Oil and Gas Production in Brazil: A Strategic Reference, 2007

Oil and Gas Production in Brazil: A Strategic Reference, 2007 Edited by Philip M. Parker, Ph.D. Eli Lilly Chair Profes...

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Oil and Gas Production in Brazil: A Strategic Reference, 2007

Edited by

Philip M. Parker, Ph.D. Eli Lilly Chair Professor of Innovation, Business and Society INSEAD (Fontainebleau & Singapore)

www.icongrouponline.com

©2007 Icon Group International, Inc.

ii COPYRIGHT NOTICE ISBN 0-497-35841-7 All of ICON Group International, Inc. publications are copyrighted. Copying our publications in whole or in part, for whatever reason, is a violation of copyrights laws and can lead to penalties and fines. Should you want to copy tables, graphs, or other materials from our publications, please contact us to request permission. ICON Group International, Inc. often grants permission for very limited reproduction of our publications for internal use, press releases, and academic research. Such reproduction requires, however, confirmed permission from ICON Group International, Inc. Please read the full copyright notice, disclaimer, and user agreement provisions at the end of this report.

IMPORTANT DISCLAIMER

Neither ICON Group International, Inc. nor its employees can be held accountable for the use and subsequent actions of the user of the information provided in this publication. Great efforts have been made to ensure the accuracy of the data, but we cannot guarantee, given the volume of information, accuracy. Since the information given in this report is forward-looking, the reader should read the disclaimer statement and user agreement provisions at the end of this report.



iii

About Icon Group International, Inc. Icon Group International, Inc.’s primary mission is to assist managers with their international information needs. U.S.-owned and operated, Icon Group has field offices in Paris, Hong Kong, and Lomé, Togo (West Africa). Created in 1994, Icon Group has published hundreds of multi-client databases, and global/regional market data, industry and country publications. Global/Regional Management Studies: Summarizing over 190 countries, management studies are generally organized into regional volumes and cover key management functions. The human resource series covers minimum wages, child labor, unionization and collective bargaining. The international law series covers media control and censorship, search and seizure, and trial justice and punishment. The diversity management series covers a variety of environmental context drivers that effect global operations. These include women’s rights, children’s rights, discrimination/racism, and religious forces and risks. Global strategic planning studies cover economic risk assessments, political risk assessments, foreign direct investment strategy, intellectual property strategy, and export strategies. Financial management studies cover taxes and tariffs. Global marketing studies focus on target segments (e.g. seniors, children, women) and strategic marketing planning. Country Studies: Often managers need an in-depth, yet broad and up-to-date understanding of a country’s strategic market potential and situation before the first field trip or investment proposal. There are over 190 country studies available. Each study consists of analysis, statistics, forecasts, and information of relevance to managers. The studies are continually updated to insure that the reports have the most relevant information available. In addition to raw information, the reports provide relevant analyses which put a more general perspective on a country (seen in the context of relative performance vis-à-vis benchmarks). Industry Studies: Companies are racing to become more international, if not global in their strategies. For over 2000 product/industry categories, these reports give the reader a concise summary of latent market forecasts, pro-forma financials, import competition profiles, contacts, key references and trends across 200 countries of the world. Some reports focus on a particular product and region (up to four regions per product), while others focus on a product within a particular country.



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Table of Contents 1

INTRODUCTION & METHODOLOGY.............................................................................1

1.1

What Does This Report Cover?

1

1.2

How to Strategically Evaluate Brazil

1

1.3

Latent Demand and Accessibility in Brazil

3

2

OIL AND GAS PRODUCTION IN BRAZIL .......................................................................5

2.1 Latent Demand and Accessibility: Background 5 2.1.1 Oil Bidding Rounds.................................................................................................................................... 6 2.1.2 Geological and Geophysical Surveys ......................................................................................................... 7 2.1.3 Drilling Activities....................................................................................................................................... 7 2.2

Latent Demand: Leading Segments

7

2.3

Market Trends

10

2.4

Latend Demand: Target Buyers

10

2.5

Market Issues and Obstacles

11

2.6 Accessibility: The Structure of Competition 12 2.6.1 Import Market .......................................................................................................................................... 12 2.6.2 Local and Foreign Competition................................................................................................................ 13 2.7

Market Access

13

2.8 Accessibility: Key Factors 14 2.8.1 Standards .................................................................................................................................................. 14 2.8.2 Financing Strategies ................................................................................................................................. 14 2.9

Accessibility: Trade Events

15

2.10

Key Contacts

15

2.11

Import Statistics

17

3

FINANCIAL INDICATORS: OIL AND GAS FIELD SERVICES .................................19

3.1 Overview 19 3.1.1 Financial Returns and Gaps in Brazil....................................................................................................... 20 3.1.2 Labor Productivity Gaps in Brazil............................................................................................................ 22 3.1.3 Limitations and Extensions ...................................................................................................................... 23 3.2 Financial Returns in Brazil: Asset Structure Ratios 24 3.2.1 Overview .................................................................................................................................................. 24 3.2.2 Assets – Definitions of Terms .................................................................................................................. 24 3.2.3 Asset Structure: Outlook .......................................................................................................................... 27 3.2.4 Large Variances: Assets ........................................................................................................................... 28 3.2.5 Key Percentiles and Rankings .................................................................................................................. 31



Contents

v

3.3 Financial Returns in Brazil: Liability Structure Ratios 46 3.3.1 Overview .................................................................................................................................................. 46 3.3.2 Liabilities and Equity – Definitions of Terms .......................................................................................... 46 3.3.3 Liability Structure: Outlook ..................................................................................................................... 48 3.3.4 Large Variances: Liabilities ..................................................................................................................... 49 3.3.5 Key Percentiles and Rankings .................................................................................................................. 52 3.4 Financial Returns in Brazil: Income Structure Ratios 65 3.4.1 Overview .................................................................................................................................................. 65 3.4.2 Income Statements – Definitions of Terms .............................................................................................. 65 3.4.3 Income Structure: Outlook ....................................................................................................................... 68 3.4.4 Large Variances: Income.......................................................................................................................... 69 3.4.5 Key Percentiles and Rankings .................................................................................................................. 72 3.5 Financial Returns in Brazil: Profitability Ratios 87 3.5.1 Overview .................................................................................................................................................. 87 3.5.2 Ratios – Definitions of Terms .................................................................................................................. 87 3.5.3 Ratio Structure: Outlook .......................................................................................................................... 89 3.5.4 Large Variances: Ratios ........................................................................................................................... 90 3.5.5 Key Percentiles and Rankings .................................................................................................................. 93 3.6 Productivity in Brazil: Asset-Labor Ratios 106 3.6.1 Overview ................................................................................................................................................ 106 3.6.2 Asset to Labor: Outlook ......................................................................................................................... 107 3.6.3 Asset to Labor: International Gaps......................................................................................................... 108 3.6.4 Key Percentiles and Rankings ................................................................................................................ 111 3.7 Productivity in Brazil: Liability-Labor Ratios 126 3.7.1 Overview ................................................................................................................................................ 126 3.7.2 Liability to Labor: Outlook .................................................................................................................... 127 3.7.3 Liability and Equity to Labor: International Gaps.................................................................................. 128 3.7.4 Key Percentiles and Rankings ................................................................................................................ 131 3.8 Productivity in Brazil: Income-Labor Ratios 144 3.8.1 Overview ................................................................................................................................................ 144 3.8.2 Income to Labor: Outlook ...................................................................................................................... 145 3.8.3 Income to Labor: Gaps ........................................................................................................................... 146 3.8.4 Key Percentiles and Rankings ................................................................................................................ 149

4

MACRO-ACCESSIBILITY IN BRAZIL .........................................................................164

4.1 Executive Summary 164 4.1.1 Government Role in the Economy ......................................................................................................... 164 4.1.2 Infrastructure .......................................................................................................................................... 165 4.2 Political Risks 165 4.2.1 Economic Relationship with the United States ...................................................................................... 165 4.2.2 The Political System............................................................................................................................... 165 4.3 Marketing Strategies 166 4.3.1 Distribution Channel Options................................................................................................................. 166 4.3.2 Agents and Distributors.......................................................................................................................... 166 4.3.3 Franchising ............................................................................................................................................. 167 4.3.4 Direct Marketing Options....................................................................................................................... 167 www.icongrouponline.com


Contents 4.3.5 4.3.6 4.3.7 4.3.8 4.3.9 4.3.10 4.3.11 4.3.12 4.3.13 4.3.14

vi

Joint Ventures and Licensing Options.................................................................................................... 168 Creating a Sales Office........................................................................................................................... 169 Selling Factors and Techniques.............................................................................................................. 169 Advertising and Trade Promotion .......................................................................................................... 169 Pricing Issues.......................................................................................................................................... 171 After Sales Service and Customer Support ............................................................................................ 171 Selling to the Government...................................................................................................................... 171 Intellectual Property Risks ..................................................................................................................... 172 Hiring Local Counsel ............................................................................................................................. 177 Performing Due Diligence and Checking Bona Fides............................................................................ 178

4.4 Import and Export Regulation Risks 178 4.4.1 Taxes and Fees Assessed on Imports ..................................................................................................... 179 4.4.2 Customs Regulations.............................................................................................................................. 182 4.4.3 Import Licenses ...................................................................................................................................... 182 4.4.4 Export Controls ...................................................................................................................................... 183 4.4.5 Documentation Required for Trade........................................................................................................ 183 4.4.6 Temporary Goods Entry Requirements.................................................................................................. 183 4.4.7 Labeling and Marking Requirements ..................................................................................................... 184 4.4.8 Restrictions on Imports .......................................................................................................................... 185 4.4.9 Standards ................................................................................................................................................ 185 4.4.10 Free Trade Zones and Warehouses......................................................................................................... 188 4.4.11 Membership in Free Trade Arrangements.............................................................................................. 190 4.5 Investment Climate 190 4.5.1 Openness to Foreign Investment ............................................................................................................ 190 4.5.2 Conversion and Transfer Policies........................................................................................................... 191 4.5.3 Expropriation and Compensation ........................................................................................................... 192 4.5.4 Dispute Settlement ................................................................................................................................. 192 4.5.5 Political Violence ................................................................................................................................... 192 4.5.6 Performance Requirements and Incentives ............................................................................................ 192 4.5.7 Right to Private Ownership and Establishment ...................................................................................... 193 4.5.8 Protection of Property Rights ................................................................................................................. 193 4.5.9 Transparency of the Regulatory System................................................................................................. 194 4.5.10 Bilateral Investment Agreements ........................................................................................................... 194 4.5.11 OPIC and Other Investment Insurance Programs................................................................................... 195 4.5.12 Labor ...................................................................................................................................................... 195 4.5.13 Capital Outflow Policy........................................................................................................................... 196 4.5.14 Major Foreign Investors ......................................................................................................................... 196 4.5.15 Efficient Capital Markets and Portfolio Investment............................................................................... 197 4.6 Trade and Project Financing 198 4.6.1 Banking System...................................................................................................................................... 198 4.6.2 Foreign Exchange Controls Affecting Trade.......................................................................................... 199 4.6.3 General Availability of Financing .......................................................................................................... 199 4.6.4 How to Finance Exports and Methods of Payment ................................................................................ 200 4.6.5 Availability of Project Financing ........................................................................................................... 203 4.6.6 Banks with Correspondent Banking Arrangement ................................................................................. 204 4.7 Travel Risks 205 4.7.1 Travel Advisory and Visas ..................................................................................................................... 205 4.7.2 Infrastructure for Conducting Business.................................................................................................. 206 4.7.3 Country Data .......................................................................................................................................... 207



Contents

vii

4.8 Key Contacts 207 4.8.1 Brazilian Government Contacts ............................................................................................................. 207 4.8.2 Brazilian Trade Associations and Chambers of Commerce ................................................................... 213 4.8.3 Market Research Companies.................................................................................................................. 238 4.8.4 Commercial Banks ................................................................................................................................. 242 4.8.5 U.S. Mission in Brazil ............................................................................................................................ 244 4.8.6 Attorneys in Brazil ................................................................................................................................. 245 4.8.7 U.S. Government Agencies .................................................................................................................... 249

5

DISCLAIMERS, WARRANTEES, AND USER AGREEMENT PROVISIONS .........253

5.1

Disclaimers & Safe Harbor

253

5.2

Icon Group International, Inc. User Agreement Provisions

254



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1 1.1

INTRODUCTION & METHODOLOGY WHAT DOES THIS REPORT COVER?

The primary audience for this report is managers involved with the highest levels of the strategic planning process and consultants who help their clients with this task. The user will not only benefit from the hundreds of hours that went into the methodology and its application, but also from its alternative perspective on strategic planning relating to oil and gas production in Brazil. As the editor of this report, I am drawing on a methodology developed at INSEAD, an international business school (www.insead.edu). For any given industry or sector, including oil and gas production, the methodology decomposes a country’s strategic potential along four key dimensions: (1) latent demand, (2) micro-accessibility, (3) proxy operating pro-forma financials, and (4) macro-accessibility. A country may have very high latent demand, yet have low accessibility, making it a less attractive market than many smaller potential countries having higher levels of accessibility. With this perspective, this report provides both a micro and a macro strategic profile of oil and gas production in Brazil. It does so by compiling published information that directly relates to latent demand and accessibility, either at the micro or macro level. The reader new to Brazil can quickly understand where Brazil fits into a firm’s strategic perspective. In Chapter 2, the report investigates latent demand and micro-accessibility for oil and gas production in Brazil. In Chapters 3 and 4, the report covers proxy operating pro-forma financials and macro-accessibility in Brazil. Macro-accessibility is a general evaluation of investment and business conditions in Brazil.

1.2

HOW TO STRATEGICALLY EVALUATE BRAZIL

Perhaps the most efficient way of evaluating Brazil is to consider key dimensions which themselves are composites of multiple factors. Composite portfolio approaches have long been used by strategic planners. The biggest challenge in this approach is to choose the appropriate factors that are the most relevant to international planning. The two measures of greatest relevance to oil and gas production are “latent demand” and “market accessibility”. The figure below summarizes the key dimensions and recommendations of such an approach. Using these two composites, one can prioritize all countries of the world. Countries of high latent demand and high relative accessibility (e.g. easier entry for one firm compared to other firms) are given highest priority. The figure below shows two different scenarios. Accessibility is defined as a firm’s ease of entering or supplying from or to a market (the “supply side”), and latent demand is an indicator of the potential in serving from or to the market (the “demand side”).



Introduction & Methodology

2

Framework for Prioritizing Countries Demand/Market Potential Driven Firm

High

Highest Priority

High Priority Latent Demand

Moderate Priority Low Priority

Low

Lowest Priority Low

High Relative Accessibility

Accessibility/Supply Averse Firm High Highest Priority High Priority Latent Demand

Moderate Priority Low Priority Lowest Priority

Low High

Low Relative Accessibility




3

In the top figure, the firm is driven by market potential, whereas the bottom figure represents a firm that is driven by costs or by an aversion to difficult markets. This report treats the reader as coming from a “generic firm” approaching the global market – neither a market-driven nor a costdriven company. Planners must therefore augment this report with their own company-specific factors that might change the priorities (e.g. a Canadian firm may have higher accessibility in Canada than a German firm).

1.3

LATENT DEMAND AND ACCESSIBILITY IN BRAZIL

This report provides a detailed overview of factors driving latent demand and accessibility for oil and gas production in Brazil. Latent demand is largely driven by economic fundamentals specific to oil and gas production. This topic is discussed in Chapter 2 using work carried out in Brazil on behalf of American firms and authored by the United States government (typically commercial attachés or similar persons in local offices of the U.S. Department of State). I have included a number of edits to clarify the information provided. Latent demand only represents half of the picture. Chapter 2 also deals with micro-accessibility for oil and gas production in Brazil. I use the term “micro” since the discussion is focused specifically on oil and gas production. Chapter 3 is also a stand-alone report that I have authored. It covers proxy pro-forma financial indicators of firms operating in Brazil. I use the word “proxy” because the provided figures only cover a “what if” scenario, based on actual operating results for firms in Brazil. The numbers are only indicative of an average firm whose primary activity is in Brazil. It covers a vertical analysis of the maximum likelihood balance sheet, income statement, and financial ratios of firms operating in Brazil. It does so for a particular Standard Industrial Classification (SIC) code. That code covers “oil and gas field services”, as defined in Chapter 3. Again, while “oil and gas field services” does not exactly equate to “oil and gas production”, it nevertheless gives an indicator of how Brazil compares to other countries for a proxy adjacent category along various dimensions. Chapter 4 deals with macro-accessibility and covers factors that go beyond oil and gas production. A country may at first sight appear to be attractive due to a high latent demand, but it is often less attractive when one considers at the macro level how easy it might be to serve that entire potential and/or general business risks. While accessibility will always vary from one company to another for a given country, the following domains are typically considered when evaluating macro-accessibility in Brazil: •

Openness to Trade in Brazil

•

Openness to Direct Investment in Brazil

•

Local Marketing and Entry Strategy Alternatives

•

Local Human Resources

•

Local Risks




4

Across these domains, a number of not-so-obvious factors can affect accessibility and risk. These are covered in the Chapter 4, which is a general overview of investment and business conditions in Brazil. Chapter 4 is also presented from the perspective of an American firm, though is equally applicable to most firms entering Brazil. This chapter is also authored by local offices of the U.S. government, as is Chapter 2. Likewise, I have included a number of edits to clarify the provided information as it relates to the general strategic framework mentioned earlier.



5

2 2.1

OIL AND GAS PRODUCTION IN BRAZIL LATENT DEMAND AND ACCESSIBILITY: BACKGROUND

Brazil’s oil and gas industry is one of the most attractive sectors for U.S. exporters. Since state-owned Petrobras’ monopoly ended in 1998, over 50 firms have entered Brazil’s upstream sector, with 633 oil blocks awarded during eight oil-concession offerings, most recently in November 2006. Still, Petrobras was awarded the majority of these concessions, so most opportunities for U.S. firms lie in servicing or supplying Petrobras. (Interested suppliers must register at www.petrobras.com.br – “Suppliers Channel Guide.”) During the 2007-2011 timeframe, Petrobras plans to invest U.S. $40.7 billion in domestic exploration and production (E&P) to increase domestic production from 2005’s 1.720 million BOED (barrels of oil equivalent/day) to 3.493 million BOED by 2011. From January to September 2006, Brazil produced 1.823 million BOED, of which approximately 18% or 310,000 BOED originated from onshore fields. The natural gas production from onshore fields reached 16.9 million cubic meters/day from January to September 2006, accounting for 55% of Brazil’s total natural gas production. Brazil’s proven domestic reserves reached 13.2 billion BOE in 2005, 10% of which is in the onshore segment. Offshore oil production accounts for about 82% of Brazil’s oil production, although in terms of quantity, the onshore segment accounts for a larger number of oil/gas fields. The vast majority of offshore fields (96%) are located in the Campos Basin in the State of Rio de Janeiro, whereas onshore fields are mostly found in the north and northeast of Brazil, primarily in Rio Grande do Norte and the Amazon. Best sales prospects in the onshore segment include progressive cavity and sucker rod pumps, polish rods, tri-cone drill bits, packer systems, flow control equipment, compressors, heat exchangers, fiberglass reinforced pipes, intelligent pig inspection, plant automation, well stimulation, sand control completions, and others. This report will focus on Brazil’s onshore exploration and production activities. Brazil ranks 6th in world proven oil reserves as well as in oil production, but it is not part of the Organization of Petroleum Exporting Countries (OPEC). Brazil’s crude varies from an API degree of 13 to 42 with an average above an API of 20, heavy oil. In the onshore segment, however, the average API degree is of 34, light oil. Brazil’s daily production reached a level of 1.823 million BOED from January to September 2006, of which 18% or 310,000 BOED originated from onshore fields. In the same period, the natural gas production from onshore fields reached 16.9 million cubic meters/day, accounting for 55% of Brazil’s total natural gas production. Brazil’s leading oil onshore states are Rio Grande do Norte and Bahia, however the largest onshore natural gas fields are found in the Amazon, followed by Bahia.



Oil and Gas Production

6

The following map illustrates Petrobras’ oil exploration wells distributed by Brazilian Basins, for the period 20062010, and the concession areas that Petrobras and other oil companies currently hold.

Source: Petrobras Since 1998, 724 exploration wells have been drilled – 592 of them by Petrobras. The number of operating drilling rigs in Brazil is larger in the onshore segment; however the bulk of Brazil’s oil and gas production (62%) comes predominantly from offshore, with water depths of 300 to 1500 meters. High international oil prices, however, have resulted in new players in Brazil’s onshore segment. Concurrently, Petrobras, which is still the largest onshore producer, is also gradually increasing investments in this segment. From 2007 to 2011, Petrobras plans to invest U.S. $7.1 billion in the onshore sub-sector, or 17.4% of its entire E&P investment portfolio of U.S. $40.7 billion. Specifically, on December 21, 2006, Petrobras’ Executive Board announced investments of U.S. $724 million in two onshore fields: the Canto do Amaro, in Rio Grande do Norte State (U.S. $410 milhões), and the Carmópolis, Sergipe State (U.S. $314 milhões). Petrobras’ goal is to increase these fields’ daily oil production from 48,000 b/d to 70,000 b/d. These fields are included in Petrobras’ Revitalization Program for Fields with a High Exploitation Degree (“Recage” program), created in 2004. The Recage is turned to those mature onshore fields that may result in high premium with minimum risks. As part of the Recage, Petrobras plans to drill 367 production and injection wells and another 1,387 for conversion or re-completion works. The goal is to apply best practices in asset management, increase production and recovery factors, and optimize costs. According to Petrobras, the average growth rate of Brazil’s oil onshore production has been 1.36% a year from 1999 to 2005, versus 17.63% growth in the offshore segment. The reason for that was the priority given by Petrobras to find large oil fields offshore.

2.1.1

Oil Bidding Rounds

Since 1998, 633 oil blocks have been awarded during eight oil-concession offerings, most recently in November 2006. In the 2005 round, however, from a total of 251 blocks awarded, 210 were onshore. In that specific round, Brazil’s National Oil and Gas Regulatory Agency, ANP, included a number of marginal fields that attracted the attention of several bidders. These companies plan to invest U.S. $27 million during their concession period to recover these mature fields. A complete table showing all the oil round results is available on the ANP site www.icongrouponline.com



7

(www.anp.gov.br/petro/rodadas_de_licitacoes.asp). The next oil round should be held in 2007, but the dates have yet to be announced.

2.1.2

Geological and Geophysical Surveys

ANP reportedly plans to offer a larger number of new frontier onshore blocks during the next oil bidding rounds. ANP believes that new frontier blocks are key to ensure larger onshore discoveries over the next few years. As a comparison, ANP usually argues that while in the United States about 2,700 pioneer onshore wells are drilled per year, in Brazil this number is less than 50 per year. To accomplish the goal of offering a substantial number or new frontier blocks, ANP is expected to contract out geological and geophysical survey mappings in the market. Such contracts, however, are pending an improvement in ANP’s budget. In theory, ANP is entitled to receive about U.S. $1 million per year from royalty revenues to increase its knowledge of Brazilian oil and gas Basins; however, over the last few years, the Brazilian government has reallocated ANP’s funds to other areas, thus jeopardizing ANP’s goal to contract larger geological surveys. On the other hand, Petrobras has, reportedly, reactivated a second seismic/geophysical staff to support its onshore exploration campaign. In fact, Petrobras recently purchased new survey equipment and hired the U.S. company Grant Geophysical to give operational support to Petrobras’ staff. Concurrently, as part of Petrobras/CENPES’ PRAVAP – Advanced Oil Recovery Program, CENPES will test new technologies to increase the recovery factor of onshore heavy oil production. PRAVAP’s study areas focus on technologies applicable to well-formation interface and construction of wells to produce low-cost oil in mature or middle-aged fields, on or offshore. More details on the PRAVAP program are available on CENPES’ Web site: www2.petrobras.com.br/tecnologia/ing/areadeatuacao_recuperacaoavancada.asp.

2.1.3

Drilling Activities

In 2006, Petrobras drilled 324 onshore fields, the majority of which (315) were production development fields. Over the next few years, Petrobras plans to increase its onshore drilling activities to implement large exploitation projects aimed at accelerating drainage of oil reservoirs that have already been discovered. Instead of trying to reverse the declining rate of oil production, the goal is to pump more oil more quickly to take advantage of high oil prices. The rationale behind the exploitation approach is the fact that onshore exploration is yielding diminishing returns. According to Petrobras, from 2003 to mid 2006, only six new onshore fields have been discovered and put into production, whereas the reactivation of mature areas yielded better results. In 2005 alone, Petrobras managed to reactivate eight fields in the Bahia state.

2.2

LATENT DEMAND: LEADING SEGMENTS

In a recent presentation at the 1st Brazil Onshore Show held in November 2006 in Natal, Rio Grande do Norte State, Petrobras announced specific opportunities for contractors in the onshore field, as follows: •

Increase recovery factor and drainage speed.

•

Improve reservoir management policies.

•

Access non-conventional reservoirs.

•

Optimize steam injection and water injection projects.

•

Remove bottlenecks in production facilities.

•

Optimize lift systems.



Oil and Gas Production •

8

Reduce drilling and workover costs.

In the same presentation, Petrobras also released a list of goods and service requirements in the onshore sub-sector that they will procure over the next few years. They include the following: •

Production equipment: Progressive cavity pumps, sucker rod pumps, polish rods, tri-cone drill bits, packer systems, flow control equipment.

•

Process Equipment: Compressors, turbo generators, heat exchangers, engines, steam generators, fiberglass reinforced pipes.

•

Services: Intelligent pig inspection, plant automation, coating services, well stimulation, sand control completions, horizontal drilling.

Currently, 60 workover and production onshore drilling rigs render services to Petrobras, nine of which are Petrobras-owned. The plan is to reach 71 rigs by 2008. Likewise, Petrobras plans to almost double the number of drilling rigs by 2008, jumping from 18 in 2006 to 34 by 2008, as shown in the following table.

Petrobras’ Onshore Equipment Demand Year

Drilling Rigs

Workover/Production Rigs

2006

18*

60**

2007

28

67

2008

34

71

*13 Petrobras-owned, 5 contracted-out

**9 Petrobras-owned, 51 contracted-out

Source: Petrobras (Brazil Energia Magazine) Petrobras plans to rent and also start an upgrade program of its own drilling and production rigs. If the domestic or international market is not able to meet Petrobras’ rental demand, Petrobras reportedly plans to purchase new rigs. If Petrobras opts for purchasing new rigs domestically, trade sources believe that the construction period could last two years and demand U.S. $15 million of investment. Due to the slowdown in onshore activities in Brazil in the 80’s, a number of previous domestic drilling service companies ceased operations. Currently Queiroz Galvão, Petrosynergy, Drillfor, Sotep, BCH/Brazalta, Prest, Azevedo Travassos, and Petrobras’ own fleet of onshore rigs represent the domestic drilling and workover segment in Brazil. Another alternative under consideration is a shared used of workover rigs. The Brazilian Association of Oil and Gas Marginal Field Producers (APPOM) opened a tender in October 2006 to rent a 150,000-pound rig to be shared among its member companies. APPOM invited ten national and international onshore drilling companies and selected the Brazilian Riveti Consultores Associados from Bahia for an initial six-month contract to begin in March 2007. Petrobras’ onshore production has been stable over the last few years, despite a high decline in its oil reservoirs. Currently, Petrobras produces about 230,000 BOED. The following table shows Petrobras’ estimated production by state and by Petrobras management unit:




9

Petrobras’ Onshore Oil, Condensed Oil, and Liquids of Natural Gas Unit/State UN-BSOL

Est. 2006 (BOED)* 53,091

Amazonas

53,091

UN-RN/CE

61,955

Ceará

1,527

R. G. do Norte

60,428

UN-SE/AL

47,265

Alagoas

9,674

Sergipe

37,500

UN-BA

49,383

Bahia

49,383

UN-ES

16,981

Espírito Santo

16,981

UN-SIX

3,849

Paraná

3,849

Total

232,524

Petrobras’ current onshore production is supported by 183 concessions, mostly located in the state of Bahia, where Petrobras operates 77 fields. About 8,630 Petrobras’ onshore wells are operating. 8,272 are production wells while 418 are injection wells. In addition to the operating areas, Petrobras keeps 15 closed concessions, which are not producing anything. The following tables illustrate Petrobras’ onshore fields by basin, its 10 largest oil production fields, and the status of other Petrobras’ onshore fields.

Petrobras’ Onshore Oil Fields by Basin Location

In Production

Closed

Total

Amazonas

3

9

12

Rio Grande do Norte

47

4

51

Ceará

2

0

2

Sergipe

12

0

12

Alagoas

4

2

6

Bahia

77

0

77

Espírito Santo

37

0

37

Paraná

1

0

1

Total

183

15

198




10

Petrobras’ 10 Largest Onshore Oil Fields Oil Field

State

Barrels of Oil Equivalent/Day

Leste do Urucu

Amazonas

51,755

Rio Urucu

Amazonas

48,504

Canto do Amaro

R. G. do Norte

30,897

Carmópolis

Sergipe

23,482

Miranga

Bahia

16,591

Pilar

Alagoas

14,800

Fazenda Alegre

Espírito Santo

10,069

Água Grande

Bahia

8,818

Sirizinho

Sergipe

5,630

Estreito

R. G. do Norte

5,540

Source: PETROBRAS (Brazil Energia Magazine)

2.3

MARKET TRENDS

As to its exploration portfolio, Petrobras currently has 97 exploration blocks spread throughout different onshore Basins such as Solimões, Espírito Santo, Potiguar, Recôncavo and others. Additionally, Petrobras maintains exploration partnerships with other oil companies in 41 areas. In 2007, Petrobras plans to drill 35 wells. Additionally, by 2011, Petrobras plans to acquire 1,500 square kilometers (sqkm) of 3D seismic surveys for exploration projects and 2,500 sqkm for oil production assets. The 1997 Petroleum Law (#9,478) ended Petrobras’ monopoly on exploration, production, refining, and transportation of petroleum and also created the ANP as a regulatory body. Petrobras is a government-owned oil and gas company and was created in 1953 to operate in all oil and gas segments.

2.4

LATEND DEMAND: TARGET BUYERS

Petrobras is also Brazil’s largest company, with net revenues of U.S. $60 billion (R$136.6 billion) in 2005, and 6th in the rank of the world largest oil companies in oil production. The break-up of Petrobras’ monopoly has not changed its position as the largest exploration and production company in Brazil, as well as the largest potential customer for U.S. products and services. As noted earlier in this report, nearly 100% of Brazil’s onshore production belongs to Petrobras. Other onshore producers include Aurizônia, Petrosynergy, Recôncavo E&P and W. Washington. Additionally, companies such as Ral Oil and Gas and Alcom are expected to start producing oil in the Foz do Vaza (Sergipe) and Pitanga and Jacarandá/Recôncavo fields (Bahia) soon. Over the last few years, about 15 companies have been awarded 307 oil onshore exploration blocks in oil licensing rounds in Brazil, but 97 of these blocks have been awarded to Petrobras. The following table shows these companies and their oil blocks to be explored.




11

Awarded Oil Blocks Companies Petrobras Arbi/Quantra Petróleo/Potióleo Oil M&S W.Washington Petrogal Petrosynergy Starfish Silver Marlim Partex Tarmar Recôncavo E&P (Petrorecôncavo) Orteng Queiroz Galvão Repsol YPF Vitória Ambiental

Number of Blocks to be Explored 97 51 41 31 29 22 12 9 5 4 2 1 1 1 1

Source: Brazil Energia Magazine, November 2006 About 250 of the total onshore areas awarded to the companies listed above are located in mature fields such as Potiguar and Ceará or in areas with little previous exploration such as Sergipe-Alagoas and Espírto Santo. Only 55 of these areas are considered new frontier/ areas in the Solimões and São Francisco Basins. Among onshore oil players, Petrosynergy has plans to increase its current production of 900 BOED to 2,300 BOED in 2007 and to invest U.S. $20 million to drill 10 exploratory wells. The company’s 2010 goal is to reach 8,000 BOED, which will demand investments of approximately U.S. $130 million including the drilling of 57 exploratory wells. Petrosynergy owns six rigs, three of which are drilling rigs.

2.5

MARKET ISSUES AND OBSTACLES

A joint venture between the Brazilian company W. Washington and the Canadian company Brazalta will reportedly invest U.S. $45 million in E&P activities in Brazil over the next three years. This budget excludes the amount to be invested in the five new oil blocks secured in the November 2006 8th oil-licensing round in partnership with Brownstone Venture. This investment will cover oil field revitalization as well as new exploratory activities resulting from blocks awarded during the 4th and 6th oil rounds. U.S. oil and gas firms entering Brazil are likely to face strategic challenges created by protectionist measures. Petrobras and Brazilian federal and state governments are increasingly seen as favoring local firms or firms with significant levels of local content. Because local content in Petrobras’ purchases varies from 51% in E&P to 92% downstream, U.S. companies are encouraged to seek local supplier partnerships and establish after-sales technical support in Brazil. The 2007-2011 Petrobras’ strategic investment plan calls for 65% of equipment and services to be sourced from domestic suppliers, or an of average of U.S. $6.4 billion/year, while about U.S. $3.5 billion a year will be sourced from foreign suppliers. www.icongrouponline.com



12

Local content sentiments have also created tax changes. For example, to attract foreign oil and gas investors, Brazil’s government created a special federal tax exemption regime (Repetro) in 1999 (scheduled until 2020). Although domestic suppliers were also eligible, foreign suppliers benefited the most because they were also exempt from the state sales tax (ICMS). In June 2003, though, Rio de Janeiro State abolished the ICMS exemption for foreign oil and gas equipment suppliers. After successful lobbying from drilling service providers in 2004, the state has allowed ICMS exemptions for oil rig, exploration and drilling equipment suppliers, and extended this benefit to rig and spare part suppliers for oil development projects whose contracts were signed before June 2003. Such unpredictability deters further oil investment, and some oil companies have urged the government to reconsider fiscal terms for E&P activities, arguing that the trend in Brazil is finding heavy oil in ultra-deep water, increasing risks and costs while reducing rewards. The average import duty (ID) for oil and gas equipment is 14%. Under Repetro, ID and other taxes, such as the IPI excise tax, do not apply. However, this regime is considered extremely complex and many companies have had difficulties benefiting from the exemptions. The following are types of equipment eligible for Repetro; however, given the predominance of offshore production, most equipment applies to the offshore segment. Auxiliary equipment for drilling and production: •

Centrifugal pumps.

•

Chemical mixer for oil well treatment.

•

Fixed exploration, drilling and production rigs.

•

Flexible lines.

•

Floating cranes.

Geological and geophysical data acquisition equipment including vacuum pumps: •

High-pressure concrete pumping units for oil well cementing.

•

Manifolds.

•

Oil flow safety valves and other valves.

•

Risers and fixed units.

•

ROVs (remote operated vehicles).

•

Tow boats.

•

Umbilicals.

Vessels to support exploration, drilling, production, and storage of oil and natural gas: •

Wet Christmas trees.

2.6 2.6.1

ACCESSIBILITY: THE STRUCTURE OF COMPETITION Import Market

Examining the 2006 (January-November) Brazilian foreign trade statistics of selected items published by the Foreign Trade Office of Bank of Brazil (SECEX), the United States supplied Brazil drilling machinery and parts, geophysical




13

survey, instruments, line pipes for oil well casing and drilling, sucker rods, seamless production tubing, process control and measurement instrumentation, among others. The main countries competing in the E&P sector are Germany, UK, France, Japan, Argentina, Sweden, and Israel. Note: This list does not include the items imported under the Repetro regime since it is collected by a different government agency. Therefore, the products listed previously in this report as eligible under Repetro can also represent good prospects for U.S. suppliers.

2.6.2

Local and Foreign Competition

A survey performed by the Brazilian Organization of the Petroleum Industry (ONIP) in 2005 identified the bottlenecks of the domestic oil and gas industry. The study revealed that 14” seamless conductor pipes, gas engines, diesel engines greater than 600 KW, gas turbines, and cranes above 60 tons are not supplied locally. The survey also concluded that due to a variety of different (mostly technological) reasons, local suppliers are not fully prepared to meet Brazil’s oil and gas market demand over the next few years in the following product lines: heat exchangers and their high pressure tubing, high pressure air coolers, process and high pressure vessels, forged valves over 4”, cast valves over 24”, selected pumps, and 38 to 70 mm steel moorings. More recently, in mid 2006, ONIP established a partnership with government-owned Brazil’s project and study finance agency FINEP and the National Observatory agency to map Brazil’s domestic market potential to conduct geophysical surveys in the oil and gas onshore and offshore segments. The project, named ONIPGEO, aims to identify domestic companies interested in this area and also foreign companies that already have an expertise in geophysical surveys. ONIP will encourage association with foreign suppliers through license agreements in order to meet the local equipment and service content goals.

2.7

MARKET ACCESS

Multinationals such as FMC Energy, Halliburton, Cooper Cameron, Marine/Oceaneering, National Oil, Weatherford, the Swedish/Swiss ABB, the Norwegian Aker Kvaerner and the British B.J. Services have plants and/or service facilities in Brazil and hold a significant market share in their respective sub sectors. In the onshore seismic survey segment, Grant and Brain are virtually the only companies to maintain specialized personnel in Brazil. Companies like PGS and WesternGeco are also active in Brazil, but only for offshore seismic surveys. A good listing of such companies as well as of Brazilian manufacturers can be found in the Oil and Gas Directory published by the Brazil Energia magazine with an English translation. Brazil does not have a Free Trade Agreement (FTA) with the United States. Thus, U.S. equipment suppliers are subject to regular import duties into Brazil. The average import duty for oil and gas equipment is 14%, as noted in the statistical table in the Appendix section of this report. Other state and federal taxes apply to the importing process. The receptivity to U.S. goods and services is high, as Brazil has traditionally enjoyed strong commercial ties with U.S. firms, mainly because of high quality standards and the fact that many Brazilian project managers have been educated in the United States.




2.8

14

ACCESSIBILITY: KEY FACTORS

2.8.1

Standards

The Brazilian Association of Technical Standards (ABNT) and the Brazilian Organization of the Petroleum Industry (ONIP) indicate that, in practice, Petrobras has been setting its own standards for 40 years, which, in turn, have been based on API and ASME regulations. Depending on the equipment, Brazilian oil and gas standards may be adapted to reflect local climate and geological conditions, among other cases. This, however, can be mostly noted in the offshore sector rather than in the onshore segment, considering that the Brazilian offshore oil basins (e.g. the large Campos Basin) are an oasis compared to the Gulf of Mexico given the weather patterns in that region ABNT encourages more active participation of U.S. company representatives in oil and gas technical committees.

2.8.2

Financing Strategies

The U.S. Export Import Bank has an open credit line available for Petrobras, but Petrobras claims that other countries tend to offer more attractive financing terms for Petrobras. In any case, recently Petrobras has indicated that it is not using export credit agencies due to the high insurance premium charged. Interested companies should contact Ex-Im to get an update on Brazil’s financing status. Petrobras’ decentralized procurement activities allows its various business units (e.g., upstream, downstream, energy, etc.) to procure directly or through its Materials Procurement Department (MPD). Nevertheless, the use of Petrobras’ central, pre-approved vendor lists is a requirement. Occasionally, if the supplier is not registered with Petrobras, a business unit can establish a cooperation agreement for the supplier to test its technology on a certain project. If the technology proves efficient, Petrobras may then purchase it directly or refer the supplier for registration so it can be invited to bid on future projects. When the fiscal benefits outweigh the costs, Petrobras can also import materials from its U.S. subsidiary, Petrobras America. Petrobras registration requirements are detailed in the “business” section of the Petrobras Web site www.petrobras.com.br, under the “Supplier or Service Provider Channel” guide available in English. Depending on the product in question, the supplier must comply with two or more of the following requirements: •

ISO 9000 certification.

•

Tradition (main sales, reference letters).

•

Welding inspection and non-destructive tests.

•

Mark of conformity or conformity with Petrobras technical standards.

•

Petrobras approval of the project and/or the prototype.

•

Field tests.

•

Facilities for technical assistance.

•

Other specific requirements.

Note: Especially for lump sum and turnkey contracts, Petrobras provides specific vendor lists with suppliers that are on the Master Vendors List. The main contractor in this case, depending on the negotiation between the players involved, must follow the specific vendors list. Suppliers other than those on the list must be submitted for approval by Petrobras. In project finance contracts, if the engineering procurement company (EPC) is responsible for the Vendors List, Petrobras negotiates procedures and requirements to preserve its interests. www.icongrouponline.com



15

Petrobras requires that the foreign company secure a legal representative in Brazil. Usually, commercial representatives or agents can play this role. It is a Petrobras procurement policy to reduce Brazilian suppliers’ technological shortcomings by fostering partnerships between foreign and Brazilian companies. In this regard, Petrobras is aligned with the National Program for the Mobilization and Development of Oil and Gas Industry – PROMINP – that sets the rules and requirements for local equipment or service content. Details may be found on the PROMINP home page by clicking on the PROMINP logo at the address www.mme.gov.br. Usually, Petrobras’ payment terms are 30 days after delivery. In addition to approaching Petrobras and other oil companies, U.S. suppliers of oil and gas equipment and services are encouraged to establish contacts with main engineering companies and contractors (Camargo Correa, Odebretch, Ultratec, Queiroz Galvão, Promon, GDK, Technip, etc) as well as with large equipment and service suppliers for possible subcontracting opportunities.

2.9

ACCESSIBILITY: TRADE EVENTS

Rio Oil and Gas Show September 15-18, 2008 Frequency: Biennial Show Organizer: The Brazilian Petroleum Institute www.ibp.org.br www.riooilegas.com.br Brazil Onshore The first edition of this show was held on November 27-30, 2006, in Natal, Rio Grande do Norte. The date of the next show has not yet been published. Show Organizer: The Brazilian Petroleum Institute www.ibp.org.br

2.10

KEY CONTACTS

ONIP – Organização Nacional da Indústria do Petróleo Av. Graça Aranha, 1-5th floor 20030-002 Rio de Janeiro Roberto Azevedo de O. Magalhães, Superintendent, Industrial Relations Tel.: 55 21 2563-4630 Fax: 55 21 2563-4616 E-mail: [email protected] www.onip.org.br Agência Nacional de Petróleo – ANP (National Petroleum Agency) Newton Monteiro, Director Av. Rio Branco, 65 – Centro 20090-004 – Rio de Janeiro, RJ Tel: (55 21) 2112-8133 Fax: 2112-8129 www.anp.gov.br




16

IBP – Instituto Brazileiro de Petróleo (Brazilian Petroleum Institute) Avenida Almirante Barroso # 52 – 26th floor 20031-000 – Rio de Janeiro, RJ Tel: 55-21- 2112-9002 Contact: Alvaro Teixeira, Director E-mail: [email protected] www.ibp.org.br Brazil Energia Magazine Editora Brazil Energia Av. Rio Branco # 311 – suite 303 20040-009 – Rio de Janeiro, RJ Tel: 55-21-2240-3776 Fax: 55-21-2240-0720 Contact: George Hawrylyshyn, Editor E-mail: [email protected]; [email protected] www.guiapetroleo.com.br; www.Brazilenergia.com.br Available in English and in Portuguese. Brazil Energia also publishes an oil and gas directory and maps. TB Petroleum Rua do Rosário # 99 – 7th floor 20041-004 Rio de Janeiro, RJ Tel: 55-21-3852-5762 Fax: 55-21-3852-8756 Contact: Frederico Magalhães E-mail: [email protected]; [email protected] www.tnpetroleo.com.br; www.tbpetroleo.com.br Another petroleum publication with four issues a year in English. Publishes maps on logistics and facilities in the oil and gas sector. Associação de Empresas Produtoras de Petróleo e Gás Natural Extraídos de Campos Marginais (APPOM) Brazilian Association of Oil and Gas Marginal Field Producers Contact: Anabal Alves, Executive Director E-mail: [email protected] Tel: 55-71-3432-0301 Fax: 55-71-3450-7770 www.appom.org.br




2.11

17

IMPORT STATISTICS

The following products and, consequently, the dollar figures also apply to other industrial segments in Brazil, as well as to the oil offshore sub sector. There are no import statistics available for the onshore segment exclusively. The table also shows the import duties for these products.

HS Code* 730410

HS Description Line Pipe, Oil/Gas, Seamless, Steel or Iron (Not Cast)

2006 (a) U.S. 2006 (a) Exports to Exports to Brazil Brazil (USD) (USD) 6,410,761 1,231,202

2006 (a) U.S. Market Share (%) 19%

Competitors Germany, China

Import Duty 16%

730421

Pipe, Oil/Gas Drilling, Seamless, Steel or Iron (Not Cast)

3,910,314

1,139,446

29.1%

Germany, Netherlands

16%

730429

Casings, Oil/Gas Drilling, Seamless, Steel or Iron (Not Cast)

9,317,591

4,822,974

52%

Japan, France, Argentina

16%

730610

Pipe, Line, Oil/Gas, Not Seamless, 406.4 mm or Less, Steel or Iron

22,001,386

498,204

2.3%

China, Germany

14%

730620

Casings, Oil/Gas Drilling, Not Seamless, 406.4 mm Diameter or Less, Steel or Iron

1,587,950

1,288,986

81.2%

820713

Rock Drilling or Earth Boring Tools With Working Part of Cermets, and Parts Thereof

5,859,974

1,850,404

31.6%

820719

Rock Drill Bits, Core Bits And Reamers of Base Metal

37,863,784

820750

Tools for Drilling, Other Than for Rock Drilling, Parts Thereof

841330

14%

Israel, Sweden

18%

24,199,394 63.9%

England, Italy

18%

15,664,451

1,250,162

Germany, China

18%

Pumps, Liquid, Except Fuel Injection, for Internal Combustion Piston Engine

75,777,490

13,426,090 18%

Germany, Japan, England, Czech, Republic

18%

841391

Sucker Rods

5,374,386

92,467

Argentina, Germany

14%

841350

Other Reciprocating Positive Displacement Pumps

52,072,077

14,060,341 27%

Germany

14%2%**

841360

Other Rotary Positive Displacement Pumps

46,238,222

8,526,090

France, Germany, Japan

14%


8%

2%

18%


Oil and Gas Production 842121

Water Filtering or Purifying Machinery and Apparatus

10,654,566

3,723,263

34.9%

Italy, Germany

14%2%**

842123

Oil or Fuel Filters for Internal Combustion Engines

30,171,720

13,332,628 44.2%

Japan, France, Germany

16%

842129

Oil-Separation Equipment

73,835,053

19,207,992 26%

Germany, Japan, Austria

14%

842131

Air Filters for Internal Combustion Engines

16,115,479

6,885,964

Germany, Japan

16%

842139

Air Filtering Equipment

51,113,489

11,626,794 23%

Germany, Japan

14-18%

843039

Coal or Rock Cutters and Tunneling Machinery, Other Than Self-Propelled

2,617,902

11,975

Germany

0-10%

843041

Boring or Sinking Machinery, Self-Propelled

29,545,817

14,024,427 47%

Sweden, Italy, Finland

0-14%

843049

Boring or Sinking Machinery, Rotary, for Oil Well and Gas Field Drilling

2,852,642

260,482

Sweden

0-10%

843143

Parts for Boring or Sinking Machinery

22,585,482

12,991,299 58%

England

0-14%

9015

Other Surveying Equipment and Parts

Norway, Japan, Germany

14%

848110

Pressure Reducing Valves

36,022,983

5,977,882

Germany, Argentina

14%

902610

Flow Meters

42,464,743

19,002,514 45%

Netherlands, China

14-18%

902810

Gas Meters

4,933,669

812,476

Argentina

14-18%

Total General

641,873,866

196,912,455 30.7%

42.7%

0.5%

9%

16.6%

16%

18

(a) January through November 2006 * Brazilian Common External Code. The first four TEC digits correspond to the U.S. HS Code. ** Reduced tariff of 2% until 06/30/07. Source: Secex



19

3 3.1

FINANCIAL INDICATORS: OIL AND GAS FIELD SERVICES OVERVIEW

Is Brazil competitive? With the globalization of markets, the increased mobility of corporate assets, and the need for productive human resources, this question has become all the more complex to answer. The financial indicators section was prepared to tackle this question by focusing on certain fundamentals: financial performance and labor productivity. Rather than focus on the economy as a whole, the analysis presented here considers only one sector: oil and gas field services. We are essentially interested in the degree to which firms operating in Brazil have fundamentally different financial structures and performance compared to firms located elsewhere. With respect to this view of competitiveness, if one were to invest or operate in Brazil, how would the firm’s asset structure likely vary compared to a firm operating in some other country in Latin America or average location in the world? In Brazil, do firms typically hold more cash and other short term assets, or do they concentrate their assets in physical plant and equipment? On the liability side, do firms operating in Brazil have a higher percent of payables compared to other firms operating in Latin America, or do they hold a higher concentration of long term debt? The structure of the income statement is also telling. Do firms operating in Brazil have relatively higher costs of goods sold, operating costs, or income taxes compared to firms located elsewhere in the region or the world in general? Are returns on equity higher in Brazil? Are profit margins greater? Are inventories held longer? The financial indicators section was designed to answer these and similar questions that naturally affect one’s decision to invest or operate in Brazil. Again, we are particularly interested in oil and gas field services, and not the economy as a whole. In many instances, people make all the difference. In addition to financial competitiveness, we consider the extent to which labor deployment and productivity in Brazil differs from regional and global benchmarks. In this case, we are interested in the amount of labor required to operate a typical business in Brazil and the likely returns on this human investment. What is the typical ratio of short-term and long-term assets to employee (employed in oil and gas field services operations)? What are typical capital-labor ratios? How different are these ratios to those in Latin America in general and the world as a whole? What are the average sales and net profits per employee in Brazil compared to regional benchmarks? The goal of this section is to assist managers in gauging the competitive performance of Brazil at the global level for oil and gas field services. With the globalization of markets, greater foreign competition, and the reduction of entry barriers, it becomes all the more important to benchmark Brazil against other countries on a worldwide basis. Doing so, however, is not an obvious task. This report generates international benchmarks and measures gaps that might be revealed from such an exercise. First, data is collected from companies across all regions of the world. For each of these firms, data are standardized into comparable categories (assets, liabilities, income and ratios), by country, region and on a worldwide basis. From there, we eliminate all currency effects by standardizing within each category. Global benchmarks are then compared to those estimated for oil and gas field services in Brazil. Though we heavily rely on historical performance, the figures reported are not historical but are forecasts and projections for the coming fiscal year.



