The Recent Internationalization of Brazilian Companies

Glauco Arbix

University of Sao Paulo, Brazil

Luiz Caseiro

University of Sao Paulo, Brazil


The recent wave of internationalization among Brazilian companies differs from past experiences, in terms of volume, reach, destination and quality. Brazilian multinationals are not restricting their activities solely to regional markets, nor are their first steps entirely directed towards South America. In amount of investment and number of subsidiaries there are signs they prefer assets and activities in advanced markets—including Europe and North America—where they compete on an equal footing with major conglomerates for a share of these markets. Some Brazilian companies have previous international­ization experience, and a significant portion had been prepared and initiated outward growth in the 1990s, after the economy opened up. However, the boom of internationalization that began in 2004 took place in such unusual conditions as to deserve highlight and special analysis. This chapter discusses the recent expansion of Brazilian multinationals as a result of: (1) the functioning of a more responsive and targeted system of financing, (2) transformation of the Brazilian productive structure, which led to the emergence of a group of companies seeking internationalization as a strategy, (3) preference for seeking more advanced economies as a means to expand access to new markets and suppliers, as well as to absorb innovations and technology, (4) the State’s performance in several dimensions, especially in financing the implementation ofpolicies which support the creation of large national groups with a presence in the globalized market.

DOI: 10.4018/978-1-61350-165-8.ch032

Copyright © 2012, IGI Global. Copying or distributing in print or electronic forms without written permission of IGI Global is prohibited.


After the reduction of Outward Foreign Direct Investment (OFDI) flows in 2009 due to the in­ternational economic crisis, the rhythm of expan­sion by Brazilian multinationals abroad quickly accelerated, accompanied by the resumption of economic growth.2 In just the first nine months of 2010, the sum of acquisitions abroad by Brazilian companies totaled US $17 billion, a value greater than the total international acquisitions made by Brazilian companies throughout the 1990s. Ac­cording to data from the Brazilian Central Bank, a definite and unprecedented acceleration of investments by Brazilian companies abroad only started in 2004. However, the first movements of this new wave had its roots exactly in the 1990s, after the opening of Brazilian economy, a period of rehearsal and preparation for this more aggres­sive thrust into the path of globalization, as can be seen in Figure 1.

During this same period, companies like Petrobras (oil and gas), Vale (mining), Embraer (aeronautics industry) Braskem (petrochemicals) and JBS (meat processing) established themselves as large international players; other companies— like Gerdau (steel), WEG (engines), Coteminas (textiles), Marcopolo (buses), BRFoods (food), Votorantim (cement, mining and pulp and paper), Odebrecht (construction) and Camargo Correa (textiles, cement, and construction)—which al­ready held leadership positions in South America, consolidated, expanded and diversified their in­ternationalization. Besides this, a number of other companies from different sectors—like Marfrig (food); Totvs, Stefanini e Bematech (in­formation technology); Randon, Sabo and Ioschpe Maxion (cars and car parts); Lupatech, Romi and Tupy (mechanics); Natura (cosmetics); EMS and Eurofarma (pharmaceuticals), among others—el - evated their standards of competitiveness and broadened activities abroad. Unlike prior experi­ences, the more recent internationalization of Brazilian companies possesses particular charac­teristics: in this most recent migration, the Brazil­ian multinationals went beyond their niches and their closest market, South America, and pursued targets like the OECD countries, North America and Europe in particular, where they compete directly with large conglomerates for an important slice of the international market (Figure 2).

Figure 1. Brazilian companies’OFDI

Brazilian Companies' OFDI - in billions ofUS$

Total OFDI Flows -*-M&A OFDI Flows

Source Author’s elaboration based on data from Central Bank of Brazil October 2010 *2010 data only for the first nine months

Background Information for Selected Brazilian Multinationals


Industry / Main Product



Revenues 2009 - US$ M



Has subsidiaries in

Main Foreign Markets (% of sales)


Oil & Gas




27 countries in all continents

Americas & Africa


Meat Processing/ Beef




20 countries in all continents

U. S., Asia & Australia


Mining / Iron, nickel




35 countries in all continents

Asia & Europe


Conglomerate/ Cement, Mining, Pulp and Paper




23 countries mainly in Americas and Europe, but also China and Australia.

Americas & Europe


Steel / long carbon and special steel





14 countries, mainly in Americas, but also Spain and India

North America


Meat Processing/ Chicken




France, Japan, Netherlands, Russia, Singapore, UAE, U. K.

Asia & Europe




Conglomerate/ Engineering. Ethanol




18 countries, mainly in Americas & Africa, but also Europe & Asia.

Latin America & Africa


Petrochemicals/ Plastic Resins and Basic Petrochemicals





Bolivia, Mexico, Peru, U. S.A, Venezuela

Latin America

C. Correa

Conglomerate / Engineering. Cement, Footwear




16 countries in Americas, Europe, Africa

Latin America


Aeronautics / Regional & Executive Jets




China, France, Portugal, Singapore, U. SA

North America & Europe


Meat Processing/ Beef




22 countries, maily in Americas & Europe, but also S. Africa & China



Vehicles / truck trailers and parts




Argel, Argentina, Chile, China, Germany, Kenya. Mexico, Morocco, S. Africa, U. AE. U. SA

Americas, Europe. Africa


Mechanics /Engines and compressors




25 countries in all continents

Americas & Europe






Argentina, Bolivia, Chile, Colombia, Mexico, Peru & France

Latin America






Argentina. Canada, China, India. Mexico, U. SA

North America






Argentina, China, Colombia, Egypt, India. Mexico, Russia

India & Mexico



Vehicles / Freight cars & autoparts




China. Mexico. U. SA



IT/ERP Software & Services




Angola, Bolivia, Mercosur, Mexico & Portugal

Latin America


Eletronics / Comercial Freezers and Refrigerators.




Denmark, Mexico. Russia, Turkey, Ukraine, U. SA

Americas & Europe

Stefan ini

ГГ / Services




17 countries, mainly Americas & Europe, but also Angola & India

Americas & Europe


IT / Flardware, Software & Services




Argentina, China, Germany. Taiwan. U. SA


Source: Author's elaboration based on Companies' Annual Reports; Valor (2010:28-29); Valor (2009); Caseiro (2009:Annex 3).

The main objective of this chapter is to under­stand this unprecedented activity among Brazilian businesses. Recurring explanations seek to reduce this dynamic to the good moment that the Brazil­ian economy is currently experiencing, or even advantages due to the low exchange rate, which has facilitated international acquisitions. From a different angle, a substantial portion of academic literature emphasizes individual cases of entre - preneurism and business success stories. These explanations, although pertinent and useful, help to clarify only specific cases and do not address how and why the internationalization movement grew so rapidly, and was incorporated, as a strat­egy, by a significant number of companies. Our hypothesis seeks to reveal the four factors that work together to make viable and to accelerate the expansion of Brazilian companies abroad:

• The capitalization of companies and avail­able financial resources, both foreign and domestic, with special highlight on areas of the economy linked to production of commodities, whose prices have boomed in the international market, basically due to the rise of China.

