Friday, 24 February 2017

Micro Level Trends – Brazil's Automotive Sector – “Brazil 66”...Sixty Six Years of Economic Power Lifting (Part 5)

'Carnival' is underway in Rio de Janeiro, and those less fortunate will, for a time, forget their woes in the current dour economic climate, and look to a brighter future, even if that be 'the day after tomorrow', once recent reforms have revitalised society.

The preceding sections of this weblog sought to inform of both the Macro-Level issues of the country's historical PESTEL context, and thereafter provide general insight into those Micro-Level factors pertaining to the automotive sector through which B2B and B2C actions satiated and indeed prompted the needs, wants and desires.

From the macro perspective of Parts 2 and 3 it was seen how – with new revolution always a threat - the overtly profit-centric (and so socially divisive) mercantile ethos of 19th century Brazil gave way to a cohesion of better societal cohesion, and the impact of a self-reliance guiding principle under President Vargas, with the spoils of primary industries providing broadening commerce which began to provide socio-economic 'trickle-down', and the basis of secondary industries (esp. energy, steel) put into place as state owned enterprises. Thereafter President Kubitschek used this base to attract a plethora of foreign auto-companies which would mobilise the potential of the nation.

Whilst the micro perspective of (the multi-aspect) Part 4 illustrated that since its very start the sector has been rooted in the technical and economic advantages of international relations, initially the US, then Europe and Japan, and latterly China and India, spanning much from agricultural small tractor production, the licensed manufacture of heavy trucks, self-created niche cars of advanced construction there after leading to proprietry 'light green' military vehicles, through to world-class coach and bus. From 1950s HGV trucks hauling crops, timber and cement, to 1960s dual-use hi-style pick-up trucks for self-made men, through to the ubiquitous VW 'Fusca' and 'Kombi', seen in multiple roles from police cars to family and group transport. Thereafter from the 1970s onward foreign vehicles and brands taken to the nation's heart, injected with ever greater self-educational 'know-how' and made more and more de-facto 'Brazilian'. Perhaps more than any other, the auto-sector transforming the lives and aspirations of many millions for decades, to this day, and into the distant future.

Vitally, as seen and proven time and time again, across all of these endeavours, the successful and less so, has been the central theme of a strong trade ties, industrial correlation and industrial and regional planning with the capabilities of other countries; spanning everything from AM-derived technologies through to EM-enabled low cost supply-chains.

The following Part 5 will provide a summary of the primary political forces that shape the industrial and commercial landscape of the present day, with specific attention drawn to:

- The 'Plano Real' (1993/4)
- The Asian Tiger Financial Crisis (1997/8)
- The Globalisation Boom (1999 – 2012/3)
- The 'Plano Brasil Maior' (2013 onward)
- The "Car Wash" Reforms (2017 onward)
- The Current Economic Picture

The latest of the prime policy initiatives – 'Plano Brasil Maior' - itself could be seen as a precursor, or indeed a possible prompter of, the recent retraction from globalisation by the USA.

[NB a seeming abrupt about turn of its own pro-globalist stance, previously supported by much hard and soft power. (The tectonic plates of much theorised 21st century “world-power” now seen to be visibly shifting in real-time under Trump's 'American Pledge'].

How things develop for Brazil will only bee seen in the fullness of time, but with broad Asia and equatorial Africa still much affected by the Chinese slow-down and stabilisation, and Europe still in apparent politically-driven 'reconfiguration' mode, Brazil may well see its mid-term future as that of increased self-reliance allied with greater trade and indeed mutual FDI exposure to the domestic bullishness of the USA.

This begs the question as to whether under the guise of any new 'ISI' edict and policies the likes of Microsoft, Alphabet-Google, FIAT-Chrysler Auto et al could be given new incentives to prosper, so as to establish there own versions of campus-orientated “Fordlandias”, nearly a century after Henry Ford's failed original 'township' attempt.

[NB such an acute relationship with the USA ideally latterly re-enacted with European, Japanese, S.Korean and Chinese firms, to re-prompt timely 're-globalisation']

So, instead of depleting and tapping the forest-lands as of old, the agendas of such corporations would be to nurture and tap the aspirations, energies and minds of Brazilian youth and thus recapture a rising socio-economic tide for all.

