São Paulo: Day 1 - Full Day Business Visits

Trip Start Jun 01, 2013
1
4
13
Trip End Jun 12, 2013


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Where I stayed

Flag of Brazil  , State of Sao Paulo,
Monday, June 3, 2013

Itinerary

6:00AM Breakfast at hotel, Restaurant Amaranto
8:00AM Depart Hotel

9:00A-10:30P: Itau http://www.itau.com/
Speaker: Gustavo Rodrigues
Topic: Overview of Banking in Brazil: Challenges, Opportunities, Barriers to Entry, Socio-economic characteristics

12:00PM Lunch at Congonhas Prime restaurant

3:00P-5:00P: Natura http://www.natura.net/br/index.html
Speaker: Jimena Berlanga
Topic: Site Visit to Factory, distribution center, vertical factory and service lane

6:00PM Return to hotel
Dinner on own

We met downstairs in the hotel after a quick breakfast and some coffee for our first day of business visits, and were met by Fernando and our bus, from where we were driven to the Itau bank building in downtown São Paulo. The building was very modern with abstract art and water features in the lobby. We went upstairs, where we were greeted in a boardroom by our speaker, Gustavo Rodrigues. They offered us some Brazilian coffee "shots" which as American's we were not used to (No Grande, Venti or Big Gulps here!), but it quickly became my favorite. They would normally offer us two flasks of coffee, one sweetened and one non-sweetened, but no milk. I'm very used to drinking milk in my coffee because of the bitterness of American coffee, but after trying Brazilian coffee I can definitely say I have a new favorite. It's very smooth and easy to drink, and even if you order it in a restaurant as Cafe com Leite (Coffee with Milk), it's quite delicious.

Gustavo proceeded to give us a presentation about Itau Bank and an overview of the banking system in Brazil. There are 6 large banks in Brazil, 3 of which are government owned, and 3 which are privately owned. Itau is the largest Brazilian bank by market capitalization. The Government owned banks focus on granting credit to the low income community as well as funding start-up businesses, while the focus of private banks is more on the middle class, mortgages and vehicle loans.

Brazil went through a long period of astronomical inflation (hyperinflation) in the '80's and '90's (up to 728% per year) before stabilizing around 1995 with the introduction of former president Lula da Silva's Plano Real. The Plano Real (or Real Plan) intended to stabilize the domestic currency in nominal terms after a string of failed plans to control inflation. It created the Unidade Real de Valor (Unit of Real Value), which served as a key step to the implementation of the current currency, the Real. After the introduction of the Plano Real, the inflation rate in Brazil stabilized at around 7% between 1995 and 2012. In order to grow the economy through consumption, the government also cut interest rates to promote spending at private banks. This however resulted in higher delinquency rates, so banks needed to be more conservative in their lending practices. Mortgages are still in their infancy in Brazil, about 7% of the overall GDP, compared to 78% of GDP in established markets like the USA. Inflation for 2013 is currently at 6.7%, and growing due to increased demand for products and services. Brazil also has a very low unemployment rate compared to the USA, at around 5.4%.

As a larger percentage of the population is emerging from low income to the middle-class, they are opting to get loans to buy cars, appliances, etc. Until 2005, banks were not able to repossess items due to delinquencies, as the repossession process was very long, and could take 7-8 years to complete. Today, due to streamlining of this process and the ability to repossess, delinquency rates in Brazil are much lower. The average mortgages in Brazil are 30 year mortgages, however most people try to pay them early, at an average of 20 years up to a minimum of 8 years. Like in the USA, the Brazilian dream is to own a home. Down payments are much higher than in the USA, with a minimum down payment being 20%, and the normal being around 60%. Interest rates are also much higher, around 11%.

Itau has become the 15th largest bank in the world, however it is still mostly family-owned. They have strong brand recognition, and are seen as a premium bank in Brazil with a large Latin America footprint. They are focusing a lot of their investment in technology, such as augmented reality (the ability to use a mobile phone camera to find a branch), mobile I-tokens, Internet banking, mobile applications, on-line brokers, and mobile payments. Branches are becoming less required, however culturally many people still prefer banking in branches as much of the population has limited access to the Internet. Itau also prides themselves on being the most sustainable bank in the Americas, with paperless initiatives, on-line education, calculators for products and advice, sustainability of clients, and environmental impact evaluations.

After the presentation we headed downstairs to their employee recreation area. They have an outside area where employees can go to relax, get some coffee from the coffee shop, and just get some fresh air. To me it resembled a Zen garden type place, and even had swings. We boarded the bus to head off to lunch.

Along the way we passed the Congonhas airport, which is one of the busiest airports in Brazil due to it's unique location right next to the downtown area. It was also the scene of a large airplane disaster in 2007. While attempting to land, an Airbus A320 jet skidded off the runway and into a building across the street killing 200 people. The site were the building has now become a memorial and a reminder to everyone of the accident, however the airport is still in daily use, and has been nicknamed "The Aircraft Carrier" due to the relatively short runway. There are three airports in São Paulo, the São Paulo international airport, the Congonhas airport, and a third airport which is exclusively used for corporate jets and helicopters.

