New Study Ranks Brazil's Multinational Corporations

 

 

Table 1. FDC-CPII ranking of the top 20 Brazilian multinationals, in terms of foreign assets, 2006 (Millions of US$)
Rank	Name	Industry
1	Companhia Vale do Rio Doce (CVRD)	Mining & metals
2	Petrobras S.A. (Petroleo Brasileiro S.A.)	Oil & gas
3	Gerdau S.A.	Steel
4	EMBRAER - Empresa Brasileira de Aeronáutica S.A.	Aviation
5	Votorantim Participações S.A.	Diversified
6	Companhia Siderurgica Nacional (CSN)	Steel
7	Camargo Corrêa S.A.	Diversified
8	Odebrecht S.A.	Construction & petrochemicals
9	Aracruz Celulose	Pulp & paper
10	Weg S.A.	Electro-mechanical
11	Marcopolo S.A.	Transport
12	Andrade Gutierrez S.A.	Diversified
13	Tigre S.A. Tubos e Conexões	Construction
14	Usinas Siderúrgicas de Minas Gerais S.A.-Usiminas	Steel
15	Natura Cosméticos S.A.	Cosmetics
16	Itautec S.A.	IT
17	America Latina Logistica S.A.	Logistics
18	Ultrapar Participações S.A.	Diversified
19	Sabó Indústria e Comércio de Autopeças Ltda.	Automobile parts
20	Lupatech S.A.	Electro-mechanical
Total foreign assets of the Top 20: 56,426
Source: FDC-CPII survey of Brazilian multinationals.

 

Table 1[2] (and annex table 1) list the Top 20 in terms of foreign assets in 2006. Half of the Top 20 are headquartered in Sao Paulo state (annex figure 1). They are all privately held firms, except for Petrobras. CVRD and Petrobras, the top two (and both natural resource companies), together accounted for over two-thirds of the foreign assets of the Top 20; if the third ranking firm, Gerdau, is added, more than three-quarters of all the foreign assets of the Top 20 are accounted for. There are also many small firms that have investments abroad and are, in fact, quite multinational; they are listed, by way of example, in annex table 2. Of the 18 top multinationals that responded to this question,, only four began to establish foreign affiliates between 1990 and 1996, and an additional five since 1997 – in other words, they are young multinationals. 

 

Table 2. Snapshot of Brazil's 20 largest MNEs, 2004-2006
(Billions of US$ and no. of employees)
Variable				2004	2005	2006	% change (2005-6)
Assets
	Foreign			24	27	56	112
	Total			190	215	277	29
	Share of foreign in total (%)			13	12	20
Employment
	Foreign			32,645	41,284	77,058	87
	Total			312,306	330,689	405,817	23
	Share of foreign in total (%)			10	12	19
Sales (excluding exports)
	By foreign affiliates			23	26	30	14
	Total			148	167	190	14
	Share of foreign  affiliates in total (%)			15	16	16
Source: FDC-CPII survey of Brazilian multinationals.

 

 

 

As a percentage of total assets, the foreign assets of the Top 20 range from 1% to 46%, with only two having more than $10bn in foreign assets. For the group as a whole, foreign assets were 20% of total assets in 2006, compared to 12% in 2005 (this increase is mostly due to CVRD’s acquisition of Inco). This compares to 33% for the 100 largest multinationals from developing countries in 2005[3] – indicating that Brazilian multinationals still have a considerable way to go to catch up with the average of their (especially Asian) competitors. – indicating that Brazilian multinationals still have a considerable way to go to catch up with the average of their (especially Asian) competitors.

 

 

 

 

If the exports of the parent firms of the Top 20 (not including Petrobras and Natura, due to lack of data) are added to the production and sales of their foreign affiliates, the total is US$42bn, for a 44% ratio of international vs. total sales. This ratio is already in line with the data reported by UNCTAD for the largest 100 MNEs from developing countries (43%).

 

 

 

If one calculates the number of host countries in which a Brazilian multinational is located in a given region as a percentage of all host countries in which it is located (times 100), one arrives at the Regionality Index. It shows that about half of the Top 20 have most of their activities in Latin America, with a few giving special attention to Europe and Asia (annex table 3). In other words, in line with firms from other outward FDI countries, most Brazilian multinationals are regional firms.

The data on the Top 20 need to be seen in the context of Brazil's total inward and outward FDI flows. For the first time since official statistics have become available, outward flows in 2006 (US$28bn) were higher than inward flows (US$19bn) (annex figure 4), although this is not likely to become a pattern in the near future.[5] Still, both types of flows are forecasted to stay at relatively high levels.[6] This made Brazil the second most important outward investor among developing countries (after Hong Kong (China)) in terms of FDI outflows in 2006, and the top outward investor in Latin America. A good part of these flows took the form of mergers and acquisitions (M&As) (annex table 4), but greenfield investments were also quite important (annex table 5). Still, both types of flows are forecasted to stay at relatively high levels. This made Brazil the second most important outward investor among developing countries (after Hong Kong (China)) in terms of FDI outflows in 2006, and the top outward investor in Latin America. A good part of these flows took the form of mergers and acquisitions (M&As) (), but greenfield investments were also quite important ().

 

By the end of 2006, Brazil had accumulated an OFDI stock of US$108, making it the third largest outward investor among developing countries (after Hong Kong (China) and Singapore). According to Brazil’s Central Bank, in 2005 most of this investment was in financial services (49%), followed by professional services (36%) and petrochemicals and energy (4%)[7]. The lion’s share is located in Latin America and the Caribbean (56%), followed by Europe (36%) and North America (7%).. The lion’s share is located in Latin America and the Caribbean (56%), followed by Europe (36%) and North America (7%).

 

Brazil’s outward FDI is being undertaken by 885 multinationals[8] headquartered in Brazil, showing that, apart from the firms captured in the ranking, there are many small and medium-sized Brazilian firms that are beginning their efforts to become competitive in foreign markets. headquartered in Brazil, showing that, apart from the firms captured in the ranking, there are many small and medium-sized Brazilian firms that are beginning their efforts to become competitive in foreign markets.

 

The results of this survey will be analyzed during the international seminar “Consolidação Regional e Expansão Global das Empresas Multinacionais Latino-Americanas”, São Paulo (Hotel Transamérica), December 6-7, 2007. Researchers from the International Business Center (FDC) and the Columbia Program on International Investment responsible for the ranking, and executives from the ranked companies, will participate as panelists during the seminar. In a special roundtable, they will discuss the main issues and challenges related to the internationalization strategies of Brazilian MNEs. For more information, please contact [email protected].

 

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