To better understand the present socio-economic status quo, the following weblog section looks at each of these important issues in turn to gauge to what degree politicians, industrialists and the populace - through the mechanisms of the auto-sector and much more - should be able to see beyond their country's presently erratic economic position.

Friday, 10 February 2017

Micro Level Trends – Brazil's Automotive Sector – “Brazil 66”...Sixty Six Years of Economic Power Lifting (Part 4.8)

The following reviews how the mix of MNC 'transplanted' brands and domestic participants have over the decades formed themselves into professional SIG associations to operate as coordinated administrators, lobbyists and promoters.

9. Sector Promotion


The earliest established representative association, 'Associacao Nacional dos Fabricantes de Veiculos Automotores' (the National Assoc of Motor Vehicle Manufacturers) was born in 1956, and celebrated its 60th anniversary recently.

Given the importance of assisting in the co-ordination of national industrial policy at its watershed period in the mid 1950s, it took on the broad umbrella interests of all producers, across passenger cars, vans, pick-up trucks, heavy goods vehicles and buses and coaches, with later inclusion of the typically specialist manufacturers of a broad range of defence orientated, agricultural and 'off-highway' equipment.

As such it is the voice of the indigenous automotive sector, indeed the broad wheel-motive transport sector, highlighting its own self-promotion in the fact that 70m of the 78m vehicles produced in the modern era have been domestically produced and used.

A major step forward was its prominence in the mid 1980s when it coordinated the creation of an industry-wide electronic data information exchange, the EDI database itself critical in disseminating vital information regards the technical specifications of components and design and manufacturing capabilities, allowing for advancement and efficiency across many areas, from vehicle design and re-design at the 'front-end' of the engineering process through to the ability of dealers to maintain near like for like parts stock/inventory keeping to allow for the retro-fit of officially discontinued parts, so extending the life-span of older vehicles in use for the soon to be burgeoning used-vehicle markets of the 1990s, from trucks to cars.

In this way ANFAVEA's push for EDI boosted much in the way of automotive productivity, in design, production and use, from the scale of the factory floor to (for a long period) the ability for small-time entrepreneurs to profit as more reliable used-vehicle intermediaries.

This type of proactive influence was driven by its industry members, the list of which has continually grown since its earliest days and spans all indigenous and foreign-transplanted vehicle producing companies. The old-time yesteryear intimacy of industry representation continues to this day, with the vast majority of its members recognised as 'Vice-Presidents' (spanning AGCO to COAO to John Deere to Hyundai to Jaguar Land-Rover to Komatsu to Mahindra to MAN to PSA to Scania...with many others besides). Representational terms last 3 years with the current senior positions of President and '1st V-P' held by Volkswagen and Ford.

In what historically was a fragile internal economy for so long, the rise of close relationships within such a central body, and so across member companies, was inevitable. Members able to create and make good use of its slowly expanded services, but with specific reliance upon the sharing, collation and interpretation of market statistics; thus sensitively propelling either domestic and foreign investment expansion, keeping 'steady-state' conditions so as to better amortise such costs, or indeed any necessary TIV contraction and thus re-investment delays.


This body was formed in 1991 at the time Brazil was once again opening its doors to the world. It was in reaction to Brazilian entrepreneurs with interests in the potential of imported (status and entry level) vehicles into the country, to satisfy what appeared the two prime market segments that had been under-served in previous years.

[NB ABEIVA is the acronym for 'Associacao Brasileira das Emprasas Importadoras de Veiculos Automotores' which when also embracing / absorbing a new set of foreign 'transplant' companies became known as ABEIFA (the 'F' reflecting the 'Fabricant' manufacturing element].

Initially Germany's BMW was attracted, followed by the stark counterpoint of an affordable Russian brand with LADA; these prompting actions and the potential of the whole market thereafter also drawing in France's Citroen and Japan's Mitsubishi. By 1995 a full thirty (30) international brands had become affiliate members – spanning European luxury and sports 'craft' producers to all global mass manufacturers, with some names more recently supplanted by the continued massive influence of China.

Today ABEIFA's members roster consists of: Aston Martin, Rolls Royce, Jaguar Land-Rover, Mini, Volvo, Porsche, BMW, Maserati, Ferrari, Lamborghini, Suzuki, KIA, Geely, Chery, JAC, BYD and Lifan. Thus it must reflect the importation and transplant interests of a wide variety of members with both aligned and disparate individual agendas.