Financial Indicators

3.1.1

20

Financial Returns and Gaps in Brazil

The approach used in this report to evaluate operating performance for oil and gas field services in Brazil is called "vertical analysis." For those unfamiliar with this type of analysis, frequently taught in graduate schools of business, the reader is recommended Jae K. Shim and Joel G. Siegel’s recent book titled Financial Management.1 In their discussion of financial statement analysis and ratios, Skim and Siegel (p. 42-43), describe common-size statement (vertical analysis) as follows: A common-size statement is one that shows each item in percentage terms. Preparation of common-size statements is known as vertical analysis, in which a material financial statement item is used as a base value and all other accounts on the financial statement are compared to it. In the balance sheet, for example, total assets equal 100 percent, and each individual asset is stated as a percentage of total assets. Similarly, total liabilities and stockholders’ equity are assigned a value of 100 percent and each liability or equity account is then stated as a percentage of total liabilities and stockholders’ equity, respectively. … For the income statement, a value of 100 percent is assigned to net sales, and all other revenues and expense accounts are related to it. It is possible to see at a glance how each dollar of sales is distributed among various costs, expenses, and profits. The authors suggest that vertical analyses involve industry-based comparisons. Such a comparison “allows you to answer the question, ‘How does a business fare in the industry?’ You must compare the company’s ratios to… industry norms.” (p. 43-44) This approach is extended to country competitiveness (in this case Brazil) for a particular sector (in this case oil and gas field services). This involves calculating country, regional and global norms. This introduction will describe the seven-stage methodology used to perform this analysis. Each stage should be seen as a working assumption behind the numbers presented in later chapters. Stage 1. Industry Classification. This stage begins by classifying the company into an industry. For this, we have relied on a combination of the North American Industry Classification System (NAICS pronounced “Nakes”), a relatively new system for classifying business establishments, and the older Standard Industrial Classification (SIC) system. Adopted in 1997, NAICS codes are the new industry classification codes used by statistical agencies of the United States. NAICS was developed jointly by the U.S., Canada, and Mexico to provide comparability in statistics about business activity across North America. After 60 years of service, the outdated SIC system was retired on October 1, 2000, leaving only the NAICS codes for official use. The NAICS classification system adds some 350 new industries and represents a revision to over 60% of the previous SIC industries. Despite its official retirement, the SIC system is still commonly used (and often reported in firm’s financial statements). For most companies in the world, classification within either the new NAICS or older SIC systems is a rather straight forward exercise. For some, however, it can be problematic. This is true for several reasons. The first being that the SIC or NAICS classification systems are rather broad for many product and industry categories (a firm’s products or services may be only a minor aspect of the classification’s definition). The second is that some firms’ activities span multiple codes. Finally, it is possible that a firm is classified by one source using its SIC code, and by another using its NAICS code, and by a third using both. Furthermore, some sources do not report either code, but instead use qualitative statements of the firm’s activities. Nevertheless, if one wishes to pursue a vertical analysis, some classification needs to take place which selects a peer group. In making this classification, one can rely on a number of sources. In some countries, firms must “self” classify in official periodic reports (e.g. annular reports, 10Ks, etc.) to public authorities (such as the Securities and Exchange Commission). These reports are then open for public scrutiny (e.g. EDGAR filings). In other cases, commercial data vendors or private research firms provide SIC/NAICS codes for specific companies. These include: •

Bloomberg - www.bloomberg.com

•

Datastream (Thomson Financial) - www.datastream.com

1

Skim and Siegel (2000), Financial Management published by Barron’s Educational Series, Inc. (BARON’S BUSINESS LIBRARY Series), ISBN: 0-7641-1402-6. www.icongrouponline.com


Financial Indicators •

21

Dun & Bradstreet - www.dnb.com

•

Hoovers - www.hoovers.com

•

HarrisInfoSource - www.HarrisInfo.com

•

InfoUSA - www.infousa.com

•

Investext (Thomson Financial) - www.investext.com

•

Kompass International Neuenschwander SA. - www.kompass.com

•

Moody's Investors Service - www.moodys.com

•

Primark (Thomson Financial) - www.primark.com

•

Profound (The Dialog Corporation – A Thomson Company) - www.profound.com

•

Reuters - www.reuters.com

•

Standard & Poor's - www.standardandpoors.com

It is interesting to note that commercial vendors often report different qualitative descriptions and industrial classifications from one to another. These descriptions and classifications may also be different from those reported by the firm itself. Anyone hoping to perform a benchmarking study, therefore, has to make a judgment call across these various sources in order to determine a reasonable classification. In this report, we have decided a metaanalytic process, by combining various sources (including linking a classification’s keywords to qualitative descriptions of the firm’s product line). In cases of inconsistency, the most recent or globally comparable available is chosen. Again, the overall goal is to classify firms, which either produce similar products, offer similar services, or are in the same stage of the value chain for a particular industrial classification. In the case of this report, the SIC code selected is: 138 which is defined as “oil and gas field services”. This classification should be seen as a working assumption. In order to obtain a more detailed discussion of this classification, the reader is referred to the Web sites developed by the U.S. Census Bureau: http://www.census.gov/epcd/www/naics.html. Basic definitions and descriptions are provided at: http://www.census.gov/epcd/www/drnaics.htm#q1. A full correspondence table between SIC and NAICS codes, and detailed definitions are given at http://www.census.gov/epcd/www/naicstab.htm. Stage 2. Firm-Level Data Collection. A global search was conducted across over 20,000 companies in over 40 major economies, including Brazil, for those that report financials (balance sheet and income statements) and that are involved in oil and gas field services. It should be noted that the public-domain financials can be either historic or projections. It should also be noted that even historic figures can be modified in the future and often represent “estimates” of performance. Stage 3. Standardization. Once collected, public domain financial figures of firms identified in Stage 2 are standardize into comparable categories (assets, liabilities, and income). Again, these are limited to firms involved in some aspect of oil and gas field services (i.e. are members of the value chain). From there, we eliminate all currency effects by standardizing within each category (creating ratios). In order to maintain comparability over time and across countries, vertical analysis is used. In the case of a firm’s assets, we treat the total assets as equaling 100, irrespective of the value of the local currency. All other assets are then calculated as a percent of total assets. In this way, the structure of the firm’s assets can be easily interpreted and compared with international benchmarks. For liabilities, total liabilities and equity are indexed to equal to 100. For the income statement, total revenue is indexed to equal 100, and all other figures are calculated as a percent of these figures. Stage 4. Filtering. Not all the firms selected in Stage 2 or the ratios calculated in Stage 3 are used for the country, regional or global benchmarks, as a number of companies are purposely dropped from the analysis. This is justified by the “outlier” phenomenon that plagues such analysis. The problem lies in that any given company in the benchmarking pool may be facing some exceptional event or may be organized in an exceptional way so as to make its ratios vastly different from the norm. By including such firms, the global benchmarks can be overly skewed. In many countries, firms are organized into holding groups. These groups nominally have very few employees (e.g. 4




22

to 25 employees), but have extremely large assets, liabilities, or revenues. As such, the inclusion or exclusion of firms having this form of management can affect the ratios and benchmarks reported. Likewise, some firms have no net sales, no assets, no liabilities, or ratios. Others have ratios that appear implausible for a normal or viable company. In order to not allow these firms to affect the global benchmarks, only those firms with reasonable financials have been chosen. Finally, in some countries, detailed financials are not available or are not comparable to either the company in question or the global norm (e.g. various forms of depreciation). In this case, only those which exist and are comparable are reported. The details, therefore, that comprise a given ratio or set of ratios may not be reported. This may lead to the addition of several ratios, not summing to the whole. Stage 5. Calculation of Global Norms. Once the filtering process has eliminated outliers, a final list of companies included is compiled. Based on this list, the ratios discussed in Stage 3 are calculated for every firm, and then averaged to create country, regional and global benchmarks. The world average is calculated using each country’s population as a weight. Stage 6. Projection of Deviations. The goal of this report is not only to estimate raw ratios or averages, but also to present the difference between Brazil and projected global averages for that same ratio. Furthermore, it can be insightful to know the location of each ratio within the distribution of the countries represented in Stage 5. These deviations, in fact, can be seen as projections or likely scenarios for the future. This is often true for two reasons. First, while a company’s financials change from year to year, its ratios are often stable. This is especially true for the country, regional and global benchmarks which represent averages across companies. From a purely Bayesian sense, the difference between the company’s recent ratios and the benchmarks are a reasonable prior for future deviations. This is true, even if the entire industry is hit by an external or exogenous shock, such as an oil crisis or economic slowdown. In other words, we assume that the structure of the variance in the industry’s financials remains stable. Second, many of the data are based on preliminary reports that might be changed in future filings. As forecasts, therefore, the numbers derived from these are also forecasts of past and future performance (with associated uncertainties). The calculation of the difference between a country’s ratios and the global benchmarks is meant to yield roughly approximate forecasts, or "useful measures". In general, more developed countries have more reliable source data. For many, ratios are econometrically extrapolated using models that use country characteristics (e.g. income per capita) as independent variables (i.e. countries having similar economic structures are assumed to have similar operating ratios). Again, the forecasts are based on the assumption of relative stability. This assumption has proven extremely robust in previous applications of this methodology (i.e. today’s weather is a good predictor of tomorrow’s weather, but not the weather three years from now). The results reported should be viewed as those for a “proto-typical” firm operating in Brazil whose primary activity is oil and gas field services. Stage 7. Projection of Ranks and Percentiles. Based on the calculation of deviations, relative ranks and percentiles are calculated across the firms used in the benchmarks. The percentile estimates the percent of a representative sample of countries in the world having values of the ratio lower than Brazil. It is important to note that a percentile being high (or low) does not mean good (or bad) past, present or future financial performance. The reader must draw this conclusion on their own. The estimates provided were created to provide managerial insight, and not a recommendation with respect to particular investments within any country. We graphically report, for each part of the financial statement, the larger structural differences between Brazil and the regional and global benchmarks, and provide a summary table of ranks and percentiles. These are estimates for firm which would be involved in oil and gas field services. A deviation from the global norm need not be a bad sign. Rather, it is simply a substantial difference that might merit further attention or perhaps signal a country's relative strength or weakness for the coming fiscal year.

3.1.2

Labor Productivity Gaps in Brazil

In the case of labor productivity measures, this report maintains comparability over time and across countries by using a common currency (the US dollar) and relates each measure to a “per employee basis”. Ratios are projected www.icongrouponline.com



23

using raw financial statistics and, as ratios, are therefore comparable. Given a country’s human resource ratios, the resulting figures are benchmarked across regional and global averages. The seven stage approach given above is used in a similar manner. We then report, for each part of the financial statement, the larger labor productivity gaps that Brazil has vis-à-vis the worldwide average (for oil and gas field services). Again, a gap need not be a bad sign. Rather, it is simply a substantial difference that might merit further attention or signal a firm’s relative incentive to invest locally. All figures are projections, so due caution is required.

3.1.3

Limitations and Extensions

Shim and Siegal (p. 60) stress that “while ratio analysis is an effective tool for assessing a company’s financial condition,” operating Brazil or any other country, “its limitations must be recognized.” They find that (p. 59) “no single ratio or group of ratios is adequate for assessing all aspects of a company’s financial condition” operating in a particular country. The authors note the following limitations associated with ratio analyses which apply to the global benchmarking and vertical analysis presented here (p.60): •

Accounting standards or policies may limit useful comparisons across companies

•

Management accounting practices across companies and countries may not be performed in the same style

•

Ratios are static and do not reveal future trends

•

Ratios do not indicate the quality of the components used to calculate the ratios (i.e. ratios have ambiguous interpretations)

•

Reported ratios may not reflect real values

•

Companies may be highly diversified, limiting the comparability of their ratios to others

•

Industry averages or norms are approximate; finer industry definitions may be required for certain interpretations or comparisons

•

Financial statements and resulting ratios often mean different things to different people depending on their points of view or motivations.

Again, all figures reported here are estimates, so due caution is required. The above caveats, and the fact that statements made in this report are forward-looking, requires that this point be emphasized. A number of intervening factors can have material effect on the ratios and variances forecasted. These include changes in a company's management style, exchange rate volatility, changes in accounting standards, the lack of oversight or comparability in accounting standards, changes in economic conditions, changes in competition, changes in the global economy, changes in source data quality, and similar factors.




3.2 3.2.1

24

FINANCIAL RETURNS IN BRAZIL: ASSET STRUCTURE RATIOS Overview

In this chapter we consider the asset structure of companies involved in oil and gas field services operating in Brazil benchmarked against global averages. The chapter begins by defining relevant terms. A common-size statement, or vertical analysis of assets is then presented for companies operating in Brazil and the average global benchmarks (total assets = 100 percent). For ratios where there are large deviations between Brazil and the benchmarks, graphics are provided (sometimes referred to as a financial “gap” analysis). Then the distribution of ratios is presented in the form of ranks and percentiles. Certain key vertical analysis asset ratios are highlighted across countries in the comparison group.

3.2.2

Assets – Definitions of Terms

The following definitions are provided for those less familiar with the asset-side of financial statement analysis. As this chapter deals with the vertical analysis and global benchmarking of assets, only definitions covering certain terms used in this chapter’s tables and graphs are provided here. The glossary below reflects commonly accepted definitions across various countries and official sources. •

Accumulated Depreciation - Buildings. Accumulated depreciation is commonly understood as a contra asset account used to report the accumulation of periodic credits to reflect the use of the estimated service life of a fixed asset. Buildings are fixed assets which represent the acquisition and improvement costs of permanent structures owned or held by the company. Such structures typically include office buildings, storage quarters, or other facilities and also associated items such as loading docks, heating and airconditioning equipment, refrigeration equipment, and all other property permanently attached to or forming an integral part of the structure. However, it generally does not include furniture, fixtures, or other equipment which are not an integral part of the building.

•

Accumulated Depreciation – Property, Plant & Equipment Under Capitalized Leases. Accumulated depreciation of property, plant and equipment under capitalized leases is commonly understood as a contra asset account used to report the accumulation of periodic credits to reflect the use of the estimated service life of property, plant and equipment under capitalized lease obligations.

•

Accumulated Depreciation -Machinery & Equipment. Accumulated depreciation of machinery and equipment is commonly understood to be contra asset account used to report the accumulation of periodic credits to reflect the use of the estimated service life of machinery and equipment.

•

Buildings. Buildings are defined as fixed assets which represent the acquisition and improvement costs of permanent structures owned or held by the company. Such structures include office buildings, storage quarters, or other facilities and also associated items such as loading docks, heating and air-conditioning equipment, refrigeration equipment, and all other property permanently attached to or forming an integral part of the structure. However, it does not include furniture, fixtures, or other equipment which are not an integral part of the building.

•

Cash. Cash is typically defined as money on hand, on deposit with chartered bank, or held in the form of eligible securities.




25

•

Current Assets. Current assets are generally defined to be resources which are available, or can readily be made available, to meet the cost of operations or to pay current liabilities.

•

Finished Goods. Finished goods generally comprise the ready-for-sale inventory.

•

Intangible Other Assets. Intangible assets are generally understood to be nonphysical assets such as legal rights (patents and trademarks) recorded at their historical cost then reduced by systematic amortization.

•

long Term Receivables. Long-term receivables are commonly defined as amounts due within a period exceeding one year from private persons, businesses, agencies, funds, or governmental units which are expected to be collected in the form of moneys, goods, and/or services.

•

Machinery & Equipment. Machinery and equipment is commonly defined as a fixed asset classification which typically includes tangible property (other than land, buildings, and improvements other than buildings) with a life of more than one year. Such assets typically include office equipment, furniture, machine tools, and motor vehicles. Equipment may be attached to a structure for purposes of securing the item, but unless it is permanently attached to an integral part of the building or structure, it will generally be classified as equipment and not buildings. Equipment is generally defined as tangible property other than land, buildings, or improvements other than buildings, which is used in operations. Examples include machinery, tools, trucks, cars, furniture, and furnishings.

•

Prepaid Expenses. Prepaid expenses are typically defined as those supplies and/or services (not inventory) acquired or purchased but not consumed or used at the end of the accounting period.

•

Progress Payments. Progress payments are commonly defined as periodic payments to a supplier, contractor, or subcontractor for work as it is completed as desired, in order to reduce working capital requirements.

•

Property Plant & Equipment Under Capitalized Leases. Property plant & equipment under capitalized leases generally consists of the gross book value (rather than the more commonly-used measures of fixed capital stocks in current or real value), of all commercial buildings, associated land and equipment used therein that are owned by the company and that are either used or operated by the company or leased or rented to others (under capitalized leases).

•

Property Plant and Equipment - Gross. Gross property, plant and equipment generally consists of the gross book value (rather than the more commonly-used measures of fixed capital stocks in current or real value), of all commercial buildings, associated land and equipment used therein that are owned by the company and that are either used or operated by the company or leased or rented to others.

•

Property Plant and Equipment - Net. Net PP&E equals the original cost of property, plant, and equipment (PP&E), less accumulated depreciation, depletion and amortization (DD&A).

•

Raw Materials. Raw materials are materials which will be converted by a manufacturer into a finished product.

•

Receivables (Net). Net receivables are defined as the net amount due to the company from private persons, businesses, agencies, funds, or governmental units which is expected to be collected in the form of moneys, goods, and/or services.

•

Short Term Investments. Short-term investments are investments which can be typically liquidated in less than one year.




26

•

Total Assets. Total assets are defined as the financial representation of economic resources, the beneficial interest in which is legally or equitably secured to a particular organization as a result of a past transaction or event.

•

Total Inventories. Total inventories are defined as the total amount of goods on hand.

•

Work in Process. Work in progress includes goods which have been started but are not yet ready for sale.




3.2.3

27

Asset Structure: Outlook

Using the methodology described in the introduction, the following table summarizes asset structure benchmarks for firms involved in oil and gas field services in Brazil. To allow comparable benchmarking, a common index of Total Assets = 100 is used. All figures are current-year projections for companies operating in Brazil based on latest financial results available. Asset Structure Brazil Latin America World Avg. _________________________________________________________________________________________________________

Cash & Short Term Investments Cash Receivables (Net) Total Inventories Raw Materials Work in Process Finished Goods Progress Payments & Other Prepaid Expenses Other Current Assets Current Assets - Total Long Term Receivables Other Investments Property Plant and Equipment - Net Property Plant and Equipment - Gross Buildings Machinery & Equipment Other Property Plant & Equipment Property Plant & Equipment Under Capitalized Leases Accumulated Depreciation - Total Accumulated Depreciation - Buildings Accumulated Depreciation -Machinery & Equipment Accumulated Depreciation - Other Prop & Equip Accumulated Depreciation - PP&E Under Capitalized Leases Other Assets Intangible Other Assets Total Assets

3.97 4.06 7.92 8.73 1.76 6.77 3.52 2.70 0.14 0.55 21.24 0.59 0.04 60.06 100.85 78.93 45.07 5.44 2.70 40.79 32.92 21.13 0.44 0.44 8.83 0.06 100.00

6.94 4.26 8.10 9.76 3.55 2.74 6.06 0.63 0.60 0.94 26.00 0.22 1.11 51.70 84.72 41.77 37.58 9.80 1.86 37.90 17.50 19.85 4.46 0.30 4.08 1.39 100.00

6.74 3.34 11.78 6.02 1.46 1.38 2.81 0.62 4.04 0.79 29.20 0.28 3.14 47.51 72.99 13.74 44.70 16.60 0.54 29.91 6.29 19.50 6.06 0.17 2.31 0.94 100.00

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007




3.2.4

28

Large Variances: Assets

The following graphics summarize for oil and gas field services the large asset structure gaps between firms operating in Brazil and the world average. A gap cannot necessarily be interpreted as a positive or negative reflection on performance. Gaps may signal areas of specialization, market focus, or expertise. More contextual information is required to fully interpret these gaps. The gaps highlighted here are simply those that are large.

Gap: Work in Process 8

6.77 5.39

6 4

2.74 1.38

2 0

Brazil

Latin America

World Average

Gap

Gap: Prepaid Expenses 6

4.04

4 2

0.14

0.6

0 -2 -4

Brazil

Latin America

World Average

-3.9 Gap

Gap: Current Assets - Total 30

26

29.2

21.24

20 10 0 -10

-7.96 Brazil


Latin America

World Average

Gap



29

Gap: Property Plant and Equipment - Net 80 60

60.06

51.7

47.51

40 12.55

20 0

Brazil

Latin America

World Average

Gap

Gap: Property Plant and Equipment - Gross 120

100.85

100

84.72

80

72.99

60 27.86

40 20 0

Brazil

Latin America

World Average

Gap

Gap: Buildings 80

78.93 65.19

60 41.77 40 13.74

20 0

Brazil

Latin America

World Average

Gap

Gap: Other Property Plant & Equipment 20 15 10 5 0 -5 -10 -15

16.6 9.8 5.44

-11.16 Brazil


Latin America

World Average

Gap



30

Gap: Accumulated Depreciation - Total 50

40.79

40

37.9 29.91

30 20

10.88

10 0

Brazil

Latin America

World Average

Gap

Gap: Accumulated Depreciation - Buildings 40

32.92 26.63

30 17.5

20

6.29

10 0

Brazil

Latin America

World Average

Gap

Gap: Accumulated Depreciation - Other Prop & Equip 8 6 4 2 0 -2 -4 -6

6.06 4.46 0.44

Brazil

Latin America

World Average

-5.62 Gap

Gap: Other Assets 10

8.83

8

6.52

6

4.08

4

2.31

2 0

Brazil


Latin America

World Average

Gap



3.2.5

31

Key Percentiles and Rankings

We now consider the distribution of asset ratios for oil and gas field services using ranks and percentiles. What percent of countries have a value lower or higher than Brazil (what is the ratio's rank or percentile)? The table below answers this question with respect to the vertical analysis of asset structure. The ranks and percentiles indicate, from highest to lowest, where a value falls within the distribution of all countries considered in the global benchmark (the number of countries in the benchmark per line item may vary, as indicated in the Rank). Again, a high or low figure does not necessarily indicate good or bad performance. After the summary table below, a few key vertical asset ratios are highlighted in additional tables. Asset Structure

Brazil

Rank of Total

Percentile

Cash & Short Term Investments Cash Receivables (Net) Total Inventories Raw Materials Work in Process Finished Goods Progress Payments & Other Prepaid Expenses Other Current Assets Current Assets - Total Long Term Receivables Other Investments Property Plant and Equipment - Net Property Plant and Equipment - Gross Buildings Machinery & Equipment Other Property Plant & Equipment Property Plant & Equipment Under Capitalized Leases Accumulated Depreciation - Total Accumulated Depreciation - Buildings Accumulated Depreciation -Machinery & Equipment Accumulated Depreciation - Other Prop & Equip Accumulated Depreciation - P P & E Under Capitalized Leases Other Assets Intangible Other Assets Total Assets

3.97 4.06 7.92 8.73 1.76 6.77 3.52 2.70 0.14 0.55 21.24 0.59 0.04 60.06 100.85 78.93 45.07 5.44 2.70 40.79 32.92 21.13 0.44 0.44 8.83 0.06 100.00

37 of 53 26 of 46 45 of 53 18 of 53 15 of 27 2 of 25 18 of 34 4 of 25 32 of 34 32 of 44 38 of 53 11 of 25 34 of 41 20 of 53 18 of 47 4 of 44 19 of 44 26 of 45 6 of 12 18 of 47 4 of 42 18 of 42 33 of 36 6 of 12 5 of 49 35 of 40

30.19 43.48 15.09 66.04 44.44 92.00 47.06 84.00 5.88 27.27 28.30 56.00 17.07 62.26 61.70 90.91 56.82 42.22 50.00 61.70 90.48 57.14 8.33 50.00 89.80 12.50

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________





32

Cash & Short Term Investments Countries

Value (total assets = 100)

Rank

Percentile

43.48 40.62 37.00 35.95 26.18 26.13 18.26 17.67 17.54 16.21 13.66 13.51 12.41 11.65 11.50 10.83 10.64 10.56 9.28 9.08 8.80 7.92 7.67 7.21 6.79 6.48 4.90 4.88 4.83 4.43 4.39 4.22 3.97 3.78 3.29 2.72 2.56 1.51 1.45 1.21 1.21 0.53 0.47 0.44 0.43

1 2 3 4 5 6 7 8 9 10 11 13 15 16 17 18 19 20 21 23 24 25 26 27 28 29 30 31 32 33 34 35 37 38 39 41 42 43 44 45 46 48 49 50 51

98.11 96.23 94.34 92.45 90.57 88.68 86.79 84.91 83.02 81.13 79.25 75.47 71.70 69.81 67.92 66.04 64.15 62.26 60.38 56.60 54.72 52.83 50.94 49.06 47.17 45.28 43.40 41.51 39.62 37.74 35.85 33.96 30.19 28.30 26.42 22.64 20.75 18.87 16.98 15.09 13.21 9.43 7.55 5.66 3.77

Region

_________________________________________________________________________________________________________

Pakistan Malaysia Sweden Denmark Greece Hong Kong Japan Finland Germany Thailand France Austria the United Kingdom Singapore Spain Philippines Israel Ireland Norway Australia Taiwan Portugal USA Russian Federation India Hungary Italy Switzerland New Zealand Indonesia South Africa Luxembourg Brazil Chile Netherlands China Belgium Canada Poland Turkey Mexico Peru Czech Republic Argentina South Korea

the Middle East Asia Europe Europe Europe Asia Asia Europe Europe Asia Europe Europe Europe Asia Europe Asia the Middle East Europe Europe Oceana Asia Europe North America Europe Asia Europe Europe Europe Oceana Asia Africa Europe Latin America Latin America Europe Asia Europe North America Europe the Middle East Latin America Latin America Europe Latin America Asia

_________________________________________________________________________________________________________





33

Cash & Short Term Investments (Oil and Gas Field Services) Countries in Latin America


Rank

Percentile

42.07 36.85 12.92 12.54 10.80 9.49 5.31 3.97 3.78 2.97 2.92 1.45 1.28 1.21 1.19 1.12 0.53 0.48 0.44 0.44 0.41 0.40

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

95.45 90.91 86.36 81.82 77.27 72.73 68.18 63.64 59.09 54.55 50.00 45.45 40.91 36.36 31.82 27.27 22.73 18.18 13.64 9.09 4.55 0.00

_________________________________________________________________________________________________________

Guyana Falkland Islands Paraguay Colombia Bolivia Nicaragua Panama Brazil Chile Costa Rica Belize French Guiana Suriname Mexico Uruguay Venezuela Peru Guatemala El Salvador Argentina Ecuador Honduras

_________________________________________________________________________________________________________





34

Receivables (Net) Countries


Rank

Percentile

31.41 30.45 30.31 30.12 27.13 25.01 23.88 23.25 21.64 20.94 19.43 19.13 17.83 16.38 15.99 15.80 15.23 14.72 14.38 13.83 13.24 13.22 11.98 11.95 11.65 11.14 11.03 11.00 10.90 10.81 10.38 9.16 9.01 8.74 8.42 8.19 8.11 7.92 7.56 7.54 7.14 4.30 3.49 3.39 1.12

1 2 3 4 5 6 7 8 9 10 11 12 13 14 16 17 18 19 20 21 22 23 25 26 27 28 29 30 32 33 34 37 38 39 41 43 44 45 46 47 48 49 50 51 52

98.11 96.23 94.34 92.45 90.57 88.68 86.79 84.91 83.02 81.13 79.25 77.36 75.47 73.58 69.81 67.92 66.04 64.15 62.26 60.38 58.49 56.60 52.83 50.94 49.06 47.17 45.28 43.40 39.62 37.74 35.85 30.19 28.30 26.42 22.64 18.87 16.98 15.09 13.21 11.32 9.43 7.55 5.66 3.77 1.89

Region

_________________________________________________________________________________________________________

Germany France Spain Austria Norway Singapore Netherlands Greece Japan Finland Belgium Philippines Italy India Switzerland Czech Republic Malaysia Argentina South Korea Luxembourg the United Kingdom Poland Pakistan Australia Indonesia Thailand Turkey Mexico Israel Ireland Hong Kong USA Taiwan South Africa Russian Federation Canada Portugal Brazil Hungary Chile China New Zealand Sweden Denmark Peru

Europe Europe Europe Europe Europe Asia Europe Europe Asia Europe Europe Asia Europe Asia Europe Europe Asia Latin America Asia Europe Europe Europe the Middle East Oceana Asia Asia the Middle East Latin America the Middle East Europe Asia North America Asia Africa Europe North America Europe Latin America Europe Latin America Asia Oceana Europe Europe Latin America

_________________________________________________________________________________________________________





35

Receivables (Net) (Oil and Gas Field Services) Countries in Latin America


Rank

Percentile

19.08 16.77 14.72 13.19 11.66 11.60 11.00 10.82 10.22 8.88 8.62 7.92 7.54 6.20 5.91 5.82 3.48 1.12 1.02 0.93 0.86 0.85

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

95.45 90.91 86.36 81.82 77.27 72.73 68.18 63.64 59.09 54.55 50.00 45.45 40.91 36.36 31.82 27.27 22.73 18.18 13.64 9.09 4.55 0.00

_________________________________________________________________________________________________________

Bolivia Nicaragua Argentina French Guiana Suriname Guyana Mexico Uruguay Venezuela Paraguay Colombia Brazil Chile Panama Costa Rica Belize Falkland Islands Peru Guatemala El Salvador Ecuador Honduras

_________________________________________________________________________________________________________





36

Total Inventories Countries


Rank

Percentile

25.69 22.69 22.06 18.78 16.29 15.67 15.62 14.51 12.47 11.93 11.41 10.21 9.73 9.63 9.35 8.73 8.30 5.92 5.89 5.85 5.75 5.29 5.11 4.77 4.46 4.28 3.14 2.99 2.95 2.85 2.05 1.91 1.89 1.62 1.35 1.34 1.11 1.00 0.83 0.83 0.78 0.76 0.71 0.24 0.24

1 2 3 5 6 7 8 10 11 12 13 14 15 16 17 18 20 21 22 23 24 25 26 28 29 30 32 33 34 35 36 37 38 40 42 43 44 45 46 47 48 49 50 52 53

98.11 96.23 94.34 90.57 88.68 86.79 84.91 81.13 79.25 77.36 75.47 73.58 71.70 69.81 67.92 66.04 62.26 60.38 58.49 56.60 54.72 52.83 50.94 47.17 45.28 43.40 39.62 37.74 35.85 33.96 32.08 30.19 28.30 24.53 20.75 18.87 16.98 15.09 13.21 11.32 9.43 7.55 5.66 1.89 0.00

Region

_________________________________________________________________________________________________________

Singapore Philippines Greece Poland Germany Turkey Mexico Spain Malaysia Italy Peru Belgium Norway South Africa Netherlands Brazil Chile France Russian Federation Austria India Hungary Indonesia Australia Hong Kong Pakistan China the United Kingdom Japan Finland Thailand Canada New Zealand USA Israel Ireland Taiwan Portugal Czech Republic Switzerland Argentina South Korea Luxembourg Sweden Denmark

Asia Asia Europe Europe Europe the Middle East Latin America Europe Asia Europe Latin America Europe Europe Africa Europe Latin America Latin America Europe Europe Europe Asia Europe Asia Oceana Asia the Middle East Asia Europe Asia Europe Asia North America Oceana North America the Middle East Europe Asia Europe Europe Europe Latin America Asia Europe Europe Europe

_________________________________________________________________________________________________________





37

Total Inventories (Oil and Gas Field Services) Countries in Latin America


Rank

Percentile

22.64 19.90 18.74 16.56 15.62 15.37 14.51 11.41 10.36 9.44 8.77 8.73 8.69 8.30 6.51 6.41 4.34 4.14 1.64 1.59 0.78 0.24

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

95.45 90.91 86.36 81.82 77.27 72.73 68.18 63.64 59.09 54.55 50.00 45.45 40.91 36.36 31.82 27.27 22.73 18.18 13.64 9.09 4.55 0.00

_________________________________________________________________________________________________________

Bolivia Nicaragua French Guiana Suriname Mexico Uruguay Venezuela Peru Guatemala El Salvador Ecuador Brazil Honduras Chile Costa Rica Belize Panama Guyana Paraguay Colombia Argentina Falkland Islands

_________________________________________________________________________________________________________





38

Current Assets - Total Countries


Rank

Percentile

71.58 68.82 68.51 63.58 61.14 56.66 56.14 51.25 50.70 46.23 44.59 43.15 41.76 41.56 41.29 40.81 40.58 36.42 34.44 33.52 31.40 30.23 28.73 28.65 27.84 26.85 24.04 23.73 23.53 23.45 22.07 21.60 21.24 20.21 19.61 19.08 19.03 18.58 17.65 17.30 16.91 16.47 14.21 12.34 11.70

1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 32 33 34 35 36 37 38 39 40 42 43 44 45 46 47 48 50 51 52

98.11 96.23 94.34 92.45 90.57 88.68 86.79 84.91 83.02 79.25 77.36 75.47 73.58 71.70 69.81 67.92 66.04 64.15 62.26 60.38 58.49 56.60 54.72 52.83 50.94 49.06 39.62 37.74 35.85 33.96 32.08 30.19 28.30 26.42 24.53 20.75 18.87 16.98 15.09 13.21 11.32 9.43 5.66 3.77 1.89

Region

_________________________________________________________________________________________________________

Greece Germany Malaysia Singapore Pakistan Spain Philippines France Austria Norway Japan Finland Sweden Hong Kong India Netherlands Denmark Italy Poland Belgium Thailand the United Kingdom Turkey Mexico Australia Indonesia Russian Federation Israel Ireland South Africa Switzerland Hungary Brazil Chile Taiwan Luxembourg USA Czech Republic Portugal Argentina South Korea China Peru Canada New Zealand

Europe Europe Asia Asia the Middle East Europe Asia Europe Europe Europe Asia Europe Europe Asia Asia Europe Europe Europe Europe Europe Asia Europe the Middle East Latin America Oceana Asia Europe the Middle East Europe Africa Europe Europe Latin America Latin America Asia Europe North America Europe Europe Latin America Asia Asia Latin America North America Oceana

_________________________________________________________________________________________________________





39

Current Assets - Total (Oil and Gas Field Services) Countries in Latin America


Rank

Percentile

59.16 56.01 49.22 41.60 34.36 30.37 28.65 28.18 26.61 25.03 24.30 21.24 20.21 17.72 17.30 15.85 15.61 14.21 12.90 11.75 10.91 10.81

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

95.45 90.91 86.36 81.82 77.27 72.73 68.18 63.64 59.09 54.55 50.00 45.45 40.91 36.36 31.82 27.27 22.73 18.18 13.64 9.09 4.55 0.00

_________________________________________________________________________________________________________

Guyana Bolivia Nicaragua Falkland Islands French Guiana Suriname Mexico Uruguay Venezuela Paraguay Colombia Brazil Chile Panama Argentina Costa Rica Belize Peru Guatemala El Salvador Ecuador Honduras

_________________________________________________________________________________________________________





40

Property Plant and Equipment - Net Countries


Rank

Percentile

87.16 85.15 76.63 76.08 75.83 73.65 73.30 72.69 72.09 70.87 69.25 68.97 66.29 65.86 65.57 63.08 60.08 60.06 59.90 59.52 57.69 57.14 56.91 54.07 50.28 49.65 49.51 47.62 45.92 42.57 42.29 38.75 34.83 33.14 32.06 27.29 26.52 25.81 25.67 22.21 20.18 18.88 16.00 15.83 13.77

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 18 19 20 21 22 23 24 25 27 28 29 31 32 34 35 36 39 41 42 43 44 45 46 47 48 49 50 51 52 53

98.11 96.23 94.34 92.45 90.57 88.68 86.79 84.91 83.02 81.13 79.25 77.36 75.47 73.58 71.70 66.04 64.15 62.26 60.38 58.49 56.60 54.72 52.83 49.06 47.17 45.28 41.51 39.62 35.85 33.96 32.08 26.42 22.64 20.75 18.87 16.98 15.09 13.21 11.32 9.43 7.55 5.66 3.77 1.89 0.00

Region

_________________________________________________________________________________________________________

New Zealand Canada Peru Czech Republic Switzerland USA Russian Federation Israel Ireland Argentina South Korea Indonesia South Africa Hungary Luxembourg Australia Taiwan Brazil Belgium Poland the United Kingdom Chile Hong Kong Portugal Thailand Turkey Mexico India Norway Philippines China Pakistan Italy Japan Finland Sweden Denmark Singapore Greece Netherlands Germany Spain France Austria Malaysia

Oceana North America Latin America Europe Europe North America Europe the Middle East Europe Latin America Asia Asia Africa Europe Europe Oceana Asia Latin America Europe Europe Europe Latin America Asia Europe Asia the Middle East Latin America Asia Europe Asia Asia the Middle East Europe Asia Europe Europe Europe Asia Europe Europe Europe Europe Europe Europe Asia

_________________________________________________________________________________________________________





41

Property Plant and Equipment - Net (Oil and Gas Field Services) Countries in Latin America


Rank

Percentile

76.63 70.87 69.57 63.41 60.06 59.39 58.86 58.33 57.14 54.03 52.49 49.51 48.70 45.99 44.82 44.15 42.47 40.08 38.91 37.50 37.32 27.18

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

95.45 90.91 86.36 81.82 77.27 72.73 68.18 63.64 59.09 54.55 50.00 45.45 40.91 36.36 31.82 27.27 22.73 18.18 13.64 9.09 4.55 0.00

_________________________________________________________________________________________________________

Peru Argentina Guatemala El Salvador Brazil French Guiana Ecuador Honduras Chile Panama Suriname Mexico Uruguay Venezuela Costa Rica Belize Bolivia Paraguay Colombia Guyana Nicaragua Falkland Islands

_________________________________________________________________________________________________________





42

Accumulated Depreciation - Total Countries


Rank

Percentile

136.47 130.90 129.48 71.40 69.75 69.45 67.49 65.76 64.15 61.42 54.85 54.70 50.73 45.26 45.02 44.55 40.79 38.81 38.18 37.90 37.87 31.55 29.77 28.40 27.45 25.73 25.56 25.21 20.12 19.86 19.55 19.24 18.71 18.26 17.07 14.45 13.51 12.82 6.20 2.74 2.37

1 2 3 4 5 6 7 8 9 10 11 12 14 15 16 17 18 19 20 21 22 23 24 25 27 28 29 30 34 35 37 38 39 40 41 42 43 44 45 46 47

97.87 95.74 93.62 91.49 89.36 87.23 85.11 82.98 80.85 78.72 76.60 74.47 70.21 68.09 65.96 63.83 61.70 59.57 57.45 55.32 53.19 51.06 48.94 46.81 42.55 40.43 38.30 36.17 27.66 25.53 21.28 19.15 17.02 14.89 12.77 10.64 8.51 6.38 4.26 2.13 0.00

Region

_________________________________________________________________________________________________________

Belgium France Austria Russian Federation Japan Italy Finland Poland Hungary USA Turkey Mexico Canada Australia South Africa Germany Brazil Chile Israel the United Kingdom Ireland Taiwan Indonesia Portugal Philippines India Thailand New Zealand Sweden Pakistan Denmark Hong Kong Spain China Norway Greece Singapore Netherlands Malaysia Switzerland Luxembourg

Europe Europe Europe Europe Asia Europe Europe Europe Europe North America the Middle East Latin America North America Oceana Africa Europe Latin America Latin America the Middle East Europe Europe Asia Asia Europe Asia Asia Asia Oceana Europe the Middle East Europe Asia Europe Asia Europe Europe Asia Europe Asia Europe Europe

_________________________________________________________________________________________________________





43

Accumulated Depreciation - Total (Oil and Gas Field Services) Countries in Latin America


Rank

Percentile

65.61 57.99 54.70 53.80 52.63 50.81 40.79 38.81 30.44 29.98 27.39 24.07 20.38 20.04 19.78 19.21

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

93.75 87.50 81.25 75.00 68.75 62.50 56.25 50.00 43.75 37.50 31.25 25.00 18.75 12.50 6.25 0.00

_________________________________________________________________________________________________________

French Guiana Suriname Mexico Uruguay Panama Venezuela Brazil Chile Costa Rica Belize Bolivia Nicaragua Paraguay Falkland Islands Colombia Guyana

_________________________________________________________________________________________________________





44

Intangible Other Assets Countries


Rank

Percentile

34.42 13.09 8.59 6.37 5.93 5.04 4.88 4.83 4.37 4.34 3.71 3.61 3.25 1.60 1.37 1.19 1.18 0.91 0.88 0.80 0.70 0.58 0.58 0.43 0.37 0.19 0.18 0.18 0.07 0.06 0.06 0.01 0.01 0.00 0.00

1 2 3 4 5 6 7 8 10 11 12 13 14 15 16 17 18 21 22 23 24 25 26 28 29 30 31 32 34 35 36 37 38 39 40

97.50 95.00 92.50 90.00 87.50 85.00 82.50 80.00 75.00 72.50 70.00 67.50 65.00 62.50 60.00 57.50 55.00 47.50 45.00 42.50 40.00 37.50 35.00 30.00 27.50 25.00 22.50 20.00 15.00 12.50 10.00 7.50 5.00 2.50 0.00

Region

_________________________________________________________________________________________________________

Netherlands Spain the United Kingdom USA Peru Germany France Austria Israel Ireland Norway Taiwan Portugal Belgium Canada Hong Kong Thailand Japan Finland Singapore Poland Turkey Mexico Italy Australia Czech Republic Argentina South Korea South Africa Brazil Chile Russian Federation Hungary Greece India

Europe Europe Europe North America Latin America Europe Europe Europe the Middle East Europe Europe Asia Europe Europe North America Asia Asia Asia Europe Asia Europe the Middle East Latin America Europe Oceana Europe Latin America Asia Africa Latin America Latin America Europe Europe Europe Asia

_________________________________________________________________________________________________________





45

Intangible Other Assets (Oil and Gas Field Services) Countries in Latin America


Rank

Percentile

5.93 5.38 4.91 4.56 4.51 0.94 0.92 0.70 0.62 0.58 0.57 0.54 0.18 0.06 0.06 0.04 0.04 0.01

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

94.44 88.89 83.33 77.78 72.22 66.67 61.11 55.56 50.00 44.44 38.89 33.33 27.78 22.22 16.67 11.11 5.56 0.00

_________________________________________________________________________________________________________

Peru Guatemala El Salvador Ecuador Honduras Paraguay Colombia French Guiana Suriname Mexico Uruguay Venezuela Argentina Brazil Chile Costa Rica Belize Panama

_________________________________________________________________________________________________________





3.3 3.3.1

FINANCIAL RETURNS RATIOS

IN

46

BRAZIL: LIABILITY STRUCTURE

Overview

In this chapter we consider the liability structure of firms operating in Brazil benchmarked against global averages. The chapter begins by defining relevant terms. A common-size statement, or vertical analysis of liabilities and shareholder equity is then presented for the proto-typical firm operating in Brazil and the average global benchmarks (sometimes referred to as a financial “gap” analysis). The figure reflect firms involved in oil and gas field services in Brazil. For ratios where there are large deviations between Brazil and the benchmarks, graphics are provided (total liabilities and equity = 100 percent). Then the distribution of ratios is presented in the form of ranks and percentiles. Certain key vertical analysis liability ratios are highlighted.

3.3.2

Liabilities and Equity – Definitions of Terms

The following definitions are provided for those less familiar with the liability-side of financial statement analysis. As this chapter deals with the vertical analysis and global benchmarking of liabilities and equity, only definitions covering certain terms used in this chapter’s tables and graphs are provided here. The glossary below reflects commonly accepted definitions across various countries and official sources. •

Accounts Payable. Accounts payable are defined as amounts owed on open account to private persons or organizations for goods or services received.

•

Capital Surplus. Capital surplus is commonly defined as an amount of equity which is directly contributed capital in excess of the par value.

•

Capitalized Lease Obligations. A capitalized lease obligation is commonly defined as an ownership arrangement in which the item under lease is typically a long-term asset. Capital leases are generally recorded as assets with liability at the current value of the lease payment.

•

Common Equity. Common equity is defined to equal the company's net worth. It typically comprises capital stock, capital surplus, retained earnings, and, in some cases, net worth reserves. Common equity is the portion of total net worth belonging to the common stockholders. Synonyms which are often used for common equity are “common stock” and “net worth”.

•

Common Stock. Common stock is defined as the securities which represent the company's ownership interest. Common stockholders typically assume greater risk than preferred stockholders; although common stockholders maintain greater control and generally greater dividends and capital appreciation. Common stock can be used interchangeably with the term capital stock when the company has no preferred stock.

•

Current Liabilities - Total. Total current liabilities are defined as the total amount of obligations which would require the use of current assets or other current liabilities to pay.

•

Current Portion of Long Term Debt. The current proportion of long term debt is typically defined as debt which is payable in more than one year.




47

•

Deferred Taxes. Deferred taxes are compulsory charges from a previous accounting period which are yet unpaid.

•

Dividends Payable. Dividends payable typically include the declared dividend dollar amount that a company is obligated to pay. The dividend payment eliminates dividends payable and reduces cash.

•

Income Taxes Payable. Income taxes payable are understood to mean taxes which are levied by state, federal, and local governments on the company's reported accounting profit. Income taxes payable are those which are due in the current accounting period.

•

Long Term Debt. Long-term debt is defined to be due in a period exceeding one year or one operating cycle, whichever is longer. Long-term debt can have an extended repayment period such as a many-year mortgage on land and buildings, or debt that's intended to be permanent such as bonds issued to investors.

•

Long Term Debt Excluding Capitalized Leases. Long term debt excluding capitalized leases is defined as debt which is typically due in a period exceeding one year or one operating cycle, whichever is longer, less capitalized leases (see Long Term Debt for exceptions). Capital leases are generally recorded as assets with liability at the current value of the lease payment.

•

Minority Interest. Minority interest is the proportional share of the minority ownership's interest (less than 50 percent) in the earnings or losses.

•

Non-Equity Reserves. Non-equity reserves are the amount set aside for losses or liabilities which are certain to arise but cannot be quantified with certainty, and are not part of the firm’s equity.

•

Preferred Stock. Preferred stock receives payment of dividends from the company's earnings before common stock. Preferred stock generally maintains priority in the case of the company's liquidation. Usually the dividends from preferred stock are priced at a specific rate which has been determined by the board of directors.

•

Retained Earnings. proprietary funds.

•

Shareholders Equity. Shareholders equity is commonly defined to be the amount of total equity reserved for common and preferred shareholders.

•

Short Term Debt. Short term debt is generally defined as debt payable within one year.

•

Total Liabilities. Total liabilities are generally defined to include all the claims against a corporation. Liabilities include accounts and wages and salaries payable, dividends declared payable, accrued taxes payable, fixed or long-term liabilities such as mortgage bonds, debentures, and bank loans.


Retained earnings is an equity account reflecting the accumulated earnings of



3.3.3

48

Liability Structure: Outlook

Using the methodology described in the introduction, the following table summarizes liability and equity structure benchmarks for firms involved in oil and gas field services in Brazil. To allow comparable benchmarking, a common index of Total Liabilities & Shareholders Equity = 100 is used. All figures are current-year projections for companies operating in Brazil based on latest financial results available. Liability Structure Brazil Latin America World Avg. _________________________________________________________________________________________________________

Accounts Payable Short Term Debt & Current Portion of Long Term Debt Income Taxes Payable Dividends Payable Other Current Liabilities Current Liabilities - Total Long Term Debt Long Term Debt Excluding Capitalized Leases Capitalized Lease Obligations Provision For Risks and Charges Deferred Taxes Other Liabilities Total Liabilities Non-Equity Reserves Minority Interest Preferred Stock Common Equity Common Stock Capital Surplus Revaluation Reserves Other Appropriated Reserves Unappropriated Reserves Retained Earnings Total Liabilities & Shareholders Equity

9.53 10.85 1.59 0.70 4.58 23.55 7.34 7.33 0.01 3.56 6.42 1.11 40.20 0.09 2.07 0.99 47.77 5.63 17.80 8.77 -3.51 -3.78 26.14 100.00

6.45 9.50 0.94 1.17 8.10 22.83 7.23 6.74 0.48 2.33 3.31 2.08 36.43 0.30 1.23 0.20 47.17 6.36 15.00 3.62 6.78 4.46 15.76 100.00

6.19 4.92 3.84 0.91 4.26 19.35 9.86 9.79 0.07 1.49 4.23 3.16 37.98 0.09 0.60 0.17 45.24 12.22 13.10 0.87 1.60 6.88 11.30 100.00

_________________________________________________________________________________________________________





3.3.4

49

Large Variances: Liabilities

The following graphics summarize for oil and gas field services the large liability structure gaps between firms operating in Brazil and the world average. A gap cannot necessarily be interpreted as a positive or negative reflection on performance. Gaps may signal areas of specialization, market focus, or expertise. More contextual information is required to fully interpret these gaps. The gaps highlighted here are simply those that are large.

Gap: Accounts Payable 10

9.53

8

6.45

6.19

6 3.34

4 2 0

Brazil

Latin America

World Average

Gap

Gap: Short Term Debt & Current Portion of Long Term Debt 12

10.85 9.5

10 8

5.93

4.92

6 4 2 0

Brazil

Latin America

World Average

Gap

Gap: Current Liabilities - Total 25

23.55

22.83 19.35

20 15 10

4.2

5 0

Brazil


Latin America

World Average

Gap



50

Gap: Long Term Debt 10

9.86 7.34

7.23

5 0 -2.52 -5

Brazil

Latin America

World Average

Gap

Gap: Common Equity 50

47.77

47.17

45.24

40 30 20 10 0

2.53 Brazil

Latin America

World Average

Gap

Gap: Common Stock 15 10

12.22 5.63

6.36

5 0 -5 -10

-6.59 Brazil

Latin America

World Average

Gap

Gap: Capital Surplus 20

17.8 15

15

13.1

10 4.7

5 0

Brazil


Latin America

World Average

Gap



51

Gap: Revaluation Reserves 10

8.77

7.9

8 6 3.62

4 2 0

0.87 Brazil

Latin America

World Average

Gap

Gap: Other Appropriated Reserves 8

6.78

6 4

3.51

0

1.91

1.6

2 Brazil

Latin America

World Average

Gap

Gap: Unappropriated Reserves 6.88

8 6 4

3.78

4.46

2 0 -2 -4

-3.1 Brazil

Latin America

World Average

Gap

Gap: Retained Earnings 30

26.14

25 20

15.76

15

14.84 11.3

10 5 0

Brazil


Latin America

World Average

Gap



3.3.5

52


We now consider the distribution of liability ratios for oil and gas field services using ranks and percentiles. What percent of countries have a value lower or higher than Brazil (what is the ratio's rank or percentile)? The table below answers this question with respect to the vertical analysis of liability structure. The ranks and percentiles indicate, from highest to lowest, where a value falls within the distribution of all countries considered in the global benchmark (the number of countries in the benchmark per line item may vary, as indicated in the Rank). Again, a high or low figure does not necessarily indicate good or bad performance. After the summary table below, a few key vertical liability ratios are highlighted in additional tables. Liability Structure

Brazil

Rank of Total

Percentile


9.53 10.85 1.59 0.70 4.58 23.55 7.34 7.33 0.01 3.56 6.42 1.11 40.20 0.09 2.07 0.99 47.77 5.63 17.80 8.77 -3.51 -3.78 26.14 100.00

12 of 46 13 of 51 18 of 39 11 of 16 32 of 52 21 of 53 29 of 51 29 of 51 15 of 17 20 of 39 11 of 43 21 of 39 27 of 53 11 of 16 15 of 46 5 of 9 28 of 53 33 of 46 10 of 34 2 of 13 43 of 44 17 of 18 16 of 51

73.91 74.51 53.85 31.25 38.46 60.38 43.14 43.14 11.76 48.72 74.42 46.15 49.06 31.25 67.39 44.44 47.17 28.26 70.59 84.62 2.27 5.56 68.63

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________





53

Accounts Payable Countries

Value (total liabilities & equity = 100)

Rank

Percentile

20.92 17.84 17.41 17.22 16.68 12.11 11.94 11.91 11.50 11.19 10.52 9.53 9.33 9.30 9.15 9.07 6.84 6.81 6.64 6.43 6.39 6.34 5.97 5.61 5.42 5.28 5.21 5.02 4.75 4.49 4.37 4.35 4.34 4.21 3.76 3.17 2.15 2.09 1.95 0.99

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 39 42 43 44 45

97.83 95.65 93.48 91.30 89.13 86.96 84.78 82.61 80.43 78.26 76.09 73.91 71.74 69.57 67.39 65.22 60.87 58.70 56.52 54.35 52.17 50.00 47.83 45.65 43.48 41.30 39.13 36.96 34.78 32.61 30.43 28.26 26.09 23.91 21.74 15.22 8.70 6.52 4.35 2.17

Region

_________________________________________________________________________________________________________

Greece Spain France Austria Singapore Italy India Malaysia Belgium Poland South Africa Brazil Turkey Mexico Canada Chile Hong Kong Pakistan Russian Federation Norway Israel Ireland Hungary Australia USA Taiwan Germany the United Kingdom Portugal Netherlands Thailand Japan Switzerland Finland Luxembourg Indonesia Sweden Denmark China Philippines

Europe Europe Europe Europe Asia Europe Asia Asia Europe Europe Africa Latin America the Middle East Latin America North America Latin America Asia the Middle East Europe Europe the Middle East Europe Europe Oceana North America Asia Europe Europe Europe Europe Asia Asia Europe Europe Europe Asia Europe Europe Asia Asia

_________________________________________________________________________________________________________





54

Accounts Payable (Oil and Gas Field Services) Countries in Latin America


Rank

Percentile

11.16 9.86 9.53 9.30 9.15 9.07 8.64 7.11 7.01 6.59 4.90 3.48 3.38 2.14 0.99 0.87

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

93.75 87.50 81.25 75.00 68.75 62.50 56.25 50.00 43.75 37.50 31.25 25.00 18.75 12.50 6.25 0.00

_________________________________________________________________________________________________________

French Guiana Suriname Brazil Mexico Uruguay Chile Venezuela Costa Rica Belize Guyana Panama Paraguay Colombia Falkland Islands Bolivia Nicaragua

_________________________________________________________________________________________________________





55

Current Liabilities - Total Countries


Rank

Percentile

58.69 50.34 47.32 40.33 39.81 39.38 35.81 32.87 32.24 29.49 29.40 28.43 26.89 26.82 26.00 25.90 25.81 23.71 23.55 22.90 22.41 21.28 20.83 20.59 20.06 18.61 18.34 18.19 17.32 16.83 16.72 16.44 15.31 15.16 14.96 13.64 13.58 13.27 12.96 9.10 8.12 7.06 6.03 5.86 4.98

1 2 3 5 6 7 8 9 10 11 12 13 14 15 16 17 18 20 21 22 23 24 25 26 27 28 29 30 32 33 34 35 36 37 38 41 42 44 45 46 47 49 50 51 53

98.11 96.23 94.34 90.57 88.68 86.79 84.91 83.02 81.13 79.25 77.36 75.47 73.58 71.70 69.81 67.92 66.04 62.26 60.38 58.49 56.60 54.72 52.83 50.94 49.06 47.17 45.28 43.40 39.62 37.74 35.85 33.96 32.08 30.19 28.30 22.64 20.75 16.98 15.09 13.21 11.32 7.55 5.66 3.77 0.00

Region

_________________________________________________________________________________________________________

Spain Philippines Singapore Italy France Austria Greece Switzerland Poland Belgium India Luxembourg Turkey Mexico South Africa Pakistan Norway Peru Brazil Malaysia Chile Japan the United Kingdom Finland Hong Kong Russian Federation Israel Ireland Thailand Australia Hungary Czech Republic Argentina Taiwan South Korea Portugal Germany USA Canada Netherlands Indonesia New Zealand Sweden Denmark China

Europe Asia Asia Europe Europe Europe Europe Europe Europe Europe Asia Europe the Middle East Latin America Africa the Middle East Europe Latin America Latin America Asia Latin America Asia Europe Europe Asia Europe the Middle East Europe Asia Oceana Europe Europe Latin America Asia Asia Europe Europe North America North America Europe Asia Oceana Europe Europe Asia

_________________________________________________________________________________________________________





56

Current Liabilities - Total (Oil and Gas Field Services) Countries in Latin America


Rank

Percentile

50.22 44.13 32.17 28.43 26.82 26.38 25.06 24.91 23.71 23.55 22.41 21.53 19.62 18.22 18.05 17.58 17.31 15.31 13.81 13.72 13.41 6.01

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

95.45 90.91 86.36 81.82 77.27 72.73 68.18 63.64 59.09 54.55 50.00 45.45 40.91 36.36 31.82 27.27 22.73 18.18 13.64 9.09 4.55 0.00

_________________________________________________________________________________________________________

Bolivia Nicaragua French Guiana Suriname Mexico Uruguay Guyana Venezuela Peru Brazil Chile Guatemala El Salvador Ecuador Honduras Costa Rica Belize Argentina Paraguay Panama Colombia Falkland Islands