• The increase in capacity for innovation and entrepreneurship among Brazilian compa­nies. After the opening of the economy, at the beginning of the 1990s, many Brazilian companies started to gradually adopt stan­dards of international competitiveness, to modernize their management processes, to improve the quality of products and ser­vices and to increasingly pursue innova­tion in every step of their operations. These changes allowed many companies to incor­porate exportation into their growth strate­gies, going beyond a business culture ori­ented to the internal market and to prepare for a bolder expansion abroad;

• The preference among Brazilian compa­nies to act and establish themselves in the most advanced countries and markets. The data and its analysis allows us to conclude that the internationalization of Brazilian companies does not necessarily follow a linear route, with the assumption of us­ing a regional base, in this case, South America—as a platform for its expan­sion, nor do, at a basic level, direct them­selves to countries with linguistic affinity. Without negating the explicative value of these components, our research reveals, on the other hand, that Brazilian companies have accepted the challenge of competing in OECD countries, where the community of shared language is small.

• The clearly pro-internationalization posi­tion of the Brazilian government, which strongly and formally encouraged inter­nationalization of companies as one of its industrial policy objectives beginning in 2003. Changes in BNDES (Brazilian Development Bank) regulation, sown in 2002, with the first version of the Policy for Industrial, Technological and Foreign Trade Policy (PITCE, 2004) and the Productive Development Policy (PDP, 2008) allowed the bank to play an increasingly important role in supporting internationalization. The Ministry of Development (MDIC), the Bank of Brazil (BB), Petrobras and the Brazilian Agency for the Promotion of Exports and Investments (APEX) worked in harmony with the BNDES.

Beyond this introduction, this chapter is structured into four sections, in addition to the conclusion: Capitalization and Financing; In­ternationalization and Innovation; Destination of Brazilian OFDI; and New relations between State and Business.

The rapid and aggressive emergence of Bra­zilian multinationals finds support in these four processes that function in a linked and interde­pendent manner, within an economic environment distinct from the past, from both a domestic and international perspective.


In this moment that Brazilian companies intensi­fied their internationalization, Brazil, like many other emerging countries, experienced an ex­tremely positive and rare moment from the point of view of finance, which hadn’t occurred since the 1970s. Starting in 2004, the country benefited from high prices for raw materials and from the solid entry of foreign capital—mainly due to the resumption of economic growth.

Prices of raw materials—oil, minerals, and food—have been driven by the accelerated in­dustrialization and vigorous growth of China and India, countries heavily dependent on imported food and basic supplies (Figure 3).

This boom in commodity prices, in turn, con­tributed to the valuation of companies producing and marketing commodities, and also attracted a great deal of foreign capital to BOVESPA, where it has significant weight (Figure 4). Some of the leading Brazilian multinationals are producers of commodities—including Petrobras, Vale, Gerdau, JBS Friboi, BRFoods, Marfrig, Magnesite—and directly benefitted from these factors. However, other companies also indirectly benefited from the greater international visibility of Brazilian capital markets.

Also contributing to the increased availability of financial capital: (1) low interest rates in the main developed countries, which liberated a major portion of capital seeking more profitable applications, and (2) a series of financial innova­tions that allowed for the multiplication of liquid­ity and the profitability of high-risk financial securities (Ocampo, 2007; Jenkinson, Penalver & Vause, 2008).

It is appropriate, however, to show the impor­tance of strategies adopted by both the Brazilian government and companies in order to maximize this financially favorable moment and use it to

Figure 3. Commodities prices

Commodities Prices (2000 = 100)

crude petroleum minerals, ores and metals

vegetable oilseeds and oils —- food and tropical beverages

Source: Authors elaboration based on data from UNCTAD's Commodities Price Statistics * Annual Averages

Figure 4. Domestic market capitalization

Domestic Market Capitalization (US$ millions)

$1400 000

A i


A /

/ /


/ I /


$600,000 $400,000 $200 000

/ ¥ ■ Mexican Exchange

I --------------------- Santiago SE

у - ■ ■ Buenos Aires SE


Source: Author's elaboration based on data from World Federation of Exchanges ‘Value at the end of each year

stimulate greater competitiveness ofthe Brazilian economy. Maintaining economic stability and the drastic reduction of external vulnerability (with unprecedented increase in liquid reserves) was fundamental for decreasing country risk and cost of credit for the entire Brazilian economy.

The pro-activity of the government in reduc­ing strong economic constraints, coupled with the increasing competitiveness of Brazilian compa­nies, helps to understand the contrasts between capitalization of BOVESPA and the BuenosAires SE, given that both countries have benefited from high commodity prices.

The reentry of a set of industrial policies designed to modernize Brazilian productivity and raise standards of competitiveness—mainly through stimulating innovation, technology and investment—represent significant moments in the resumption of a proactive state. It should be remembered that this new state activism in Brazil has gone beyond the boundaries of economics, and generated social impacts through the restructure of the labor market, in raising minimum wage, expansion of social protection network, and cash transfer programs (e. g. Bolsa Familia), aimed at combating social inequalities and poverty. The expansion and increase in social policies was shown to be essential for growth in family income in Brazil and improved revenue for companies in order to leverage and maintain domestic demand during the 2008-2009 crisis (Landim Jhnior & Menezes Filho 2009; Sant’Anna, Ambrozio & Meirelles, 2010).

Brazilian multinationals has adopted new financing strategies to take advantage of the situ­ation and the conducive business environment in several ways, beginning with the myriad initial public offerings to leverage resources to strengthen and expand internationally. From 2004 to the first half of 2010, 30 Brazilian multinationals from various sectors (with the exception of the finan­cial industry), and raised a total R$ 57.2 billion (~ US$ 33 billion) on the BOVESPA (Sao Paulo Stock Exchange), half of this value coming from foreign investors3.

The reduction of country risk linked to increas - ing international competitiveness also facilitated access to external financing sources for the main Brazilian companies. According to research from Economatica Consulting, the trading volume of 32 Brazilian companies listed on the New York Stock Exchange (NYSE) in 2007 was valued at

US$ 555.6 billion, higher than the trading volume of these companies on the Bovespa (US$ 528.9 billion)4. In the same sense, large companies also increased their share of loans from international banks, with interest rates lower than in Brazil. As an example, Vale alone raised US$ 14.6 billion from foreign banks to acquire the Canadian company Inco in 2006, which became the company’s clear advantage in relation to its competitors (Fluriet & Braga 2009:116).

During 2009, at the peak of the international financial crisis in Brazil, large firms secured US$25.3 billion abroad, a figure higher than that obtained in the years 2007 and 2008 combined. The fact that record volumes can be achieved in a context of credit restriction shows that the large Brazilian companies were regarded as a safe haven for risk aversion and had acquired robustness, pres­tige, and confidence in the international market. This was completely unthinkable a decade ago.


The opening of the Brazilian economy that be­gan during the government of former president Fernando Collor and continued throughout the Fernando Henrique Cardoso administration, was designed to inject competitiveness into an economy accustomed to protectionism, and gen­erated contradictory or even negative results for many firms in its early phase. While it triggered profound changes in standards of competitiveness in the economy—which drove many companies to restructure to adapt to a more open environ - ment—it destabilized or even lead to the downfall of many companies which could not raise their low productivity to match new times.

During this early reorganization of the econo­my the Brazilian industrial GDP fell by 12% just from 1990 to 1992.5 The companies that survived were forced to quickly and often radically restruc­ture production, to learn advanced management practices and incorporate the diversification of products and services into growth plans, expand­ing their activities and exporting. On the positive side, from the restricted angle of the economy, (without regard to social costs, for example) in the first four years ofthe 1990s, industry in Brazil reached a relative gain in labor productivity ten times higher than that obtained throughout the 1980s (Bielschowsky & Stumpo 1996:172).

