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Invest Minas: Navigating Foreign Direct Investment Opportunities in Minas Gerais, Brazil with Gustavo Almeida

Invest Minas: Navigating Foreign Direct Investment Opportunities in Minas Gerais, Brazil with Gustavo Almeida

Gustavo Almeida
Chief Operating Officer
Invest Minas
gustavo.almeida@investminas.mg.gov.br

LATAM FDI: Hello. Today we have Gustavo Garcia Almeida with us. Gustavo is the Chief Operating Officer of an organization called Invest Minas. Invest Minas is in Belo Horizonte, Brazil. Gustavo, I’ll let you tell us a little bit about yourself and your organization.

Gustavo Almeida: Thanks for having me. It’s such a pleasure to talk to you. So, a bit about me. I’m deeply passionate about government relations and investments. Over the past 15 years, I’ve had the privilege of working closely with the public and private sectors, helping them navigate through strategic implementation of plans, fostering business development, and promoting investment opportunities. I’m currently, as I said, the Chief Operating Officer at Invest Minas. Invest Minas is the investment promotion agency for the State of Minas Gerais, Brazil. I’m grateful to be here today doing international relations and discussing investment opportunities in Minas Gerais.

LATAM FDI: Well, thank you for that background information. Let’s start today by discussing the type of participation foreign companies are engaged in in Minas Gerais. Can you provide examples of notable foreign companies that have established themselves in Minas Gerais and what factors influenced them to choose your region?

Gustavo Almeida: There are several reasons why companies establish operations in Minas Gerais. Through Invest Minas, we point to factors such as abundant resources, skilled labor, government incentives, and proximity to markets. I think that those factors have influenced companies’ decisions. For example, we have a British company called Anglo-American and an Australian company called Latin Resources here. The availability of minerals such as iron ore attracted them. Recently, Invest Minas has helped Amazon and Mercado Libre, the Argentinian company, establish facilities in Minas Gerais. They chose to install their distribution centers here in Minas Gerais due to its strategic logistics position and the need to reach customers quickly. Nowadays, we all know that people are willing to pay a little more for their purchases to arrive faster, and these companies understand that. Another example is Solaico, which is a Spanish company in the solar energy sector. They decided to set up in the state with the help of Invest Minas because of the availability of natural resources, aligning themselves with the growing global need for sustainability. So, we have many examples of international companies that decided to come to Minas Gerais and have received assistance from Invest Minas. We have Canadian companies, Dutch companies, Danish companies such as Novo Nordisk, Japanese companies, and Italian, French, and Chinese companies as well.

LATAM FDI: You spoke about companies that are involved in mining services, Mercado Libre and Amazon. What other kinds of industry are in Minas Gerais? It’s my understanding that there’s a significant automotive industry. Maybe you could say a little bit about that and others?

Gustavo Almeida: Yes. Minas Gerais is the regional mining land in Brazil today. However, it has a diversified economy with significant contributions from many sectors. I’ll mention three traditional sectors that have worked with Invest Minas, and maybe we can talk about others that I consider to be emerging sectors. The state’s three traditional industries are mining, agribusiness, and auto manufacturing. For example, mining is historically strong, especially in iron ore and its products. It’s important to highlight that the company, formerly known as Vale Doce, one of the world’s biggest mining companies, was founded here in the city of Itabira. Agribusiness is also very strong. I think Minas Gerais is the largest coffee-producing state, with more than 55% of Brazil’s production. We usually say that Minas would be the world’s largest producer if it were a country. And it’s also the largest producer of other products, such as milk and potatoes. It ranks second in sugar cane and beans and third in producing tomatoes, chickens, and eggs. When talking about the auto industry, this is also very relevant. We have a Stellantis factory here. It owns the Fiat brand. It is here in the metropolitan area of Belo Horizonte.

A vast number of supplier factories surround the factory itself. There’s also an Italian Iveco factory in the city of Sete Lagoas. This plant manufactures everything from trucks and vans to military vehicles. Yes, Minas Gerais is growing faster and becoming more and more diversified. Regarding the emerging sectors, we can talk about renewable energy, which in Minas Gerais is the largest in Brazil. The tourism sector has also stood out a lot. Pharmaceuticals and also the logistics segment have been highlighted. Places in Minas Gerais are rapidly running out. And the demand is only growing because the state has excellent logistical advantages. We at Invest Minas can help foreign companies make their investments and establish their facilities.

LATAM FDI: You mentioned logistics in a little more depth just now. What’s the state of infrastructure in Minas Gerais, particularly in terms of transportation, logistics, and connectivity? And how does Invest Minas facilitate operations in your state?

Gustavo Almeida: Okay, that’s a great question. Infrastructure is always a priority. Like the United States, Brazil relies heavily on roads to transport people and goods. Minas Gerais has the largest road network in Brazil. It accounts for around 16% of the country’s total. There are over 272,000 highways. This includes federal, state, and municipal roads. And in terms of road conditions?  Most federal and state highways are paved, but there are still unpaved municipal roads, especially those in more remote areas. So, the state is actively investing in improving infrastructure, including improving airports and regional flights through partnerships with airlines. For international travelers, for example, reaching Minas Gerais right now is relatively straightforward. For example, there are direct flights from Orlando and Fort Lauderdale to Belo Horizonte from the United States. From here, travelers can easily access other parts of the state and the country.

LATAM FDI: Regarding the investment environment for foreign companies that might want to make a foray into Minas Gerais, are there government initiatives or policies in place to encourage and support both foreign and domestic investors?

Gustavo Almeida: That’s a good question. There is, and there are. Minas Gerais’s investment environment is diverse, and it has a supportive government. In general, the environment in Minas Gerais is considered one of the prime business locations in Brazil. As I mentioned before, the process of opening and operating companies is straightforward, with a skilled workforce readily available, the land offered at fair prices, and logistical advantages. There is also abundant energy and the second-largest consumer market in Brazil. The government right now is a very investor-friendly offering. For example, various tax incentives are in place to attract and support both domestic and foreign investors. The State Department of Finance, for example, provides benefits to over seventy sectors. For example, deferral of VAT tax. With the acquisition of inputs within the state, VAT rates and even zero rates for specific sectors are reduced. Numerous credit lines are also available to support investment endeavors, particularly through the State Development Bank. The government actively promotes investment through Invest Minas, which serves as a comprehensive support center for investors. We are a one-stop shop for investors. We offer unified assistance, collaborating with public agencies and private entities to ensure the project succeeds throughout all operations and development stages.

This includes, for example, providing market intelligence to help identify suppliers and potential clients and assistance with projects. Yes, that’s it. Minas Gerais presents excellent investment opportunities. As a result, many Brazilian and foreign companies are choosing the state as their headquarters.

LATAM FDI: Tell us a little bit about the workforce. How would you describe it regarding skills, education, and overall productivity?

Gustavo Almeida: Well, the workforce is very well-educated. The state has consistently ranked among the best performing, and the main education quality index is called IDEB. Moreover, Minas Gerais stands out for its abundant federal universities, which hold the highest concentration in the country. Just as a fun fact, Brazilian federal universities are recognized as elite institutions renowned for their excellence in research, development, patent production, etc.

LATAM FDI: Are there specific workforce advantages, such as a skilled labor force or a competitive wage structure, that make Minas Gerais an appealing destination for investors?

Gustavo Almeida: Yes, there are. Due to the state’s vast size, many different skill sets are available. Universities actively develop these skills according to the strengths in various economic sectors. For example, the state’s central region, specifically in Belo Horizonte and its metropolitan area, strongly emphasizes biotechnology, startups, and services in general. The Federal University of Minas Gerais in Belo Horizonte is a hub for this, along with many technology centers in our capital city. We have been recognized to be in the top ten of the best startup ecosystems in Latin America, and Belo Horizonte ranks in the top three cities with the most startups in Brazil. Here, there are over five hundred startups. I just spoke about the center of the state. In the south of the state, a robust region focused on technology development encompasses cities like Itajubá, São Tiago, and Sapucaí. These cities concentrate on sophisticated educational institutions and house technology centers specializing in electronics, such as the Federal University of Itajubá (UNIFE) and also INATEL, the National Institute of Telecommunications. There are also significant hubs in the agriculture sector, especially in the triangle region that includes cities like Uberaba and Uberlândia, and also in the south of the state, which produces the best doce de leite in the world.

So, these regions offer a skilled label force and also feature competitive wage structures, making them attractive to investors seeking opportunities here.

LATAM FDI: Well, we’ve covered a lot of ground in a short period, Gustavo. What inevitably happens after our listeners tune in to our podcasts is they produce questions that haven’t been addressed during these conversations. We would like to provide contact information so that people with questions can contact you directly. How would people contact you?

Gustavo Almeida
: Yes, they can contact me by email, which is the best way. My email is: gustavo.almeida@investminas.mg.gov.br.

LATAM FDI: At the top of the transcript section on our podcast pages, we have links to the organization websites of the speakers that join us, and we’ll also include a link to your LinkedIn profile so that people can contact you in that way as well. Would that be okay?

Gustavo Almeida: That’s perfect.

LATAM FDI: All right, thank you very much for joining us.

Gustavo Almeida: Thank you so much. Thank you for the opportunity to present information on investment opportunities in Minas Gerais. I hope your listeners may visit us someday and be in touch. Thank you so much.

LATAM FDI: Okay, thank you.

Foreign Direct Investment in Honduras

Foreign Direct Investment in Honduras

Leonardo Morazán
Foreign Direct Investment Consultant
Tegucigalpa, Honduras

LATAM FDI: Today we have Leonardo Morazán with us. Leonardo is somebody who’s worked several years, quite a few, as a matter of fact, as an investment consultant to both private sector and public sector entities. Most recently, he’s done work to promote foreign direct investment in Honduras with the Consejo Nacional de Inversion and USAID. But I won’t say more. I’ll let you introduce yourself, Leonardo. Thank you for joining me.

