Edition June 2024: Brazil - A Pioneering Nation on the Road to Sustainable Mobility

Edition June 2024: Brazil - A Pioneering Nation on the Road to Sustainable Mobility

Preface

Brazil: A pioneering nation on the road to sustainable mobility

In recent decades, Brazil has established itself as a pioneer in the use of renewable energy sources and has undergone a remarkable transformation. What began half a century ago is now unfolding its full force and impressively demonstrating how innovative approaches can revolutionize the automotive industry.

A look back at Brazil's journey towards sustainable energy

Brazil's journey towards sustainable energy began 49 years ago with the National Alcohol Program (Proálcool) in 1975. Initiated in response to the oil crises, this program laid the foundation for reducing greenhouse gas emissions by promoting ethanol as a fuel. The next significant step followed in 2003 with the introduction of the flex-fuel car, which was developed by Brazilian engineers and can use both ethanol and gasoline.

These early initiatives have given Brazil a unique position in the global fight against climate change. On December 30, 2023, the country set another milestone with the launch of the Green Mobility and Innovation Program (Mover), which promotes the production of greener vehicles and provides for significant investment in clean technologies.

The progress of renewable energy in Brazil

Today, Brazil produces an impressive 91% of its electrical energy from renewable sources. The Brazilian energy matrix is made up as follows:

  • Hydropower: Over 60% of installed capacity (110 GW) comes from hydropower plants.
  • Wind power: Installed wind power capacity rose to 29.14 GW in 2023, contributing almost 15% of electricity generation
  • Solar power: The installed capacity of photovoltaic systems exceeded 35 GW, which corresponds to around 16% of the total energy matrix.

These impressive figures show Brazil's strong growth and potential in the use of wind and solar energy, consolidating the country's position as a leading player in the renewable energy sector.

Impact on the automotive industry

Brazil is pursuing a unique decarbonization strategy in the automotive sector by focusing on flex-fuel hybrid cars. These vehicles, which can run on both ethanol (in some cases gasoline with 27-30% ethanol) and electricity, offer a viable solution for reducing CO2 emissions. While the focus in Europe and the USA is strongly on purely battery-powered vehicles, Brazil is showing that a hybrid solution with ethanol offers significant advantages.

The Mover program, which provides for investments of almost USD 4 billion by 2028, promotes research and development in the field of clean technologies for the automotive sector. A key element of this program is the introduction of the “well-to-wheel” method for measuring greenhouse gas emissions, which takes into account the entire life cycle of the energy used.

In other countries and regions (North America, Europe, Asia etc.), the “tank-to-wheel” method is used, which only measures exhaust emissions. According to the “well-to-wheel” method used in Brazil, for example, an electric car manufactured in Europe or China has higher emissions because some of the energy used there comes from coal-fired power plants. Nuclear power, which is suddenly being discussed again with the methods currently in use, also performs extremely poorly as an energy supplier. To this day, for example, final storage costs and the complete lack of insurance cover are not included in the costs of nuclear power, especially in Europe.

source: generated by

Goal: decarbonization

The use of fuel derived mainly from sugar cane will be sufficient for Brazil to achieve its decarbonization target of at least 50% by 2030 compared to 2015. Moreover, hybrids do not require any disruption to the current production model, which would lead to factory closures and mass layoffs.

Flex-fuel hybrids as the key to decarbonization

Thanks to its well-developed ethanol infrastructure, Brazil is well positioned to effectively utilize flex-fuel hybrid vehicles. These vehicles do not require drastic changes in the production model and allow for a gradual decarbonization of the automotive sector.

The Brazilian government is supporting this development through the Green Mobility and Innovation Program, which promotes the production of hybrid vehicles. Major car manufacturers are already planning extensive investments in the production of such vehicles (in total USD 24 billion until 2028/30). At the same time, the market for purely battery-powered electric cars in Brazil remains a niche market, especially for premium models.

Even a car manufacturer from China, where the government decided around ten years ago that the automotive industry should focus on electric models, has opted for hybrids in Brazil. Great Wall Motors (GWM) will initially only produce plug-in hybrid SUVs at its local production plant, which is due to open in the second half of the year.

The company is investing USD 0.8 billion to adapt a former Mercedes-Benz plant in Iracemápolis (SP) to its needs. There are probably no plans to produce 100% electric vehicles in Brazil just yet.

Future prospects

With its pioneering role in the use of renewable energies and the development of innovative automotive technologies, Brazil is setting standards for a sustainable future. The strategic investments and programs such as Mover show that Brazil is determined to achieve its decarbonization goals while promoting economic growth and job creation.

