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Growth of a new middle-class with avid consumers of added value products and services, added to high local production costs, make Brazil a strategic market for Colombian entrepreneurs seeking to diversify their exports.
"It is the largest market in Latin America and the sixth-largest economy in the world with a population of 193 million. Recently, however, it has also recorded an increase in domestic consumption boosted by growth of a middle-class in new parts of the country, like the north and north-east," explained PROCOLOMBIA president, Maria Claudia Lacouture.
Brazil's middle-class currently consists of 105 million people, that is 54% of the total population, having recorded an increase of 35 million people in the last 10 years according to FGV data.
The increase in new consumers was the central theme of a seminar organized by Proexport. Its objective was to highlight business opportunities and to teach Colombian entrepreneurs about relevant logistical and cultural aspects.
" Colombia also has competitive advantages over other countries, such as tariff benefits. It is on equal terms as other Mercosur members," added Carlos de Oliveira, an international consultant and one of the panelists, referring to the Economic Complementation Agreement in force between the two countries since 2005, which has benefited 676 Colombian products.
" In general, I think that Colombian products have a huge advantage when entering that market, especially in the north and north-east. Food will be very important because Colombia has a strong and well-prepared industry, and also cosmetics. I believe that it is a sector that has a huge consumption potential in Brazil," said Oliveira.
Beverages, food, bars and restaurants, trips, clothes, cosmetics, school supplies and furniture were the main focuses of middle-class consumption, according to a study by Data Popular which was also presented at the seminar.
High Local Production Costs Are Another Advantage
PROCOLOMBIA analysis shows that high domestic production costs should also be added to the above advantages as this creates new opportunities for foreign providers.
Infrastructure, taxes, labor, energy prices and inefficient bureaucracy processes are some of the reasons for high costs paid by Brazilian producers.
" We believe it was very important to learn that we have competitive advantages in freight costs, given that it is cheaper to send things from Cartagena to the north-east of Brazil than to ship things from other regions in Brazil," affirmed John Jairo Lopez from Tomacol S.A.S., a company from Bogota specializing in functional and natural foods, such as cereal bars and dried fruit.
This effect can be seen in imports, which, according to Trademap, totaled USD 223,149.1 million in 2012. Its main providers were China, the United States and Argentina. Colombia came in 14th place last year, which indicates that there is room for growth.
Fluctuations in the Business Cycle Are Important
Another participant in the seminar was Ricardo de Zubiria from Ciplas S.A., a company that manufactures polypropylene packing products for export to the United States, Mexico and Venezuela. " Their schedule is very important to us, for example to know that in January or February they trade different things than in other months. The cultural aspect is not just interesting, it is essential when doing business," said Zubiria.
Panelist and international consultant Amabry Castro said that " It is important to understand Brazil's annual business cycles, such as its climate and commemorative dates."
For example, summer, school vacations and carnivals take place from January to March, so there are opportunities in tourism, food and beverage, hygiene and apparel segments. " Holy Week (Easter) is the central activity in March and April, with demand for products such as chocolates, toys and cakes. And there are the June Festivals, Festa Junina, so business opportunities are in products like corn derivatives, cassava, beverages and candies."
Opportunities Identified by PROCOLOMBIA
PROCOLOMBIA also spoke about a few of the neighboring country's consumption trends. " For example, Colombian flower cultivators have interesting opportunities, given that roses and carnations have the highest consumption as they are considered elegant and appropriate for meeting and wedding decorations, as well as other events," stated the PROCOLOMBIA president.
She also explained that producers of small leather goods may be able to trade with the Brazilians. " There is demand, mainly in boutiques and department stores, where we have seen that the trend is for modern designs but that don't loose the cultural inheritance from Portugal and indigenous communities. Therefore, they require cutting-edge designs that are adapted to the latest trends in fashion."
Some other opportunities identified were as follows:
Agribusiness: palm fats and oils, tuna, flowers, fresh tropical fruit, cape gooseberry, sweet passion fruit, cookies and snacks.
Manufacturing: PVC and polyethylene, insecticides, fungicides, glass containers, cosmetics, chemical supplies, bed linen hotel supplies, machinery parts, graphics industry, publicity stickers, and home and office furniture.
Apparel: woolen suits for men, jeans with special washes and textile fibers, and small leather goods.
Services: Software development, cell applications and Spanish BPO services.
