% 5 8% 12% 2 4 6
3212 Pigments for Paints 49 1% 1,00% 0,2 0% 10% 0 5 5
9603Brooms, Brushes and Hand Operated Sweepers 90 15% 9,36% 0 0% 3% 0 4 5
8547 Insulate Fitting for electrical 95 8% 8,00% 1 1% 3% 0 3 3
3823 Fatty Acids, Industrial Carboxyclic Acids 150 5% 5,00% 14 9% 9% 2 - 2
5509 Yarn, Synthetic Staple Fibres 338 17% 9,36% 87 26% 20% 37 -36 1
5205 Cotton Yarn 134 -10% 0,00% 82 61% 50% 0 -10 -10
2704 Coke and Lignite 937 1% 1,00% 189 20% 15% 8 -50 -43
<25 M in additional annual growth in Exports
We evaluated each of these items individually and made reasonable assumptions to gauge potential ( VI)
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The Jai GroupBusiness Services for the BRICs Economies
AGENDA
• Executive Summary
• Indo Brazil Trade Today
• Sourcing From India
• Sourcing From Brazil
• Services Imports
• Investment Study
• Strategies for Trade Promotion for the Consulate
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The Jai GroupBusiness Services for the BRICs Economies
COUNTRY VALUE (US$ Bn)
SHARE (%)
1 U ARAB EMTS 34 14
2 U S A 26 10
3 CHINA P RP 20 8
4 HONG KONG 10 4
5 SINGAPORE 10 4
6 NETHERLAND 8 3
7 U K 7 3
8 GERMANY 7 3
9 BELGIUM 6 3
10 INDONESIA 6 2
18 BRAZIL 4 2
Major Markets for Indian Exports in 2011
Total Indian Exports(2011)
251 US$ Bn
45
Major Supplier Markets to India in 2011 (Imports)
Total Indian Imports(2011)
369 US$ Bn
Source : MDIC, DGFT, Jai Group Analysis
COUNTRY VALUE (US$ Bn)
SHARE (%)
1 CHINA P RP 43 12
2 U ARAB EMTS 33 9
3 SWITZERLAND 25 7
4 SAUDI ARAB 20 6
5 U S A 20 5
6 GERMANY 12 3
7 IRAN 11 3
8 AUSTRALIA 11 3
9 NIGERIA 11 3
10 KOREA RP 10 3
31 BRAZIL 4 1
Brazil is even less important to India as a source
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The Jai GroupBusiness Services for the BRICs Economies
INDIAN TRADE WITH BRAZIL AND WORLD
46
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20110
1
2
3
4
5
6
7
8
9
10
Total Indian Imports v/s Exports (Brazil) 2000-2011
Export Import
US$
Bill
ion
27.7%
32.6%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100
100
200
300
400
500
600
700
Total Indian Imports v/s Exports (World) 2000-2011
Export Import
US$
Bill
ion
22.1%
18.8%
Source : MDIC, DGFT, Jai Group Analysis
Imports from Brazil are however growing only slightly faster over overall imports
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The Jai GroupBusiness Services for the BRICs Economies
DIVISION OF INDIAN IMPORTS BY BRAZIL SHARE
Is India Importing
these Items from Rest of
World
Of the items currently imported
Brazils’ Share is >= 1%
# of products = 18
# of Products=
# of Products = 23
# of products = 0
< 8% Share:Live animals, trees, coffee, gum, tobacco, salt, crude oil, raw hides, wood, pulp, iron and steelVinegars and Ores(slag) 8-9% ShareSugar 18% Share
Meat, Fish, Fertilizers, Cereal, Dairy Produce, Malt, Fur, Cork, Stra, Carpets, Headgear, Umbrellas, Lead Zinc, Tin,
Yes
No
No
Yes
No
Yes
Currently Traded between India and Brazil ?
