Economic relations between Germany and Brazil are currently more dynamic than they have been for many years: some 60 high-ranking business delegations are visiting the South American country in 2011; last year, the total was already 50 groups of entrepreneurs. However, German interest is by no means only restricted to what is by far the largest economy in Latin America. The entire Latin American continent with its roughly 590 million inhabitants is currently the centre of interest for many German firms and businesses. Lost ground needs to be made up because German industry concentrated very strongly on Eastern Europe and China from the 1990s. “We underestimated and neglected Latin America,” admits Hans-Peter Keitel, president of the Federation of German Industries (BDI), openly. That was a mistake, since nowhere else in the world does German industry do better than in Latin America. The Brazilian metropolis of São Paulo is even considered the largest German industrial city abroad with 1,200 German companies. Some 10% of Brazil’s industrial output is produced by Brazilian subsidiaries of German companies. German businesses are also among the most important foreign investors in Mexico – additionally, Germany is the country’s most important trading partner in Europe. German firms like Siemens, Bayer, Hamburg Süd and Deutsche Bank have also long been represented in Chile, Argentina, Peru and Colombia.
Almost no week goes by in Brazil without German companies announcing takeovers, major shareholdings or investments in new plants or sales organizations. During the past 12 months roughly 100 German companies have arrived in Brazil to start doing business, estimates the German-Brazilian Chamber of Trade and Industry in São Paulo. “Today there are no companies that do not have Brazil on their top investment list,” says Stefan Zoller, chair of the Brazil Board in the BDI. The same applies to Mexico, which ranks second among the Latin American economies. In Chile, Colombia, Peru and Uruguay, too, chambers of industry and commerce abroad are registering a veritable stampede of German companies. The reason, says Cornelia Sonnenberg of the Chilean-German Chamber of Commerce in Santiago, is: “Stable markets are suddenly becoming attractive for German companies again, even if they are relatively small.” Additionally, the countries of Latin America are important as suppliers of raw materials, as sales markets for industrial products and as an export platform for markets in the USA and the Far East. German businesses are welcomed with open arms: Latin America needs investors and high technology from Germany in order to equip itself to face the Chinese competition and reduce its dependence on raw materials.
Latin America steered its way through the global economic crisis with relative stability. The region is expected to record around 5% growth in 2011 and 2012. The most important sectors in the German wave of investment since the beginning of 2011 are transport, automotive, energy (electricity, oil and gas), medical technology, construction and chemicals. Companies are relying on Latin Americans’ continuing consumption and want to participate in the continent’s large investment programmes in infrastructure and energy. Siemens, for example, is building up a brand-new energy research department in Rio de Janeiro not far from Petrobras in order to participate in the energy giant’s oil and gas extraction efforts.
In the process, investments are being made equally by both large corporate groups and small and medium-sized businesses. In the automotive sector, for example, Continental, the tyre manufacturer, recently announced a doubling of production in northeastern Brazil for 90 million euros. BMW is also looking for a location for its first own car production plant in South America. German car makers and automotive suppliers can no longer ignore Brazil: more cars were produced there than in Germany for the first time in 2010. Mexico is also an interesting exporting base for the US market for the car industry: Volkswagen is planning investments worth two billion euros by 2013, including a new engine plant. Above all, the Wolfsburg-based company hopes this will finally enable it to grow out of its niche existence on the US market.
German companies are attracted by the growing market: 590 million Latin Americans are consuming more than ever before. These countries have become important growth markets not only for many German brands like Nivea and Faber-Castell, but also for high-priced premium products like Audi and Hugo Boss. German firms have also been successful as suppliers of local manufacturers of consumer goods. BASF, for example, is now planning to develop production of acrylic acid – the basic material for diapers. “Previously the domestic market was too small, but that has now changed,” says Michel Mertens of BASF. Henkel, the manufacturer of adhesives, is locating two out of ten worldwide investment projects in Brazil.
Many German firms are expanding their involvement by taking over local partners or setting up new joint ventures. Cooperation usually works on the following basis: German businesses offer their technology in exchange for market information. “The companies are also willing to invest money in advance in order to gain a foothold, for example, in Brazil,” observes Zoller of the BDI. Germany appreciates Latin America as a reliable provider of raw materials: Brazil supplies everything from iron ore, soya, sugar and coffee to biofuels. Chile is one of the world’s largest exporters of copper, lithium and molybdenum. Peru is a leader when it comes to gold, silver and zinc. Nevertheless, despite the new dynamism of these economic relations, progress can sometimes be too slow. Take Suape in Brazil, for example. An enormous industrial port is being built there, one of the new hubs of world trade. The Brazilians now want to advertise in Germany to encourage engineering companies to locate there. Seven new shipyards are to be built in Suape and Brazil aims to again become one of the world’s leading shipbuilders. Silvio Leimig, development manager in Suape, is certain: “Germany has the perfect know-how for us.”