_________________________________________________________________________________________________________





57

Long Term Debt Countries


Rank

Percentile

43.14 31.07 30.89 26.87 26.46 25.49 24.99 22.87 21.79 21.64 21.62 21.61 20.14 19.68 19.48 18.01 16.82 16.80 16.21 10.36 10.16 9.33 8.10 7.91 7.39 7.34 7.26 6.99 5.84 5.53 5.47 5.33 5.25 5.16 5.12 4.95 3.73 3.63 2.63 2.20 2.19 2.09 1.28

1 2 3 4 5 7 8 10 11 12 13 14 15 16 17 19 20 21 22 23 24 25 26 27 28 29 30 31 33 34 35 37 38 39 40 41 42 43 44 45 46 47 51

98.04 96.08 94.12 92.16 90.20 86.27 84.31 80.39 78.43 76.47 74.51 72.55 70.59 68.63 66.67 62.75 60.78 58.82 56.86 54.90 52.94 50.98 49.02 47.06 45.10 43.14 41.18 39.22 35.29 33.33 31.37 27.45 25.49 23.53 21.57 19.61 17.65 15.69 13.73 11.76 9.80 7.84 0.00

Region

_________________________________________________________________________________________________________

New Zealand Switzerland Thailand Luxembourg Canada Malaysia USA Norway Israel Netherlands Czech Republic Ireland Argentina South Korea India Taiwan the United Kingdom Belgium Portugal Australia Hong Kong Singapore South Africa Philippines Spain Brazil Peru Chile Russian Federation France Austria Japan Hungary Finland Germany Italy Sweden Denmark Poland Turkey Mexico Indonesia China

Oceana Europe Asia Europe North America Asia North America Europe the Middle East Europe Europe Europe Latin America Asia Asia Asia Europe Europe Europe Oceana Asia Asia Africa Asia Europe Latin America Latin America Latin America Europe Europe Europe Asia Europe Europe Europe Europe Europe Europe Europe the Middle East Latin America Asia Asia

_________________________________________________________________________________________________________





58

Long Term Debt (Oil and Gas Field Services) Countries in Latin America


Rank

Percentile

24.63 23.91 20.14 7.89 7.34 7.26 6.99 6.93 6.59 6.01 5.58 5.53 5.48 5.40 4.31 3.72 2.63 2.32 2.19 2.15 2.03

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

95.24 90.48 85.71 80.95 76.19 71.43 66.67 61.90 57.14 52.38 47.62 42.86 38.10 33.33 28.57 23.81 19.05 14.29 9.52 4.76 0.00

_________________________________________________________________________________________________________

Paraguay Colombia Argentina Bolivia Brazil Peru Chile Nicaragua Guatemala El Salvador Ecuador Honduras Costa Rica Belize Panama Falkland Islands French Guiana Suriname Mexico Uruguay Venezuela

_________________________________________________________________________________________________________





59

Total Liabilities Countries


Rank

Percentile

76.23 71.05 65.92 62.58 59.47 58.50 58.42 57.89 57.29 57.11 56.51 56.49 55.52 50.76 49.16 47.72 47.69 47.35 47.30 45.45 44.37 42.00 41.30 40.20 39.56 39.41 39.13 38.37 38.25 38.24 37.29 37.11 36.12 35.47 35.31 34.45 34.36 31.78 30.76 30.75 29.01 26.06 18.86 12.73 12.37

1 2 3 4 5 6 7 8 9 10 11 12 13 15 17 18 19 20 21 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 40 41 43 44 45 46 49 51 52 53

98.11 96.23 94.34 92.45 90.57 88.68 86.79 84.91 83.02 81.13 79.25 77.36 75.47 71.70 67.92 66.04 64.15 62.26 60.38 56.60 54.72 52.83 50.94 49.06 47.17 45.28 43.40 41.51 39.62 37.74 35.85 33.96 32.08 30.19 28.30 24.53 22.64 18.87 16.98 15.09 13.21 7.55 3.77 1.89 0.00

Region

_________________________________________________________________________________________________________

Switzerland Spain Luxembourg Philippines Thailand Singapore Belgium New Zealand Italy France Norway Austria India Canada Germany Malaysia Israel USA Ireland the United Kingdom South Africa Czech Republic Poland Brazil Pakistan Taiwan Argentina Peru Chile South Korea Australia Netherlands Greece Portugal Hong Kong Turkey Mexico Japan Indonesia Finland Russian Federation Hungary China Sweden Denmark

Europe Europe Europe Asia Asia Asia Europe Oceana Europe Europe Europe Europe Asia North America Europe Asia the Middle East North America Europe Europe Africa Europe Europe Latin America the Middle East Asia Latin America Latin America Latin America Asia Oceana Europe Europe Europe Asia the Middle East Latin America Asia Asia Europe Europe Europe Asia Europe Europe

_________________________________________________________________________________________________________





60

Total Liabilities (Oil and Gas Field Services) Countries in Latin America


Rank

Percentile

62.43 54.86 47.41 46.03 41.21 40.20 39.13 38.37 38.28 38.25 36.42 34.83 34.36 33.79 31.92 31.75 30.00 29.55 29.47 29.20 21.38 12.68

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

95.45 90.91 86.36 81.82 77.27 72.73 68.18 63.64 59.09 54.55 50.00 45.45 40.91 36.36 31.82 27.27 22.73 18.18 13.64 9.09 4.55 0.00

_________________________________________________________________________________________________________

Bolivia Nicaragua Paraguay Colombia French Guiana Brazil Argentina Peru Guyana Chile Suriname Guatemala Mexico Uruguay Venezuela El Salvador Costa Rica Belize Ecuador Honduras Panama Falkland Islands

_________________________________________________________________________________________________________





61

Common Equity Countries


Rank

Percentile

86.76 84.30 69.24 68.50 65.70 63.57 63.34 62.71 61.55 61.34 61.21 59.90 58.17 58.00 54.54 54.02 53.45 53.14 52.79 52.73 52.70 51.87 50.38 47.92 47.77 47.12 45.50 45.45 45.37 44.31 43.91 43.42 42.89 42.46 42.42 41.56 39.62 39.52 39.00 37.79 37.21 33.62 27.26 23.77 20.56

1 2 3 4 5 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 27 28 29 30 31 32 34 35 36 37 38 39 41 42 43 44 45 46 47 51 52 53

98.11 96.23 94.34 92.45 90.57 86.79 84.91 83.02 81.13 79.25 77.36 75.47 73.58 71.70 69.81 67.92 66.04 64.15 62.26 60.38 58.49 56.60 54.72 49.06 47.17 45.28 43.40 41.51 39.62 35.85 33.96 32.08 30.19 28.30 26.42 22.64 20.75 18.87 16.98 15.09 13.21 11.32 3.77 1.89 0.00

Region

_________________________________________________________________________________________________________

Sweden Denmark Indonesia Russian Federation Japan Finland Greece Netherlands Hungary Australia Peru Pakistan Hong Kong Czech Republic Poland Argentina the United Kingdom Israel South Korea South Africa Ireland Malaysia USA Canada Brazil Germany Turkey Chile Mexico India Taiwan Norway France China Austria Belgium Italy Portugal Singapore Thailand Philippines New Zealand Spain Switzerland Luxembourg

Europe Europe Asia Europe Asia Europe Europe Europe Europe Oceana Latin America the Middle East Asia Europe Europe Latin America Europe the Middle East Asia Africa Europe Asia North America North America Latin America Europe the Middle East Latin America Latin America Asia Asia Europe Europe Asia Europe Europe Europe Europe Asia Asia Asia Oceana Europe Europe Europe

_________________________________________________________________________________________________________





62

Common Equity (Oil and Gas Field Services) Countries in Latin America


Rank

Percentile

86.41 61.21 57.96 55.57 54.42 54.02 50.65 50.50 48.10 47.77 47.02 46.59 45.45 45.37 44.63 42.15 37.13 35.65 35.12 32.63 30.13 29.25

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

95.45 90.91 86.36 81.82 77.27 72.73 68.18 63.64 59.09 54.55 50.00 45.45 40.91 36.36 31.82 27.27 22.73 18.18 13.64 9.09 4.55 0.00

_________________________________________________________________________________________________________

Falkland Islands Peru Guyana Guatemala French Guiana Argentina El Salvador Panama Suriname Brazil Ecuador Honduras Chile Mexico Uruguay Venezuela Bolivia Costa Rica Belize Nicaragua Paraguay Colombia

_________________________________________________________________________________________________________





63

Retained Earnings Countries


Rank

Percentile

41.33 37.79 33.29 32.21 31.84 31.52 31.44 30.46 30.06 29.96 28.85 28.37 27.72 26.15 26.14 24.87 24.51 24.31 23.49 22.90 21.62 20.26 20.09 19.93 19.45 18.23 17.82 14.90 14.90 14.74 13.27 12.85 10.36 8.14 7.66 7.50 7.01 6.81 1.79 1.54 1.26 0.96 -3.14

1 2 3 4 5 6 7 8 9 10 12 13 14 15 16 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 38 40 41 42 43 44 46 47 48 49 51

98.04 96.08 94.12 92.16 90.20 88.24 86.27 84.31 82.35 80.39 76.47 74.51 72.55 70.59 68.63 64.71 62.75 60.78 58.82 56.86 54.90 52.94 50.98 49.02 47.06 45.10 43.14 41.18 39.22 37.25 35.29 33.33 25.49 21.57 19.61 17.65 15.69 13.73 9.80 7.84 5.88 3.92 0.00

Region

_________________________________________________________________________________________________________

Germany Poland Japan Finland Malaysia Turkey Mexico Czech Republic Norway Belgium South Africa Argentina South Korea Russian Federation Brazil Chile Israel Ireland Hungary Hong Kong Singapore Taiwan Netherlands Australia the United Kingdom Portugal USA Thailand France Austria Indonesia Canada Spain China Italy Philippines Sweden Denmark Switzerland Luxembourg Greece India Peru

Europe Europe Asia Europe Asia the Middle East Latin America Europe Europe Europe Africa Latin America Asia Europe Latin America Latin America the Middle East Europe Europe Asia Asia Asia Europe Oceana Europe Europe North America Asia Europe Europe Asia North America Europe Asia Europe Asia Europe Europe Europe Europe Europe Asia Latin America

_________________________________________________________________________________________________________





64

Retained Earnings (Oil and Gas Field Services) Countries in Latin America


Rank

Percentile

37.71 33.33 31.44 30.92 29.20 28.37 26.14 24.87 19.51 19.27 19.21 11.88 11.54 7.48 6.98 6.58 -2.39 -2.41 -2.60 -2.85 -3.14

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

95.24 90.48 85.71 80.95 76.19 71.43 66.67 61.90 57.14 52.38 47.62 42.86 38.10 33.33 28.57 23.81 19.05 14.29 9.52 4.76 0.00

_________________________________________________________________________________________________________

French Guiana Suriname Mexico Uruguay Venezuela Argentina Brazil Chile Costa Rica Panama Belize Paraguay Colombia Bolivia Falkland Islands Nicaragua Honduras Ecuador El Salvador Guatemala Peru

_________________________________________________________________________________________________________





3.4 3.4.1

FINANCIAL RETURNS RATIOS

IN

65

BRAZIL: INCOME STRUCTURE

Overview

In this chapter we consider the income structure of companies operating in Brazil benchmarked against global averages. The chapter begins by defining relevant terms. A common-size statement, or vertical analysis of income is then presented for the proto-typical firm involved in oil and gas field services operating in Brazil and the average global benchmarks (total revenue = 100 percent). For ratios where there are large deviations between Brazil and the benchmarks, graphics are provided. Then the distribution of ratios is presented in the form of ranks and percentiles. Certain key vertical analysis income ratios are highlighted across countries in the comparison group.

3.4.2

Income Statements – Definitions of Terms

The following definitions are provided for those less familiar with the income-side of financial statement analysis. As this chapter deals with the vertical analysis and global benchmarking of income, only definitions covering certain terms used in this chapter’s tables and graphs are provided here. The glossary below reflects commonly accepted definitions across various countries and official sources. •

Amortization. Amortization generally refers to the depreciation, depletion, or charge-off to expense of intangible and tangible assets over a period of time. Amortization is commonly understood to be the taking as an expense (writing off) of the loss of value of an intangible asset such as a copyright, a patent, or a mailing list, in an accounting period.

•

Cost of Goods Sold (excluding depreciation). For retail companies, cost of goods sold is generally defined as the equivalent of starting inventory plus purchases minus ending inventory. In manufacturing, cost of goods sold is defined to equal the starting inventory plus the cost of goods manufactured minus ending inventory. Most pure service firms do not generally have cost of goods sold.

•

Current Domestic Income Tax. Current domestic income taxes are commonly defined as compulsory charges levied by the government where the company is located on current income.

•

Current Foreign Income Tax. Current foreign income taxes are commonly defined as compulsory charges levied by foreign governments on current income.

•

Deferred Domestic Income Tax. Deferred domestic income tax is defined as a compulsory charge from a previous accounting period which is yet unpaid to the government where the company is located on current income.

•

Deferred Foreign Income Tax. Deferred foreign income tax is generally defined as a compulsory charge from a previous accounting period which is yet unpaid to foreign governments on current income.

•

Depletion. Depletion is commonly defined to be included as one of the elements of amortization, and is understood to be the portion of the carrying value (other than the portion associated with tangible assets) prorated in each accounting period for financial reporting purposes.




66

•

Depreciation. Depreciation generally is defined as the expiration in the service life of fixed assets, other than depletable assets, attributable to wear and tear, deterioration, action of the physical elements, inadequacy and obsolescence. Depreciation is commonly defined as the portion of the cost of a fixed asset charged as an expense during a particular period. In accounting for depreciation, the cost of a fixed asset, less any salvage value, is prorated over the estimated service life of such an asset, and each period is charged with a portion of such cost. Through this process, the cost of the asset is ultimately charged off as an expense.

•

Earnings Before Interest and Taxes (EBIT). EBIT is a financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. In other words, operating and non-operating profit before the deduction of interest and income taxes.

•

Equity in Earnings. Equity in earnings is defined as a company's proportional share (based on ownership) of the net earnings or losses of an unconsolidated company.

•

Gross Income. Gross income is commonly defined as all the money, goods, and property received by the company that must be included as taxable income.

•

Income Taxes. Income taxes are defined to include those taxes levied by state, federal, and local governments on the company's reported accounting profit. Income taxes generally include both deferred and paid taxes. They are generally determined after the interest expense has been deducted.

•

Interest Capitalized. Interest capitalized is generally added to a fixed asset instead of expensed. Capitalized interest can usually be found in footnotes or the face of the income statement.

•

Interest Expense on Debt. Interest expenses on debt are those which are spent on current debt and added to the net income so avoid underestimating interest coverage.

•

Minority Interest. Minority interest is the proportional share of the minority ownership's interest (less than 50 percent) in the earnings or losses.

•

Net Income Available to Common. Net income available to common is defined as the net income available to common stockholders.

•

Net Income Before Preferred Dividends. Net income before preferred dividends is generally calculated as the difference between total revenues and total expense prior to the granting of preferred dividends.

•

Net Sales or Revenues. Revenues or net sales are defined as payments made to and received by an entity. May take the form of taxes, user fees, fines, fees for service, and so on.

•

Non-Operating Interest Income. Non-operating interest income is generally understood to be any interest received (e.g., royalty, production payment, net profits interest) that does not involve the operation of the company.

•

Operating Expenses. Operating expenses are generally defined as those incurred in paying for the company’s day-to-day activities.

•

Operating Income. Operating income is generally defined to equal operating revenues less operating expenses. It typically excludes items of other revenue and expense such as equity in earnings of unconsolidated companies, dividends, interest income and expense, income taxes, extraordinary items, and cumulative effect of accounting changes.




67

•

Pretax Income. Pretax income is generally defined as income before tax deductions.

•

Selling, General & Administrative Expenses. Selling, general and administrative expenses are expenses independent from cost of sales for the purpose of illustrating the amount of the company's selling and administrative costs. Generally included in this figure are the costs of employees' salaries, commissions, and travel expenses; company payroll and office costs; and advertising and promotion.




3.4.3

68

Income Structure: Outlook

Using the methodology described in the introduction, the following table summarizes income structure benchmarks for firms involved in oil and gas field services in Brazil. To allow comparable benchmarking, a common index of Net Sales or Revenues = 100 is used. All figures are current-year projections for companies operating in Brazil based on latest financial results available. Income Structure Brazil Latin America World Avg. _________________________________________________________________________________________________________

Net Sales or Revenues Cost of Goods Sold (Excluding Depreciation) Depreciation, Depletion & Amortization Gross Income Selling, General & Administrative Expenses Other Operating Expenses Operating Expenses - Total Operating Income Non-Operating Interest Income Other Income/Expense Net Earnings Before Interest and Taxes (EBIT) Interest Expense on Debt Interest Capitalized Pretax Income Income Taxes Current Domestic Income Tax Current Foreign Income Tax Deferred Domestic Income Tax Deferred Foreign Income Tax Minority Interest Equity in Earnings Net Income Before Extra Items/Prefer Dividends Net Income Before Preferred Dividends Net Income Available to Common

100.00 49.01 8.39 33.20 15.69 76.30 2.20 15.86 0.34 1.09 17.21 2.70 0.00 14.51 4.76 0.70 2.15 0.38 0.81 0.39 0.00 9.36 9.36 9.36

100.00 55.83 6.93 22.20 10.58 72.98 3.21 11.74 0.97 2.70 15.13 2.65 0.00 12.48 3.33 1.76 1.25 0.79 0.29 0.12 0.13 6.97 6.97 6.97

100.00 49.06 10.93 21.22 5.93 65.88 2.99 14.53 1.80 2.68 18.73 1.63 0.05 17.14 5.74 2.51 0.51 2.66 0.07 0.09 0.19 10.80 10.80 10.79

_________________________________________________________________________________________________________





3.4.4

69

Large Variances: Income

The following graphics summarize for oil and gas field services the large income structure gaps between firms operating in Brazil and the world average. A gap cannot necessarily be interpreted as a positive or negative reflection on performance. Gaps may signal areas of specialization, market focus, or expertise. More contextual information is required to fully interpret these gaps. The gaps highlighted here are simply those that are large.

Gap: Depreciation, Depletion & Amortization 15 10

10.93 8.39

6.93

5 0 -2.54 -5

Brazil

Latin America

World Average

Gap

Gap: Gross Income 40

33.2

30

22.2

21.22

20

11.98

10 0

Brazil

Latin America

World Average

Gap

Gap: Selling, General & Administrative Expenses 20

15.69

15 10.58 10

9.76 5.93

5 0

Brazil


Latin America

World Average

Gap



70

Gap: Other Operating Expenses 80

76.3

72.98

65.88

60 40 20 0

10.42 Brazil

Latin America

World Average

Gap

Gap: Non-Operating Interest Income 1.8

2 1

0.97 0.34

0 -1 -1.46 -2

Brazil

Latin America

World Average

Gap

Gap: Other Income/Expense Net 2.7

3 2

2.68

1.09

1 0 -1 -2

-1.59 Brazil

Latin America

World Average

Gap

Gap: Earnings Before Interest and Taxes (EBIT) 20

17.21

18.73 15.13

15 10 5 0 -5

-1.52 Brazil


Latin America

World Average

Gap



71

Gap: Pretax Income 20 15

14.51

17.14 12.48

10 5 0 -5

-2.63 Brazil

Latin America

World Average

Gap

Gap: Current Domestic Income Tax 2.51

3 1.76

2 1

0.7

0 -1 -2

Brazil

Latin America

-1.81 Gap

World Average

Gap: Current Foreign Income Tax 2.5

2.15

2

1.64 1.25

1.5 1

0.51

0.5 0

Brazil

Latin America

World Average

Gap

Gap: Deferred Domestic Income Tax 2.66

3 2 1

0.38

0.79

0 -1 -2 -3

-2.28 Brazil


Latin America

World Average

Gap



3.4.5

72


We now consider the distribution of income ratios for oil and gas field services using ranks and percentiles. What percent of countries have a value lower or higher than Brazil (what is the ratio's rank or percentile)? The table below answers this question with respect to the vertical analysis of income structure. The ranks and percentiles indicate, from highest to lowest, where a value falls within the distribution of all countries considered in the global benchmark (the number of countries in the benchmark per line item may vary, as indicated in the Rank). Again, a high or low figure does not necessarily indicate good or bad performance. After the summary table below, a few key vertical income ratios are highlighted in additional tables. Income Structure

Brazil

Rank of Total

Percentile


100.00 49.01 8.39 33.20 15.69 76.30 2.20 15.86 0.34 1.09 17.21 2.70 0.00 14.51 4.76 0.70 2.15 0.38 0.81 0.39 0.00 9.36 9.36 9.36

34 of 48 28 of 53 16 of 48 9 of 45 33 of 47 22 of 37 21 of 53 39 of 43 32 of 53 26 of 53 22 of 53 12 of 13 28 of 53 25 of 48 29 of 36 7 of 22 18 of 40 3 of 18 9 of 39 11 of 13 24 of 53 25 of 53 24 of 53

29.17 47.17 66.67 80.00 29.79 40.54 60.38 9.30 39.62 50.94 58.49 7.69 47.17 47.92 19.44 68.18 55.00 83.33 76.92 15.38 54.72 52.83 54.72

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________





73

Cost of Goods Sold (Excluding Depreciation) Countries

Value (total revenue = 100)

Rank

Percentile

98.38 90.12 86.11 85.34 84.26 80.84 77.80 76.71 72.87 72.74 69.87 65.66 63.80 63.26 62.30 60.67 60.51 60.28 59.44 58.49 58.37 54.09 53.40 53.38 52.38 51.98 51.95 51.89 51.19 49.01 48.12 46.63 46.50 45.43 44.94 43.70 43.47 43.29 38.96 35.80 35.44

1 2 3 4 5 6 7 8 10 11 12 13 14 15 16 17 18 19 20 21 22 25 26 27 28 29 30 31 33 34 35 36 37 38 39 40 41 42 44 47 48

97.92 95.83 93.75 91.67 89.58 87.50 85.42 83.33 79.17 77.08 75.00 72.92 70.83 68.75 66.67 64.58 62.50 60.42 58.33 56.25 54.17 47.92 45.83 43.75 41.67 39.58 37.50 35.42 31.25 29.17 27.08 25.00 22.92 20.83 18.75 16.67 14.58 12.50 8.33 2.08 0.00

Region

_________________________________________________________________________________________________________

Greece Philippines Malaysia Spain Switzerland Singapore Belgium Netherlands Luxembourg Poland Peru Sweden Denmark India Japan Turkey Mexico Finland Russian Federation Germany Indonesia South Africa Hungary Italy Israel Norway Ireland Hong Kong Australia Brazil the United Kingdom Chile Thailand France Austria USA Pakistan Taiwan Portugal China Canada

Europe Asia Asia Europe Europe Asia Europe Europe Europe Europe Latin America Europe Europe Asia Asia the Middle East Latin America Europe Europe Europe Asia Africa Europe Europe the Middle East Europe Europe Asia Oceana Latin America Europe Latin America Asia Europe Europe North America the Middle East Asia Europe Asia North America

_________________________________________________________________________________________________________





74

Cost of Goods Sold (Excluding Depreciation) (Oil and Gas Field Services) Countries in Latin America


Rank

Percentile

89.91 79.01 72.58 69.87 65.40 64.15 63.43 60.51 59.52 57.82 56.21 53.67 53.19 49.01 46.63 43.81 42.07 37.07 36.57 36.03 35.99

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

95.24 90.48 85.71 80.95 76.19 71.43 66.67 61.90 57.14 52.38 47.62 42.86 38.10 33.33 28.57 23.81 19.05 14.29 9.52 4.76 0.00

_________________________________________________________________________________________________________

Bolivia Nicaragua French Guiana Peru Falkland Islands Suriname Guatemala Mexico Uruguay El Salvador Venezuela Ecuador Honduras Brazil Chile Panama Guyana Paraguay Costa Rica Belize Colombia

_________________________________________________________________________________________________________





75

Selling, General & Administrative Expenses Countries


Rank

Percentile

23.62 21.73 21.01 20.78 17.32 16.55 16.33 15.84 15.69 14.93 13.40 13.22 13.18 12.96 11.36 10.89 10.02 9.94 9.80 8.93 8.28 8.02 7.98 7.96 7.55 7.45 7.37 6.52 6.01 5.63 5.47 5.41 5.07 4.38 3.87 1.79 1.29 0.37

1 2 3 4 5 6 7 8 9 10 11 12 13 14 17 18 19 20 21 23 24 25 26 27 28 29 30 32 33 34 35 36 37 38 39 42 43 44

97.78 95.56 93.33 91.11 88.89 86.67 84.44 82.22 80.00 77.78 75.56 73.33 71.11 68.89 62.22 60.00 57.78 55.56 53.33 48.89 46.67 44.44 42.22 40.00 37.78 35.56 33.33 28.89 26.67 24.44 22.22 20.00 17.78 15.56 13.33 6.67 4.44 2.22

Region

_________________________________________________________________________________________________________

Germany Italy France Austria South Africa Peru Singapore Poland Brazil Chile Japan Turkey Mexico Finland Norway USA Israel Ireland Indonesia Russian Federation Taiwan Hungary the United Kingdom Canada Hong Kong Portugal Belgium Australia China Sweden Denmark Netherlands Switzerland Luxembourg Thailand Malaysia Greece Philippines

Europe Europe Europe Europe Africa Latin America Asia Europe Latin America Latin America Asia the Middle East Latin America Europe Europe North America the Middle East Europe Asia Europe Asia Europe Europe North America Asia Europe Europe Oceana Asia Europe Europe Europe Europe Europe Asia Asia Europe Asia

_________________________________________________________________________________________________________





76

Selling, General & Administrative Expenses (Oil and Gas Field Services) Countries in Latin America


Rank

Percentile

16.55 15.81 15.69 15.02 14.93 13.97 13.69 13.18 12.96 12.71 12.60 12.24 11.71 11.53 6.58 5.61 3.08 2.99 0.37 0.32

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

95.00 90.00 85.00 80.00 75.00 70.00 65.00 60.00 55.00 50.00 45.00 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00

_________________________________________________________________________________________________________

Peru French Guiana Brazil Guatemala Chile Suriname El Salvador Mexico Uruguay Ecuador Honduras Venezuela Costa Rica Belize Panama Falkland Islands Paraguay Colombia Bolivia Nicaragua

_________________________________________________________________________________________________________





77

Operating Expenses - Total Countries


Rank

Percentile

22.96 20.63 20.22 13.99 13.84 10.94 8.22 8.01 6.44 6.20 6.20 5.66 4.61 4.19 4.08 3.56 3.54 2.96 2.42 2.20 2.11 2.11 2.09 1.74 1.45 1.45 1.44 1.43 1.42 1.23 1.04 0.06 0.06

1 2 3 4 5 6 7 8 9 10 11 12 14 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 33 35 36 37

97.30 94.59 91.89 89.19 86.49 83.78 81.08 78.38 75.68 72.97 70.27 67.57 62.16 56.76 54.05 51.35 48.65 45.95 43.24 40.54 37.84 35.14 32.43 29.73 27.03 24.32 21.62 18.92 16.22 10.81 5.41 2.70 0.00

Region

_________________________________________________________________________________________________________

Russian Federation Hungary New Zealand France Austria Australia Spain Pakistan Hong Kong Malaysia Norway Thailand Singapore Germany India Italy USA Canada South Africa Brazil the United Kingdom Belgium Chile Poland Turkey Mexico Philippines Netherlands Switzerland Luxembourg Greece Japan Finland

Europe Europe Oceana Europe Europe Oceana Europe the Middle East Asia Asia Europe Asia Asia Europe Asia Europe North America North America Africa Latin America Europe Europe Latin America Europe the Middle East Latin America Asia Europe Europe Europe Europe Asia Europe

_________________________________________________________________________________________________________





78

Operating Expenses - Total (Oil and Gas Field Services) Countries in Latin America


Rank

Percentile

16.92 7.75 4.51 4.38 2.20 2.09 1.74 1.64 1.61 1.53 1.45 1.44 1.42 1.34 1.27

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

93.33 86.67 80.00 73.33 66.67 60.00 53.33 46.67 40.00 33.33 26.67 20.00 13.33 6.67 0.00

_________________________________________________________________________________________________________

Panama Guyana Paraguay Colombia Brazil Chile French Guiana Costa Rica Belize Suriname Mexico Bolivia Uruguay Venezuela Nicaragua

_________________________________________________________________________________________________________





79

Operating Income Countries


Rank

Percentile

64.11 55.89 52.07 50.88 41.99 34.77 27.13 24.97 24.26 23.92 22.20 20.00 19.40 19.20 17.51 16.21 16.00 15.86 15.83 15.68 15.65 15.52 15.19 15.09 14.75 12.93 12.66 11.64 10.37 9.52 7.77 5.97 5.93 5.59 5.41 5.36 4.49 4.22 3.86 3.37 3.34 2.81 2.34 2.34 -1.60

1 2 3 4 6 7 9 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 32 33 34 36 37 38 39 40 41 43 44 45 46 47 48 50 51 53

98.11 96.23 94.34 92.45 88.68 86.79 83.02 79.25 77.36 75.47 73.58 71.70 69.81 67.92 66.04 64.15 62.26 60.38 58.49 56.60 54.72 52.83 50.94 49.06 47.17 45.28 43.40 39.62 37.74 35.85 32.08 30.19 28.30 26.42 24.53 22.64 18.87 16.98 15.09 13.21 11.32 9.43 5.66 3.77 0.00

Region

_________________________________________________________________________________________________________

New Zealand Czech Republic Argentina South Korea Pakistan Thailand Hong Kong Canada Australia Norway the United Kingdom Italy USA India South Africa Japan France Brazil Austria Finland Israel Ireland Sweden Chile Denmark Taiwan Indonesia Portugal Netherlands Germany China Russian Federation Belgium Philippines Malaysia Hungary Spain Singapore Switzerland Peru Luxembourg Poland Turkey Mexico Greece

Oceana Europe Latin America Asia the Middle East Asia Asia North America Oceana Europe Europe Europe North America Asia Africa Asia Europe Latin America Europe Europe the Middle East Europe Europe Latin America Europe Asia Asia Europe Europe Europe Asia Europe Europe Asia Asia Europe Europe Asia Europe Latin America Europe Europe the Middle East Latin America Europe

_________________________________________________________________________________________________________





80

Operating Income (Oil and Gas Field Services) Countries in Latin America


Rank

Percentile

52.07 40.63 27.72 26.91 15.86 15.12 15.09 11.84 11.66 5.58 4.90 4.40 3.37 3.06 2.80 2.79 2.59 2.57 2.48 2.34 2.30 2.17

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

95.45 90.91 86.36 81.82 77.27 72.73 68.18 63.64 59.09 54.55 50.00 45.45 40.91 36.36 31.82 27.27 22.73 18.18 13.64 9.09 4.55 0.00

_________________________________________________________________________________________________________

Argentina Guyana Paraguay Colombia Brazil Falkland Islands Chile Costa Rica Belize Bolivia Nicaragua Panama Peru Guatemala French Guiana El Salvador Ecuador Honduras Suriname Mexico Uruguay Venezuela

_________________________________________________________________________________________________________





81

Earnings Before Interest and Taxes (EBIT) Countries


Rank

Percentile

61.68 58.53 57.46 56.15 43.97 37.49 28.86 27.98 27.40 27.06 26.62 25.56 25.43 25.15 22.12 20.82 19.83 19.80 18.99 18.08 17.93 17.93 17.21 16.37 16.11 16.05 15.53 15.28 14.94 13.45 12.90 9.79 9.71 9.37 8.39 7.71 7.25 6.83 5.82 5.37 5.25 4.99 4.38 4.37 0.79

1 2 3 4 6 7 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 34 35 37 38 39 40 41 42 44 45 46 47 48 50 51 53

98.11 96.23 94.34 92.45 88.68 86.79 81.13 79.25 77.36 75.47 73.58 71.70 69.81 67.92 66.04 64.15 62.26 60.38 58.49 56.60 54.72 52.83 50.94 49.06 47.17 45.28 43.40 41.51 39.62 35.85 33.96 30.19 28.30 26.42 24.53 22.64 20.75 16.98 15.09 13.21 11.32 9.43 5.66 3.77 0.00

Region

_________________________________________________________________________________________________________

Czech Republic New Zealand Argentina South Korea Pakistan Thailand India Hong Kong Sweden the United Kingdom Denmark Canada France Austria Italy USA Norway Australia South Africa Israel Russian Federation Ireland Brazil Chile Hungary Japan Finland Indonesia Taiwan Portugal Germany Peru Netherlands China Switzerland Malaysia Luxembourg Belgium Spain Philippines Poland Singapore Turkey Mexico Greece

Europe Oceana Latin America Asia the Middle East Asia Asia Asia Europe Europe Europe North America Europe Europe Europe North America Europe Oceana Africa the Middle East Europe Europe Latin America Latin America Europe Asia Europe Asia Asia Europe Europe Latin America Europe Asia Europe Asia Europe Europe Europe Asia Europe Asia the Middle East Latin America Europe

_________________________________________________________________________________________________________





82

Earnings Before Interest and Taxes (EBIT) (Oil and Gas Field Services) Countries in Latin America


Rank

Percentile

57.46 42.54 29.89 29.02 27.29 17.21 16.37 13.22 12.84 12.65 9.79 8.89 8.10 7.52 7.45 5.36 5.24 4.71 4.63 4.37 4.30 4.06

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

95.45 90.91 86.36 81.82 77.27 72.73 68.18 63.64 59.09 54.55 50.00 45.45 40.91 36.36 31.82 27.27 22.73 18.18 13.64 9.09 4.55 0.00

_________________________________________________________________________________________________________

Argentina Guyana Paraguay Colombia Falkland Islands Brazil Chile Panama Costa Rica Belize Peru Guatemala El Salvador Ecuador Honduras Bolivia French Guiana Nicaragua Suriname Mexico Uruguay Venezuela

_________________________________________________________________________________________________________





83

Pretax Income Countries


Rank

Percentile

57.46 53.52 52.30 43.96 33.95 27.26 26.72 25.89 25.16 24.40 24.13 23.33 21.17 20.47 19.31 17.73 16.88 16.10 16.01 15.69 15.52 15.18 15.16 14.64 14.51 13.80 13.16 13.05 11.84 10.88 9.79 8.98 7.61 7.03 5.61 5.25 5.09 4.49 4.40 4.35 4.32 3.63 3.62 2.37 0.51

1 2 3 5 6 8 9 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 31 32 33 34 36 37 38 39 40 41 42 43 44 45 46 48 49 51 53

98.11 96.23 94.34 90.57 88.68 84.91 83.02 79.25 77.36 75.47 73.58 71.70 69.81 67.92 66.04 64.15 62.26 60.38 58.49 56.60 54.72 52.83 50.94 49.06 47.17 45.28 41.51 39.62 37.74 35.85 32.08 30.19 28.30 26.42 24.53 22.64 20.75 18.87 16.98 15.09 13.21 9.43 7.55 3.77 0.00

Region

_________________________________________________________________________________________________________

Czech Republic Argentina South Korea Pakistan Thailand India Hong Kong Sweden Denmark France Austria the United Kingdom New Zealand Italy Canada Australia Russian Federation Norway South Africa Japan USA Finland Hungary Indonesia Brazil Chile Israel Ireland Germany Taiwan Portugal China Netherlands Malaysia Belgium Spain Switzerland Philippines Luxembourg Poland Singapore Turkey Mexico Peru Greece

Europe Latin America Asia the Middle East Asia Asia Asia Europe Europe Europe Europe Europe Oceana Europe North America Oceana Europe Europe Africa Asia North America Europe Europe Asia Latin America Latin America the Middle East Europe Europe Asia Europe Asia Europe Asia Europe Europe Europe Asia Europe Europe Asia the Middle East Latin America Latin America Europe

_________________________________________________________________________________________________________





84

Pretax Income (Oil and Gas Field Services) Countries in Latin America


Rank

Percentile

53.52 42.53 27.06 26.28 25.79 14.51 13.80 12.44 10.83 10.66 4.48 4.34 3.94 3.83 3.62 3.56 3.36 2.37 2.15 1.96 1.82 1.80

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

95.45 90.91 86.36 81.82 77.27 72.73 68.18 63.64 59.09 54.55 50.00 45.45 40.91 36.36 31.82 27.27 22.73 18.18 13.64 9.09 4.55 0.00

_________________________________________________________________________________________________________

Argentina Guyana Paraguay Colombia Falkland Islands Brazil Chile Panama Costa Rica Belize Bolivia French Guiana Nicaragua Suriname Mexico Uruguay Venezuela Peru Guatemala El Salvador Ecuador Honduras

_________________________________________________________________________________________________________





85

Income Taxes Countries


Rank

Percentile

12.63 12.49 11.80 10.71 10.36 10.30 9.68 9.37 8.51 8.30 8.09 7.97 7.95 7.74 6.23 5.34 5.26 4.99 4.96 4.89 4.76 4.64 4.61 4.53 3.84 3.45 3.05 2.74 2.27 2.13 1.94 1.69 1.67 1.41 1.41 1.40 1.36 1.33 1.23 1.03 0.05

1 2 3 4 5 6 7 8 10 11 12 14 15 16 18 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 44 47 48

97.92 95.83 93.75 91.67 89.58 87.50 85.42 83.33 79.17 77.08 75.00 70.83 68.75 66.67 62.50 58.33 56.25 54.17 52.08 50.00 47.92 45.83 43.75 41.67 39.58 37.50 35.42 33.33 31.25 29.17 27.08 25.00 22.92 20.83 18.75 16.67 14.58 12.50 8.33 2.08 0.00

Region

_________________________________________________________________________________________________________

France Austria Pakistan Japan Finland Thailand Italy India Norway Canada Indonesia Sweden the United Kingdom Denmark Australia Hong Kong South Africa Germany China USA Brazil Israel Ireland Chile Taiwan Portugal Russian Federation Hungary Malaysia Netherlands Switzerland Poland Luxembourg Peru Turkey Mexico Spain Philippines Belgium Singapore Greece

Europe Europe the Middle East Asia Europe Asia Europe Asia Europe North America Asia Europe Europe Europe Oceana Asia Africa Europe Asia North America Latin America the Middle East Europe Latin America Asia Europe Europe Europe Asia Europe Europe Europe Europe Latin America the Middle East Latin America Europe Asia Europe Asia Europe

_________________________________________________________________________________________________________





86

Income Taxes (Oil and Gas Field Services) Countries in Latin America


Rank

Percentile

11.41 8.21 7.97 7.94 4.76 4.53 3.56 3.50 2.25 1.68 1.49 1.41 1.40 1.38 1.33 1.30 1.28 1.17 1.17 1.08 1.07

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

95.24 90.48 85.71 80.95 76.19 71.43 66.67 61.90 57.14 52.38 47.62 42.86 38.10 33.33 28.57 23.81 19.05 14.29 9.52 4.76 0.00

_________________________________________________________________________________________________________

Guyana Paraguay Colombia Falkland Islands Brazil Chile Costa Rica Belize Panama French Guiana Suriname Peru Mexico Uruguay Bolivia Venezuela Guatemala Nicaragua El Salvador Ecuador Honduras

_________________________________________________________________________________________________________





3.5 3.5.1

87

FINANCIAL RETURNS IN BRAZIL: PROFITABILITY RATIOS Overview

In this chapter we consider additional financial ratios estimated for firms involved in oil and gas field services operating in Brazil benchmarked against global averages. The chapter begins by defining relevant terms. Estimates are then presented for the proto-typical firm operating in Brazil compared to average global benchmarks. For ratios where there are large deviations between the average firm in Brazil and the benchmarks, graphics are provided. Then the distribution of ratios is presented in the form of ranks and percentiles. Certain key ratios are highlighted across countries in the comparison group.

3.5.2

Ratios – Definitions of Terms

The following definitions are provided for those less familiar with financial ratio analysis. As this chapter deals with the global benchmarking of ratios, only definitions covering certain terms used in this chapter’s tables and graphs are provided here. The glossary below reflects commonly accepted definitions across various countries and official sources. •

Accounts Receivables Days. The number of days' receivable sales generally correlates to the amount of the accounts receivables to the average daily sales on account. Accounts receivables days is often determined by dividing the gross receivables by (net sales/365).

•

Cash Earnings Return On Equity (%). Cash earnings return on equity generally measures the return of revenues to the shareholders. This ratio is generally calculated by dividing (net income before nonrecurring items minus preferred dividends) by the average common equity.

•

Cash Flow. Cash flow is generally defined as being equal to the company's net income plus the charge-off amounts for depreciation, depletion, amortization, extraordinary charges to reserves. These are bookkeeping deductions which are not paid out as cash.

•

Current Ratio. The current ratio is generally defined as a ratio of liquidity measuring the ability of a business to pay its current obligations when due. The current ratio is generally calculated by dividing total current assets by total current liabilities. Managers and lenders often want the current ratio to be 2.00 or greater. This ratio is often seen as an indication of short-term debt-paying ability. The higher the ratio, the more liquid the company.

•

Dividend Payout (% Earnings) - Total Dividends (%). The dividend payout ratio is generally used to measure the amount of current earnings per common share which are paid out in dividends. This ratio is generally determined by dividing dividends per common share by diluted earnings per share.

•

Fixed Charge Coverage Ratio. The fixed charge coverage ratio is generally seen as an indication of the company's ability to cover its fixed charges. This ratio is typically determined by dividing recurring earnings excluding interest expense, tax expense, equity earnings, and minority earnings plus interest from rentals by interest expense including capitalized interest and interest from rentals.

•

Gross Profit Margin (%). The gross profit margin is typically defined to equals the difference, in percent, between net sales revenue and the cost of goods sold.




88

•

Inventories (# of Days) Held. Inventory days held is generally determined by dividing the ending inventory by (the cost of goods held/365). The number of days held results in the average daily cost of goods held.

•

Inventory Turnover (%). Inventory turnover is used as a measure of the balance of inventory. It generally compares the amount of inventory with the total sales for the year. The ratio can reflect both on the quality of the inventory and the efficiency of management. Typically, the higher the turnover rate, the greater the likelihood that profits would be larger and less working capital bound up in inventory.

•

Net Margin (%). The net margin is the ratio of net income dollars generated by each dollar of sales.

•

Operating Profit Margin (%). Operating profit margin percent is the ratio of operating profit to net sales. Operating profit (loss) is income or loss before taxes calculated by the difference between total revenues and total expense disregarding the effects of any extraordinary transactions.

•

Quick Ratio. The quick ratio, also commonly known as the “acid test ratio”, is a refined current ratio and is often seen as a more conservative measure of liquidity. The quick ratio is generally determined by dividing cash and equivalents plus trade receivables by total current liabilities. The ratio shows the degree to which a company's current liabilities can be covered by the most liquid current assets. Financial management texts generally conclude that any value of less than 1 to 1 implies a reciprocal dependency on inventory or other current assets to liquidate short-term debt.

•

Reinvestment Rate - Total (%). The reinvestment rate is typically defined as the rate at which an investor assumes interest payments made on a debt security can be reinvested over the life of that security.

•

Return on Assets (%). Return on assets is generally used to measure a company's ability to use assets to create profit.

•

Return on Equity - Total (%). The return on total equity ratio is often seen to reflect the profitability of the company's operations after income taxes. Return on equity is often considered to be a good measure of the company's profitability. Tax laws and tax loss carryovers can affect the net income and therefore can also affect the return on equity.

•

Return on Invested Capital (%). The ratio of return on invested capital is typically defined as an evaluation of earnings performance without regard to the method of financing. This ratio measures the earnings on investment and is an indication of how well the company utilizes its asset base. Return on investment is a type of return on capital, therefore this ratio can be an indication of the company’s ability to reward investors who provide long-term funds and to attract future investors.

•

Tax Rate (%). The tax rate is typically defined as the average rate of domestic tax owed to government by the company.

•

Working Capital. Net working capital equals the difference between total current assets and total current liabilities. Working capital often reflects a company's ability to expand volume and meet obligations. Since growth is usually one goal, the amount of working capital on this year's balance sheet should be greater than that of the previous year's. This is an efficiency, or turnover, ratio which benchmarks the rate at which current assets less current liabilities are used by the company in making sales. A low ratio can indicate a less profitable use of working capital in making sales. On the other hand, a very high ratio can indicate the company is wasting current assets which could be more efficiently deployed in production and in increasing sales and profits; or that the company my be undercapitalized, and thus vulnerable to liquidity problems in a period of weak business conditions.




3.5.3

89

Ratio Structure: Outlook

Using the methodology described in the introduction, the following table summarizes ratio structure benchmarks for firms involved in oil and gas field services in Brazil. All figures are current-year projections for companies operating in Brazil based on latest financial results available. Ratios Brazil Latin America World Avg. _________________________________________________________________________________________________________

Profitability Return on Equity - Total (%) Reinvestment Rate - Total (%) Return on Assets (%) Return on Invested Capital (%) Cash Earnings Return On Equity (%) Cash Flow % Sales Cost Goods Sold / Sales (%) Gross Profit Margin (%) Selling, General & Administrative Expense/Net Sales (%) Research & Development / Net Sales (%) Operating Profit Margin (%) Operating Inc / Total Capital (%) Pretax Margin (%) Tax Rate (%) Net Margin (%) Total Asset Turnover (X) th USD Asset Utilization Inventory Turnover (%) Net Sales % Working Capital Capital Expenditure % Gross Fixed Assets Capital Expenditure % Total Assets Capital Expenditure % Total Sales Accumulated Depreciation % Gross Fixed Assets Leverage Total Debt % Total Capital Long Term Debt % Total Capital Equity % Total Capital Preferred Stock % Total Capital Fixed Charge Coverage Ratio Dividend Payout (% Earnings) - Total Dividends Fixed Assets % Common Equity Working Capital % Total Capital Liquidity Quick Ratio Current Ratio Accounts Receivables Days Inventories (# of Days) Held

14.95 11.37 9.75 12.92 34.69 21.94 49.01 33.20 15.58 0.14 15.86 22.65 14.51 23.24 9.36 0.74

11.63 7.08 6.58 8.73 22.50 15.08 55.83 22.20 10.56 0.08 11.74 13.10 12.48 31.58 6.97 0.70

13.04 8.13 7.23 9.67 18.65 17.86 49.06 21.22 5.88 0.12 14.53 10.75 17.14 31.73 10.80 0.62

7.10 -1.22 5.01 7.09 12.89 33.50

13.46 13.86 5.36 5.92 11.62 36.60

10.07 6.61 6.76 6.40 33.19 30.72

24.00 12.47 72.36 1.46 42.81 17.13 134.60 -5.02

21.55 11.00 71.43 0.28 213.88 21.67 100.01 4.39

20.04 14.51 68.15 0.22 158.40 16.83 107.04 14.03

0.76 1.14 31.00 56.92

0.92 1.30 34.72 73.93

1.12 1.66 98.72 37.87

_________________________________________________________________________________________________________





3.5.4

90

Large Variances: Ratios

The following graphics summarize for oil and gas field services the large ratio structure gaps between firms operating in Brazil and the world average. A gap cannot necessarily be interpreted as a positive or negative reflection on performance. Gaps may signal areas of specialization, market focus, or expertise. More contextual information is required to fully interpret these gaps. The gaps highlighted here are simply those that are large.

