6.

Doing business in Brazil

Also in t his section 62 AT&rs big merger blocked 63 Boeing's nightm areliner 63 Guitars and green laws 64 Exxon beats BPin Ru ssia

Rio or Sao Paulo?
~ IO

oeJ A IH I ~ O ANO S';'O PAULO

For the first time in decades, Brazil's Marvellous City looks attrac tive for business

64 Grabbing mines in Zimbabwe 66 Schumpeter. Angst for th e educated
Community-policing projects a re taming its infamous favelas, or shantytowns: its murder rate, though still very high at 26 per 100,000 people p er year (2.5 tim es Sao Paulo's), is a t last falling. Brazil's soaring real is pricing expats paid in foreign currencies out of Sao Paulo's classy restaurants a nd shopping malls; Rio's recipe of sun, sea and sam ba is still free. Even Hollywood seems to be on Rio's side: an eponymous animation, w ith its lush depictions of rain forest a nd carni val, is one of the year's highest-grossing fi lms. Rio's mayor, Eduardo Paes, has big plans for capitalising on the city's magic moment. He has set up a business-developm ent agency, Rio Negocios, to ma rket the city, h elp businesspeop le find inve stm ent opportunities, and advise on pap erwork and tax breaks. It concentrates on sec to rs where it reckons Rio has an edge: ~~

T AST year Paulo Rezende, a Brazilian privL ate-equity investor, and two partners decided to set up a fund investing in suppliers to oil a nd gas companies. Although this industry is centred on Rio de Janeiro, Brazil's second-larges t city, with its huge offshore oilfields- and fabu lous beache s, dramatic scen ery and outdoor lifestylethey inste ad established the Brasil oil and Gas Fund 430km (270 miles) away, in Sao Paulo's conc rete sprawl. Even though it means flying to Rio on ce or twice a week, Mr Rezende, like many othe r businesspeople, decided that Sao Paulo 's economic heft outweighed Rio's charms. But the choice is harder than it used to be. For many years, Sao Paulo has been the place for multinationals to op en a Brazil office. It may be less gla morous than Rio, as the two cities' nickna mes suggest: Rio is Ctdade Maravilhosa (the Marvellous City); Sao Paulo is Cidade da Garoa (the City of Drizzle). But as Mr Rezende sadly concluded: "Sao Pa ulo is the financia l centre, and that's w here the money is." Edilson Camara of Egan Zehnder International, an executive-sea rch firm , does 12 sea rches in Sao Paulo for each one in Rio. The biggest mi stake , h e reckons, is for fi rms to let future expatriates visit Rio a t all. "They are seduced by the scenery and lifestyle, and it's a m ove they can se ll to their families. But ma ny have ended up moving their office to Sao Paulo a couple of years later, with all the upheaval that entails." From a hamlet founded by Jesuit mission arie s in 1554, Sao Paulo grew on coffee in the isth century,industry in the fi rst hal f of the zoth-and then on the misfortunes

of Rio, once Brazil's capital and its rich est, biggest city. The federal government abandoned Rio for the newly bu ilt Brasilia in 1960, starting a half-century of decline. Misgovern ed by politici ans a nd fought over by drug gangs and corrupt police, Rio be came da ngerous, even by Brazilian standards.The exo du s gained pace as businesses and the rich fled, mostly for Sao Paulo. Now, though, there are signs that the cost-benefit calculation is shifting.Sao Paulo's econ omy has done well in Brazil's recent boo m years and it is still much bigger, but Rio's is growing faster, boo sted by oil discoveries and winning its bid to host the 2016 Olympics (see table). Last yea r Rio received $7.3 billion in foreign direct inves tment- seven times more than the year before, and more than twice as much as Sao Paulo. Prime office rents in Rio are now higher than anywhere else in the Americas, north or south, according to Cushman and Wakefield, a property consultancy.

I

MalVel v Drizzle
Brazil's two larqest cities Rio de Janeiro Soio Paulo Population.m 6.3 .. ... ........ .... .... ................... .... .... .. .. 11 .3 ... ...... G DPper person,
2008, S

Rio de Janeirc

Soio Paulo

1S.S00
26

21.000
11

M urder rate per 100,000.2010 ..._ . . _
""-

.
7.27 12 (29) 2.73
(189)

FDl inflow, 2010, $bn (ost ofliving, world ranking, 2011 (/010)

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