The stabilization of inflation since 1994 has helped to stimulate domestic consumption and allowed for a significant increase in production, but has also attracted more foreign companies to Brazil, increasing local competition The ra­tionalization of organizational practices showed itself to be insufficient to ensure long term com­petitiveness in the most dynamic sectors, and many companies began to quickly lose ground to foreign competitors. Product differentiation and internationalization of activities were alternatives (sometimes complementary) for cost reduction, and for sophistication of business processes and products incorporated by these companies.

Innovation, exportation and internationaliza­tion, though not always implemented simultane­ously, become more widespread among Brazilian companies. In the second half of the 1990s, even in unfavorable financial conditions and without the support of governmental policies, there was a significant expansion of OFDI. In the last five years of the 1980s, Brazilian OFDI was, on aver­age, US$ 212 million annually. In the first half of the 1990s, thisjumped to US$591 million annually (an increase of 178%) and in the second half to US$1.57 billion annually (an increase of 640% compared to the 1980s) (Figure 5)6.

Figure 5. First steps of Brazilian OFDI flows

It was during this period that Gerdau (metal­lurgy/siderurgy), which already had subsidiaries abroad since 1980, intensified its internationaliza­tion. From 1995 to 1998, Gerdau launched new plants in Canada, Argentina and Chile. In 1999, after an IPO on the NYSE, it aggressively entered the NorthAmerican market, acquiring Ameri Steel for US$ 872 million. Since then, it has continu­
ally increased its market position via several further acquisitions, becoming the second largest producer of steel throughout theAmericas. Gerdau also took advantage of cross-borders acquisitions to diversify its operations, transforming itself into one of the largest worldwide suppliers of special steel products, of larger aggregated value (stain­less steel, car parts, tools, hospital supplies). This was done through the acquisitions of Spanish companies Sidenor (2005) and GBS Acero (2006) that allowed Gerdau to strengthen its presence in the European’s auto parts and machinery indus­tries. (Fleury & Fleury, 2009).

The literature on International Business seeks to show that the relationship between internation­alization and innovation is two-way. According to the classic conception of multinationals, based on the Anglo-Saxon experience (Dunning, 1981; 1988), to internationalize successfully a company had to possess some competitive advantage trans­ferable to the host country. Advantages derived from labor cost or a brand only locally known, for example, would not be transferable to other coun­tries. More appropriate would be the advantages linked to technology and innovation (of products and processes). Therefore, the more innovative the company, the greater its advantage over local firms and the greater its chances of success in internationalization.

Recently, however, many studies emphasize other aspects of the relationship between interna­tionalization and innovation, mainly when it occurs in companies from emerging countries (Mathews, 2002; Arbix, Salerno & De Negri, 2004; Child & Rodrigues, 2005; Aykut & Goldstein, 2006; Borba Vieira & Zilbovicius, 2008). For emerging companies, innovation would not be necessarily a prerequisite, but instead a consequence of es­tablishing overseas subsidiaries. When entering new markets—especially more demanding ones such as the American and European—compa - nies would be able to absorb higher standards of competitiveness, capture new trends, become acquainted with new products and processes and even the tastes, habits and demands of new sup­pliers and customers.

Though recent, the studies have already traced trajectories that show the different types of relationships between innovation and interna­tionalization. There are cases—such as Embraer (Miranda, 2007)—where innovation is mainly related to product design and in networks of international partnerships that ensures access to technology and also the most competitive prices. In others cases, the strategy is to specialize oneself as a preferred supplier of a major multinational, installing factories close to them around the world and taking on new challenges and contracts—as is the case of Sabo (auto parts) in partnership with automakers (Aykut & Goldstein, 2006).A different road leads to acquisition of companies, mainly in developed countries, in order to absorb essential technological assets. This path has been taken by many Chinese companies, which rely on strong state support (Rui & Yip, 2008; Luo, Xue & Han, 2010). This was also, in part, the strategy adopted by Gerdau when it acquired steel mills in Spain, and by Magnesita in acquiring LWB Refractories of Germany, the world leader in basic refractory product, in 2008.

Beyond technology, strategy based on acqui­sitions also helps reduce the negative impact of cultural differences on the productivity of the subsidiary abroad. This means that in addition to tangible assets, technology, and brand, the company has access to contractual relationships established with employees and suppliers, and the habits and demands of customers.

There is strong evidence on the complemen­tary relationship between internationalization and innovation in the activities of Brazilian multina­tionals. In a survey conducted by the Department for Business, Innovation & Skills in the UK in 2008, five Brazilian companies appear among those who invest most in R&D, detailed below (apud FAPESP, 2010). These companies are also among the fourteen Brazilians companies ranked on a Boston Consulting Group (2009) list of 100 emerging companies that vie for global leadership in their respective industries:

• Petrobras appears in second place among companies in the oil and gas sector, with investments of £442 million, correspond­ing to 1% of its revenues, in R&D in 2007. It has subsidiaries in 28 countries and about 10% of its assets and jobs are overseas.

• Vale is in first place in the mining sector, with R&D expenditures of £368 million, or 2.3% of its revenues. It has subsidiaries in 34 countries and 25% of jobs and 39% of assets are outside Brazil.

• Embraer is the 16th among aerospace and defense companies with £131 million in R&D investment, equivalent to 5% of its revenues. It has subsidiaries in six coun­tries and 12% of jobs and 39% of assets are abroad.

• Braskem appears in 90th in the chemical sector, with investments of £22 million in R&D, representing 0.4% of its revenues. It has subsidiaries in eight countries and is part of Odebrecht, which has about 56% of their jobs and assets abroad.

• WEG is the 106th in the electrical equip­ment and electronics sector, with invest­ments of £21 million in R&D, or 2.1% of its revenues. It has subsidiaries in 26 coun­tries and 11% of jobs and 18% of assets abroad. (FAPESP, 2010 and Valor, 2009).

Although Brazil has fewer companies in the R&D investment ranking than India and China (15 and 9 firms respectively), the above companies are responsible for activities that impact on the entire Brazilian economy. Recent research (De Negri, 2010) states that about 40% of all engineers with formal work contracts in Brazil work for suppli­ers of Petrobras, a company that has a business plan to invest US$ 224 billion between 2010 and 2014 and expand its production rates of 10% p. a.

This link between internationalization and in­novation is also evident even when the analysis involves the whole Brazilian industry. Arbix, Salerno & De Negri (2004) crossed statistical data corresponding to 72,000 industrial compa­nies in Brazil, relating to the year 2000. While 30.5% of the enterprises of the sample claimed to have done some product or process innova­tion after 1998, that figure rose to 70.4% among the firms that possessed OFDI. The authors also identified a cluster of approximately 250 com­panies in which their subsidiary abroad was the main source of information for innovative activ­ity. These companies, despite representing only 0.35% of the sample, accounted for 5.8% of total national industrial exports. Their competitiveness was also demonstrated by the fact that they paid higher salaries and hired more qualified labor than average, generating positive impact for the entire Brazilian economy.