Source: Jai Group Analysis
Plastics, Fertilizers, Inorganic Chemicals, Furniture, Suitcases, Iron Steel, Footwear
23 Items
75 Items
47
Brazilian share is dominant in sugar and slag, but much lesser in most other commodities
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The Jai GroupBusiness Services for the BRICs Economies
India’s Import Basket for 2010-11
48
27, Min
eral
Fuels
& O
ils
71, Nat
ural /
Culture
d Pearls
84, Nucle
ar re
acto
rs/boile
rs
85, Elec
trica
l for S
ound Rec
29, Org
anic
Chemica
ls
72, Iron an
d Stee
l39, P
lastic
15, Anim
al an
d Veg Fa
ts31, F
ertiliz
ers
98, Misc
26, Ore
s, Sla
g
90, Optica
l, Med
ical P
recs
ion M
eas
87, Veh
icles
Oth
er th
an Rail
28, Inorg
anic
Chemica
ls
73, Arti
cles I
ron/S
teel
89, Ship
s, Boat
s
88, Airc
raft Par
ts
28, Misc
Chem Pro
d
40, Rubber
Article
99,Misc
Good
76, Alu
min
ium
Article
s
48, Pap
er an
d Pulp
74, Copper
Article
s
25, Salt
, Sulp
hur and Cem
ent
44, Wood, C
harco
al7, E
dible
Roots8, E
dible
Fruits
30, Phar
mac
eutica
l Pro
d
32, Tan
ning a
nd Dye
ing E
xtra
cts
47, Pulp
of Cell
usotic M
ater
ials
0
20
40
60
80
100
120
140
116
77
29 27
13 118 7 6 6 5 5 4 4 4 4 3 3 3 3 2 2 2 2 2 2 1 1 1 1
US $
Bn
Source: Jai Group Analysis
Out of 99 HS 2 Level Commodities India’s Imports of 30 are above US$ 1 Bn
Products for Which Brazil is a Net Exporter and India is Net Importer
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49
The Filtering Process Explained
38 Products Where India Net Importer
Removed Product where Brazil Net Importer
75 Common Trade Products
7 HS2 Level Products with India Imports from World Moderate
Source : Jai Group Analysis
3838
We did distance analysis and also checked at HS 4 level if opportunity presents itself
1717 10 HS2 Level Products with India Imports from World >
US$1 Bn
We used a similar filtering process as used for Indian exports
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50
Sourcing From Brazil
Tot Imp From Brazil – US $ 3.5 Bn
High Potential for growth Low Potential for growth
Top 10 Imports From Brazil Currently Traded
(US $ 2.9 Bn)
2603 Copper Ores1507 Soyabean Oil7204, Ferrous Waste2903 Halogenated derivative of Hydrocarbon
High Value But Subjective to Market Needs2709 Petroleum and Oils1701 Cane and Beet Sugar2926 Nitrile Function2524 Asbestos2207 Undenatured Ethyl Alcohol7208 Flat rolled > 600mm widtb
Currently traded
7502, Unwrought Nickel3901, Polymers of Ethylene4407,Wood Sawn2922, Oxygen Function Amino Compunds
8802, Helicopter Parts8523, Prepared Unrecorded Media2602, Mn Ores and Concentrates8501, Electric Motors Excluding Gensets7225, Flat Rolled Prd of Steel and other alloy4104, Tanned Crusted Skin of Bovine7207, Semi Finished Prd of Iron and Steel7227, Bars and rods irregularly wound of Iron and steel2849, Carbides
Future Large Value
4703, Chemical Wood Pulp Soluble7601, Unwrought Aluminium8302, Base Metal Mountings4702, Chemical Wood Pulp Insoluble
4403, Rough Wood7404, Copper Wastes8406, Steam Turbines2901, Acyclic Hydrocarbons7213, Coils of steel
Future Small Value
4410, Particle Board907, Cloves1806, Chocolate /cocoa5004, Silk yarns,4408, vener sheets for wood,2009, Fruit Juices
2909, Ethers and their derivatives2825, Hydrazine2507, Kaolin and Other Kaloinic Clay4813, Cigarette Paper1520, Glycerol7103, Precious Stones1521, Vegetable Wax
Source : Jai Group Analysis
Wood, Pulp, currently untraded items with potential for growth
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The Jai GroupBusiness Services for the BRICs Economies
Sourcing From Brazil (Reasoning)
51Source : Jai Group Analysis
High Potential for further growth Low Potential for further growth
Top 10 Imports From Brazil Currently Traded
•High Growth > 10 %•Brazil Share Moderate
•Low Growth <10%•Dependant •Brazil Share High >15%
Currently traded•High Growth >10%•Brazil to India Share Low < 5%•Brazil to Asia Significant >15%
•Low Growth <10%•Brazil to India Share Already High > 5%•Export to Asia Limited <15%
Future Large Value
•Imports by India Greater than US $ 150 Mn•Brazil Share Low <5%•Brazil to Asia Significant >15%•Also products that are almost zero in terms of value
imported from Brazil.
•Imports by India Greater than Cutoff•Import Growth Not High <10%•Brazil Share High Already >5%•Export to Asia Limited <15%
Future Small Value•Imports Lesser than US $ 150 Mn•High Growth
•Imports Lesser than Cutoff•Low Growth
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The Jai GroupBusiness Services for the BRICs Economies
Scoring Mechanism – Sourcing From Brazil
52
When do you
Score ?
Strategic, industry related barriers
Long term sustainability Logistics Asset Price Multiples Payment terms Trading culture
Price to cost difference: does one need to own
assets to access competitive cost ?
Predominance of Brazilian players as
against multi-nationals
1Brazil has no structural advantage
No logistics access is available
The sector is in great demand and buying a company or the underlying productive assets such as land/ mines/ trees very expensive versus revenue / profit potential
Payment is very informal with very high risk of non performance.
Trading culture is very unorganized. People go back on their word very easily. Very few people speak English in the industry.
One needs to own assets to have access to better than market prices..
Multinationals are pre-dominant and they control both sourcing and markets in Asia.
