Brazil: Balancing on the Brink?
For the first three quarters of 2008, Brazil’s economy grew at a robust rate of more than 6%. As the world financial crisis takes its toll, signs have begun to appear that business in Brazil could run into trouble. The Bovespa stock market index has been volatile, and falling commodity prices have eroded export earnings. How will Brazil fare during the coming months? To answer this question, Knowledge@Wharton interviewed leaders from industries ranging from petrochemicals and telecommunications to banking, real estate and manufacturing. In this special report, CEOs and other experts share their insights into what’s in store for Brazil. The report will be updated with additional interviews over the next few weeks, so be sure to check back.
Founded in 1928, Mangels Industrial is among Brazil’s leading manufacturers. Its products range from cold rolled steel to gas cylinders. In addition, the company is Latin America’s largest maker of aluminum wheels for the auto industry. How are manufacturers such as Mangels Industrial coping with the global recession? In an interview with Knowledge@Wharton, Bob Mangels, company CEO and grandson of the founder, shares his insights on managing during the slowdown as well as principles that help family businesses succeed.
Octavio Lopes, senior partner of private equity firm GP Investments, is in the middle of raising what might be the largest private equity fund ever for Latin America. In a podcast recorded in Sao Paulo, Lopes discusses the prospects for investing in Brazil and Latin America, where he thinks commodity prices are headed, and how the discovery of oil in places like Brazil, Colombia and Mexico will affect the local and regional economy.
Brazil’s petrochemicals industry has been going through active consolidation, a phase that is almost at an end. That process, however, has seen the creation and growth of Braskem, a giant of a firm that is the largest petrochemicals producer not just in Brazil but in all of Latin America. Bernardo Gradin, who has been part of Braskem since the company’s formation in 2002, took over in July as its CEO. In an interview with Knowledge@Wharton conducted at the company’s Sao Paulo headquarters, Gradin discussed Braskem’s goal of becoming one of the world’s top 10 petrochemical companies as measured by shareholder value.
Alberto Duran, founder and CEO of Mundivox Communications of Brazil, has seen the world of telecommunications from various perspectives. He worked in the telecom sector for J.P. Morgan in New York, and Bain & Company and Monitor Company in Boston and London. He specialized in the development of strategies for major industry players worldwide, including privatizations and M&A in North America, Europe and Asia. In 1999, Duran founded Mundivox Communications in Brazil. In an interview with Knowledge@Wharton, he talks about the troubled environment in the wake of the slowdown and the key issues in managing a company that is growing at an astonishing 100% a year.
Arminio Fraga was president of the Central Bank of Brazil from 1999 to 2002. He has sometimes been called the Alan Greenspan of Latin America, though that comparison may not sit well these days as Greenspan comes in for his share of the blame for the global financial crisis. In 2001, Fraga founded the Rio de Janeiro-based Gávea Investimentos, an independent asset management company. It operates principally in the areas of hedge funds, wealth management and illiquid investment strategies. In an interview with Knowledge@Wharton, Fraga draws upon his wide experience and understanding to talk about the financial crisis, its causes and future concerns.
Economic crises around the globe have often hit Brazilian banks hard, with capital flight hammering the country’s currency, the real. But Brazil’s financial institutions seem better positioned to weather the current worldwide credit crunch, although lending there is just as frozen as it is elsewhere, according to Candido Bracher, president and chief executive officer of the São Paulo-based Banco Itaú BBA, one of the country’s largest private banks. In an interview with Knowledge@Wharton, Bracher discusses how the international market turmoil has affected Brazil and how this differs from the financial crises of the 1990s. He also speaks about what a commodity-price "hangover" could mean for the country’s economy.
These are volatile times for Brazilian real estate, which mirrors the situation in most countries. But according to Elie Horn, chairman and CEO of Cyrela Brazil Realty, Brazil’s largest developer of residential properties, Brazil doesn’t have the deep-rooted problems of the U.S. market. It’s just a matter of lying low for some time until confidence returns, he suggests in an interview with Knowledge@Wharton.