Borba Vieira and Zilbovicius (2008) observed a similar phenomenon when conducting case studies of three Brazilian multinationals from the auto parts, petrochemicals and adhesives sectors; they concluded that OFDI is a strategy for them to gain exposure to the most modern technology in foreign markets.

Another dimension ofthe relationship between internationalization and innovation is revealed in research from the Dom Cabral Foundation (2008), of about 100 Brazilian multinationals—that was a reissue of a survey applied in 2002. While in 2002 none ofthe companies interviewed declared they performed R&D activities abroad, in 2008, one third of the sample stated they had adopted this strategy.

Three Short Case Studies on Innovation and Internationalization

The major goal of this chapter is to understand the strategy transformations that occurred at various Brazilian companies that led to intense acceleration of their internationalization. In the following we present a succinct overview of how three companies developed different strategies for innovation and internationalization: Embraer (aviation), Marcopolo (busses) and Natura (cos­metics). The three are innovative and rapidly grow­ing companies that understood how to respond to the Brazilian crisis of the 1980s and 1990s and created dynamic competitive advantages based on product diversification, investment in R&D, and internationalization. These mechanisms continued and intensified in recent times, and explain how these companies came to be recognized as global players (BGC, 2009).

These companies began their growth with imitation strategies, through intensive licensing of technologies (Embraer), or adapting of products for the domestic market (Marcopolo), or through hiring from large multinationals (Natura). These fast-followers moved into the position of prospec­tors, and, more recently, began to be guided by offensive strategies, based on a quest for global technological leadership (Griffin, 1997; Freeman & Soete, 1997; Goldstein, 2002, 2007).

In the last decade, these companies expanded themselves vigorously in the domestic as well as in the foreign market, showing that that foreign and domestic expansion were not mutually exclu­sive strategies, as the literature showed during the 1980s and 1990s, but instead more complementary (e. g. Iglesias & Mota Veiga, 2002:19; Cyrino & Tanure, 2009:18). The stronger a company’s position in the domestic market, the greater the muscle for companies to raise the bar. Moreover, the more internationalized a company, the more competitive it is in the global market, as it pos­sesses fast access to new productive knowledge, financial resources, suppliers, and clients.


The building of high-technology companies in emerging countries generally involves the incor­poration of productive knowledge from foreign markets. The case of Embraer is no different. Its first commercial success, the Bandeirante turbo­prop (commercial aviation, eight seats) and the Ipanema (agricultural spraying) were developed by foreign technicians brought in to work at the Aerospace Technical Center by the Brazilian government.

In addition to this, in its early years Embraer also learned to manufacture jets and entered into the military segment thanks to a partnership with the Italian company Aermacchi, using technol­ogy transfer for the development of the Xavante ground-attack j et (1971) and afterwards the AMX jet fighter in 1985 (Miranda, 2007).

It was also through licensing oftechnology with the North American Piper (1975) that Embraer took its first steps into the executive jet market, now one of its major segments. In both segments, however, the growth of the company was only possible due to continual investment in R&D, and in the diversification of products.

In fact, the innovations that Embraer has ob­tained through its precocious internationalization were as essential for its success as the major state support it received. The first subsidiary abroad was opened in the USA in 1979 and three years later the company already dominated one-third of the North American market for 10-20-seat planes. In 1983, it established a new subsidiary in France, aiming to service the European and Middle Eastern markets, and a couple of years later was already competing for worldwide leaderships of aircraft of 30-40 seats.

Beyond this, the strong dependence on the State brought financial difficulties when serious crises hit the country in the 1980s and 1990s. State management also became problematic when the technological capacity of Embraer began to serve foreign policy interests without proper at­tention to necessary market demands, as was the case with the CBA-123, an expensive turboprop that revealed itself to be a commercial failure in a troubled partnership with Argentina at the end of the 1980s (Goldstein, 2002).

With the opening of the Brazilian economy in the early 1990s, the financial situation of Em­braer grew more complicated. In 1994, the year of its privatization, its debts surpassed US$1 billion (Miranda, 2007). After privatization, the company adopted a new organizational structure, with sizeable investments in IT and the establish­ment of boards for each specific aircraft project, which begun to operate as semiautonomous cells of the company. The result was optimization of learning and enhanced agility for development of new projects (Vasconcellos et al., 2008). The time for delivery ofthe EMB - 120Brasilia (30-seat commercial aircraft) fell from 16 to nine months (Goldstein, 2002).

However, the principal innovation ofthe period occurred during the ERJ-145 project (commercial jet for 50 passengers) that required the creation of a wide international network of 350 vendors and clients participating in diverse steps of product development. Four of its main suppliers were risk partners, that is, they helped to finance the project. The major clients were invited to participate in a pre-project phase, in order to define the character­istics of the aircraft (Vasconecellos, et al. 2008).

Besides capturing market trends, the partner­ships made Embraer, as supervisor of projects, the main beneficiary of international integration of the R&D routines of its vendors. The strategy was revisited even more intensely with the EMB - 170/190 family of jets, for up to 122 passengers, when 16 supplies took on a role as partner of risk. These mechanisms were fundamental to stimulate the whole innovation system of the company and could be considered as one of the first successful experiences of Open Innovation, even before the dissemination of this concept by Henri Chesbrough, in 2003.

The success ofthe new commercial jets, in turn, pushed internationalization even more. In 1999, a consortium of French companies—Dassault, Aerospatiale/Matra, Thomson-CSF e SNECMA— acquired 20% of the ordinary shares of Embraer, making possible greater financial solidity and generating new opportunities for technological capacity, especially in the military segment. In the following year, the company executed an IPO on the New York Stock Exchange (NYSE) and opened its first commercial offices in China and Singapore. The year of 2002 saw the open­ing of the first factory in China, in Harbin, near

Beijing, for the creation of the ERJ-145 family of jets (Miranda, 2007). In 2004, it bought the Portuguese OGMA and should inaugurate two new plants, with complex structures and composite materials fundamental for the production of more agile aircraft, in 2011.

Embraer is today a global company. It is the third largest producer of planes in the world by annual delivery and is the market leader in regional jets. To maintain its competitiveness, Embraer is diversifying its portfolio even further, currently moving in the direction of military aviation seg­ment and aeronautical services offerings. In the newest defense area, the project is a transport and air refueling plane KC-390, with a capacity to transport up to 23 tons. The project, currently in the phase of vendor selection, expects to generate more than 14 technology transfer contracts with foreign companies7.

The mechanisms of open innovation developed by the company teaches us that success—beyond state support - is linked to the sources of its own business dynamism and of the close ties main­tained with partners, suppliers, and clients around the world.


The Brazilian bus producer was founded in 1949, initially dedicated to the production of artisanal wooden car bodies. It had a trajectory of rapid expansion and at the end of the 1970s, it was ex­porting steel car bodies to practically all of Latin America and some Africa countries from its three factories in Brazil.

Since its first years, the company invested in constant diversification of products for the launch of its lines of microbuses (1972) linked busses (1978) and electric busses (1979). It was also the first company to adapt European bus makers’ innovations for South America, as in the case of the high-decker bus in 1984, and the double-decker, launched in the Argentine market in 1996 (Stal, 2007).