One of the things I noticed along the way where the number of small cars and hatchbacks, that were on the roads. I asked Fernando about this, and he told me that the high gasoline prices in Brazil have forced everyone to buy smaller cars. All new cars in Brazil also need to have "Flex Fuel" engines, which means that they can run on either pure gasoline, a combination of gasoline and ethanol, or on ethanol alone. All gas stations in Brazil sell gasoline and ethanol, and it is up to the consumer to decide which they would prefer to pump. As ethanol is only about 70% as efficient as gasoline, the decision is made on price, and there are even mobile apps for phones that help consumers decide what the best deal is. The other thing I noticed was the amount of security gates, barbwire fences, electrified fences, and security cameras on all the buildings and houses. It reminded me of driving through areas of Johannesburg or Cape Town in South Africa. We had been warned numerous times that São Paulo is not a safe city, and it showed in the amount of security that was present.

As we were little early and had about an hour to spend, we stopped at one of the shopping malls in São Paulo. What struck me here was that everything was priced with installment prices. I asked Fernando about this and he explained that all Brazilians by large ticket items on installment plans, as this was the only way that they could afford it. Clothes and shoes are very expensive in Brazil, and many Brazilians will actually plan shopping trips to the USA when buying large amounts of clothes as it would be cheaper for them to fly to Miami and back for shopping sprees.

We then arrived at our lunch restaurant, Congonhas Prime, for yet another to Churrasco experience. At this point everyone was starting to crave some fish, just for a change. Brazilians are a large meat eating people, and while I love meat, too much of a good thing can become a little overwhelming.

After lunch we headed out of town, and arrived at our next business visit, Natura Cosmetics. Natura has a direct selling business model utilizing door to door sales consultants, and can be compared very closely to Avon or Mary Kay in the USA. We were met by our guide, Henrique, at the Natura training center. The entire plant is architecturally stunning and built of concrete and glass, and utilizes natural light and cooling as much as possible to reduce their energy consumption. One of the walls of the training center has been dedicated to what they called their "Wall of Fame", and any consultant who has sold their cosmetics for more than 15 years gets the opportunity to place their name on a disk on the wall of fame.

From there, Henrique took us on a tour of three of the factories, one being lipstick production, one being fragrances, and the other being creams. We also get got a high-up view of the packing production floor, as well as some of the automated filling and robotic packing lines. The most impressive thing I saw at the factory was their fully automated raw material storage tower. It was about as long as a football field, and had four robots that manned it in complete darkness. It had the capability of storing 52,000 pallets, and was fully computerized. When materials were received from suppliers. They were placed on little unmanned automated carts that would drive down to the storage tower. Once there, one of the robots would pick up the raw material pallet, and move it to an available location. Once there the robot would make note of the bin or location number, and move onto the next receipt. When material is required for production, their system sends a message to the storage tower, requesting the products required. The robots would then retrieve the pallets from their locations, and drop them on the little automated carts, which would then drive off and deliver the product to the correct production location.  From there we moved onto the automated picking and shipping order fulfillment lines, where bar-coded boxes on conveyors would alert packers of what needed to be sent to fulfill an order. The entire process worked very seamlessly, and it is evident that a large number of orders can't be fulfilled pretty easily. Natura is currently also in the process of building a new plant to expand their operations, and the new plant would be three times the size of the existing plant. They do not have any plans to close the current plant, as the new plant would purely be for added capacity.

The next stop was at the Natura employee center. Natura is definitely a company that takes care of their staff, as their employee center consisted of day care centers, cafeterias, libraries, football fields, gyms, a spa and a company store. Standard maternity leave in Brazil is six months, however Natura provides free daycare to children of employees from the age of six months up to three years. We then visited the Natura employee store where we were able to sample all of the products that they manufacture, however product sales were limited to employees only, so we were not able to purchase any. We then met with Jimena Berlanga, who gave us an overview of the sustainability projects that Natura has in place, as well as answered all of the questions that we had regarding the company and the products.

From there we headed back to São Paulo, and got stuck in the infamous São Paulo traffic. As we had dinner on our own that night, a bunch of us went to a local restaurant called Spot (after getting lost trying to find it - thank you Google Maps for finding our way back), where we indulged in Caipirinhas (the local Brazilian drink) and meals that did not consist of huge chunks of meat. Due to local recommendations, I ordered a pasta dish with melon and prosciutto (yes I know it sounds disgusting) but it was incredibly tasty, and one of the best meals I had while in Brazil. The restaurant was surrounded by high-rise buildings, and it's easy to see why they call São Paulo the New York City of the Southern hemisphere. After dinner we headed back to the hotel, to get some sleep before our very early start the next day.
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