The body is currently managed by six people, acting in the capacity of: Presidend, Vice-President, Administrative Officer, Chief Financial Officer, Government Relations Director and a CEO / Investments Officer; each whose full-time role is as senior manager of one of the member corporations. Supporting these are 16 others in 'Consulting' and 'Work Committee' roles who offer critical administrative and technical knowledge; again whose 'day jobs' are within a member company.

As with ANFAVEA, statistical records are a cornerstone of the organisation, by which members can both gauge the health of Brazilian production and foreign importation, and as necessary use those figures for lobbying and comparison purposes.

As an example the month of December 2016 saw BMW produce 8,424 vehicles (1-series, 3-series, X1-series, X3-series and X4-series), Suzuki assemble 1,503 Jimny models, Chery manufacture 1,401 vehicles (Celar, Celar sedan and QQ), Land Rover produce 746 vehicles (Evoque and Discovery) and MINI assemble 239 vehicles (Countryman and Cooper S).

These 12,313 cars however represent only about third of the 35,852 cars imported – themselves limited in demand volume by substantial import taxes. So illustrating the present small level of domestic supply vs shipped-in, and more importantly, the potential to scale up manufacturing in the future (as Brazil rebounds) to meet an uplift in consumer demand under a reduced tax regime for the premium status, leisure off-road, and entry-level segments.

The problem for the transplant corporations though is the manner in which they balance capacity investment in local factories against the rise in demand, itself constrained by domestic vs import tariff policy. This is undoubtedly a prime agenda item for the representational organisation.

However, it must be noted that the membership itself consists of very varied mix of players each with varied domestic market impact. This seen again with the Dec 2016 figures once again. Whilst BMW imported 3,412 cars, and Land Rover's model driven resurgence gave 5,926 vehicles, Aston Martin only imported 2 cars, whilst Lamborghini did so with 4 cars. Between these extremes stood the remaining very varied range of brands and spectrum of volumes.

This issue of the need to re-balance the very wide gap between production vs import volumes (and the commensurate underlying business needs) that provides ABEIFA with its increasingly pertinent raison d'etre; and thus its prime differentiation to ANFAVEA.


Established in 1980, this organisation is primarily concerned with representing those companies which manufacture trailers and bodies in the trucking and cargo/logistics industry. ANFIR is the acronym for 'Associacio Nacional dos Fabricantes de Implementos Rodoviarios'. Given Brazil's geographical size and its broad history of transport enabled industrialisation, it is little surprise that today the body comprises of a plethora of member companies, apparently about 1,300, from small local trucking firms to major conglomerates; having started from the mutual interests of 13 founder companies. Today the membership A-Z spans 'Auto Clara' to 'Zian de Amazonia'.

Like its peer organisations in the car world, ANFIR operates as coordinator and lobbyist, with a members' service focus upon production and market statistics, regulatory standards, technical matters and singular legal representation. Furthermore, with members reliant upon the positive advancement of the broad economy – which encourages trade and infrastructure and so propels road transportation – it has increasingly become involved with national development issues, espousing itself as doing so with a social consciousness.

Concerned with all 'road operational equipment' spanning various specialist items, the predominance of interests relates to the trailer and truck body sector, itself literally closely coupled with the offerings of truck producers. These on-chassis and towed vehicles span much from basic flat-beds to tankers to container beds to box-sides to curtain-sides and tailor-made (SVO) loading and storage solutions, and in the semi-trailer sphere span both single and double articulated trailers, with the obvious ability to inter-link and so create road-trains.

[NB The topic of long-range transportation across Brazil and LatAm set in a future of ever greater digital interconnection, with the idea of distinct hybrid and EV 'power units' within a road-train – akin to railway carriage application - indicates that ANFIR should seek to broaden its coverage to include 'digital development' within its technical strategy outlook].

As part of its remit ANFIR assists in the sector exhibition and conference that is FANETRAN; itself held every second year. This exhibition dedicated to the haulage industry illustrating not only current products (trucks, trailers, special equipment etc) to promote immediate B2B trade, but also as a display for applied and commercialised research and development projects.


These conjoined organisations represent component producers. The former 'Sindicato Nacional da Industria de Componentes para Veiculos Automotores' and the latter 'Associacao Brasileira da Industra de Autopecas'.