Gap: Cash Earnings Return On Equity (%) 40

34.69

30

22.5

20

18.65

16.04

10 0

Brazil

Latin America

World Average

Gap

Gap: Gross Profit Margin (%) 40

33.2

30

22.2

21.22

20

11.98

10 0

Brazil

Latin America

World Average

Gap

Gap: Selling, General & Administrative Expense/Net Sales (%) 20 15.58 15 10.56 10

9.7 5.88

5 0

Brazil


Latin America

World Average

Gap



91

Gap: Operating Inc / Total Capital (%) 25

22.65

20 13.1

15

11.9

10.75

10 5 0

Brazil

Latin America

World Average

Gap

Gap: Tax Rate (%) 40 30

31.58

31.73

23.24

20 10 0 -10

Brazil

Latin America

-8.49 Gap

World Average

Gap: Capital Expenditure % Total Sales 40 30 20 10 0 -10 -20 -30

33.19 12.89

11.62

-20.3 Brazil

Latin America

World Average

Gap

Gap: Fixed Charge Coverage Ratio 300

213.88

200 100

158.4

42.81

0 -100 -200

-115.59 Brazil


Latin America

World Average

Gap



92

Gap: Fixed Assets % Common Equity 150

134.6 100.01

100

107.04

50 0

27.56

Brazil

Latin America

World Average

Gap

Gap: Working Capital % Total Capital 14.03

15 10 5

5.02

4.39

0 -5 -10

Brazil

Latin America

-9.01 Gap

World Average

Gap: Accounts Receivables Days 98.72

100 31

50

34.72

0 -50 -100

-67.72 Brazil

Latin America

World Average

Gap

Gap: Inventories (# of Days) Held 73.93

80 60

56.92 37.87

40

19.05

20 0

Brazil


Latin America

World Average

Gap



3.5.5

93


We now consider the distribution of financial ratios for oil and gas field services using ranks and percentiles. What percent of countries have a value lower or higher than Brazil (what is the ratio's rank or percentile)? The table below answers this question with respect to financial ratios. The ranks and percentiles indicate, from highest to lowest, where a value falls within the distribution of all countries considered in the global benchmark (the number of countries in the benchmark per line item may vary, as indicated in the Rank). Again, a high or low figure does not necessarily indicate good or bad performance. After the summary table below, a few key financial ratios are highlighted in additional tables. Ratios

Brazil

Rank of Total

Percentile

14.95 11.37 9.75 12.92 34.69 21.94 49.01 33.20 15.58 0.14 15.86 22.65 14.51 23.24 9.36 0.74

26 of 49 24 of 48 22 of 49 22 of 49 16 of 49 23 of 53 34 of 48 16 of 48 9 of 45 19 of 21 21 of 53 19 of 49 28 of 53 40 of 48 25 of 53 24 of 53

46.94 50.00 55.10 55.10 67.35 56.60 29.17 66.67 80.00 9.52 60.38 61.22 47.17 16.67 52.83 54.72

7.10 -1.22 5.01 7.09 12.89 33.50

33 of 49 40 of 53 31 of 47 21 of 53 25 of 53 33 of 47

32.65 24.53 34.04 60.38 52.83 29.79

24.00 12.47 72.36 1.46 42.81 17.13 134.60 -5.02

29 of 52 30 of 51 28 of 53 5 of 9 11 of 53 24 of 44 12 of 53 46 of 53

44.23 41.18 47.17 44.44 79.25 45.45 77.36 13.21

0.76 1.14 31.00 56.92

38 of 53 33 of 53 43 of 49 16 of 49

28.30 37.74 12.24 67.35

_________________________________________________________________________________________________________

Profitability Return on Equity - Total (%) Reinvestment Rate - Total (%) Return on Assets (%) Return on Invested Capital (%) Cash Earnings Return On Equity (%) Cash Flow % Sales Cost Goods Sold / Sales (%) Gross Profit Margin (%) Selling, General & Administrative Expense/Net Sales (%) Research & Development / Net Sales (%) Operating Profit Margin (%) Operating Inc / Total Capital (%) Pretax Margin (%) Tax Rate (%) Net Margin (%) Total Asset Turnover (X) th USD Asset Utilization Inventory Turnover (%) Net Sales % Working Capital Capital Expenditure % Gross Fixed Assets Capital Expenditure % Total Assets Capital Expenditure % Total Sales Accumulated Depreciation % Gross Fixed Assets Leverage Total Debt % Total Capital Long Term Debt % Total Capital Equity % Total Capital Preferred Stock % Total Capital Fixed Charge Coverage Ratio Dividend Payout (% Earnings) - Total Dividends Fixed Assets % Common Equity Working Capital % Total Capital Liquidity Quick Ratio Current Ratio Accounts Receivables Days Inventories (# of Days) Held

_________________________________________________________________________________________________________





94

Gross Profit Margin (%) Countries

Value

Rank

Percentile

Pakistan Thailand France Austria Hong Kong Norway Russian Federation Germany South Africa Italy Hungary Canada Australia Brazil USA Chile the United Kingdom Japan Finland Israel Ireland India Indonesia Taiwan Poland Peru Sweden Denmark Portugal Netherlands Turkey Singapore Mexico Belgium China Spain Malaysia Switzerland Luxembourg Philippines Greece

49.99 44.30 44.00 43.52 41.11 38.45 38.04 37.33 36.64 34.43 34.18 34.04 33.38 33.20 32.39 31.59 30.87 29.66 28.69 25.67 25.45 23.28 22.46 21.21 20.39 19.92 19.73 19.17 19.09 17.21 17.01 17.00 16.96 15.41 13.78 12.71 12.50 10.35 8.95 7.40 0.73

1 2 3 4 5 6 7 8 10 11 13 14 15 16 17 18 19 20 21 22 23 24 25 26 28 29 30 31 32 33 34 35 36 39 41 42 43 44 45 46 48

97.92 95.83 93.75 91.67 89.58 87.50 85.42 83.33 79.17 77.08 72.92 70.83 68.75 66.67 64.58 62.50 60.42 58.33 56.25 54.17 52.08 50.00 47.92 45.83 41.67 39.58 37.50 35.42 33.33 31.25 29.17 27.08 25.00 18.75 14.58 12.50 10.42 8.33 6.25 4.17 0.00

Region

_________________________________________________________________________________________________________

the Middle East Asia Europe Europe Asia Europe Europe Europe Africa Europe Europe North America Oceana Latin America North America Latin America Europe Asia Europe the Middle East Europe Asia Asia Asia Europe Latin America Europe Europe Europe Europe the Middle East Asia Latin America Europe Asia Europe Asia Europe Europe Asia Europe

_________________________________________________________________________________________________________





95

Gross Profit Margin (%) (Oil and Gas Field Services) Countries in Latin America

Value

Rank

Percentile

Guyana Paraguay Colombia Brazil Chile Panama Costa Rica Belize French Guiana Peru Falkland Islands Guatemala Suriname Mexico Uruguay El Salvador Venezuela Ecuador Honduras Bolivia Nicaragua

48.38 35.32 34.29 33.20 31.59 28.04 24.77 24.40 20.35 19.92 19.65 18.08 17.98 16.96 16.69 16.48 15.76 15.30 15.16 7.39 6.49

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

95.24 90.48 85.71 80.95 76.19 71.43 66.67 61.90 57.14 52.38 47.62 42.86 38.10 33.33 28.57 23.81 19.05 14.29 9.52 4.76 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________





96

Pretax Margin (%) Countries

Value

Rank

Percentile

Czech Republic Argentina South Korea Pakistan Thailand India Hong Kong Sweden Denmark France Austria the United Kingdom New Zealand Italy Canada Australia Russian Federation Norway South Africa Japan USA Finland Hungary Indonesia Brazil Chile Israel Ireland Germany Taiwan Portugal China Netherlands Malaysia Belgium Spain Switzerland Philippines Luxembourg Poland Singapore Turkey Mexico Peru Greece

57.46 53.52 52.30 43.96 33.95 27.26 26.72 25.89 25.16 24.40 24.13 23.33 21.17 20.47 19.31 17.73 16.88 16.10 16.01 15.69 15.52 15.18 15.16 14.64 14.51 13.80 13.16 13.05 11.84 10.88 9.79 8.98 7.61 7.03 5.61 5.25 5.09 4.49 4.40 4.35 4.32 3.63 3.62 2.37 0.51

1 2 3 5 6 8 9 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 31 32 33 34 36 37 38 39 40 41 42 43 44 45 46 48 49 51 53

98.11 96.23 94.34 90.57 88.68 84.91 83.02 79.25 77.36 75.47 73.58 71.70 69.81 67.92 66.04 64.15 62.26 60.38 58.49 56.60 54.72 52.83 50.94 49.06 47.17 45.28 41.51 39.62 37.74 35.85 32.08 30.19 28.30 26.42 24.53 22.64 20.75 18.87 16.98 15.09 13.21 9.43 7.55 3.77 0.00

Region

_________________________________________________________________________________________________________

Europe Latin America Asia the Middle East Asia Asia Asia Europe Europe Europe Europe Europe Oceana Europe North America Oceana Europe Europe Africa Asia North America Europe Europe Asia Latin America Latin America the Middle East Europe Europe Asia Europe Asia Europe Asia Europe Europe Europe Asia Europe Europe Asia the Middle East Latin America Latin America Europe

_________________________________________________________________________________________________________





97

Pretax Margin (%) (Oil and Gas Field Services) Countries in Latin America

Value

Rank

Percentile

Argentina Guyana Paraguay Colombia Falkland Islands Brazil Chile Panama Costa Rica Belize Bolivia French Guiana Nicaragua Suriname Mexico Uruguay Venezuela Peru Guatemala El Salvador Ecuador Honduras

53.52 42.53 27.06 26.28 25.79 14.51 13.80 12.44 10.83 10.66 4.48 4.34 3.94 3.83 3.62 3.56 3.36 2.37 2.15 1.96 1.82 1.80

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

95.45 90.91 86.36 81.82 77.27 72.73 68.18 63.64 59.09 54.55 50.00 45.45 40.91 36.36 31.82 27.27 22.73 18.18 13.64 9.09 4.55 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________





98

Quick Ratio Countries

Value

Rank

Percentile

8.03 7.80 3.60 2.98 2.95 2.90 2.81 2.14 2.05 2.00 1.98 1.78 1.65 1.57 1.38 1.38 1.29 1.21 1.20 1.19 1.13 1.12 0.99 0.99 0.93 0.92 0.90 0.84 0.84 0.83 0.83 0.78 0.76 0.75 0.75 0.74 0.72 0.63 0.63 0.60 0.55 0.46 0.38 0.38 0.07

1 2 3 4 5 6 7 8 9 10 11 13 14 15 17 18 20 22 23 24 25 26 27 28 29 30 31 32 33 34 36 37 38 39 40 41 42 43 44 45 46 48 49 50 52

98.11 96.23 94.34 92.45 90.57 88.68 86.79 84.91 83.02 81.13 79.25 75.47 73.58 71.70 67.92 66.04 62.26 58.49 56.60 54.72 52.83 50.94 49.06 47.17 45.28 43.40 41.51 39.62 37.74 35.85 32.08 30.19 28.30 26.42 24.53 22.64 20.75 18.87 16.98 15.09 13.21 9.43 7.55 5.66 1.89

Region

_________________________________________________________________________________________________________

Sweden Denmark Germany Netherlands Malaysia Japan Finland Pakistan Hong Kong Australia Indonesia the United Kingdom Thailand USA Norway Greece New Zealand China France Austria Israel Ireland India Czech Republic Taiwan Argentina South Korea South Africa Portugal Russian Federation Canada Singapore Brazil Hungary Belgium Spain Chile Switzerland Italy Philippines Luxembourg Poland Turkey Mexico Peru

Europe Europe Europe Europe Asia Asia Europe the Middle East Asia Oceana Asia Europe Asia North America Europe Europe Oceana Asia Europe Europe the Middle East Europe Asia Europe Asia Latin America Asia Africa Europe Europe North America Asia Latin America Europe Europe Europe Latin America Europe Europe Asia Europe Europe the Middle East Latin America Latin America

_________________________________________________________________________________________________________





99

Quick Ratio (Oil and Gas Field Services) Countries in Latin America

Value

Rank

Percentile

7.99 2.07 1.31 1.27 0.92 0.76 0.72 0.62 0.59 0.57 0.56 0.52 0.45 0.40 0.38 0.37 0.35 0.07 0.06 0.06 0.05 0.05

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

95.45 90.91 86.36 81.82 77.27 72.73 68.18 63.64 59.09 54.55 50.00 45.45 40.91 36.36 31.82 27.27 22.73 18.18 13.64 9.09 4.55 0.00

_________________________________________________________________________________________________________

Falkland Islands Guyana Paraguay Colombia Argentina Brazil Chile Panama Bolivia Costa Rica Belize Nicaragua French Guiana Suriname Mexico Uruguay Venezuela Peru Guatemala El Salvador Ecuador Honduras

_________________________________________________________________________________________________________





100

Current Ratio Countries

Value

Rank

Percentile

8.27 8.04 5.07 4.48 3.61 3.31 3.30 3.20 2.38 2.36 2.30 2.03 2.01 2.00 1.85 1.85 1.79 1.66 1.56 1.53 1.51 1.36 1.28 1.25 1.25 1.24 1.15 1.14 1.14 1.13 1.12 1.08 1.07 1.05 1.04 1.03 1.02 1.01 0.95 0.93 0.89 0.89 0.67 0.60 0.58

1 2 3 4 5 6 7 8 10 12 13 14 15 16 17 18 19 20 21 23 24 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 46 47 48 50 51 52

98.11 96.23 94.34 92.45 90.57 88.68 86.79 84.91 81.13 77.36 75.47 73.58 71.70 69.81 67.92 66.04 64.15 62.26 60.38 56.60 54.72 50.94 49.06 47.17 45.28 43.40 41.51 39.62 37.74 35.85 33.96 32.08 30.19 28.30 26.42 24.53 22.64 20.75 18.87 13.21 11.32 9.43 5.66 3.77 1.89

Region

_________________________________________________________________________________________________________

Sweden Denmark Germany Netherlands Malaysia Indonesia Japan Finland Australia Pakistan Hong Kong China the United Kingdom Greece Thailand Norway USA New Zealand India France Austria Singapore Russian Federation Israel South Africa Ireland Hungary Belgium Brazil Czech Republic Philippines Chile Poland Argentina Taiwan South Korea Spain Canada Italy Portugal Turkey Mexico Switzerland Peru Luxembourg

Europe Europe Europe Europe Asia Asia Asia Europe Oceana the Middle East Asia Asia Europe Europe Asia Europe North America Oceana Asia Europe Europe Asia Europe the Middle East Africa Europe Europe Europe Latin America Europe Asia Latin America Europe Latin America Asia Asia Europe North America Europe Europe the Middle East Latin America Europe Latin America Europe

_________________________________________________________________________________________________________





101

Current Ratio (Oil and Gas Field Services) Countries in Latin America

Value

Rank

Percentile

8.24 2.28 1.48 1.43 1.14 1.11 1.08 1.07 1.05 0.98 0.94 0.94 0.89 0.87 0.85 0.84 0.83 0.60 0.54 0.50 0.46 0.46

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

95.45 90.91 86.36 81.82 77.27 72.73 68.18 63.64 59.09 54.55 50.00 45.45 40.91 36.36 31.82 27.27 22.73 18.18 13.64 9.09 4.55 0.00

_________________________________________________________________________________________________________

Falkland Islands Guyana Paraguay Colombia Brazil Bolivia Chile French Guiana Argentina Nicaragua Panama Suriname Mexico Uruguay Costa Rica Belize Venezuela Peru Guatemala El Salvador Ecuador Honduras

_________________________________________________________________________________________________________





102

Accounts Receivables Days Countries

Value

Rank

Percentile

India Czech Republic Argentina South Korea France Austria Japan Finland Germany Malaysia Norway Netherlands Australia Switzerland the United Kingdom Luxembourg Canada USA Singapore Pakistan Belgium Israel Ireland Italy Spain Russian Federation Taiwan Hungary Thailand New Zealand Portugal Hong Kong Poland Philippines Turkey Mexico South Africa Greece Brazil Sweden Denmark Chile Peru

291.24 147.68 137.56 134.43 126.90 125.52 115.91 112.15 110.64 107.32 102.18 100.39 88.16 87.22 86.48 75.43 74.00 72.21 69.41 67.12 64.09 61.63 61.12 60.26 59.61 55.18 50.94 49.57 48.46 46.95 45.84 44.12 42.03 35.27 35.06 34.96 34.22 33.99 31.00 30.55 29.68 29.50 14.21

1 2 3 4 5 6 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 37 38 39 40 41 43 44 46 47 48

97.96 95.92 93.88 91.84 89.80 87.76 83.67 81.63 79.59 77.55 75.51 73.47 71.43 69.39 67.35 65.31 63.27 61.22 59.18 57.14 55.10 53.06 51.02 48.98 46.94 44.90 42.86 40.82 38.78 36.73 34.69 32.65 30.61 24.49 22.45 20.41 18.37 16.33 12.24 10.20 6.12 4.08 2.04

Region

_________________________________________________________________________________________________________

Asia Europe Latin America Asia Europe Europe Asia Europe Europe Asia Europe Europe Oceana Europe Europe Europe North America North America Asia the Middle East Europe the Middle East Europe Europe Europe Europe Asia Europe Asia Oceana Europe Asia Europe Asia the Middle East Latin America Africa Europe Latin America Europe Europe Latin America Latin America

_________________________________________________________________________________________________________





103

Accounts Receivables Days (Oil and Gas Field Services) Countries in Latin America

Value

Rank

Percentile

137.56 64.95 41.94 40.67 38.63 37.51 37.07 35.19 34.96 34.39 32.48 31.00 30.93 30.43 29.50 23.14 22.79 14.21 12.90 11.76 10.91 10.82

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

95.45 90.91 86.36 81.82 77.27 72.73 68.18 63.64 59.09 54.55 50.00 45.45 40.91 36.36 31.82 27.27 22.73 18.18 13.64 9.09 4.55 0.00

_________________________________________________________________________________________________________

Argentina Guyana French Guiana Panama Paraguay Colombia Suriname Bolivia Mexico Uruguay Venezuela Brazil Nicaragua Falkland Islands Chile Costa Rica Belize Peru Guatemala El Salvador Ecuador Honduras

_________________________________________________________________________________________________________





104

Inventories (# of Days) Held Countries

Value

Rank

Percentile

Norway Peru Germany Singapore Italy Poland South Africa Turkey Mexico Thailand Russian Federation Canada Pakistan Brazil Malaysia Chile India Hungary Australia Philippines Belgium USA Hong Kong Netherlands Greece Japan Spain the United Kingdom Finland New Zealand Israel Ireland Sweden Denmark Taiwan Portugal Czech Republic Switzerland Argentina South Korea Luxembourg Austria France

296.07 188.44 99.15 89.10 82.18 74.18 62.83 61.87 61.71 61.15 59.05 57.84 57.10 56.92 54.46 54.16 54.14 53.06 51.94 49.91 48.45 47.59 45.91 45.73 39.71 37.36 36.96 36.60 36.15 22.66 14.77 14.65 13.73 13.34 12.21 10.99 6.64 6.49 6.19 6.05 5.61 -19.67 -19.89

1 2 4 5 6 7 8 9 10 11 12 13 15 16 17 18 19 20 21 23 24 25 27 28 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 48 49

97.96 95.92 91.84 89.80 87.76 85.71 83.67 81.63 79.59 77.55 75.51 73.47 69.39 67.35 65.31 63.27 61.22 59.18 57.14 53.06 51.02 48.98 44.90 42.86 38.78 36.73 34.69 32.65 30.61 28.57 26.53 24.49 22.45 20.41 18.37 16.33 14.29 12.24 10.20 8.16 6.12 2.04 0.00

Region

_________________________________________________________________________________________________________

Europe Latin America Europe Asia Europe Europe Africa the Middle East Latin America Asia Europe North America the Middle East Latin America Asia Latin America Asia Europe Oceana Asia Europe North America Asia Europe Europe Asia Europe Europe Europe Oceana the Middle East Europe Europe Europe Asia Europe Europe Europe Latin America Asia Europe Europe Europe

_________________________________________________________________________________________________________





105

Inventories (# of Days) Held (Oil and Gas Field Services) Countries in Latin America

Value

Rank

Percentile

188.44 171.07 155.93 144.75 143.43 74.01 65.41 61.71 60.69 57.32 56.92 55.26 54.16 49.79 48.75 47.33 43.75 43.53 42.48 41.84 13.68 6.19

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

95.45 90.91 86.36 81.82 77.27 72.73 68.18 63.64 59.09 54.55 50.00 45.45 40.91 36.36 31.82 27.27 22.73 18.18 13.64 9.09 4.55 0.00

_________________________________________________________________________________________________________

Peru Guatemala El Salvador Ecuador Honduras French Guiana Suriname Mexico Uruguay Venezuela Brazil Guyana Chile Bolivia Paraguay Colombia Nicaragua Panama Costa Rica Belize Falkland Islands Argentina

_________________________________________________________________________________________________________





3.6 3.6.1

106

PRODUCTIVITY IN BRAZIL: ASSET-LABOR RATIOS Overview

In this chapter, we consider numerous asset-labor ratios for oil and gas field services in Brazil benchmarked against global averages. Productivity and utilization ratios are presented for companies oprating in Brazil and the average global benchmarks for oil and gas field services. For ratios where there are large deviations between Brazil and the benchmarks, graphics are provided (sometimes referred to as a “gap” analysis). Then the distribution of ratios is presented in the form of ranks and percentiles. Certain asset-labor ratios are highlighted across countries in the comparison group. In the case of asset-labor ratios, this report maintains comparability over time and across countries by using a common currency (the US dollar) and relates each measure to a “per employee basis”. Ratios are projected using raw financial statistics and, as ratios, are therefore comparable. Given a country’s human resource ratios, the resulting figures are benchmarked across regional and global averages. We then report the larger asset-labor ratio gaps for oil and gas field services that Brazil has vis-à-vis the worldwide average. Again, a gap need not be a bad sign. Rather, it is simply a substantial difference that might merit further attention or signal a firm’s relative incentive to invest locally. All figures are projections, so due caution is required.




3.6.2

107

Asset to Labor: Outlook

The following tables and graphs are prepared using the methodology described at the beginning of this section. All units are in thousands of US dollars per employee. All figures are current-year projections for oil and gas field services in Brazil based on latest financial results available. Labor-asset Ratios ($k/employee) Brazil Latin America World Avg. _________________________________________________________________________________________________________

Cash & Short Term Investments Cash Receivables (Net) Total Inventories Raw Materials Work in Process Finished Goods Progress Payments & Other Prepaid Expenses Other Current Assets Current Assets - Total Long Term Receivables Other Investments Property Plant and Equipment - Net Property Plant and Equipment - Gross Buildings Machinery & Equipment Other Property Plant & Equipment Property Plant & Equipment Under Capitalized Leases Accumulated Depreciation - Total Accumulated Depreciation - Buildings Accumulated Depreciation -Machinery & Equipment Accumulated Depreciation - Other Prop & Equip Accumulated Depreciation - PP&E Under Capitalized Leases Other Assets Intangible Other Assets Total Assets

98.42 131.00 96.18 32.57 0.78 2.98 1.52 0.40 8.04 0.24 231.43 0.26 0.01 1046.98 2329.74 2990.11 15.55 303.54 1.13 1282.76 1696.17 6.92 24.64 0.17 1.60 0.03 1280.21

93.37 56.47 57.94 32.93 10.75 2.62 29.49 -0.11 3.68 6.33 191.85 0.10 2.79 352.26 918.93 747.88 129.31 218.85 0.78 432.41 411.68 62.69 87.91 0.11 11.24 2.34 725.20

70.49 39.10 98.39 27.56 6.48 3.82 14.07 1.94 17.06 6.94 218.83 1.95 20.30 791.31 1092.76 217.53 300.40 662.51 4.31 314.55 118.66 120.15 163.54 3.08 21.02 11.37 1083.06

_________________________________________________________________________________________________________





3.6.3

108

Asset to Labor: International Gaps

The following graphics summarize for oil and gas field services the large labor-asset gaps between firms operating in Brazil and the world average. A gap cannot necessarily be interpreted as a positive or negative reflection on performance. Gaps may signal areas of specialization, market focus, or expertise. More contextual information is required to fully interpret these gaps. The gaps highlighted here are simply those that are large.

Gap: Cash ($k/employee) 150

131 91.9

100 56.47 39.1

50 0

Brazil

Latin America

World Average

Gap

Gap: Property Plant and Equipment - Net ($k/employee) 1200

1046.98

1000

791.31

800 600

352.26

400

255.67

200 0

Brazil

Latin America

World Average

Gap

Gap: Property Plant and Equipment - Gross ($k/employee) 2500

2329.74

2000 1500 918.93

1000

1092.76

1236.98

500 0

Brazil


Latin America

World Average

Gap



109

Gap: Buildings ($k/employee) 3000

2990.11

2772.58

2500 2000 1500 747.88

1000

217.53

500 0

Brazil

Latin America

World Average

Gap

Gap: Machinery & Equipment ($k/employee) 400 300 200 100 0 -100 -200 -300

300.4 129.31 15.55

Brazil

Latin America

World Average

-284.85 Gap

Gap: Other Property Plant & Equipment ($k/employee) 800

662.51

600 400

303.54

218.85

200 0 -200 -400

Brazil

Latin America

World Average

-358.97 Gap

Gap: Accumulated Depreciation - Total ($k/employee) 1500

1282.76 968.21

1000 432.41

500 0

Brazil


Latin America

314.55

World Average

Gap



110

Gap: Accumulated Depreciation - Buildings ($k/employee) 2000

1696.17

1577.51

1500 1000 411.68

500 0

118.66 Brazil

Latin America

World Average

Gap

Gap: Accumulated Depreciation -Machinery & Equipment ($k/employee) 120.15

150 100 50

62.69 6.92

0 -50 -100 -150

-113.23 Brazil

Latin America

World Average

Gap

Gap: Accumulated Depreciation - Other Prop & Equip ($k/employee) 163.54

200 100

87.91 24.64

0 -100 -200

-138.9 Brazil

Latin America

World Average

Gap

Gap: Total Assets ($k/employee) 1500

1280.21 1083.06

1000

725.2

500 0

197.15 Brazil


Latin America

World Average

Gap



3.6.4

111


We now consider the distribution of asset-labor ratios using ranks and percentiles across . What percent of countries have a productivity indicator lower or higher than Brazil (what is the indicator's rank or percentile)? The table below answers this question with respect to asset-labor structure. The ranks and percentiles indicate, from highest to lowest, where a value falls within the distribution of all countries considered in the global benchmark (the number of countries in the benchmark per line item may vary, as indicated in the Rank). Again, a high or low figure does not necessarily indicate good or bad performance or productivity. After the summary table below, a few key asset-labor ratios are highlighted in additional tables. Asset Structure ($k/employee)

Brazil

Rank of Total

Percentile

98.42 131.00 96.18 32.57 0.78 2.98 1.52 0.40 8.04 0.24 231.43 0.26 0.01 1046.98 2329.74 2990.11 15.55 303.54 1.13 1282.76 1696.17 6.92 24.64 0.17 1.60 0.03 1280.21

21 of 53 15 of 46 27 of 53 20 of 53 26 of 27 13 of 25 33 of 34 18 of 25 13 of 34 39 of 44 27 of 53 21 of 25 40 of 41 14 of 53 10 of 47 2 of 44 42 of 44 14 of 45 10 of 12 6 of 47 2 of 42 39 of 42 18 of 36 10 of 12 36 of 49 36 of 40 21 of 53

60.38 67.39 49.06 62.26 3.70 48.00 2.94 28.00 61.76 11.36 49.06 16.00 2.44 73.58 78.72 95.45 4.55 68.89 16.67 87.23 95.24 7.14 50.00 16.67 26.53 10.00 60.38

_________________________________________________________________________________________________________

Cash & Short Term Investments Cash Receivables (Net) Total Inventories Raw Materials Work in Process Finished Goods Progress Payments & Other Prepaid Expenses Other Current Assets Current Assets - Total Long Term Receivables Other Investments Property Plant and Equipment - Net Property Plant and Equipment - Gross Buildings Machinery & Equipment Other Property Plant & Equipment Property Plant & Equipment Under Capitalized Leases Accumulated Depreciation - Total Accumulated Depreciation - Buildings Accumulated Depreciation -Machinery & Equipment Accumulated Depreciation - Other Prop & Equip Accumulated Depreciation - P P & E Under Capitalized Leases Other Assets Intangible Other Assets Total Assets

_________________________________________________________________________________________________________





112

Cash & Short Term Investments Countries

Value ($K/employee)

Rank

Percentile

865.40 840.85 552.75 387.91 380.98 364.67 352.85 278.88 233.69 231.76 223.19 193.13 173.82 140.08 108.63 107.33 101.89 100.78 98.42 93.64 86.43 85.44 84.77 79.80 65.17 59.01 51.77 32.54 24.23 22.03 19.91 19.66 17.22 16.02 9.82 4.91 4.41 3.32 3.22 2.68 2.68 1.23 1.14 1.12 0.23

1 2 3 4 5 6 7 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 28 29 30 31 32 33 34 35 36 37 40 41 42 43 44 45 46 48 49 50 52

98.11 96.23 94.34 92.45 90.57 88.68 86.79 81.13 79.25 77.36 75.47 73.58 71.70 69.81 67.92 66.04 64.15 62.26 60.38 58.49 56.60 54.72 52.83 50.94 47.17 45.28 43.40 41.51 39.62 37.74 35.85 33.96 32.08 30.19 24.53 22.64 20.75 18.87 16.98 15.09 13.21 9.43 7.55 5.66 1.89

Region

_________________________________________________________________________________________________________

Sweden Denmark the United Kingdom Hong Kong Thailand Japan Finland Australia Israel Ireland Greece Taiwan Portugal USA South Africa Malaysia France Austria Brazil Chile India Italy Philippines Pakistan Norway New Zealand Spain Germany Singapore Canada Switzerland Belgium Luxembourg Indonesia China Russian Federation Hungary Netherlands Poland Turkey Mexico Czech Republic Argentina South Korea Peru

Europe Europe Europe Asia Asia Asia Europe Oceana the Middle East Europe Europe Asia Europe North America Africa Asia Europe Europe Latin America Latin America Asia Europe Asia the Middle East Europe Oceana Europe Europe Asia North America Europe Europe Europe Asia Asia Europe Europe Europe Europe the Middle East Latin America Europe Latin America Asia Latin America

_________________________________________________________________________________________________________





113

Cash & Short Term Investments (Oil and Gas Field Services) Countries in Latin America

Value ($K/employee)

Rank

Percentile

861.95 303.73 294.88 98.42 93.64 84.58 77.22 74.33 73.45 72.34 3.62 3.21 2.84 2.68 2.63 2.49 1.14 0.23 0.21 0.19 0.18 0.17

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

95.45 90.91 86.36 81.82 77.27 72.73 68.18 63.64 59.09 54.55 50.00 45.45 40.91 36.36 31.82 27.27 22.73 18.18 13.64 9.09 4.55 0.00

_________________________________________________________________________________________________________

Falkland Islands Paraguay Colombia Brazil Chile Bolivia Guyana Nicaragua Costa Rica Belize Panama French Guiana Suriname Mexico Uruguay Venezuela Argentina Peru Guatemala El Salvador Ecuador Honduras

_________________________________________________________________________________________________________





114

Receivables (Net) Countries

Value ($K/employee)

Rank

Percentile

347.59 336.33 247.97 247.71 239.71 237.10 221.98 220.15 205.85 200.41 198.28 183.46 180.69 174.38 173.84 165.11 157.57 153.10 149.75 149.33 146.70 106.94 106.16 96.18 91.52 82.86 65.27 58.26 56.44 52.56 52.21 42.07 41.38 40.62 38.55 37.67 29.26 25.80 24.40 24.34 24.13 22.00 5.64 5.07 0.48

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 17 18 20 21 22 23 25 26 27 28 29 30 31 32 33 34 35 36 37 39 40 43 44 45 46 47 49 50 51 52

98.11 96.23 94.34 92.45 90.57 88.68 86.79 84.91 83.02 81.13 79.25 77.36 75.47 73.58 71.70 67.92 66.04 62.26 60.38 58.49 56.60 52.83 50.94 49.06 47.17 45.28 43.40 41.51 39.62 37.74 35.85 33.96 32.08 30.19 26.42 24.53 18.87 16.98 15.09 13.21 11.32 7.55 5.66 3.77 1.89

Region

_________________________________________________________________________________________________________

Japan Finland the United Kingdom Norway France Austria Israel Ireland Italy Thailand Greece Taiwan India USA Canada Portugal Sweden Denmark Philippines Belgium Spain Australia South Africa Brazil Chile Hong Kong Switzerland Germany Luxembourg New Zealand Singapore Indonesia Czech Republic Malaysia Argentina South Korea Poland China Turkey Mexico Netherlands Pakistan Russian Federation Hungary Peru

Asia Europe Europe Europe Europe Europe the Middle East Europe Europe Asia Europe Asia Asia North America North America Europe Europe Europe Asia Europe Europe Oceana Africa Latin America Latin America Asia Europe Europe Europe Oceana Asia Asia Europe Asia Latin America Asia Europe Asia the Middle East Latin America Europe the Middle East Europe Europe Latin America

_________________________________________________________________________________________________________





115

Receivables (Net) (Oil and Gas Field Services) Countries in Latin America

Value ($K/employee)

Rank

Percentile

159.77 156.95 155.12 149.40 131.29 96.18 91.52 71.78 70.70 38.55 29.19 25.80 24.34 23.94 22.61 21.29 4.16 0.48 0.44 0.40 0.37 0.37

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

95.45 90.91 86.36 81.82 77.27 72.73 68.18 63.64 59.09 54.55 50.00 45.45 40.91 36.36 31.82 27.27 22.73 18.18 13.64 9.09 4.55 0.00

_________________________________________________________________________________________________________

Paraguay Falkland Islands Colombia Bolivia Nicaragua Brazil Chile Costa Rica Belize Argentina French Guiana Suriname Mexico Uruguay Venezuela Guyana Panama Peru Guatemala El Salvador Ecuador Honduras

_________________________________________________________________________________________________________





116

Total Inventories Countries

Value ($K/employee)

Rank

Percentile

188.06 177.68 111.60 78.48 70.30 61.84 61.48 60.81 50.51 50.15 47.41 41.56 38.84 35.95 34.90 34.67 34.61 34.57 32.57 32.36 30.99 30.53 30.21 29.54 29.08 28.84 25.96 24.26 23.06 18.47 17.04 11.33 9.70 9.45 7.85 6.41 6.23 4.90 3.84 3.45 3.37 2.92 2.18 2.04 1.99

1 2 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 22 24 25 26 28 29 30 31 32 33 34 36 38 39 40 41 42 43 44 45 47 48 49 50 51 52

98.11 96.23 92.45 90.57 88.68 86.79 84.91 83.02 81.13 79.25 77.36 75.47 73.58 71.70 69.81 67.92 66.04 64.15 62.26 58.49 54.72 52.83 50.94 47.17 45.28 43.40 41.51 39.62 37.74 35.85 32.08 28.30 26.42 24.53 22.64 20.75 18.87 16.98 15.09 11.32 9.43 7.55 5.66 3.77 1.89

Region

_________________________________________________________________________________________________________

Greece Philippines Italy Belgium Spain Norway France Austria Australia Singapore the United Kingdom Poland Thailand South Africa Israel Turkey Ireland Mexico Brazil Malaysia Chile Japan Germany Finland India Taiwan Portugal Hong Kong New Zealand Indonesia Canada China USA Netherlands Pakistan Sweden Denmark Peru Russian Federation Hungary Switzerland Luxembourg Czech Republic Argentina South Korea

Europe Asia Europe Europe Europe Europe Europe Europe Oceana Asia Europe Europe Asia Africa the Middle East the Middle East Europe Latin America Latin America Asia Latin America Asia Europe Europe Asia Asia Europe Asia Oceana Asia North America Asia North America Europe the Middle East Europe Europe Latin America Europe Europe Europe Europe Europe Latin America Asia

_________________________________________________________________________________________________________





117

Total Inventories (Oil and Gas Field Services) Countries in Latin America

Value ($K/employee)

Rank

Percentile

177.26 155.78 41.47 36.65 34.57 34.00 32.57 32.12 30.99 30.96 30.06 24.31 23.94 7.60 6.38 4.90 4.45 4.06 3.77 3.73 2.83 2.04

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

95.45 90.91 86.36 81.82 77.27 72.73 68.18 63.64 59.09 54.55 50.00 45.45 40.91 36.36 31.82 27.27 22.73 18.18 13.64 9.09 4.55 0.00

_________________________________________________________________________________________________________

Bolivia Nicaragua French Guiana Suriname Mexico Uruguay Brazil Venezuela Chile Paraguay Colombia Costa Rica Belize Guyana Falkland Islands Peru Guatemala El Salvador Ecuador Honduras Panama Argentina

_________________________________________________________________________________________________________





118

Current Assets - Total Countries

Value ($K/employee)

Rank

Percentile

1060.16 1030.09 882.71 779.26 754.01 653.37 610.38 525.51 521.17 515.70 481.22 439.54 439.35 434.31 405.63 401.22 390.88 375.01 352.24 338.43 270.57 257.66 255.44 231.43 227.24 220.21 180.58 143.04 129.34 127.64 112.22 96.99 90.04 77.87 76.21 63.57 63.39 59.48 48.65 45.32 44.29 41.25 16.27 14.61 6.10

1 2 3 4 5 6 7 9 10 11 13 14 15 16 17 18 19 20 22 23 24 25 26 27 28 29 30 31 32 33 34 35 37 38 39 41 42 43 45 46 47 48 50 51 52

98.11 96.23 94.34 92.45 90.57 88.68 86.79 83.02 81.13 79.25 75.47 73.58 71.70 69.81 67.92 66.04 64.15 62.26 58.49 56.60 54.72 52.83 50.94 49.06 47.17 45.28 43.40 41.51 39.62 37.74 35.85 33.96 30.19 28.30 26.42 22.64 20.75 18.87 15.09 13.21 11.32 9.43 5.66 3.77 1.89

Region

_________________________________________________________________________________________________________

Sweden Denmark the United Kingdom Japan Finland Thailand Greece Israel Ireland Hong Kong Australia Philippines Italy Taiwan France Austria Portugal Norway India USA Spain Belgium South Africa Brazil Canada Chile Malaysia New Zealand Singapore Germany Pakistan Indonesia Switzerland Luxembourg Poland Turkey Mexico China Czech Republic Argentina South Korea Netherlands Russian Federation Hungary Peru

Europe Europe Europe Asia Europe Asia Europe the Middle East Europe Asia Oceana Asia Europe Asia Europe Europe Europe Europe Asia North America Europe Europe Africa Latin America North America Latin America Asia Oceana Asia Europe the Middle East Asia Europe Europe Europe the Middle East Latin America Asia Europe Latin America Asia Europe Europe Europe Latin America

_________________________________________________________________________________________________________





119

Current Assets - Total (Oil and Gas Field Services) Countries in Latin America

Value ($K/employee)

Rank

Percentile

1055.94 520.87 505.70 438.52 385.36 231.43 220.21 172.71 170.12 108.59 76.04 67.20 63.39 62.35 58.89 45.32 11.99 6.10 5.54 5.05 4.69 4.65

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

95.45 90.91 86.36 81.82 77.27 72.73 68.18 63.64 59.09 54.55 50.00 45.45 40.91 36.36 31.82 27.27 22.73 18.18 13.64 9.09 4.55 0.00

_________________________________________________________________________________________________________

Falkland Islands Paraguay Colombia Bolivia Nicaragua Brazil Chile Costa Rica Belize Guyana French Guiana Suriname Mexico Uruguay Venezuela Argentina Panama Peru Guatemala El Salvador Ecuador Honduras

_________________________________________________________________________________________________________





120

Property Plant and Equipment - Net Countries

Value ($K/employee)

Rank

Percentile

2688.27 2666.05 2593.15 2375.17 2238.64 2221.71 2024.08 1999.54 1895.93 1203.26 1155.59 1155.33 1065.23 1046.98 996.20 760.18 721.50 701.04 588.64 460.44 455.53 440.77 333.32 309.43 267.60 249.13 218.89 199.24 185.60 181.37 177.30 175.37 152.78 131.71 109.86 109.56 105.06 74.80 71.13 47.97 43.10 37.42 32.92 24.55 22.45

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 18 19 20 21 22 23 24 25 26 28 29 31 32 33 34 36 37 39 40 41 42 43 45 46 47 48 49 50 51 53

98.11 96.23 94.34 92.45 90.57 88.68 86.79 84.91 83.02 81.13 79.25 77.36 75.47 73.58 71.70 66.04 64.15 62.26 60.38 58.49 56.60 54.72 52.83 50.94 47.17 45.28 41.51 39.62 37.74 35.85 32.08 30.19 26.42 24.53 22.64 20.75 18.87 15.09 13.21 11.32 9.43 7.55 5.66 3.77 0.00

Region

_________________________________________________________________________________________________________

Israel Ireland the United Kingdom Canada Norway Taiwan USA Portugal India Australia South Africa Thailand New Zealand Brazil Chile Hong Kong Sweden Denmark Italy Belgium Japan Finland Philippines Switzerland Luxembourg Indonesia Greece Czech Republic Argentina South Korea France Austria China Poland Turkey Mexico Spain Singapore Pakistan Russian Federation Hungary Germany Peru Malaysia Netherlands

the Middle East Europe Europe North America Europe Asia North America Europe Asia Oceana Africa Asia Oceana Latin America Latin America Asia Europe Europe Europe Europe Asia Europe Asia Europe Europe Asia Europe Europe Latin America Asia Europe Europe Asia Europe the Middle East Latin America Europe Asia the Middle East Europe Europe Europe Latin America Asia Europe

_________________________________________________________________________________________________________





121

Property Plant and Equipment - Net (Oil and Gas Field Services) Countries in Latin America

Value ($K/employee)

Rank

Percentile

1046.98 996.20 921.04 894.21 781.33 769.61 718.63 332.55 292.24 185.60 131.41 116.15 109.56 107.76 101.78 68.82 35.36 32.92 29.89 27.24 25.29 25.06

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

95.45 90.91 86.36 81.82 77.27 72.73 68.18 63.64 59.09 54.55 50.00 45.45 40.91 36.36 31.82 27.27 22.73 18.18 13.64 9.09 4.55 0.00

_________________________________________________________________________________________________________

Brazil Chile Paraguay Colombia Costa Rica Belize Falkland Islands Bolivia Nicaragua Argentina French Guiana Suriname Mexico Uruguay Venezuela Guyana Panama Peru Guatemala El Salvador Ecuador Honduras

_________________________________________________________________________________________________________





122

Accumulated Depreciation - Total Countries

Value ($K/employee)

Rank

Percentile

2037.85 2015.69 1614.16 1521.71 1415.82 1282.76 1282.75 1220.54 1048.95 956.16 930.17 925.18 909.63 902.11 896.46 751.76 676.59 558.34 536.65 521.42 465.02 308.07 274.73 214.94 151.54 145.51 123.18 121.37 121.04 107.54 103.33 82.62 65.95 53.10 47.71 37.24 36.45 13.35 12.96 11.17 9.66

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 22 24 25 26 28 29 30 31 32 34 35 37 39 40 41 42 43 44 45 46 47

97.87 95.74 93.62 91.49 89.36 87.23 85.11 82.98 80.85 78.72 76.60 74.47 72.34 70.21 68.09 65.96 63.83 61.70 59.57 57.45 53.19 48.94 46.81 44.68 40.43 38.30 36.17 34.04 31.91 27.66 25.53 21.28 17.02 14.89 12.77 10.64 8.51 6.38 4.26 2.13 0.00

Region

_________________________________________________________________________________________________________

France Austria the United Kingdom USA South Africa Brazil Canada Chile Belgium Japan Italy Finland Israel Ireland Australia Taiwan Portugal Thailand Sweden Denmark Hong Kong New Zealand Norway Philippines India Poland Greece Turkey Mexico Indonesia Spain Germany China Russian Federation Hungary Singapore Pakistan Malaysia Netherlands Switzerland Luxembourg

Europe Europe Europe North America Africa Latin America North America Latin America Europe Asia Europe Europe the Middle East Europe Oceana Asia Europe Asia Europe Europe Asia Oceana Europe Asia Asia Europe Europe the Middle East Latin America Asia Europe Europe Asia Europe Europe Asia the Middle East Asia Europe Europe Europe

_________________________________________________________________________________________________________





123

Accumulated Depreciation - Total (Oil and Gas Field Services) Countries in Latin America

Value ($K/employee)

Rank

Percentile

1282.76 1220.54 957.28 942.92 534.51 445.12 432.15 214.44 188.45 145.18 128.31 121.04 119.05 112.44 39.14 35.27

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

93.75 87.50 81.25 75.00 68.75 62.50 56.25 50.00 43.75 37.50 31.25 25.00 18.75 12.50 6.25 0.00

_________________________________________________________________________________________________________

Brazil Chile Costa Rica Belize Falkland Islands Paraguay Colombia Bolivia Nicaragua French Guiana Suriname Mexico Uruguay Venezuela Panama Guyana

_________________________________________________________________________________________________________





124

Intangible Other Assets Countries

Value ($K/employee)

Rank

Percentile

599.92 101.49 100.65 83.88 75.49 67.17 61.54 53.63 53.05 34.79 21.17 20.49 12.28 9.98 9.65 9.48 9.35 8.94 8.30 2.55 2.06 1.55 1.29 1.29 1.26 0.51 0.47 0.46 0.03 0.03 0.03 0.02 0.01 0.01 0.01

1 2 3 4 5 6 7 8 9 10 11 12 15 16 17 18 19 20 21 22 23 25 26 27 28 30 31 32 34 35 36 37 38 39 40

97.50 95.00 92.50 90.00 87.50 85.00 82.50 80.00 77.50 75.00 72.50 70.00 62.50 60.00 57.50 55.00 52.50 50.00 47.50 45.00 42.50 37.50 35.00 32.50 30.00 25.00 22.50 20.00 15.00 12.50 10.00 7.50 5.00 2.50 0.00

Region

_________________________________________________________________________________________________________

the United Kingdom Israel Ireland Taiwan Portugal Spain USA France Austria Netherlands Thailand Norway Belgium Japan Finland Australia Germany Italy Canada Peru Hong Kong Poland Turkey Mexico Singapore Czech Republic Argentina South Korea Greece South Africa Brazil Chile India Russian Federation Hungary

Europe the Middle East Europe Asia Europe Europe North America Europe Europe Europe Asia Europe Europe Asia Europe Oceana Europe Europe North America Latin America Asia Europe the Middle East Latin America Asia Europe Latin America Asia Europe Africa Latin America Latin America Asia Europe Europe

_________________________________________________________________________________________________________





125

Intangible Other Assets (Oil and Gas Field Services) Countries in Latin America

Value ($K/employee)

Rank

Percentile

16.88 16.39 2.55 2.31 2.11 1.96 1.94 1.55 1.37 1.29 1.27 1.20 0.47 0.03 0.02 0.02 0.02 0.00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

94.44 88.89 83.33 77.78 72.22 66.67 61.11 55.56 50.00 44.44 38.89 33.33 27.78 22.22 16.67 11.11 5.56 0.00

_________________________________________________________________________________________________________

Paraguay Colombia Peru Guatemala El Salvador Ecuador Honduras French Guiana Suriname Mexico Uruguay Venezuela Argentina Brazil Chile Costa Rica Belize Panama

_________________________________________________________________________________________________________





3.7 3.7.1

126

PRODUCTIVITY IN BRAZIL: LIABILITY-LABOR RATIOS Overview

In this chapter we consider the liability-labor ratios of companies operating in Brazil benchmarked against global averages for oil and gas field services. For ratios where there are large deviations between Brazil and the benchmarks, graphics are provided (sometimes referred to as a “gap” analysis). Then the distribution of productivity ratios is presented in the form of ranks and percentiles. Certain key liability-labor ratios are highlighted for oil and gas field services across countries in the comparison group. Definitions of liability statement terms are given in Chapter 3. In the case of liability-labor ratios, this report maintains comparability over time and across countries by using a common currency (the US dollar) and relates each measure to a “per employee basis”. Ratios are projected using raw financial statistics and, as ratios, are therefore comparable. Given a country’s human resource ratios, the resulting figures are benchmarked across regional and global averages. I then report the larger liability-labor ratio gaps for oil and gas field services that Brazil has vis-à-vis the worldwide average. Again, a gap need not be a bad sign. Rather, it is simply a substantial difference that might merit further attention or signal a firm’s relative incentive to invest locally. All figures are projections, so due caution is required.




3.7.2

127

Liability to Labor: Outlook

The following tables and graphs are prepared using the methodology described at the beginning of this section. All units are in thousands of US dollars per employee. All figures are current-year projections for oil and gas field services in Brazil based on latest financial results available. Labor-liability Ratios ($k/employee) Brazil Latin America World Avg. _________________________________________________________________________________________________________


2.89 3.50 62.87 0.10 157.57 194.70 53.44 53.43 0.00 198.46 57.37 0.20 404.93 0.04 0.91 0.15 874.41 19.15 705.91 1.30 -233.86 -0.56 446.66 1280.21

22.64 38.10 24.66 1.64 51.94 117.98 66.29 66.05 0.24 57.28 31.78 2.75 240.78 0.64 5.21 0.05 478.56 103.32 404.87 3.87 143.58 10.95 136.15 725.20

106.04 30.86 25.41 3.59 40.76 200.43 388.53 388.21 0.33 23.22 34.24 12.12 652.04 0.31 4.66 2.59 423.42 102.59 248.21 1.91 13.71 25.58 116.75 1083.06

_________________________________________________________________________________________________________





3.7.3

128

Liability and Equity to Labor: International Gaps

The following graphics summarize for oil and gas field services the large labor-liability gaps between firms operating in Brazil and the world average. A gap cannot necessarily be interpreted as a positive or negative reflection on performance. Gaps may signal areas of specialization, market focus, or expertise. More contextual information is required to fully interpret these gaps. The gaps highlighted here are simply those that are large.

Gap: Accounts Payable ($k/employee) 150

106.04

100 50

2.89

22.64

0 -50 -100 -150

-103.15 Brazil

Latin America

World Average

Gap

Gap: Other Current Liabilities ($k/employee) 200

157.57

150

116.81

100 51.94 50 0

Brazil

Latin America

40.76

World Average

Gap

Gap: Long Term Debt ($k/employee) 388.53

400 200

53.44

66.29

0 -200 -400

-335.09 Brazil


Latin America

World Average

Gap



129

Gap: Long Term Debt Excluding Capitalized Leases ($k/employee) 388.21

400 200

53.43

66.05

0 -200 -400

-334.78 Brazil

Latin America

World Average

Gap

Gap: Provision For Risks and Charges ($k/employee) 200

198.46 175.24

150 100

57.28

50 0

23.22 Brazil

Latin America

World Average

Gap

Gap: Total Liabilities ($k/employee) 800 600

652.04 404.93

400

240.78

200 0 -200 -400

-247.11 Brazil

Latin America

World Average

Gap

Gap: Common Equity ($k/employee) 1000

874.41

800 600

478.56

423.42

450.99

400 200 0

Brazil


Latin America

World Average

Gap



130

Gap: Capital Surplus ($k/employee) 800

705.91

600

457.7

404.87 400

248.21

200 0

Brazil

Latin America

World Average

Gap

Gap: Other Appropriated Reserves ($k/employee) 233.86

250

220.15

200 143.58

150 100 50

13.71

0

Brazil

Latin America

World Average

Gap

Gap: Retained Earnings ($k/employee) 446.66

500 400

329.91

300 200

136.15

116.75

100 0

Brazil

Latin America

World Average

Gap

Gap: Total Liabilities & Shareholders Equity ($k/employee) 1500

1280.21 1083.06

1000

725.2

500 0

197.15 Brazil


Latin America

World Average

Gap



3.7.4

131


We now consider the distribution of liability-labor ratios using ranks and percentiles across . What percent of countries have a value lower or higher than Brazil (what is the indicator's rank or percentile)? The table below answers this question with respect to liability-labor ratios. The ranks and percentiles indicate, from highest to lowest, where a value falls within the distribution of all countries considered in the global benchmark (the number of countries in the benchmark per line item may vary, as indicated in the Rank). Again, a high or low figure does not necessarily indicate good or bad performance or productivity. After the summary table below, a few key liabilitylabor ratios are highlighted in additional tables. Liability Structure ($k/employee)

Brazil

Rank of Total

Percentile

2.89 3.50 62.87 0.10 157.57 194.70 53.44 53.43 0.00 198.46 57.37 0.20 404.93 0.04 0.91 0.15 874.41 19.15 705.91 1.30 -233.86 -0.56 446.66 1280.21

45 of 46 46 of 51 9 of 39 15 of 16 6 of 52 24 of 53 28 of 51 28 of 51 16 of 17 6 of 39 16 of 43 32 of 39 25 of 53 12 of 16 26 of 46 8 of 9 15 of 53 35 of 46 4 of 34 12 of 13 43 of 44 17 of 18 6 of 51 21 of 53

2.17 9.80 76.92 6.25 88.46 54.72 45.10 45.10 5.88 84.62 62.79 17.95 52.83 25.00 43.48 11.11 71.70 23.91 88.24 7.69 2.27 5.56 88.24 60.38

_________________________________________________________________________________________________________


_________________________________________________________________________________________________________





132

Accounts Payable Countries

Value ($K/employee)

Rank

Percentile

348.24 215.06 178.40 139.77 139.36 138.21 129.14 119.99 115.17 106.58 106.56 105.53 105.40 103.66 103.56 102.11 88.43 85.79 70.01 61.01 59.19 58.95 32.46 24.75 24.04 20.64 20.59 17.73 15.33 12.51 11.46 9.66 7.79 7.03 4.54 4.08 3.66 3.19 2.89 2.75

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 25 26 27 28 29 31 32 33 34 36 38 39 41 42 43 44 45 46

97.83 95.65 93.48 91.30 89.13 86.96 84.78 82.61 80.43 78.26 76.09 73.91 71.74 69.57 67.39 65.22 63.04 60.87 58.70 56.52 54.35 52.17 45.65 43.48 41.30 39.13 36.96 32.61 30.43 28.26 26.09 21.74 17.39 15.22 10.87 8.70 6.52 4.35 2.17 0.00

Region

_________________________________________________________________________________________________________

India Canada Greece the United Kingdom Israel Ireland USA Italy Taiwan Sweden France Japan Austria Portugal Denmark Finland Belgium Spain Thailand Norway Hong Kong Australia Singapore Poland Malaysia Turkey Mexico Switzerland Luxembourg Pakistan Indonesia Germany Philippines China Netherlands Russian Federation Hungary South Africa Brazil Chile

Asia North America Europe Europe the Middle East Europe North America Europe Asia Europe Europe Asia Europe Europe Europe Europe Europe Europe Asia Europe Asia Oceana Asia Europe Asia the Middle East Latin America Europe Europe the Middle East Asia Europe Asia Asia Europe Europe Europe Africa Latin America Latin America

_________________________________________________________________________________________________________





133

Accounts Payable (Oil and Gas Field Services) Countries in Latin America

Value ($K/employee)

Rank

Percentile

106.16 55.81 54.19 24.69 21.83 20.59 20.25 19.13 12.10 7.77 6.83 3.01 2.89 2.75 2.16 2.13

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

93.75 87.50 81.25 75.00 68.75 62.50 56.25 50.00 43.75 37.50 31.25 25.00 18.75 12.50 6.25 0.00

_________________________________________________________________________________________________________

Falkland Islands Paraguay Colombia French Guiana Suriname Mexico Uruguay Venezuela Guyana Bolivia Nicaragua Panama Brazil Chile Costa Rica Belize

_________________________________________________________________________________________________________





134

Current Liabilities - Total Countries

Value ($K/employee)

Rank

Percentile

662.60 552.53 549.27 534.63 508.70 504.50 463.36 450.02 420.41 394.13 378.37 351.66 305.33 279.67 275.41 260.92 254.62 251.85 226.69 214.89 194.70 191.00 185.58 185.25 169.48 162.50 134.15 116.01 109.71 86.31 71.34 59.50 59.34 47.54 47.15 43.05 40.10 39.19 29.33 25.19 17.99 12.50 11.23 10.19 9.20

1 2 3 4 5 6 7 8 9 10 11 12 14 16 17 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 38 39 40 41 42 44 46 48 49 50 51 52

98.11 96.23 94.34 92.45 90.57 88.68 86.79 84.91 83.02 81.13 79.25 77.36 73.58 69.81 67.92 64.15 62.26 60.38 58.49 56.60 54.72 52.83 50.94 49.06 47.17 45.28 43.40 41.51 39.62 37.74 35.85 33.96 32.08 28.30 26.42 24.53 22.64 20.75 16.98 13.21 9.43 7.55 5.66 3.77 1.89

Region

_________________________________________________________________________________________________________

Norway Japan the United Kingdom Finland Israel Ireland Italy India Taiwan Philippines Portugal Thailand Greece Canada Spain USA France Austria Belgium South Africa Brazil Sweden Denmark Chile Australia Hong Kong Switzerland Luxembourg Singapore New Zealand Poland Turkey Mexico Pakistan Malaysia Czech Republic Argentina South Korea Indonesia Germany China Russian Federation Hungary Peru Netherlands

Europe Asia Europe Europe the Middle East Europe Europe Asia Asia Asia Europe Asia Europe North America Europe North America Europe Europe Europe Africa Latin America Europe Europe Latin America Oceana Asia Europe Europe Asia Oceana Europe the Middle East Latin America the Middle East Asia Europe Latin America Asia Asia Europe Asia Europe Europe Latin America Europe

_________________________________________________________________________________________________________





135

Current Liabilities - Total (Oil and Gas Field Services) Countries in Latin America

Value ($K/employee)

Rank

Percentile

393.22 345.55 280.35 272.18 194.70 190.24 185.25 145.30 143.12 71.18 62.91 59.34 58.37 55.13 46.00 40.10 10.19 9.25 9.22 8.43 7.83 7.75

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

95.45 90.91 86.36 81.82 77.27 72.73 68.18 63.64 59.09 54.55 50.00 45.45 40.91 36.36 31.82 27.27 22.73 18.18 13.64 9.09 4.55 0.00

_________________________________________________________________________________________________________

Bolivia Nicaragua Paraguay Colombia Brazil Falkland Islands Chile Costa Rica Belize French Guiana Suriname Mexico Uruguay Venezuela Guyana Argentina Peru Guatemala Panama El Salvador Ecuador Honduras

_________________________________________________________________________________________________________





136

Long Term Debt Countries

Value ($K/employee)

Rank

Percentile

1268.84 1107.26 1098.11 915.09 884.81 823.59 711.45 710.72 615.42 527.21 319.50 186.20 129.11 126.78 118.69 114.84 109.64 106.49 98.33 95.54 92.11 85.40 61.92 58.98 56.62 53.44 52.74 52.39 51.82 51.54 50.85 41.91 21.88 16.59 9.49 7.57 5.83 4.86 4.85 4.64 3.98 3.58 3.12

1 2 3 4 5 6 7 8 9 10 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 31 32 33 34 36 37 38 39 40 42 44 45 46 48 49 50

98.04 96.08 94.12 92.16 90.20 88.24 86.27 84.31 82.35 80.39 74.51 72.55 70.59 68.63 66.67 64.71 62.75 60.78 58.82 56.86 54.90 52.94 50.98 49.02 47.06 45.10 43.14 39.22 37.25 35.29 33.33 29.41 27.45 25.49 23.53 21.57 17.65 13.73 11.76 9.80 5.88 3.92 1.96

Region

_________________________________________________________________________________________________________

India Israel Ireland Taiwan the United Kingdom Portugal USA Canada Thailand New Zealand Australia Norway Belgium Switzerland Japan Finland Luxembourg Hong Kong Sweden Denmark Italy Malaysia Philippines South Africa Czech Republic Brazil Argentina France Austria South Korea Chile Spain Netherlands Singapore Germany Indonesia Poland Turkey Mexico China Russian Federation Hungary Peru