In 1991, when the crisis in Brazil was intense, Marcopolo opened its first factory abroad, in Co­imbra, Portugal. The choice of this country was not due just to linguistic and cultural proximity, but the location also functioned as a laboratory to incorporate technology from European facto­ries, principally through access to simultaneous engineering with suppliers outside the Brazilian market. Thanks to this intense learning, coupled with its own efforts in R&D, Marcopolo’s vehicles became capable of competing in whatever country and the company became a worldwide exporter of technology for production of busses (Rosa & Rhoden 2007).

Unlike Embraer, Marcopolo was able to obtain success through an elevated level of verticaliza - tion, maintaining direct control over its principal Brazilian suppliers (materials, seats, doors, win­dows, plastic components, etc.) that facilitated the transfer of technology for European vendors to local vendors (Rosa, 2006).

Between 1999 and 2001, Marcopolo opened its new productive units in Argentina, Colombia, South Africa, and Mexico, beginning with part­nerships with large local chassis manufacturers (Mercedes Benz in Argentina and Mexico; Sca - nia, in South Africa). This model of entry via a joint venture with major local manufacturers was repeated in India and in Russia in 2008, when it established joint ventures with Tata Motors and Ruspromauto, and in Egypt in 2009 in partnership with GB Auto8

In its first internationalization experiences, Marcopolo exported all components manufactured in Brazil and only performed the assembly in the host country. However, starting in 2004, the company began to work to develop new suppliers abroad, to protect against currency oscillations, as the strategy of internationalization for Marcopolo had as its focus the large emerging countries that possessed few consolidated companies and high growth potential, but volatile exchange rates.

At each industrial plant, Marcopolo has its own R&D team responsible for adapting prod­ucts to customer demand. One of the company’s competitive advantages is the ability to mount bodies on any type of chassis. The high quality of its products and its flexible development capabili­ties were fundamental for the Indian giant Tata Motors to be convinced to sign a joint venture with a Brazilian company within its own country. Currently the Indian factory is Marcopolo’s lead­ing international operation.

With installed production in eight countries and exports to more than one hundred, Marcopolo is now a company with global coverage that holds 40% ofthe Brazilian market and 7.0% ofthe world market. It is also an exporter of technology and has an internationalization model that is above all pragmatic and flexible. Control and development of supplier networks and aggressive associations with local champions sustains Marcopolo’s excel­lence in design and assembly technology of its car bodies.


Natura is a leader in cosmetics, fragrances and personal hygiene in Brazil—the world’s third largest market, behind only the U. S. and Japan, according to data from Euromonitor (apudABIH - PEC, 2009), with annual revenues of $ 2.4 billion in 2009. Like the two other cases seen here, this is a young company that had rapid growth based on constant innovation of products and processes.

Its internationalization is less intense than in the other two cases examined and the domestic market accounts for 93% of its revenues—while this figure is 60% for Marcopolo and just 7% of Embraer. Its plans, however, are ambitious, and it is important to note that company always tried to absorb knowledge from abroad and strove to integrate the strategies of innovation and inter­nationalization.

Natura was founded in 1969 by Antonio Luiz Seabra, a young economist who was manager of a small cosmetic laboratory owned by a French esthetician in Sao Paulo. Three years later, in 1972, the company hired Anisio Pinotti, an industrial chemist, who had experience in other companies in the cosmetics industry, to lead the development of new products based on herbal extracts and marine compounds (Ghoshal et al., 2002).

The rapid growth of Natura began when it joined Pro-Estetica, a company specializing in direct sales at home, in 1974. This business model was clearly inspired by the U. S. company Avon, already used in Brazil for more than a decade. The partnership moved forward. Natura, with its inexpensive, but quality products, saw its revenue jump from $53,000 in 1973 to $ 3 million in 1979, when the company had 1,000 sales consultants (Nakagawa, 2008).

Since then, the company’s rapid growth has attracted several other entrepreneurs by creating a set of sister companies including a fragrance and makeup company that used the same vendors as Natura, and two distribution companies that send their products to all regions of Brazil. In the late 80’s, Natura has merged the operations of these four companies as a way of responding to the crisis that affected the Brazilian economy and prepare itself for the market opening that was already being announced.

The merger was followed by a deep organiza­tional restructuring in the early 90’s which included the hiring of several executives and consultants who had worked for large multinationals in the sector. Among the new executives hired was Phil - lippe Pommez, a French citizen, PhD in Physical Chemistry from the Sorbonne who had been vice president at Johnson & Johnson’s headquarters. He took on the role of research director at the company and today he is vice president for in­ternationalization and a major contributor to the French subsidiary of Natura9. It was also after the hire of Pommez that Natura launched some of its main family of products, such as Simbios in 1991, Chronos in 1992, and Mother and Baby in 1993, and Ekos in 2000, which only uses active ingredients extracted from Brazilian biodiversity.

The importance of innovation in Natura’s suc­cess has continued to grow. In 1990, 10% of its revenue was derived on the sale ofproducts created in the previous two years. In 2009, the percent­age was 67.5%, revealing a high dependence of innovative activity (Natura 2009). Spending on R&D also increased. Recently, Natura decided to reduce by half the high number of launches per year—which reached 200 annually—to con­centrate on innovation efforts on sales of its key products (Frederick & Vasconcellos, 2008).

It was also in the 1990s, when it embarked on its most innovative phase that Natura also obtained success in its internationalization process. In 1994, it opened its own distribution centers in Argentina and Peru, where an intensive training program for vendors and a reward scheme for successful management of operations were developed. The same model was replicated successfully in Chile in 2002 and in 2004 a new corporate headquar­ters was created in Buenos Aires, responsible for operations in the countries of Hispanic America (Lima et al., 2008).

It was in 2005, however, that it began its most ambitious international project, entry into the French market, one of the most world’s most competitive markets in this sector. That choice, which at first glance appears to be irrational from the perspective of opportunities for growth, was supported by a strategic vision of leveraging its innovative activity.

The French subsidiary is part of a project of relative separation of research and development activities. In this project, research teams are moving towards medium and long-term plan­ning, directed towards radical innovations, while development teams are focused on short-term and on fulfilling the yearly plan of launching new products. To optimize the potential for radical innovation, research activities then began to be allocated in knowledge-intensive areas (Frederick & Vasconcellos, 2008).

Besides having an R&D center, the European subsidiary also had a distinct business strategy. Anticipating difficulties in implementing its system of direct sales in France, Natura opened a “sensory store” in Paris so that customers could try out their products. Today, in addition to the store, the company already has a network of 1,700 salespeople in the country.

The strategy of opening a “sensory store” was also replicated in Mexico in 2005 and in the Colombian market in 2007 (Lima et al., 2008). In both countries the activities are still incipient and the company is studying the possibility of chang­ing its distribution strategy for faster penetration abroad, such as establishing partnerships with local companies and outsourcing manufacturing of products abroad (Valor, 2010:62).

Despite internationalization of some of its R&D and early production abroad, the company still focuses most of its innovative effort in Brazil. Its main laboratory is located in the city of Cajamar, near Sao Paulo, and houses about 250 researchers. In 2007, Natura acquired 300,000 square meters of land within the Ciatec 2 Technological Hub, near the University of Campinas (the second largest university in Brazil), to install the com­pany’s newest and most modern R&D center, to accommodate 300 researchers10. Also in 2007, the company created the “Natura Campus Program,” which seeks closer ties with leading university centers in the country. There are now more than 250 research groups registered voluntarily in the initiative, which has received about 100 proposals for university/company cooperation.

