As many worldwide await
the Paralympic Games, Brazil continues to be humanity's geographic focal point.
Pertinent is the fact
that many Paralympians experience the world itself “upon wheels”, doing so with astounding ability. Whilst great
swathes of Latin America hope to escape their own socio-economic
confines via eventual car ownership and so their own set of wheels.
Here in Europe the
standard issue of summertime 'Eurotrash' songs have been superceded
by Brazilian signature tunes: feel-good and party inspiration
provided by the musical descendants of Sergio Mendes and 'Brasil 66', with Latin themed girl trios of 'Nossa' and 'Bellini', whilst the men
of 'Mojito' provide modern rendition of the Mariachi.
Interestingly in the
spirit of CSR (corporate social responsibility) the organisation 'OI
Brazil' provides what might be described as updated Brazilian
traditionalism, targeting the cash rich realm of corporate events so as to
provide economic trickle-down to those far less secure in the Fevellas.
The United Nations may
have recognised a plethora of distinct national and regional musical
genres, but for the rest of the world beyond Latin American borders the music represents pure summer escapism.
A snapshot of the Brazilian national ambition toward betterment for all
can be heard in lyrics of The Black Eyed Peas' version of “Mas Que
Nada” when apl.de.ap raps:
“Try hard, hard, be
my daily operation,
Got to put in work in
this crazy occupation,
Got ta keep it movin'
(that's the motivation)
Got to ride the waves
and keep a tight relation...
With my team, keep it
movin' and doing it right
I bring it loud
everyday 'till daylight,
Just to make things
move in this monkey business,
(We took an old samba
song and remixed it).
Back in 2006 it was
used for a Nike TV advert featuring the Brazilian football team, and
almost became the de facto national team theme tune for a while.
As will be shown, those
words could equally describe Brazil's attitude and efforts toward its
own auto-industry, seeking continual progress over the decades since
1950 and through a myriad of constraints and opportunities.
The necessary economic
're-mixing' of industrial policy-setting and industrial dynamics
within the sector continues, but within this obvious commercial
planning must be allied with a new sense of culturally inspired
'visioneering' for the future.
For the present, the
following provides a general description of “Brazil 66” : the
sixty-six years of auto-sector economic power-lifting.
Achievements that have
done so much for people spanning all social spheres.
A Brief History of
Brazil's Auto Industry -
In the Beginning...
The globalisation
effect of European colonisation over centuries, together with the
combine of European and American industry and high finance, meant
that Brazil's “open door” policy under-pinning trade of primary
goods (agricultural and extracted commodities) was by the beginning
of the 20th century enjoying its own export super-cycle.
Brazil's scale and
diverse terrain meant that inland infrastructure and associated
transportation methods and links had always been a major issue. Where
feasible rail routes allowed for deep inland penetration, but the
load limitations of equine hauled carts and wagons meant that there
was a fundamental disjuncture between the capacities and logistics
flow of 'mule-trains' versus steam-trains.
The appearance of the
internal combustion engine in heavy load trucks solved that dichotomy
and so revolutionised and continued to powerfully propel Brazil's own
economic engine.
By the 1920s and 1930s
Ford, GM, and Chrysler trucks, buses and cars became the
transportation staple, mostly directly imported but also part
assembled to appear “all Brazilian”.
So good were the trade
relations (underpinned by the need for advanced American military
equipment) that Henry Ford invested millions of dollars into
'Fordlandia' deep in the Amazonian river basin, to obtain, process
and ship raw materials back to his Baton Rouge plant in the USA.
However, claims of
“American Imperialism” and industrial slavery led to social
unrest within 'Fordlandia', this anger spreading elsewhere, toward
the “foreign imperialists” and Brazilian (ie European rooted)
elite. America's capitalists and their “national co-conspirators”
were viewed as reaping profits at the cost of the health, happiness
and dignity of ordinary Brazilians.
To help counter this,
new trade links grew with Germany in the mid 1930s. As a neutral
country Brazil (along with other similar Latin American countries)
was able throughout WW2 to trade exported raw materials in direct
exchange for imported German finished goods; all done on a
barter-system basis for use across the social spectrum.
However, the legacy effect of previously imported items and the innate technological strength of American capital goods and consumer goods meant that it would have been very foolish to have severed such trade ties, so they were retained.
However, the legacy effect of previously imported items and the innate technological strength of American capital goods and consumer goods meant that it would have been very foolish to have severed such trade ties, so they were retained.
The Mid-Century
Modernisation Drive...
The American
connections to Ford, GM and Chrysler made in the 1920s were logically retained , but as as ostensibly non-partisan throughout WW2 until the very end, Brazil could begin
to maximise its retained relations with Germany, Italy and Japan.