Leonardo Morazán: Thank you, Steven. It’s a pleasure to be with you. As you say, for the last 10 years I have been a consultant with different entities promoting foreign direct investment in Honduras and advising companies in which industries to invest. I had previous experience as the CEO of an international Spanish company involved in software development that has a presence in Honduras. We began with the company here in 2014 and worked to make it grow. We had the chance to go public on the stock exchange in Madrid. So, it was a really interesting road to make a business grow and sell it. So that gave me a lot of insight into how Honduras could be a potential ally for investment worldwide, especially in Central America.

LATAM FDI: Well, that’s good that you have both private sector and public sector experience. It’ll help to orient the listeners to our discussion today about foreign investment in Honduras. With that, how would you describe the current investment climate in Honduras, and what factors make it attractive or provide challenges that people have to face?

Leonardo Morazán: Okay. One of the principal attractions of Honduras is its geographical position. We’re the heart of the Americas and have good opportunities in diverse sectors. We are used to working with American companies. There are a lot of nearshoring investments, and we are now open to various sources of investment. The Northern Triangle has been focused on different efforts to develop new economic opportunities and avoid migration. We have many people and a thriving workforce and are interested in attracting more foreign investment. Our national investors are aggressive. We have four or five groups that are expanding in the region. Currently, 90% of the investment comes from Honduran nationals, and only 10% comes from foreign investors. So, there’s an interesting opportunity to develop investments that take innovation, and new technologies to the region and use Honduras as a hub, a logistics hub, to distribute products and services through Latin America.

LATAM FDI: Those are the upsides. What are the challenges that companies face?

Leonardo Morazán: Okay. As in every country, we have a government that has to work on promoting investments. However, in recent history, most of our investments in the country face the challenge of how the laws and the rules of the game change. This happens when we shift politically from one spectrum of policy to another. This creates kind of a struggle. Projects with a return on investment over 10,15 or 20 years must have the same business conditions during the life of the investment. So, stability usually comes from two particular factors, how your market moves is the most important one. Now, we see a lot of movement in textiles and other types of manufacturing because of market shifts and the changes we are having from Asia to closer options near the markets for their products. This is the near-shoring effect. And the other factor is how the country gives stability to investors, to the employees, and the society as a whole.

LATAM FDI: Given what you just said, can you give any recent regulatory or economic developments in Honduras that have impacted the landscape for investors?

Leonardo Morazán: Yes. One of the principal attractions of our country is the free trade zones law. When we have a special regime to import goods, transform, and export them. It used to be a law specifically for exportation. Companies were not allowed to sell their products in the domestic market. It was a really strong motor for development. In the last three or four years before COVID, a regulation allowed those players to sell at least 50% of their production in the country. So that shifted a lot of the opportunities, and the players in the local market got upset because now they had to compete with industries with a lot of experience and technology.  Before this change, even though they were our neighbors, they didn’t have to compete with international investors. As a result, local investors had to seek other markets and try to compete.

LATAM FDI: So, just getting back to one of the things that you just said, people in special economic zones were allowed to sell into the domestic market. I would assume one of the issues that came up was that the people in the special economic zones were probably getting some tax incentives that were not enjoyed by the people who are domestic investors. Would that have been an issue?

Leonardo Morazán: Yes, they already had the tax incentives upon their establishment. So, once you have an open market, you already have most of the return on your investment. So, the prices could be competitive. However, the product has a tax on sales, which created some revenue for the government.

LATAM FDI: What sectors in Honduras are looking up these days? Where’s the activity?

Leonardo Morazán: Mostly, we have a really strong BPO service sector. People in Honduras have a really good English level and speak several languages. Our time zone is also appropriate for call centers and IT development, especially for America. That’s one of the industries where the most demand for workers is. The government finds these enterprises very attractive for the government because they usually create good jobs. And another industry is growing fast as well, manufacturing. Honduras is really powerful on textiles. We’re the number one selling socks, jerseys, and shirts to different markets. Then, the largest part of the country has an agribusiness industry. We are one of the top exporters of coffee. And in that line, most of the agribusiness industry has tried to diversify, and we’re exporting vegetables and fruits worldwide. However, it’s a primary product. I mean things such as bananas and coffee. We have to move forward to sell finished products and more value-added agriculture. That requires investment, knowledge, and access to markets. So, there is one big opportunity for international companies to see Honduras not only as a tropical country with no winter but only a rainy and dry season.

As a result, the agricultural business is really good because companies can produce twice or even three times a year. Additionally, our position is strategic to distribute these products all around the world.

LATAM FDI: How is the government working to promote investments? Are they doing anything actively to try to bring business to the country?

Leonardo Morazán: Yes. Five different institutions have promoted foreign direct investment in Honduras in the last four to five years. Foreign policy, the economic department, and the National Investment Council. It was a dispersed effort. In 2023, a new strategy focused all the investment attraction activities on the same organization. The National Investment Council right now has board members, a steering committee, the economy minister, the president,  and even the environmental head of state. The efforts to attract foreign direct investment in Honduras are more concentrated and focused. The new relationship with China has brought new opportunities to the country, especially from Asian companies, including Korea, Japan, and China. These companies seek to develop investments in the Americas, especially to access Honduras’s free trade agreements with South America, North America, and Europe. From the point of view of what the government is doing, the market, in some instances, is shifting away from Mexico. The government in Mexico has increased the minimum wage by over 20%. So that makes some of the production, both in agriculture and manufacturing, more competitive for those companies that seek to make foreign direct investment in Honduras.

LATAM FDI: Are there any notable success stories or case histories about foreign businesses that have thrived in the Honduran market? What lessons can others learn from their experience?

Leonardo Morazán: This is fresh information. Ten years ago, one company produced wooden car tables, especially for BMW and Mercedes Benz. It was a German company, and that was the only part of the car that we produced. In recent years, many electrical components were built in Honduras for Toyota, Nissan, and several other brands. Now, we even receive some companies interested in building leather seats. Slowly, we are transitioning from textile to automotive manufacturing, at least some of the components. That has become a new pole of development because now you need electrical engineers and electric technicians who are labor resources with many more skills. Luckily the country has a wide offer of higher education and technical education that has allowed companies to grow. One of them was a Canadian company, a really small company. It has grown because of access to adequately skilled labor. They had an interest. Our experience in textile factories gave us the infrastructure and the keys that other industries could use. Additionally, we have a really good port for shipping products in Puerto Cortes.

We have a US Customs office in the port. Companies have free clearance of any products that go to us. So, the US market is close, both in distance and ineffectiveness for exporters. So that was one of the best stories we have. It generated a lot of jobs and put another industry on the map that usually stays in Mexico or maybe in Brazil.

LATAM FDI: If you had to give one piece of advice to a foreign investor regarding what they should most look out for in terms of opportunities and a manner of doing business in Honduras, what would be the advice that you give them?

Leonardo Morazán: I’ll take the idea from agriculture, but it could be applied to most industries in Honduras. The country has all the components to generate innovation and value-added processes. We have a great workforce with several capabilities, both on the management side and in operations. Our people are really good workers. With the correct leadership, especially focusing on social and environmental issues, most companies grow and thrive because the communities are aware that the company not only generates profit but also jobs, economy, and social benefits. Overall, most companies build the roads to their factories and help the communities develop their infrastructure and electrical power. Our country has lots of sunshine. We have a lot of factories with solar panel systems to get not only green energy but also more cost-efficient energy. Honduras’ energy matrix is diversified. It has hydroelectric, wind and solar. As a result, the energy industry has grown a lot in recent years, and there’s a lot more room to grow. Our country is part of the Central American electric network, so we can also export energy to other countries.

All the issues that an energy company usually has are easy to tackle because of the potential that the country has because of its location. In any country, especially small countries, we need a lot of development, and there is a lot of red tape on most of the industries. But we have identified at least four to five profitable sectors. Tourism, manufacturing, agribusiness and energy. Even though there are some obstacles to overcome, companies will discover that the profits are really good. And there’s a lot of chance of growing in Honduras and the region. We have a connection, a customs connection, both with Guatemala and El Salvador. Many companies seeking foreign direct investment in Honduras see Central America as a block. They know all the alliances that can be built regionally and realize that it is a good commerce route to Mexico and North America.

LATAM FDI: As you know, we’ve had a pretty good discussion with an overview of the environment for foreign direct investment in Honduras. I’m sure that some of the listeners who sit through and listen to this conversation will have some questions, and maybe some of them will need someone to help orient them in their activities in Honduras. That being the case, Leonardo, how would people contact you? What we’ll do is, in the transcript section of the podcast page, we’ll put a link to your LinkedIn profile. But are there any other ways that people might get in touch with you?

Leonardo Morazán: I usually use my LinkedIn profile. I like networking and trying to understand the needs and views of the industries because transparency is one of the values that I think helps a lot of businesses. If you work with government entities, They typically highlight the opportunities and the good things. They often avoid discussing the negative, which usually causes problems because those making a foreign direct investment in Honduras want to focus on avoiding and solving problems. My recommendation usually is to work with someone who could have both views from the government and the private sector. You want to talk with the investors that are already here in Honduras and understand what are the benefits they perceive and what are the challenges that they have had. One of my biggest concerns is that there’s not enough information about our country available. Usually, the media and the news are about bad, negative things. If you want to know about minimum wage and the cost of electricity, there’s little information about it. That is where an experienced consultant is valuable.

Usually, you have to contact consultants with market knowledge or companies to get that information. That’s just preliminary information to make an accurate decision based on data. One of my focuses and our team usually focused on getting updated information online, both in English and Spanish, that will trigger questions and investigations about the potential of our country. I’ll be more than pleased to point anyone interested in making a foreign direct investment in Honduras in the right direction.

