S'pore, Brazil have much to gain from each other: Minister

S'pore, Brazil have much to gain from each other: Minister

SINGAPORE - Singapore and Brazil may not often be seen as natural trading and investment partners because of the distance and cultural differences that separate them, but the unique importance of the countries to each other - especially in these times - cannot be underestimated, nor ignored.

Making the point is Singapore's Minister for Foreign Affairs and Law K Shanmugam, who has just returned from a trip to Brazil where he sought to deepen ties between the two economies.

The minister opened Singapore's first resident embassy in Latin America in Brazil's capital Brasilia - only one of two new embassies opened by Singapore in the last five years.

He met the country's senior government officials and signed a Memorandum of Understanding on bilateral political consultations with Brazil's Minister of External Relations Antonio Patriota.

"These initiatives, especially the opening of the embassy, are important signals of our long-term commitment to strengthening our bilateral relationship," Mr Shanmugam told The Business Times in an exclusive interview.

The benefits of closer economic cooperation between the two countries was one of the main pitches of the minister's visit.

"In particular, I explained the role Singapore can play as a gateway for Brazil to the dynamic region of South-east Asia and beyond. Most people in Latin America think of China when they think of Asia. Few realise that South-east Asia alone has a population larger than Latin America, and is growing at an equally fast pace. Singapore is also well linked up to China and India, as well as to Australia and New Zealand," he said.

The minister emphasised these points in a speech on the challenges and unexplored opportunities between Latin America and Asia at Brazil's premier business school Fundacao Getulio Vargas (FGV) in Sao Paulo. "After the speech, several companies got in touch with our economic agencies to explore setting up presences in Singapore," he said.

He could not reveal the names of these companies, but shared that they came from a range of sectors, including consumer products, IT and consulting services.

They would join the ranks of a number of Brazilian multinationals that already recognise the benefits of establishing a foothold here - the likes of energy giant Petrobras, diversified metals and mining corporation Vale, food company Brasil Foods or BRF, and aerospace conglomerate Embraer.

Ricardo Pesce, president of Embraer Asia Pacific, told BT that the company chose to set up in Singapore in 2000 "because of its central location to cover the region, including the Indian subcontinent, and its conducive environment for doing business and quality of life".

Mr Pesce added: "Since Embraer established its presence in Singapore, it has observed the number of large Brazilian companies that have established their regional bases here, (which) attests (to) this positive environment."

Conversely, Singapore companies also stand to gain a great deal from investing in Brazil and are much sought after by the country, Mr Shanmugam pointed out.

"Already, we are the fourth largest Asian investor in Brazil (after Japan, China and South Korea), with our total investment estimated conservatively at US$2 billion (S$2.5 billion)," the minister said.

Singapore companies employ over 10,000 people in Brazil.

Keppel Corp owns two shipyards in Brazil - in Angra dos Reis and Navegantes - with over 8,000 people; Jurong Shipyard and Sembcorp Marine are set to invest US$550 million in building a new shipyard in Espirito Santo; Jurong Consultants, a member of Jurong International, has signed a US$4.2 million contract with the Federal District of Brasilia for a masterplanning project in Brasilia; Temasek Holdings has an office in Sao Paulo; and Singapore Airlines choose Sao Paulo as its first South American destination for direct flights between Singapore and South America.

APL, MAC-NELS Lines, Olam International and Wilmar International have also established presences in Brazil.

Keppel Corp, which has been operating in Brazil for more than a decade, says Brazil "has articulated its vision to grow beyond energy self-sufficiency to eventually be a net energy exporter".

Keppel Offshore & Marine's chief operating officer Chow Yew Yuen remembers that the learning curve was steep, initially - especially when it came to dealing with Brazil's local unions and the complex Brazilian customs, tax system, laws and regulations.

"Besides focusing on productivity and timeliness, our ability to adapt to the industrial and cultural environment won us many friends. The Brazilians appreciate our willingness to transfer knowledge to Brazil and to adapt to local conditions. Most importantly, they recognise the value we bring to their country," Mr Chow said.

Despite the numerous projects Keppel has been involved in, in the past decade, the Brazilian demand for the conglomerate's expertise continues to grow.

In fact, the expertise and investment by Singapore companies are so sought after in Brazil that it even generated some controversy recently.

Mr Shanmugam remembers: "Around the time of my visit, several Brazilian media reports surfaced alleging attempts by the Brazilian Federal Government to persuade Sembcorp Marine to move its shipyard in the state of Espirito Santo to the state of Rio de Janeiro. This had sparked outrage on the part of the Espirito Santo Government who strongly valued our investments and the partnership they had developed with Sembcorp Marine.

"Sembcorp Marine had told me that they had made a carefully considered decision, based on their long-term interests, to locate the shipyard in Espirito Santo. As such, I was able to pass on Sembcorp Marine's position to Senator FerraƧo, who hails from Espirito Santo, that Sembcorp Marine was committed to its US$550 million project in Espirito Santo, and that the project was on track to be completed by end-2014," the minister explained.

Looking ahead, Mr Shanmugam hopes to further facilitate such bilateral investments by removing the remaining barriers to trade and investment.

"Brazil's blacklisting of Singapore as a low tax jurisdiction since 2002 prevents bilateral trade and investment from reaching its full potential," he said. "Through my meetings with my Brazilian interlocutors, I had strongly advocated Singapore's exemption, if not removal, from Brazil's blacklist, pointing out that Singapore's well-diversified economy is built on real business activities.

"I also expressed Singapore's interest to have an Avoidance of Double Taxation Agreement (DTA) with Brazil, which has been advocated by both Brazilian and Singapore companies. We could also consider a limited treaty in specific areas of interest if Brazil is not prepared to go for a full DTA," Mr Shanmugam said.

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