That impetus came in
the early 1950s, in reaction to the UN's ECLA recommendation regards
necessary domestic industrial expansion, so beyond narrow focus and reliance upon the
'primary industries' (agriculture, forestry, mining), and toward
greater economic self-development of 'higher-value' secondary and
tertiary industries (steel, automotive, engineering design etc).
So as to diversify the
national economic base, modernise quickly (“50 years progress in 5
years”), raise livings standards, gain international respect,
and critically extract itself from near total the reliance upon the
vageries of the worldwide commodities market - which experiences sharp downturns and slow upturns. Vitally so as to create a worthy export
base of higher value manufactured goods across and broad spectrum to
both its South American neighbours and worldwide.
The ECLA
recommendations for future economic prosperity highlighted that much
of Brazil's own 20th century modernisation agenda would
need to be supported by the pragmatic creation of an indigenous
automotive industry.
The start point to that
ambition would of course the attraction of additional foreign
parties beyond Detroit's Big Three.
Initial steps were made
after 1953 with the imposition of a vehicle import ban so as to kick-start homeland efforts.
Four small scale
ventures were agreed. Firstly the CKD based production license of the 3-wheeled Iso-Isetta to a domestic machine tool manufacturer, renamed the Romi-Isetta. Second, the comparitively large CKD of Willys-Overland vehicles, notably the iconic Jeep. Thirdly, CKD assembly of the first Toyota
LandCruiser. Thereafter the initial tentative CKD
start of the Volkswagen Type 1 “Fusca”.
Interestingly, though
the government promised to financially support the Romi-Isetta
venture as the first step in its national plan, in fact it failed to
do so.
Instead, 1957 saw the creation of ANFAVEA, set up as the country's central auto-sector association with initially very close ties to government and important role in sector development.
Instead, 1957 saw the creation of ANFAVEA, set up as the country's central auto-sector association with initially very close ties to government and important role in sector development.
So whilst the first
notionally Brazilian car was of Italian origin, it was Germany
through VW that became the first foreign vehicle producer to invest
heavily and build a full capacity semi-automated plant in 1957.
Initially for the Type 2 Kombi van in 1959 for industry and commercial buyers,
with two years later the Type 1 “Beetle” or “Fusca” for scaled-up private mobility. Even a 'long back' estate version of the Fusca was
created as a prototype to improve interior space, but did not warrant
the cost of production for additional small internal space gain.
VW's own factory
investment prompted a wave of additional FDI in the 1960s from Ford
and GM. Much of the Brazilian population, the youth especially,
altering its previous Anti-US stance given the outcome of WW2, the
size of the American market for export goods, and the promise of economic
expansion; with which new life-improving American-made household
goods could be bought, such as GM's Frigidaire refrigerators.
Since Brazilian cars
would obviously be in the small, light and efficient European mould,
with their own cars effectively defunct, the American firms instead
utilised low labour rates to produce engines, heavy trucks and
pick-ups for burgeoning haulage and general commercial demand. As
will be seen later, most interesting was the Brazilian-unique Ford F-100
pick-up.
Recognising the
advancement made by the Americans and Germans, and as part of their own internationalist agendas, France and Italy were enticed in during the 1960s.
Renault created an alliance with Willys-Overland for sale of their Dauphin small car.FIAT providing greater commitment with the building of a new plant in Betim (Belo Horizonte) in Minas Geras.
Thus for over a decade the government pledged support to foreign vehicle makers, even if such assistance was spasmodic to its own entrepreneurs. Volkswagen, Ford, GM, Willy's and FIAT all received cheap land, grants and loans equivalent to typically 50% of the start-up costs, with additional key provision of the required infrastructure of roads, sewerage and electricity.
After start-up the instigated of a low taxation regime, controlled-labour legislation to surpress overhead costs and allowance for foreign investor firms to repatriate profits back to the home country.
Renault created an alliance with Willys-Overland for sale of their Dauphin small car.FIAT providing greater commitment with the building of a new plant in Betim (Belo Horizonte) in Minas Geras.
Thus for over a decade the government pledged support to foreign vehicle makers, even if such assistance was spasmodic to its own entrepreneurs. Volkswagen, Ford, GM, Willy's and FIAT all received cheap land, grants and loans equivalent to typically 50% of the start-up costs, with additional key provision of the required infrastructure of roads, sewerage and electricity.
After start-up the instigated of a low taxation regime, controlled-labour legislation to surpress overhead costs and allowance for foreign investor firms to repatriate profits back to the home country.
Thus it was largely
Ford, GM, VW and FIAT, who provided the cornerstones for Brazilian national ambition, through both democratic and autocratic forms of rule.
This provided the
ability to create pseudo-indigenous vehicles often through adaptive
hybridisation of adopted foreign vehicles to allow for Brazil's own
self-build products.
