Invest in Espirito Santo: Exclusive Interview with Governor Renato Casagrande

Interview with Renato Casagrande, Governor of Espirito Santo

Can you tell us a bit about the state of Espirito Santo?

Compared to Brazil, Espirito Santo is a small state. We have only 0.54% of the national territory. We also have a small population, approximately 3,550,000 inhabitants and an area of 46,000 km2. What differentiates us is that we are close to the big guys, big in terms of territory and big in terms of population. Rio de Janeiro, for example, which is our southern neighbouring state, is a small state in terms of territory but very large in terms of population. Apart from Rio de Janeiro, we have Sao Paulo and Minas Gerais, here in the southeast region. So we are a state surrounded by very autonomous and powerful neighbours. We have a very strategic position, because Espirito Santo, geographically speaking, is centrally located within Brazil. We are in the middle of the Brazilian coastline, we have an extremely diverse cultural make up, we have a diversity of European origins, people who came here, colonized this state and are still present and preserving their cultures. I always say that we are Brazil´s meeting point. We practically have everything that the whole of Brazil has right here in Espirito Santo: whether in terms of resources, climate, culture, economics, etc. We have a huge economical, cultural and natural diversity in a tiny area.

Also, we have a great potential and, in recent years, we have grown well above the national average. Just to give you an example, in 2011, Espirito Santo grew 9.2% whereas Brazil grew 2.7%. If we look at 2010, Espirito Santo grew 12.5% and Brazil grew 7.5%, so we are always growing above the national average because here we also have a strong international trade culture, even though we don´t have a very strong public port system, but we have very efficient private ports, specialized in pulp (cellulose), in iron-ore, coal, etc.

What would be some of the state’s attractive points in terms of the economy?

An important attractive point is our location: we have all the large consumers close by. 1,000 kms from Espirito Santo’s center, we are within reach of more than 70% of the nation´s GDP. We are close to Rio de Janeiro, Belo Horizonte, Minas Gerais, Brasília, Sao Paulo and Salvador. We are at the boundary of the north-east with the south-east, so this location is extremely strategic for anyone wanting to distribute freight throughout Brazil and also for anyone wanting to distribute freight to the world.

As we also have half the territory included within the area of SUDENE (Superintendence for the Development of the Northeast), which receives incentives from the Federal Government, this ends up bringing entrepreneurs to the northern region of our state. So our location and this inclusion in SUDENE has attracted significant investments. Until 2016 we will get more than R$ 100 billions in private and public investment.

Secondly we have had the presence of international companies operating in this state for a long time. It’s the country’s most globalized state: almost 50% of the state’s GDP depends on international trade, so this culture of port operations and international trade is also an attraction that we have, because we are training professionals, we are gaining an important knowledge base so the companies in these areas can work here. In addition to this, we have a mechanism of development incentives from the state government that helps attract investors to this state.

What are the main sectors in which you have foreign companies with strong operations in Espirito Santo?

Firstly, we have the petroleum and gas sector. This is a sector that has really grown; we are now producing in terms of barrels the equivalent of close to four hundred thousand barrels of petroleum per day, more than three hundred thousand in petroleum (crude oil) and the rest in gas. So petroleum and gas is a strong activity in Espirito Santo, and is the main factor attracting foreign companies to our state. We are about to go to Singapore where we have just consolidated the sale of the shipyard Jurong that will be installed here in the municipality of Aracruz, in the central northern region of Espirito Santo. Jurong will work particularly to service the petroleum and gas sector. We’ve also been in Rotterdam, and the Rotterdam port is going to establish a partnership with local companies to build a port infrastructure looking to attract companies linked to the petroleum sector. Also, the American company Edson Schuester, from Louisiana will be installing a base for offshore service in the municipality of Itapemirim.

The steel industry is also a very strong economic activity that has historically been involved in the growth of Espirito Santo. Here, we have companies such as Vale, ArcelorMittal and Samarco, which are all big companies operating in this area, and anchors in the process of our development.

Other important sectors are mining, iron ore industry, ornamental rocks, marble and granite, clothing, furniture, cellulose, metal-mechanics, etc. We are diversified, our economy isn’t held up by one sole activity and we have formed a technological base of expertise in different regions of Espirito Santo.

What sectors do you want to push as a priority?

