Opportunity taken: AkzoNobel in Brazil

Posted on 26 Jun 2012 by The Manufacturer

Following TM’s article There for the taking: Latin America, Jaap de Jong, AkzoNobel regional director LatAm and country director Brazil, contacted TM to give some insight into his organisation’s operations and intentions in South America’s biggest economy.

Jaap de Jong, AkzoNobel regional director LatAm and country director Brazil
Jaap de Jong, Regional Director LatAm and Country Director Brazil, AkzoNobel

TM: What is the nature of AkzoNobel’s interest in Brazil – did it start operations out there because it is a cheap manufacturing location or to access local markets?

We have been in Brazil for almost 100 years through different segments. We now have 15 plants in Brazil and almost everything we sell here is also produced here.

Brazil is now the fourth largest market for AkzoNobel globally and it is among the company’s highest growth markets.

The country offers plenty of opportunities for our industry in the next few years considering. Brazil is growing fast and along with this growth come high value infrastructure opportunities brought by the need to build or refurbish new stadiums, airports and other infrastructure such as hotels, ports and so on.

Moreover, Brazil has been the basis for exports for many other Latin American countries and the economy is now the 6th largest in the world.

AkzoNobel’s intentions in Brazil never included accessing a cheap manufacturing location. It is not a cheap place for doing businesses since the tax system is complex and taxes are among the highest in the world here. Labor costs are also high.

TM: How is AkzoNobel now investing in its Brazilian operations?

More recently we have been investing in our Pulp & Performance business in Brazil. This emphasizes the importance of high growth markets to AkzoNobel and will help drive a medium-term strategy to double Brazilian revenues €1.5 billion.

Over a 12 month period we announced €190 million investments to develop two chemicals plants in Brazil: one to serve the Eldorado Papel y Celulose pulp mill, located in Três Lagoas city, in Mato Grosso do Sul state and the other to serve the pulp mill from Suzano that will be built in Imperatriz, located in Maranhão state.

These developments will build on a concept, developed in Brazil, of ‘the chemical island’. This involves supplying, storing and handling all chemicals for each pulp mill. With the chemical island serving the customer we can provide the chemicals needed for the pulp mill trough pipelines, avoiding costs of transportation and using the energy generated by the pulp mill. Both plants will be fully operational by the end of 2013.

TM: What has been most rewarding about working with AkzoNobel to build its presence in Brazil and the wider South American markets and what challenges are still to be overcome?

The most rewarding has been seeing the continuing growth of the markets and the company’s profitability. Brazil is now the fourth largest market for AkzoNobel globally and last year it was the fastest growing region, with attractive margins.

The challenges continue to centre on the cost of doing business: taxes, transportation, labor costs, and legal considerations. We continue to look for opportunities to reduce costs, but it is not easy.

TM: Some UK companies looking at establishing operations in foreign markets worry about compromising hard earned ethical standards which are often integral to their competitive offering. Has it been difficult for AkzoNobel to maintain, for example, environmental commitments, in Brazil?

We pay a lot of attention to make sure we do business according to the core values of the company. These values apply globally.

In most cases we find Brazil has good infrastructure for supporting sustainable business ambitions but in all our global locations we try to be market leaders in waste reduction, controlled energy and water usage and serving our local communities.

AkzoNobel is not only building its capabilities in fast growing economies like Brazil. Read about developments on its new multimillion pound UK site here.

Brazil facts:

  • In 2011 the UK exported over £2.3 billion worth of goods to Brazil
  • Brazil has an extimated population of 205 million
  • In 2012 Brazil became the sixth largest global economy with a total GDP of $2.28 trillion
  • Brazilian GDP per capita is $11,600
  • Brazil’s primary industry is agriculture thanks to 40% of its land being classified as farm land
  • Other storng industries in Brazil include chemicals and aerospace. Brazil is the third largest manufacturer of commercial aircraft in the world