2Brazil has some structural advantage, so does India
Logistics exists, but is locked up by oligopolistic operators
The sector is a sector with long term fundamentals well recognized, though at present it is not in the midst of a bubble
Payment terms are better than most informal sectors, but is largely based on trust without any documentary hold.
People speak some English. While not every trader is untrustworthy, It is possible to identify good versus bad traders. Trading culture is more formal
Owning assets improves the ability to access lower costs
Multinationals and Brazilians share the ownership of key privileged assets connected with sourcing.
3Brazil has a structural advantage stronger than India
Logistics exists but if prohibitively expensive
The sector is a sector with long term fundamentals well recognized, and currently is fairly valued
Payment terms are international , but are relatively high cost alternatives. Letter of credit required from a class 1 bank of American / European origin.
Most traders are reliable and trust worthy. Easy to communicate. Trading culture is very formal.
Owing assets allows improves reliability and lowers hidden costs
Sourcing is largely dominated by larger Brazilian companies with an international presence
4
Brazil has structural advantage that India cannot match but some of its neighbors can attempt to compete with Brazil
Good logistics options exists, but requires planning
The sector is currently undervalued.
Payment terms are standard international payment and letter of credit from Indian banks are accepted.
Trading is very international. Multinational traders dominate. Very organized and formal culture.
Owing assets is not required , a good sourcing contract ( by volume, time or payment variables) can lower costs significantly.
Sourcing dominated by Brazilian companies who trade internationally, also with India.
5
Brazil has significant structural advantage, which India or its neighbors cannot achieve due to factors that cannot be changed
Logitics is not a big issue at all
The sector’s assets are available very cheap.
Payment terms are open credit. They are better than international standards avoiding huge transaction costs.
Most trading is done transparently on an electronic trading platform. Impersonality lends credibility
Owning assets is not required. It is a easily traded commodity and prices in Brazil are among the lowest even under fair market conditions.
Sourcing dominated by Brazilian companies, who trade internationally, but have not traded with India yet.
Assuming India wants to source ( ignoring Government related barriers), we generated a questionnaire for scoring the sourcing opportunities
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The Jai GroupBusiness Services for the BRICs Economies
53
Tot Imp From
Brazil – US $ 3.5
Bn
High Potential for further growth Low Potential for further growth
Currently traded
2922, Oxygen Function Amino Compounds A 39 8802, Helicopter Parts A 377502, Unwrought Nickel A 35 4104, Tanned Crusted Skin of Bovine A 363901, Polymers of Ethylene A 33 2849, Carbides A 354407,Wood Sawn A 30 7225, Flat Rolled Prd of Steel and other alloy B 34
7207, Semi Finished Prd of Iron and Steel B 337227, Bars and rods irregularly wound of Iron and steel B 338523, Prepared Unrecorded Media B 328501, Electric Motors Excluding Gensets B 312602, Mn Ores and Concentrates B 30
Future Large Value
8302, Base Metal Mountings A 32 2901, Acyclic Hydrocarbons B 337601, Unwrought Aluminium A 31 7213, Coils of steel B 334702, Chemical Wood Pulp Insoluble B 26 7404, Copper Wastes B 314703, Chemical Wood Pulp Soluble B 25 8406, Steam Turbines B 31
4403, Rough Wood B 29
Future Small Value
1806, Chocolate /cocoa A 36 7103, Precious Stones C 325004, Silk yarns, A 36 2909, Ethers and their derivatives C 31907, Cloves A 35 2825, Hydrazine C 314410, Particle Board B 33 1520, Glycerol C 314408, vener sheets for wood, B 30 2507, Kaolin and Other Kaloinic Clay C 302009, Fruit Juices C 29 4813, Cigarette Paper C 27
1521, Vegetable Wax C
As a result, we arranged each heading items in decreasing order of their ease of export (Total Score =45)