These bodies have about 500 enterprise members from small to large, which supply directly to Brazilian and foreign vehicle assemblers (as the OEM providers) and to the After-Market as both OEM and 'pattern-part' providers.

The four prime areas of concern are:

- to stimulate industry growth
- to inform and train
- industry representation
- sector coordination and support

Unlike the specific sector representation of ANFAVEA and its direct peers, this organisation necessarily spans many segments and sectors given its micro-orientation on parts supply:

- motorcycles
- cars
- light commercial vehicles
- trucks
- bus and coach
- agricultural equipment
- construction equipment
- engines

Its A-Z members listing spans varied companies from: AAM do Brasil (transmissions and axles) to ZM Industria (alternators and starter motors).

The Sao Poalo International Auto Show -

The official title of this annual landmark event is the 'Salao Internacional do Automovel de Sao Paulo'.

First held in 1960 it showcased the ambition of the then newly reformed country, very early on (early to mid 1960s) it sought to showcase Brazil's tremendous automotive accomplishments across the board.

Nigh on immediate achievements in three spheres: the mass manufacture of cornerstone 'bread-and-butter' vehicles that would mobilise the economy with the VW Type 1 and Type 2 et al; the rise of home-grown niche producers with the then new and exciting business models at the top of the value-ladder with the hand-built sportscars and luxury GT cars; and the combination of the best of both these worlds with the 'personal car' in the form of the VW-Karmann Ghia); as well as the luxurious large sporting sedan with the 'JK' from FNM.

Thus in its first half-decade or so, as vital part of the economic drive for revitalisation, the show was prolific. Promising much to both the populace and industry alike, at home and potentially abroad, so cementing the importance and aspiration of the auto-sector within the foundations of national economic activity.

To serve the 'wind of modernity' increasingly seen all around through regional planning, architecture and transport, by 1970 the Salon event was relocated to the newly constructed, well planned/integrated and massive Anhembi Parque Convention Centre in the Santana district, (its home for the next 34 years).

Whilst the USA, UK and Europe had entered recession by 1970, the momentum of that 'Brazilian promise' was still evident in the 1970s, even if the previous swathes of FDI had contracted and the onus was on government and local industry to maintain momentum. Yes the previous frenetic pace of socio-economic change had slowed because of the western woes, but in an historical context the times were still good and any pessimism countered with jingoistic fervency.

The taps of newly created consumer credit were opened further and a new generation of more affordable patriotic vehicles showcased: with the VW Brasilia, FIAT Panorama and an expanded Gurgel range and VW Gol exemplifying Brazilian pride.

Although four decades ago those glory days of Brazil's former march still echoed in the Anhembi Parque Convention Centre for the following years, with the late 1990s boom-time and new nationalistic models like the FIAT Palio and later Nuvo Uno themselves echoes of the romanticised early days.

Nonethless, as a convention, business and even resort hub with good land and air inter-connections, the Anhembi had played a major role in communicating the much developed strengths and capabilities of the nation's auto-sector to both inward and outward audiences.

The Sao Paulo show moved as of 2015-16 to the refurbished 'Expo' Centre, which has a foot-print over 8,000 square metres greater (100,000 sq m vs the previous 92,000) and very probably the offer of reduced event costs for organisers and so participants.

Given the demands of major infrastructure overhaul for the 2016 Olympics and Paralympics upon the city's infrastructure, its inevitability to over-shadow other usual events, and the impact of the 2014 economic slowdown, it was deemed appropriate to post-pone the Salon.

FENATRAN is the trade show for the Transport/Haulage sector and has been likewise held at the Anhembi Centre for many years, with AUTOCOM focused upon the realm of on-board/external diagnostics, fleet inter-communications and infotainment.

Concept Cars -

The history of Brazilian concept cars is a true mixed bag.

From radical indigenous hand-builds of the early 1960s through to dilution of the term since the 1990s onward (when deployed as empty PR short-hand for a near production ready new version of a standard model).

Unlike centres such as Detroit, Frankfurt, Tokyo etc steeped in the old heartlands of car companies and where true firsts are typically showcased, the previous 'back-water' that was Sao Paulo has had to perhaps overstate itself on the international stage.