LATAM FDI: We will ensure that the link to your profile is there, and anybody with further questions on Honduras can seek you out as a source of good information. How would that be?

Leonardo Morazán: That would be great.

LATAM FDI: Well, thanks for joining me today. Have a good rest of the day.

 

 

 

Agribusiness Investment in El Salvador

Agribusiness Investment in El Salvador

Christian Navas
Investment Attraction Specialist
Invest in El Salvador
cnavas@investinelsalvador.gob.sv

LATAM FDI: Welcome to another LATAM FDI podcast. Today, we’re pleased to have Christian Navas with us. He’s an investment attraction specialist with Invest in El Salvador. Today, we are going to discuss agribusiness investment in El Salvador. I’ll let Christian introduce himself and tell us a little bit about his organization.

Christian Navas: Thank you, Steven. First, I appreciate you inviting me to speak about the opportunities that El Salvador offers foreign investors interested in the country. I work for Invest in El Salvador, which is an investment agency of the government that promotes investments in different sectors of the economy. The country has a roadmap and has different sectors that are the main interest to promote for various reasons. I work to facilitate things for people interested in learning more about the country’s companies, private investors, and executives. I also facilitate information services, investments, and the installation of their companies in El Salvador. My area of concentration is agribusiness investment in El Salvador.

LATAM FDI: Thank you very much for that introduction. Today, we will talk about the agribusiness investment in El Salvador. And the first question I’d like to ask has to do with some recent developments. There’s been a lot of news lately about the security situation having improved in El Salvador. What has happened concerning land that was previously inaccessible because of security concerns? Is there now more land open and available for agribusiness activities and purposes?

Christian Navas: Yes, actually, in the past, we have had a civil war. This caused a lot of immigration from rural and countryside areas to the United States or other countries. We lost a lot of agricultural labor that used to work in the fields. After the war ended, we had a problem regarding gangs. These gangs were scattered around the countryside and all these lands outside the urban areas. So, this caused us another problem. The people who used to work on this land could not do so for many reasons. One of them was homicides that were happening in the rural areas. There were other criminal activities as well. Since El Salvador has dramatically improved its security situation in the last two years, we have seen people returning to the land and the countryside to work. We’ve seen a lot of people coming from the United States, Salvadorans who used to live in the United States, returning to El Salvador to invest in the lands they used to occupy. We see that all these properties are becoming activated again. We also see many properties, actually large, that have excellent characteristics and feature the cultivation of different crops. Agribusiness investment in El Salvador is on the rise.

The land is now available for cultivation and has not been appropriately worked in almost 30 years. So, there are a lot of advantages to that. A company or investors can see the opportunity to harvest different fruits and different vegetables. They will find a very fertile opportunity for agribusiness investment in El Salvador.

LATAM FDI: You may have a renaissance in the agricultural sector in El Salvador because of this.

Christian Navas: Yes.

LATAM FDI: What legal changes have been implemented by El Salvador recently to promote entrepreneurial agriculture, food processing in free trade zones, and also for the rapid exportation of agricultural products?

Christian Nava: El Salvador has identified that for many years, food security is one of the main problems the country has faced. We used to import almost 80% of the food that we needed for the citizens of El Salvador. That is a very large number. The government is promoting agribusiness investment in El Salvador, specifically through institutions. We now have an Agriculture Ministry that is working actively to facilitate processes and to facilitate permits. In that way, companies and private individuals can harvest their crops more efficiently and faster to secure the food for the Salvadoran population and export. However, the law’s main benefit is that it affects food manufacturing. In the past month, there has been a change in the Free Trade Zones Law that now allows companies to manufacture and process food in FTZs for export free of taxes. This means that there is an opportunity for foreign companies to make an agribusiness investment in El Salvador. They can export their products to other high-value markets, such as the United States.

We have many foreign trade zones around the country where these companies can come here and work like a plug-and-play or a one-stop shop. They can resolve many of their problems regarding production. Since we are promoting agriculture to attract business from these companies, we have all the inputs they need to manufacture their products. Additionally, El Salvador is increasing its efficiencies concerning borders and exportation. In that way, companies can export their products faster, and we speed up the permitting process to initiate their agribusiness investment in El Salvador. We have excellent connectivity regarding roads, ports, and airports. In that way, we can help companies be faster and achieve more financial efficiency, not only because of the law but also because of our improved logistics infrastructure.

LATAM FDI: You mentioned roads. I understand that El Salvador is taking some actions to improve its road infrastructure. Please give us more details on that and how it applies to the agribusiness investment in El Salvador.

Christian Navas: Yes, El Salvador is interested in becoming a logistic hub for the region. We have a great geographical position in the Americas since we are almost practically in the middle of the hemisphere. Because of this, El Salvador is investing a lot in roads and, in the following years, in a railroad. In that way, goods can move faster inside the country and throughout the region. We’re also investing in ports and airports in different areas, from storage to logistics, in trucks, boats, and airplanes. We are attracting companies that can operate these diverse modes of transportation. But yes, in that way, El Salvador is investing in the infrastructure needed to develop the country’s agribusiness sector.

I invite people to come to El Salvador to see firsthand how our roads are excellent. It’s hard to believe what these roads were like in the past. Now it’s really good to see the excellent condition that they are in. But yes, in infrastructure, we are growing fast and improving measurably.

LATAM FDI: I also heard that the government is incentivizing research and development of the agribusiness sector. What opportunities does this present for technology-based agribusiness investment in El Salvador?

Christian Navas: El Salvador has recently approved the Innovation and Technology Law, which promotes companies interested in having research centers or labs here in El Salvador. They can take advantage of significant tax incentives. The new law also includes the agribusiness sector. Because of the generous provisions of this legislation, investors might see El Salvador as an opportunity to invest in a research center. Since we have the conditions, we have great weather. We have water resources. We have people with technology degrees and engineers who will be an opportunity for companies to start businesses or establish their research centers here in El Salvador.

LATAM FDI: Given all the positive changes that are happening in agribusiness investment in El Salvador, what is the outlook for the sector in the coming years? And what things make El Salvador a strategic, long-term investment opportunity for people from outside your country?

Christian Navas: From my point of view, I see the agriculture and the agribusiness sector as a whole, as a blue and open ocean. The agribusiness sector has been a challenge for many years because of all the insecurity and uncoordinated institutions. Companies were still determining the perks and benefits of making an agribusiness investment in El Salvador. But now things are changing, and we see that we lack a lot of businesses here to develop this industry or to develop this sector specifically. Because of this, potential investors will see this as a blue ocean opportunity since many lands are not properly cultivated. Much of our best land has not been exploited in almost 50 years.

Additionally, we have excellent conditions for shrimp. We have great conditions for different species of fish. We have great lands with different microclimates that have yet to be appropriately produced. We are good at cultivating coffee,  especially specialty coffee. We are good at producing cacao for chocolate and many other fruits in the region.

We have free trade zones and industrial complexes that manufacture food with excellent human resources. Already, companies can see the advantages of exporting to the region. We’re close to the United States. We’re close to Mexico and to South America, as well. There are opportunities to make an agribusiness in El Salvador for companies in South America that want to have their plants in El Salvador to export their products more efficiently to Miami, New York City, New York, and Los Angeles. A company that knows the roadmap for development in the agribusiness sector will find a lot of benefits and profits in investing in El Salvador.

LATAM FDI: Well, as is the case with most of our podcasts, our listeners have questions after listening to the information that our speakers have presented. And I’m sure that’ll be the case with this podcast. So Christian, how would they do that if somebody wants to contact you with questions?

Christian Navas: Great. First, I recommend going to the website of Invest in El Salvador, which www.investinelsalvador.gob.sv. There, you will find information on how to invest in El Salvador. There is a section for companies interested in making an agribusiness investment in El Salvador. There, you will find my personal and professional information to be contacted. Also, if someone wants to email me with questions or inquiries, they can send them to me at cnavas@investinelsalvador.gob.sv. They can find me by accessing my LinkedIn profile.

LATAM FDI: Yes, that’s good. We’ll make it easy for people to access what you just mentioned, and we’ll put links in the transcript section on the podcast’s page. We’ll make sure that anybody with any questions can communicate with you in a very efficient way.

Christian Navas: I will be more than pleased to resolve any doubt or question. We invite any investors and companies in the agribusiness sector interested in investing in El Salvador to contact me and learn more about the opportunities for agribusiness investment in El Salvador.

LATAM FDI: Well, thank you very much for being here today. What you had to say was very interesting, and I’m sure we’ll have you back to talk about more things in the future and hear about the successes that you’ve had.

Christian Navas: Thank you. I appreciate it.

 

The free zone regime in Costa Rica with Laura   Pérez

The free zone regime in Costa Rica with Laura  Pérez

Laura Pérez
Government Affairs & Free Trade Zone Manager
Arias Law Firm
laura.perez@ariaslaw.com

LATAM FDI: Today, we have Laura Perez with us. Laura is with a law firm that is very prominent in Latin America called Arias Law. I will let Laura tell us a little bit about herself and the company she represents before we begin our discussion of the free trade zone regime in Costa Rica. Laura, hi, how are you today?

Laura Pérez: Hi, Steve. I’m very well. Thank you very much for inviting me to talk about this topic. I work at the law firm Arias. As you said, I’ve been in charge of the special tax regimes and government affairs consulting area for more than eight years and have worked in the foreign direct investment world for over fifteen years. I’m more than happy to be here and answer any questions that you may have.

LATAM FDI: That means you have a very comprehensive knowledge of the free trade zone regime in Costa Rica. Would that be correct?

Laura Pérez: That is correct, Steve, yes.

LATAM FDI: Well, let’s start out with something very general. Why is Costa Rica a good place for foreign direct investors to set up shop? And what’s the value proposition that the country offers to these companies?