We did not score top 10 traded items. Also, we point out the category that each product belong
Sourcing From Brazil
J
The Jai GroupBusiness Services for the BRICs Economies
AGENDA
• Executive Summary
• Indo Brazil Trade Today
• Sourcing From India
• Sourcing From Brazil
• Services Imports
• Investment Study
• Strategies for Trade Promotion for the Consulate
J
The Jai GroupBusiness Services for the BRICs Economies
Brazil’s Service Imports Basket
55
243,O
ther
perso
nal tr
avel
272,O
pera
tional
leasin
g ser
vices
208,Se
a tra
nspo
rt - F
reigh
t
280,A
rchite
ctura
l, eng
ineer
ing
and o
ther
tech
nical c
onsu
ltancy
209,Se
a tra
nspo
rt - S
uppor
ting,
auxil
iary a
nd oth
er se
a tra
nspo
rt se
rvice
s
263,Co
mputer
serv
ices
211,A
ir tra
nspo
rt - P
asse
nger
294, O
ther
gove
rnmen
t ser
vices
n.i.e
.26
0, Fina
ncial s
ervic
es
284,O
ther
busin
ess,
profes
sionna
l
and t
echnic
al se
rvice
s
391, W
orke
r's Re
mittan
ces
270, M
erch
antin
g25
7, Rein
sura
nce27
5, Leg
al se
rvice
s
256, O
ther
dire
ct insu
ranc
e
278, A
dverti
sing,
marke
t res
earch
and p
ublic o
pinion
polling
292, E
mbassi
es an
d con
sulat
es
213, S
uppo
rting a
ir tra
nspor
t
serv
ices
247, T
eleco
mmunica
tion s
ervic
es
255, F
reigh
t insu
rance
0
2000
4000
6000
8000
10000
12000
14000
16000
1800015844
13806
4110 3825 3501 3414 29171907 1679 1119 855 851 756 650 642 521 488 299 270 123U
S $
Mn
Source: Trade Map, Jai Group Analysis
Services for Which Brazil is a Net Importer and India is Net Exporter
Brazil is Net Importer and India Is Significant Exporter i.e > US$1BnBrazil is Net Importer and India Is Significant Exporter i.e > US$1Bn
There are 20 Common Services Traded By India and Brazil with the world where Brazil’s Imports >= US $ 100 Mn
US $ Mn
-17-17-4-466773434-30-301414114114-4-41717882121
121200141433
-5-5
1212
3333
2323 CAGR % (2008-10)of Brazilian Service
Imports
CAGR % (2008-10)of Brazilian Service
Imports
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The Jai GroupBusiness Services for the BRICs Economies
56
The Filtering Process Explained
• India Total Services Traded = 39
• Brazil Total Service Traded = 46
Removed• Brazil Service Imports <$ 100Mn
and• India Services Exports <$ 100Mn
Removed Services• Where India is a Net Importer• Where Brazil is a Net Exporter
28 Common Services at
Detailed Level
7 Services With Probable
Opportunity
EBOPS : Extended Balance of Payments Services ClassificationSource : Jai Group Analysis
99
Like Products have HS Code Services Have EBOPS Code which are 3 Digit Numbers, EBOPS level is most detailed level i.e. similar to HS8 and BPM5 which similar to HS2 in terms of Hierarchy.
J
The Jai GroupBusiness Services for the BRICs Economies
Overview of Service Exports
57
-0.1 0.4 0.9 1.4
-2
0
2
4
6
8
10
12
14
16
Export / Import Ratio Of Brazil
Indi
a’s
Tota
l Exp
orts
(US
$ Bn
))
Source : Trade Map, Jai Group Analysis
53 3 1
There are 19 Common Services Traded By India and Brazil with the world but for some of these India itself is a Net Importer
4
1
India Net Importer
All Values – Total Brazilian Imports (US $ Bn)
Personal Travel
Sea Transport and Frieght
Computer Services
Workers Remittances
Financial ServicesArchitectural
Engg Services
Embassies and Consulates
Misc Business and Proffessional Services
Sea Transport and auxiliary services
Operational Leasing Services
Air Transport Advertising, Market Research
Freight Insurance
Telecommunication ServicesLegal Services
Other Govt Service
Other Direct Ins
Reinsurance
Merchanting
J
The Jai GroupBusiness Services for the BRICs Economies
List Of Services With Opportunity for Export from India to Brazil
58
India Brazil
EBOPS Code
Description
ExportGrowth (05-10)
Import ImportGrowth (05-10)
Export
2009 2010 2009 2010 2009 2010 2009 2010
243 Other personal travel 11,136 14,160 14% 3,706 4,235 10,457 15,844 30% 5,191 5,780
208 Sea transport – Freight 7,508 9,502 17% 2,910 5,577 2,906 4,110 19% 1,161 1,517
280Architectural, engineering and other technical consultancy
1,412 1,971 -6% 3,584 5,565 3,200 3,825 19% 5,583 5,591
263 Computer services 46,233 56,286 21% 1,616 2,176 2,709 3,414 16% 192 195
275 Legal services 603 474 4% 212 160 628 650 42% 273 317
