Brazilian companies invest in machinery to reduce external dependency

In recent years, industries such as automotive, motorcycle, household appliances, road implements, furniture, electronics, and packaging have resorted to purchasing imported machinery to expand local production.

The automotive industry, for example, has a large-scale project to attract manufacturers of components primarily imported from Asia. With the crisis caused by the lack of semiconductors, which resulted in the shutdown of vehicle factories worldwide, the Brazilian industry focused all of its efforts on developing these projects to become less reliant on the countries of that region.

Stellantis, the owner of the Fiat, Jeep, Citroën, and Peugeot brands, is currently developing a component-producing plant for the new Citroën C3, which has started to be produced at its factory in Porto Real (Rio de Janeiro state). According to the company, the supply of hood opening lever, gas spring, tool kit, brake pedal, and engine cradle, previously imported from India, have already been nationalized with suppliers in Minas Gerais and São Paulo. The project succeeded, and new parts, such as suspension components, will be produced here.

Employment

In the small appliances sector, Mondial, for example, accelerated nationalization in 2020. It started to manufacture electric irons, air fryers, multiprocessors, and acoustic boxes in Brazil, which were previously imported from China. As a result, it created over a thousand jobs in Conceição do Jacuípe (state of Bahia).

“It was something we were supposed to do in four years, and we did it in one,” says Giovanni Marins Cardoso, the company’s founding partner, which is number one in Brazil in this sector. With the pandemic, the cost and difficulty of bringing these small appliances from China increased, and he claims the best option was to produce them in Brazil. As a result, the company gained agility in meeting demand by manufacturing locally. “If retail sales are good, a national factory can start producing more items the next day; if we rely on Chinese imports instead, a new shipment may take 90 to 120 days to arrive.”

To enable the domestic production of such items, Mondial invested R$ 80 million in machinery and equipment in a year and a half. “We more than doubled our injection molding park and established local suppliers of electrical resistance, thermostats, and packaging,” he says. In addition, the company intends to foster a new round of nationalization to produce hair dryers, dryer brushes, vacuum cleaners, and coffee makers in-house. “The (electrical and electronics) sector is undergoing profound transformations because the globalization model has made the industry globally vulnerable,” says Humberto Barbato, president of the Brazilian Association of Electrical and Electronics Industry.

Trade

While the industry tries to replace imports, the retail strategy to circumvent the high prices and logistical problems was to change commercial partners. In a study by the chief economist of the National Confederation of Trade in Goods, Services and Tourism, Fabio Bentes, compared average imported quantities of 3,700 consumer goods from January to October, between 2012 and 2019, before the pandemic, with the same period between 2020 and 2022, reveals that there was a change of supplier countries.

The volume imported from Brazil’s traditional trading partners, such as the US, the Netherlands, France, and South Korea, recorded double-digit drops in the pandemic compared to the previous period.

On the other hand, purchases from other countries were expanded, whereas prices dropped, such as India, Belgium, Portugal, Turkey, and Vietnam.

In addition to Chile, neighboring Peru and Paraguay appear on the list of commercial partners with the highest volume growth in the post-pandemic period. “Brazil’s closest commercial partners are gaining strength,” Bentes says, emphasizing that the process of import substitution takes time.

What has impacted the supply chain: 

– Global inflation: Due to the pandemic, the governments of several countries had to help the population with aid. This extra injection of resources fueled the rise in prices.

– Supply cut: The lockdowns in China, the world’s central factory hub and the pandemic’s epicenter, caused a shortage of imported components.

– Freight boom: The cost of ocean freight has skyrocketed.

Source: BOL

To read the original article, please access: https://www.bol.uol.com.br/noticias/2022/11/30/brasil-e-de-longe-principal-comprador-na-america-latina-de-agrotoxicos-exportados-pela-franca.htm

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