Laura Pérez: Sure. Steve. Yes. Costa Rica has been a magnet attracting foreign direct investment since the late eighties and early nineties. That’s because the country has a value proposition that has always circled around four main topics. Number one is definitely human talent. Companies find it easy to do business with Costa Ricans, and the professionals and technical teams that they have found in the country are very good. That’s the reason why they continue to stay and reinvest in Costa Rica. So, human talent is number one. The second thing will be the democratic stability that Costa Rica has. You know that we have many political issues throughout the Central American region and Latin America. Costa Rica has always been far away from that. The company is and has been a very stable democracy. That is something that is also very attractive. The third thing I would say is definitely the location. Eighty to ninety percent of foreign direct investment in Costa Rica comes from the United States and Canada. So, location and nearshoring are very important from business and logistics perspectives. Connectivity with the US from Costa Rica is really good, as well.

And the fourth thing definitely will be the free trade regime in Costa Rica. We will talk a little bit more about that. It is a special tax regime. That’s also something important. In most recent years, I will say that other sorts of external political and environmental matters also contribute to strengthening Costa Rica’s position as an attractor of foreign direct investment. Definitely, the tension between the United States and China and having more nearshoring and friendshoring is something important. Also, the pandemic triggered problems with the logistics and supply chain. This is also pushing more companies toward nearshoring friendshoring. Also, things like climate change, such as wildfires and floods, have an influence. Companies are looking for second and third locations to have redundancy. So that’s also important. I would say another thing that is external to Costa Rica but that has also strengthened Costa Rica’s position is the labor pool problem that the United States seems to have. Right? Companies sometimes want to grow but can’t find the right people because there’s not enough talent pool or it’s very expensive. I will say those initial four traditional human talent, democracy, location, and free trade regime in Costa Rica were the initial ones that still stand.

LATAM FDI: You mentioned the free trade zone regime in Costa Rica that’s been very successful over the last thirty or so years. Can you tell us what free trade zones in Costa Rica are? What are the benefits, and what kind of companies can apply to be in them?

Laura Pérez: Sure, Steve. The free trade zone regime in Costa Rica is a special tax regime that the Costa Rican government grants to companies willing to commit to certain levels of employment and investment and operate in certain specific strategic sectors if they want to operate inside the Greater Metro Area. I will go into that shortly. There are distinct categories that the companies can go into the free trade zone regime in Costa Rica. Still, manufacturing companies are the most popular ones, which add up to almost 90% of the cluster. They are more on electronics, medical devices, and services. Before, it was very popular to have Costa Rican services such as call centers, shared services, and back offices. That was like in the early 2000s, but now we have more sophisticated services like software development, and we are starting to see some AI and things like that. So, services and manufacturing are definitely the strongest ones. Also, in recent years, the government has made some changes and some amendments to the law to attract this type of project and others to less developed areas outside the Greater Metro Area. We have special incentives that are more flexible if you want to go outside the Greater Metro Area.

And we have included additional sectors, for example, like hospitals and specialized clinics and things like that. It’s been changing very recently because of that. Regarding benefits, the free trade zone regime in Costa Rica is a special tax regime that grants either a full tax, basically a full tax holiday for services companies in which you have a 0% income tax rate, or for manufacturing, we have lower rates. If you are operating inside the Greater Metro Area, which is basically a 6% income tax rate compared to the regular rate. That’s a significant break because the regular tax rate can go up to 30%; again, for services, it is 0%. If you go with manufacturing outside the Greater Metro Area, then you also get a 0% income tax rate. This depends on the investment you make and other things, but in general, you get that income tax benefit. In addition to that, you also get full exoneration of import and re-export taxes. You do not pay real estate transfer tax; you do not pay municipal tax. You’re exonerated from remittance payments, which is very important if your headquarters are elsewhere outside Costa Rica. Also, you do not pay local VAT tax.

And all the imports you do specifically for manufacturing raw materials are also exonerated from the payment of taxes. Those are the main benefits of the free trade zone regime in Costa Rica.

LATAM FDI: You mentioned several times the terms “inside the Greater Metropolitan Area ” and “Outside the Greater Metropolitan Area.” For those listeners who might not know what that refers to, can you explain those terms?

Laura Pérez: Sure. Absolutely. Costa Rica is divided into these two big areas. The Greater Metro Area is this place in the center of the country where we have the four biggest cities. It’s where almost 70% of the population live. Everything outside that north, south, east, and west is called outside the Greater Metro

Area. The government has divided free trade zones in these two big areas so they could provide better incentives for outside the Greater Metro Area so they can attract investments there. So that’s the reason why this is divided. That’s the difference between the Greater Metro Area and outside.

LATAM FDI: Okay, thank you for clearing that up. Is there a difference in the incentives and requirements available to manufacturers on the one hand and providers of services on the other?

Laura Pérez: Yes. So basically, what happens is that we need to go back to inside and outside the Greater Metro Area. That will be the first important thing. So, if you’re inside the Greater Metro Area for both services and manufacturing, the investment requirement is $150,000. Outside the Greater Metro

The area for both services and manufacturing the amount is $100,000. There’s also an option that is called outside of Free Trade Zone Park, which is not common. I’m not going to talk a lot about that, but if companies are interested in that, investments for that are a bit higher. But let’s stay with, let’s say, the regular projects. There’s also another category that is called megaproject. The investment requirement for a megaproject is $10 million. There’s a difference between, let’s say, these regular projects of $150,000 and the megaproject, and that is that for the regular projects, you need to invest that money in fixed assets. You need to invest that money and maintain those $10 million for megaprojects. Another difference is that for regular projects, you have three years to comply with that investment. And for megaprojects under the free trade zone regime in Costa Rica, you have up to eight years to comply with that investment.

And also, in addition to, let’s say, the investment, there are also various times of exoneration. So, for example, if you’re a services or manufacturing company inside the Greater Metro Area, you get a 0% income tax rate if you’re a service entity. If you’re manufacturing, you get a lower income tax rate, which is 6%. And if you’re a megaproject, then you get 0% inside and outside. The benefits’ length and period change depending on the size and location of your investment under the free trade zone regime in Costa Rica.

LATAM FDI: Okay. There’s one other phrase I’ve heard you mention before that I think is very important to bring up in the context of what you just said. Can you explain what reclocking is? I’ve heard you mention that a few times.

Laura Pérez: It is possible for companies to continue to reinvest, basically reclock how you’re saying the benefits. There’s a provision in the law, which is discretionary, that allows the government to basically renew and reclock your benefits from scratch. Suppose you are willing to make a significant additional investment before your initial term of exonerations comes up, which could be six years, eight years, or twelve years, depending on the category that you’re in. You can do that in that case, and your benefits start from scratch. That’s why we’ve had companies operating since the late eighties that have maintained their zero income tax rate since then and have been operating for almost 40 years under this free zone regime in Costa Rica. So, reclocking and continuing with your initial income tax rate is possible.

LATAM FDI: When a company applies for free trade zone regime treatment and is up and running, what kind of time frame is there to put everything in place so that companies can be ready to start producing?

Laura Pérez: We must differentiate between services and manufacturing because we have two processes to follow. The first is the regulatory process to get your free trade zone approval, which usually takes between four to six months. And then we have the construction aspect of it that also varies depending on if you are services or manufacturing and the complexity of your project. This can take from between six to 18 months. So usually, what we tell companies is that for services operations, it will take you up to six months. For manufacturing operations, actual construction is the one issue that guides your installation timeline. It could be up to 18 months or even more if it’s a very sophisticated construction that you have to do. Basically, how the process works is that in the first month, you need to incorporate your legal entity, prepare the environmental filings, and work on the free trade zone application. Then, it goes through an approval process within the Free Trade Zone authority that goes, and you need to get signatures from different legal departments, the Ministry of Foreign Trade, and even the President of the Republic. The process of getting those signatures is the one that takes two to three months.

In the end, you get your approval, which is basically an executive agreement from the government and a special resolution from Customs, which allows you to import and export tax-exempt. That happens for both services and manufacturing under the free trade zone regime in Costa Rica.

LATAM FDI: Once you’re up and running and in your free trade zone regime program, are there any things that happen on a continuing basis? For instance, are there any kind of audits that people should be aware of?

Laura Pérez: Yes. Under the free trade zone regime in Costa Rica, companies are subject to all, let’s say, regular obligations, just as any other company, but aside, let’s say, from those regular tax filings and et cetera. There are a couple of things. One is an annual operations report, which needs to be submitted, the latest in April, which is sort of a summary of what you did last year and a lot of financial information that is particular to free trade zones. Also, there are two types of audits. The first one is, let’s call it, the regular audits for free trade zones, which are very focused and asset-controlled. I will go into detail about that. And there’s a second type of audit called the expenses audit. The second audit process basically reviews that the expenses that are being exonerated are directly linked to the activities approved under the free trade zone regime in Costa Rica. I would say that asset management under the free trade zone regime is the number one thing companies need to be careful with because the government is basically granting you incentives. So, you buy goods that are exempted assets for you to perform specific activities. That’s why they track assets very closely.

So, assets need to be tagged and controlled. If you take them in and out of the facility, there are specific processes for that. If assets are outside the facility because they’re in an employee’s home, there are specific processes for that on a work-from-home system. So, I will say that taking care of asset control is very important from the beginning. Those will be the two additional things you need to have for tax-free treatment: the annual operations report and complying with these two audits.

LATAM FDI: Well, another thing I think is important to consider, given that multinational companies often make changes, is what kind of things happen in a merger and acquisition transaction scenario with respect to the foreign trade zone regime in Costa Rica?