However, unlike new limited edition variants in 'advanced markets' which have typically little impact, the fact is that in Brazil new variant lines inevitably of the sporting or cross-over ilk have had far greater impact on the public's consciousness, desire and purse; thus whilst appearing somewhat naïve in its obviousness, the fact is that the high visual impact of a 'street style' has proven as the magical formulae for the sales of both life-extended models and today's shortened period for face-lift and special edition models; FIAT Palio 'Interlagos' spawning the likes of the Chevy Onix 'Track Day'.

This recognised, the fact that Brazil has become far more of a new model development homeland has meant that a new breed of truly home-grown, pan-EM and even EM-AM targeted products have first seen the light as true concept cars.

And moreover, to help stir the imagination and attract brand-specific attention from the future Brazilian buyer (many within the youth cohort) more and more radical concepts are being shown with recognition that the aesthetic and functionality will be diluted in the factory model years later.

A few examples of the inevitable 'mixed-bag' are:

2006 – FIAT FCC I 'cross-over' coupe
2008 – FIAT FCC II 'hi-style' off-road buggy
2009 – FIAT Mio 'city-pod'
2012 - VW Buggy
(VW farewell to Type 2 'Kombi').
Renault Dcross
Ford Evos Coupe
Troller R-X
2013 – Nissan Urban Rally Extrem
2014 – Renault (Dacia) Duster Oroch pick-up
Chevrolet Onix 'Track-Day' (altered production car)
Renault Kwid
2015 – Nissan Kicks
Ford Eco-Sport re-body
2016 – Hyundai Creta pick-up
Renault Kwid Outsider

With further exploration of the matter it can be seen that the hi-concept design studies were relatively prevalent a decade ago when FIAT, wishing to maintain its market profile and lead, offered a sense of the near and distant futures over a three year span. Tellingly, to both maintain immediate public interest in “adventuristic” vehicle whose characterisation has been well received, whilst also pointing to the “shape of things to come” with highly efficient small-scale 'city-pod' transport.

Since then the offerings of all manufacturers – though named concepts -are largely either hyper-styled variants of production vehicles soon to be launched, or conceptual evocation of specific segment evolution. Medium and small Cross-Overs and Pick-Ups are already well proven boom segments that have a broad stylistic and specifications envelope from which to generate ever more consumer demand, the power of the SUV styling already seen to influence the face-lift and next generation aesthetics across a brands complete vehicle range.

Government -

The three primary ministerial departments which promote and police the intricate dealings of the national automotive and transportation sectors are:

1. (Development), Industry, Foreign Trade and Services
2. Transportation, Ports and Aviation
3. Science, Technology, Innovation and Communications

The first of these and is formally titled 'Ministerio do Desenvolvimento, Industria, e Comercio Exterior' (the MDIC) and has a wide span of involvement.

The following is a literal 'cut and paste' of the department's website so that nothing be lost in possible erroneous transcript:

Established in 1999, the Ministry of Industry, Foreign Trade and Services is responsible for the following subjects:
    - Development policy on industry, trade and services;
    - Intellectual property and technology transfer;
    - Metrology, standardization and industrial quality;
    - Foreign trade policy;
    - Regulation and implementation of programs and activities related to foreign trade;
    - Assess and apply trade remedies;
    - Participation in international trade negotiations.

To accomplish its goals, the Ministry acts through four Secretariats:
    - Secretariat of Industrial Development and Competitiveness (SDCI);
    - Secretariat of Foreign Trade (SECEX);
    - Secretariat of Trade and Services (SCS);
    - Secretariat of Innovation and New Business (SINN).

The Ministry also hosts and chairs the ministerial council of the National Council of Export Processing Zones (CZPE).
The following entities are linked to the Ministry of Industry, Foreign Trade and Service:

- Superintendency of the Manus Free Trade Zone (SUFRAMA)
- National Institute of Industrial Property (INPI)
- National Institute of Metrology, Quality and Technology (INMETRO)

There are also private non-profit organizations that receive resources from the Ministry for public interest actions:

- Brazilian Industrial Development Agency (ABDI)

To formulate, implement and evaluate public policies, in order to promote competitiveness, foreign trade, investment, business innovation and consumer welfare.


To be a reference in the management of public policies, in order to strengthen the competitiveness of Brazilian companies.