Critically, beyond the
tailored Brazilian packaging and aesthetic of the vehicles produced,
was the necessary ability to retain and utilise relatively basic
power-train technologies. VW's small air-cooled boxer-4 engine simple
to run and maintain across very varied geographies, altitudes, climates and
temperatures where professional assistance could be hundreds of miles
away. Ford's big lazy, low compression V8s able to breath deeply and
so provide torque at mid and even high altitudes. Both the 'boxer'
and 'big V' able to run on poor low-octane fuel, or indeed old stale
fuel often found in remote locations.
Thus, little surprise
that such basic engine technologies were so long entrenched in such a
highly variable transport conditions from the mid 1950s through to
the mid 1980s and beyond.
Another critical cause
being the economic stagnation of the country, and lost decade and a
half from the mid 1970s through to the late 1980s, caused by initial
social unrest and reactionary monolithic political rule for that
period.
The 1990s / 2000s
Boom...
Over the last twenty
years or so Brazil has demonstrate itself as an increasingly
competent and highly vertically integrated champion of the global
auto industry.
The 're-opening' of the
country to international investment and a vital world mindset in the
early 1990s prompted a fresh (and long awaited) injection of FDI and
vitally foreign commercial belief in both domestic and export
potential.
The resource rich land
proffered much by way of raw materials and lower cost input costs, as
did likewise somewhat policy tempered energy costs regards running
heavy industry. But critically business and government leaders
recognised the to encourage and nurture expanded and new sector
competences to improve of those critical core functional capabilities
that underpin substantive vehicle design, production and
distribution.
Much of this learning
was inevitably 'imported in' from the personnel and processes of
those long established Multi-National Companies already present, but
vitally a renewed complimentary effort was made within academia and
smaller indigenous auto firms.
Today...
As of 2015, even whilst
in the midst of a severe domestic recession and global fragility, it
is reported that Brazil had still risen to become the 9th
largest producer of vehicles. Countries such as China, USA, Japan and
Germany may have been well ahead in terms of production volumes, but
tellingly Brazil was far in advance of France, UK and Italy.
Today Brazil produces a
myriad of vehicle types is destined for a range of distinctly
targeted markets. These span cars, trucks, bus and coach, general
utility, military (light green) and agricultural vehicles.
Within (the prime focus
of) passenger cars an increasingly diverse range is being produced,
from increasingly affordable city cars thanks to a previous credit
expansion for the less wealthy (tho' generating concerns about
accordant fail rates of sub-prime loans within this recessionary
period) to the more recent introduction of premium marque executive
sedans.
In the former category
the likes of the compact but voluminous FIAT Novo Uno distinctly
designed for Brazilian and LatAm demands, to the smaller VW Fox
city-car destined for both homeland and European and Japanese export,
production units specified with varying levels of technology content
befitting target market to suit a wide range of income levels and
tastes.
The expansionist
mindset now includes the legendary VW Gol (the Brazilian archetype
after the Brasilia), long since matured beyond its 'grass roots'
technical origins and licensed to Iran Khodro company for 'satellite'
plant production in the Middle East, this business model set to be
replicated elsewhere .
Renault-Nissan has set
out its EM strategy likewise, after the massive success of Dacia in
Eastern Europe and far beyond (Western Europe, MENA, India etc), it
seeks to replicate that achievement with new models. Once such is the
Nissan Kicks, a compact SUV initially produced in Mexico, to be
manufactured in Brazil imminently and supposedly set for 80 local
manufacture and export destinations.
Whilst, in a nicely
paradoxical and serendipitous manner that illustrates the end of one
important era and the new beginnings of another for Brazil, the last
of the locally produced iconic Type2 vans (with water cooled modern
engines) were themselves exported as 'fashionista' products to
various export locales (eg Danbury in the UK) to satiate the
post-modern demand for 'authentic retro' by cash-flush middle aged
hipsters keen to differentiate themselves from the neo-retro
mainstream crowd.
In the Global Manufacturing Sweet-Spot...
Brazil today then is a
much advanced auto-player, with the advantage of enjoying near world
class production standards thanks to the quality measures of global
manufactures, yet still offering a relatively lower cost of labour.
Thus foreign and
domestic manufacturing firms are able to adroitly 'mix and match' the
levels of (fixed overhead) capital spend on plant, tooling and
associated equipment, against the requisite (variable) spend on
labour; whether on a project by project basis, or indeed for complete
long term business cases.
Brazil then could be
said to have at last reached its production zenith, its regions able
to offer keenly sought business model flexibility.
Little wonder that
since the mid 1990s all the major global auto-players have
re-invested heavily (FIAT, VW, GM, Ford, Renault, Toyota) or
undertaken varying degrees of new millennium investment as either
sole production owners (PSA, Nissan, Daimler, BMW, Mahindra, TATA
Jaguar Land-Rover) or via joint venture importers
(Coao-Hyundai-Suburu).