Asia the Middle East Europe Asia Europe Europe North America North America Asia Oceana Oceana Europe Europe Europe Asia Europe Europe Asia Europe Europe Europe Asia Asia Africa Europe Latin America Latin America Europe Europe Asia Latin America Europe Europe Asia Europe Asia Europe the Middle East Latin America Asia Europe Europe Latin America

_________________________________________________________________________________________________________





137

Long Term Debt (Oil and Gas Field Services) Countries in Latin America

Value ($K/employee)

Rank

Percentile

490.62 476.33 97.94 61.78 54.29 53.44 52.74 50.85 39.88 39.28 5.81 5.14 4.85 4.77 4.50 3.12 2.94 2.83 2.58 2.40 2.37

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

95.24 90.48 85.71 80.95 76.19 71.43 66.67 61.90 57.14 52.38 47.62 42.86 38.10 33.33 28.57 23.81 19.05 14.29 9.52 4.76 0.00

_________________________________________________________________________________________________________

Paraguay Colombia Falkland Islands Bolivia Nicaragua Brazil Argentina Chile Costa Rica Belize French Guiana Suriname Mexico Uruguay Venezuela Peru Panama Guatemala El Salvador Ecuador Honduras

_________________________________________________________________________________________________________





138

Total Liabilities Countries

Value ($K/employee)

Rank

Percentile

2007.55 1880.57 1865.03 1746.75 1739.53 1554.19 1398.77 1315.78 1258.89 1212.86 772.42 740.58 716.58 707.54 702.42 489.95 477.83 472.63 449.05 446.93 432.58 404.93 385.29 361.40 351.15 345.13 311.06 308.01 269.01 131.79 131.77 111.11 110.01 102.48 100.14 91.40 91.17 76.23 76.03 72.61 68.14 37.51 19.84 17.83 16.48

1 2 3 4 5 6 7 8 9 10 13 14 15 16 17 18 19 20 21 22 23 25 26 27 28 29 30 31 32 33 34 35 36 38 39 41 42 44 45 46 48 49 50 51 52

98.11 96.23 94.34 92.45 90.57 88.68 86.79 84.91 83.02 81.13 75.47 73.58 71.70 69.81 67.92 66.04 64.15 62.26 60.38 58.49 56.60 52.83 50.94 49.06 47.17 45.28 43.40 41.51 39.62 37.74 35.85 33.96 32.08 28.30 26.42 22.64 20.75 16.98 15.09 13.21 9.43 7.55 5.66 3.77 1.89

Region

_________________________________________________________________________________________________________

Norway Israel Ireland India the United Kingdom Taiwan Portugal Canada Thailand USA Italy Japan Finland New Zealand Australia Philippines France Austria Belgium South Africa Hong Kong Brazil Chile Sweden Denmark Spain Switzerland Greece Luxembourg Malaysia Singapore Indonesia Czech Republic Argentina South Korea Poland Germany Turkey Mexico Pakistan China Netherlands Russian Federation Hungary Peru

Europe the Middle East Europe Asia Europe Asia Europe North America Asia North America Europe Asia Europe Oceana Oceana Asia Europe Europe Europe Africa Asia Latin America Latin America Europe Europe Europe Europe Europe Europe Asia Asia Asia Europe Latin America Asia Europe Europe the Middle East Latin America the Middle East Asia Europe Europe Europe Latin America

_________________________________________________________________________________________________________





139

Total Liabilities (Oil and Gas Field Services) Countries in Latin America

Value ($K/employee)

Rank

Percentile

1003.61 974.37 488.81 429.56 404.93 385.29 359.96 302.19 297.65 102.48 91.19 80.60 76.03 74.78 70.62 70.26 16.48 14.96 14.63 13.64 12.66 12.55

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

95.45 90.91 86.36 81.82 77.27 72.73 68.18 63.64 59.09 54.55 50.00 45.45 40.91 36.36 31.82 27.27 22.73 18.18 13.64 9.09 4.55 0.00

_________________________________________________________________________________________________________

Paraguay Colombia Bolivia Nicaragua Brazil Chile Falkland Islands Costa Rica Belize Argentina French Guiana Suriname Mexico Uruguay Venezuela Guyana Peru Guatemala Panama El Salvador Ecuador Honduras

_________________________________________________________________________________________________________





140

Common Equity Countries

Value ($K/employee)

Rank

Percentile

4679.38 4546.65 2394.30 1435.08 1423.22 1291.38 1256.31 1197.68 1186.02 1067.42 965.12 964.48 933.23 895.83 874.41 843.96 832.00 641.13 608.70 576.44 540.07 504.00 498.52 410.90 319.45 291.37 250.14 153.39 151.89 144.04 141.49 138.26 120.70 109.94 103.76 100.67 100.40 97.02 90.54 87.39 83.90 63.38 44.62 40.09 26.30

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 20 21 22 23 24 25 26 27 28 29 33 34 35 36 37 39 40 41 42 43 44 46 47 48 49 50 51 52

98.11 96.23 94.34 92.45 90.57 88.68 86.79 84.91 83.02 81.13 79.25 77.36 75.47 73.58 71.70 69.81 67.92 62.26 60.38 58.49 56.60 54.72 52.83 50.94 49.06 47.17 45.28 37.74 35.85 33.96 32.08 30.19 26.42 24.53 22.64 20.75 18.87 16.98 13.21 11.32 9.43 7.55 5.66 3.77 1.89

Region

_________________________________________________________________________________________________________

Sweden Denmark the United Kingdom Israel Ireland Canada Australia USA Taiwan Portugal South Africa Japan Finland Thailand Brazil Hong Kong Chile Norway Italy India Greece France Austria New Zealand Belgium Philippines Indonesia China Czech Republic Spain Argentina South Korea Poland Pakistan Malaysia Turkey Mexico Switzerland Singapore Germany Luxembourg Netherlands Russian Federation Hungary Peru

Europe Europe Europe the Middle East Europe North America Oceana North America Asia Europe Africa Asia Europe Asia Latin America Asia Latin America Europe Europe Asia Europe Europe Europe Oceana Europe Asia Asia Asia Europe Europe Latin America Asia Europe the Middle East Asia the Middle East Latin America Europe Asia Europe Europe Europe Europe Europe Latin America

_________________________________________________________________________________________________________





141

Common Equity (Oil and Gas Field Services) Countries in Latin America

Value ($K/employee)

Rank

Percentile

4660.74 874.41 832.00 714.17 693.36 652.55 642.76 290.69 255.46 141.49 120.42 106.43 106.38 100.40 98.75 93.27 32.89 26.30 23.87 21.76 20.20 20.02

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

95.45 90.91 86.36 81.82 77.27 72.73 68.18 63.64 59.09 54.55 50.00 45.45 40.91 36.36 31.82 27.27 22.73 18.18 13.64 9.09 4.55 0.00

_________________________________________________________________________________________________________

Falkland Islands Brazil Chile Paraguay Colombia Costa Rica Belize Bolivia Nicaragua Argentina French Guiana Suriname Guyana Mexico Uruguay Venezuela Panama Peru Guatemala El Salvador Ecuador Honduras

_________________________________________________________________________________________________________





142

Retained Earnings Countries

Value ($K/employee)

Rank

Percentile

1020.39 820.95 492.99 453.07 450.09 446.66 446.37 424.99 377.04 371.97 364.82 353.71 344.44 342.46 334.78 248.16 230.30 220.00 213.76 196.43 194.29 132.09 94.83 83.63 79.76 76.66 74.30 72.61 69.75 69.56 58.74 54.74 54.10 47.93 44.16 29.39 20.31 16.97 15.24 10.77 7.29 6.30 -1.35

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 35 36 37 39 41 43 44 45 46 47 48 49 51

98.04 96.08 94.12 92.16 90.20 88.24 86.27 84.31 82.35 80.39 78.43 76.47 74.51 72.55 70.59 64.71 62.75 60.78 58.82 56.86 54.90 52.94 50.98 49.02 47.06 45.10 43.14 41.18 39.22 37.25 31.37 29.41 27.45 23.53 19.61 15.69 13.73 11.76 9.80 7.84 5.88 3.92 0.00

Region

_________________________________________________________________________________________________________

Norway the United Kingdom South Africa Australia Israel Brazil Ireland Chile Japan Taiwan Finland Thailand Hong Kong USA Portugal Canada Belgium Sweden Denmark France Austria Italy India Poland Czech Republic Germany Argentina South Korea Turkey Mexico Philippines Spain Singapore Indonesia Malaysia China Netherlands Russian Federation Hungary Greece Switzerland Luxembourg Peru

Europe Europe Africa Oceana the Middle East Latin America Europe Latin America Asia Asia Europe Asia Asia North America Europe North America Europe Europe Europe Europe Europe Europe Asia Europe Europe Europe Latin America Asia the Middle East Latin America Asia Europe Asia Asia Asia Asia Europe Europe Europe Europe Europe Europe Latin America

_________________________________________________________________________________________________________





143

Retained Earnings (Oil and Gas Field Services) Countries in Latin America

Value ($K/employee)

Rank

Percentile

446.66 424.99 333.33 328.33 281.99 273.77 219.12 83.44 74.30 73.75 69.56 68.42 64.62 58.60 51.50 12.51 -1.03 -1.04 -1.12 -1.23 -1.35

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

95.24 90.48 85.71 80.95 76.19 71.43 66.67 61.90 57.14 52.38 47.62 42.86 38.10 33.33 28.57 23.81 19.05 14.29 9.52 4.76 0.00

_________________________________________________________________________________________________________

Brazil Chile Costa Rica Belize Paraguay Colombia Falkland Islands French Guiana Argentina Suriname Mexico Uruguay Venezuela Bolivia Nicaragua Panama Honduras Ecuador El Salvador Guatemala Peru

_________________________________________________________________________________________________________





3.8 3.8.1

144

PRODUCTIVITY IN BRAZIL: INCOME-LABOR RATIOS Overview

In this chapter we consider the income-labor ratios for oil and gas field services in Brazil benchmarked against global averages. For ratios where there are large deviations between the average firm operating in Brazil and the benchmarks, graphics are provided (sometimes referred to as a “gap” analysis). Then the distribution of ratios is presented in the form of ranks and percentiles. Certain key income-labor ratios are highlighted across countries in the comparison group. In the case of income-labor ratios, this report maintains comparability over time and across countries by using a common currency (the US dollar) and relates each measure to a “per employee basis”. Ratios are projected using raw financial statistics and, as ratios, are therefore comparable. Given a country’s human resource ratios, the resulting figures are benchmarked across regional and global averages. We then report the larger income-labor ratio gaps for oil and gas field services that Brazil has vis-à-vis the worldwide average. Again, a gap need not be a bad sign. Rather, it is simply a substantial difference that might merit further attention or signal a firm’s relative incentive to invest locally. All figures are projections, so due caution is required.




3.8.2

145

Income to Labor: Outlook

The following tables and graphs are prepared using the methodology described at the beginning of this section. All units are in thousands of US dollars per employee. All figures are current-year projections for oil and gas field services in Brazil based on latest financial results available. Labor-income Ratios ($k/employee) Brazil Latin America World Avg. _________________________________________________________________________________________________________


639.69 296.30 156.72 186.67 34.21 648.46 1.41 151.40 5.32 0.06 155.45 10.01 0.00 145.44 55.05 10.59 47.46 0.20 22.30 0.20 0.00 90.19 90.19 90.19

608.54 586.38 43.57 98.46 22.15 898.85 10.83 69.76 4.75 31.71 105.29 7.74 0.00 97.56 26.50 12.67 21.63 4.58 6.61 0.82 16.58 80.08 80.08 80.08

409.74 264.97 48.72 97.39 21.39 356.51 9.00 72.53 4.25 9.63 84.61 8.14 0.45 76.79 34.87 24.34 6.65 8.01 1.71 0.71 1.33 41.93 41.91 41.84

_________________________________________________________________________________________________________





3.8.3

146

Income to Labor: Gaps

The following graphics summarize for oil and gas field services the large labor-income gaps between firms operating in Brazil and the world average. A gap cannot necessarily be interpreted as a positive or negative reflection on performance. Gaps may signal areas of specialization, market focus, or expertise. More contextual information is required to fully interpret these gaps. The gaps highlighted here are simply those that are large.

Gap: Net Sales or Revenues ($k/employee) 800

639.69

608.54

600 409.74 400

229.95

200 0

Brazil

Latin America

World Average

Gap

Gap: Depreciation, Depletion & Amortization ($k/employee) 200

156.72

150

108

100 43.57

50 0

Brazil

Latin America

48.72

World Average

Gap

Gap: Gross Income ($k/employee) 200

186.67

150 98.46

100

97.39

89.28

50 0

Brazil


Latin America

World Average

Gap



147

Gap: Other Operating Expenses ($k/employee) 898.85

1000 800

648.46

600 356.51

400

291.95

200 0

Brazil

Latin America

World Average

Gap

Gap: Operating Income ($k/employee) 200 151.4 150 100

69.76

78.87

72.53

50 0

Brazil

Latin America

World Average

Gap

Gap: Earnings Before Interest and Taxes (EBIT) ($k/employee) 200 155.45 150 105.29 100

84.61

70.84

50 0

Brazil

Latin America

World Average

Gap

Gap: Pretax Income ($k/employee) 150

145.44 97.56

100

76.79

68.65

50 0

Brazil


Latin America

World Average

Gap



148

Gap: Current Foreign Income Tax ($k/employee) 50

47.46 40.81

40 30

21.63

20 6.65

10 0

Brazil

Latin America

World Average

Gap

Gap: Net Income Before Extra Items/Prefer Dividends ($k/employee) 100

90.19

80

80.08

60

41.93

48.26

40 20 0

Brazil

Latin America

World Average

Gap

Gap: Net Income Before Preferred Dividends ($k/employee) 100

90.19

80

80.08

60

41.91

48.28

40 20 0

Brazil

Latin America

World Average

Gap

Gap: Net Income Available to Common ($k/employee) 100

90.19

80

80.08

60

41.84

48.35

40 20 0

Brazil


Latin America

World Average

Gap



3.8.4

149


We now consider the distribution of income-labor ratios using ranks and percentiles across . What percent of countries have a value lower or higher than Brazil (what is the ratio's rank or percentile)? The table below answers this question with respect to income-labor ratios. The ranks and percentiles indicate, from highest to lowest, where a value falls within the distribution of all countries considered in the global benchmark (the number of countries in the benchmark per line item may vary, as indicated in the Rank). Again, a high or low figure does not necessarily indicate good or bad performance or productivity. After the summary table below, a few key income-labor ratios are highlighted in additional tables. Income Structure ($k/employee)

Brazil

Rank of Total

Percentile


639.69 296.30 156.72 186.67 34.21 648.46 1.41 151.40 5.32 0.06 155.45 10.01 0.00 145.44 55.05 10.59 47.46 0.20 22.30 0.20 0.00 90.19 90.19 90.19

27 of 53 22 of 48 10 of 53 20 of 48 23 of 45 20 of 47 33 of 37 20 of 53 17 of 43 47 of 53 22 of 53 21 of 53 12 of 13 20 of 53 21 of 48 20 of 36 7 of 22 28 of 40 4 of 18 22 of 39 11 of 13 17 of 53 17 of 53 17 of 53

49.06 54.17 81.13 58.33 48.89 57.45 10.81 62.26 60.47 11.32 58.49 60.38 7.69 62.26 56.25 44.44 68.18 30.00 77.78 43.59 15.38 67.92 67.92 67.92

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________





150

Cost of Goods Sold (Excluding Depreciation) Countries

Value ($K/employee)

Rank

Percentile

6568.62 6382.29 1954.41 1288.17 1225.36 1185.66 1108.36 932.63 872.97 865.75 790.60 721.46 672.53 649.32 470.55 418.11 410.18 327.04 296.30 281.93 271.67 265.62 259.66 232.42 231.45 194.63 178.17 168.32 158.31 148.61 148.21 111.10 94.01 68.47 67.72 66.38 57.65 52.10 23.44 21.06 9.45

1 2 3 4 5 6 7 9 10 11 12 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 36 37 39 40 42 43 44 45 46 47

97.92 95.83 93.75 91.67 89.58 87.50 85.42 81.25 79.17 77.08 75.00 68.75 66.67 64.58 62.50 60.42 58.33 56.25 54.17 52.08 50.00 47.92 45.83 43.75 41.67 39.58 37.50 35.42 33.33 31.25 29.17 25.00 22.92 18.75 16.67 12.50 10.42 8.33 6.25 4.17 2.08

Region

_________________________________________________________________________________________________________

Sweden Denmark Greece Philippines Japan Finland Italy Thailand Israel Ireland Spain Taiwan Belgium Portugal the United Kingdom Norway Australia South Africa Brazil Chile USA Hong Kong India Canada Singapore Switzerland Poland Luxembourg Malaysia Turkey Mexico Germany Indonesia France Austria Netherlands China Pakistan Russian Federation Hungary Peru

Europe Europe Europe Asia Asia Europe Europe Asia the Middle East Europe Europe Asia Europe Europe Europe Europe Oceana Africa Latin America Latin America North America Asia Asia North America Asia Europe Europe Europe Asia the Middle East Latin America Europe Asia Europe Europe Europe Asia the Middle East Europe Europe Latin America

_________________________________________________________________________________________________________





151

Cost of Goods Sold (Excluding Depreciation) (Oil and Gas Field Services) Countries in Latin America

Value ($K/employee)

Rank

Percentile

6542.45 1285.17 1129.39 743.51 721.85 296.30 281.93 221.12 217.80 177.77 157.11 148.21 145.78 137.68 50.41 17.28 9.45 8.57 7.82 7.26 7.19

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

95.24 90.48 85.71 80.95 76.19 71.43 66.67 61.90 57.14 52.38 47.62 42.86 38.10 33.33 28.57 23.81 19.05 14.29 9.52 4.76 0.00

_________________________________________________________________________________________________________

Falkland Islands Bolivia Nicaragua Paraguay Colombia Brazil Chile Costa Rica Belize French Guiana Suriname Mexico Uruguay Venezuela Guyana Panama Peru Guatemala El Salvador Ecuador Honduras

_________________________________________________________________________________________________________





152

Selling, General & Administrative Expenses Countries

Value ($K/employee)

Rank

Percentile

284.38 281.28 228.93 89.37 88.63 85.44 82.67 79.43 73.86 68.09 66.47 63.71 59.54 56.51 54.26 44.87 42.79 41.57 38.81 37.76 34.21 32.55 32.37 32.28 27.28 25.61 23.61 20.23 15.79 11.71 10.13 9.68 5.29 4.68 4.04 3.63 3.31 2.24

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 18 19 20 21 22 23 24 25 26 28 29 30 31 32 34 36 37 38 39 41 42 43 44

97.78 95.56 93.33 91.11 88.89 86.67 84.44 82.22 80.00 77.78 75.56 73.33 71.11 68.89 66.67 60.00 57.78 55.56 53.33 51.11 48.89 46.67 44.44 42.22 37.78 35.56 33.33 31.11 28.89 24.44 20.00 17.78 15.56 13.33 8.89 6.67 4.44 2.22

Region

_________________________________________________________________________________________________________

France Austria Italy Israel Ireland Japan Finland USA Taiwan the United Kingdom Portugal Belgium Thailand Canada Australia Germany Sweden Denmark Poland South Africa Brazil Chile Turkey Mexico Singapore Greece Hong Kong Norway Indonesia Switzerland Luxembourg China Philippines Netherlands Russian Federation Hungary Malaysia Peru

Europe Europe Europe the Middle East Europe Asia Europe North America Asia Europe Europe Europe Asia North America Oceana Europe Europe Europe Europe Africa Latin America Latin America the Middle East Latin America Asia Europe Asia Europe Asia Europe Europe Asia Asia Europe Europe Europe Asia Latin America

_________________________________________________________________________________________________________





153

Selling, General & Administrative Expenses (Oil and Gas Field Services) Countries in Latin America

Value ($K/employee)

Rank

Percentile

47.47 46.08 42.62 38.72 34.22 34.21 32.55 32.28 31.75 29.99 25.53 25.15 5.28 4.64 2.98 2.24 2.03 1.85 1.72 1.70

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

95.00 90.00 85.00 80.00 75.00 70.00 65.00 60.00 55.00 50.00 45.00 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00

_________________________________________________________________________________________________________

Paraguay Colombia Falkland Islands French Guiana Suriname Brazil Chile Mexico Uruguay Venezuela Costa Rica Belize Bolivia Nicaragua Panama Peru Guatemala El Salvador Ecuador Honduras

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154

Operating Expenses - Total Countries

Value ($K/employee)

Rank

Percentile

141.25 139.72 95.86 93.69 80.91 59.86 40.83 35.76 28.51 20.64 20.62 20.33 18.22 15.33 11.56 11.34 10.89 9.78 9.59 7.95 5.23 4.26 3.55 3.54 3.28 3.22 2.84 1.56 1.41 1.34 1.24 0.31 0.30

1 2 3 4 5 6 9 10 11 12 13 14 15 17 18 19 20 21 22 23 24 25 26 27 29 30 31 32 33 34 35 36 37

97.30 94.59 91.89 89.19 86.49 83.78 75.68 72.97 70.27 67.57 64.86 62.16 59.46 54.05 51.35 48.65 45.95 43.24 40.54 37.84 35.14 32.43 29.73 27.03 21.62 18.92 16.22 13.51 10.81 8.11 5.41 2.70 0.00

Region

_________________________________________________________________________________________________________

France Austria Hong Kong Spain New Zealand Thailand Italy USA Australia Philippines Greece Canada Belgium Norway Singapore Malaysia Russian Federation Hungary Pakistan Germany India Poland Turkey Mexico Switzerland the United Kingdom Luxembourg South Africa Brazil Chile Netherlands Japan Finland

Europe Europe Asia Europe Oceana Asia Europe North America Oceana Asia Europe North America Europe Europe Asia Asia Europe Europe the Middle East Europe Asia Europe the Middle East Latin America Europe Europe Europe Africa Latin America Latin America Europe Asia Europe

_________________________________________________________________________________________________________





155

Operating Expenses - Total (Oil and Gas Field Services) Countries in Latin America

Value ($K/employee)

Rank

Percentile

47.72 46.33 20.59 18.09 9.28 8.03 4.25 3.76 3.54 3.49 3.29 1.41 1.34 1.05 1.04

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

93.33 86.67 80.00 73.33 66.67 60.00 53.33 46.67 40.00 33.33 26.67 20.00 13.33 6.67 0.00

_________________________________________________________________________________________________________

Paraguay Colombia Bolivia Nicaragua Guyana Panama French Guiana Suriname Mexico Uruguay Venezuela Brazil Chile Costa Rica Belize

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156

Operating Income Countries

Value ($K/employee)

Rank

Percentile

923.07 533.03 515.76 421.05 384.49 271.31 268.36 260.04 256.52 240.94 234.11 214.60 214.55 212.78 177.31 167.11 159.58 151.40 145.44 144.06 79.91 65.71 61.21 60.27 59.81 58.56 51.28 50.32 42.71 34.94 20.39 18.08 12.51 10.01 9.11 8.97 8.91 7.70 6.88 5.74 5.73 2.86 2.57 0.46 -31.76

1 2 3 4 5 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 25 26 27 28 29 31 32 33 34 35 37 39 40 41 42 43 44 45 46 47 49 50 51 53

98.11 96.23 94.34 92.45 90.57 84.91 83.02 81.13 79.25 77.36 75.47 73.58 71.70 69.81 67.92 66.04 64.15 62.26 60.38 58.49 56.60 52.83 50.94 49.06 47.17 45.28 41.51 39.62 37.74 35.85 33.96 30.19 26.42 24.53 22.64 20.75 18.87 16.98 15.09 13.21 11.32 7.55 5.66 3.77 0.00

Region

_________________________________________________________________________________________________________

Norway Japan Finland Thailand the United Kingdom France Austria Hong Kong New Zealand Italy Canada USA Israel Ireland Taiwan South Africa Portugal Brazil Australia Chile Philippines Czech Republic Argentina Sweden South Korea Denmark Belgium Pakistan India Spain Indonesia Germany China Malaysia Singapore Netherlands Switzerland Luxembourg Poland Turkey Mexico Russian Federation Hungary Peru Greece

Europe Asia Europe Asia Europe Europe Europe Asia Oceana Europe North America North America the Middle East Europe Asia Africa Europe Latin America Oceana Latin America Asia Europe Latin America Europe Asia Europe Europe the Middle East Asia Europe Asia Europe Asia Asia Asia Europe Europe Europe Europe the Middle East Latin America Europe Europe Latin America Europe

_________________________________________________________________________________________________________





157

Operating Income (Oil and Gas Field Services) Countries in Latin America

Value ($K/employee)

Rank

Percentile

335.67 325.89 151.40 144.06 112.99 111.29 79.73 70.06 61.21 60.03 48.69 6.87 6.07 5.73 5.63 5.32 2.11 0.46 0.41 0.38 0.35 0.35

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

95.45 90.91 86.36 81.82 77.27 72.73 68.18 63.64 59.09 54.55 50.00 45.45 40.91 36.36 31.82 27.27 22.73 18.18 13.64 9.09 4.55 0.00

_________________________________________________________________________________________________________

Paraguay Colombia Brazil Chile Costa Rica Belize Bolivia Nicaragua Argentina Falkland Islands Guyana French Guiana Suriname Mexico Uruguay Venezuela Panama Peru Guatemala El Salvador Ecuador Honduras

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158

Earnings Before Interest and Taxes (EBIT) Countries

Value ($K/employee)

Rank

Percentile

904.55 731.81 711.05 501.05 484.81 461.59 426.33 342.20 338.48 278.86 275.03 272.76 261.30 257.44 239.66 234.16 227.30 204.57 171.58 155.45 147.91 121.99 76.72 72.51 67.55 66.01 59.06 59.06 52.69 47.81 24.60 24.51 19.37 16.75 15.78 15.09 14.23 12.87 11.57 10.73 10.70 8.40 7.19 6.46 1.32

1 2 3 4 5 6 7 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 31 32 33 34 35 36 38 40 41 42 43 44 45 46 47 49 50 51 52

98.11 96.23 94.34 92.45 90.57 88.68 86.79 81.13 79.25 77.36 75.47 73.58 71.70 69.81 67.92 66.04 64.15 62.26 60.38 58.49 56.60 54.72 52.83 50.94 49.06 47.17 41.51 39.62 37.74 35.85 33.96 32.08 28.30 24.53 22.64 20.75 18.87 16.98 15.09 13.21 11.32 7.55 5.66 3.77 1.89

Region

_________________________________________________________________________________________________________

Norway Sweden Denmark Japan Finland Thailand the United Kingdom France Austria USA Israel Ireland Hong Kong Italy Canada New Zealand Taiwan Portugal South Africa Brazil Chile Australia Philippines Czech Republic Argentina South Korea India Belgium Pakistan Spain Indonesia Germany Switzerland Luxembourg Greece China Malaysia Poland Singapore Turkey Mexico Netherlands Russian Federation Hungary Peru

Europe Europe Europe Asia Europe Asia Europe Europe Europe North America the Middle East Europe Asia Europe North America Oceana Asia Europe Africa Latin America Latin America Oceana Asia Europe Latin America Asia Asia Europe the Middle East Europe Asia Europe Europe Europe Europe Asia Asia Europe Asia the Middle East Latin America Europe Europe Europe Latin America

_________________________________________________________________________________________________________





159

Earnings Before Interest and Taxes (EBIT) (Oil and Gas Field Services) Countries in Latin America

Value ($K/employee)

Rank

Percentile

728.89 367.99 357.27 155.45 147.91 116.01 114.27 76.55 67.55 67.27 50.99 12.84 11.35 10.70 10.53 9.94 5.30 1.32 1.20 1.09 1.02 1.01

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

95.45 90.91 86.36 81.82 77.27 72.73 68.18 63.64 59.09 54.55 50.00 45.45 40.91 36.36 31.82 27.27 22.73 18.18 13.64 9.09 4.55 0.00

_________________________________________________________________________________________________________

Falkland Islands Paraguay Colombia Brazil Chile Costa Rica Belize Bolivia Argentina Nicaragua Guyana French Guiana Suriname Mexico Uruguay Venezuela Panama Peru Guatemala El Salvador Ecuador Honduras

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160

Pretax Income Countries

Value ($K/employee)

Rank

Percentile

879.50 717.14 696.80 495.89 479.82 411.39 377.98 338.63 334.95 255.16 236.35 230.13 191.98 176.13 174.68 160.53 145.56 145.44 138.38 131.01 98.25 84.68 67.54 64.17 62.92 61.48 54.35 52.68 48.47 43.94 23.57 22.50 14.46 12.98 11.76 10.65 10.17 10.05 9.53 8.88 8.86 6.70 6.58 6.02 0.32

1 2 3 4 5 6 7 9 10 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 31 32 33 34 35 36 39 40 41 42 43 44 45 46 47 49 50 51 52

98.11 96.23 94.34 92.45 90.57 88.68 86.79 83.02 81.13 77.36 75.47 73.58 71.70 69.81 67.92 66.04 64.15 62.26 60.38 58.49 56.60 54.72 52.83 50.94 49.06 47.17 41.51 39.62 37.74 35.85 33.96 32.08 26.42 24.53 22.64 20.75 18.87 16.98 15.09 13.21 11.32 7.55 5.66 3.77 1.89

Region

_________________________________________________________________________________________________________

Norway Sweden Denmark Japan Finland Thailand the United Kingdom France Austria Hong Kong Italy USA Canada Israel Ireland South Africa Taiwan Brazil Chile Portugal Australia New Zealand Czech Republic Philippines Argentina South Korea India Pakistan Belgium Spain Indonesia Germany China Malaysia Switzerland Poland Luxembourg Greece Singapore Turkey Mexico Russian Federation Netherlands Hungary Peru

Europe Europe Europe Asia Europe Asia Europe Europe Europe Asia Europe North America North America the Middle East Europe Africa Asia Latin America Latin America Europe Oceana Oceana Europe Asia Latin America Asia Asia the Middle East Europe Europe Asia Europe Asia Asia Europe Europe Europe Europe Asia the Middle East Latin America Europe Europe Europe Latin America

_________________________________________________________________________________________________________





161

Pretax Income (Oil and Gas Field Services) Countries in Latin America

Value ($K/employee)

Rank

Percentile

714.28 327.97 318.41 145.44 138.38 108.54 106.91 64.02 62.92 56.26 50.98 10.63 9.39 8.86 8.71 8.23 4.94 0.32 0.29 0.26 0.25 0.24

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

95.45 90.91 86.36 81.82 77.27 72.73 68.18 63.64 59.09 54.55 50.00 45.45 40.91 36.36 31.82 27.27 22.73 18.18 13.64 9.09 4.55 0.00

_________________________________________________________________________________________________________

Falkland Islands Paraguay Colombia Brazil Chile Costa Rica Belize Bolivia Argentina Nicaragua Guyana French Guiana Suriname Mexico Uruguay Venezuela Panama Peru Guatemala El Salvador Ecuador Honduras

_________________________________________________________________________________________________________





162

Income Taxes Countries

Value ($K/employee)

Rank

Percentile

743.52 488.51 472.68 198.30 196.15 187.52 122.75 113.54 106.20 103.18 81.43 77.09 75.44 74.82 69.80 62.35 60.76 56.11 55.05 52.38 39.81 19.06 18.79 14.14 13.03 10.86 10.59 9.47 7.99 4.47 4.19 4.13 3.87 3.44 3.44 2.34 1.84 1.20 1.08 1.05 0.19

1 2 3 4 5 6 7 8 9 10 13 14 15 16 17 18 19 20 21 22 23 24 25 27 28 30 31 32 34 35 36 37 38 39 40 42 43 44 45 46 47

97.92 95.83 93.75 91.67 89.58 87.50 85.42 83.33 81.25 79.17 72.92 70.83 68.75 66.67 64.58 62.50 60.42 58.33 56.25 54.17 52.08 50.00 47.92 43.75 41.67 37.50 35.42 33.33 29.17 27.08 25.00 22.92 20.83 18.75 16.67 12.50 10.42 8.33 6.25 4.17 2.08

Region

_________________________________________________________________________________________________________

Norway Japan Finland France Austria the United Kingdom Thailand Italy Sweden Denmark Canada USA Israel Ireland Hong Kong Taiwan South Africa Portugal Brazil Chile Australia Philippines India Pakistan Indonesia Spain Belgium Germany China Switzerland Malaysia Poland Luxembourg Turkey Mexico Singapore Netherlands Russian Federation Hungary Greece Peru

Europe Asia Europe Europe Europe Europe Asia Europe Europe Europe North America North America the Middle East Europe Asia Asia Africa Europe Latin America Latin America Oceana Asia Asia the Middle East Asia Europe Europe Europe Asia Europe Asia Europe Europe the Middle East Latin America Asia Europe Europe Europe Europe Latin America

_________________________________________________________________________________________________________





163

Income Taxes (Oil and Gas Field Services) Countries in Latin America

Value ($K/employee)

Rank

Percentile

105.77 97.86 95.01 55.05 52.38 41.08 40.47 19.01 16.71 13.68 4.12 3.64 3.44 3.38 3.19 0.88 0.19 0.17 0.16 0.15 0.14

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

95.24 90.48 85.71 80.95 76.19 71.43 66.67 61.90 57.14 52.38 47.62 42.86 38.10 33.33 28.57 23.81 19.05 14.29 9.52 4.76 0.00

_________________________________________________________________________________________________________

Falkland Islands Paraguay Colombia Brazil Chile Costa Rica Belize Bolivia Nicaragua Guyana French Guiana Suriname Mexico Uruguay Venezuela Panama Peru Guatemala El Salvador Ecuador Honduras

_________________________________________________________________________________________________________




164

4 4.1

MACRO-ACCESSIBILITY IN BRAZIL EXECUTIVE SUMMARY

Brazil has the 11th largest economy in the world, and represents about half of the South American population, territory, and economy. With over 170 million people, it is rich in agricultural, mineral and industrial resources and offers a substantial market opportunity for U.S. exporters, particularly in sectors such as computer hardware and software, Internet, telecommunications, aircraft, petroleum equipment and services, franchising, and safety and security equipment. Brazil is also one of the top three locations for U.S. foreign direct investment (FDI). Most industrial economic activity is focused around the southeastern states of Rio de Janeiro, Minas Gerais, and Sao Paulo and includes automobiles, steel, petrochemicals, computers, and aircraft. The Brazilian agricultural sector is well diversified and Brazilians are world leaders in production of sugarcane, coffee, soybeans, and orange juice. Internal migration from the poor northeastern states continues to produce rapid urbanization in the southeast. Crime, drug abuse, health epidemics, and environmental degradation are major problems that are exacerbated by one of the most unequal distributions of wealth in the world. Yet Brazilians remain an optimistic people and are leaders in Latin America in their calls for free trade and transparent governance. Overall relations between Brazil and the United States are strong. Government anti-inflation policies, uncertainties about future economic plans, economic difficulties in neighboring Argentina, and the continued sluggish world economy have put a damper on growth. However, exports are booming because of the weak real, the Brazilian currency. Over one quarter of Brazil’s exports go to the United States, making it Brazil’s largest single trading partner. Despite partial liberalization in recent years, the complexities of the Brazilian business environment still create substantial obstacles for U.S. exporters. Doing business in Brazil requires intimate knowledge of the local environment, including explicit as well as hidden costs of doing business (referred to as the “Custo Brasil”). U.S. companies face high tariff barriers, a difficult customs system, a heavy and unpredictable tax burden, and a legal system that is overloaded and often incapable of enforcing business law or intellectual property rights effectively. Nevertheless, many companies find that the opportunities outweigh the risks. With its team of industry sector experts, the U.S. Commercial Service can assist U.S. exporters gain entry into the Brazilian market through market research reports, match-making services and advocacy programs. The Commercial Service has offices in Brasilia, Sao Paulo, Rio de Janeiro, Belo Horizonte and Porto Alegre. You can also visit the Web site: www.FocusBrazil.org.br or www.export.gov.

4.1.1

Government Role in the Economy

Under the development policies of Brazilian administrations since the 1960s, the government has established itself as the dominant force in shaping economic growth by means of planning and management. Its influence was felt not only directly through the day-to-day activities of government entities, but also through wage, price, and credit policies, and subsidy and fiscal incentive programs. While the central government retains an important economic role, the policies of the Cardoso administration in the mid to late 1990’s significantly reduced the public sector presence in economic activities and focused government efforts on areas such as public health, safety, and education. The Cardoso government emphasized greater economic opportunities for the private sector through privatization, deregulation, and removal of impediments to competition. Despite these recent structural changes, however, the majority of the private sector has so far been unable to prosper.



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The Cardoso government broke up numerous federal monopolies in key areas, although oligopolies have sometimes emerged in their places. In the energy sector, the government began privatizing state entities in 1995 and created the National Electrical Energy Agency (ANEEL) to regulate the sector in 1996. Most electricity distribution has been privatized, but a large share of generation and transmission capacity is still held by the government. In the petroleum and gas sectors, the Cardoso government opened offshore exploration to private companies, although PETROBRAS, a state-owned enterprise, still dominates the sector. In telecommunications, the government ended the state monopoly and established a National Telecommunications Agency (Anatel) to regulate this sector, which has experienced explosive growth immediately following privatization. In the transportation sector, the Cardoso government privatized all seven railway firms and has either privatized or turned over to the states most of the federal highway network. The Lula administration has indicated it would continue this effort.

4.1.2

Infrastructure

Most products reach Brazil by sea and must pass through Brazil’s inefficiently run and notoriously costly seaports. Offloading costs are high and ship turnaround time is long. Bureaucracy and paperwork can be serious impediments at the ports. Port reform legislation, enacted in 1993, has not yet significantly improved port conditions. The Cardoso government had promised to privatize the port system, although the position of the Lula government towards privatizing the ports remains unclear. The Rio and Espírito Santo ports in the state of Rio are partially privatized. Costs are lower and turnaround time is shorter there. With the exception of the southeast coast, Brazil lacks an extensive rail network. The entire rail system has been privatized. Almost all internal transportation is by truck on a grossly inadequate, poorly maintained highway system. The highway network only reaches first-world standards in the state of São Paulo. Fuel costs are high and add significantly to the cost of transportation. Except for the Amazon Basin, geographic constraints and environmental concerns have limited river transport development.

4.2 4.2.1

POLITICAL RISKS Economic Relationship with the United States

The United States and Brazil have traditionally enjoyed friendly and active relations encompassing a broad political and economic agenda. By most measures -- geographic size, population, and gross economic product, each approaching 50 per cent of South America -- Brazil is the continent’s dominant country. It has played an important role in international collective security efforts -- from sending an expeditionary force to the Allied campaign in Italy during World War II to dispatching a battalion to Angola as UN Peacekeepers from 1995-1997 and coordinating the Military Observer Mission on the Peru-Ecuador border (MOMEP). Brazil led the successful effort to invoke the Rio Treaty of mutual security following the events of September 11, 2001. It has also led political efforts for economic integration in the Southern Cone.

4.2.2

The Political System

It is worth noting here Brazil’s current political structure. Brazil is a federal republic with 26 states and a Federal District. The federal government is comprised of the executive, legislative, and judicial branches. The system is governed by the 1988 Constitution, which grants broad powers to the federal government. The President may be elected to two four-year terms and appoints his own cabinet which does not require Congressional confirmation. The Congress consists of two houses, the Senate and the Chamber of Deputies. There are 81 Senators, three for each state and the Federal District, and 513 Deputies. Senate terms are for eight years (with elections staggered so that twowww.icongrouponline.com


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166

thirds of the upper house is up for election at one time and one-third four years later). Chamber terms are for four years, and Deputies are elected statewide. State representation in the Chamber is only loosely proportional. Each state is eligible for a minimum of 8 seats; the largest state delegation (Sao Paulo’s) is capped at 70 seats. The net result is a system heavily weighted in favor of the less populated states. In addition to geographic imbalance, Congress is characterized by a large number of political parties. Federal deputies and senators do not always vote with their parties, a consequence of weak internal party discipline, and party switching is commonplace. States are organized like the federal government, with three branches of government. Because of mandatory revenue allocation to states and municipalities provided for in the 1988 Constitution, Brazilian governors and mayors have exercised considerable power since 1989.

Orientation of Major Political Parties The following are Brazil’s major political parties: •

PT - Partido dos Trabalhadores (left)

•

PFL - Partido da Frente Liberal (center-right)

•

PMDB - Partido do Movimento Democratico Brasileiro (center)

•

PSDB - Partido da Social Democracia Brasileira (center-left)

•

PTB - Partido Trabalhista Brasileiro (center-right)

•

PPB - Partido Progressista Brasileiro (center-right)

•

PL - Partido Liberal (center-right)

•

PSB - Partido Socialista Brasileiro (left)

•

PPS - Partido Popular Socialista (left)

•

PDT - Partido Democrático Trabalhista (left)

•

PCdoB - Partido Comunista do Brasil (left)

4.3 4.3.1

MARKETING STRATEGIES Distribution Channel Options

All of the customary import channels exist in Brazil: Agents, distributors, import houses, trading companies, subsidiaries and branches of foreign firms, among others. Brazilian importers generally do not maintain inventory of capital equipment, spare parts, or raw materials. This is partly due to high importation and storage costs. Recently, due to the creation of additional bonded warehouses, industries that rely heavily on imported components and parts are maintaining larger inventories there.

4.3.2

Agents and Distributors

Although some companies import directly from foreign manufacturers without local representation, in most cases the presence of a local agent or distributor can be very helpful. As in other countries, the selection of an agent requires www.icongrouponline.com


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careful consideration. In general, larger companies will have sales offices throughout Brazil, which is key for U.S. companies seeking countrywide presence. Smaller agents may have geographical limitations. Lawyers recommend that the exporter and representative have a written agreement. The advantages of a written agreement are that the exporter can limit his liability in case of any product defects, can define the type of warranty, protect his trademark and better ensure payments. It is up to the foreign company and the local agent or distributor to negotiate the type of representation, whether it is an exclusive representation and whether performance targets are included. Contract clauses are freely negotiated between the foreign and local firms. However, we strongly suggest that U.S. companies consult with a Brazilian law firm before signing any type of agreement with local firms to avoid legal problems in the future. Under Brazilian law, an agency agreement entitles an agent to receive a termination amount equivalent to at least 1/12 of all commissions received throughout the contract.

4.3.3

Franchising

Franchising is one of the healthiest segments in the Brazilian economy and accounts for approximately 25% of gross revenue in the retail sector. Local Brazilian Franchises dominate the market (90%), however, foreign groups, particularly from the U.S., are making their way into the market too. The apparent success of local franchise operations is primarily attributed to the speed of service and quality of products offered by these firms. To take best advantage of this huge market, U.S. franchisers must be prepared to adapt their product or service to the Brazilian market, invest in market research and test market receptivity thorough pilot projects. In Brazil franchise consultants call this process “the tropicalization of the franchise.” The Franchising Law requires close attention. It states that franchisors - or their master-franchisees - should provide all their potential franchisees with a Franchise Offering Circular (Circular de Oferta de Franquia). This document must contain basic information regarding the economic and financial health of the franchisor, as well as information on any pending legal disputes.

4.3.4

Direct Marketing Options

Brazil is a large country, with a vast untapped interior, which is perfect for direct marketing. E-commerce is on the increase and provides many additional marketing and business opportunities. Because of its excellent postal service, direct marketing is a proven way to reach 35 million middle-class Brazilian consumers. On average, Brazilians only receive 10 percent as much direct mail as U.S. citizens each year. Although the Brazilian market differs from that of the United States in regards to telemarketing, postal rates, regulations, fulfillment, printing and mailing services, U.S. exporters do well in South America. U.S. leading catalog, E-commerce and teleservice firms have had a significant presence and have successfully marketed their products and services in Brazil (e.g.: Amazon.com is the largest online bookseller in Brazil). Brazil is the ninth largest Internet market in the world, and the first in Latin America with the most advanced Internet and e-commerce industries. The Internet is having a profound effect on Brazil, and Brazilians have rapidly become the Latin American leaders in technological innovation and Internet applications. In Brazil, business perspectives for the digital “e-conomy” are optimistic. Brazil has the most advanced Internet and e-commerce industries in Latin America. Today, approximately 20 million Brazilians are on-line on a regular basis



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and there are 35 million credit cards in circulation. Growth has been steady. Thus, Brazil is an important trading partner for U.S. companies, particularly for U.S. IT firms. The Brazilian Direct Marketing Association (ABEMD) has over 1,000 members and reported that catalogers, financial service companies, publishers, telemarketers, E-commerce companies, and service suppliers to the direct marketing industry constantly look to Brazil as a growing market. Nevertheless, U.S. companies must track the latest information about direct mail, Internet marketing, telemarketing, mailing lists, databases, media, DRTV, shipping, tariffs, taxes, credit cards, financial services, and other subjects vital to direct marketing. U.S. exporters may sell directly to Brazilian consumers or distributors. However, different Brazilian customs rules apply to these types of transactions. As far as shipments to distributors or Brazilian trading companies, U.S. exporters can only sell to Brazilian companies that are registered with the Secretariat of Foreign Trade (SECEX) of the Ministry of Development, Industry and Commerce (MDIC). SECEX plays a central role in the implementation of directives on trade issues in general. With respect to sales to end users or consumers, U.S. exporters may ship the goods directly to them. In such cases the following regulations must be noted: •

Shipments under US$50 enter Brazil duty free;

•

Shipments over US$50 up to US$500 are subject to a flat 60 percent import tariff rate (except for pharmaceutical drugs and books which enter duty free regardless of the value of the shipment);

•

Merchandise imported under this mechanism cannot be resold locally; and

•

All Shipments valued above US$500 must be imported by Brazilian companies that are registered with SECEX. Also, in these cases, the product specific import tariff rate will apply rather than the flat 60 percent rate applied to shipments valued under US$500, as described above.

4.3.5

Joint Ventures and Licensing Options

Establishment of joint ventures is a common practice in Brazil. A major motivation for joint ventures is to pair foreign firms with Brazilian partners to compete in segments of the government procurement market or in other markets subject to government regulation, such as telecommunications and energy. Usually, joint ventures are established through two main legal formats -- “sociedades anônimas” or “limitadas,” which are legally similar to corporations and limited partnerships companies in the U.S. Licensing agreements are common forms of accessing the Brazilian market. Use of a competent local attorney in structuring such an arrangement is advised. All licensing and technical assistance agreements, including trademark licenses, must be registered with the Brazilian Industrial Property Institute (INPI). BRAZILIAN INDUSTRIAL PROPERTY INSTITUTE - INPI Praça Mauá nº 7 - Centro 20081-240 - Rio de Janeiro - RJ – Brazil Phone: 55/21) 2206-3000 Fax: 55/21 2263-2539 E-mail: [email protected]



Macro-Accessibility

4.3.6

169

Creating a Sales Office

Either setting up a company in Brazil or acquiring an existing entity is an option for investing in Brazil. Setting up new companies is relatively complex, although the Ministry of Development has signaled its desire to simplify this process. Acquisitions of existing companies are monitored by the Central Bank. Corporations (sociedades anonimas) and limited liability companies (limitadas) are relatively easy to form. Local law requires that foreign capital be registered with the Central Bank. Failure to do so may cause serious problems related to access to foreign exchange, capital repatriation, and profit remittance. For further information please contact the Secretariat of Foreign Trade - SECEX or the Brazilian Consulate in New York City. See Brazil’s Ministry of External Relations’ homepage at http://www.mre.gov.br for more information.

4.3.7

Selling Factors and Techniques

Sales are typically price-driven, but quality is also an important factor. Generally, U.S. goods are perceived as high quality products, but the opening of the market in the early nineties upgraded considerably the quality of locally produced products. To be competitive in the market, U.S. companies must offer high quality products at competitive prices. Other important aspects include financing, delivery, after sales support and customer service. To be successful in Brazil, U.S. companies should also take into consideration the local culture and technical requirements, and adapt their products accordingly. In many cases, products manufactured at U.S. standards are not acceptable in Brazil. Due to Brazil’s vast territory and cultural differences, one must often develop different approaches for different parts of the country.

4.3.8

Advertising and Trade Promotion

Advertising in specialized trade and technical publications is an important marketing tool in the Brazilian market. With its well-established and diversified industrial sector, Brazil has a variety of specialized publications that serve the industrial and business communities. U.S. companies willing to sell in the Brazilian market should not ignore advertising in these trade publications. TV advertising in Brazil is also highly developed and plays an important role in the promotion of consumer goods and food products. Brazil is home to many sophisticated advertising agencies, with first-world standards and a high level of creativity. According to Zenith Media and The Economist, Brazil’s total ad spending two years ago was US$ 6.9 billion and the sector has been growing steadily since then. Some of the top networks in Latin America are: •

McCann-Erickson

•

J. Walter Thompson Co.

•

Ogilvy & Mather

•

Euro RSCG

•

Leo Burnett

•

Y&R Advertising

•

D’Arcy Masius Benton & Bowles

•

Foote



Macro-Accessibility •

Cone & Belding

•

DDB Worldwide Communications

•

Grey Worldwide

•

Lowe & Partners

•

Publicis Worldwide

•

Fischer America Comunicação

•

Duailibi Petit Zaragoza Propaganda (DPZ)

•

Grupo Interamericano de Comunicação

•

Saatchi & Saatchi

•

Talent Comunicação

•

Bates Worldwide

•

TBWA.

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The Latin American ranking presents both foreign-owned agency networks and indigenous Brazilian agencies with multiple offices throughout Brazil. Brazil accounts for approximately 42% of publicity gross income in the region. Top advertisers vary from year to year, but can be listed as: Volkswagen, Unilever, Fiat, Ford Motor Co., and Lopes Consultoria de Imoveis (real estate company) among others. The top ad categories per investment ($) are: •

Trade & commerce

•

Consumer services

•

Culture

•

Leisure

•

Sports & tourism

•

Media

•

Public & social services

The top ad-funded Web sites in Brazil include: •

Universo OnLine (www.uol.com.br) with 650,000 subscribers

•

Terra/ZAZ (www.terra.com.br) with 450,000 subscribers

The biggest and most popular magazine in Brazil with a circulation of 1.12 million copies is a weekly publication called Veja, published by the Abril Publishing Company (www.uol.com.br/veja) and the biggest daily circulation newspaper is Folha de São Paulo, published by the Folha Group, with a circulation of 592,934 on Sundays, 449,888 on Mondays and 451,534 from Tuesday through Saturday (www.uol.com.br/fsp). Participation in Brazilian trade fairs is another important marketing tool. The city of São Paulo hosts around 300 trade fairs per year. These events attract a large number of visitors and exhibitors from Brazil and foreign countries. www.icongrouponline.com


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The U.S. Department of Commerce assists U.S. companies seeking to do outreach at several of them (www.focusbrazil.org.br). Sources: Adage Global (www.adageglobal.com), Interactive Media Association, Institute of Circulation Verification (IVC), Monitor/IBOPE, Zenith Media, The Economist, Meio & Mensagem (MMOnline).

4.3.9

Pricing Issues

Due to high local interest rates, often the price of products sold in the domestic market reflects financing costs. Therefore, price negotiations are intimately related to the supplier’s payment terms. It is not unusual for a company to select a supplier whose prices are higher than the competition based solely on payment terms. The tax burden in Brazil on both imported and locally manufactured products is the heaviest in Latin America and higher than in the United States. To be competitive in the market, several companies are reducing profit margins and implementing efficient logistics systems to reduce costs. In the case of foreign suppliers, it is important to calculate the import-related costs. In Brazil such costs are generally high. In some cases they are so high that a simple calculation may indicate that there is de facto no way the product can effectively compete with a locally made similar product.

4.3.10

After Sales Service and Customer Support

The “Consumer Protection Law” of 1992 requires customer support and after-sales servicing. In the case of imported products, the importer or the distributor is responsible for such services. Therefore, it is important that U.S. manufacturers appoint agents or distributors in Brazil that are qualified to provide such services.