Laura Pérez: Yes, that’s a very good question. The free trade zone regulation is very specific and strict regarding M & A transactions. First, you must know that companies operating in Costa Rica that already are subject to income tax and that already pay taxes cannot go into the free trade zone. There’s no viable way. The law doesn’t have anything around that. There’s a specific prohibition in the law to do that. So that’s one thing. If the merging companies are operating under the free trade zone in Costa Rica, then that’s different. You have two options. You can either notify Procomer in advance and comply with the 20 P, which is basically the reclocking we discussed. You can also inform Procomer, the free trade zone administrator, after completing the merger. The difference between doing that, let’s say in advance or later, is that if you do it in advance and you follow the 20-based rule of reinvestment. The benefits that prevail are the benefits of the company that has the longest exoneration period. If you don’t do that and you do the merger and tell the free trade administrator after you have done the merger, basically, they will merge both commitments of investment and employment. The prevailing benefits are the ones of the company with the shortest exoneration period ahead. So, there’s a significant difference regarding that and a very big prohibition of companies that cannot go into the free trade zone if they are already subject to income tax.

LATAM FDI: You mentioned Procomer, and they’re the administrator of the free trade regime in Costa Rica. Is there anything that’s important that you can say something about them for the listeners to understand who they are and what their role is as well?

Laura Pérez:  Procomer is the free trade zone administration. Authority over the free zone regime in Costa Rica is actually exercised by many institutions. Again, Procomer is the administrator of the Free trade zone. Then you have the Ministry of Foreign Trade, which is actually authority number one. And you also have the Ministry of Finance, which is authority number two of the free trade zone. Regarding the Ministry of Finance the Customs Authority is part of the Ministry of Finance. It also plays a key role. So those are the two free trade zone authorities, those two ministries, and Procomer is the administrator.

LATAM FDI: Well, that seems to be a lot of information we’ve covered in a very short time. What we find is the case with these podcasts is that they generate questions in our listener’s minds, and we like to put them in a position to be able to get follow through on their questions. How could somebody contact you if they have a question they’d like to ask or maybe even engage your services at the Arias Law Firm?

Laura Pérez: Absolutely, Steve. They can definitely reach out to me. My email is  laura.perez@ariaslaw.com. Also, listeners can visit our website, which is www.ariaslaw.com, and you can find my information there. We will be more than happy to answer any questions and have a courtesy meeting with anyone who is interested in the free trade zone regime in Costa Rica.

LATAM FDI: Okay, Laura, what we’ll do is we’ll have a link to your website, and we’ll put your email address on the webpage where the podcast sits. In addition to that, if you have a LinkedIn profile, would it be okay to include that as well?

Laura Pérez: Absolutely. I will send you that as well. Yes

LATAM FDI: Well, thank you very much for being with us. It was very informative. I wish you a wonderful day. We’re on the cusp of the weekend, the day that we’re recording this, so have a good weekend.

Laura Pérez: Thank you, Steve, for the invitation, and I really hope you have a really good weekend as well. Thank you.

Manufacturing in Mexico with Ricardo Rascon

Manufacturing in Mexico with Ricardo Rascon

Ricardo Rascon
Marketing Director
Tetakawi
ricardo.rascon@tetakawi.com

LATAM FDI: Today, we are fortunate to have Ricardo Rascon with us. Ricardo is with a company called Tetakawi, one of the leading shelter companies in Mexico. He’s the marketing director. Ricardo, I’ll let you introduce yourself and tell us a little bit about your organization.

Ricardo Rascon: Great. Thank you, Steve. I’m really honored to be here with you today, and I feel like I should be interviewing you with all the knowledge you have on Mexico, but I appreciate you taking the time to ask me some questions about manufacturing in Mexico. As you mentioned, my name is Ricardo Rascon, director of marketing at the Tetakawi. We’re, a company based in Tucson, Arizona, that for nearly four decades has been helping foreign manufacturing companies expand into Mexico via what’s known as the shelter program, which I’m sure we’ll talk about in more detail. Thanks again, Steve. I really appreciate the opportunity to be here.

LATAM FDI: Well, thank you for being here, Ricardo. But to set the stage for the people who are listening, can you highlight some of the advantages of setting up of operations for manufacturing in Mexico compared with other global destinations?

Ricardo Rascon: Yes, definitely. I think if you’ve turned on the TV any time in the last four months or listened to the radio, anything besides Taylor Swift, you’ve probably heard about the countless advantages that Mexico has to offer. I think it really comes down to four or five. I would say, number one, you have cost efficiencies. When you look at labor costs compared to other regions in the world, there are significant savings that could be had by manufacturing in Mexico. So that’s one of the primary reasons. I would say, aside from that, it’s a strategic location. Our proximity to North American markets makes a lot of sense. When you’re comparing, should I manufacture my product in China versus Mexico, do I want this product to be sitting on a ship for a couple of weeks, or do I want it on a truck where it could be in the US? In 8 hours? I think Mexico is very fortunate to have the US as a neighbor, and that’s one of the key reasons why a lot of companies are looking to Mexico right now. Aside from that, there are a lot of free trade agreements that companies that are manufacturing in Mexico take advantage of.

The USMCA is obviously the one that everyone talks about, but there are other ones when you kind of do the math. I think there are over 50 countries that participate in various free trade agreements with Mexico. It’s a great launching pad for places aside from just the US and Canada, and Latin America. That’s why a lot of kind of European companies like it as well because you’re not just getting preferential trade access to North America, but there are also other countries that you’re able to trade with as well. Aside from that, I would say the last two are probably going to be the skilled workforce. We talked about cost efficiencies, but just because they’re lower cost doesn’t mean that they’re lower-skilled. Companies that are manufacturing in Mexico find that the workforce has a lot of skills. We have aerospace companies, medical device companies, automotive companies, and companies that have been manufacturing in Mexico for decades. Mexican workers have that industrial work culture that a lot of companies need. And the last one, I would say, is especially important now. It’s really the favorable demographics. When you look at Mexico’s workforce, the median age is in the mid-twenties, and what’s most important what we see is it’s a workforce that’s ready, willing, and able to work in the manufacturing industry.

I live here in Tucson, Arizona, and a lot of people around that age have zero interest in working in manufacturing. But in Mexico, these are aspirational jobs for them. So that’s another key benefit. And I think a lot of these factors collectively make Mexico an attractive destination. There are a lot of other advantages as well. And I’m sure you could read about them, listen to them on TV. But I think at the end of the day, those are the four or five that really have companies thinking about manufacturing in Mexico as a solution, not just for their current needs, but for their future needs as well.

LATAM FDI: For businesses that are considering opening manufacturing operations in Mexico. What are the primary modes of entry that are available to them, and how do they differ?

Ricardo Rascon: Yes. So, there are really five modes of entry. I would say when it comes to expanding into Mexico; there are contract manufacturing options, there are joint ventures, there are acquisitions, there’s standalone or fully owned subsidiaries. And then there’s something unique to Mexico, which is called the Shelter Model. For the sake of today’s conversation, I’m just going to talk about contract manufacturing. standalone operations and the shelter program. As for joint ventures and acquisitions, we don’t see them happening too much right now in Mexico. They don’t have a strong history of success either.

The first mode of entry is contract manufacturing. This is where a company looks for a third-party firm in Mexico with some existing capacity and says, hey, I need you to make this widget for me. It’s a low-risk entry strategy. It doesn’t require a ton of capital investment, and you’re able to benefit from a company that might already have these manufacturing processes in place. They may have some economies of scale, scope, and learning. So that could be a good solution for a company that’s already kind of made the decision from a strategic perspective that when it comes to the production part of my value chain, I’m going to outsource manufacturing in Mexico through a third party.

When we look at kind of this nearshoring that’s kind of taking place right now. That’s where a lot of interest in Mexico is right now. Many companies say, hey, maybe I make this Widget through a third-party company in China. Now, I’m looking for a substitute solution, and I’d like to do this in Mexico. Oftentimes, they kind of have a greater affinity towards the contract manufacturing model. But there are some challenges with that. Number one, they’re hard to find. It’s hard to find 100% owned Mexican contract manufacturing companies that can manufacture products for you at a competitive price. You could certainly find some US-based companies with operations in Mexico that do have some capacity, but they’re going to pass on that US. It may not make It the most cost-effective way, but if it is an option that you’re considering, I would advise you to consider working with a sourcing agent, someone who has a Rolodex of companies that might have the capabilities that you need. Typically, that’s the best way to make that work. So aside from contract manufacturing, you also have a standalone operation.

So, in this model, a foreign company sets up its own operation for manufacturing in Mexico. It forms its own legal entity, just as if you were a US. Company and looking to form A company in Canada, for instance. It gives you the highest level of control over all aspects of your manufacturing process and your administrative process, from production to workforce management. You’re 100% responsible for all of the activities related to manufacturing in Mexico. But because of this, it comes with the highest level of risk, and it requires a significant amount of investment and resources in order to make this type of operation possible. So that’s where things kind of open the door to the shelter model. The shelter model is unique to Mexico, and it’s been around for over 40 years, but it’s getting even more popular now. And really, it allows a foreign company to operate in Mexico as a division of a shelter service provider. The shelter service provider, like Tetakawi, would take a company, let’s say ABC Manufacturing, and ABC Manufacturing would say, hey, Ricardo, I’m looking for 35,000 square feet of industrial space and need to hire 80 people. We would find and lease the building on their behalf, recruit and hire all the people that they need, help them move everything in and out of the country, and make sure that they’re compliant with all regulations.

It’s really A turnkey solution that allows them to take advantage of everything that Mexico has to offer without worrying about the bureaucracies and the administrative kinds of nightmares. For lack of a better word, of doing business in a foreign country. Each of these models obviously has its own advantages and considerations. But I think the shelter model, at the end of the day, really stands out because of how it allows you to control production-related activities without having to worry about the administrative aspects of doing business in Mexico. At the end of the day, there are a lot of risk mitigation strategies built into the model as well.