For very good reason,
sixty-six years after the dream of a substantive and convincing
indigenous automotive industry, Brazil has begun a phase which
positions it very favourably “front and centre” of the world's
automotive stage.
Into the Future -
Given the economic
contraction and fiscal budget woes of today that induces austerity
led policy-making, together with the headlines of political
corruption, when the present socio-economic mire is contrasted with
the (albeit erratic) leaps and bounds of the past sixty-six years,
many of Brazil's reputable leaders within the political and business
elite will be frustrated by the late impact of the global recession;
a recession which various economic theorists thought would pass-by
given Brazil's strong all-round economic platform.
Indeed, compared to the
devastating impact upon North America, Europe and elsewhere Brazil's
'real-world' recession beyond statistical data-sets and hard-leftist
generated demonstrations has indeed been comparatively shallow. The continued broad export success of the auto-sector, and maintained
strength of sub-prime loan repayments just two interconnected
illustrations of the reality for many in “Main Street” Rio de
Janeiro or Sao Paulo.
The fact is that unlike the truly poor in the West facing high existence costs (food, winter heating, etc) various lower-level ('D' category) urban Brazilians with a comparative higher disposable income (given low existence costs) are able to enjoy relatively high priced brand-named FMCG and consumer electronics goods (for status-seeking) whilst bemoaning the raised cost of public transport.
[NB this is not to overlook the many who are simply existing at a subsistence level].
The fact is that unlike the truly poor in the West facing high existence costs (food, winter heating, etc) various lower-level ('D' category) urban Brazilians with a comparative higher disposable income (given low existence costs) are able to enjoy relatively high priced brand-named FMCG and consumer electronics goods (for status-seeking) whilst bemoaning the raised cost of public transport.
[NB this is not to overlook the many who are simply existing at a subsistence level].
Nonetheless, Brazil's
economic stewards - typically drawn from the elite and with a sense
of national responsibility – well recognise the need to continue to
build upon the achievements made to date.
Today industry and
services account for a greater proportion of national GDP than the
primary sectors of mining and agriculture, even if Brazil is
externally seen by narrow minded foreign investors as a “commodities
play” awaiting a return.
As seen and recognised
by senior national planners - who themselves directly experienced
the transformative effect of VW Fuscas, Brasilias and little FIATs -
the ever broadening automotive industry is core to future betterment.
However, what they may not (but must) appreciate is the extend to
which 'Brazi Autos LTDA' presently sits in a remarkably unique
position relative to the rest of the world.
The 'Social Headwind'
and the 'Industrial Tailwind' must now be coalesced to provide
ongoing national metamorphosis.
The time then is right
to re-undertake a brave new era of national economic planning and
thus regional re-planning. Planning in which the automotive sector
can continue to act as a socio-economic transformer.
New Visions for Rio de
Janiero and Sao Paulo as cyber inter-connected 21st
century cities have been seen to provide fundamental advantage within
pre-existing organically generated central urban spaces.
But a much bigger
planning mindset is now required relative to the life-limiting
constraints of the favelas both in city centres and in sprawling
suburbs versus the newer and very understandable trend for
middle-class life to be kept within the safe-zones of remote gated
communities, upscale shopping malls, business districts and leisure
areas.
Europe and North
America went through broadly the same archetypical development
pattern in the late 19th and 20th centuries,
and it was a combination of garden cities (with planned industries),
the aspirational suburbs (with good transport links) and vitally the
car itself that allowed a powerful new phase in societal evolution.
When an increasing
numbers of new cars are parked in the narrow streets of poorer
districts and yet basic infrastructure services may still not be
available, it illustrates much about a fundamental disjuncture
between social planning and social consumption.
Like the planning and
execution of Brasilia, the massive achievement that is the completed
Trans-Oceanic Highway linking Atlantic and Pacific coastlines
highlights Brazil's ability to complete monumental infrastructure
projects.
Just as this provides
the raison d'etre and suitable logistical context for trucks and
road-trains, so the lower stratas of society, themselves obviously
and naturally intent upon car ownership, must be provided with the
appropriate physical environment.
Since the state
presently has its hands financially tied, it should look to all kinds of public-private partnerships models, far beyond the 'IPP's' conventional goals for SOE privatisation, and toward more novel schemes within this new age of global corporate
social responsibility.
Brasilia itself created
the transformative conditions for the indigenous auto sector, time
now to do the same in terms of regional re-planning commercially, industrially and residentially; for an ever-more inter-connected populace whose own world presently is, or soon hopes to be, on wheels.
To Follow -
1. Detailed account of
the transformative phases within Brazil's auto-industry to date.
2. Broad account
regards the “cultural visioneering” of Brazilian autos.
3. Broad account of the
necessary socio-economic vision required by Brasilia of the
“intra-global template” (serendipitously following in the
footsteps of the Brazilian-made 'World Car' ideology).