256 Other direct insurance 99 119 19% 110 102 1,042 642 4% 269 366
255 Freight insurance 979 1,240 18% 0 0 133 123 4% 5 9
Travel , Transport , Engineering and Computer Services are Main Targets
Source : Trade Map, Jai Group Analysis
J
The Jai GroupBusiness Services for the BRICs Economies
Sourcing of Services From India
59
High Potential Low Potential
Relatively Easier to Enter
(Score >= 30)
208, Sea transport – Freight 33
243, Other personal travel 30
More difficult to enter Brazil(Score < 30)
263, Computer services 27 256, Other direct insurance 15
280, Architectural, engineering and other technical consultancy
24 255, Freight insurance 19
275, Legal services 19
As a result, we classified the products in to four different categories
J
The Jai GroupBusiness Services for the BRICs Economies
AGENDA
• Executive Summary
• Indo Brazil Trade Today
• Sourcing From India
• Sourcing From Brazil
• Services Imports
• Investment Study
• Strategies for Trade Promotion for the Consulate
J
The Jai GroupBusiness Services for the BRICs Economies
Country Total Inward FDI(US $ Bn) Total Outward FDI (US $ Bn)
2009 2010 2011 2009 2010
India 25.8 19.5 36.5 15.9 14.6
Brazil 25.94 48.4 66 10 11.5
61Source : DIPP, UNCTAD, Jai Group Analysis
Brazil receives two times as much and invests outside slightly less than India
J
The Jai GroupBusiness Services for the BRICs Economies
Where India is Sourcing FDI and where Brazil is directing its FDI Globally
India’s Main Sources Of Inward FDI
Country 2009 2010 2011Cumulative
00-11
% Share of Total
Inward Cumulative
Mauritius 10.3 6.9 9.9 64.1 38
Singapore 2.3 1.7 5.2 17,1 10
UK 0.6 0.7 9.2 15.8 9
Japan 1.1 1.5 2.9 12.3 7
USA 1.9 1.1 1.1 10.5 6
Netherlands 0.8 1.2 1.4 7.1 4
Cyprus 1.6 0.9 1.5 6.4 4
Germany 0.6 0.2 1.6 4.6 3
France 0.3 0.7 0.6 2.9 2
UAE 0.6 0.3 1.7 2.2 1
Brazil’s Main Destinations For Outward FDI
62
Country200
8200
9201
0Cumulative
01-10
% Share of Total
Outward Cumulative
Europe -1 53 4 87 48%
Austria 0 43.2 -5.2 40 22%
Cayman Islands
11 -44 9 32 18%
British Virgin Islands
-2 3 -1 16 9%
United States 4 -1 2 14 8%
Bahamas -1 1 0 13 7%
Netherlands 0 1 8 12 7%
Denmark -3 5 -2 10 6%
Spain 1 0 3 10 6%
Argentina 1 1 1 6 3%
US $ Billion
Source: UNCTAD, Central Bank of Brazil, DIPP, Jai Group Analysis
Brazil mainly invests abroad in Europe, India’s main investors are from Anglo-saxon geographies and Japan
J
The Jai GroupBusiness Services for the BRICs Economies
Brazilian Companies Invested and Present in India
63Source: Jai Group Analysis
Who ? When Entered ? What did they invest in and how much ? Quantitative Indicator of Returns
Gerdau 2007 USD 71 million Gerdau agreed to a second wave of investments (USD 50 millon) to increase production in India
Marcopolo 2008 USD 44 million
Marcopolo is producing 11000 business in India. Local plant is expected to beat Brazil in the next years in terms of the
number of buses produced in a year, Delhi Government has given an order of 600 buses and they are already plying the
streets of New Delhi.
WEG2006 for commercial
sales, 2011 for investment
USD 170 million Have tasted India selling over USD 100 million from Brazil
COFAP 2009 USD 14 million Business grew to USD 10 to USD 15 million in 2011
Vulcabras 2011 USD 20 million Too soon to say as the deal has just closed
Brazilian companies have invested in India …..
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The Jai GroupBusiness Services for the BRICs Economies
64
SERVICES S
ECTOR
TELE
COMMUNICATI
ONS
CONSTRUCTI
ON ACTI
VITIE
S
COMPUTER S
OFTW
ARE & H
ARDWARE
HOUSING &
REAL
ESTATE
CHEMICALS
DRUGS & P
HARMACEUTICALS
POWER
AUTOMOBIL
E INDUSTR
Y
METALL
URGICAL
INDUSTR
IES
HOTEL
& TOURIS
M
PETROLE
UM & N
ATURAL
GAS
TRADIN
G
ELECTR
ICAL
EQUIPMENTS
INFO
RMATION &
BROADCASTI
NG
CEMENT AND G
YPSUM PRODUCTS
MISCELL
ANEOUS MECHANIC
AL
CONSULTANCY S
ERVICES
INDUSTR
IAL
MACHINERY
PORTS
NON-CONVENTI
ONAL ENERGY
AGRICULT
URE SERVIC
ES
FOOD P
ROCESSING IN
DUSTRIE
S
HOSPITAL
& DIA
GNOSTIC C
ENTRES
ELECTR
ONICS
SEA TRANSPORT
TEXTI
LES (I
NCLUDIN
G DYED,P
RINTE
D)
FERMENTA
TION IN
DUSTRIE
S
MININ
G
PAPER AND P
ULP
0
5
10
15
20
25
30
35
32
1311 11 11
109
7 76