Secretariat of Industrial Development and Competitiveness :

The Secretariat of Industrial Development and Competitiveness (SDCI) is the main governmental body designated to elaborate, manage and monitor industrial policy. In the context of finalistic macro processes, SDCI acts as an instance for receiving and processing national private sector demands, identifying structural bottlenecks and seeking ways to foster business environment and industrial competitiveness. SDCI operates through the improvement and simplification of regulatory and fiscal mechanisms, financing and investment, besides monitoring consolidated industrial policy instruments.This Secretariat aims to foster industrial development and competitiveness through actions designed to strengthen industrial development, such as granting competitive stimulus to the productive sector.

Secretariat of Foreign Trade :

The Secretariat of Foreign Trade develops, implements and monitors foreign trade policies and programs, and also establishes necessary standards and procedures in order to properly implement these policies. It also carries out sectorial guidelines for foreign trade of goods, encompassing both those set by domestic legislation and by international agreements.

Furthermore, the Secretariat manages the Integrated System of Statistics on Trade (SISCOMEX), which collects data from and optimizes Brazilian international trade. Finally, the Secretariat also undertakes the trade remedies procedures, in full-compliance with WTO normative.

Secretariat of Commerce and Services :

The competences of the Secretariat of Commerce and Services encompasses the development, coordination, implementation and evaluation of public policies, programs and actions regarding the development of commerce and services sectors, both at domestic level as abroad. The Secretariat is also responsible for analysing and monitoring these sectors trends within Brazil and abroad, as well as for designing and publishing relevant information regarding services trade.
Additionally, the Secretariat is in charge of managing the Integrated System of Statistics on Trade of Services (SISCOSERV) as well as other programs for fostering commerce and services sectors in Brazil.

Secretariat of Innovation and New Businesses :

The Secretariat of Innovation and New Businesses is the main government actor in charge of connecting public policies on innovation with private sector demands, focusing on entrepreneurship and technology innovation. It aims to promote innovation within Brazilian companies through mechanisms designed to support and foster the culture of innovation. Also, the Secretariat takes active part in elaborating innovation policies, in order to increase competitiveness to goods and services manufacturing, and monitors policies on Intellectual Property.

Among its main activities are: the development of fiscal, financial and regulatory incentives for the development and use of green technologies; the public-private partnership on innovation policies and its results; qualification in strategic and technology-based industries to meet market demands; reorientation of instruments to support innovation for competitiveness in companies; and the attraction of global centers of R&D.

Summary -

Thus history of the automotive and transport sectors illustrate a direct correlation between the embracing of Brazil's “open door” policy and the pace of internal change within these specific sectors.
As seen that response was the formation of many intermediaries from both sides of the industrial and governmental interface. The agencies being:

ANFAVEA, ABEIFA, ANFIR, SINDIPECAS/ABIPECAS, the Soa Paulo International Auto Show, FENETRAN and the numerous publicly absorbing concept cars and showcase technologies. These bodies and events in turn influencing the purpose and formation of government, with its primary ministeries: (Development), Industry, Foreign Trade and Services / Transportation, Ports and Aviation / Science, Technology, Innovation and Communications.

It was obvious recognition of the need to handle the opportunities arising from globalisation and the desire for a robust, internationalist domestic economy that brought unabashed corporate self-interest into being. But such thrusts forward generate important internal discussions inside industries and with government, as how to best meld, satisfy and indeed promote (via various roads of creative destruction) often disparate demands.
This formation of today's present status quo has occurred at a seemingly glacial basis over the decades, each respective association emergent from a conflux of multi-interests, each seeking to create a confluence of interests and so more harmonious future change.

Such internalised understanding about the prime micro and macro issues of today and tomorrow is vital to absorb the pace of change and provide adroit reaction to the moulding of the 'new norm'; this spanning much; from the threat of ongoing currency wars and increased possible tendency toward retracted semi-isolationism at the individual country level, versus the continued need for ever more inclusive thinking and solutions at the G20 level regards global-warming and sustainability, with the efficiency of intelligently networked cyber-mobility offering solutions, added to which is the issue of global wealth rebalancing, now not simply toward those poorest in EM regions but also today, to halt global fractures, also toward the 'new poor' in notional AM regions.

Having made greater strides in EM and AM spheres with a 'socio-commercial' mentality, Brazil will seek to continue to be part of such a "solutions for all" internationalist ethos.