LATAM FDI: Ricardo, I just heard You mention a shelter service provider will help a company find and lease space. I know that Tetakawi does do that. But just to give our listeners an idea of the size and breadth of Tetakawi. How much real estate does Tetakawi have under roof?

Ricardo Rascon:  We actively own and manage over 7.5 million industrial space. We definitely have more room to operate as well. Our core product is what we know as a manufacturing community. So really, it’s much more than just an industrial park. It’s an industrial park with onsite support services and amenities that help make sure that companies can kind of facilitate this turnkey expansion to manufacturing in Mexico as seamlessly as possible. But that’s not necessarily a fit for every type of company. Some companies might say, hey, Ricardo, I really love your value proposition. I would like to use some of your shelter services. However, operating inside of your real estate may not make sense for me for several reasons. We’re also able to provide services outside of our real estate as well.

LATAM FDI: One thing that I’ve always thought about shelter companies, and an easy way to explain it to people is it’s an all-encompassing solution. If I’m a manufacturer, I want to make something in Mexico. I don’t have to know anything about doing business in Mexico. I just plug into the system, and I’m good to go in a short period of time.

Ricardo Rascon: Yes. I think that the speed of entry is really key. Under current conditions, it’s kind of changed. Obviously, a lot of companies are looking to Mexico. Real estate is hard to find. Before this kind of wave of expansion into Mexico, we could get a company set up in as little as 30 days. So, sign a contract, and in 30 days you could be shipping out finished products. I would say now it’s probably closer to three months if we could find an available building for manufacturing in Mexico. If there’s not an available building, and we have to build from the ground up, you’re probably looking at between six to eight months to get started. But if you compare that to a standalone operation, there’s still a savings of time. If you were to say, hey, I want to go into Mexico and I want to do it on my own, you’d first have to secure the real estate, then you’d have to apply for certain certifications that on their own could take upwards of six to eight months. To get started with the current administration in Mexico and how things have become even more bureaucratic than they should be, in my opinion, you’re probably looking for a standalone operation anywhere between twelve to 16 months to get set up.

LATAM FDI: Yes. Another thing that’s pretty important to consider is that in addition to all the physical infrastructure preparation that has to be done to get up and running in Mexico if you’re doing a standalone, you have to staff up with people who know HR and labor law. You have to staff up with people who know accounting in Mexico. You have to staff up with people who know how to do customs and logistics issues, and environmental compliance. So, all of those things are already in place under the shelter program model of doing business in Mexico.

Ricardo Rascon: Yeah, and definitely you get it from top-notch people. And what I always tell companies, especially SMEs, hey, if you’re looking to expand into Mexico with about 50 to 70 people, you could try to do a lot of those things on your own. Or you can work with a shelter service provider like Tetakawi, which does these things for over 70 companies and has over 24,000 employees in Mexico. And you could get access to the types of people, the types of infrastructure, the types of resources that would normally only be available to a Fortune 100 company. When you talk about the economies of scale, scope, and learning, it’s really a no-brainer. And in my biased opinion, I guess you could say I agree with you. Yeah. I don’t know why a company wouldn’t at least start under the shelter program because it’s an amazing way to get started, because of the speed, but also to learn how to do things the right way. And for some companies, it is a perpetual mode of entry. I mean, we’ve been in business for almost 40 years, and our oldest client has been with us for over 35 of those years.

For other companies, they may say, hey, I just need a one, two, three-year engagement. And then, after that, I want to take the training wheels off and see what makes the most sense for my company. But what I always tell clients is, what’s the number one reason you’re expanding into Mexico? And a lot of them have some different reasons, but at the end of the day, it all kind of boils down to making high-quality products at a lower cost. I say, great, you’re not coming to Mexico to become an expert in how to deal with labor unions or how to deal with environmental health and safety standards. You’re coming here to do your best manufacturing in Mexico at a lower cost. So, work with the shelter service provider. We’re experts in these other things, and we’ll help you improve your competitive advantage by allowing that kind of focused production environment at a lower cost.

LATAM FDI: Well, when it comes to making a decision, what should a company do and if you could summarize, what should a company consider when it’s contemplating starting out in Mexico with a shelter company as opposed to a standalone operation?

Ricardo Rascon: I think that the biggest thing is going to be the degree of control. So how much control do you want over every single aspect of your operation for manufacturing in Mexico? If you’re a company that says, hey, I want to go to Mexico, and I want to be like Hernan Cortez and just conquer every aspect of it? I want to be an expert in environmental health and safety laws and regulatory compliance and labor unions and how to deal with them. Suppose you want to have complete and 100% control over all the administrative aspects. In that case, you should really consider setting up your own subsidiary, build out these teams internally, and get started on your own. If you’re a company that says, hey, I want to expand to Mexico and take advantage of everything that it has to offer. I do want to have 100% control over production-related activities, but when it comes to the administrative side of the business, I just don’t want to deal with that. Then, typically, the shelter will be more advantageous for you. And there are even some companies who are kind of in the middle of it, and they say, hey, eventually, I want to be able to do those things on my own.

But right now, I just want to focus on getting started as quickly as possible. Like I said, there are ways to kind of transition outside of the shelter. So, degree of control I would say, is probably an important thing to consider when pondering manufacturing in Mexico. The second thing is going to be time to market. And Steve and I kind of talked about this earlier. If you need to get set up as quickly as possible, there’s no quicker way than the shelter option. If you have time if time isn’t of the essence and you say, okay, I want to establish a manufacturing facility in Mexico. Still, I don’t need to be operational until 2025, and I do want to have a lot more control over it, so maybe the standalone option could make a little more sense.

I’d say that the third most important consideration when you’re comparing a shelter versus a stand-alone operation is going to be the headcount of your operation because that’s going to be really crucial. For a small operation, if you’re saying, hey, I’m looking at something less than 15 people, I think neither of these options would make sense. I would encourage you to consider going the contract manufacturing route, but between 15 to around 400, when you start comparing it from an economic perspective, the shelter option for manufacturing in Mexico is the most cost-effective route.

I think headcount is crucial to consider if your operation will exceed 400, and maybe you’re looking at 500 or more people. The economics of it may not make a ton of sense, but there are other aspects of the value proposition that still might incline you to consider using the shelter route. For instance, we have companies that have over 3000 employees with us under the shelter program, and from a cost perspective, it may not make the most sense, but there are other aspects of the value proposition. As I mentioned, there’s risk mitigation. There’s focused production. For instance, if you’re a medical device company and you’re making products that are 100% quality critical, would you want a plant manager who’s also stressing about how am I going to deal with this next labor union negotiation? How am I going to make sure that everyone’s paid on time, how am I going to handle this audit from the environmental authorities? Or do you want a plant manager who says, hey, I know a company like Tetakawi can take care of all of this and I could just be 100% focused on making pacemakers or making some other mission-critical device.

Some companies that are kind of on the higher end of the headcount perspective start to look at the shelter model for reasons other than just cost savings. And I think those are important to consider as well.

LATAM FDI: From an operational standpoint, how does the day-to-day management of a manufacturing unit under the shelter program differ from the standalone that you just got through commenting on?

Ricardo Rascon: Yeah, so from an operational standpoint, the day-to-day management of a manufacturing unit under the Shelter program is going to be less burdensome from an administrative perspective compared to a traditional setup. But I think it’s important to kind of highlight that from a production-related perspective, the amount of control is going to be the same at the end of the day. Really, the only difference is that the shelter service provider will handle all the administrative responsibilities. So, they’re going to handle all aspects of HR, of import-export administration, regulatory compliance, accounting, finance, and all of those things so that you could be 100% focused on what you do best, which is production-related activities. From a day-to-day perspective, that’s really how it works. The shelter provider is an extension of your team for manufacturing in Mexico. I would say typically, the end user of our product is going to be the plant manager that our clients handle. The plant manager is then well-equipped regarding how to activate different departments within our organization. If he needs to scale up production, he would talk to our HR team and say, hey, I need to hire 50 more of X position if they’re going to be working on a new product line.

He would get with our import-export team to let them know that things need to change from an importation or exportation perspective, or if they’re bringing in different types of chemicals, he would get with our environmental, health and safety team, and they would make sure that everything’s well documented and that employees are trained on those things. So really, at the end of the day, the shelter acts as an extension of the team, but they handle all of those administrative functions, and the plant manager is 100% focused on production.

LATAM FDI: For businesses that have been intrigued by what you described in terms of the Shelter program, how can they go about comparing different options that are available to them in the marketplace?

Ricardo Rascon: I mean, I would just contact Tetakawi, and we could solve all your problems. But no, if you do the research, there are about 27 different shelter service providers in Mexico. I would say about seven of them own 80% of the market share. So, there’s a lot of them. I would encourage any company to speak to as many as they can. But I think at the end of the day, what it really comes down to is finding a shelter service provider who can help you with a couple of elements of your strategy. Number one is going to be location. A lot of shelter service providers are location-specific. If you’re looking to operate in a specific region in Mexico, not every shelter service provider might be there. For instance, if you’re coming to Tetakawi and you’re saying, I absolutely, positively need to be in Tijuana, we would say we cannot provide services there. But if you were interested in another one of our venues, let’s say Sonora, Coahuila, or Mazatlán, we would gladly be able to help you there. But there are some shelter service providers that may not provide that key service there either. I think that’s kind of the most important thing to consider is maybe having a list of locations where you are seeking to do your manufacturing in Mexico.