These developments underline Brazil's importance as an international role model in the field of clean energy and sustainable mobility.

The beginning of a future that was written almost half a century ago now demonstrates the importance of continued innovation and adaptation to successfully meet the global challenges of climate change.

The Race

The definition of flex-fuel hybrid models has triggered industry investment of around USD 24 billion.

Strategic

According to experts, the use of ethanol will help the country achieve its decarbonization of mobility sector target of min. 50% by 2030.

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impressive story from the industry newsroom with high transformational potential

mining, Chile

Exciting Developments in Chile's Lithium Industry: ENAMI's New Partnerships

Preface

Chile's lithium sector is buzzing with activity as 18 companies express interest in partnering with the state-owned Empresa Nacional de Minería (ENAMI) to extract lithium in the Atacama Region. This move aligns with Chile's new LithiumPolicy, aimed at boosting the nation's role in the global lithium market. Iván Mlynarz, ENAMI's executive vice-president, shared this development but kept the identities of these interested parties under wraps due to confidentiality agreements.

A Race to Extract Lithium

Among the potential partners, French company Eramet recently made headlines by announcing its ambitious plans. If Eramet wins the tender, it intends to invest a substantial US$1 billion and create 1,800 jobs, spanning both construction and operational phases. This announcement marks the beginning of an exciting race to harness the Atacama Region's rich lithium resources.

The National Lithium Strategy in Action

The management emphasized the proactive steps being taken in the commune of Diego de Almagro, showcasing the effectiveness of the National Lithium Strategy. The campaign that the national company is carrying out today in Atacama demonstrates that the National Lithium Strategy is working. ENAMI is investing, and the national company is accelerating as much as possible to have a project that will benefit ENAMI, Atacama, and all Chileans.

Competitive Edge Over Argentina

Highlighting Chile's competitive advantages, the management noted that the cost projections for the Atacama projects are lower than those of current projects in Argentina. ENAMI would be in some way competing in volumes with any of the projects that are currently being activated in the neighboring country. This positions Chile favorably in the regional and global lithium markets.

Conclusion

As Chile forges ahead with its National Lithium Strategy, the potential partnerships between ENAMI and various global entities signal a promising future for the nation's lithium industry. These developments not only aim to bolster Chile's economy but also to strengthen its standing in the ever-growing global lithium market. With significant investments and job creation on the horizon, the Atacama Region is set to become a pivotal player in the lithium sector, benefiting both the local community and the broader Chilean economy.

foot note

In 2022/23, we carried out projects as iMB in the Lithium Triangle region of South America. Our founding partner Frank P. Neuhaus studied in Chile and also worked in a copper mining consortium. From this time, as well as from the time of the project missions in 2022/23, we at iMB have a solid network, especially in Chile. If you are interested in the region and the specific sector, we can arrange a non-binding orientation meeting. Please use the following link:

https://www.imb.solutions/contact-hub


the LatAm story - creating a high impact scenario

Exploring New Horizons: Strategic Site Selection in Mexico - and then we no longer call it nearshoring!

Preface

Mexico is poised for growth through near shoring?

With shifts in global supply chains and ongoing political tensions between the U.S. and China, Mexico has benefited from near shoring and re-shoring efforts by manufacturers in recent years. Near shoring is the relocation of production and manufacturing operations from one country to another that is closer to the final consumer, in this case the United States.

Mexico attracted more than USD 141 billion in foreign direct investment (FDI) announcements during 2023, according to the Mexican government. More than 40% of the FDI investments ($56 billion) originated from U.S.-based companies opening facilities in Mexico.

“From January through December, the private sector made almost 400 investment announcements in our country, creating near to 250,00 new jobs, 42% of which are associated with the automotive industry,” Mexico’s Ministry of Economy posted on differnet social media outlets.?

Mexico offers transportation options that are shorter and less expensive than those from Asia, a lower-cost labor force and a country causing fewer trade concerns compared to China.?

While nearshoring in Mexico is starting to become a reality on a large scale, the country faces fierce competition for foreign manufacturing investments from countries such as India, Vietnam, Thailand and Malaysia. China will also continue to fiercely fight for its share of the global market.

Getting operational

When considering new locations within Mexico, careful planning is paramount. Choosing the most appropriate site involves a multifaceted approach, where securing a stable supply of electricity and water is vital. Additionally, assessing the quality of logistics infrastructure is crucial to ensure seamless operations. Given the pressure on some existing industrial hubs, it may be beneficial to explore alternative locations that offer untapped potential.

