Pernambuco: a new growth engine?

 

Northeastern Brazil is becoming a region of growing industrial activity. The state of Pernambuco and its capital Recife are examples of the Northeast’s effort to become a growth engine in the Brazilian economy. The following observations are from a recent information session on business in Brazil that took place in Boston, and from information published by the American Chamber of Commerce for Brazil.

 

Demographics & Human Capital

Per capita income in Pernambuco is growing along with the rest of the Northeast region. Yet the state’s income is significantly less than that of Brazil as a whole.

Similarly, Pernambuco’s educational outcomes, measured by Brazil’s Basic Education Development Index, have improved steadily since 2005.

 

Macroeconomics

Pernambuco’s economic growth has exceeded that of Brazil as a whole for the past two years and is forecast to do so again in 2012.

 

 

ECONOMIC GROWTH RATES

  2010 2011 2012
PERNAMBUCO 9.30% 4.50% 6.00%
BRAZIL 7.50% 2.70% 4.50%

Source: Central Bank of Brazil

 

Infrastructure

Seaports: Recife, the state capital and Suape, connecting the northeast coast to North America, Europe and Africa.

Railways: The Transnordestina connecting the seaports and industrial centers on the coast to the rural interior and other states in Northeast Brazil.

Informatics Hub: Technology Center that symbolizes modern electronic connectivity and a platform for innovation.

The Northeastern ports feature docking and logistics facilities and intermodal links to roads and railways.

Suape is home to an industrial complex with infrastructure for shipping manufactured goods throughout the country and to several export markets. Pernambuco has positioned itself as a viable route into and out of Brazil.

 

What Pernambuco buys:

  • Acids and Salts
  • Fuels and Petroleum Products

 

What Pernambuco sells:

  • Sugarcane, beet sugar, and related products
  • Fresh Grapes
  • Petrochemicals
  • Fuels and Lubricants

 

Conclusions:

  • Pernambuco’s trade seems to revolve around primary and intermediate products to support industrial activity in the state or elsewhere.
  • Exporters should consider positioning products and services to support the region’s growing industrial and infrastructure development
  • Given the somewhat lower income levels in the region, consumer goods would have to appeal to the lower middle of the pyramid
  • The economic profile of Pernambuco indicates that Northeast Brazil is not just growing but also attempting to integrate into the supply chain. Will it be enough to make the region a serious trade alternative to Sao Paolo, Rio de Janeiro and the the southern regions that tend to attract the most attention?

 

 

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