I also wouldn’t assume that one location is the best location. I would compare and  I would benchmark, and work with different shelter companies to work through cost models and understand what the cost implications are for different locations. But I’d say when comparing shelter service providers, location is going to be a key difference. Number two, I would also look at cultural fit. At the end of the day, a shelter service provider is a risk-sharing partner, but you have to make sure that it’s a partner that kind of aligns with you from a lot of perspectives. Some shelter service providers, for instance, are US-based based, like Tetakawi. So, if you’re a US-based or a Canadian company, you could align with a provider and have a contractual base in the US. That could offer a big advantage in terms of communication and legal alignment, which will be really crucial to make sure you have smooth operations. I think the cultural fit is important. I think a track record is also something worth exploring as well. At the Tetakawi, we always encourage prospective clients to speak to existing and former clients. I think the conversations with the former clients will help you to really know about the shelter service provider and when you transitioned out, how did they helped you.

What were some of the reasons that you decided to no longer use their services for manufacturing in Mexico, and would you recommend them to someone? I think looking at track record is important as well. But again, I think that the biggest thing is to talk to as many shelter service providers as you can if you are interested in exploring this mode of entry and see what makes the most sense for your business. When we talk to a prospect, we always say, hey, our goal is number one to help you decide if is Mexico right for you, yes or no. Because for some companies manufacturing in Mexico may not make sense. Number two is the shelter mode of entry. The best way for you to establish in Mexico, yes or no? And number three, is Tetakawi the right fit? Yes or no? Because sometimes we aren’t. We may not be in the location that you’re looking for. We may not be able to offer you the very specific flexibility that you need. But at the end of the day, we’re very proud, and we have a lot of strong belief in our business model, but it’s not necessarily a 100% fit for every company.

So again, I would encourage you to speak to many shelters, visit them in person, go see it for yourself, tour their facilities, talk to their clients, but also make sure that they’re providing you with data that you can kind of use and benchmark and do the homework yourself. Because at the end of the day, no one can make that decision for you. It’s a decision you have to make, but there are quantitative and there are qualitative factors that you have to evaluate.

LATAM FDI: With respect to the data that you just mentioned, I know that one of the most valuable pieces of data that Tetakawi, in particular, offers its client is the cost model analysis. Can you tell us a little bit about your cost model analysis and how that helps companies make decisions?

RICARDO RASCON: Yeah, definitely. Our cost model is based on proprietary data that we aggregate based on the operation of our 70 clients in Mexico. At the end of the day, we have real-time data. We pay 26,000 people every Friday. So, when a company is saying, hey, I’m thinking about expanding to begin manufacturing in Mexico, we can take this data and provide them with an estimation of what it would cost them to set up that facility in Mexico. Within our cost model, we would look at not just labor, we would look at real estate, we would look at logistical movements and purchases in Mexico, and then we’re able to benchmark different regions in Mexico. If you’re saying, hey, I’m location neutral, maybe I’m not quite sure where I want to operate. We could help you model the different cost scenarios versus locating in different locations there. I think the cost model is an important thing for a company to kind of work through, and I think it’s great to work with a shelter service provider. But again, just make sure you’re comparing apples to apples and you’re getting real information because some companies may not provide fully fringe wages, for instance. They may say, hey, this is what this person will cost, not considering other benefits that you may have to provide the workforce.

It may seem that one location in Mexico or one provider in Mexico has a better cost scenario than another, but just make sure you’re looking at things with a transparent lens. The cost model for manufacturing in Mexico is very effective, and we could also help companies benchmark a standalone operation versus a shelter operation. If you’re kind of in between both and you’re saying, hey, well, maybe I’d want to start with the shelter and eventually transition out, we can help you understand what that’s going to look like from a cost perspective, not just in the short term, but also in the long term.

LATAM FDI: How is Tetakawi, at this point in time, innovating or adapting its shelter services in response to some of the changing needs that we’re seeing in the global business?

Ricardo Rascon: So, you know, at the Tetakawi, we’re well aware of what’s going on not just in the global manufacturing landscape, but also in Mexico as a whole. When it comes to kind of evolving, innovating, and adapting our business model, there are a couple of things that we’re doing. Number one is exploring new venues. As I mentioned, there’s a lot of interest in Mexico right now, but that also creates some problems in some areas that have been attracting investment for years. You have more competition for labor. You have increased real estate prices. There are some areas along the border where the maquiladora industry is over 24,000 workers, where turnover is upwards of 16% a month.

What we’re doing at the Tetakawi is looking at other venues in Mexico that may not be traditional manufacturing hubs but that have labor availability that can help ensure that companies have access not just to the talent they need today but also to the talent they need tomorrow. For instance, we’re going to be establishing a new manufacturing community in Mazatlan, which is an area mostly known as a tourist destination. But when we do our research, when we look at the demographics, when we look at the needs of the local workforce, there’s a lot of talent there that’s looking for jobs in the manufacturing sector.

We believe that could be a venue that’s very attractive to companies that want to hire a workforce, train them, and not worry about them leaving tomorrow for 20 more pesos a day. It could be a good venue for a company really focused on reducing turnover and looking to invest in its workforce. So that’s one thing that we’re doing. We also invest a lot in training centers and position ourselves as an employer of choice. Steve, you’ve been to our manufacturing communities. I think you could really speak to what you’ve seen there, anything from daycare facilities to sports complexes to transportation services to onsite medical services. And really, many of these things that we’re investing in within our manufacturing communities have a dual purpose. So first, they support our employees, and they contribute positively to the different communities where we operate. But they also provide our clients, who may be entering Mexico for the first time, with access to services and amenities that normally they wouldn’t be able to invest in. The level of infrastructure and support that we’re able to provide these SMEs in Mexico is significant.

The amenities that Tetakawi provides can really be a game changer for a company that says, I don’t just want to expand into Mexico; I want to expand into Mexico the right way, and I want to do the right things, and I want to help elevate the local communities. I’d say those are some of the things that we’re doing to kind of innovate our business model and elevate the communities where we operate.

LATAM FDI: One thing that is particularly impressive, and I’m familiar with this, was what was done beginning in the early 2000s in Guaymas. There was no aerospace in Guaymas in the early 2000s. Today you have one of the biggest aerospace clusters for the manufacture of aerospace engine parts. Tell us a little bit about what was done there in terms of creating an educational infrastructure to make that cluster happen.

Ricardo Rascon: Yeah, definitely. And I wish I could say I was part of that, but that was well before my time. But really, at the end of the day, it was our team’s knowledge that, hey, we need to kind of change the way we’re doing things here and maybe let’s focus less on labor-intensive operations and look more for capital-intensive operations that are looking to expand into manufacturing in Mexico. Aerospace made a lot of sense, but the challenge there was kind of the workforce. and how do you ensure these people have the necessary knowledge to do things like CNC machining and things like that? So, then Tetakawi worked with local universities and also invested in its own training facilities to kind of help elevate the local workforce. And over the years, we built a very strong aerospace cluster that was really driven early on by engine components. OEMs, who recognized the local talent, who also recognized that it’s one of the few venues in Mexico where if you invest in a worker, you won’t have to worry about them leaving tomorrow for a 5% pay bump. It’s a more stable workforce, a workforce that is interested in learning more, and if you show a desire to invest in them, they’re willing to stay there a little longer.

And now, as you said, that initiative started in the early 2000s. Here we are in 2023. We have about 17 aerospace component manufacturers that do anything from secondary processing to castings and things like that. We’re very proud of what’s happened in Guaymas. When we look at what it’s done to the local community and how it’s kind of elevated employees and their pay levels there specifically, it’s really impressive.

LATAM FDI: Well, Ricardo, we’ve traveled quite a distance here in terms of the information that we’ve covered in a relatively short period of time. The experience that we’ve had with these podcasts is that the listeners have questions after taking in the information. They want to speak to those who have been kind enough to do a podcast with LATAM FDI. That being the case, can people contact you, and how would they do that?

Ricardo Rascon: Definitely. You know, you could shoot me an email ricardo.rascon@tetakawi.com. You could also visit www.tetakawi.com. We have a chat box there. You could shoot me a message and I’d be happy to respond, or you can fill out a Contact Us form. You could even call me directly. My cell phone number is 520-971-9096, and I’d be happy to answer any questions that you may have about manufacturing in Mexico.

LATAM FDI: Okay. In addition to that information, we’ll include a link to your LinkedIn profile if that’s okay with you on our transcript section of the podcast.

Ricardo Rascon: Yeah, no problem at all.

LATAM FDI: Well, thank you very much for joining me today. It’s been very instructive and informationally packed, and we wish you well in the future and everything that both you and Tetakawi do.

Ricardo Rascon: No thank you Steve. I really appreciate the consideration, and I look forward to seeing where we can disseminate this information on manufacturing in Mexico.

LATAM FDI: Take care.

Ricardo Rascon: All right, take it easy. Bye

Foreign direct investment in Brazil: An overview

Foreign direct investment in Brazil: An overview

Marcos Antonio Mandacaru
CEO
TSX Invest
mandacaru.marcos@gmail.com

LATAM FDI: Hello. Today, we have Marcos Antonio Mandacaru with us. I hope I got that pronunciation right. Marcos Antonio, please correct me. We’re going to talk about foreign direct investment in Brazil. I’ll let Marcos Antonio introduce himself and tell us a little bit about the organization that he represents.

Marcos Antonio Mandacaru: Thank you very much for the invitation to be here. I have been dedicated to foreign direct investment attraction to Brazil since 2007. Currently, I am in Bello Horizonte which is the capital of Minas Gerais State. I am an associate professor at Fundação Dom Cabral which is a business school that is very well known worldwide and CEO of TSX Invest, a company dedicated to helping companies and cities to attract investment. So, I’m here with you to discuss to talk about foreign direct investment in Brazil.

LATAM FDI: That’s great. That’s a very interesting topic because Brazil is the foreign direct investment leader in Latin America. That being the case, what are the main sectors that companies are coming to do business in Brazil?