Prioritizing End-to-End Planning

Effective supply chain management is essential for operational efficiency. In light of possible constraints around the supply of components or the availability of freight, identifying pinch points is critical. Managing these constraints through strategic partnerships and capacity contracting can help mitigate disruptions. Opting for smart shipping solutions to optimize delivery routes is particularly useful for transporting large goods such as cars and commercial vehicles.

Nurturing Talent for Sustainable Growth

Securing the right talent is a significant challenge, especially for smaller and midsize companies. While major industrial hubs can attract skilled workers, these smaller entities often struggle, impacting the supply chain of larger firms. Implementing reskilling and upskilling programs is vital to bridge this gap. Companies should consider partnering with universities or colleges to ensure that graduates possess the necessary skills to transition smoothly into the workforce.

Navigating the Business Environment

Understanding and navigating the complex political and economic landscape in Mexico requires local expertise. Dealing with various levels of authorities can be convoluted, and navigating laws related to finance and tax can be challenging. Additionally, safety and security issues can vary significantly by state. To manage these complexities, companies should seek local knowledge partners and consider outsourcing legal and/or compliance work to specialists.

Embracing a Long-Term Perspective

Many of the aforementioned challenges require time and investment to address. Relocating production facilities is a long-term commitment that comes with initial hurdles. However, the cost advantage of operating in Mexico is likely to remain favorable in the foreseeable future. Companies should be prepared for some initial challenges but remain optimistic about the long-term benefits.

iMB Ltda’s Strategic Approach

At iMB Ltda, our approach transcends the buzzwords of near shoring or friend shoring.

“At our core, it's all about strategic precision: choosing the perfect product for the perfect location while proactively navigating potential challenges. We call this smart approach "best shoring.", says Frank (co-founder of iMB.Solutions).

This philosophy underscores the importance of thoughtful site selection, meticulous planning, and strategic foresight in achieving sustainable growth and operational excellence.

By embracing these strategies, businesses can navigate the complexities of expanding operations in Mexico, ensuring a stable, efficient, and prosperous future.

Blog: Business Case

Discover the strategic advantages of opening production facilities in Brazil and Mexico. Learn how these locations offer economic potential, cost efficiency, supply chain resilience, and sustainable development opportunities in the evolving global landscape. Explore a European mechanical engineering company's successful expansion case study.

Read blogs


short cuts from industries

venture capital/start-ups, Latin America

VC in Latin America is up & burning

Venture capital companies focused on start-ups invested a total of USD 357 million in Latin America in April 2024 alone. Compared to the same period in 2023, this represents growth of +83%. Of this investment amount, USD 175 million was invested in Brazilian startups, which represents an increase of +70% compared to the previous year 2023.


e-commerce, Uruguay

Mercado Libre's Bold $4.6 Billion Investment in Brazil: A Game-Changer for E-Commerce

Argentine company Mercado Libre , the Uruguay-based e-commerce titan, has announced an ambitious investment of USD 4.6 billion in Brazil's e-commerce market for 2024. This record-breaking investment reflects the company's confidence in Brazil's booming digital economy and underscores its commitment to expanding its footprint in Latin America.

A Significant Increase in Investment

Mercado Libre's planned investment for 2024 marks a 21.1% increase from its 2023 investments in Brazil. This substantial boost in funding will facilitate the opening of new distribution centers across the country, enhancing the company's logistical capabilities and customer reach. With this move, Mercado Libre aims to solidify its position as the leading e-commerce platform in Latin America.

Brazil: A Key Market for Mercado Libre

Brazil plays a crucial role in Mercado Libre's success, contributing to more than half of the company's revenue. Alongside other rapidly growing markets like Mexico and Colombia, Brazil has shown remarkable resilience and growth, especially since the onset of the coronavirus pandemic. This growth trajectory contrasts with the slowdown in e-commerce expenditure observed in Europe, highlighting the potential and dynamism of the Latin American market.

Expanding Presence and Enhancing Services

The new investment will not only expand Mercado Libre's physical presence through additional distribution centers but also improve service efficiency and delivery times. By bolstering its infrastructure, Mercado Libre can better meet the increasing demand from Brazilian consumers, providing a more seamless and satisfying shopping experience.

A Bright Future for E-Commerce in Latin America

Mercado Libre's significant financial commitment to Brazil is a testament to the thriving e-commerce landscape in Latin America. As the company continues to invest in and adapt to the unique needs of this market, it demonstrates that the e-commerce model remains robust and promising in regions outside of Europe and North America.