4.3.11

Selling to the Government

The Brazilian Government procurement policies apply to purchases by government entities and by parastatal companies. Government procurement regulations contained in Law 8666 of August 1993 establish an open competitive process for major government procurement. Under 8666, price is to be the determining factor in selecting suppliers, i.e., the bid with the lowest price becomes the provisional winner. Law 8666 establishes general norms regarding tenders and administrative contracts (for goods and services) to be followed at the Federal, State, and Municipal levels, by entities directly and indirectly administered by the Federal Government, special funds, public enterprises, and companies of joint public and private ownership that are controlled by the Brazilian Government. Following enactment of Constitutional Amendment No. 6, of 15 August 1995, which suppressed the difference between nationally owned and foreign-owned companies, there is no distinction between Brazilian and foreign enterprises in the government procurement process. Nevertheless, in the case of a tie in the tendering process, preference is given to goods produced or services supplied by Brazilian firms of national capital; domestically produced in Brazil; or produced by a Brazilian company. Most government procurement processes are open to international competition, either through direct bidding, consortia or imports. However many of the larger bids (e.g. military purchases) become very political and are done through “sole sourcing” or “national security” arrangements that exclude competition. This kind of purchasing does often require an act of Congress, which can be difficult and time consuming. Brazil is not a signatory of the WTO multilateral Agreement on Government Procurement (GPA), and as such does not necessarily use the same procedures as developed country signatories. International bidding is required for all procurements with international



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development bank funding, i.e. the Inter-American Development Bank, the World Bank, etc. The Brazilian executing agencies of IDB loans require international bidding above specific ceilings, according to IDB procurement guidelines. For example, consultant contracts require international bidding above US$200,000 and civil works above US$5 million. However, portions of major projects financed by IDB may not require bidding where local Brazilian counterpart funding is involved. Government procurement of telecommunications equipment and data processing (informatics) equipment is exempted from the above requirements. Special requirements were established in 1993 and 1994 allowing locally manufactured telecommunications and informatics products to receive preferential treatment in government procurement, and to be eligible for tax and other fiscal benefits based on meeting local content and other requirements. In practice, it is difficult for foreign companies to operate in the public sector in Brazil unless they are associated with a local firm. To be considered Brazilian, a firm must have majority Brazilian capital participation and decisionmaking authority (“operational control”). A Brazilian State enterprise is permitted to subcontract services to a foreign firm if domestic expertise is not available for the specific task. A foreign firm may only bid for government contracts to provide technical services when no qualified Brazilian firms exist. In the case of international bids to supply goods and services or specific government projects, successful bidders are required to have local representation -- i.e., “legal presence” in Brazil. Since the open period for bidding is often as short as one month, it is advisable to have a partner resident in Brazil able to act on tenders as soon as they are announced. An U.S. supplier may find that inclusion of local purchases of Brazilian goods and services within its bid, or significant subcontract association with a Brazilian firm, will improve the chances for success. Similarly, a financing proposal that includes credit for the purchase of local goods and services for the project will be more attractive. Advance descriptions of U.S. suppliers’ capabilities can often be influential in gaining a bid contract. These early proposals can be effective even before the exact terms of an investment plan are defined or the project’s specifications are completed. Such a proposal should include financing, engineering, and equipment presentations. Due to the advance of Internet technology and its successes with e-government trials, the Brazilian Government is changing Law 8666 to modify electronic procurement. The goal is to create a more efficient system using electronic purchase contracts and to allow small companies to have a better chance at competing with medium and large size companies.

4.3.12

Intellectual Property Risks

Brazil is a signatory to the Paris, Bern, and Universal Copyright conventions on intellectual property rights (IPR) protection, the WTO Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS), and the Patent Cooperation Treaty (PCT). Brazil is also a member of the World Intellectual Property Organization (WIPO). The Brazilian Institute of Industrial Property (INPI – www.inpi.gov.br) is the government entity in charge of industrial property rights, and the formal examination of applications for trademark and advertising slogan registration, and the issuance of letters of patent.

Industrial Property The Industrial Property Law (May 15, 1997, Law No. 9279) features the granting of patents to medicines, chemical, pharmaceutical and food products; besides patents of invention, utility models, industrial designs and models, trade



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and service marks, and advertising slogans. An additional feature is the recognition given to well-known (“famous”) brands.

Patents For an invention to be protected, it must be patented in Brazil. Brazil is a member of the Paris Convention and thus U.S. patent holders have an exclusive right to apply for patents during certain periods: 6 months for industrial designs, and 12 months for inventions and utility models (a new arrangement of known materials which improve a product). A patent holder must use the patent commercially or the patent lapses. Food, medical, chemicalpharmaceutical products or preparations, and microorganisms are patentable. Foreign patent holders have expressed concern about INPI’s slow processing of patent applications. As provided for in article 8 of the Industrial Property Law, the requirements essential for the granting of a patent in Brazil are: absolute novelty, industrial nature, and inventive nature. A patent is considered to be new when its subject is not included in the prior art concept. Prior art constitutes everything that has become accessible to the public through a written or oral description or by use or any other means, including the contents of patents in Brazil and abroad before filing a patent application, with the exception of cases where priority was previously applied for or a priority claim was made pursuant to the Paris Convention. Letters patent may be issued for the protection of inventions, utility models, and registration of industrial designs. The protection granted by a patent extends for 20 years, in the case of inventions; for 15 years for patents on utility models; and for 10 years for industrial design patents, always as from the date the request for protection is filed at INPI. Proceedings for the issuance of a letter patent are lengthy and time-consuming. An application must be submitted to INPI, containing the inventor’s claims, a full description of the invention and its drawing (when applicable), and proof of compliance with all legal requirements. Once the application has been presented, a preliminary formal examination takes place, and a certificate of filing is issued. The application will be kept secret for 18 months, and will then be officially published. The inventor has 36 months to request a formal examination of the application. Failure to request this formal examination will cause the application to be considered withdrawn. Granting of any patent application can be cancelled at any time by the courts. Commercial use of the patent must be initiated within three years of the date of issue of the letter patent, under penalty of obligatory licensing or lapse. Extinguishment of a patent may also occur if its use is interrupted for a period of two or more consecutive years; if the inventor fails to pay the required annuities to INPI; if the inventor expressly waives the privilege; or if it is administratively cancelled or judicially annulled. The Industrial Property Law provides for conducts that constitute patent infringement, which is subject to penalties varying from three (3) months to one (1) year of imprisonment or a fine. This law determines that the manufacture of a product or use of any means or processes covered by a patent, without authorization of the respective patent owner, will constitute a patent infringement.

Trademarks Application for a trademark may be either as a foreign or a Brazilian trademark. A foreign trademark is registered under the terms of the Paris Convention and thus establishes an exclusive priority. Registering your trademark secures protection and enables the trademark to be licensed or transferred in return for a royalty payment. A registration is valid for ten years and is renewable for successive ten-year periods. The system for protection of trademarks in Brazil is based on ownership, and all rights stem from the registration of the trademark in Brazil. No protection whatsoever is accorded an unregistered owner even though it may have been using a trademark for years.



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However, if the foreign owner of an unregistered trademark is able to prove its trademark is well-known worldwide, it is possible to claim the international protection granted by article 6 bis of the Paris Convention, which establishes that the signatory countries must deny applications for registration or cancel registrations of a trademark that reproduces a well-known trademark registered in another signatory country. However, in order to qualify for the benefit of article 6 bis of the Paris Convention, the owner must apply for registration of its trademark in Brazil. Registration of a trademark in Brazil may be applied for either by a Brazilian or foreign company. If a trademark registration is applied for in Brazil by a foreign company without the priority claim established in the Paris Convention, it will be considered a Brazilian trademark, and therefore the benefit of such Convention will not be granted. Brazilian law requires that the field of business of the trademark owner in Brazil be related to the goods or services covered by such trademark. To apply for registration of a trademark in Brazil, certification that the applicant is a company duly organized in accordance with the laws of its country to operate within its field of business is required. The use of a trademark is essential to its protection in Brazil. A trademark will lapse if it is not used for five years from the date of registration, or if its use is interrupted for more than five consecutive years. Use can be proved by the owner of the trademark in Brazil or by the licensee that actually uses it.

Technology Transfer Agreements and Trademark or Patent License Agreements Companies established in Brazil are now virtually free to negotiate technology transfer contracts. However, contracts still have to be registered with INPI. Franchising agreements are not subject to the same statutory rules as trademarks, patents and transfer of technology. However, these contracts are subject to review and approval by INPI. It is not mandatory to register a franchising agreement to be valid, but to be executable against third parties it must be registered in accordance with Norm 115/93. If the franchiser is a foreign party, it has to register with the Central Bank in order to remit payments. Technology transfer agreements in Brazil are subject to filing at INPI. After approval of the Industrial Property Law, several requirements for approval of agreements of this kind were eliminated, simplifying the procedures for approval. Among other changes, the list of mandatory clauses that the agreements should contain was eliminated. Currently, INPI review of agreements that involve licensing of industrial property rights (trademarks and/or patents), transfer of technology, technical assistance services and similar agreements will be limited to examination of the aspects intrinsic to the documents submitted thereto, the tax and exchange legislation, and any characterization of antitrust or unfair competition practices. INPI approval of such agreements is not only essential for the registration at the Central Bank of Brazil that will allow remittance of the remuneration abroad, but a lso for the deduction of fees paid by the licensee or recipient of the technology as operating expenses. Furthermore, INPI approval of patent license agreements is necessary, together with actual use by the licensee, to evidence commercial use of the licensed patent and to avoid forfeiture, as well as to enforce them upon third parties. Other valid documents evidencing the transfer of technology and conditions governing such transfers (invoices, for instance) may also be submitted to INPI for approval, thus permitting remittance of funds abroad and tax deduction of payments resulting from the transfer. Generally, technology transfer agreements must clearly state their object and the industrial property rights involved, and describe in detail how the transfer will actually take place.



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The license agreements must state the conditions for actual use of patents regularly applied for or granted in Brazil; the registered trademark in Brazil or application for registration; the acquisition of know-how and technology not protected by industrial property rights; and the obtainment of techniques, planning and programming methods, research, studies and projects intended for execution or rendering of specialized services. Trademark and patent license agreements must also state whether the license is exclusive and remunerated, and whether sublicensing is permitted. The term of the agreement must not exceed the validity of the trademark registration or patent. Trademark and patent license agreements will only entitle the owners to collect fees if the requirements mentioned above are met. Contracts for rendering of technical and scientific assistance services must state the time required to perform the specialized services, the number of technicians required, their specialization and training programs, and respective remuneration. Remuneration of the technology to be transferred may be established at a fixed price, a fixed price per item sold, a percentage of the profits, or a percentage of the net sales price, less taxes, fees and other charges agreed to by the parties.

Informatics In October 1984, Congress approved Law 7232 (the Informatics Law), establishing the principles, objectives and guidelines for the Brazilian Informatics Policy, and empowering the federal government to establish restrictions on the manufacture, operation, marketing, and import of computer goods and services; this was the start of the practice known as market reserve. Although the Informatics Law did not expressly establish the market reserve, the federal government used to monitor imports of computer goods and services, as well as examine and decide on plans for development and production of such goods. Companies not considered domestic (or national) pursuant to article 12 of the Informatics Law could only manufacture computer goods and qualify for the benefits granted by the law if their plans were approved by the Brazilian Informatics and Automation Council (CONIN). Under article 12 of the Informatics Law, a domestic company was defined as one incorporated according to the laws of Brazil, and headquartered in this country. Additionally, to qualify as a domestic company, its decision-making as well as technological and capital control had to be exclusively in the hands of individuals resident and domiciled in Brazil. At least 70% of the total corporate capital should be held by Brazilians, and no voting rights should be granted to any alien. On October 24, 1991, Law No. 8248 was enacted, introducing several modifications in the regulation of the computer science field in Brazil, and amending the Informatics Law. The first important modification introduced concerns about the definition of a domestic company for the purposes of manufacturing and marketing of computer goods in Brazil. The new law defines a Brazilian company with domestic capital as a legal entity incorporated and headquartered in Brazil, in fact controlled--directly or indirectly--by individuals domiciled and resident in Brazil, or by a state-owned company. Law 8248/91 clearly states that as from October 29, 1992 no special monitoring of imports or approvals of manufacturing plans would be in force. This should mean the end of market reserve, although some incentives were left in effect until 1997 as a sop to domestic companies.



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On the other hand, Law 8248/91 also provides for certain benefits applicable to any company producing computer products, such as: •

Exemption from the Tax on Manufactured Products (IPI) until October 29, 1999 with regard to products manufactured following certain criteria;

•

Deduction of al research and development expenditures up to the limit of 50% of the income tax owed by the company; and

•

Deduction of up to 1% of the income tax owed by legal entities investing in domestic informatics companies.

Copyrights Copyrights are protected regardless of whether or not they are registered. Criminal and civil proceedings may be brought against infringers. The registration of software prior to marketing is no longer required. However, registration is recommended. Brazil’s new software law meets the TRIPS accord framework. It addresses protection of software programs, and modifies definitions of reproduction, publication, transmission, and distribution. This provides protection especially against large distributors of pirated software including producers of hardware and CDs. Nevertheless, concern remains about the lack of effective copyright enforcement against pirated videocassettes, sound recordings, books and computer software entering the market. The Brazilian Law protects copyrights, trademarks and intellectual property under the terms of the Paris Convention. The copyright piracy is punished with payment of damages and loss of profits, besides a Court order to stop the piracy and search and seizure of the forgery goods (if required in Court). Copyrights in Brazil are regulated by Law No. 9610 of February 19, 1999, pursuant to which all creative works of inspiration howsoever expressed are protected as intellectual property. The author of the work or, in the absence of proof to the contrary, the person claiming to be the author or whose name is included in the registered work, is treated by Brazilian law as owner of the copyright. In addition, any person who adapts, translates, arranges or edits a work that is no longer under copyright may claim the copyright to the work, but he/she cannot prevent the publication of another adaptation, translation, arrangement or edition of the same work unless the new version is derived from his/her own. Not only individuals, but also corporations are allowed to own the copyright to a work. However, a corporation must hold such rights always at the author s approval. Registration of a work in Brazil is optional, and not essential for its protection. Nevertheless, to secure the copyright the author may register his/her work with the following bodies, depending on its nature: •

At the Brazilian National Library

•

At the School of Music of the Federal University of Rio de Janeiro

•

At the School of Fine Arts of the Federal University of Rio de Janeiro

•

At the Brazilian Film Institute

•

At the Federal Council of Engineering, Architecture & Agronomy

Any other work that cannot be classified within any of the above categories may be registered at the Brazilian Copyright Information Center of the National Copyright Council. Proceedings in the civil and criminal courts may be brought against anyone who infringes another’s copyright. The civil courts prohibit publication of a work which infringes copyright, and can also award damages to the owner of the copyright. Infringement of copyright can also be punished as an offense by the criminal courts. www.icongrouponline.com


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Software Protection of software in Brazil is regulated by Law No. 9609 of February 19, 1999, which provides mainly for: (a) protection of the software itself as intellectual property; (b) the rules for marketing software, creating mechanisms for government agencies to monitor this marketing with a view to protecting Brazilian software; and (c) penalties of a criminal nature, for cases of infringement of software copyrights and certain rules for marketing. Software is protected for 50 years as from January 1st of the year following its publication, or if not published, following its creation in each country. As with copyrights, software owners that reside outside Brazil are ensured protection, provided that their country of origin offers reciprocal treatment, granting both Brazilian and aliens resident in Brazil protection equivalent in extent and time. The protection of software does not depend on registration, and the author need not register it. Registration can be made at the Brazilian Institute of Industrial Property (INPI). Infringement of software copyright is a criminal offense, which subjects the offender to detention from six months to two years, plus a fine. Unless the parties agree otherwise, the rights to any software developed during the life of any agreement or statutory relationship, research or development, in which such activity is carried out by the employee, civil servant or individual hired to render services as expressly provided for in the respective agreements, or which results from the nature of the work for which he/she was hired, will belong to the employer or service principal. However, if the software is developed independently of any agreement or statutory relationship, and without the use of any resources, know-how, materials, facilities or equipment belonging to the employer or service principal, the rights to such software will belong to the employee, civil servant or individual rendering the services. According to the Software Law, the following situations will not violate software copyright: •

Reproduction of a copy that has been legally acquired, provided it is essential to the proper use of the program

•

Partial quotation for educational purposes, provided the author and the software quoted are mentioned

•

Similarity of two copies, provided this similarity stems from functional features in their application, from compliance with legal, regulatory precepts or technical standards, or a limitation of alternative forms for their expression

•

Integration of software and its basic features into an application or operating system that is technically indispensable to the user’s needs, provided it is used exclusively by whoever undertook this integration.

Source: 2000 Pinheiro Neto Advogados

4.3.13

Hiring Local Counsel

Local assistance can be very useful when entering, consolidating or expanding in the Brazilian market. Understanding the legal aspects of the Brazilian market is extremely important. To operate in accordance with Brazilian laws, it may be essential to hire a local lawyer, qualified to act on behalf of the foreign company. Without the appropriate legal assistance, investors might be subject to several liabilities, which range from a denial of an appropriate authorization to operate in the Brazilian market to facing obstacles with a Brazilian partner, causing eventual losses to the foreign company.



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Local lawyers can assist with minimizing your company’s tax burden by taking advantage of tax incentives provided by local, state or federal levels. Lawyers can also explain aspects related to real estate, labor, intellectual property, and antitrust laws, all of which can be complicated in Brazil. Local legal council may also provide expertise in negotiating with local players.

4.3.14

Performing Due Diligence and Checking Bona Fides

Because laws regulating commercial agreements and commercial transactions vary from country to country, the U.S. Commercial Service strongly encourages all U.S. companies to conduct legal and financial due diligence before completing a commercial transaction or formalizing any agreement outside the United States. In Brazil, the Commercial Service can provide U.S. companies with lists of well-known and respected credit rating companies and law firms to assist U.S. firms to conduct credit checks on potential customers or to obtain important legal advice before signing commercial agreements. Detailed due diligence on a target company based on all documentation provided by the Brazilian company and field investigation by a law firm is crucial when trying to avoid any negative surprises in the future. In the event that the relationship with the Brazilian company is strictly commercial, the U.S. Company may not have access to the private and confidential documentation and information, relying only the public investigations regarding the legal and financial situation of the Brazilian company. It is advisable to check corporate compliance with Brazilian corporate tax laws. The Federal Taxpayer Registry Number of the company can help obtain information that attests to the firm’s compliance with tax requirements and other public and third party interests.

4.4

IMPORT AND EXPORT REGULATION RISKS

Since 1990, Brazil has made substantial progress in reducing traditional border trade barriers (tariffs, import licensing, etc.), even though tariff rates in many areas are still high. Tariffs, in general, are the primary instrument in Brazil for regulating imports. All tariffs are ad valorem, with rates between 0-35%, levied on the c.i.f. value of the import, with the exception of some telecommunication goods. Brazil also maintains a higher average tariff on processed items than on semi-processed goods and raw materials. The United States continues to encourage tariff reductions on products of interest to U.S. firms. Brazil and its Southern Common Market (Mercosul) partners, Argentina, Paraguay and Uruguay, implemented the Mercosul Common External Tariff (CET) on January 1, 1995. In November 1997, after consulting with its Mercosul partners, Brazil implemented an across-the-board three-percentage point increase on all tariffs (inside and outside the CET), raising the ceiling from 20 to 23%. The surcharge is being gradually phased out (over a longer period than initially anticipated). Other Mercosul members have also unilaterally adjusted their tariffs in response to economic crises, and given these developments, the CET is currently full of exceptions. In January 1997, the Secretariat of Foreign Trade (SECEX) implemented a computerized trade documentation system (SISCOMEX) to handle import licensing, and a wide variety of products were subject to non-automatic licensing. There are fees assessed per import statement submitted through SISCOMEX, and importers must comply with onerous registration guidelines, including a minimum capital requirement, to register with SECEX (the Foreign Trade Secretariat). Complete information on requirements for importing into Brazil is available only through SISCOMEX, which is only available to registered importers. Beginning in October 1998, Brazil issued a series of administrative measures that required additional sanitary/phytosanitary (SPS), quality and safety approvals from various government entities for products subject to non-automatic licenses.



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To fight increasing under-invoicing, Brazil issued a series of measures that required additional approvals for products subject to non-automatic licensing, and broadened the list of such products. While the Government is now in the process of phasing these out and moving most products to the automatic license category, these requirements still present a barrier. Under Brazil’s new Customs Valuation regulations, Customs will focus its efforts on underinvoicing, and are authorized to hold up imports until the goods are valued. A primary concern has been the use of minimum reference prices both as a requirement to obtain import licenses and/or as a base requirement for import. It appears that the Government of Brazil has required some products to meet minimum prices for the issuance of import licenses and/or in order to receive normal customs processing. This would raise questions about whether Brazil’s regime is consistent with its obligations under the WTO. In November 1999, the United States actively participated as an interested third party in European WTO consultations on the issue, and in July 2000 the United States held its own WTO consultations with Brazil. The Brazilian Government reportedly has modified its customs regime somewhat, but it has not codified these changes in a public document. Senior Brazilian officials have stated to Embassy officers since late 1999 that such requirements currently do not exist. In addition, product registrations from the Ministry of Health are required for imported processed food products and food supplement products effective March 1, 2000, with a reduced term of validity for registrations. Registration fees for these imports, as well as for medical and pharmaceutical products, also increased significantly over the course of 1999. The U.S. Government also has received complaints relating to Brazil’s “law of similars,” including that it leads to non-transparent preferences for Brazilian products in procurement bids for government and non-profit hospitals and prejudices against the import of refurbished medical equipment when domestically-produced “similars” exist. Implementation of such import measures continues to be poorly coordinated and not well publicized, magnifying the negative impact on U.S. exports. The United States signed a trade and investment framework agreement with Mercosul in 1991. The United States will continue to encourage the reduction of barriers to trade and investment, including tariffs and the creation of a customs union that is open and consistent with the WTO, specifically GATT Article XXIV.

4.4.1

Taxes and Fees Assessed on Imports

Imports are subject to a number of taxes and fees in Brazil, which are usually paid during the customs clearance process. There are three main taxes that account for the bulk of importing costs: •

Import Duty itself (known in Brazil as the “II”)

•

Industrialized Product tax (known in Brazil as the “IPI”)

•

Merchandise and Service Circulation tax (known in Brazil as the “ICMS”).

Please note that most taxes are calculated on a cumulative basis. In addition to these three taxes, several other taxes and fees apply to imports; such costs are discussed below.

Import Duty Import duty is a federally mandated product specific tax. After the creation of the MERCOSUR customs union, the four member countries -- i.e., Argentina, Brazil, Paraguay and Uruguay -- adopted a single import tariff structure known as the “common external tariff” (known in Brazil as the “TEC”). While after the adoption of the TEC, Brazilian import tariff rates were reduced, they are still high in comparison to U.S. import tariff rates. In most cases, Brazilian import duty rates range from 10 - 20 %.



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Industrialized Product Tax (IPI) The IPI is a federal tax levied on most domestic and imported manufactured products. It is assessed at the point of sale by the manufacturer or processor in the case of domestically produced goods, and at the point of customs clearance in the case of imports. The IPI tax is not considered a cost for the importer, since the value is credited to the importer. Specifically, when the product is sold to the end user, the importer debits the IPI cost. The Government of Brazil levies the IPI rate by determining how essential the product may be for the Brazilian enduser. Generally, the IPI tax rate ranges from 0 to 15 %. In the case of imports, the tax is charged on the product’s c.i.f. value plus import duty. Often one can note that usually a relatively low import tariff rate carries a lower IPI rate. Conversely, a relatively high import tariff rate carries a correspondingly higher IPI rate. As with value-added taxes in Europe, IPI taxes on products that pass through several stages of processing can be adjusted to compensate for IPI taxes paid at each stage. Brazilian exports are exempt from the IPI tax.

Merchandise and Service Circulation Tax (ICMS) The ICMS is a state government value-added tax applicable to both imports and domestic products. The ICMS tax on imports is assessed ad valorem on the c.i.f. value, plus import duty, plus IPI. Although importers have to pay the ICMS to clear the imported product through Customs, it is not necessarily a cost item for the importer, because the paid value represents a credit to the importer. When the product is sold to the end-user, the importer debits the ICMS, which is included in the final price of the product and is paid by the end-user. Effectively, the tax is paid only on the value-added, since the cost of the tax is generally passed on to the buyer in the price charged for the merchandise. The ICMS tax due to the state government by companies is based on taxes collected on sales by the company, minus the taxes paid in purchasing raw materials and intermediate goods. The ICMS tax is levied on both intrastate and interstate transactions and is assessed on every transfer or movement of merchandise. The rate varies among states, in the State of Sao Paulo, the rate is 18 percent. On interstate movements, the tax will be assessed at the rate applicable in the state of destination. (Some sectors of the economy, such as construction services, mining, electrical energy, liquid and gaseous fuels are exempt from the ICMS tax. Most Brazilian exports are exempt.)

Additional Miscellaneous Taxes and Fees •

Warehouse Tax: 0.65% of CIF for a 15 day period

•

Typical Terminal Handling Charges at Santos’ port: US$100 per container

•

Merchant Marine Tax: 25% of ocean freight charges (does not apply to air freight)

•

Mandatory Contribution to Custom Broker’s union: 2.2% of CIF with a minimum contribution of US$71 and a ceiling set at US$160

•

SISCOMEX usage fee: US$30

•

Typical Cargo Transportation Fee: US$35



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The hypothetical cost buildup for an imported machine, shipped in a 20-foot container, shipped from Miami to the port of Santos illustrates how taxes and fees are calculated. It also illustrates the impact of importing costs on the landed price of the product in the Brazilian market. FOB price of Product

100,000

*Freight

2,400

Insurance (1%)

1,000

CIF Price of Product

103,400

Import Dury Rate: 19% -- applied to CIF

19,646

IPI: 5% -- applied to CIF + import duty

6,152

ICMS: 18% -- applied to CIF + import duty + IPI

23,256

Merchant Marine Tax: 25% of ocean freight cost

600

Warehouse: 0.65% of CIF; or min. US$ 170, max US$ 235

235

Terminal Handling Charges: average US$ 100 per container

100

Contribution to Custom Broker’s union 2.2% CIF; or min of US$ 71, max US$ 160

160

Custom Brokerage Fee: average 0.65% of CIF or min US$ 170, max US$ 450

450

SISCOMEX Fee

30

Typical Cargo Transportation charge

35

Typical Bank Costs: 2% of FOB

2,000

FINAL COST

156,064

State of Espírito Santo Tax Exemption Incentive (SP) The State of Espirito Santo has established an import-friendly system entitled FUNDAP to defer payment of ICMS (value-added tax charged by all Brazilian States) to the State. Specifically, either an importer of record or simply a consignee located in the City of Vitoria is exempt from this tax, payable upon Customs clearance of the imported goods. Vitoria, in the State of Espirito Santo, claims to have the largest privatized port complex of Latin America. The FUNDAP program allows for payment of ICMS up to 60 days after the product is sold to the final Brazilian customer. The FUNDAP program also applies to imports by air transport, as well as sea. Under the new Customs regime imported goods in bond (or out of bond) may be held until the U.S./foreign exporter is ready to ship to its customer(s). During this entry phase, the goods are retained in a tax/duty free status. The goods can be held at the Customs Interior facilities (EADI) for up to 6 months. The FUNDAP regulation permits the importer of record or consignee to transfer some financial benefits to the U.S./foreign exporter, thus improving the exporter’s cash flow and competitive position. The FUNDAP program has been instrumental in developing in the State of Espirito Santo an efficient and economical port structure (seven ports), reducing the time and cost of clearing imported goods, and improving the final operational efficiency of the import process.



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Briefly, the main advantages to Brazilian importers using the FUNDAP system are: •

Exemption of the “import” ICMS tax during customs clearance. The ICMS rate is 18% of the total import cost. Import cost is here defined as the total CIF + Import duty + Industrial Federal tax

•

Deferred payment of the “Sales” ICMS for approximately 60 days after consignee invoices the goods to the final customer [“Sales” ICMS is 12% of the sales amount in inter-state sales and is otherwise due within several days of the sale.]

Wordata – GB – Procedures – FUNDAP CCG 2003

4.4.2

Customs Regulations

In 1997 the Brazilian Government established a computerized information system to monitor imports and to facilitate customs clearance known as the Foreign Trade Integrated System (SISCOMEX). The SISCOMEX has facilitated and reduced the amount of paperwork previously required for importing into Brazil, which, however, can still be burdensome. Brazilian importers must be registered in the Foreign Trade Secretariat - SECEX’s Export and Import Registry and receive a password given by Customs to operate the SISCOMEX. The SISCOMEX has a graphic interface for the composition of electronic import documents and transmits information to a central computer. Customs Clearance in Brazil can be a time consuming and frustrating process, similar to other countries in the region. In a report issued by ICEX (Instituto de Estudos das Operações de Comércio Exterior), the average customs clearance time in Brazil was the slowest in the Hemisphere (150 hours). Products can get “caught up” in customs because of minor errors of emissions in paperwork. In FTAA negotiations, Brazil and the U.S. are working on measures to allow more rapid customs clearance. The Brazilians recognize that many of its ports, loading and unloading as well as customs clearance need increased efficiency. To this end, they are also working on a “green line” expedited method of clearance. However, you should be prepared for the fact that unloading and clearance may take substantially longer than expected.

4.4.3

Import Licenses

Automatic License As a general rule, Brazilian imports are subject to the “automatic import license” process. This procedure requires that the Brazilian importer submits information concerning each import, including description of the product as well as the harmonized tariff classification number, quantity, value of the shipment, shipping costs, etc. This information will be used for purposes of preparing the “Import Declaration” (locally known as the DI). Subsequently, all information is fed into Brazil’s customs computer system known as the SISCOMEX. The Brazilian Foreign Trade Secretariat (SECEX) is the government agency responsible for granting import licenses. Certain products and import operations are subject to special requirements, which should also be completed prior to the customs clearance process. Below is an illustrative list of special requirements. •

Approval by Brazil’s Agricultural Ministry for imports of meat and food products, sea food products, milk and milk derivatives, eggs and honey, fruits, and several other animal or vegetal products;

•

The Brazilian Environmental Protection Agency may need to issue a determination concerning imports of natural, synthetic or artificial rubber;

•

Company and/or product registration may be required for imports of numbers for asbestos, agricultural chemicals, pharmaceutical products, perfumes and cosmetics and medical related products.



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Non-Automatic License (LI) Whenever imports are subject to the Non-Automatic License (LI) regime, the importer must provide information concerning each shipment to Brazilian customs authority either prior to shipment or prior to customs clearance. The required information includes a description of the product as well as the harmonized tariff classification number, quantity, value of the shipment, shipping costs, etc. •

Prior to Customs Clearance: Products imported under the drawback regime, as well as imports destined to the free trade zones and the National Council for Scientific and Technological Development.

•

Prior to Shipment Clearance: Products subject to special controls from SECEX or which require approvals from other Brazilian government agencies. Such products may include: used products in general, products that enjoy import tariff reductions, imports that do not involve payment from importer to the exporter -- e.g., samples, donations, temporary admission, psychotherapeutic drugs, products for human or veterinary research; weapons and related products, radioactive products and rare earth metal compounds, crude oil, oil derivatives or other petroleum derivatives, anti-hemophilic serum, medications with plasma and human blood, products that may be harmful to the environment -- e.g., CFC, mailing machines, stamp selling machines, airplanes, etc.

Shortly after feeding the SISCOMEX system information concerning a specific shipment, the SISCOMEX system will indicate whether or not a “non-automatic import license” is required.

4.4.4

Export Controls

At this time, the U.S. Government maintains no export controls specific to Brazil. Normal controls are maintained on military equipment, high-tech information systems, and equipment of a highly sensitive nature. Items on the Munitions Control list are also a controlled export to Brazil requiring a special license from the State Department or Commerce Department depending on the item. For Additional information, please contact the U.S. Trade Information Center at 1-800-USA-TRADE.

4.4.5

Documentation Required for Trade

Any product that comes in contact with the human body is controlled by the Ministry of Health, including pharmaceuticals, vitamins, cosmetics and medical equipment/devices. Such products can only be imported and sold in Brazil if: •

The foreign company establishes a local Brazilian manufacturing unit or local office; or

•

The foreign company appoints a Brazilian distributor who is authorized by the Brazilian authorities to import and distribute medical products. However, such products must be registered with the Brazilian Ministry of Health.

4.4.6

Temporary Goods Entry Requirements

On December 20, 1999, Brazilian Customs issued regulation 150 (Instrução Normativa 150) establishing new procedures for imports under Temporary Admission Program. The Program allows for imports of goods for a predetermined time frame and a clear objective. Under the program, import tax and the Federal tax (IPI) are only charged on products that will be used in the production of other products and involves payment of rental or lease from the local importer to the international exporter. This includes products such as dies, matrices, sheets and industrial tools. Taxes due are proportional to the time frame the imported product will remain in Brazil.



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The import tax applicable on products imported under temporary admission program is calculated according to the following formula: •

V = the tax to be paid

•

I = Federal Taxes in the normal import process

•

P = number of months in which the product will remain in Brazil

•

U = the life span of the product - according to Normative Instruction # 162, dated December 31, 1998)

An example is a leasing operation for 12 months of a US$ 200,000 machine into Brazil, with 10% import tariff and 5% tax over industrial product (IPI). The life span of this hypothetical machine is 5 years. In a regular operation the due taxes would be as follows: •

CIF Price: 200,000

•

Import Tax: 20,000

•

IPI: 11,000 (5% over CIF Price + Import Tax)

•

Payable taxes: US$ 31,000

Under the temporary admission program payable taxes would be as follows: •

V= 31000 x [ 1-{12 x 5 – 12}]

•

12 x 5

•

V = 31000 x [1 – 0.8]

•

V = 31000 x 0.2

•

V = 6200

•

V = US$ 6200

4.4.7

Labeling and Marking Requirements

The Brazilian Customer Protection code, in effect since September 12, 1990, requires that product labeling provide the consumer with correct, clear, precise, and easily readable information about the product’s quality, quantity, composition, price, guarantee, shelf life, origin, and risks to the consumer’s health and safety. Imported products should bear a Portuguese translation of this information. Since metric units are the official measuring system, products should be labeled in metric units or show a metric equivalent. The labeling requirement for genetically modified organism (GMO) must follow the same procedures as mentioned above, although, GMO is currently being debated in Brazil. The United States Senate Concurrent Resolution nº 40 adopted July 30, 1953, invited U.S. exporters to inscribe, on external shipping containers in indelible print of a suitable size. “United States of America”. Although such marking is not compulsory under law, U.S. shippers are urged to follow this procedure in publicizing Americanmade goods.

Information Sources IPEM – Instituto de Pesos e Medidas do Estado de São Paulo Rua Santa Cruz, 1922 – Vila Gumercindo Cep www.icongrouponline.com


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04122-002 - São Paulo, SP Phonefax: 55/11/ 5085-2600 Web site: www.ipem.sp.gov.br CVS – Centro de Vigilância Sanitária Av. São Luiz, 99 – Centro Cep 01046-001 São Paulo, SP Phonefax: 55/11/3257-7611 Web site: www.cvs.saude.sp.gov.br E-mail: [email protected]

4.4.8

Restrictions on Imports

The Brazilian Government has eliminated most import prohibitions. However, it places special controls on certain imports and prohibits the importation of others. The general rule prohibits the importation of all used consumer goods. Used capital goods, are allowed only when there is no similar produced locally. There is also specific legislation that prohibits the importation of products that the Brazilian regulatory agencies consider harmful to health/sanity, national security interest, and to the environment. Imports of used machinery and equipment to the Manaus Free Trade Zone are subject to more liberal treatment

4.4.9

Standards

Brazilian Federal law established, in1973, the National System of Metrology, Standardization and Industrial Quality, SINMETRO, with participation from public and private organizations. Under this system, ABNT, the Brazilian Association for Technical Standards (Associaçao Brasilera de Normas Técnicas), is the recognized standards organization. INMETRO, a government agency, is the national accreditation body and is responsible for all aspects of metrology. INMETRO is also the operating arm of CONMETRO, the national committee that oversees the work of SINMETRO.

Voluntary Standards National voluntary standards in all sectors are developed by ABNT. Standards committees are under the umbrella of ABNT but, in some sectors, industry groups hold the secretariat and run the technical committees that develop standards. In some areas, ABNT bases its standards on those of ISO and IEC and on occasion on U.S. standards. ABNT is also a certification organization for both products and systems. In Brazil, many standards are voluntary. The buyer and seller share responsibility in determining what product standard is applicable. Products conforming to U.S. standards may be fully acceptable. However, products that meet European requirements may be preferred. This preference may be expressed in procurement specifications or in customary design and construction practices. Given the growing importance of standards and conformity assessment in expanding U.S. exports, a standards expert is assigned to work in the Commercial Service, at the U.S. Embassy in Brasilia, with regional responsibilities for South American countries.



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Technical Regulations In regulated sectors, the appropriate agencies may impose their own requirements, ranging from registration of products and laboratories to mandatory certification with the 3rd party testing done in-country. Some ministries such as Health, Agriculture, and Mines and Energy issue technical regulations for products under their jurisdiction. Products that are not under the jurisdiction of a specific ministry may be regulated by INMETRO. Some of the regulations managed by INMETRO and currently in place are being strengthened and new ones are being studied. Most recent rules mandate compliance to safety requirements with evidence of compliance often, but not exclusively, through mandatory product certification.

Mandatory Testing and Mandatory Product Certification For regulated products, the relevant government agency generally requires that entities that engage in product testing and mandatory certification must be accredited by INMETRO. Testing must generally be performed in-country unless the needed capability does not exist in Brazil. Brazil (INMETRO) is a signatory to the mutual recognition arrangement of the International Laboratory Accreditation Cooperation that may facilitate acceptance of test results from U.S. laboratories that are accredited by U.S. organizations party to the ILAC MRA.

Non-Mandatory Testing and Product Certification There is no legal mandate to date to retest non-regulated products that have been approved in their country of origin. For non-regulated products, some U.S. marks and product certification may be accepted. As with standards, any certification that may be required in non-regulated sectors is a contractual matter to be decided between the buyer and the seller. Market forces and preferences however may sometimes lead to the need for a specific certification. To facilitate the acceptance of U.S. products in the Brazilian market, agreements between U.S. and local certifiers and testing houses are encouraged. This could provide recognition of existing certifications. Also, there is no impediment for U.S. certification organizations to be established and accredited in Brazil.

Future Trends Brazil develops and issues national planning documents for standards and certification activities that indicate general tendencies and the sectors where activities will be focused.

Standards and Regulations in Mercosul Brazil, as an active Mercosul member, participates in the development of both Mercosul standards and regulations. Mercosul countries are Argentina, Brazil, Paraguay and Uruguay. The Mercosul Standards Association, AMN (previously known as the Mercosul Standards Committee) is composed of the standards institutes of Argentina, Brazil, Paraguay and Uruguay and develops and harmonizes voluntary standards. The AMN Executive Secretariat is located in Sao Paulo. Most of the voluntary standards published deal with steel products, cement and concrete and electrical safety. Several hundred additional standards are at different stages of preparation or in the work plan. Regional technical regulations are developed and/or harmonized within the Mercosul Sub Working Group 3 in the following fields: automotive, foods, metrology, electrical products safety, toys, pre-measured products and others. Separate working groups, such as those for telecommunications and health issues, also focus on mandatory technical requirements for their particular sectors. To be applicable, harmonized Mercosul regulations must be adopted by each country. The four countries generally adopt all Mercosul regulations though at different speeds.



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International Agreements Brazil, a member of the World Trade Organization (WTO), signed the Agreement on Technical Barriers to Trade, affirming its WTO obligations relative to technical regulations and conformity assessment procedures. ABNT has signed the WTO TBT Code of Good Practice for the Preparation, Adoption and Application of Standards. Responsibilities under the TBT agreement include the establishment of a national inquiry point to serve as a central location for information on standards-related issues, including proposed mandatory regulations. The Brazilian inquiry point is in INMETRO in Rio de Janeiro. The US inquiry point is the NCSCI, located at NIST (see Information Sources below).

Information Sources ABNT - Associação Brasileira de Normas Técnicas Av. Paulista 726 – 10o andar, Bela Vista 01310-910 São Paulo, SP Brazil Phone: (55-11) 3016-7040 Fax: (55-11) 3016-7049 Web site: http://www.abnt.org.br AMN, Asociacion Mercosul de Normalizacion Av. Auro Soares de Moura Andrade 664 01156-001 Sao Paulo – SP Brazil Phone: (55-11) 3823-4603/02 Fax: (55-11) 3826-3724 E-mail: [email protected] Web site: http://amn.org.br For information on the WTO-TBT inquiry point, contact: INMETRO – Instituto Nacional de Metrologia, Normalização e Qualidade Industrial Contact: Annalina Camboim de Azevedo Rua Santa Alexandrina 416, Rio Comprido 20261-232 Rio de Janeiro – RJ Brazil Phone: (55-21) 563-2816/24 Fax: (55-21) 502-6542 Web site: http://www.inmetro.gov.br For information in the U.S., contact: National Center for Standards and Certification Information (NCSCI) National Institute of Standards and Technology (NIST) Gaithersburg, MD 20899 Phone: (301) 975-4038 Fax: (301) 926-1559 E-mail: [email protected] Web site: http://www.nist.gov/ncsci



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American National Standards Institute (ANSI) 11 West 42nd Street New York, NY 10036 Phone: (212) 642-4900 Fax: (212) 398-0023 Web site: http://www.ansi.org

4.4.10

Free Trade Zones and Warehouses

There are eight Free Trade Zones in Brazil. Manaus, which has the most important Free Trade Zone, is located in the State of Amazonas. The other seven Free Trade Zones are located in Amazon’s frontier regions: Macapá-Santana, in the State of Amapá; Tabatinga, in the state of Amazonas, which borders with Peru; and Guajará-Mirim, in the State of Rondônia, bordering with Bolivia; Bonfim and Paracaíma in the state of Roraima; Brasiléia-Epitacilândia and Cruzeiro do Sul, in the State of Acre. The Manaus Free Trade Zone is the most extensively developed. The Decree No. 288 of February 1967 established special incentives for a period of 30 years with the aim of creating an industrial, commercial and agricultural center in the heart of the Brazilian Amazon. The Manaus Free Trade Zone has a 10,000 square kilometer area, which includes the city of Manaus, the capital of the State of Amazonas in the north region of Brazil, and benefits an area that corresponds to 25% of the national territory. Unlike Manaus, which has special incentives for the establishment of industries, the other zones are only free ports for import and export of goods. The Brazilian Federal Constitution of 1988 endorsed the fiscal benefits of the Manaus Free Trade Zone and extended their applicability to the year of 2013. The Free Trade Zone status implies that goods of foreign origin may enter into the Manaus free port without the payment of customs duties or other Federal, State or local import taxes. In addition, the Brazilian tax for industrialized products (which has the Brazilian acronym IPI) on certain commodities and the tax for in-country sales (called ICMS, as a Brazilian acronym for Merchandise Circulation Tax) on most items are not applied. With very few exceptions, imported products to be used for processing, re-export or transshipment, which are subsequently shipped to other parts of Brazil, are also qualified for these tax exemptions. The ICMS sales tax is imposed on items produced in the free port whenever they are shipped out of the Free Trade Zone into other areas of Brazil. The Brazilian Law No. 8387 of December 30, 1991, modifies the regulations for the Manaus Free Trade Zone by eliminating the previously existing import quota and requiring only that prior notification is made to the Superintendent of the Manaus Free Trade Zone (SUFRAMA) which is the Manaus Free Trade Zone Authority. However, in May 1995 the Brazilian Government returned to the import quota system and nowadays only imports of wheat and petroleum are not subject to quotas. It is important to notice that Commercial invoices and bills of lading must have a letterhead mentioning “Free Zone of Manaus” that must be typed on them, and one of the following statements: “Zona Franca de Manaus para Consumo” (Manaus Free Zone for Consumption) or “Zona Franca de Manaus para Reexportação” (Manaus Free Zone for Re-export). The Brazilian Foreign Trade Secretariat – SECEX – is responsible for import licenses, issued through the electronic system called SISCOMEX. The import licenses must be issued prior to shipment of goods destined for the Brazilian marketplace. These licenses are additionally subject to authorization at SUFRAMA. The Manaus Free Trade Zone importers are allowed to supply foreign goods from their stock in Manaus to other parts of the country regardless of quantity. These goods, however, are subjected to all duties assessed under normal importation. On the other hand, there is the advantage that the ICMS is reduced to only 4 percent. The general lowering of tariff and non-tariff barriers seriously hit the Manaus Free Trade Zone. In July 1992 the Brazilian Government announced a serial number of measures in order to help the Manaus Free Trade Zone. Each industry had to perform certain basic assembly steps in the zone in order to qualify for the fiscal incentives. To www.icongrouponline.com


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protect Manaus industries, such as consumer electronics, which are heavily concentrated in the zone, the IPI Tax was raised by ten percent on competing products, which are either imported or produced in Brazil but outside the zone. The initial list included stereos, televisions, and VCRs; those are not produced outside the Free Trade Zone in Brazil. Computers and peripherals were not on the list. Fiscal incentives for Manaus include exemption from the IPI tax and from tariffs on imported components, reduced tariffs on products shipped from Manaus to the rest of Brazil; reduced state tax (ICMS) on products imported from or exported to the rest of Brazil, up to ten years exemption from federal income tax, (Actually, there is a program that reduces the income tax as following: 75% of reducing until 2003; 50% of reducing from 2004 to 2008; 25% of reducing from 2009 to 2013) and an exemption from import license fees. Detailed information can be obtained at the Internet under: www.suframa.gov.br (Brazilian Government Official homepage) and www.estudosfiscais.hpg.ig.com (private-owned homepage). The 1992 regulations allowed computer firms to benefit from both fiscal benefits and the change in local content requirements. With special government permission, computer firms, although required to perform much basic assembly in the zone, may be permitted to import circuit boards which use only surface mounted devices. Brazilian restrictions on the informatics sector no longer apply to the Manaus Trade Zone. A license and an authorization requirement for health/sanitary controls, national security interests, and environmental protection remain in effect. In addition to the free trade zones, 19 export processing zones have been authorized. The Ministry of Development, Industry and Foreign Trade administers them. Legislation regarding Export Processing Zones (which has the Brazilian acronyms ZPEs) requires that firms operating in the zone export at least 90 percent of their production. Up to 10 percent of production can be sold in the domestic market, and is subject to a duty of 75 percent ad valorem on the final price, minus the cost of the imported inputs. Normal corporate income taxes apply to profits generated in the zones. Firms operating in the zones will be exempted from foreign exchange regulations and will maintain dollar and local currency accounts. The official Brazilian exchange rate must be used to convert dollar accounts for local purchases. Foreign firms established in the zones may use their own hard-currency resources for tax-free imports of machinery and raw materials from abroad. Firms in the ZPE may not produce goods subject to export quotas. License and authorization requirements remain in effect in ZPEs for health/sanitary controls, national security interests, and environmental protection. However, there are currently no ZPE’s in Brazil. See above samples of the facilities that transform some states into ¨fiscal paradises¨: •

Espírito Sant FUNDAP, provides a reduction of ICMS and larger period of time for paying it. (To have these facilities the importer needs to be on the state and in the program)

•

Mato Gross 21 years to pay the ICMS for imported goods to industrial projects of interest to the state.

•

Goiás Comex Produzir: Importations processed at the state have reduction of 85% on the ICMS.

•

DF Brasília: Importations processed at the Distrito Federal have 30 years of term to pay the ICMS. With 15 years of free time.

Although the federal government is trying it’s not easy to combat these kind of “fiscal politics” once it involves big amount of money and local political power.



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4.4.11

190

Membership in Free Trade Arrangements

Brazil is a founding member of Mercosul, the Southern Common Market, a member of the World Trade Organization. An imperfect customs union, Mercosul members Brazil, Argentina, Paraguay, and Uruguay implemented a Common External Tariff (CET) on January 1, 1995. Chile and Bolivia joined Mercosul as associate members in 1996.

4.5 4.5.1

INVESTMENT CLIMATE Openness to Foreign Investment

Brazil welcomes foreign investment and has lifted many restrictions in the past several years to encourage foreign investors. The 1962 Foreign Capital law and subsequent amendments govern most foreign investment. Foreign investors have been permitted to invest in the Brazilian stock market since 1991. The Brazilian Congress approved constitutional amendments in 1995 to eliminate the distinction between foreign and national capital. New rules considerably liberalizing foreign investment in equities, which essentially put foreign investors on an equal footing with Brazilians, took effect in 2000. Constitutional amendments passed in 1995 opened formerly closed sectors, such as petroleum, telecommunications, mining, power generation, and internal transport to foreign investors. In 2002, Congress approved a constitutional amendment permitting foreign investors to own up to 30% of media companies. There are restrictions on foreign investment in a limited number of sectors: •

Nuclear energy

•

Health services

•

Media

•

Rural property

•

Fishing

•

Mail and telegraph

•

Aviation and aerospace

New or expanded foreign investment in the banking sector is technically forbidden by the Constitution of 1988. However, since 1995 entry or expansion has been approved on a case-by-case basis; the vast majority of requests for entry or expansion have been granted. Foreign banks currently account for 20% of total banking system assets and 38% of private bank assets. Since 1996, the insurance sector has been open to foreign investors and most major U.S. firms are already represented, mainly via joint venture arrangements. The government plans to privatize the state monopoly, the Brazil Reinsurance Institute, have been delayed by a court decision; this has also delayed the country’s plan to open the reinsurance market to foreign and domestic competition. All foreign investment must be registered with the Central Bank. In most cases, registration is a pro forma matter. The certificate of registration permits remittances of profits and repatriation of capital without additional Central Bank authorization. Foreign loans must be registered with the Central Bank. Usually this is done automatically, but some loans may be subject to review by the Central Bank. Central Bank authorities say that they intend to proceed with a general capital account liberalization in the medium term.



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Brazil looks to foreign direct investment (FDI) as an important source of financing for its balance of payments, which runs sizeable current account deficits.

4.5.2

Conversion and Transfer Policies

There are few restrictions on converting or transferring funds associated with an investment. At this time, foreign investors may freely convert Brazilian currency in the unified foreign exchange market wherein buy-sell rates are mainly determined by market forces. All foreign exchange transactions, including identifying data, must be reported to the Central Bank. Foreign exchange transactions on the current account have been fully liberalized in practice, and in 2000 the Central Bank greatly simplified requirements for capital account transactions. Foreigners investing in Brazil must register their investment with the Central Bank within 30 days of the inflow of resources to Brazil. Registration is done electronically. Investments involving royalties and technology transfer must be registered with the patent office (INPI) as well. Investors must have a representative in Brazil and register with the Brazilian securities commission (CVM). Subsequent transactions, such as reinvested profits, may also have to be registered with the Central Bank. Foreign investors, upon registering their investment with the Central Bank, are able to remit dividends, capital (including capital gains), and, if applicable, royalties. Remittances must also be registered with the Central Bank. Dividends cannot exceed corporate profits. The remittance transaction may be carried out at any bank by documenting the source of the transaction (evidence of profit or sale of assets) and showing that applicable taxes have been paid. Foreign loans obtained abroad no longer require advance approval by Central Bank, provided the recipient is not a government entity (loans to government entities still require prior approval). Upon concluding the transaction, the loan must be registered electronically with the Central Bank. In most instances, the registration is completed automatically. Automatic registration is not issued when the costs of the operation are “not compatible with normal market conditions and practices.” In such instances, the loan is reviewed by the Central Bank; if the Central Bank does not respond within five working days, the registration is considered complete. Interest and amortization payments specified in the loan contract can be made without additional approval from the Central Bank. That also applies to early payments, if there is a provision in the contract for early payment. If the contract does not have such a provision, early payment requires prior approval of the Central Bank. According to Central Bank officials, this requirement is to ensure accurate records of Brazil’s stock of debt, and all requests have been approved since the new guidelines were issued in 2000. In addition to payments associated with registered loans and investments, there are other approved procedures for transferring funds abroad that in practice can be used for a wide range of purposes. Taxes— Dividend and capital gain remittances are subject to a 15 percent income withholding tax. Repatriation of an initial investment is exempt from income tax. Beginning in 2000, lease payments were assessed a 25 percent withholding tax. Remittances related to technology transfers are subject to the tax on credit, foreign exchange, and insurance (IOF). Loans of 90 days or less must pay the IOF, while those of longer maturity do not. In 2002 Brazil eliminated the application of the financial transaction tax (CPMF), which is currently 0.38%, on stock market transactions. Brazil has no double taxation treaty with the United States, but does have such treaties with a number of other countries.



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192

Expropriation and Compensation

There have been no expropriatory actions in Brazil in the recent past nor any signs suggesting that the Government is contemplating such actions. In 1999 a state government sought and obtained a court ruling canceling contractual obligations, signed by the prior state government, associated with the partial privatization of a state electricity company. The court ruling is being appealed by the U.S. investors. Some claims regarding land expropriations by state agencies many years ago have been judged by courts in U.S. citizens’ favor. There remain individuals who have not yet been compensated because the states have appealed these decisions.

4.5.4

Dispute Settlement

Brazil is not a member of the International Center for the Settlement of Investment Disputes (ICSID - also known as the Washington Convention) nor of the New York Convention of 1958 on the recognition and enforcement of foreign arbitration awards. In August 1995, Brazil ratified the 1975 Interamerican Convention on International Commercial Arbitration, as well as the 1979 Interamerican Convention on Extraterritorial Validity of Foreign Judgements and Arbitral Awards. Brazil has signed Bilateral Investment Agreements with about fourteen countries (but not the United States) that permit arbitration by either ICSID or a panel set up under the United Nations Rules for International Commercial Law. None of the agreements has been ratified. Legal experts doubt that such arbitration provisions would apply if the Government of Brazil, or another government entity, was one of the parties to the dispute. Arbitration clauses in contracts are not enforceable as such. Foreign arbitration awards require confirmation by a court of the country in which rendered and the Brazilian Supreme Court. Binding arbitration between foreign investors and state entities is apparently prohibited on the grounds that it infringes the sovereign rights of the state. Brazil has a functional commercial code that governs most aspects of commercial association, except for corporations formed for the provision of professional services, which are governed by the civil code. Bankruptcy laws provide for creditor rights, although those rights are sometimes difficult to enforce. Congress is considering legislation that would streamline the assertion of lender rights in the case of default on a loan. An overburdened court system is available for enforcing property rights but decisions can take years.

4.5.5

Political Violence

Significant human rights violations occur throughout Brazil. In urban areas, the police are sometimes implicated in killings, as well as other criminal activities and abuse of prisoners. They are rarely charged and convicted. In rural areas, powerful landowners, often aided by police serving as their private security agents, may use violence to settle land disputes and influence the local judiciary. Finally, it is worth noting that the Landless Workers’ Movement (MST) political action group has recently been invading a variety of agricultural interests, both domestic and foreign.