On the one hand, Natura is recognized as an example of Brazilian innovation and has an intense material and symbolic relationship with national biodiversity, and on the other hand, one of its strengths is precisely its longstanding openness to knowledge flows from other organizations in Brazil and abroad. In the 1990s, it restructured its management activity and R&D by hiring several highly qualified professionals from multinationals in the sector. Most recently, in the current decade, it looked to France for a chance to renew its in­novative activity.


The predisposition of the Brazilian business elite to follow the path of innovation is also evident if we map out the main destinations of Brazilian multinationals going abroad.

Although some authors insist that Brazilian companies concentrate their international activi­ties in South America (e. g. Dunning, Kim & Park, 2008:167), there is no available data to support this hypothesis. Despite the fact that Brazilian multinationals have important influence in this region, evidence suggests that migration is increas­ingly directed to the more dynamic markets in the United States, Europe, and more recently, China.

Two-thirds of Brazilian OFDI is reportedly located in tax havens (Figure 6). With rare excep­tions, it is not possible to accurately determine their final destination11. These assets are often used to make acquisitions in distant countries, where it is more difficult to achieve success through organic growth (Goldstein 2007:17). In addition to the assets located in tax havens, Brazilian com­panies state they possess more assets in Europe (16.5%) and North America (8.9%) than in their own region (6.4%).

Given the difficulties in determining the real destination of OFDI, this study sought to identify the location of the subsidiaries of Brazilian com­panies. This exercise was conducted in detail for 88 multinationals across various sectors (Figure 7 and Figure 8).

This exercise has limitations because, in the first place, there is no available data on the amounts invested by each company in each destination, and secondly, the sample size does not necessar­ily represent the full number of enterprises with investments abroad. However, the authors believe that this is a useful exercise to capture important features of expansion by major Brazilian groups.

The visual result ofthe second analysis (Figure 8) is very different from what might be expected from a mapping of OFDI. As is already known, a significant proportion of Brazilian investments are

Figure 6. Brazilian MNEs reported OFDI stock

Figure 7. Number of Brazilian MNEs in each other

Number of Brazilian MNEs in each country from a sample of 88 firms

Figure 8. Number of Brazilian MNEs by industry in each region

concentrated in a few large commodity-producing companies, especially Petrobras, Vale, Gerdau12 and more recently JBS Friboi (Funda^ao Dom Cabral, 2007). This does not underestimate the role ofthese companies for the Brazilian economy. The mapping, however, shows the number of companies in each sector in each region of the globe, emphasizing a little studied aspect of the recent internationalization process: in other words, it reveals the involvement of a growing number of midsized businesses and sectors of medium-high and high-technology looking at the foreign market as a way to gain competitiveness.

The country that attracts the largest number of Brazilian multinationals is the United States, with 59 companies, in contrast toArgentina, which has 51 Brazilian companies. The Central Bank data also points in the same direction: the U. S. is the largest destination country—excluding tax havens—for Brazilian OFDI, with US$10.5 bil­lion, while Latin America accounts for a total of US$ 8.05 billion.13. This preference for the U. S. market questions the interpretations that identify South America as the preferred area for Brazilian multinationals.

In a broader sense, this also calls into question, in the Brazilian case, the validity of the gradual­ist approach of Johanson & Vahlne (1977; 1990) that gives a theoretical basis for many important works on emerging multinationals. The gradualist approach assumes that firms first internationalize themselves close to home, geographically and culturally speaking, as a way to reduce risk and uncertainty for business owners and managers, then expand into more distant markets. In Brazil, the major multinationals in the country do not necessarily follow this pattern when it comes to establishing subsidiaries.

By observing the European market, we see that Portugal has fewer numbers of Brazilian subsidiaries when compared with the United Kingdom, and Germany also stands out, contrary to the arguments for preference based on access facilitated by language. In the declared value of

OFDI, Spain ranks first among Europeans while Portugal is only the seventh destination. In the Far East, a significant number of companies make efforts to serve the Chinese market, which is already the fifth-largest destination for Brazilian multinationals. Almost all of these subsidiaries were opened in the last decade, with 26% of the sampled companies already having a foothold in China. Despite the importance of cultural fac­tors and linguistic community, it is possible to conclude that the typical destination of Brazilian multinationals, across all continents, shows a preference for admission to the largest and most dynamic markets.

This search for more dynamic markets is due, on one hand, to the fact those markets demand more constant and intense presence from firms hoping to succeed through exports and therefore, given its competitiveness, they are the markets that offer greater returns. On the other, however, it is due to the fact that these markets are the privileged locus of innovation, construction and dissemination of new knowledge production, emergence of new trends, and of partnerships and synergies with competitive companies.

This is precisely the justification that Mar­cel Malczewski, former president and founder of Bematech, a Brazilian multinational in the hardware and automation industry, offers in ex­plaining why his company set up subsidiaries in China and Taiwan in recent years, accepting the challenge to participate among fierce Asian com­petition: “a very important part of our company, of our business, is in Asia, because if we have a hardware company and we want to innovate, we have a presence there.” Malczewski stated that the company invests between 4% and 8% of its net revenues in R&D14.

A similar phenomenon occurred with the IT services companies, CI&T and Politec which has subsidiaries in the United States, Britain, China and Japan (Valor, 2009:62; Arruda, Almeida & Casanova, 2009:202), and with the IT sector in gen­eral, which tends to always seek the U. S. market.

It also occurred with several companies from the metalworks and auto parts sectors—WEG, Romi, Lupatech, Gerdau, Tupy, Tramontina, Randon and Sabo—that moved into the competitive German market; with Natura (cosmetics) which opened a subsidiary in France; and Renner Sayerlack (industrial paints) which has a factory and R&D center in Italy, among others.

Yet from Figure 8, it is possible to note that Latin America and Africa are preferred targets for a larger number of companies in the engineering, mining and textiles sectors, while the greatest number of companies from the IT, chemical, mechanical and vehicles and auto parts sectors prefer the American, European and East Asian markets. This is another indication that the more knowledge intensive the sector in question is, the more it tends to seek out competitive markets as a source of innovation.

Although the first internationalization activi­ties of some ofthe leading Brazilian multinationals (e. g. Petrobras, Vale, Embraer, Gerdau, Odebre - cht, and Andrade Guitierrez, Coopersucar, Tigre, Duratex, and Alpargatas) had their start in the 1970s and 1980s (Guimaraes, 1985; Diaz, 1994), the recent expansion, besides being more intense and including a larger number of companies and industries, has three fundamental differences from the past in respect to business strategies.

• The first of them is precisely the fact that they are not more concentrated in Latin America, as was the case in the 1990s. (BNDES, 1995; Iglesias & Mota Veiga, 2002).

• The second is that it is no longer just a situ­ational movement, as it was during the 80s, when, protected by the domestic market some companies became internationalized as an alternative to escape the stagnation and instability that plagued the Brazilian economy.

• The third is that the companies do not limit themselves to regional or niche markets, and instead compete openly for larger slic­es of the market with multinationals that have been traditionally better equipped and more powerful.

The internationalization of business strategies in Brazil started with the opening of the economy in the 1990’s due to the need—and also the pos- sibility—of becoming more competitive against foreign competition. This strategy is associated with - as both cause and consequence of—sophis - tication in production and management standards and a more entrepreneurial stance among the business elite.