Conclusion

Mercado Libre's $4.6 billion investment in Brazil for 2024 is set to reshape the e-commerce landscape in the region. By increasing its annual investments and expanding its distribution network, the company is poised to enhance its market dominance and continue its growth trajectory. This strategic move not only reinforces Mercado Libre's leadership in Latin America but also highlights the immense potential of the Brazilian e-commerce market.


steel industry, Mexico

Gerdau invests in Mexico

As a result of the impressive growth figures in the automotive industry in Mexico, the Brazilian steel group Gerdau has started to prepare a feasibility study for the production of special steels. An annual production of 600,000 tons of steel is assumed. The investment sum will be between USD 500-600 million. Gerdau already has three different local business units in Mexico. The final decision will be made in the last quarter of 2024 and construction could start in 2025, with operations scheduled to begin 2.5 years later.

Mexico currently has to import around 70% of these special steels. Gerdau also exports to Mexico from its operations in the USA and Brazil. Due to the high investments of the automotive industry in Mexico, local production is necessary. With this step, Gerdau is also manifesting its presence in the USMCA region.

Mexico is already the third largest producer of automotive parts in the world and the main exporter to the USA. In 2025, Mexico will produce at least 4 million vehicles.


industrial machinery, Brazil

Accelerated Depreciation Law

In Brazil, a law to modernize the industrial park has come into force: the accelerated depreciation law. From now until the end of 2025, companies will receive tax benefits for the purchase of new machinery and equipment. According to the Brazilian Confederation of Industry (Confedera??o Nacional da Indústria - CNI), the equipment in the industrial park is on average 14 years old and almost 40% of it needs to be replaced. This is an excellent business opportunity for both national and multinational companies operating in Brazil, as well as for suppliers of industrial machinery.


ups & downs

According to various Brazilian industry associations, the number of companies that have removed products from their product portfolios has increased by around +20% over the past 12 months. This trend can be observed particularly in small and medium-sized companies.

The Brazilian stock exchange B3, known as BOVESPA, recorded growth in private investors and investors for the eighth consecutive month in March 2024. A total of 19.4 million private investors are currently registered on B3, which represents a growth of +2% compared to the previous period. Of these, a total of 26.3% are invested in equities and 73.7% in fixed income securities. The number of private investors represents a new national record.

E-commerce continues to grow in Brazil and currently represents 10% of total retail trade. In 2023, the share of digital sales channels in Brazil grew by +3% compared to 2022. In total, 68% of Brazil's entire population currently shops in electronic channels at least once a month.

Exports from Brazil to the European Union increased by +46% in April 2024 compared to the same month of the previous year. The main products were coffee and soy. The comparison with the USA shows growth of +22% and in the case of China +14%. Exports to other Latin American countries increased by +13%. Argentina is an exception. Exports to Brazil's most important trading partner on the continent slumped by -34%.

The heated Brazilian labor market is taking its toll according to the law of supply and demand. Compared to the first trimester of 2023, voluntary redundancies increased by almost +11%. The most highly educated professionals represent around 80% of this wave. The main reasons given were better growth prospects, better salaries and more extensive benefits. Brazilian companies increased their search for managers and directors by +77%. The most active sectors are finance, mining, agriculture, retail and consumer goods. Overall, the supply of formal jobs grew by +34% compared to the 2023 period.

The confidence index of Brazilian companies rose again in the period April-May 2024 by 0.2 points to 95.8. This is the highest value since October 2022. The manufacturing and construction sectors are proving very resilient and remain at around 100 points. On the other hand, the service sector and retail are showing a slowdown in activity.

French President Macron's visit in March 2024 is having astonishing effects. With a view to the COP-30 conference in 2025 in the city of Belém do Pará, the development bank Banco da Amaz?nia has received offers for projects in unprecedented amounts. An agreement for around USD 80 million was signed during Macron's visit; a further agreement for USD 100 million is expected shortly. Further negotiations with the World Bank, the BID, the German KfW and the European development bank BEI are in the pipeline. The development bank Banco da Amaz?nia plans to use the massive capital increase to issue shares and massively strengthen the Basel III rules in order to increase its capacity to grant local credit lines.

M&A projects in Brazil fell by -22% in 2023. A total of 376 transactions with a volume of USD 8.07 were carried out. The two largest transactions took place in the electronic payment systems sector (Cielo) and the fashion industry (Soma/Arezzo). In total, 47% of all acquisitions were realized by foreign capital. In terms of capital, 58% of all acquisitions were made by foreign investors. In 2022, the share of foreign capital amounted to 29%.