3 3 3 3 3 3 2 2 2 2 1 1 1 1 1 1 1 1 1 1
Top 30 Sectors for FDI Inflow into India Cumulative(2000-2012)US $ Billion
Source: DIPP, Jai Group Analysis
COFAP,Endurance, Marco Polo
Gerdau
WEGPerto
Petrobras
Some of the investments have been in the top 30 sectors where India invites FDI
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The Jai GroupBusiness Services for the BRICs Economies
65
US $ Billion
Source: Central Bank Of Brazil, Jai Group Analysis
Financ
e
Mini
ng a
nd q
uarry
ing
Met
al an
d m
etal
prod
ucts
Trans
port,
Sto
rage
& C
omm
un
Busine
ss a
ctivi
ties
Food,
beve
rage
s & to
bacc
o
Who
lesale
& re
tail t
rade
Petro
leum
Chem
icals
& Che
mica
l pro
duct
s
Electri
city,
gas
and
wat
er
Mot
or v
ehicl
es &
oth
er tr
ansp
ort
Electri
cal a
nd e
lectro
nic e
quipm
ent
Coke,
pet
roleu
m, n
uclea
r fue
l
Const
ruct
ion
Woo
d& w
ood
prod
ucts
Mac
hiner
y an
d eq
uipm
ent
Non-m
etall
ic m
inera
l pro
duct
s
Rubbe
r and
plas
tic p
rodu
cts
Unspe
cified
terti
ary
Agricu
lture
and
hun
ting
Hotels
and
rest
aura
nts
Textile
s, c
lothin
g an
d lea
ther
Fores
try a
nd F
ishing
Comm
unity
, per
sona
l ser
vice
Publis
hing,
prin
ting
of re
cord
ed m
edia
Public
adm
inist
ratio
n an
d de
fenc
e
Unspe
cified
sec
onda
ry
Other
man
ufac
turin
g
Educa
tion
Precis
ion in
stru
men
ts0
5
10
15
20
25
30
35
30
2625 24
21 21 20 20
13 13
11
76 6
4 4 3 3 2 2 2 1 1 1 1 1 1 1 0 0
Top 30 Sectors for FDI Inflow into Brazil Cumulative (2001-10)
Torrent Pharma, Dr ReddysLabs,Glenmark, Zydus Cadila, Neelam America,Pidlite, Aurobindo Pharma, Stride Arcolab,
Wipro, Infosys, TCS, Hcl, Mahindra Satyam, Genpact
Renuka Sugars
Aditya Birla Novelis,
L&T
Mahindra Automotive, TVS, Motherson Sumi, Minda
Vijai Electrical, Crompton Greaves, KEC, Kalpataru
ONGC CRI Pumps,Thermax
Aditya Birla Carbon Black United
Phosphorus
Indian investments have been more wide spread and several Indian companies function in Brazil
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The Jai GroupBusiness Services for the BRICs Economies
66
India FDI Inflow Average
2010 & 2011
Average Share of Sector
Brazil FDI Outflow Average
2009 & 2010
Average Share of Sector
Agriculture 323 1% 0 0%
Mining 153 1% 24782 47%
Petroleum and gas 617 2% 2312 14%
Food, beverage 371 1% 2176 8%
Chemicals 2608 9% 48 0%
Construction 1251 5% 27 0%
Textiles 215 1% 62 1%
Metallurgy 1773 5% 1090 5%
Rubber 104 0% 0 0%
Other Manufacturing 10441 36% 968 6%
Trade retail + wholesale 645 2% 496 3%
Finance and Insurance 0 0% 2530 15%
Services to Companies 7311 27% 0 0%
Others services 4133 15% 800 5%
Only IndiaOnly IndiaCommonCommon Only BrazilOnly Brazil
Source: UNCTAD, Central Bank of Brazil, DIPP, Jai Group Analysis
Brazilian outflow strong in Finance, Food and Beverages, Mining and Metals, Petroleum and Gas and, Indian track record in these areas attracting investments has been limited
J
The Jai GroupBusiness Services for the BRICs Economies
AGENDA
• Executive Summary
• Indo Brazil Trade Today
• Sourcing From India
• Sourcing From Brazil
• Services Imports
• Investment Study
• Strategies for Trade Promotion for the Consulate
J
The Jai GroupBusiness Services for the BRICs Economies
TRADITIONAL INITIATIVES
68
Traditional Initiatives
Useful when ? Limitations
Exhibitions and Trade Fairs
Use funding lines availableGood excuse to make a trip
General purpose India fair probably makes less sense than specialized industry fair
Buyer Seller meets New product, where Brazil imports and India exports to ROW
If not backed by research could be wasteful expenditure
Funding Journalists to go to India
Cheap way to get attention to India Often journalists are badly briefed and do a poor job
Sending students for free to India
Relatively inexpensive Wrong kind of students could go
General purpose credit lines for exports
Easy, plain vanilla credit, that relies on local bank for targeting sectors
Banks do not push Indian credit lines which give them low returns
Traditional initiatives of trade promotion have significant limitations
J
The Jai GroupBusiness Services for the BRICs Economies
INITIATIVE PROS AND CONS ( 1/3)
69
New Initiatives Intensity of Examples/ What is it Exactly ? Why and when to use ?