4.5.6

Performance Requirements and Incentives

Geographic preferences consist of tax benefits for investment in less developed parts of the country, such as the Northeast and the Amazon, with equal application to foreign and domestic investors. These benefits have had limited impact on most foreign investment decisions; most foreign investment remains concentrated in the more industrialized southern part of Brazil. Individual states have sought to attract investment by offering ad hoc tax



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benefits and infrastructure support to specific companies. Some municipalities provide land on favorable terms for industrial development. In firms employing three or more persons, Brazilian nationals must constitute at least two-thirds of all employees and receive at least two-thirds of total payroll. Foreign specialists in fields where Brazilians are unavailable are not counted in calculating the one-third permitted for non-Brazilians. The Special Agency for Industrial Financing (FINAME) of the National Bank for Economic and Social Development (BNDES) provides financing for purchases by Brazilian firms of Brazilian-made machinery and equipment -- capital goods with a high level of domestic content. An export program known as PROEX was established in 1991 to equalize domestic and international interest rates for export financing and to directly finance production of tradeable goods. The government also has a series of smaller programs designed to assist small and medium sized businesses export.

4.5.7

Right to Private Ownership and Establishment

Foreign and domestic private entities may establish, own, and dispose of business enterprises.

4.5.8

Protection of Property Rights

Brazil is a signatory to the GATT Uruguay Round Accords, including the Trade Related Aspects of Intellectual Property (TRIPS) Agreement, signed in April 1994. Brazil is a member of the World Intellectual Property Organization (WIPO) and a signatory of the Bern Convention on artistic property, the Washington Patent Cooperation Treaty, and the Paris Convention on Protection of Intellectual Property. In August 1992, Brazil removed its reservations and fully accepted the Stockholm revision of the Paris Convention. Brazil has not yet ratified the WIPO Treaties on Copyright and Performances and Phonograms.

Patents In most respects, Brazil’s 1996 Industrial Property law brings its patent and trademark regime up to the international standards specified in the TRIPS Agreement. However, the law includes compulsory licensing and local working requirements which may be TRIPS-inconsistent. The law would theoretically permit the grant of a compulsory license if a patent owner has failed to work, i.e. locally manufacture, the patented invention in Brazil within three years of issuance. Brazil has agreed to consult with the United States before invoking the local working requirement (to date, it has not used this provision).

Trademarks The fraudulent use of internationally “famous” marks has been a problem in Brazil. However, the Industrial Property Law has provided significant improvements in Brazil’s trademark regime, including better protection for internationally known trademarks. Some foreign firms have been successful in court actions against trademark infringement. Trademark licensing agreements must be registered with the National Institute of Industrial Property (INPI) to be enforceable; however, the failure to register licensing agreements will no longer result in cancellation of trademark registration for non-use.

Copyrights Brazil’s copyright law generally conforms to world-class standards. Likewise, its software copyright protection law contains provisions that would introduce a rental right and an increase in the term of protection to 50 years. Despite www.icongrouponline.com


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passage of these copyright laws in 1998, widespread piracy of copyright and trademark material remains a problem. Government efforts to stem the flow of pirated goods through its ports and across the border with Paraguay have been largely unsuccessful. To enhance enforcement efforts, the Brazilian Congress passed a law in July 2003 that establishes prison terms of two to four years for copyright violations, not only for those selling pirated products, but also for those convicted of renting, smuggling, hiding or acquiring counterfeit copyright products. The new law also establishes procedures for making arrests and destroying confiscated products.

Integrated Circuit Layout Designs A government-drafted bill to provide protection for the layout design of integrated circuits (computer mask works) was introduced in the Brazilian Congress in April 1996. The draft law was still under discussion in 2002.

4.5.9

Transparency of the Regulatory System

Although some improvements have been made, the Brazilian legal and procedural system is complex and overburdened. State courts in particular are subject to political influence. The central government has historically exercised considerable control over private business through extensive and frequently changing regulations. The bureaucracy has broad discretionary authority. Taxes are numerous and burdensome, but do not discriminate between foreign and domestic firms, although in a few instances there have been complaints that the value-added tax collected by individual states (ICMS) is set to favor local companies. Taxes on commercial and financial transactions are particularly burdensome, and businesses complain that these taxes hinder international competitiveness of Brazilian products. Brazil has separate value-added tax systems run by the federal and state governments, and also imposes several invoice taxes that are cumulative. In 2002, one of the invoice taxes was converted to a value-added tax. Regulatory agencies for sectors such as telecommunications, energy and transportation are a relatively new phenomenon in Brazil. ANATEL, the country’s telecommunication agency, handles the licensing and assigning of bandwidth. The National Petroleum Agency (ANP) is commended by the industry for its fair handling of auctions of oil exploration blocks and its willingness to assist industry in seeking to simplify regulatory procedures such as environmental licensing. However, in the electric power sector, a number of companies have complained about the high level of regulatory risk in the sector. They cite the tariff review process and the lack of medium-term to longterm energy policy. Brazil suffered an energy crisis in 2001 when lack of rainfall triggered an electricity supply shortage in the heavily hydro-dependent country, which led to extensive financial losses for a number of companies. This prompted the government to review the regulatory framework for the electricity sector, a process that is ongoing as of June 2003.

4.5.10

Bilateral Investment Agreements

Brazil has signed Bilateral Investment Agreements (BITs) with fourteen countries and completed negotiations on two regional Mercosul agreements since 1994. There are two Mercosul investment-related agreements: the Buenos Aires Protocol (“extrabloc”) and the Colonia Protocol (“intrabloc”); the latter has not been signed by Brazil. Seven of the bilateral investment treaties have been sent to the Brazilian Congress, but have not been ratifified. The United States signed an Investment Warranty Treaty with Brazil in 1965. The United States and Brazil currently have no plans to discuss a BIT.



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OPIC and Other Investment Insurance Programs

Programs of the Overseas Private Investment Corporation (OPIC) are fully available and activity has increased in recent years. The size of OPIC’s exposure in Brazil may occasionally limit its capacity for new coverage. Brazil became a member of the Multilateral Investment Guarantee Agency in 1992.

4.5.12

Labor

The Brazilian labor force comprises nearly 80 million workers in a wide range of occupations and industries. Nearly half of the labor force is employed in the service sector, roughly a quarter in agriculture, and the retail and manufacturing sectors combine to employ another quarter of all workers. The participation of women, who now account for over 40 percent of the labor force, continues to grow. The labor market has a high rate of informal sector employment; most sources estimate that nearly half of all workers are not formally registered, pay no income taxes, and do not enjoy full protection under the law. About a quarter of all workers are self-employed. The Brazilian Institute of Geography and Statistics (IBGE) calculates an average unemployment rate for the country based on data collected monthly in Brazil’s six largest metropolitan areas. Earnings also vary significantly by region and industry. The typical industrial worker in Sao Paulo, for example, earns about three times as much as the average retail worker in the northeastern state of Bahia. Differences in earnings are caused in part by the regional disparity in educational attainment and in the availability of skilled workers. According to a 1999 survey by IBGE, two-thirds of the population studied fewer than 8 years, with this number reaching 60 percent in the Southeast (including Rio and Sao Paulo) and 77 percent in the Northeast (including Recife and Salvador). Illiteracy rates also exhibit regional disparities. The IBGE reports that about 13 percent of the population is illiterate, with 7 percent illiteracy in the Southeast and 26 percent in the Northeast. Labor unions, especially in the most skilled sectors such as metalworking and banking, tend to be well-organized and aggressive in defending wages and working conditions. In more remote areas with smaller local unions, however, unions tend to be less effective. Union members account for approximately 16 percent of the workforce, but unions represent more than twice this number in collective bargaining. Unions, which are funded largely by a mandatory tax equivalent to one day’s wages per year, are obliged to represent all formal sector workers in a professional category and geographical area, regardless of membership status. The Ministry of Labor estimates that there are over 11,000 labor unions in Brazil, but Ministry officials note that these figures are inexact. Local unions often associate with state federations and national confederations in their professional category. In addition, four major labor centrals have emerged: the Workers’ Unitary Central (CUT), the Union Force (Forca Sindical - FS), the Workers’ General Confederation (CGT), and the Social Democratic Union (SDS). Labor federations channel much of the political activity of the labor movement; organize strikes and salary campaigns involving multiple professional categories, and represent workers in many governmental and tripartite councils. While some labor organizations and their leadership operate independently of the government and of political parties, others are viewed as closely associated with such parties as the PT and the PDT. The labor code is highly detailed and relatively generous; formal sector workers are guaranteed 30 days of annual leave, an annual bonus equal to one month’s salary, and severance pay in the case of dismissal without cause. Brazil also has a system of labor courts that are charged with resolving routine cases involving unfair dismissal, working conditions, salary disputes, and other grievances. Currently, over 2.5 million complaints are languishing in the labor court system, where they may remain unresolved for four or five years. The Brazilian government is attempting to reduce this backlog and increase the efficiency of the labor courts through recent initiatives to expedite legal procedures and increase the number of claims that are resolved before reaching the courts.



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Labor courts have the power to impose an agreement on employers and unions if negotiations break down and either side appeals to the court system. As a result, labor courts routinely are called upon to determine wages and working conditions in industries across the country. This has led labor relations in Brazil to be characterized by a conflict approach in which both sides typically take extreme positions. This approach is changing, however, as labor and management have become more flexible and collective bargaining has assumed greater relevance. According to the Interunion Department of Socioeconomic Studies and Statistics (DIEESE), the number of strikes each month has declined from 111 in 1996 to roughly 46 in 1999. DIEESE reports that most strikes were motivated by salary demands in the early 1990s, but that strikes are increasingly are undertaken to protest a perceived failure by management to comply with negotiated agreements.

4.5.13

Capital Outflow Policy

There are few restrictions on converting or transferring funds associated with an investment. However, the Central Bank has broad administrative discretion in regulating remittances, which in the past has created problems for foreign investors. At this time, foreign investors may freely convert Brazilian currency at the “commercial” rate. There has been a relaxation since 1991 of the restrictions on the remittances of royalty payments for patent and trademark use between subsidiaries established in Brazil and the parent office headquartered overseas and on remittances of franchise contract royalties. A 1992 INPI resolution simplified procedures and, in particular, eliminated a number of requirements (but not all) concerning technology transfer agreements. No royalties or other fees may be transferred between related companies for the use of software.

4.5.14

Major Foreign Investors

As of December 1998, the United States was the largest single foreign investor in Brazil followed by Spain, Netherlands, France, Germany and Portugal. Investment from the Cayman Islands began growing rapidly in 1995 and is thought to represent mainly repatriation of Brazilian capital entering the country as foreign investment and, to a lesser extent, investment activity by other national groups. Investment from Spain and Portugal surged in 1998 due to involvement in telecom privatizations and greatly increased investment in the banking sector by Spain. Three U.S. companies -- GM, Texaco, and Exxon -- are among the top twenty domestic firms. Seven of the top ten importing firms in 2002 were foreign: •

Motorola

•

Volkswagen

•

Ford Motor Co.

•

Nokia

•

Cisa Trading

•

Bunge and Halliburton

Six of the top ten exporters -- Bunge, Volkswagen, Cargill, General Motors, Motorola and Ford-- represented foreign investment.



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Efficient Capital Markets and Portfolio Investment

Brazil opened its market to foreign portfolio investment in 1991. In 2000, the government further liberalized portfolio investment by granting foreign investors greater flexibility in reallocating domestic assets without passing through the foreign exchange market. The Brazilian financial sector is large and sophisticated, in part a legacy of the high inflation period when good financial management was critical for a firm’s survival. Despite current moderate inflation rates, bank lending spreads remain extremely high due to taxation, risk, high mandatory reserve requirements and administrative overhead. With the elimination of high inflation in the mid-1990s, and the disappearance of so-called “float income” due to high inflation, the banking sector entered a period of consolidation in 1995. Domestic banks began to experience liquidity problems, and 1996 and 1997 were marked by a series of failures, mergers, and acquisitions. Three of the country’s ten largest banks failed and were taken over by other banks, and some 20 smaller banks were liquidated. Banks owned by state governments in particular were burdened with large amounts of unserviced debts. Most state banks were taken over by the federal government, liquidated, privatized, or transformed into development agencies. The federally owned banks were also undercapitalized and carrying poorly performing loans, many the result of the banks undertaking loss-making “social” lending. In June 2001, the government announced plans to recapitalize the banks and clean up their balance sheets. At the same time it is undertaking measures to prevent the banks from undertaking loss-making social programs without government budget support to subsidize the programs. As a result of these failures, the Central Bank strengthened its bank audits, implemented more stringent internal control requirements, and tightened its capital adequacy rules to better reflect risk. It also established loan classification and provisioning requirements. These measures are applied to private and publicly owned banks alike.

Brazil’s Ten Largest Banks (US$ Billions) Bank Banco do Brasil BNDES Federal Savings Bank Bradesco Itau Unibanco Santander Banespa ABN Amro Nossa Caixa Safra

Assets 60.1 45.0 38.3 33.3 31.7 18.1 15.0 12.4 7.9 7.9

The above banks include both public and private institutions. (March 2003) Source: Central Bank Notes. Banco do Brasil, the Federal Savings Bank (Caixa Economica Federal), and the National Bank for Economic and Social Development (BNDES) are owned by the federal government. Nossa Caixa is owned by the state government of Sao Paulo. Bradesco, Itau, Unibanco, and Safra are Brazilian-owned private banks. Santander and ABN Amro are foreign-owned banks (Spanish, Dutch and U.S.) www.icongrouponline.com


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Few corporations raise capital through the Brazilian stock exchanges. In 2000, with the intent of promoting the stock market and improving liquidity, the numerous regional stock markets agreed to consolidate. All stock trading is done in Sao Paulo stock market, while trading of public securities is conducting on the Rio de Janeiro market. The Sao Paulo stock market also launched a “New Market,” in which the listed companies would comply with strict corporate governance requirements. Historically, up to two-thirds of a corporation’s capital may be preferred (non-voting) shares, so it is possible to achieve majority control of voting shares, in some cases, by holding only 17 percent of total capital. In 2001, the Congress approved a law that limits preferred shares for new issuances to 50 percent. The same proposal strengthens rights for minority shareholders. The Brazilian Securities Exchange Commission (CVM) directly regulates the stock exchanges, brokers, distributors, pension funds, mutual funds, and leasing companies. In 2001, new legislation granted the CVM independence and established stronger penalties against insider trading. In January 2000, Brazilian regulators removed a number of remaining restrictions on foreign portfolio investment. As a result, foreign investors – both institutions and individuals – can directly invest in equities, securities and derivatives. The foreign investors are required to trade derivatives and stocks of publicly held companies on established markets. BNDES, the government national development bank, is the primary Brazilian source of longer-term credit, and also provides export credits. FINAME (Special Agency for Industrial Financing) provides foreign and domestic companies operating in Brazil financing for the manufacturing and marketing of capital goods. FINAMEX (Export Financing) is a part of FINAME, which finances capital good exports for both foreign and domestic companies. An export credit program for capital and some consumer durable goods, known as PROEX, was established in 1991. PROEX receives funds from the National Treasury to offer assistance in the areas of interest rate equalization, capital and other goods exports, and service exports. Wholly owned subsidiaries of multinational accounting firms, including the major U.S. firms, are present in Brazil. The failure of major banks and large businesses during 1995, notwithstanding positive financial statements prepared by the major accounting firms, raised doubts about the credibility of these financial statements. Beginning in 1996, auditors have been personally liable for the accuracy of accounting statements prepared for banks. The government legally ended the reinsurance monopoly in late 1996, but opening the reinsurance market to domestic and foreign competition has been help up pending the privatization of the Brazil Reinsurance Institute (IRB). Brazilian law recognizes mergers, in which one company loses its separate identity by being merged into another, and consolidations, in which the pre-existing companies are extinguished and a new entity emerges. The procedures for both are essentially the same. Sales of Brazilian companies usually result from private negotiations, rather than stock exchange activities. Acquisitions resulting in market concentration in excess of 20 percent are subject to review by the Administrative Council for Economic Defense (CADE) under Brazil’s 1994 Anti-trust Law.

4.6 4.6.1

TRADE AND PROJECT FINANCING Banking System

The largest in South America, Brazil’s banking system is highly developed, efficient, and offers a wide range of financial services. Brazil’s Central Bank regulates banking and financial services, and maintains strict accounting and operational supervision. Private sector banks are often organized as financial conglomerates offering a full range www.icongrouponline.com


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of financial services through subsidiaries and associated companies. The number of such state-level banking institutions has fallen in recent years due to the central government’s financial and banking reform efforts. Four of Brazil’s states still have state-owned or state-controlled banks offering public and private banking services: The States of Maranhão, Santa Catarina, Ceará, and Piauí. The following are key governmental financial institutions: •

National Monetary Council -- Sets financial and monetary policy;

•

Central Bank -- Executes monetary policy, sets interest rates within inflation-targeting policy framework via the Monetary Policy Committee (COPOM), manages exchange transactions, regulates banking and financial institutions, registers foreign investment;

•

Bank of Brazil -- Finances both public and private sector projects, primary lender to the agricultural sector;

•

National Economic and Social Development Bank (BNDES) -- Provides long-term financing and administers the privatization program;

•

Caixa Econômica Federal – Finances social programs, including housing and educational programs, for the lowincome citizens. It is the principal governmental entity responsible for financing urban development and sanitation.

4.6.2

Foreign Exchange Controls Affecting Trade

Obtaining an import license gives importers access to foreign exchange to pay for imports at the commercial rate through commercial banks. Individuals may import items via catalogs or phone/mail order, paying with an international credit card. In May 1997, the government instituted new rules that forbade normal financing of outstanding balances arising from international credit card purchases. Ended in October 1999 were import financing restrictions imposed in April 1997 that had required importers to purchase foreign exchange for financing purposes at least 180 days in advance of the due date for short-term supplier credit, i.e., of less than 360 days in duration. With the reduction of the financial operations tax (IOF) on overseas credit card purchases to less than 2 % in February 2000, Brazil removed the last obstacle to full liberalization of the current account.

4.6.3

General Availability of Financing

Interest rates currently prevailing in Brazil for short term loans (60 to 90 days) range currently from 20 to 60% a year. The key interest Selic rate (Brazil’s counterpart to the U.S. Fed Funds) adopted by the Brazilian Central Bank monetary policy committee (Copom) is 26% a year. The BNDES is one of the few sources of long term financing in the market.

Brazilian National Development Bank - BNDES The Brazilian Development Bank (BNDES), founded in 1952, is the main source of medium and long-term financing in the Brazilian economy, as well as the main Brazilian agent of multilateral credit organizations. The sovereign risk is 100% owned by the Brazilian Federal Government. BNDES focus has varied in the past: •

1950’s: Infrastructure - Steel

•

1960’s: Basic inputs – Consumer goods – Small and medium-sized enterprises



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•

1970’s: Import substitution of basic inputs – Capital goods

•

1980’s: Energy-Agribusiness

•

1990’s: Private Infrastructure and Brazilian Exports; Privatization (Management of the Brazilian Privatization Program -Total: $100 billion)

Presently BNDES emphasizes: •

Social inclusion (employment, education);

•

Financing infrastructure (energy, oil and gas, water, ports, telecommunications and logistics);

•

Modernization and expansion of the productive structure (creation of micro, small and medium companies);

•

Technology projects (Biotechnology, nanotechnology);

•

Continental integration (partnership with other South American financing agencies); and

•

Financing to Brazil-based exporters and buyers abroad.

BNDES’s main credit activities are: •

Financing of fixed investment

•

Brazilian export of goods and services

•

Acquisition and leasing of machinery and equipment

Web site: www.bndes.gov.br.

FINAME (Special Agency for Industrial Financing) Loan terms for FINAME (Special Agency for Industrial Financing) are: •

Maximum coverage is 90 % of transaction

•

Maximum of US$ 7,000,000 is automatic, per company, disbursed in one year

•

Disbursal above that limit depends on the company in question

•

Cost: Currently 13.55 to 16.86 % per annum (long term interest rate of 10.25 % plus spread of 3 to 6 % representing BNDES spread and commercial bank fee

•

Amortization period: Six months to 5 years

•

Maximum grace period: Up to twelve months.

Leasing, lease-back and leasing-import are widely used in Brazil. Leasing is available for both new and used, locally produced, and imported equipment. The leasing operation includes financing of installation, transportation, freight, import taxes, and all other taxes and fees involved in the importation.

4.6.4

How to Finance Exports and Methods of Payment

All the standard methods of export financing are available and used in Brazil, both for exports and imports. Brazilian commercial banks, and subsidiaries of international banks are active in trade finance. However, letters of credit and other trade finance can be expensive to open in Brazil. As a result, many suppliers extend open account privileges to



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established reliable clients in Brazil to avoid high financing costs. BNDES also provides export finance for capital goods and for services.

United States Department of Agriculture Credit Assistance Program A GSM-102 credit assistance program was extended to the Brazilian private sector for the first time in the Fiscal Year 1995 (October-September). Terms were increased to 18 months in March 1997, at the time Brazilian government instituted restrictions on short term import financing. Payment terms are available for up to three years for breeder livestock exports. This is an adaptation of the GSM-102 program and is designed to assist exporters of U.S. agricultural commodities who wish to provide relatively short-term credit to their importers. These credit guarantee programs reduce the risk of nonpayment to U.S. banks that extend credit to Brazilian banks to finance U.S. agricultural exports. The reduction of risk may be reflected in lower interest rates on financing than would be the case without a USDA guarantee, or it may mean the difference for the availability of U.S. bank financing. U.S. exporters may apply for credit guarantees on a first-come-first-serve basis to cover sales of any of food and agricultural products. Eligible products under the GSM -102 Program include: •

Breeder livestock (cattle, swine, sheep, goats, horses and donkeys, including semen and embryos)

•

Wine and brandy, distilled spirits (rum, vodka and whiskey)

•

Fresh vegetables (asparagus, beans, broccoli, carrots, cauliflower, celery, corn, garlic, lettuce, onions, peppers, potatoes and tomatoes)

•

Canned vegetables (asparagus, beans, carrots, corn, peas, tomatoes and tomato paste)

•

Frozen vegetables (beans, broccoli, carrots, corn and spinach)

•

Peanut butter or peanut flour

•

Dairy products (butter, butter oil, ghee, anhydrous milk fat, non-fat and whole milk powder, whey powder, whey protein concentrate, lactose, non-sweetened condensed milk, fluid milk, lecithin and cheese)

•

Ice cream

•

Meat, frozen or chilled (beef, pork and their products);wheat, wheat flour, semolina

•

Cotton, 100% cotton yarn, 100% cotton fabrics (woven and knit unbleached/bleached/dyed, and/or printed)

•

Rice

•

Feed grains (barley, including malting barley, white corn, yellow corn, sorghum and oats)

•

Corn products (flour, starch, corn meal, popcorn and gluten)

•

Pulses(dry beans, peas and lentils), poultry breeder stock (baby chicks, turkey pouts and hatching eggs)

•

Eggs and egg products (fresh, dry, refrigerated, frozen, albumin, etc)

•

Fresh fruits (apples, apricots, avocados, blueberries, cherries, grapes, grapefruit, kiwi, lemons, melons, nectarines, oranges, pears, plums, peaches, raspberries and tangerines)

•

Hops: hops extract

•

Tallow: grease, lard, barley malt

•

Potatoes(cut and chilled or frozen

•

Flakes, granules)




Peanuts

•

Commercially prepared dog and cat food, animal feed ingredients, fish food

•

Seeds for sowing

•

Almonds ( walnuts, pistachios, hazelnut and pecan)

•

Dry fruits, frozen fruits, canned fruits, fruit pure and fruit pulp, 100% natural fruit juice

•

Seafood (fresh and frozen);tomato paste

•

Alfalfa

•

Honey

•

Skins

•

Nutritional beverages preparations (for human consumption)

•

Soy protein products

•

Vegetable oils

•

Wood

•

Beer

•

Cereals

•

Preparation for breads and pizzas (powder, refrigerated of frozen)

•

Canned pickles

•

Ready-to-eat meals

•

Soft drinks and sodas

•

Soups and sauces.

202

Four additional credit options are also available for coverage of sales to Brazil. These new configuration are set forth below. Also, applicable guarantee fee rates, expressed in cents per US$100 of coverage (based upon guaranteed value) are shown. These fee rates include a charge to provide adjustable interest coverage. Length (Term) of Coverage

Principal Repayment Intervals

Fee (cents/$100)

15 months

Full repayment at 15 months

40.5

18 months

5/6 repayment at 15 months and 1/6 at 18 months

43.5

18 months

Full repayment at 18 months

48.8

36 months (Livestock only)

15/36 repayment at 15 months, 9/36 at 24 months, and 12/36 at 36 months

67.0

No interest coverage is offered. Two promissory note forms exist, one or the other of which must be used by the importer to evidence its obligation to pay for the U.S. agricultural commodities exported under SCGP. Exporters are advised by CCC to review thoroughly the provisions of these promissory notes with the importer. No changes may be made to the promissory note form elected for use and no other form of promissory note may be used.



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In order to obtain an updated list of the OAA Brazilian participating banks, please contact the Foreign Agricultural Office at the U.S. Embassy in Brasilia.

4.6.5

Availability of Project Financing

Overseas Private Investment Corporation There is a huge potential for project finance operations in Brazil because of the lack of public funds for infrastructure investment. Due to high domestic interest rates, almost all project finance is raised in the international market. Exporting companies typically securitize future export earnings not only for implementing restructuring projects but also for working capital. Since February 1995, the Brazilian Government has granted concessions to private companies to explore commercially some of the activities formerly reserved to state-owned companies (electricity distribution and generation, road repair). The concessions opened new business opportunities for banks operating in Brazil. Several banks are engaged in project finance for private investors, by providing financial advisory services and raising funds. Preliminary studies involved in project finance can take as long as four years. Investors typically seek guarantees from international institutions because the long-term nature of the operations presents high commercial, economic, and political risk. Citibank; Banco Bradesco, Banco Itaú and Banco Unibanco are some of the banks in Brazil that have been involved in project finance. Additional information on OPIC programs can be obtained from: Overseas Private Investment Corporation 1100 New York Avenue, N.W. Washington, D.C. 20527 Web site: www.opic.gov Contacts: Ms. Nancy Rivera, Manager, Project Finance Phone: (202) 336-8500 Mr. Richard Greenberg, Manager, Asia & Latin America Investment Development Phone: (202) 336-8616 Ruth Ann Nicastri – Regional Manager for Latin America and the Caribbean, Insurance Phone: (202) 336-8590 Andre Potasinski – Country Ofiicer, Insurance Phone: (202) 408-6240

Export-Import Bank In June 1994, the Ex-Im Bank established a Project Finance Division. The Bank is capable of financing all creditworthy projects that request its support. Ex-Im has no minimum or maximum project size limitations and no specific country lending caps. The cost of using Ex-Im Bank financing will be directly based on the risks associated with each project and will be designed so that the bank neither makes nor loses money.



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Multilateral Development Banks and International Financial Institutions The Inter-American Development Bank (IDB) and the World Bank are also involved in supporting infrastructure projects in Latin American countries. The Bank’s activities include traditional co-financing, World Bank guarantees, creating infrastructure funds to finance private project companies, and designing projects for future private sector participation. Web sites: www.iadb.org and www.worldbank.org

4.6.6

Banks with Correspondent Banking Arrangement

Brazil has one of the most sophisticated financial systems in Latin America. U.S. commercial and investment banks have been in Brazil since 1915. In terms of asset size, Bank Boston, Citibank, Banco Ford, JP Morgan & Chase, and Banco GM were among the top 50 institutions in the country. Citibank (12th) and Bank Boston (16th) are placed among the country’s top 20 institutions on this basis. •

American Express Bank Ltd. (São Paulo)

•

BankBoston (São Paulo)

•

Bank Audi (São Paulo)

•

Bank of America - Illinois (São Paulo)

•

Bank of America International of Florida (São Paulo)

•

Bank of America International of Texas (São Paulo)

•

Bank of America National Trust and Savings Association (Rio de Janeiro and São Paulo)

•

Bank Ford (São Paulo)

•

Bank General Motors (São Paulo)

•

Bank John Deere (Porto Alegre)

•

Bank Merrill Lynch (São Paulo)

•

Bankers Trust Company (São Paulo)

•

Bear Stearns & Co. Inc. (São Paulo)

•

Capital Bank (Rio de Janeiro)

•

Chemical Bank (São Paulo)

•

Citibank (São Paulo)

•

Corestates Bank N.A. (São Paulo)

•

Delta National Bank and Trust Company of New York (São Paulo)

•

First Interstate Bank of California (Rio de Janeiro)

•

First Republicbank Dallas, N.A. (São Paulo)

•

Goldman Sachs (São Paulo)

•

Harris Trust and Savings Bank (São Paulo)

•

J.P. Morgan & Chase (São Paulo and Rio de Janeiro)

•

M & T Bank (Rio de Janeiro and São Paulo)




Manufacturers Hanover Trust Company (São Paulo)

•

Mellon Bank (São Paulo)

•

Merrill Lynch (São Paulo and Rio de Janeiro)

•

Nations Bank (São Paulo)

•

NCNB National Bank of North Carolina (São Paulo)

•

Pinebank (São Paulo)

•

Pittsburgh National Bank (São Paulo)

•

Security Pacific National Bank (São Paulo)

•

Texas Commerce Bank N.A. (São Paulo)

•

UBS Securities Inc. (São Paulo)

•

Union Bank of California N.A. (São Paulo)

•

The Bank of New York (São Paulo)

•

Wachovia Bank (São Paulo)

205

(Source: Brazilian Banking Association – FEBRABAN)

4.7

TRAVEL RISKS

U.S. business visitors should become accustomed to several business conditions specific to Brazil. Compared to the United States, the pace of negotiation is slower and is based much more on personal contact. It is rare for important business deals to be concluded by telephone or letter. Many Brazilian executives do not react favorably to quick and infrequent visits by foreign sales representatives. They prefer a more continuous working relationship. The Brazilian buyer is also concerned with after-sales service provided by the exporter. The slower pace of business negotiations does not mean that Brazilians are less knowledgeable in terms of industrial technology or modern business practices. In fact, one should be as prepared technically when making a call on a Sao Paulo firm as on a Chicago firm. In addition, a U.S. businessperson is encouraged to learn as much about the Brazilian economic and commercial environment as possible before doing business. While office hours in Brazil are generally 8:00 a.m. to 6:00 p.m., decision-makers begin work later in the morning and stay later in the evening. The best times for calls on a Brazilian executive are between 10:00 a.m. and noon, and 3:00 to 5:00 p.m., although this is less the case for Sao Paulo where appointments are common throughout most of the day. Lunch is usually two hours. While many Brazilians may speak English, they may wish to conduct business in Portuguese. The non-Portuguese speaking U.S. executive may need an interpreter on more than 50 percent of business calls. Correspondence and product literature should be in Portuguese, and English is preferred as a substitute over Spanish. Specifications and other technical data should be in the metric system.

4.7.1

Travel Advisory and Visas

A passport and visa are required for Americans traveling to Brazil for any purpose. Brazilian visas must be obtained in advance from the Brazilian Embassy or Consulate nearest the traveler’s place of residence. There are no “airport visas,” and immigration authorities will refuse entry to Brazil to anyone not possessing a valid visa. U.S. www.icongrouponline.com


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Commercial or Consular officers are unable to secure relief for anyone arriving without a valid visa. All Brazilian visas, regardless of type or validity, are considered invalid if not used within 90 days of the issuance date. Business visas are required for visitors intending to engage in business transactions such as meetings, discussions, and negotiations with subsidiaries, partners, or customers in Brazil. Business travelers attempting to enter on tourist visas risk being denied entry. Business visa holders are prohibited from engaging in gainful employment. U.S. specialists providing “technical assistance” to a firm located in Brazil related to the execution of a sale or contract of that firm with a U.S. company always require work visas, even if they are not employed in Brazil and receive no remuneration from a Brazilian source. The Brazilian entity inviting a technical expert to Brazil must apply for and obtain a work permit from the Ministry of Labor in Brazil, which must be approved and transmitted to the appropriate Brazilian Embassy or Consulate before a work visa can be issued. While the U.S. Mission in Brazil is working with the Government of Brazil to find ways of simplifying and speeding up the process, at present delays of several months are frequently experienced in the approval of such work permits. For complete visa and customs requirements for Brazil, travelers may contact the Brazilian Embassy at 3009 Whitehaven St. N.W., Washington, D.C., 20008; telephone (202) 238-2818, e-mail [email protected]; Internet: http://www.brasilemb.org. Travelers may also contact the Brazilian consulates in Boston, Houston, Miami, New York, Chicago, Los Angeles, or San Francisco. Addresses, phone numbers, web and e-mail addresses, and jurisdictions of these Consulates may be found at the Brazilian Embassy Web site above. For complete information on travel to Brazil, including safety and security, crime, traffic and road conditions, and medical and health information, business travelers may wish to consult the Department of State consular information sheet, located on Consular Affairs Web site at www.travel.state.gov.

4.7.2

Infrastructure for Conducting Business

Air Travel Brazil has four principal airlines: TAM, Gol, Varig and Vasp. These companies provide efficient service throughout the country. Brazilian regional airlines provide service to their respective parts of the country. Private charter rentals are available at major airports in Brazil. Business people, travelers, and residents spend a good deal of time among the four most important cities -- Sao Paulo, Rio de Janeiro, Brasilia, and Belo Horizonte. Sao Paulo is Brazil’s center for commerce and manufacturing; Rio de Janeiro is important for its service industries; several state companies; for oil/gas and service industries as well as hosting major national entities such as the Brazilian Development Bank, Petrobras, Eletrobras, etc. Brasilia is the seat of government and location of foreign embassies; and Belo Horizonte is a major industrial/mining center. An excellent air shuttle services (or “ponte aérea”) facilitates travel among those cities. During rush hours, flights between Rio de Janeiro and Sao Paulo leave every 15 minutes from conveniently located downtown airports. For weekend travel, return reservations must be confirmed for Rio on Friday evening and for return to Sao Paulo or Brasilia on Monday morning.

Local Transportation Meter taxis, identified by roof lights, are plentiful in urban areas. However, getting about in Sao Paulo and other large cities can still be a problem. It is not always possible to rely on taxis when making calls. They are extremely difficult to find at certain hours of the day and in certain sections of the city. Fares are inexpensive and sometimes a table used to adjust fares is posted on the inside of the taxi’s rear window. However, in Sao Paulo and Rio, taxi fares are comparable to large U.S. cities such as Washington D.C. It is not necessary to tip.



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Radio taxis (cabs) are more expensive but convenient and reliable. In Rio call: 270-1442, in Sao Paulo call: 0800106688, in Brasilia call: 325-3030, and in Belo Horizonte call: 0800-3350550. Rental cars are common, especially at airports. They can be costly compared with other forms of transportation. Note that for the newcomer driving can be confusing in large cities such as Sao Paulo and Rio. Driving is not recommended.

Time Local time in Brazil is two hours ahead of Eastern Standard Time. Brazil observes daylight savings from December to February. When daylight savings is in effect in the United States, i.e April to October, Brazilian time is one hour ahead. When daylight savings is in effect in Brazil, i.e November to March, Brazilian time is three hours ahead.

4.7.3

Country Data

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Population: 175 million inhabitants

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Population Growth Rate: 1.3 percent

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Religion: Predominantly Roman Catholic, with growing Protestant influence.

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Government System: Democratic, Federative Republic, Presidential system, with executive branch agencies, two-house congress (Senate, Chamber of Deputies), and judicial branch.

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Language: Portuguese

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Work week: 40– 44 hours

4.8 4.8.1

KEY CONTACTS Brazilian Government Contacts

Ministry of Agriculture MAPA – Ministério da Agricultura, Pecuária e Abastecimento Esplanada dos Ministerios, Bloco D 70043-000 Brasilia, DF Phone: 55/61/218-2800 Fax: 55/61/225-8091 http://www.agricultura.gov.br Ministry of Social Assistance MAS - Ministério da Assistência Social Esplanada dos Ministérios, Bloco C 70054-900 Brasilia, DF Phone: 55/61/313-1822 Fax: 55/61/224-4753 http://www.assistenciasocial.gov.br



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Ministry of the Cities Ministério das Cidades Esplanada dos Ministérios, Bloco A 70050-901 Brasilia, DF Phone: 55/61/411-4694 Fax: 55/61/223-5243 http://www.cidades.gov.br Ministry of Science and Technology MCT - Ministério da Ciência e Tecnologia Esplanada dos Ministérios, Bloco E 70067-900 Brasilia, DF Phone: 55/61/317-7508 Fax: 55/61/225-7496 http://www.mct.gov.br Ministry of Communications MC - Ministério das Comunicações Esplanada dos Ministerios - Bloco R 70044-900 Brasilia, DF Phone: 55/61/311-6201 Fax: 55/61/331-6731 http://www.mc.gov.br Ministry of Culture MINC – Ministerio da Cultura Esplanada dos Ministerios, Bloco B 70068-900 Brasilia, DF Phone: 55/61/316-2172 Fax: 55/61/225-9162 http://www.cultura.gov.br Ministry of Defense MD – Ministério da Defesa Esplanada dos Ministerios, Bloco Q 70049-900 Brasilia, DF Phone: 55/61/312-8520 Fax: 55/61/225-4151 http://www.defesa.gov.br Ministry of Agrarian Development MDA - Ministério do Desenvolvimento Agrário Esplanada dos Ministérios, Bloco A 70054-900 Brasilia, DF Phone: 55/61/314-8002 Fax: 55/61/322-0492 http://www.mda.gov.br



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Ministry of Development, Industry and Foreign Trade MDIC - Ministério do Desenvolvimento, Indústria e Comércio Exterior Esplanada dos Ministérios, Bloco J 70053-900 Brasília, DF Phone: 55/61/329-7002 Fax: 55/61/329-7230 http://www.mdic.gov.br Secretariat of Foreign Trade SECEX - Secretaria de Comercio Exterior Esplanada dos Ministérios, Bloco J 70056-900 Brasilia, DF Phone: 55/61/329-7077/7080 Fax: 55/61/325-2075 http://www.mdic.gov.br Ministry of Education MEC – Ministério da Educação Esplanada dos Ministerios, Bloco L Cep 70047-900 Brasilia – DF Phone: 55/61/410-9670 Fax: 55/61/410-9233 http://www.mec.gov.br Ministry of Sports ME - Ministério do Esporte Esplanada dos Ministerios, Bloco A Cep 70054-900 Brasilia – DF Phone: 55/61/217-1852 Fax: 55/61/217-1818 http://www.esporte.gov.br Ministry of Finance MF - Ministerio da Fazenda Esplanada dos Ministérios, Bloco P Cep 70048-900 Brasilia – DF Phone: 55/61/412-2515 Fax: 55/61/412-1721 http://www.fazenda.gov.br Secretariat of Internal Revenue Service SRF - Secretaria da Receita Federal Esplanada dos Ministérios, Bloco P Cep 70048-900 Brasilia – DF Phone: 55/61/223-4302 Fax: 55/61/321-0488 http://www.receita.fazenda.gov.br



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Ministry of National Integration MI - Ministerio da Integracao Nacional Esplanada dos Ministerios, Bloco E Cep 70062-906 Brasilia – DF Phone: 55/61/414-5815 Fax: 55/61/321-9125 http://www.integracao.gov.br Ministry of Justice MJ - Ministerio da Justica Esplanada dos Ministerios, Bloco T Cep 70064-900 Brasilia – DF Phone: 55/61/429-3101 Fax: 55/61/322-6817 http://www.mj.gov.br Ministry of Environment MMA - Ministerio do Meio Ambiente Esplanada dos Ministerios, Bloco B Cep 70068-900 Brasilia – DF Phone: 55/61/322-7819 Fax: 55/61/322-8469 http://www.mma.gov.br Ministry of Mines and Energy MME - Ministerio das Minas e Energia Esplanada dos Ministerios, Bloco U Cep 70065-900 Brasilia – DF Phone: 55/61/319-5042 Fax: 55/61/319-5074 http://www.mme.gov.br Ministry Planning and Budget MP - Ministerio do Planejamento, Orçamento e Gestao Esplanada dos Ministerios, Bloco K Cep 70040-906 Brasilia – DF Phone: 55/61/429-4102 Fax: 55/61/225-7287 http://www.planejamento.gov.br Ministry of Social Security (welfare) MPS - Ministério da Previdência Social Esplanada dos Ministérios, Bloco F 70059-900 Brasilia, DF Phone: 55/61/317-5189 Fax: 55/61/317-5407 http://www.mpas.gov.br



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Ministry of Foreign Relations MRE - Ministerio das Relaçoes Exteriores Esplanada dos Ministerios Palacio do Itamaraty Cep 70170-900 Brasilia – DF Phone: 55/61/411-6100 Fax: 55/61/411-6993 http://www.mre.gov.br Ministry of Health MS - Ministerio da Saude Esplanada dos Ministerios, Bloco G Cep 70058-900 Brasilia – DF Phone: 55/61/315-2392 Fax: 55/61/224-8747 http://www.saude.gov.br Ministry of Work and Employment MTE - Ministério do Trabalho e Emprego Esplanada dos Ministérios, Bloco F 70059-900 Brasilia, DF Phone: 55/61/225-0041 Fax: 55/61/226-9004 http://www.mte.gov.br Ministry of Transportation MT - Ministério dos Transportes Esplanada dos Ministérios, Bloco R 70044-900 Brasilia, DF Phone: 55/61/311-7001 Fax: 55/61/311-7876 http://www.transportes.gov.br Ministry of Tourism Ministério do Turismo SCES Trecho 2, Lt. 24, 1°andar, Entrada A 70200-000 Brasilia, DF Phone: 55/61/310-9491 Fax: 55/61/310-9499 http://www.turismo.gov.br Extraordinary Ministry of Hunger Safety Ministério Extraordinário de Segurança Alimentar e Combate a Fome Esplanada dos Ministérios, Bloco A 70054-900 Brasilia, DF Phone: 55/61/411-4710 Fax: 55/61/321-1077



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Brazilian Central Bank BCB - Banco Central do Brasil SBS, Qd.3, Bloco B - Edifício Sede 70074-900 Brasilia, DF Phone: 55/61/321-3060 Fax: 55/61/310-2502 http://www.bcb.gov.br Bank of Brazil BB - Banco do Brasil S/A SBS, Edifício Sede I, Quadra 1, Bloco A 70073-900 Brasilia, DF Phone: 55/61/310-2000 Fax: 55/61/310-5476 http://www.bancobrasil.com.br National Bank of Economic Social Development BNDES - Banco Nacional de Desenvolvimento Av. República do Chile, 100 – Centro 20031-917 Rio de Janeiro, RJ Phone: 55/21/2277-7001 Fax: 55/21/2533-1538 Contact: Mr. Carlos Francisco Theodoro Machado de Lessa, President http://www.bndes.gov.br Brazilian Long Distance Telephone Company (EMBRATEL) Empresa Brasileira de Telecomunicacoes S.A. Av. Presidente Vargas, 1012 - Centro 20179-900 Rio de Janeiro, RJ Phone: 55/21/2519-8182 Fax: 55/21/2519-8081 http://www.embratel.com.br Brazilian Tourism Institute EMBRATUR – Instituto Brasileiro de Turismo SCN – Quadra 2 - Bloco G - 3 floor 70712-907 Brasilia, DF Phone: 55/61/429-7777 Fax: 55/61/429-7710 http://www.embratur.gov.br Brazilian Industrial Property Institute INPI - Instituto Nacional da Propriedade Industrial Praça Mauá 7 - Centro 20081-180 Rio de Janeiro, RJ Phone: 55/21/2223-4182 Fax: 55/21/2263-2539 http://www.inpi.gov.br



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Brazilian Petroleum Company PETROBRAS – Petróleo Brasileiro S.A. Av. República do Chile, 65 – Centro 20031-912 Rio de Janeiro – RJ Phone: 55/21/2534-1000 Fax: 55/21/2534-3838 http://www.petrobras.com.br

4.8.2

Brazilian Trade Associations and Chambers of Commerce

Aerospace and Defense Departament of Civil Aviation DAC – Departamento de Aeronautica Civil Rua Santa Luzia,651- Cstelo Cep 20040-030 Rio de Janeiro – RJ Phone: 55/21/3814-6700 Fax: 55/21/220-5727 http://www.dac.gov.br [email protected] Aeronautics Command Esplanada dos Ministérios, Bloco M, 8 andar 70045-900 Brasília, DF Phone: 55/61/329-9601 Fax: 55/61/223-0930 Navy Command Esplanada dos Ministérios, Bloco N, 2 andar 70055-900 Brasília, DF Phone: 55/61/223-6058 Fax: 55/61/429-1006 Army Command SMU, QG/EX, Bloco A, 4 andar 70630-901 Brasília, DF Phone: 55/61/415-5200 Fax: 55/61/415-4379 Aerospace Technical Center – CTA Praça Marechal Eduardo Gomes, 50 12228-901 São José dos Campos, SP Phone: 55/12/3941-3400 Fax: 55/12/3941-4033 www.cta.br



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AIAB - Associação das Indústrias Aerospaciais do Brasil Rua José Alves dos Santos, 281-203 – Jardim Satélite 12230-081 São José dos Campos, SP Phone: 55/12/3931-2721 Fax: 55/12/3933-0657 [email protected] ABIMDE – Associação Brasileira das Indústrias de Material de Defesa Av. Paulista, 2644 11º andar 01310-300 Cerqueira Cesar São Paulo, SP Phone: 55/11/3159-0846 Fone/Fax: 55/11/3214-4860 www.abimde.com.br [email protected] SINAVAL – Sindicato Naval das Indústrias da Construção Civil Rua Santa Luzia, 799, sala 703 20030-040 Rio de Janeiro, RJ Phone: 55/21/2533-4568 Fax: 55/21/2533-5310 [email protected]

Agricultural Machinery Ministry of Agriculture Secretariat of Agriculture & Livestock Defense Esplanada dos Ministerios, Bloco D, Edifício Sede Cep 70043-900 Brasilia – DF Phone: 55/61/218-2828 Fax: 55/61/225-2497 http://www.agricultura.gov.br [email protected]

Air Conditioning, Heating, Refrigeration, and Ventilation ABRAVA - Brazilian Association of Manufacturers of Refrigeration, Heating, Air Conditioning and Ventilation Equipment Av. Rio Branco, 1492 01206-001 Sao Paulo, SP Phone: 55/11/221-5777 Fax: 55/11/222-4418 Contact: Mr. Arnaldo O. Correia, General Manager, Foreign Trade Dept. [email protected] http://www.abrava.com.br



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Apparel Manufacturers ABRAVEST - Brazilian Apparel Association Rua José Paulino, 795 6º andar Bom Retiro 01120-001 Sao Paulo, SP Phone: 55/11/3338-1477/ 3338-1471 Fax: 55/11/3331-2802 Contact: Mr. Roberto Chadad, President [email protected]/ [email protected] http://www.abravest.org.br

Architecture, Construction, and Engineering Services (ACE) ABCE –Brazilian Association of Consulting Engineers Av. Rio Branco,124 –13rd floor 20148-900 – Rio de Janeiro – RJ Phone 55/21/2215-1401 Fax: 55/21/2224-2693 http://www.ibpinet.com.br/abce [email protected] SECOVI – State of Sao Paulo Real Estate Developers Association Rua Dr. Bacelar,1043 04026-002-Sao Paulo – SP Phone: 55/11/5591-1300 Fax:55/11/5591-1301 http://www.secovi-sp.com.br [email protected] ASBEA – Brazilian Association of Architectural Firms Rua Tabapuã,479 – 6 Floor – Cj 62 04533-011 – Sao Paulo - SP Phone: 55/11/3168-4982 Fax: 55/11/3078-2208 http://www.asbea.org.br [email protected] ABICEM - Brazilian Association of Metallic Construction Contractors Av. Brig. Faria Lima, 1931 - 9 Floor 01452-001 Sao Paulo, SP Phone: 55/11/3816-6597 Fax: 55/11/3813-8717 Contact: Mr. Marcio Guimaraes, Executive Director [email protected] http://www.abicem.com.br



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SINDUSCON - Association of Building Contractors of the State of Sao Paulo Rua Dona Veridiana, 55 – Bairro Santa Cecilia 01238-010 Sao Paulo, SP Phone: 55/11/3334-5600 Fax: 55/11/3224-8266 Contact: Mr. Artur Quaresma Filho, President [email protected] http://www.sindusconsp.com.br SINDUSCON - Ditto, State of Rio de Janeiro Rua do Senado, 213 - térreo - centro 20231-020 Rio de Janeiro, RJ Phone: 55/21/2221-5225 Fax: 55/21/3852-8995/2221-8066(presidência) Contact: Mr. Roberto Kaulffmann, President [email protected] http://www.sindusnet.com.br SINDUSCON - Ditto, State of Paraná Rua da Glória, 175, 2o. floor – Bairro Centro Civico 80030-060 Curitiba, PR Phone: 55/41/352-2883 Fax: 55/41/253-5567 Contact: Mr. Eliel Lopes Ferreira Jr., President [email protected] http://www.sinduscon-pr.com.br

Automotive and Auto Parts ANFAVEA – National Association of Vehicle Manufacturers (Associação Nacional dos Fabricantes de Veiculos Automotores) Av. Indianopolis 496 04062-900 Sao Paulo, SP, Brazil Phone: 55/11/5051-4044 Fax: 55/11/5051-4044 ext. 225 Internet: http://www.anfavea.com.br Contact: Ecilas Nazario, Foreign Trade Division SINDIPECAS – National Association of Autoparts Manufacturers (Sindicato Nacional da Industria de Componentes para Veiculos Automotores) Rua Abilio Soares 1487 04005-005 Sao Paulo, SP, Brazil Tel: 55/11/3884-4599 ext. 222 Fax: 55/11/3884-0584 Internet: http://www.sindipecas.org.br Contact: Luiz Carlos Auler Pereira, Foreign Trade Advisor



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SINDIREPA – Brazilian Association of Mechanical Shops (Associação Brasileira dos Reparadores Independentes de Veículos) Av. Indianopolis 2357 04063-004 Sao Paulo, SP, Brazil Tel: 55/11/5066-7450 E-mail: [email protected] Contact: Antonio Gaspar de Oliveira, Consultant ANDAP – National Association of Autoparts Distributors (Associação Nacional de Distribuidores de Autopeças) Av. Paulista 1009 – 1 andar – conj. 101 01311-919 Sao Paulo, SP, Brazil Home Page: www.andap.org.br E-mail: [email protected] Tel/Fax: 55/11/3266-7700 Contact: Luiz Carlos Vieira, Executive Director

Brazilian Federation of Banks FEBRABAN - Brazilian Federation of Banks Rua Libero Badaro 425 / 17º floor / Centro 01009-905 Sao Paulo, SP Phone: 55/11/3244-9800 Fax: 55/11/3104-0641 Contact: Mr. Wilson Antonio Salmeron Gutierrez, Superintendent [email protected] http://www.febraban.org.br

Building Materials ANAMACO - National Association of Building Materials Retailers R. Major Quedinho, 111 / 21º andar 01050-904 Sao Paulo, SP Phone: 55/11/3151-5822 Fax: 55/11/3120-3611 Contact: Mr. Claudio Elias Conz, President [email protected] http://www.anamaco.com.br ABCP – Brazilian Portland Cement Association Av. Torres de Oliveira, 76 – Jaguare 05347-902 – Sao Paulo – SP Phone: 55/11/ 3760-5314 Fax: 55/11/3760-5388 http://www.abcp.org.br [email protected]



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SOBRATEMA – Brazilian Association for Equipment and Maintenance Technology Rua Francisco Matarazzo, 404 Conjunto 401 Água Branca 05001-000 – Sao Paulo - SP Phone: 55/11/3662-4159 Fax:55/11/3662-4159 http://www.sobratema.org.br [email protected]

Cable TV ABTA - Brazilian Association of Cable TV R. Paes de Araujo 29, 18 floor, conj. 181 04531-090 Sao Paulo, SP Phone: 55/11/3078-9307 Fax: 55/11/3078-9307 Contact: Sra. Leila Loria , President [email protected] http://www.abta.com.br

Cosmetic and Toilettes IBP - Brazilian Petroleum Institute. Av Almirante Barroso 52, 26o. floor / Grupo 2602 - Centro 20031-000 Rio de Janeiro, RJ Phone: 55/21/2532-1610 Fax: 55/21/2220-1596 Contact: Mr. Alvaro Teixeira, Secretary [email protected] http://www.ibp.org.br

Perfume and Cosmetic Manufacturers SIPATESP – Brazilian Association of Cosmetics Manufacturers Av. Paulista, 1313 / 10th floor – conj. 1080 01311-923 Sao Paulo, SP Phone: 55/11/251-1999 Fax: 55/11/287-9207 Contact: Mr. Manoel Teixeira Simões, Director [email protected] ADIPEC – Brazilian Association of Perfume and Cosmetics Importers. Rua Tabapuã, 649 conj. 74 04533-012 Sao Paulo, SP Phone: 55/11/3168-4518 Fax: 55/11/3168-4518 Contact: Mr. Marcos Rothenberg, President http://www.adipec.com.br



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Construction ABICEM - Brazilian Association of Metallic Construction Contractors Av. Brig. Faria Lima, 1931 - 9 Floor 01452-001 Sao Paulo, SP Phone: 55/11/816-6597 Fax: 55/11/813-8717 Contact: Mr. Marcio Guimaraes, Executive Director SINDUSCON - Association of Building Contractors of the State of Sao Paulo (residential and commercial buildings, only) Rua Dona Veridiana, 55 – Bairro Santa Cecilia 01238-010 Sao Paulo, SP Phone: 55/11/3334-5600 Fax: 55/11/224-8266 Contact: Mr. Sergio Porto, President SINDUSCON - Ditto, State of Rio de Janeiro Rua do Senado, 213 - 1 floor - centro 20231-020 Rio de Janeiro, RJ Phone: 55/21/221-5225 Fax: 55/21/221-5195 Contact: Mr. Natalino Rabinovicht, President SINDUSCON - Ditto, State of Paraná Rua da Glória, 175, 2o. floor – Bairro Centro Civico 80030-060 Curitiba, PR Phone: 55/41/352-2883 Fax: 55/41/253-5567 Contact: Mr. Gustavo Daniel Berman, President