Our priority has been attracting investment for the petroleum and gas sector, because it is the sector that is being talked about the most at an international level. Wherever you go in Brazil or in the world, everyone wants to know about petroleum and gas. People want to know about these elements because this is an activity that hasn´t decreased throughout the world. Attracting companies so we can add value to the petroleum and gas industries is fundamental. We now have a chemical/gas hub that will add value to gas. Also, Petrobras is going to undertake a huge new development of more than 4 billion US dollars in the municipality of Linhares. We are adding value, producing other products, such as fertilizer. This is the priority because it is the greatest demand that we are getting but we are not going to become prisoners of this.

We are working with an incentive policy selling to assemblers taking advantage of the federal government´s policies. The federal government has established regulations so there is a barrier against vehicle imports, so they are incentivizing industries, assemblers to come here to Brazil. Right now, we are trying to attract vehicle assemblers. We will have the brand Marco Polo here in Sao Mateus. It is an important Brazilian company, present throughout the world. We are currently in talks with some Chinese and Korean assemblers who are looking at setting up here.

The other area in which we are targeting a lot of new enterprises is in the area of international trade. We will have private investments in the area of port operations and port developments. It is essential that we develop our ports, if we want to launch this state on the world scene. To increasingly open it up to the international market, the most important exit door is the sea, so we are organizing our port infrastructure which is strong in Espirito Santo due to our location. But we will not accept that a port specializes in just one product, this company or this group has to give the opportunity for other companies to set themselves up in this port infrastructure. In Linhares, funds originating from Canada, England and South Korea have come together and organized partnerships with local companies, and this type of activity is being incentivised in the state of Espirito Santo where we want to have a strong platform for international trade.

How are these companies who are coming together and forming partnerships with local companies being supported?

In the handling of the necessary procedures with the federal government, roads and transport depend on licensing from IBAMA (Brazilian Institute for the Environment and Renewable Natural Resources). Companis also depends on political cooperation with some companies that are already here, as it is the case in Rio Doce with Petrobras. In some cases, it depends on some types of incentives, so the government works on the process of cooperation and prospecting businesses for our state and provides organization to the activities along the coast. We don´t want our coast to be developed like a shanty town, in a disorganized way, we want leisure tourism and economic activity, so people can´t just occupy space and develop it the way they want to. This has to be organized by the state government where these companies can set up and work in blocks, nuclei and hubs of international trade, preserving a good part of our coast for natural resources and leisure tourism.

What about investment for other towns within the state?

This is our priority, that´s why a good part of the investment that I told you about is located in the state’s interior, outside of the metropolitan region. We still have a state with low population density. We are not going to grow much more in terms of population, so our area is small in comparison with the rest of Brazil but in comparison with the world, we are larger than Holland. What I´m saying is that even being small, we have the potential to grow when compared with the other Brazilian states.

What are the government’s greatest challenges that have to be met?

Firstly, national and international inclusion, recognition from the people here in Espirito Santo, because we are kind of overshadowed by the size of the states of Rio de Janeiro, Sao Paulo and Minas Gerais. So one challenge is getting ourselves included, even though we´re smaller, because being small is a lot easier outside of the southeast region than it is within it in terms of recognition, in terms of people´s knowledge. It´s a challenge that we´re overcoming with more aggressive national policies and also outside Brazil.

Another great challenge is investment in infrastructure and we are extremely keen to get things done, we are determined in the construction and implementation of development projects, but we are being slowed down by the time it takes for public investments in infrastructure to be made. Here in Espirito Santo, as in many other states, the ports, airports, roads and railroads are under federal government control, so the time it takes for these investments is one of the main challenges in order to sustain our growth. So if Brazil´s growth is currently limited due to a lack of investment in infrastructure this is extremely present in Espirito Santo because we have a very organized state government that has the capacity to get investments but we are not included at the base of this infrastructure which I´ve just mentioned. Until the government starts taking visible steps to resolve part of this problem, this is a huge challenge for us.

Can’t the state government do anything? Does the federal government have to take these steps?

These investments that I´ve just mentioned come under the responsibility of the federal government and the state government can´t do anything.

Can you attract investment?

We can attract investment but not in these areas, not for public ports, because here in Brazil we have private and public ports. We are attracting private investments, but it is the federal government who makes public investments. The federal government has not authorized Espirito Santo and does not have a policy of authorizing other states to invest in the area of port operations: our port is managed by INFRAERO which is the federal government, the BR-101 north, south and the BR-262 east, west are two federal highways. Now they are starting to allow partnerships because the BR-101 is under concession and the port may receive some kind of investment. Also, we have hopes that the airport may gain some momentum but this is a major challenge, our growth is limited due to a lack of infrastructure where we can gain greater inclusion.