The argument that Brazilian firms internation­alize due to low growth in the domestic market (e. g. Cyrino & Tanure, 2009:18), although it might seem plausible for much of the 1990s, loses strength when we look at the recent boom of Brazilian OFDl, which occurs precisely as the Brazilian economy is growing at a faster pace. Throughout the last decade, OFDI is highest precisely during those years ofthe greatest GDP growth. This shows that internationalization is no longer merely the result of a tactical choice between domestic and foreign markets. It has evolved into a constant, becoming part ofthe strategies of a growing group of companies, and connected to a global vision of opportunities in the business world, in which the chains of production value and knowledge are ex­tended across countries, with suppliers, customers and competitors found in the key global markets.

This strategic direction among a group of companies in search of internationalization and innovation, the fruit of a new commitment to competitiveness, has been fundamental in the success of recent expansion among Brazilian multinationals.

From this point of view, it is important to note that the two-part innovation-internationalization of these efforts could be more intense. The total

Brazilian investment in R&D is still only half the OECD average—around just 1.1% of GDP (FAPESP, 2010)—and the country has struggled to raise this level, despite incentives created over the last decade. For the pathways of globalization identified by this study, we are led to believe that the more innovative firms are, the greater the opportunities to grow in the global market. Therefore, strategies to enhance innovation and internationalization can and should be articulated by both firms as well as public policy-oriented development.


Some authors (Schneider, 2009; Aman, 2009; and Finchelstein, 2009) analyzed how the Brazilian government, over decades, helped to structure some of the leading corporations today—CSN, Vale, Petrobras, Embraer and a good portion of Braskem. Moreover, the government furnished incentives and protection in the formation of large private groups. Even Gerdau, which justifiably boasts of its entrepreneurship, has expanded its operations with subsidized loans from BNDES (Brazilian Development Bank) since the 1970s (Andrade & Cunha, 2003), and in the early 1990s strengthened itself through the acquisition of three state steel companies, whose privatization was restricted to national capital (Finchelstein, 2009).

For this study, we opted to identify only State-implemented devices to encourage inter­nationalization of enterprises from this decade. Emphasizing the important role played by the State is not meant to minimize the companies’ roles as the principal agents in this process. As already explained, the intensification of globalization initially began in the 1990s when there was no type of policy stimulus whatsoever. It was only with the Luis Inacio Lula da Silva administra­tion that the government began to outline a clear direction to support the movement - already a reality for many companies - of expansion abroad. Given the incipient nature of the State role in this process, it is necessary to recognize that, for the most part, efforts to internationalize business are still conducted without direct State aid. However, in some cases this support has been essential.

With the return of industrial policies in Bra­zil in 2004, internationalization incentives for companies officially became part of the govern­ment agenda. In this same year, the Minister of Development Luis Furlan stated that “the goal of the government for this mandate is to keep at least 10 Brazilian transnationals in operation15.” In September 2005, BNDES funded for the first time an acquisition abroad by a Brazilian company, disbursing US$80 million to meat processor JBS/ Friboi for the purchase oftheArgentine subsidiary of the North American company Swift. (Alem & Cavalcanti, 2005).

Between 2005 and 2009, BNDES disbursed— via loans and securities underwriting - more than US$8 billion to the meat processing industry, of which at least US$4.5 billion went to the interna­tionalization ofthe J SB and Bertin groups—which then merged in yet another operation financed by the institution. Thanks to financial support from BNDES, JBS acquired several companies from the United States (including the American companies Swift & Co. and Pilgrim’s Pride), as well as Australia and Italy, making it the largest processor of animal protein in the world16.

The vast majority ofBNDES resources directly involved in acquisition of companies abroad were allocated to the meat processing industry. In other sectors there have been few operations, with sig­nificantly lower values, such as loans of US$80 million to Itautec (IT) to buy the U. S. company Tallard in July 2007, US$17 million to Bematech (IT) to purchase U. S. company Logic Control in March 2010, and US$7.5 million for Eurofarma (pharmaceuticals) to complete the purchase of Argentine company Quesada Pharmaceuticals in June 201017.

The fact that the BNDES allocated the major­ity of its investments for internationalization of a low knowledge - intensive sector, thereby reducing potential to transform the Brazilian productive structure, has been a source of much commentary, including some from the authors of this chapter. As explained (Arbix & Caseiro, 2010), although the recent inflexion of Brazilian industrial policy and its decision to support internationalization is considered positive, the authors highlight the ur­gent need to prioritize innovation and technology - oriented initiatives, in order to break away from the Brazilian dependence on commodities.

State Financial Support to M&A in Brazilian Domestic Market - in US$ million














































Pulp & Paper

Votorantim Aracruz















Brasil Tel.





Source: Caseiro (2009:96), based on data from press and BNDES. Updated on August, 2010 • Estimate, acquisition to be completed

Figure 9. State financial support to M&A in Brazilian

It is also necessary to recognize that there are various other mechanisms, direct and indirect, by which the State currently still stimulates the growth of Brazilian multinationals. Under the scope of BNDES, it was thanks to the bank’s funding for construction projects in other countries (with the support of Brazilian diplomacy), that construction companies Norberto Odebrecht, Camargo Correa andAndrade e Gutierrez—despite their know-how accumulated over decades—could resisted Chi­nese competitors in Latin America and Angola18.

In another key measure the State supports, via BNDES and Petrobras, the formation of large private groups. From February 2005 to February 2010, the bank offered at least US $10 billion of funding for the strengthening of large companies in the domestic market in various sectors, including some with high innovation potential (Figure 9). In reference to this strategy, the bank’s president, Luciano Coutinho, said, “it is consistent with the government’s industrial policy to enable the development of global players in Brazil, on a worldwide scale.”19.

A particularly interesting case is the petro­chemical sector, one of the sectors that have re­cently received more state investment. Largely built in the late 1970s from a complex alliance between the State, Brazilian companies, and multinational companies, it was decentralized in terms of geography and capital control. Through­out the 1980s the industry lost competitiveness and, at the beginning of the following decade, a total of 27 companies were privatized (Montene­gro, 2002). In 2001, Odebrecht and the Ultra Group initiated a move to consolidate the sector’s
assets. In 2007, Petrobras entered vigorously into this project, first participating in the acquisition of the Ipiranga Group in a transaction of US$ 4 billion, and incorporating its petrochemical assets in Braskem, part of the Odebrecht Group. Subse­quently, it acquired Suzano Petrochemical for US$1.5 billion and merged it with Grupo Ultra, creating Quattor.

In early 2010, Petrobras—possessing a 30% stake in Braskem and a 40% stake in Quat - tor—worked for the merger of the two largest petrochemical companies in the country, spending more than US$1.5 billion in a deal that formed the largest petrochemical company in the Americas, surpassing the North American DOW in produc­tion capacity20. In the shareholders’ agreement between Petrobras and Braskem it was estab­lished that one of the goals of this partnership was to allow “a process of internationalization through the acquisition of petrochemical as­sets, with the subsequent increase in its world market share” (p.2). Less than a month after the agreement, Braskem announced the acquisition of the American company Sunoco Chemicals for US$350 million and investments of US$2.5 billion in Polo Petrochemicals in Coatzacoalcos, Mexico. Petrobras, which owns 36% of the latter company, also gained veto power over any change in its controlling interest21.