Effort Money Relations
Webinars and Databases on trade that can be searched
High Low Moderate Recent Webinars , Cheat sheets that are being prepared as part of this project
Improve awareness and knowledge
CEO Dinners High Moderate High CEO dinner on Banking and Telecom for IT services firms
B2B sales is key , India needs investment in these sectors, keep high level connections alive
Close connection to Investment Banks and Private Equity Shops
Low Low High India- Brazil innovation fund, large Pharma deals which may need Govt support, Telecom deals, Infrastructure deals, where Government can be a catalyst/ investor
Open to new ideas,influential players with capital, having access to deals
“ Culture in Workplace” Workshops
High Moderate Moderate Inhouse workshops for large companies who can buy Indian IT services
Confront fear of the unknown : “ working with Indians who are aliens and strange people” in a corporate setting and with comfort
Sensitize Indians on how to deal with Brazilians
Press Relations High Moderate Low Press articles, interviews to help Brazilians think about India on friendly terms
Constantly create an agenda in collective psyche that suits Indian interests, confront fears and false propaganda at the idea level among Brazilian elites, crusade on specific issues of visas, imports of services, anti dumping etc, in sophisticated ways
Several new initiatives could be utilized instead (1)
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The Jai GroupBusiness Services for the BRICs Economies
INITIATIVE PROS AND CONS ( 2/3)
70
Strong Feedback and Analysis System
High Low Low Understand what do visa applicants actually do in India and where they needed help, also track whether they were influenced by any of the programs of the consulate
Provide a fact based index of performance and a way to measure impact of multiple initiative
Guided Tour with the Consul
High High Low High powered and select set of Executives chaperoned through India / Brazil
Annual tour where the Consul General and his consultants show the lay of the land to visitors, whether Indian or Brazilian
Big Initiatives with Government Support
High High High • Indian Pharma to reduce health care costs , through direct distribution
• India teaches Brazilian tourism professionals English for Olympics/ World Cup
• India provide expertise for bottom of pyramid goods
Set a bold agenda for industry ( Pharma and BPO) , a publicly visible program where India and Brazil work together where commercial objectives of both are met
On Line communities
Moderate
Moderate
Low • A place on line, for specific sectors of the industry, where Indian and Brazilian businessmen could chat / compare notes, qualify/ black list business practices, where content is created in a collaborative manner.
• A place where manufacturers can advertise their products, creating supply chain integration
Useful for new industries, where mutual knowledge is limited and terms of trade, reliable suppliers etc are difficult, instead of consulate being responsible for content, it just provides a space for people to post comments, it can add as a moderator and remove bad comments, something like Amazon book review, e-bay credibility rating
Sao Paulo- Mumbai CEO roundtable video webinar
Moderate
Low High Periodically beating the tyranny of distance using tools of technology, to connect decision makers, real time, who may not travel to Brazil often, to push major agenda in the corridor
Every three months, good way to distribute ideas among the powerful
Several new initiatives could be utilized instead (2)
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The Jai GroupBusiness Services for the BRICs Economies
INITIATIVE PROS AND CONS ( 3/3)
71
Innovation Fund High High High Using small budgets, unlike China, Engage India and Brazil productively in a value creating activity that is highly coveted by Brazilian Industry, which could convert India’s image as a friend
Areas such as seeds, bio tech, medical devices, urbanization, renewable energy etc, where India and Brazil have significant expertise and needs, but have not really worked together
Engage the Diaspora to connect to Brazil
High Low Moderate Use silicon valley and other parts of the world with active Diaspora to connect to Brazil with greater glamor
Work together with the Overseas Indian ministry to open eyes of Brazilian business to the power of India abroad and through them open more doors
Personal Letter to Buyers with facts and figures/ Direct Mailing done tastefully
Moderate Low Low Use the high office of consulate to bring attention of powerful decision makers to the benefits of trading in specific items with India, elevating a commercial promotion message in the rank of attention, through the symbol of state power delivered in a personal, written communication
Useful for new industries where Brazilians are not aware of Indian strengths
Industry / Specialized Newsletter
High Low Moderate Generate a Portuguese news letter by specific industry, rather than general purpose news, for industries which India wants to push in Brazil among buyers
Useful for new industries, a better way to get attention of practical people who are interested in specifics of an industry than global trends
Kiosks/ Showrooms/ Store in store display
High High Moderate Create display space for B2C products to attract attention of Brazilian consumer, even raffle a trip to India, like Pao de Acucar is doing for Portugal
Useful to show case Indian products and very effective if combined with promotional activity for tourist season to India
State specific partnerships, “ Adopt a Brazilian State”
High Moderate High Compensate for size through focus, by adopting and investing in a specific state, channeling Indian investment , such adoption could change every 3-4 years
Allows India a larger than life presence in small geographical entity
Several new initiatives could be utilized instead (3)
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The Jai GroupBusiness Services for the BRICs Economies
What can the Consulate do
72
Segments ExamplesProblem Description
