RIO GRANDE DO SUL
Innovation and tradition
The economic center of the Mercosul.
Rio Grande do Sul is known throughout Brazil for having great wines and strong
traditions. The state is strategically situated in southern Brazil, the richest
area in the country, and also based within the geographic and economic center
of Mercosul. Mercosul is the southern cone common market region constituted
in 1991 by Argentina, Brazil, Uruguay and Paraguay. Chile and Bolivia participate
in Mercosul as associated states and Venezuela is planning to join the organization.
From January 2003 to October 2005, many companies announced investments in the state of Rio Grande do Sul. The Governor of the state, Mr. Germano Rigotto, mentioned to us how this was achieved. “These new investments came because the Government of the State showed investors that there would be a favorable environment for the installation of new companies and new plants from existing companies in the state”. He also said his government was actively making contacts with potential Brazilian and foreign investors in order to attract investments.
According Governor Rigotto, these policies attracted more than 200 new investments in the state in last than three years, more than in any other Brazilian state. This means that companies brought R$15.6 billion in new investments, in addition to almost 35 thousand jobs. The governor says it cannot be denied that these are important projects and considerable investments, and that there are many other projects under negotiation. Most importantly, all these investments were announced during a period of economic adversity in the state. During the last few years the state has suffered from a record dry spell that affected all agricultural activities, while exporters have suffered from a federal monetary policy that has overvalued the real, the Brazilian currency. The state is using a portfolio of tax incentives in order to attract investments, including Fundopem and Integrar/RS. The latter increases the benefits if the recipient region is a less-developed one. Governor Rigotto proposes a large tax reform in all Brazil in order to offer incentives to private investment, relieve taxpayers from the complicated Brazilian tax system and in order stop tax evasion.
Even with an unfavorable exchange rate, Brazil is gaining importance as an exporting economy. Last year, Brazil boasted exports of 113.8 billion USD and imports of 70.9 billion USD, with a favorable balance of 42.9 billion USD. Rio Grande do Sul is a natural exporting state that exports more than 9.4 billion USD. “Rio Grande do Sul has a naturally export-oriented state. As an example, 55% to 60% of all agriculture machinery in Brazil is produced in the state and most of it is exported.”
However, the governor’s aims extend beyond attracting new investments. The goal is to reconvert the state economy by minimizing the economic differences between the regions and introducing completely new productive sectors such as naval construction and the forestry industry. “We are in the process of attracting new investment sectors, one of them being the naval industry. We are bringing two large naval shipyards for the construction of large ships and petroleum platforms. One of them is going to produce a platform for Petrobras with an investment of about 960 million reais. In the area of forestry, we are promoting investments from companies with sustainable forest management practices. Three large groups, Votorantim, Stora-Enso and Aracruz are going to invest about 150 million reais apiece per year for planting new forests. The ultimate idea is to create plants for the production of cellulose and paper with an investment of over one billion US dollars.”
Luiz Roberto Ponte, Secretary of Development and International Relations of Rio Grande do Sul, complements the program. “Since the forestry industry is a long term investment, investors want to have legal and political stability in order to invest. Our job is to inform society how the investments are going to benefit the region and to guarantee investors the rule of law. Through the national investment bank, BNDES, and the local development banks, CaixaRS and BRDE, entrepreneurs have access to tailor–made financial products for forestry investments.” According to Ponte, it is mandatory to create a welcoming and receptive environment in order to bring new investors, and that’s exactly what the government is achieving. Ponte adds that the government has a considerable interest in preserving the environment in the process of developing the region.
Infrastructure is an important element in order to attract investments. Fluvial transport is important, as evidenced by the investments in the river port of Porto Alegre, pointed out Mr. Ponte. In addition, the government aims to reduce agricultural dependence, promoting the creation of regional productive clusters with a complete supply chain. Mr. Ponte points out that “some of the productive clusters with a complete supply chain are the leather-shoe industry that includes everything from the production machinery to the chemicals used to manufacture shoes. Other clusters are the metal-mechanical, furniture, wine, automotive and agro-machinery industries. One of them, GM, is duplicating its plant in order to produce a new type of vehicle.” Other companies such as Randon, Marcopolo, Neobus, Agrale, Agco and John Deere are very important players that are expanding their production plants here.
Technology plays an important role in achieving competitive clusters. Mr. Rigotto remarked, “There is a lot of investment in high-technology in the state. Universities, together with the government and private companies, have created technological clusters with permanent R&D centers in order to develop new products and new technologies. Furthermore, Rio Grande do Sul has invested a lot in education and today posses a highly skilled workforce at all levels, from technical graduates of the Senae and Sebrae, to the university graduates from public and private universities.”