Dental, Medical, and Hospital Equipment ABIMO - Brazilian Association of Dental, Medical and Hospital Equipment Av. Paulista 1313, 8º Floor, conj. 806 01311-923 Sao Paulo, SP Phone: 55/11/3285-0155 Fax.: 55/11/3285-0155 Contact: Dr. Paulo Akio Takaoka, Presidente [email protected] http://www.abimo.org.br SINAEMO - Syndicate of Medical, Dental, Hospital and Laboratory Industries Av. Paulista 1313, 8º Floor, conj. 806 01311-923 Sao Paulo, SP Phone: 55/11/3285-0155 Fax: 55/11/3285-0155 Contact: Dr. Paulo Akio Takaoka, Presidente http://www.abimo.org.br [email protected]



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ABIMED – Brazilian Association of Equipment, Products and medical Supplies Importers Alameda dos Tupiniquins, 203 Moema 04077-000, São Paulo Phone: 55/11/5052-2664 Fax: 55/11/5052-7074 Contact: José Manuel Laranjeira, President http://www.abimed.org.br [email protected] MINISTÉRIO DA SAÚDE – Ministry of Health Esplanada dos Ministérios – bloco G, 5º andar (gabinete do Ministro) 70058-900, Brasília – DF Phone: 55/61/ 315-2425 Fax: 55/61/ 224-8747 http://www.saude.gov.br [email protected]

Educational Professional Training MEC – Ministerio da Educação Esplanada dos Ministérios – Bl L – Ed. Sede e Anexos 70047-902 – Brasilia – DF Phone: 55/61/410-8484 Fax: 55/61/410-9233 Contact: Osvaldo Russo de Azevedo – Chefe de Gabinete Web site: http://www.mec.gov.br E-mail: [email protected] SENAI – Roberto Simonsen School Rua Monsenhor Andrade, 298 – Brás 03008-000 – São Paulo – SP Phone: 55/11/3322-5000 Fax: 55/11/3322-5029 Contact: Alcindo Daniel Favero, Technical Director [email protected] http://www.senai101.com.br

Electronic Equipments ABINEE – 0Brazilian Association of the Electronic Industry Av. Paulista, 1313m 7andar, Conj. 703 01311-923 São Paulo, SP Phone: 55/11/251-1577 Fax: 55/11/285-0607 Contact: Mr. Fabián Yaksic [email protected] http://www.abinee.org.br



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Energy ABCE - Brazilian Association of Electrical Energy Concessionaires Alameda Campinas, 433 10º andar 01404-901 Jardim Paulista - Sao Paulo, SP Phone: 55/11/288-1166 Fax: 55/11/288-8524 Contact: Mr. José Geraldo dos Santos, President [email protected] http://www.abce.org.br APINE - Brazilian Association of Independent Electrical Energy Producers SCN Quadra 2 Edifício Centro EmpresarialEncol Torre A, room 626/8 70710-500 Brasilia, DF Phone: 55/61/315-9182 Fax: 55/61/327-2069 Contact: Mr. Eric Westberg, President http://www.apine.com.br [email protected] WORLD ENERGY COUNCIL Rua Real Grandeza, 219 22283-900 Rio de Janeiro, RJ Phone: 55/21/2528-3112 Fax: 55/21/2528-5858 Contact: Mr. José Pedro Rodrigues Oliveira, President http://www.furnas.com.br [email protected] ANEEL – Brazilian Regulatory Agency of Electric Energy SGAN – 603, Módulo J / I (diretoria) 70830-030 Brasília – DF Phone: 55/61/ 223-4592 Fax: 55/61/ 426-5615 ou 426-5711 Contact: Rulemar Pessoa Silva, Superintendet/ Regulations http://www.aneel.gov.br [email protected]

Entertainment ADIBRA-Associação de Empresas de Parques de Diversão Alameda Santos, 1343, conj. 1502 01419-001, São Paulo, SP Tel/fax: 11 3253-9354 Mr. Francisco Lopes, President [email protected]



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Associação Brasileira de Parques Rua Cabo Aylson Simões, 490 Cep 29100-320 Vila Velha, Espírito Santo Tel/fax: 27 3200-4600 E-mail: [email protected] Mr. Marco Azevedo, Director

Environment CETESB - Sao Paulo State Environmental Agency Avenida Professor frederico Hermann Jr., 345 05459-900 Sao Paulo, SP Phone: 55/11/3030-6000 Fax: 55/11/3030-6402 Contact: Ms. Fatima A. Carrara, Manager Int’l Affairs http://www.cetesb.sp.gov.br FEEMA - Rio de Janeiro State Environmental Agency Av Nossa Senhora de Copacabana, 493 10º andar Caixa Postal 23.011 22020-000 Rio de Janeiro, RJ Phone: 55/21/2255-9292 ramal 3299 Fax/tel: 55/21/2580-9229/2589-3773 Contact: Mr. Americo Fernando M. Lopes, Chief of the Industrial Control Division. Mr. José Alencar, Chief of Engineering Services, Liquid Effluent Dept. [email protected] http://www.feema.rj.gov.br SABESP - Sao Paulo State Sewage and Water Treatment Company Rua Costa Carvalho, 300 Pinheiros 05429-900 Sao Paulo, SP Phone: 55/11/3388-8000 Fax: 55/11/3813-3587 Contact: Mr. Sergio Pinto Parreira, Director of Environmental Department [email protected] http://www.sabesp.com.br FIESP - Federation of the Industries of the State of Sao Paulo Avenida Paulista, 1313 13º floor Room 1309 01311-923 Sao Paulo, SP Phone: 55/11/3549-4499 Fax: 55/11/284-6200 Contact: Dr. Angelo Albiero Filho, Director of the Environment Department [email protected] http://www.fiesp.org.br SINDESAM - National Department of Sanitation Equipment Manufacturers Avenida Jabaquara, 2925 04045-902 Sao Paulo, SP Phone: 55/11/5582-6365 Fax: 55/11/5582-6379 Contact: Mr. Ubiraci Moreno Pires Correa, President – até maio de 2004 http://www.abimaq.org.br www.icongrouponline.com


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CONAMA - National Council of Environment Esplanada dos Ministérios - Bl B - 6º andar sala 637 70068-900 Brasilia, DF Phone: 55/61/317-1392 ou 317-1433 Fax: 55/61/226-4961 or 55/61/226-2837 Contact: Sra. Muriel Saragoussi – Director http://www.mma.gov.br [email protected] FEPAM - Rio Grande do Sul State Environmental Agency Rua Carlos Chagas 55 90030-020 Porto Alegre, RS Phone: 55/51/3225-1588 Fax: 55/51/3212-4221 Contact: Dr. Lucia Coelho, Gerente de Programas http://www.fepam.rs.gov.br [email protected]

Food ABIA - Brazilian Association of Food Industries Av. Brig. Faria Lima, 1478 - 11 floor 01451-913 Sao Paulo, SP Phone: 55/11/3030-1353 Fax: 55/11/3814-6688 Contact: Mr. Edmundo Klotz, President http://www.abia.org.br [email protected] ABRABE - Brazilian Beverage Association Av. 9 de Julho, 5017 - 1 floor 01407-903 Sao Paulo, SP Phone: 55/11/3079-6144 Fax: 55/11/3167-6381 Contact: Mr. Fabrizio Fasano, President [email protected]

Franchising Activities ABF - Brazilian Franchising Association Av. Brigadeiro Faria Lima, 1739 – 3º andar São Paulo – SP CEP 01452-001 Phone. 55/11/ 3814-4200 Fax. 55/11/ 3814-4200 – ext. 37 Contact: Mr. Gerson Keila, President http://www.abf.com.br [email protected]



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Furniture ABIMOVEL – Brazilian Furniture Industry Association Av. Brigadeiro Faria Lima, 1234 – 16o andar, sala 161 01452-904 São Paulo, SP Phone: 55/11/ 3813-7377 Fax: 55/11/3813-7377 Contact: Domingos Sávio Rigoni, President http://www.abimovel.org.br [email protected] PROMOVEL – Programa de Incremento à Exportações Rua Afonso Grosskopf, 352 São Bento do Sul – SC CEP 89290-000 Phone: 55/47/ 635-1391 Fax: 55/47/ 635-1582 Contact: Pedro Paulo Pamplona, Executive Director [email protected] http://www.abimovel.org.br

Industrial Machinery ABIMAQ – Brazilian Association of Machinery and Equipment Av. Jabaquara, 2925 04045-902 São Paulo, SP Phone: 55/11/5582-6327 Fax: 55/11/5582-6239 [email protected] http://www.abimaq.org.br

Internet / E- Commerce ABRANET(SP) Brazilian Association of Internet Service Providers Associação Brasileira de Provedores Internet Av. Paulista, 1313 / 10º andar CEP: 01311-923 São Paulo – SP Phone: 55/11/3285-3866 Fax: 55/11/3285-3866 Contact: Mr. Cassio Vecchiatti, President [email protected] http://www.abranet.org.br ABRANET(RJ) Brazilian Association of Internet Service Providers Associação Brasileira de Provedores Internet Av. Presidente Vargas, 3131/1505 - Teleporto CEP 20210-030 Rio de janeiro - RJ Phone: 55/21/524-8209 Fax: 55/21/524-8209 Contact: Mr. Murilo Marques, President [email protected] http://www.abranet.org.br www.icongrouponline.com


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ANATEL – Brazilian Telecommunications Agency SAUS Quadra 06 - Bloco H e E Ed. Sergio Motta 70070-940 - Brasilia - DF - Brazil Phone: 55/61 312-2000 Fax: 55/61 312-2002 Contact: Mr. Luis Guilherme de Oliveira, President [email protected] http://www.anatel.gov.br ABINEE – Brazilian Association of Electrical and Electronics Industry Association Av. Paulista, 1313, 7o andar, conj. 703 01311-923 São Paulo, SP Phone: 55/11/251-1577 Fax: 55/11/285-0607 Contact: Mr. Benjamim Funari Neto, President [email protected] http://www.abinee.org.br CAMARA E-NET- Brazilian Chamber of Electronic Commerce Camara Brasileira de Comércio Eletrônico R. Ferreira Araujo, 221 / conj 42 CEP: 05428-000 São Paulo – SP Phone: 55/11/3026-9111 Fax: 55/11/3026-9110 Contact: Mr. Gastão Mattos, President http://www.camara-e.net [email protected] SECRETARIA DA CIENCIA, TECNOLOGIA E DESENVOLVIMENTO ECONÔMICO (Governo do Estado de São Paulo) Av. Rio Branco, 1269 01205-001 São Paulo – SP Phone: 55/11/3331-0033 Fax: 55/11/221-4927 Contact: José Zeno Fontana, Assessor Especial http://www.ciencia.sp.gov.br [email protected] MINISTRY of COMMUNICATIONS Esplanada dos Ministérios Bloco R, 8º floor Brasília – DF CEP 70044-900 Phone: 55/61/311-6201/311-6000 Fax: 55/61/226-3980 Contact: João Pimenta da Veiga Filho



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Hardware ABINEE – Brazilian Association of Electrical and Electronics Industry Association Av. Paulista, 1313, 7o andar, conj. 703 01311-923 São Paulo, SP Phone: 55/11/251-1577 Fax: 55/11/285-0607 Contact: Mr. Carlos de Paiva Lopes, President [email protected] http://www.abinee.org.br ABIMAQ - Associacao Brasileira da Industria de Maquinas e Equipamentos SINDIMAQ - Sindicato Nacional da Industria de Maquinas Av. Jabaquara, 2925 04045-902 Sao Paulo, SP, Brazil Phone: 55/11/5582-6410 Fax: 55/11/5582-6239 Contact: Maria Cecilia Cortez, Executive Manager Comments: ABIMAQ/SINDIMAQ is the Brazilian Association of Machine and Equipment Manufacturers [email protected] http://www.abimaq.org.br

Hotels and Restaurants ABIH – Brazilian Association for Hotels Industry- Rio de Janeiro Av. Nilo Peçanha,12 Room 1005 20020-100 – Rio de Janeiro – RJ Phone: 55/21/2533-7632 Fax: 55/21/2533-7632 Contact: Luis Carlos Nunes ( president) [email protected] Abrasel Nacional Rua Dom Marcos Teixeira, 25 – 2o. andar, Barra 40140-280 Salvador – BA Phone: 55/71/267-4566 Fax: 55/71/ 264-3640 - 264-2631 Contact: Sergio Bezerra, President [email protected] ABREDI – Associação de Bares e Restaurantes Diferenciados Rua Armando Penteado, 291 01242-010 Sao Paulo – SP Phone: 55/11/3663-6391 Fax: 55/11/3663-1872 Contact: Horst Tassilo Siebert, President http://www.abredi.com.br [email protected]



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ABPR – Associaçao Brasileira dos Proprietarios de Restaurantes Estrada do Vidigal, 75. 3rd. floor Leblon 22450-230 Rio de Janeiro – RJ Phone: 55/21/2516-6293 or 55/21/2512-6522 Fax: 55/21/2512-6522 Contact: Gustavo Werneck, President http://www.abpr.net [email protected] ABERC – Associaçao Brasileira das Empresas de Refeiçoes Coletivas Rua Estela, 515 – Bl. B; cj. 62 04011-904 Sao Paulo – SP Phone: 55/11/5573-9835 Fax: 55/11/5571-5542 Contact: Antonio Guimaraes, Director http://www.aberc.com.br [email protected]

Iron and Steel IBS - Brazilian Steel Institute Av. Rio Branco, 181 - 28 Floor 20040-007 Rio de Janeiro, RJ Phone: 55/21/2544-3255 Fax: 55/21/2262-2234 Contact: José Armando Figueiredo Campos, President [email protected] http://www.ibs.org.br ABTS – Brazilian Association for Metal Surface Treatment Av. Paulista, 1313 – Cj. 913 São Paulo – SP / CEP 01311-923 Phone: 55/11/251-2744 Fax: 55/11/251-2558 Contact: Mr. Roberto Della Manna, President [email protected] http://www.abts.org.br ABIFA - Brazilian Association of the Foundry Industry Av. Paulista, 1274 – 20º andar São Paulo – SP / CEP 01310-926 Phone: 55/11/3266-7331 Fax: 55/11/3266-5659 Contact: Mr. José Aoad Raya, Vice - President Mr. Luis Carlos Koch, President [email protected] http://www.abifa.org.br



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Laboratory Equipment INMETRO – Instituto Nacional de Metrologia Av. Nossa Senhora das Graças, 50 25250-020 Xerem – RJ Phone: 55/21/2679-9001 Contact: Tomaz Gonzalez, Chief of Docummentary Service Mr. Waldemar Pires Ribeiro, Director of Institutional Issues http://www.inmetro.gov.br

Material Handling ABML- Brazilian Associationo of Cargo Movement and Logistics Av. Conselheiro Rodrigues Alves, 848 São Paulo/SP-04014-002 Phone: ++55-11-50823972 Contact: Pedro Francisco Moreira, President [email protected] Web-site: www.abml.org.br ASLOG - Logistics Brazilian Association R. Machado Bittencourt, 205 - cj 96 04044-000 - São Paulo - SP Phone: ++55-11- 5084.2267 / 5084.2287 Fax: ++55-11-5084.2294 Contact: Carlos Alberto Mira, President E-mail: [email protected] Web-site: www.aslog.com.br ABAD- Brazilian Association of Wholesalers and Distributors Av. 9 de Julho, 3147 , 11 andar Phone: ++55-11-3885.9616 Fax: ++55-11-3885.6840 Contact: Paulo Herminio Pennacchi, President [email protected] Web-site: www.abad.com.br

Metallurgy ABM - Brazilian Association of Metallurgy and Materials Rua Antonio Comparato, 218 / Campo Belo 04605-030 Sao Paulo, SP Phone: 55/11/5536-4333 Fax: 55/11/240-4273 Contact: Mr. Karl Heinz Pohlmann, President [email protected] http://www.abmbrasil.com.br



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Mining ABM - Brazilian Association of Metallurgy and Materials Rua Antonio Comparato, 218 / Campo Belo 04605-030 Sao Paulo, SP Phone: 55/11/5536-4333 Fax: 55/11/240-4273 Contact: Mr.Karl Heinz Pohlmann, President http://www.abmbrasil.com.br [email protected] IBRAM – Brazilian Mining Institute SCS – Quadra 2 – Bloco D – Ed. Oscar Niemeier – Sala 1107 Brasília – DF CEP 70316-900 Phone: 55/61/226-9367 Fax: 55/61/226-9580 Contact: Mr. Edmundo Paes de Barros Mercer, President http://www.ibram.org.br [email protected]

Oil and Gas Field Equipment ABRAPET - Brazilian Association of Oil Drillers Avenida Rio Branco, 156 room 1119 20043-900 Rio de Janeiro, RJ Phone: 55/21/2240-7062 Fax: 55/21/2283-1542 Contact: Mr. José Eduardo Frascá Poyares Jardim, President [email protected]

Packaging Equipment ABRE – Associação Brasileira de Embalagens R. Oscar Freire, 379 – 4º andar – Cj. 41 São Paulo – SP / CEP 01426-001 Phone: 55/11/ 3082-9722 Fax: 55/11/ 3081-9201 Contact: Mr. Fábio Mestriner, President http://www.abre.org.br [email protected]

Pets Assofauna - Associacao dos Revendedores de Produtos, Prestadores de Servicos e Defesa Destrinado ao Uso Animal. Contact: Mr. João Regis, President Rua dos Jamaris, 884 04078 002 - São Paulo, SP Phone: 5511-5051 3511 Fax: 5511-5051 0579 E-mail: [email protected]



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ANFAL - PET - Associacao Nacional dos Fabricantes de Alimentos para Animais Contact: Mr. João Prior, Executive Director Rua Diogo Moreira, 132, 7andar 05423-010 - São Paulo, SP Phone: 5511-3031 3933 Web site: http://www.anfal.com.br

Plastic Production Associacao Brasileira da Industria de Maquinas e Equipamentos - ABIMAQ Sindicato Nacional da Industria de Maquinas - SINDIMAQ Av. Jabaquara 2925 04045-902 Sao Paulo, SP, Brazil Phone: 55/11/5582-6377 Fax: 55/11/5582-6379 Contact: Ms. Maristela Simões Miranda, President of the Plastics Production Machinery Division ABIMAQ/SINDIMAQ is the Brazilian Association of Machine and Equipment Manufacturers http://www.abimaq.org.br [email protected] Associação Brasileira da Indústria Química e Produtos Derivados - ABIQUIM Rua Santo Antonio 184 / 18 andar 01314-900 Sao Paulo, SP, Brazil Phone: 55/11/3232-1144 Fax: 55/11/3232-0919 http://www.abiquim.org.br [email protected] Contact: Mr. Carlos Mariani Bittencourt, President ABIQUIM is the Brazilian Association of Chemical Industries Instituto Nacional do Plástico Av. Brigadeiro Faria Lima 1779 – cj.62, 6andar 01451-912 - São Paulo, SP, Brazil Phone/Fax: 55/11/3814-8142; 3814-8604 http://www.plastics.org.br [email protected] Contact: Mr. Paulo da Colina, Director Instituto Nacional do Plastico- National Plastics Institute is an association of plastics, resins and plastics machines manufacturers, that provides training courses. ABIPLAST - Associação Brasileira da Indústria de Plástico Avenida Paulista, 2439 / 8º andar 01311-936 - São Paulo, SP, Brazil Phone: 55/11/3060-9688 Fax: 55/11/3060-9686 Homepage: http://www.abiplast.org.br E-mail: [email protected] Contact: Mr. Merheg Cachum, President Brazilian Association of the Plastics Industry



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Sindicato da Industria de Resinas Sinteticas no Estado de Sao Paulo Av. Paulista 1313 - 8 andar – cj. 810 01311-923 Sao Paulo, SP, Brazil Phone: 55/11/287-2619, 287-9539 Fax: 55/11/3284-9812 http://www.siresp.org.br E-mail: [email protected] Contact: Almir Abdala, Director Mr. Jean Daniel Peter, President Sao Paulo Association of Manufacturers of Synthetic Resins

Printing and Graphics Arts Equipment ABIGRAF – Associação Brasileira da Indústria Gráfica Rua Paraíso, 533 São Paulo – SP / CEP 04103-000 Phone: 55/11/5087-7777 Fax: 55/11/5087-7733 Contact: Mário Cezar Martins de Camargo, President [email protected] http://www.abigraf.org.br

Pulp and Paper BRACELPA – Associação Brasileira de Celulose e Papel Rua Afonso de Freitas, 499 São Paulo – SP / CEP 04006-900 Phone: 55/11/ 3885-1845 Fax: 55/11/3885-3689 Contact: Mr. Francisco Braz Saliba, Assesssor Diretoria Executiva http://www.bracelpa.com.br [email protected]

Security and Safety Equipment ANIMASEG (National Association of Manufactures of Safety Products Rua Francisco Tapajós, 627 Sao Paulo, SP CEP 04153-001 Phone: 55/11/5058-5556 Fax: 55/11/5058-5556 Contact: Raul Casanova Jr., Executive Director [email protected] http://www.animaseg.com.br ABRASEG - Brazilian Association of Agents, Retailers and Distributors of Safety Products Address is the same as the above (ANIMASEG)



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Software ABES - Brazilian Association of Software Companies Av. Brig. Faria Lima, 1713 - Cj. 33/34 - 3 floor 01451-910 Sao Paulo, SP Phone: 55/11/3816-1185 Fax: 55/11/3097-8288 Contact: Mr. José de Miranda Dias, President [email protected] http://www.abes.org.br ASSESPRO-SP - Brazilian Association of Data Processing Companies R. Teodoro Sampaio 417, 3 floor – Cj. 33 05405-000 Sao Paulo, SP Phone: 55/11/3064-0003 Fax: 55/11/3064-0003 Contact: Mr. Ernesto Haberkorn, President [email protected] http://www.assespro.org.br ASSESPRO-RJ- Brazilian Association of Data Processing Companies Av. Treze de Maio 33, Bloco A Gr. 509 20031-000 Rio de Janeiro - RJ Phone: 55/21/2240-2005 Fax: 55/21/2532-5730/ 2533-1940 Contact: Mr. Newton Palhano, Executive Director [email protected] http://www.assespro-rj.org.br EAN/Brasil - Brazilian Association of Commercial Automation. Al. Santos, 2441 – 9º andar São Paulo – SP / CEP 01419-002 Phone: 55/11/ 3064-8772 Fax: 55/11/3064-0821 [email protected] http://www.eanbrasil.org.br

Sporting Goods and Recreational Equipment ABIAE – Brazilian Association of Sporting Goods Industry Rua Verbo Divino, 1661, 3o andar 04719-002 São Paulo, SP Phone: 55/11/5185-9400 Fax: 55/11/5185-9411 Contact: Mr. Roberto Estefano, President [email protected] http://www.penalty.com.br



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Parts and Related Accessories ADIBRA – Associação das Empresas de Parques de Diversões do brasil Al. Santos, 1343 Cj. 1502 São Paulo – SP / CEP 01419-001 Phone: 55/11/ 253-9354 Fax: 55/11/ 284-0536 Contact: Francisco Carlos F. Lopes, President [email protected] ABRACICLO - Bicycle Association Av. Morumbi, 8390 - Cj. 62 04703-002 - Sao Paulo – SP Contact: Roberto Iouejiri, president tel: 55/11/5041-0766 fax: 55/11/5041-0256

Telecommunications ANATEL – Brazilian Telecommunications Agency SAS Quadra 06 - Bloco H Ed. Sergio Motta 70313-900 - Brasilia - DF - Brazil Phone: 55/61 312-2578 Fax: 55/61 312-2367 Contact: Mr.Luis Guilherme Schymura de Oliveira, President http://www.anatel.gov.br [email protected] TIA – Telecommunications Industry Association TEC-LA Rua Estados Unidos, 1812 01427-002 - São Paulo – SP - Brazil Phone: 55/11/3897-4023 Fax: 55/11/3062-4866 Contact: Mr. Luiz C. M. Bonilha http://www.tiaonlinel.org [email protected] TELEBRASIL - Brazilian Association of Telecommunications Av. Pasteur, 383 - Urca 22290-240 Rio de Janeiro – RJ - Brazil Phone: 55/21/ 2295-4432 Fax: 55/21/2542-4092 Contact: Cleofas de Medeiros Uchoa, President http://www.telebrasil.org.br [email protected]



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ABERIMEST – Brazilian Association of Telecom Companies and Professionals Associação Brasileira das Empresas e Profissionais das Telecomunicações Rua Brigadeiro Galvão, 923 – 01151-000 - São Paulo – SP - Brazil Phone: 55/11 3825-6533 Fax: 55/11 3825-6460 Contact: Mr. Flavio Castelli Chueri, President http://www.aberimest.org.br [email protected] ABEPREST – Brazilian Association of Telecommunication Service Providers Associação Brasileira de Empresas Prestadoras de Serviços em Telecomunicações Al. Campinas, 463 - 4º andar - Conj. 4A - Jd. Paulista 01404-000 São Paulo - SP - Brazil Phone: 55/11 3253-4633 - 5874 Fax: 55/11 251-3899 Contact:Mr. Harold Walter Weiss, President http://www.abeprest.org.br [email protected] ABRAFORTE – Brazilian Association of Telecommunication Multi-service Net Provider Associação Brasileira dos Fornecedores de Redes Multiserviços em Telecomunicação Av. Das Nações Unidas, 12551, 24º andar 04578-903 São Paulo – SP - Brazil Phone: 55/11/3043-8832 Fax: 55/11/3043-8834 Contact: Renato Pazotto, President http://www.abraforte.org.br [email protected] ABTA - Brazilian Association of Pay TV - Associação Brasileira das TVs por Assinatura Rua Paes de Araujo, 29 - cj. 181 04531-090 Sao Paulo - SP - Brazil Phone/Fax: 55//11 3078-9307 Contact : José Augusto Moreira, President http://www.abta.com.br [email protected] ABECORTEL – Brazilian Association of Telecommunications Engineering Services Companies - Associação Brasileira Das Empresas De Serviços De Engenharia De Telecomunicações Rua Domingos de Moraes, 2243, 1º andar - cj. 16 04035-000 - São Paulo - SP - Brazil Phone: 55/11 5082-2902 Phone/Fax: 55/11 5579-8078 Contact: Gilberto Justen, President http://www.abecortel.org.br [email protected]



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SET - Brazilian Society of Broadcast Engineering - Sociedade Brasileira de Engenharia de TV e Telecomunicações Rua Jardim Botânico 700 sala 306 22461-000 Rio de Janeiro RJ Phone: 55/21 2512-8747 Fax: 55/21 2294-2791 Contact: Mr. Olimpio José Franco, President http://www.set.com.br [email protected]

Textile and Yarn Industry SINDITEXTIL - Syndicate of Textile and Yarn manufacturers of the State of Sao Paulo Rua Marques de Itu, 968 01223-000 Sao Paulo, SP Phone: 55/11/3666-0101 Telex: 55/11/ 3667-8209 Contact: Mr. Paulo Skas, President [email protected] http://www.sinditextil.org.br ABIT – Associação Brasileira da Industria Textil (Brazilian Association for Industrial Textiles) Rua Marquês de Itu, 968 01223-000 – São Paulo – SP Phone: 55/11/3666-0101 Fax: 55/11/3667-8209 Contact: Mr. Paulo Skaf, President http://www.abit.org.br [email protected] ABRAFAS – Associação Brasileira de Produtores de Fibras Artificiais e Sinteticas (Brazilian Association of Artificial and Synthetic Fiber Producers) Rua Marquês de Itu, 968 01223-000 – São Paulo – SP Phone: 55/11/3666-0101 Fax:55/11/3667-8209 Contact: Mr. Carlos Roberto de Castro, President http://www.abrafas.org.br [email protected]

Travel and Tourism ABAV - Brazilian Association of Travel Agents Av. Sao Luiz, 165 - 1 floor - Centro 01046-001 Sao Paulo, SP Phone. 55/11/3231-3077 Fax. 55/11/3259-8327 Contact: Mr. Tasso Gadzanis, President [email protected] http://www.abav.com.br



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BRAZTOA-COBRAT - Brazilian Tour Operators Association Rua Marconi, 34 - 1 floor 01047-000 Sao Paulo, SP Phone: 55/11/3259-9500 Fax: 55/11/3255-1226 Contact: Mr. Ilya Hirsch, President. [email protected] http://www.braztoa.com.br

Transportation ANTF – Associação Nacional dos Transportes Ferroviários Setor de Autarquias Sul – Quadra 5 – Bl N – Edificio OAB – Room 509 70070-050 – Brasila – DF Phone: 55/61/226-5434 Fax: 55/61/321-0135 http://www.antf.org.br [email protected] ANTP – Associação Nacional de Transporte Público SCS Quadra 4, bl A- Edif.Mineiro, room 504 70300-944 – Brasilia – DF Phone: 55/61/223-0844 Fax: 55/61/223-0844 http://www.antp.org.br [email protected] Em SP Rua Augusta,1626 01304-902 Sao Paulo - SP Phone: 55-11-283-2293 Fax: 55-11-3253-8095 ABCR – Associação Brasileira de Concessionárias de Rodovias Rua Senador Vergueiro, 107/801 22230-000 Rio de Janeiro – RJ Phone: 55/21/2205-4819 or 55/11/5505-0190 Fax: 55/21/2558-9623 Contact: Gil Firmino, Technical Coordinator http://www.abcr.org.br [email protected] Em SP Rua Geraldo Flausino Gomes,42 cj. 82 Brooklin 04575-060 Sao Paulo - SP Phone: 55-11-5505-0190 Fax: 55-11-5505-1640 Contact: Mr. José Reis de O. Lima



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DNER - Ministério dos Transportes Rod. Presidente Dutra, Km 163 - P. de Lucas 21240-000 Rio de Janeiro – RJ Phone: 55/21/2473-7245 or 55/21/2471-6565 ext. 2092 Fax: 55/21/2465-2795 Contact: Carlos Henrique L. de Noronha, Higway Concessions Cordinator [email protected]

American Chamber of Commerce AMCHAM – São Paulo Rua da Paz, 1431 04713-001 São Paulo, SP Tel: 55/11/5180-3804 Fax: 55/11/5180-3777 Álvaro de Souza, President [email protected] www.amcham.com.br AMCHAM – Belo Horizonte Rua Paraíba, 1352, sala 1502 - Savassi 30130-141 Belo Horizonte, MG Tel: 55/31/3287-1012/1649 Fax: 55/31/3287-1977 Jorge Perutz, President [email protected] AMCHAM – Brasília SCS Quadra 01, Bloco G, salas 1206/7, Ed. Baracat 70309-900 Brasília, DF Tel: 55/61/321-0939 Fax: 55/61/321-0171 Roberto Villaça, President Robinson Luz, Regional Manager [email protected] [email protected] AMCHAM – Campinas Av Selma Parada, 201, s 451 13091-905 Campinas, SP Tel: 55/19/3207-4343 Fax: 55/19/3207-4440 [email protected] AMCHAM – Curitiba Av Selma Parada, 201, s 451 80250-080 Curitiba, PR Tel: 55/41/312-1657 Fax: 55/41/312-1699 [email protected]



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AMCHAM – Porto Alegre R Candido Hartmann, 570 80730-440, Curitiba, PR Tel/Fax: 55/51/325-0343 [email protected] AMCHAM – Recife Av. Governador Agamenon Magalhães, 2656 – sala 1004 - Ed. Empr. Agamenon Magalhães - Espinheiro 52020-000 Recife, PE Tel: 55/81/3426-9561 Fax: 55/81/3426-9561 [email protected] AMCHAM - Rio de Janeiro Praça Pio X, 5o andar 20040-020 Rio de Janeiro, RJ Tel: 55//21/2203-2477 Fax: 55/21/3213-9200/9201 Joel Korn, President [email protected] www.amchamrio.com.br AMCHAM – Vitória Rua Abiail do Amaral Carneiro, 191, salas 809-811 29050-060 Vitória, ES Tel: 55/27/324-8681 Fax: 55/27/345-6907 [email protected] AMCHAM - Salvador Rua Torquato Bahia, 69 Edifício Raimundo Magalhães, Sala 705 40015-110 Salvador, BA Tel. (071) 242-0077 Fax (071) 243-9986 Jorge Bonfim, Presidente www.amcham.com.br

4.8.3

Market Research Companies

Sao Paulo Arthur D. Little S/C Ltda. Av. Brig. Faria Lima, 14 78 – 21º and. Cep 01451-913 Sao Paulo – SP Phone: 55/11/3039-1000 Fax: 55/11/3039-1008 Contact: Jefferson Nascimento http://www.adlittle.com [email protected] www.icongrouponline.com


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BSR Projetos Empresariais S/C Ltda. Rua Pequetita 179, 4andar, cj 46 04552-060 – São Paulo –SP Phone: 55/11/3845-7422 Fax: 55/11/3845-0720 Contact: Mr. Samuel Ribeiro http://www.bsr.com.br [email protected] Booz Allen & Hamilton do Brasil Consultores Ltda. Av. das Naçoes Unidas, 12901 – 18º and. Torre Norte Cep 04578-000 Sao Paulo – SP Phone: 55/11/5501-6200 Fax: 55/11/5501-6300 Leticia Costa, Presidente http://www.bah.com Datamark Consultores S/C Ltda Av. Brig. Faria Lima, 1993 – cj.35 – 3º andar 01452-001 – São Paulo – SP Phone: 55/11/3819-1810 Fax: 55/11/3819-8008 Contact: William Graham Wallis [email protected] IDC Brasil Al. Ribeirão Preto, 130 – 5º andar 01331-000 – São Paulo – SP Phone: 55/11/3371-0000 Fax: 55/11/3371-0029 Contact: Ruy Mendes / Cristina Muniz, manager www.idcbrasil.com.br [email protected] Duda mendonça e Associados LTDA Av. 9 de Julho, 5960 01406-200 – São Paulo –SP Phone/Fax: 55/11/3067-4400 Contact: Duda Mendonça [email protected] Lindsey Consultores S/C Ltda. Rua Bela Cintra, 1932 Cep 01415-002 Sao Paulo – SP Phone: 55/11/3088-8122 Fax: 55/11/3085-7787 Contact: Mr. Richard Lindsey – Director



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M & L Magnus Landmann Consultores Empresariais. Av. Brig. Faria Lima, 1931 – 10º and. cj. 102 Cep 01451-917 Sao Paulo – SP Phone: 55/11/3816-3144 Fax: 55/11/3819-9621 Contact: Mr. Jorge F. Landmann – President http://www.ml.com.br [email protected] Marketing Service Associates do Brasil S/C Rua Prof. Luciano Venere Decourt, 33 Cep 04648-050 Sao Paulo – SP Phone: 55/11/5686-2322 Fax: 55/11/5686-7625 Contact: Mr. Andre Fay – Director http://www.marketing-service.com.br [email protected] MarketPlace Assessoria e Consultoria Ltda. Rua Gabriel dos Santos, 168 01231-010 São Paulo – SP Phone/Fax: 55/11/3666-2762 Contact: André Neufeld [email protected] MV Marketing and Consulting Services. Rua Morgado de Mateus 314, cj 32 Cep 04015-050 - Sao Paulo – SP Phone: 55/11/5549-9430 Fax: 55/11/5083-0783 Contact: Ms. Magda Vollker – Director www.mvconsulting.com.br Pyramid Research Av. Pres. Juscelino Kubitschek, 1830 – 1º andar – torre 4 04543-900 – São Paulo –SP Contact: Meredith Persily [email protected] Tecnology Parteners Rua Palacete da Aguias, 842 cj.132 04635-023 – São Paulo – SP Phone/Fax: 55/11/5565-6414 Contact: Norton Ribeiro de Freitas Jr.



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Simonsen Associados S/C Ltda. Av. 9 de Julho, 5017 – 12º and. Cep 01407-200 Sao Paulo – SP Phone: 55/11/3078-4733 Fax: 55/11/3079-4958 Contact: Mr. Harry Simonsen Jr. – President http://www.simonsen.com.br [email protected]

Brasilia, Distrito Federal ETROS Consultoria Ltda. Centro Empresarial – SCN Quadra 2 Lote D Torre A Room 1001 Brasilia – DF Zip 70710-500 Phone: 55/61/327-4747 Fax: 55/61/327-4746 Contact: Sergio A. A. Moura – Director http://wwwetrosconsultoria.com.br [email protected]

Minas Gerais BRANDT Meio Ambiente Rua Alameda da Serra, 322 – 6º and. – Vale do Sereno Cep 34100-000 Belo Horizonte – MG Phone: 55/31/3281-2258 Fax: 55/31/3286-7999 Contact: Wilfred Brandt – President http://www.brandt.com.br [email protected] EPC – Engenharia Projeto Consultoria Rua da Bahia, 504 – 10º and. Cep 30160-010 Belo Horizonte – MG Phone: 55/31/2122-5500 Fax: 55/31/2122-5600 Contact: Mrs. Maria V. Schettino – Mr. Nunziato Schettino http://www.epc.com.br [email protected] STRATEGOS – Consultoria e Representaçoes Ltda. Rua Ouro Fino, 395 room 309 Cep 30310-110 Belo Horizonte – MG Phone: 55/31/3227-2047/2575 Fax: 55/31/3227-8008 Contact: Mr. Celedonio Santos – Director [email protected] www.icongrouponline.com


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Pollo Com. Exp. R. Guajajaras, 977 conj. 506 30180-100 Belo Horizonte – MG - Brazil Phone: 55/31/3222-4871 Fax: 55/31/3222-4432 Contact: Mr.Joao Fabino F. Neto – Director http://www.wbcexpo.com.br [email protected]

Rio de Janeiro Maxima Consultoria Av Atlantica, 1130, BL A, 7 andar 22021-000 – Rio de Janeiro, RJ Phone: 5521/3873-8662 Fax: 5521/3873-8669 Contact: Mr. Joao Nunes Ferreira Neto, Director http://www.maximaconsultoria.com.br [email protected] Ernst & Young Av. Rio Branco, 128 17and. 20042-900 Rio de Janeiro, RJ Contact: Mr. Paulo Jose Machado - Director www.ey.com.br [email protected]

4.8.4

Commercial Banks

Most banks in Brazil operate as multiple banks, accumulating the functions of commercial and investment banks and are also active in the capital market.

Banks in Brazil Operating with Export-Import Bank Credit Lines Unibanco S.A. Av. Eusebio Matoso 891 –9and 05423-901 – Sao Paulo, SP Phone: 3097-1611 Fax: 3814-0528 Contact: Mr. Marcio Fugita, Superintedent – Global Financial Institution http://www.unibanco.com.br [email protected] Banco HSBC Bamerindus S.A. Av Brigadeiro faria Lima, 3064, 1 andar 01451-000 – Sao Paulo, SP Phone: 5511/3847-5553/5000 Fax: 3847-5167 Contact: Mr. Luiz Eduardo Assis http://www.hsbc.com.br



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243

Banco Bradesco S.A. Av. Ipiranga, 282 – 10º and. Cep 01046-920 Sao Paulo – SP Phone: 55/11/3235-9449 Fax: 55/11/3235-9169 Contact: Edesio Depaula e Silva – Manager http://www.bradesco.com [email protected] Banco BMC Av. das Naçoes Unidas, 12995 – 25º and. Cep 04578-000 Sao Paulo – SP Phone: 55/11/5503-7500/7780 Fax: 55/11/5503-7676 Contact: Arthur Paulo R. Sabadin – Director http://www.bmc.com.br [email protected]

Financial Companies and Consultants that Facilitate Access to Eximbank NetPlan Corporate Finance Ltda. Rua Joaquim Floriano, 101 – 11º and. Cep 04534-010 Sao Paulo – SP Phone: 55/11/3168Fax: 55/11/3168-0382 Contact: Ronald Leal – President 0383 http://www.netplan.com.br [email protected] Guardian SC Ltda. Av. Brig. Faria Lima, 1651 cj. 504/505 Cep 01451-001 Sao Paulo – SP Phone: 55/11/3814-2218 Fax: 55/11/3815-5977 Contact: Joao Carlos Saldanha da Gama – Consult Email: [email protected] Banco Santos Av. Paulista, 1842 – 8º and. Phone: 55/11/3269-6000 Fax: 55/11/3269-1111 Cep 01310-200 Sao Paulo – SP Contact: Mrs. Regina Grinberg http://www.bancosantos.com.br [email protected]



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M.T. Brazil Corp. Finance Al. Joaquim Eugenio de Lima 680 – 4º and. Cep 01403-901 Sao Paulo – SP Fax: 55/11/3141-0175 Contact: Mr. Milton Tiago Santana (Agent of the FirstBank of New England in Brazil)

4.8.5

U.S. Mission in Brazil

Brasília - BSB Tel: 55/61/312-7000 Ambassador: Donna Hrinak Deputy Chief of Mission: Richard Virden Economic Counselor: Roman Wasilewski Deputy Senior Commercial Officer: Janice Corbett Agricultural Counselor: William Westman Homepage: http://www.american-embassy.org.br

Sao Paulo - SP Tel: 55/11/3081-6511 Consul/General: Patrick Duddy Consul/Economic Affair: Milton Charlton Tel: 55/11/3082-3528 Agricultural Officer: Ron Verdonk Tel: 55/11/3897-4000 Senior Commercial Officer: John Harris Principal Commercial Officer: Paul Kullman Director of Commercial Officer: Brian Brisson

Rio de Janeiro - RJ Tel: 55/21/2292-7117 Principal Commercial Officer: Jim Cunningham

Belo Horizonte - BH Tel: 55/31/3213-1571 Principal Commercial Officer: Dan Crocker



Macro-Accessibility

4.8.6

245

Attorneys in Brazil

Minas Gerais A&A Advocacia & Administracao Rua Fernandes Dourinho, 735 s. 907 30112-000 – Belo Horizonte, MG Phone: 5531/3284-8280 Fax: 5531/3284-8280 Contact: Mr. Randolfo Diniz Neto http://www.dinisicampos.com.br [email protected] Dias Correa & Vaz R. Ceará, 1431 1and Bairro dos Funcionarios 30150-311 – Belo Horizonte MG Phone: 5531/3273-1234 Fax: 5531/3273-1222 Contact: Ms. Isabel Vaz [email protected] Grebler, Pinheiro, Mourao & Raso - Advogados R. Pernabuco, 353 – 7and 30130-150 – Belo Horizonte, MG Phone: 5531/3261-1400 Fax: 5531/3261-8199 Contact: Mr. Antonio Fernandez Guimaraes Pinheiro, Director http://www.gpmr.com.br [email protected] Azevedo Sette Advogados Sociedade Civil R. Paraiba, 1000 – 14and 30130-141 – Belo Horizonte, MG Phone: 5531/3261-6656 Fax: 5531/3261-6797 Contact: Mr Ordelio Azevedo Setti São Paul Mr. Ricardo Azevedo Sette – Phone: 5511/38455553 http://www.azevedosette.com.br [email protected]

Sao Paulo Amaral Gurgel & Freire – Advogados R lepoldo Couto magalhães, 110, 3th floor 04542-000 São Paulo Phone:5511/3043-7700 Fax:5511/3043-7701 Contacts: J.M.M. do Amaral Gurgel [email protected] www.amaralgurgel.com



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Amaro, Stuber e Advogados Associados Alameda Campinas, 1070, 8º e 9º andares 01404-001São Paulo Phone: 5511/3882-9911 Fax: 5511/3882-9983 Contacts: Abel Simão Amaro / Walter Douglas Stuber www.amarostuber.com [email protected] Araujo e Policastro e Portugal Advogados Av. Brig. Faria Lima, 2894 – 11º and. Cep 01452-938 Sao Paulo – SP Phone: 55/11/3168-2566 Fax: 55/11/3078-6120 Contact: Mrs. Camila Araujo http://www.araujopolicastro.com.br [email protected] Bekin e Gennari Advogados Av. Dr. Cardoso de Mello , 1750 – 7º andar Cep 04548-005 Sao Paulo – SP Fax: 55/11/3849-0039 Contacts: Mr. Paulo F. Bekin / Mrs. Elisabeth V. De Gennari [email protected] Castro, Barros e Sobral Advogados S.C. Av. Cidade Jardim, 400 – 14º andar Cep. 01454-902 – São Paulo – SP Phone: 55/11/3846-2416 Fax: 55/11/3814-4903 Contacts: Fábio Monteiro de Barros / Sérgio Soares Soral Filho Carvalho de Freitas e Ferreira Advogados e Associados Av. 9 de Julho, 5593 – 9º andar 01407-200 – São Paulo – SP Phone: 55/11/3078-6600 Fax: 55/11/3167-4735 Contact: Fabio Ferreira Kuhawski [email protected] www.carvalhodefreitaseferreira.com.br Cesar Montalvão Fernandes Av. Portugal, 341 – suite131 04559-000 – São Paulo – SP Phone: 55/11/5532-1055 Fax: 55/11/5533-2086



Macro-Accessibility

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Cunha, Marques e Kanamaru R Frei Caneca, 1380 cj 32 01307-002- São Paulo- SP Phone: 5511/3064-0364 Fax: 5511/3284-0259 Contact: Ricardo Thomazinho da Cunha www.cmpk.com.br Escritório de Assessoria Juridica Jamil Michel Haddad S/C Ltda. Av. Paulista, 807 – 2ºfloor – Cj. 221-225 01311-100 – São Paulo – SP Phone: 55/11/3285-2511 – 251-1323 Contact: Jamil Michel Haddad [email protected] Escritorio Villemor Amaral Av. 9 de Julho, 4413 Cep 01407-100 Sao Paulo – SP Phone: 55/11/3887-0977 Fax: 55/11/3887-0217 Contact: Hermano de Villemor Amaral / Claudio Mauricio Boschi Pigatti [email protected] Felsberg e Associados Advogados e Consultores Legais Av. Paulista, 1294, 2/3th flor 01310-915 – São Paulo – SP Phone: 55/11/3141-9100 Fax: 55/11/283141-9150 Contacts: Thomas Benes Felsberg / Gilda Machado www.felsberg.com.br Lacaz Martinz, Halembeck, Pereira Neto, Gurevich & Schoueri Rua Padre João Manoel, 923 - 8º andar 01411-001 – São Paulo – SP Phone: 55/11/3068-8373 Fax: 55/11/3068-8379 Contact: Cristiano Diogo de Faria [email protected] Machado, Meyer, Sendacz e Opice Advogados Rua da Consolaçao, 247 – 4º à 6º e 8º and. Cep 01301-903 Sao Paulo – SP Phone: 55/11/3150-7000 Fax: 55/11/3150-7071 Contact: Antonio de Souza C. Meyer http://www.machadomeyer.com.br [email protected]



Macro-Accessibility

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Mello & Macedo Advocacia R Sete de Abril, 296, 12 floor, conj 122 01044-000 – São Paulo – SP Phone/Fax: 55/11/3257-1445/9619 [email protected] www.macedoadvocacia.adv.br Noronha Advogados Av. Brigadeiro Faria Lima, 1355 – 3º andar 01451-903 – São Paulo – SP Phone: 55/11/3038-8090 Fax: 55/11/3812-2495 Contacts: Durval de Noronha Goys Jr. / José Paulo Alves Pequeno / Ruben Fonseca e Silva / Eliana Filippozzi. [email protected] www.noronhaadvogados.com.br Pinheiro Neto Advogados Rua Boa Vista, 254 – 8º and. Cep 01014-907 Sao Paulo – SP Phone: 55/11/3247-8400 Fax: 55/11/3247-8600 Contact: Fernando Pinheiro http://www.pinheironeto.com.br [email protected] Santos, Remor e Furriela Advogados Av. Dr. Cardoso de Melo, 1750 – 8º andar 04548-005 – São Paulo – SP Phone: 55/11/3846-9050 Fax: 55/11/3846-9054 Contacts: Manuel joaquim R. dos Santos / Fernando Nabai da Furriela [email protected] Sul America Marcas e Patentes S/C Ltda. Rua Luiz Goes, 1296 Cep 04043-150 Sao Paulo – SP Phone: 55/11/5584-0933 Fax: 55/11/5581-3858 Contact: Luis Armando Lippi Braga – Director [email protected] Tozzini e Freire Advogados Rua Libero Badaro, 293 – 21º and. Cep 01009-907 Sao Paulo – SP Phone: 55/11/3291-1000 Fax: 55/11/3291-1111 Contact: Syllas Tozzini – Partner http://www.tozzini.com.br [email protected]



Macro-Accessibility

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Trench, Rossi e Watanabe Av. Chucri Zaidan, 920 – 13º andar 04583-904 – São Paulo – SP Phone: 55/11/3048-6800 Fax: 55/11/5506-3455 Contacts: Sérgio Paula Souza Caiuby – [email protected] Luiz Antonio D’Arace Vergueiro – [email protected] www.trenchrossiewatanabe.com.br

Rio de Janeiro Custodio de Almeida & Cia. R. Alvaro Alvim, 21 – 19and 20031-010 Rio de Janeiro, RJ Phone: 5521/2240-2341 Fax: 5521/2240-2491 Contact: Dr. Custodio Cabral, Director [email protected] www.custodio.com.br Garcia & Keener Advogados Av. Rio Branco, 99 – 15and 20040-004 – Rio de Janeiro, RJ Phone: 5521/2203-2466 Fax: 5521/2233-3184 Contact: Dr. Jose Geraldo Garcia de Souza [email protected] Zairo Lara Filho & Advogados Associados Rua Mexico, 119, room 909 20017-900 – Rio de Janeiro, RJ Phone: 5524/2220-8019 Fax: 5521/2220-8019 Contact: Dr. Zairo Lara [email protected]

4.8.7

U.S. Government Agencies

Agriculture - USDA Patricia Sheikh, Trade Policy Tel: (202) 720-6887 Dan Birman, Trade Promotion Tel: (202) 690-0159 Richard Blabey, U.S. Import Policies and Program Division Tel: (202) 720-2916 AID – Assistance for International Development Dyane Barnes Tel: (202) 647-4359



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BEA – Bureau of Economic Affairs Ray Malaloni, Outward Investment Tel: (202) 606-9867 Greg Fouch, Inward Investment Tel: (202) 606-9831 BIS – Bureau of Industry and Security Addi Apiricio Tel: (202) 482-3984 Fax: (202) 482-5650 CENSUS - Population John Reed, Demographer Tel: (202) 457-1358 Trade Figures, Foreign Trade-Latin America Countries Tel: (301) 457-3041 Import Administration Steve Green, Latin American Industry Specialist Tel: (202) 482-4466 ITA – International Trade Administration John Andersen, Director of the Latin America and Caribbean Division Tel: (202) 482-2437 Tyler Shields, Brazil Desk Tel: (202) 482-3872 USCS – United States Commercial Service Daniel DeVito, Regional Director Tel: (202) 482-2736 Customs Edward Logan, International Affairs Tel: (202) 927-0400 Defense Randy Pearson, Brazil Desk Tel: (703)-6952520 Energy Moustafa Soliman, Latin America Tel: (202) 586-5904 EPA – Environmental Protection Agency Michael Young, Latin America Program Tel: (202) 260-6009 EXIMBANK – Export- Import Bank Greg O’Connor, International Business Development Officer Tel: (202) 565-3939 Cristin Wood, Senior Business Officer Tel: (202) 565-3913



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HHS-FDA – Health and Human Services – Food and Drugs Administration Minna Golden, Associate Director for the Americas Tel: (301) 827-1043 Interior (Mineral Management Service) Alfredo Gurmendi, Physical Scientist / Brazil Specialist Tel: (703) 648-7745 Marine Fisheries Dean Swanson, Latin America Tel: (301) 713-2276 NIST – National Institute for Standards & Technology Joanne R. Overman, NCSCI/NIST Tel: (301) 975-4037 Mary H. Saunders, Brazil Tel: (301) 975-2396 Walter G. Leight, Deputy Director Tel: (301) 975-4010 John Rumble, Chief, Calibration Program Tel: (301) 975-2203 NTIA – National Telecommunications & Information Administration Judy Kilpatrick, Brazil Tel: (202) 482-1087 OPIC – Overseas Private Investment Corporation Bruce Camerun, Business Development Officer Tel: (202) 336.8745 PTO – Patent & Trademark Office Robert Stoll, Administrator for External Affairs Tel: (703) 305-9300 STATE/BWHA – Bureau for Western Hemisphere Affairs Gerald Gallucci, Director for Brazil and Southern Cone Affairs Tel: (202) 647-6541 David Edwards, Economic Officer Tel: (202) 647-2326 or 736-7481 Sylvia Eiriz, Political Officer Tel: (202) 647-0443 STATE/EPS – Regional Economic Policy and Summit Coordination Russel Fraisbie, Director Tel: (202) 647-2079 TDA – U.S. Trade Development Agency Albert Angulo, Regional Director for the Latin America & the Caribbean Tel: 703-875-4357 Anne McKinney, Country Manager for Latin America & the Caribbean Tel: 703-875-7056



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Transportation Coni Hunter, Secretaty of Transportation for Latin America Tel: (202) 366-9521 or 366-7417 USTR Regina Vargo, Deputy Assistant USTR for Western Hemisphere Tel: (202) 395-5114

International Financial Institutions, Washington, D.C. World Bank (IBRD)

William Crawford, Director

458-0120

·

Agriculture & Enviroment

Constance Bernard

458-5175

·

Country Operations

Venod Thomas

473-8452

·

Infrastructure Division

Dany Leipziger

473-0001

Inter-American Development Bank

Larry Harrington, U.S. Executive Director

623-3821

Int’l Monetary Fund (IMF)

Jose Fajgenbaum Division Chief, Brazil

623-8637



253

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END



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