Drivers for Solution
Types of Government initiatives that will work
Specific Actions the Consulate can take
Products where India already has significant
market share
Pharmaceuticals, Synthetic Yarn, Organic Chemicals
“ Boldness and Creativity”We risk plateauing despite high potential, because strategies are too me-too, and need bold innovation and big moves
1. No bold moves at an industry level
2. New strategies
3. Greater depth of alliances
1. Government level alignments with Federal and State Governments to solve a Brazilian problem say in healthcare
2. Start engaging bigger banks actively, and connecting them with Indian CEOs , catalyzing interaction
1. Work with Sao Paulo Government health care to identify key problems in Brazilian health care I that India can help solve, involve local firms to dis-arm protectionist tendencies
2. Start cultivating relationships with strong Brazilian investment banks and private equity shops
Consulate should tailor specific measures for specific product niches, helping define bold initiatives at Government to Government level, involving Indian private sector is one good idea
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The Jai GroupBusiness Services for the BRICs Economies
73
Segments ExamplesProblem Description
Drivers for Solution
Types of Government initiatives that will work
Specific Actions the Consulate can take
Products where India is beginning to make an
entry
Insecticides, transformers
“ Lack of broad awareness” We risk not capitalizing on some initial victories, because not many Indian firms know that others have succeeded and the firms who have succeeded may not know how much more they can succeed if they can continue investing
1. Lack of knowledge of existing victories
2. Additional investments
3. Broadening the product portfolios
1. Publicize the success of Indian firms in specific industries through a new letter/ webinar
2. Identify key issues and show how Indian companies have solved them
3. Find ways to stimulate co-operative behavior that could benefit every one
a. Common problems every one faces
b. Lobbyingc. Sharing leads and
consortiums ( way the Spanish did)
4. EXIM Bank and other sources of capital
5. Promote small groups within the Chamber to share experiences
1. Industry specific webinars2. News Letters that are specific to
industry3. Regular industry specific work
sessions on line4. Community building on line
a. Who are the bad creditors ?
b. Which companies do not honor commitments
c. What are the upcoming tenders in the sector etc
5. Targeted credit lines to stimulate adoption
What can the Consulate do
Consulate can promote crowd learning, on line communities and study groups to attack common problems, identifying what they are is a good first step
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The Jai GroupBusiness Services for the BRICs Economies
74
Segments ExamplesProblem Description
Drivers for Solution
Types of Government initiatives that will work
Specific Actions the Consulate can take
Products where India has not even started, but
has strengths
bags and trunks, gen sets, Tourism
“ Lack of knowledge on “ low hanging fruit”Indians have been selling to the rest of the world, but not to Brazil, it is new and unknown
1. Lack of industry understanding/ customer segmentation
2. Who are the first customers for India ?
3. Which are the first suppliers from India
1. Build awareness about Indian alternatives among Brazilian buyers
2. Collect market intelligence on what sells in Brazil, under what terms and why ?
3. Create an atmosphere of comfort and trust for first deals to happen
4. Transfer credibility of consulate to worthy Indian businessmen
5. Assistance on logistics, trade terms
1. Webinars to Brazilians2. Personalized Letters to buyers3. Customized marketing campaigns,
direct mailing4. Select dinner meetings on
product categories that involve B2B selling
5. Buyer seller meets6. Guided Tours of Brazil and India7. Specific fairs
What can the Consulate do
Detailed market knowledge can help in specific sectors
J
The Jai GroupBusiness Services for the BRICs Economies
75
Segments ExamplesProblem Description
Drivers for Solution
Types of Government initiatives that will work
Specific Actions the Consulate can take
Products where India
has potential but there is/
will be resistance
IT services
Brazilians know Indians are good, Indians are here, but business is not just happening“ Trust needed, concrete win-win opportunities and multi-cultural comfort needs to be built
1. Lack of Trust2. Focus on
competition rather than co-opetition
3. Indian success elsewhere has made them less flexible and a wee bit arrogant
4. Brazilian worries has made them over protectionist
1. Articulate 2-3 platforms where Brazil and India can work together
2. Communications to the wider media that India is not a threat, but a friend
3. Actively promote real time, hands on interaction between Indian and Brazilian executives under a comfortable and trusting environment, institutionalize a “ introduction to Brazilians/ Indians at the work place ” training module together with schools like FGV
4. Actively court Brazilian Government to provide Indian solutions for Brazilian problems
5. Engage the Indian diaspora in United States as a way to bridge main land India with Brazilian self-perception of a “Western Society”
1. Use the cultural center to organize Workshops that involve Indian and Brazilian senior executives to build cultural connect, using professional coaches, organized through the chamber of commerce, subsidized by Indian IT companies/ Nasscom, without having to explicitly state it
2. Sponsor in-house workshops in Banks, Telecom and Retail companies on working with India
3. Hire a Press relations agency and re-define national debate in press and Television
4. CEO round table between Mumbai and Sao Paulo involving IT , Banking, Telecom executives and clients
5. India- Brazil, innovation fund6. Guided tour to Silicon Valley
What can the Consulate do
Trust building is needed in some sectors, Press relations is one specific area which the consulate is underutilizing today