Marcos Antonio Mandacaru: Brazil, in 2022 was number five in terms of foreign direct investment attraction in the world. Several sectors are attractive for Brazil, especially renewable energy, infrastructure, agribusiness, and automotive. Considering the size of the market and the growing middle class, we can consider health and retail as a very strong as very strong sectors for investments, especially health, as well. You can consider services, biotechnology, industry and pharma. Just to give an example about this sector in our region, Minas Gerais, we have one of the best federal universities in the country, the Federal University of Minas Gerais. The university is a leader in patents, and 70% of the patents are related to the health sector. We have here in our city, Belo Horizonte, several companies in biotechnology and health. It’s a good opportunity for foreign companies to establish cooperation, joint ventures, and other regions in Brazil. You can explore biotech too, for example, in the Amazon region and Sao Paulo State and the south of Brazil.

LATAM FDI: You mentioned a lot of sectors for foreign direct investment in Brazil a moment ago, but there’s one sector that I’m particularly interested in. It’s led by Embraer. Can you tell us a little bit about aerospace in Brazil? Because I know that it’s highly developed.

Marcos Antonio Mandacaru: The aerospace sector in Brazil is a strong opportunity for foreign companies, especially for helicopter suppliers and aircraft manufacturers and suppliers. Embraer was established in Brazil in 1969 in the countryside of Sao Paulo State, the biggest state in Brazil in terms of GDP and population. But what I can explore with you is the opportunity of Itajubá, a city located between Sao Paulo and Belo Horizonte, in the south of the state. of Itajubá is a very sophisticated city in terms of education. It is home to a very good university. There, they have the subsidiary of Helibras Helicopters there. Helibras is the only helicopter manufacturer plant in Brazil. They manufacture big helicopters there. The city has five laboratories dedicated to aerospace. Inside the university, there are several startups, and a very strong industrial park surrounding the Airbus helicopter plant. This is an opportunity to be explored for foreign direct investment in Brazil considering the fact that this sector is a very good source of investment for Arizona and the United States. I’d like to help you and your companies in the United States explore and understand better the business and the investment environment in this region.

LATAM FDI: Well, you mentioned the state of Sao Paulo and also you mentioned Minas Gerais. Besides those two states, are there other states that have been successful in attracting foreign direct investment in Brazil?

Marcos Antonio Mandacaru: Absolutely, yes. In the south of Brazil, there are three states with good track records in foreign direct investment attraction Rio Grande do Sul, Santa Catarina, and Paraná. They are well-developed states in terms of economy and industry, especially. Santa Catarina in recent years has developed a good innovative ecosystem attracting foreign companies for partnerships with local companies. They have two strong indigenous companies prepared to internationalize with a good profile for establishing partnerships for investment in Brazil in the northeast of Brazil. An example is the state of Bahia, which has just announced the BYD investment in electric car plant manufacturing there.

LATAM FDI: That’s a Chinese company, isn’t it?

Marcos Antonio Mandacaru: It is a Chinese company, yes. Ceará, another state, is a hotspot for foreign direct investment in Brazil.  Additionally, Pernambuco, as well as other regions, has been successful in attracting foreign direct investment too. In other states, for example, Goiás is very strong in agribusiness. Mato Grosso do Sul is as well. So, Brazil has plenty of opportunities in several areas, in several regions, in several industries. I consider Brazil the best opportunity for foreign investment in Latin America, considering the country has 50% of the South American GDP, and is the largest consumer market in South America. It is the same time zone as the United States and has some cultural similarities. It’s easier to do business in Brazil if you compare it to India China or Malaysia, for example. Obviously, we are a Latin country. We have some differences in terms of the culture, but there are a lot of similarities in terms of compliance and how to do business. Making a foreign direct investment in Brazil is easier if you compare it to other emerging markets.

LATAM FDI: Please, give somebody who may be listening and may not have a full picture of what Brazil is like, a lot of people may not know, but Brazil is the same size as the lower 48 states in the US. Just to give our listeners an idea of the size of Brazil.

Marcos Antonio Mandacaru: The size of Brazil is impressive. It’s interesting because sometimes you can’t imagine how big Brazil is in the world. The state of Minas Gerais is the size of Spain. The state of Sao Paulo is the size of the United Kingdom. The state of Bahia is the size of France. So only three states that I mentioned, France, Spain, and the UK can easily fit inside Brazil. The state of  Pará is the size of Angola. So, it’s a continent, it’s a big country to be exploring in different areas, in different industries, and opportunities that are attractive for foreign direct investment in Brazil.

LATAM FDI: One industry that you haven’t mentioned yet, and it has been there for a long time, maybe you could give our listeners an overview of it. Is the automotive industry important in Brazil, isn’t that correct?

Marcos Antonio Mandacaru: The automotive sector in Brazil is very well developed in terms of engineering research and development design. We have almost all Western brands with manufacturing plants here, from Mercedes Benz to Audi, Volkswagen, Ford, Stellantis, GM, Fiat, and Chrysler.

I mentioned before the foreign direct investment in Brazil announced by BYD to manufacture electric cars in Bahia. But what I consider a good opportunity is the energy transition in the automotive industry. Talking about my state again, but it’s not because it’s my state, because Minas Gerais has 70% of lithium reserves in Brazil. Additionally, we have much more including cobalt, nickel, and niobium. Minas Gerais is the largest niobium producer in the world. We have the condition together here in this region, the hotspot for the energy transition in the automotive industry in Brazil because we have engineering too.  The largest Stellantis plant in the world is located here in our region, close to Belo Horizonte. It produces 3000 cars per day. I don’t know how many they are producing nowadays, but the capacity is 3000 cars per day. Sometimes they have to adapt to the production, to the demand. But the capacity is 3000 cars per day in this manufacturing plant with an engineering center with 2000 engineers and 200 designers. It is the only design center of Stellantis outside Europe and the US.

So, we have engineering, we have strategic minerals, and we have a strategic location for foreign direct investment in Brazil. In an hour’s flight from Belo Horizonte, you can cover 70% of the Brazilian GDP. We have a strategic location, engineering, strategic minerals, and production of ethanol that can be used in hybrid cars as a very good option for combined electric and, how can I say, traditional fuel, but with zero emissions.

LATAM FDI: Okay, you just got through explaining a bit to us about a very established industry, the automotive industry. But can you tell us what the main startup ecosystems are in Brazil?

Marcos Antonio Mandacaru:  As regards the startup ecosystem for foreign direct investment in Brazil, I can talk about several ecosystems that have developed from the south to the north. I would like to start by mentioning the state of in the northeast of Brazil, Pernambuco. The capital is Recife. There is Porto Digital. There is an ecosystem of startups in technology with good capacity to develop international partnerships to attract foreign direct investment in Brazil. In Sao Paulo, the largest city in South America, a financial center and industrial center, you have a strong startup community dedicated to several sectors, especially fintech, construction, and health. Rio de Janeiro as well, has a strong ecosystem. The city, of my hometown, Belo Horizonte, the third metropolitan region in Brazil, has a strong startup community. It is sometimes considered one of the two or three best startup communities in the country.

The best startup community in Brazil nowadays is Florianopolis in the south of Brazil. The city has a good serendipity, a strong connection to industry, and a diversity of startups, able to establish international cooperation and develop partnerships for different industries and technologies. This is an overview. Obviously, we can mention other ecosystems in different regions. For agritech, for instance. Agritech is a strong area for startups in Brazil. Construction tech as well. Brazil has a good environment for innovation in terms of startups, universities, and talent.  These industries and start-up ecosystems are ready to attract more foreign direct investment in Brazil.

LATAM FDI: Well, in terms of setting up facilities in Brazil and one of the areas that you’ve pointed out to us, what do you recommend for a company to have a soft landing in Brazil?

Marcos Antonio Mandacaru: Although Brazil has a big market with a diversified industry, we have a difficult business environment. Yet, for establishing a company in Brazil, I recommend talking first with Apex Brazil. Apex Brazil is the investment promotion agency at the federal level, and after the state in which the company will invest.

It’s important to understand the government structure and if the state has an investment promotion agency, for example, Invest Sao Paulo or Invest Minas, I recommend talking with them. It’s important to identify local companies in the same sector to talk about their experience in Brazil. Depending on the size of the company that is investing in Brazil, the most recommended way to enter the market is the joint venture or by acquisition of an existing company. Here, for greenfield investment, it’s important to have the support of the National Development Bank, the BNDS. I don’t know, Steven, if you have heard about the National Development Bank, it’s a very strong bank that can support and finance investment in Brazil in different areas. Some states, like Minas Gerais, have a state development bank. It’s important to talk with them. So, we have a very strong framework to facilitate foreign direct investment in Brazil considering the complexity of the market and the business environment.

And when you go deeper into the private sector, for example, the company I’m now working for, TSX Invest, we can help foreign companies connect with other companies and governments too, like TSX. There are several companies with this mission to connect foreign companies to local companies.

LATAM FDI: Okay, well, we’ve covered a lot of ground in not so many minutes here. Our experience has been that after listeners receive the information that our speakers provide to them, they often have questions come up as a result of what they’ve heard. If somebody wants to contact you with questions that have to do with what you’ve expressed today, how could they get in touch?

Jose Antonio Mandacaru: By LinkedIn. My profile is Marco Antonio Macandaru or by email: mandacaru.marcos@gmail.com. Okay.

LATAM FDI: What we’ll do is we will include, if it’s okay with you, include a link to your profile on LinkedIn in the transcript section of the podcast, as well as a copy of your email address that people can click on so that they can get into contact with you easily. Would that be okay?

Marcos Antonio Mandacaru: I appreciate it.

LATAM FDI: Well, thank you for joining me today. I was fortunate enough when I was a younger man to spend quite a bit of time in Brazil, and I think it’s a great country. And thanks again for being with us.

Marcos Antonio Mandacaru: Thank you very much for the opportunity.