The Brazilian Connection: Supplier, Customer, Competitor and Teacher

Remember Brazil? Not that long ago it was the worlds basket case with hyper-inflation, bloated deficits , political instability and an economy stifled by bureaucracy. Today, Brazil has foreign reserves of $240 billion, which exceeds the combined debts of the nation’s government and corporations. Once a recipient of IMF bailout money, this time, Sergeo Rezende, Minister of Science and Technology told me on a recent visit “We helped the IMF save Europe.”

Why should we care about Brazil?

In the first place, they are the largest producer of coffee in the world. We are one of the largest consumers and marketers of the product.

More importantly, with a population of 194 million, and a growing middle class, Brazil, like China and India, represents an important and rapidly growing market for our products. Last year it was the eighth largest economy in the world but was the worlds fifth largest market for personal computers. It is also a booming market for cell phones, with 180 million cell phones in use, although high taxes and low competition has stunted the market for smart phones.

Although the company has traditionally discouraged imports, Sergeo Rezende, Minister of Science and Technology told me on a recent visit that this is changing. The government eliminated taxes on computers to encourage their sale. And direct foreign investments in Brazil is now the second in the world after China, reaching more than $45 billion this year, up from just $22 billion in 2006.

With the 2012 World Cup and the 2014 Olympics slated for Brazil, expect a big coming out party. Think of Japan in 1964 with the Tokyo Olympics, Korea in 1988 with the Seoul Olympics and China in 2008 with the Beijing Olympics. In each case, those Olympics marked a coming of age for those economies.

Brazil is also a potential competitor. Brazilians see themselves as pioneers in aviation. They are taught that a Brazilian aviator who flew a plan in 1906 was a more important aviation pioneer than the Wright brothers. Embraer, a company originally launched by the government but later privatized, is now one of the largest aircraft manufacturers in the world, supplying many of the world’s regional jets. Word has it that the company is now considering planes to build a plane that would carry up to 122 passengers, putting it a stone’s throw from being a direct competitior to Boeings hot-selling 737.

A third reason to look at Brazil is to learn from them. It is not only in its love for airplanes and coffee that Brazil is like us. The country is also a major agricultural power with a significant food processing industry, And it has been successful in the area of biofuels, where we have largely failed.

Although Boeing recently boasted of test flights using biofuel, Brazil flew planes using ethanol way back in 2005. A active government policy has resulted in a booming ethanol industry. Brazilian cars have flex-fuel engines that can run on any mix of gasoline or ethanol. Most people use ethanol because it is cheaper, even though all subsidies have been eliminated. Like many Washington companies, Brazil is working hard on third generation biofuels that use algae and various genetically engineered plants. Those are efforts we can learn from, and perhaps, collaborate with.

Brazil also offers us a sharp remind er of the importance of education. Unlike the Spanish, Portugal built few educational institutions in its colonies. That held back Brazils development. It wasnt until the 1960s that Brazil produced its first Phd, Rezende says.

Brazil has since made a major push in science, building a network of new educational and research institutions. In the last 15 years, the number of Phds coming out of Brazilian colleges and universities each year has quadrupled while the number of masters students is up almost 1000 percent. The number of scientific publications has increased at a 11 percent annual rate.

Brazil is now focusing its scientific resources on building up its strength in such strategic areas as biotech, nanotechnology, health and software. National investments in science and technology has risen 350 percent to $1.7 billion in the last four years while the ministry of science and technology has seen its budget double to $6.5 billion. The national government changed its laws recently to allow the government to offer direct subsidies to start-ups and mid-sized companies operating in strategic sectors.

Although the United States remains far ahead in science, Brazil offers us an important reminder of the importance of education. Recent cutbacks at crucial institutions such as the University of Washington, threaten to undermine our leadership position.