Industrial production in the state of S?o Paulo fell by -0.4% in the period February/March 2024. This contraction represents the second continuous reduction, following a slump of -1.7% in December 2023 and -0.2% in February 2024. An increase of +1% was recorded from December 2023 to January 2024.

Brazil will probably end the third year in a row without an IPO. The last IPO of a Brazilian company took place in December 2021 and was carried out by the online bank Nubank. However, the main listing took place on NASDAQ in New York and only as a secondary listing (dual listing) in S?o Paulo on B3. The main reason cited is the uncertainty on the US interest rate front. From a Brazilian perspective, the end of interest rate cuts is not helpful for IPOs either.


iMB news & publishing

What has been important during the past month?

Due to the increasing demand for project missions in Brazil and Mexico, as well as some other Latin American markets, such as the Lithium Triangle of South America, we are looking for new interim managers in the region. These independent professionals should also be interested and motivated to write monthly blog posts from their regions and markets, which will then be published regularly via the GreyRhino newsletter social media outlet .

If you are interested, please contact iMB via the following link:

Debido a la creciente demanda de misiones de proyectos en Brasil y México, así como en algunos otros mercados latinoamericanos, como el Triángulo del Litio de Sudamérica, estamos buscando nuevos gestores interinos en la región. Estos profesionales independientes también deben estar interesados y motivados para escribir artículos mensuales en el blog de sus regiones y mercados, que luego se publicarán regularmente a través de los medios de comunicación social del boletín GreyRhino .

Si está interesado, póngase en contacto con iMB a través del siguiente enlace:


Blog Publishing May 2024

Navigating Bolivia′s Path in 2024: Challenges, Prospects and Lithium Dreams

Bolivia's journey in 2024 is a tale of complexity, blending progress with persistent challenges. From political interferences to environmental concerns, the nation stands at a critical juncture. However, amidst these hurdles, Bolivia's lithium industry shines as a beacon of hope.

Join us in exploring Bolivia's current landscape and the promising prospects of its burgeoning lithium sector. Despite political and environmental challenges, partnerships with Chinese firms signal renewed opportunities for economic growth.

As Bolivia navigates this delicate balance, its relationship with the European Union offers additional avenues for progress.

Read Blog

The Argentinian Drama Continues - Is There a Loophole?

Dive into the tumultuous history of Argentina's sovereign debt crisis, from its staggering $100 billion default in 2002 to the ongoing economic challenges under President Javier Milei. Explore the legal battles, economic reforms, and social impacts shaping Argentina's future.

This blog provides an in-depth analysis of Argentina's sovereign debt crisis, highlighting the $100 billion default in 2002 and subsequent legal and economic turmoil, reaching more than USD 370 billion as today. It examines the role of key figures like Jorge Bergoglio (now Pope Francis) and institutions such as Elliott Management in shaping the narrative. The blog also covers President Javier Milei's controversial economic reforms, their social implications, and the ongoing challenges of hyperinflation and poverty. Key takeaways include lessons from Argentina's fiscal missteps, the impact of legal decisions on sovereign debt restructuring, and potential paths forward for the beleaguered nation.

The end-game question is actually: is Argentina on its way out of the crisis that has lasted for decades, or is a new default being prepared?

get out


In the first quarter of 2024, the photo exhibition “água Pantanal Fogo” took place at the Instituto Tomie Ohtake , S?o Paulo, Brazil.

At the beginning of October 2020, a large part of this wetland was suddenly engulfed in flames. The fire spread at breakneck speed and attracted global attention. Various Brazilian photographers documented this biblical environmental disaster.

Below is a small portfolio of this unimaginable destruction of nature and agricultural land. At this point, there should be no weighing up of guilt - the visual representations speak their own loud and clear language.

Probably the most shocking photo shows a completely carbonized monkey in a crouched or crawling position.


contact

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UnitedInterim - seit 2017 - The Place to be in Interim Management

Für die deutsch-sprachigen Leser des Newsletters wird auch die offene Plattform UnitedInterim empfohlen. Hier kann der interessierte Leser ohne Nebenkosten Interim Manager und unabh?ngige Berater mit unterschiedlichsten Profilen finden. Der Autor des Newsletters GreyRhino newsletter, Frank P. Neuhaus, ist ebenfalls auf der Plattform gelistet. Neben erg?nzendem Informationen zum Profil, sind auch zahlreiche

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Link: https://www.unitedinterim.com/interim-manager/Brasilien-Deutschland-Restrukturierung-Mergers



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