Other multinationals like Totvs (IT), Vo - torantim (construction, mining and pulp & pa­per), BRFoods (food) and Vulcabras (footwear) benefitted from consolidation via participation from BNDES. All of the operations in Figure 9 obtained financing from the bank, via loans and/ or securities underwriting. The operations most frequently combinethe two forms of financing, with the institution also typically receives golden shares as was the case for Vale, Embraer, CSN and Friboi, in order to avoid future acquisition by foreign companies (Mattos, 2008).

According to Bovespa’s figures, BNDES is a member of at least 18 Brazilian private capital multinationals across different sectors (Figure 10). In 2009 the bank also opened a holding company in London, BNDES Limited, with the goal of facilitating acquisitions of assets abroad by Brazilian companies22.

It is also important to note that in the last few years, with the resumption of industrial policies and accumulation of reserves by the Brazilian State, BNDES has enormously increased its ac­tivities. Between April 2009 and March of 2010, the bank was responsible for inj ecting about US$82 billion into the Brazilian economy. The Brazilian multinationals took advantage of this offer of cheap credit—about 6% p. a. against 28% in the market—to increase their operations, therefore gaining the muscle needed to compete abroad (Figure 11).

The internationalization of Petrobras (a mixed - capital firm, though under state control), as well its impact on the Brazilian economy in terms of productive investments, R&D, and mobilization of suppliers, is also increasing. Detail on the company’s activities, however, is outside the scope of this chapter’s objectives.

Figure 10. BNDES’share in Brazilian MNEs

BNDES' share in Brazilian MNEs*

(% of company).

Industry / Firm

State Share

Industry / Firm

State Share


Pulp & Paper



Fibrla (Aracruz)





JSB Friboi













Metal Mechanics

Gerdau S. A









Industries Romi










Car Parts




ALL Logistica


Source: Caseiro (2009:95) based on data from Bovespa & companies. Updated on August, 2010 / * Companies operating in Bovespa / ** For Braskem: BNDES plus Petrobras

Figure 11. BNDES’lendings to Brazilian MNEs

BNDES' lendings to Brazilian MNEs (01/2008 - 06/2010) - US$ million


Oil & Gas


Camargo С






















Building Mat.


All America































Power Distrib.


Andr. e Gut







Pulp & Paper















Pulp & Paper




Source: Author's Elaboration based on data from BNDES.

Besides BNDES and Petrobras, other institu­tions linked to public administration, such as the Bank of Brazil and APEX, are also involved in supporting the multinational activities of Brazil­ian firms.

APEX made supporting the internationaliza­tion of mainly small and medium enterprises, as one of its three main goals since 2007. Currently, the institution has six “Business Centers” located in Miami, Beijing, Dubai, Moscow, Warsaw and Havana. At these centers, Brazilian companies, in addition to relying on logistical support, can rent offices that serve as an initial commercial base abroad. According to the website of the institu­tion there are now over 150 companies using this service. APEX also works in conjunction with Brazilian diplomacy to negotiate the entry of firms to markets considered more difficult or “closed.” In 2009, APEX negotiated the first establishment of a multinational pharmaceutical in the Cuban market, the Brazilian EMS Sigma Farma. The Bank of Brazil already has branches and subsidiaries in 14 countries and recently acquired the sixth largest bank in Argentina23. In this capacity it helps to secure and transfer funds for the structuring of financial operations and financing activities of several companies abroad24.

Despite these measures, which were fun­damental for the international success of some companies, the state incentives for the creation of global players still has a long way to go, especially compared to what Brazil’s competitor economies such as China and India are doing (Pradhan, 2007; Luo, Xue & Han, 2010).


Internationalization can potentially generate ben­efits for all of Brazilian society—by increasing the competitiveness of firms, by establishing new knowledge streams, and by providing access to new technologies and connecting the Brazilian economy to global chains of greater value. This is a process that can invigorate the entire Brazil­ian industrial structure and that, if well managed, helps to generate more skilled jobs.

In the last decade, there has been an unprec­edented expansion of Brazilian multinationals. Some such as Petrobras, Vale, Embraer, JBS and Braskem have become big global players. Oth­ers, like Gerdau, WEG, Coteminas, Marcopolo, Votorantim, Odebrecht and Camargo Correa are leaders in their respective industries. Dozens of other firms, however, are also seeking to interna­tionalize to reach the highest standards of quality and competitiveness.

What we aim to demonstrate in this chapter is that the historical phenomenon ofthe expansion of Brazilian multinationals was: (1) fast and intense,
companies saw more international expansion in just six years than throughout history, (2) large and diverse, reaching different sectors of differ­ent magnitudes.

Moreover, we seek to explain how the simul­taneous linking of four processes, was essential for the economy, corporate strategies and public policy decisions made at the government level: (1) financial conditions and sustainable domestic economic growth, with greater external credibil­ity, (2) a new attitude on the part of the Brazilian business community, marked by an intense and forceful search for higher standards of quality and competitiveness, (3) the preferential choice among Brazilian companies to expand, establish subsidiaries and compete in more dynamic mar­kets, and (4) interaction with the Brazilian State, which has lately intensified its industrial policies and its stimulation of this process.

None of these factors alone could have sus­tained the recent successes. Entrepreneurship and innovation are fundamental for participation in the global market. However, they cannot go very far if they do not find favorable economic and political conditions. Likewise, it does no good to create a favorable environment without strong players to seize the opportunities. The favorable external conditions have occurred throughout all of Latin America, but our companies have stood out more than our neighbors. Our main references have now become the East Asian and developed countries25.

Furthermore, as we tried to demonstrate in this chapter, all these factors have endogenous and exogenous causes that have no guaranteed continuity. Many advances have been made, but to sustain and broaden this process, it is critical that the public and private sector continue modernizing and increasing transparency and options for the Brazilian capital market, enhancing investment while maintaining fiscal discipline and, above all, linking internationalization strategies to innova­tion strategies, which are ultimately the engines of development.

Finally, it is necessary to consider that despite all the advances and benefits, the choice of inter­nationalization is neither an easy nor risk-free. For a company, a poorly planned acquisition may bring serious complications and even jeopardize its future, and for the country, the application of public resources must be subj ect to criteria that are politically healthy, transparent and modernizing. This means that to effectively meet the urgent demand to raise the level of competitiveness of the Brazilian economy, public support should be intensified in areas, sectors and companies most in­tensive in knowledge, innovation and technology.

Today, Brazil’s economy, its companies, and its state apparatus are stronger than they were in the 1990s, but - and partly as consequence of this- the competitive pressures that led the push for internationalization in that period have also intensified. On the one hand, the Brazilian market today is one of the world’s most attractive for foreign capital (UNCTAD, 2010a, 2010b), and on the other hand, the expansion of multinationals from other developing countries, especially China and India, combined with low growth rates in developed countries, has resulted in an increasing number of new players competing for the same space, and introducing rapid and radical changes in the various sectors. We are witnessing a moment of profound international geopolitical redesign in the business world, with Asia occupying an increas­ingly central place in the global scenario. At this moment, great opportunities and challenges for Brazil and for Brazilian companies are appearing. What is needed is a strong partnership between the public and private sectors to take advantage of these opportunities at the right time and in the best possible way.

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