Espírito Santo: “A Land of Investment Opportunities”, says Lucas Izoton

Interview with Lucas Izoton, President of Izoton Group

Tell us a bit about Espirito Santo?

Espirito Santo is a small state in terms of Brazil but extremely strategic. Why? Because we are located at the entrance of the entire central western region and also within a radius of 1,000 kms, meaning one hour by plane, we are within reach of 70% of our GDP and Brazilian consumers and the trend for Brazil is to become the 5th largest world power within a few years. I see a promising future for Espirito Santo, because over the past few years it has grown well above the Brazilian average, or rather we have a port, with the Atlantic Ocean lapping our shores, I would say that we are the state with the highest percentage of economic globalization because close to 50% of our GDP is based on international trade, imports and exports, meaning that even though within Brazil this is only 20%, we are at the same level as a developed country when we look at our international trade in relation to the GDP.

You´ve spoken about some of the advantages but what are some of the challenges you are facing? When you think about the states within Brazil, it´s not the first one that comes to mind. Would it be that the image of Espirito Santo is fairly low?

Espirito Santo is the same size as Rio de Janeiro but it has a much lower population. Why? Because during the Portuguese colonisation, Espirito Santo served as a natural protection for Minas Gerais which held the riches in terms of gold, silver and diamonds and so, even though Brazil is 500 years old, I consider that Espirito Santo is only 50 years old, it´s a “country”. I say this because if you looked at it as though it was a country it would be an extremely new country being only 50 years old, as it was only when it started industrializing that it came into play, because it was hidden for 300 years, then spent 150 years involved in the monoculture of coffee production and it´s only now that it has started industrializing, meaning that Espirito Santo is something new, it has 415 kms of beautiful beaches, in just one hour by car you leave the sea behind and are in the mountains, it has various exports, it´s the world´s major exporter of pulp (cellulose), and of eucalyptus, it is an international port for iron ore, it has the largest reserve of rock salt in Latin America, it has the largest reserve and production of marble and granite in Latin America, we´re a large steel producer, meaning Espirito Santo has a series of advantages as well as having the port infrastructure, road and rail access that allows us to distribute products throughout the whole of Brazil, this is exactly what we have to take into account, we are going through a transition and over the next few years our infrastructure is going to be improved even more.

Talking about this precisely, what things really have to be overhauled in order for foreign investment and foreign know-how to start arriving in Espirito Santo? What changes need to be made in the infrastructure?

PPPs (public-private partnerships) would be extremely welcome in Espirito Santo. I see a series of opportunities for foreign companies to create alliances with companies in Espirito Santo or Brazilian companies, or for us to undertake joint ventures: airport operations is one, we´ll need to have two airports, the one that´s under construction and then a freight airport, we are privatizing 2 highways: the BR-101 which runs from North to South, and then the 262 which goes in the direction East to West, these two highways have to be privatised, increased twofold, and there´s an excellent opportunity for return on investment for the companies. We have the issue of railways, because Brazil is lacking in railways, as whereas in developed countries 40% is transported by rail only 20% is here in Brazil. So it´s an opportunity, it´s a weak point right now that could be transformed into a huge business opportunity. And we could say that Espirito Santo has had a commercial trade culture since the beginning of its colonisation. For example, 65% of people from Espirito Santo are Italian descendents, 7% are German descendents, and there´s the Portuguese colonisation, plus some people came from Spain and Switzerland. If I take myself for example, I´m four-eighths Italian, two-eighths Portuguese, one eighth Dutch and one eighth African. I have dual-citizenship: Italian-Brazilian, so the majority of people from Espirito Santo are made up in this way, so many people have dual citizenship or are mixed race, because we´re a state that a century and a half ago started to become colonized by Europeans, so the majority of people have international trade and entrepreneurship in their blood. I would say that any foreign investment would be highly regarded, welcome and would receive help from government bodies.

You are also an entrepreneur in various sectors. Tell us about real estate, the niche of resorts in Brazil.

Brazil needs to attract more foreign tourists, for example between 5 and 6 million people visit Brazil every year. When we look at a country like Portugal where 13 to 15 million people go every year, or countries like Spain and France with 70 million visitors, we´re in the Southern Hemisphere which has some limitations instead of being in the Northern Hemisphere, but now we´ve got events like the World Cup and the Olympics where it´s been proven that all countries that have hosted a World Cup or Olympics have shown staggering growth in international tourism. What will happen in terms of this? Partnerships in resorts or hotels – whether at the beach or in the mountains – should be increased, because in Espirito Santo itself you can have 30 degrees at the beach and you travel one hour by car and at night you´re sitting there having a glass of wine with a temperature of 12 to 15 degrees and that´s just one hour by car, meaning we have these differences, this diversity that can attract people and we have space to have resorts, not only beach resorts or harbour resorts but taking advantage of our biodiversity there´s a great opportunity for mountain resorts too. We have the greatest diversity of orchids in Brazil, we have international standard rocky mountain ranges, so even though Espirito Santo is small it has a lot of great things concentrated in it: be it natural riches or the potential which has only flowered within the last 50 years.

In terms of fashion and retail for foreign investors, what retail opportunities are there?

Retail in Brazil is really growing, much more than the GDP itself because we´re seeing the inclusion of the middle class in Brazil. I´ll give you an example: 20 years ago we didn´t even have a shopping centre in greater Vitoria, 19 years ago the first one was inaugurated, 10 years passed by and we had just this one shopping centre, then the second one was inaugurated, ten years went past, now we´ve inaugurated the third one, in the next 5 years, 6 more shopping centres should be inaugurated, so it´s moving at a high speed.

Espirito Santo is growing in a very fast way, as is Brazil, but even more quickly than the Brazilian average. Last year when Brazil grew 7.5%, Espirito Santo grew 12 to 13%, at the beginning of this year Espirito Santo grew 3 to 4 times more than Brazil, meaning we´re making up for lost time for our state to become a well-known state in the future, not only on a national level but internationally because the majority of Brazilian companies with international interests are here. As it is the case with Petrobras, Vale, Samarco, Fibria, but we have great opportunities to grow in terms of shipping, in the petro-chemical market and in civil construction, ornamental rocks and furniture. Espirito Santo is just coming onto the market not just in terms of Brazil but world-wide and the prospects are good.

Where would you ideally like to see the state of Espirito Santo in 2-3 years?

In 2-3 years I see Espirito Santo with challenges but better off than it is today, I see it having better infrastructure, we will have privatized the highway BR-101, with the widening of several stretches underway, the same thing with the B-262, the new airport will probably be ready and the construction of the freight airport will have begun, meaning we´ll have an industry with higher added value.

We will also have attracted several companies to our state, I would say that some medium and large-sized international companies will start operations in Espirito Santo, because we have incentives that attract these investors: we have a well-trained manual workforce, professional training which is fundamental, we have natural beauties which attract executives, there is financing available to those who come, and operational advantages.

I´m very optimistic about Espirito Santo in relation to the overall context here in Brazil and even if Brazil doesn´t grow as much as China or India, it is without doubt growing much more than the average growth rate of the developed nations and Espirito Santo is going to grow more than Brazil. I see Espirito Santo experiencing growth similar to the growth they´ve had in Asia, I believe in Espirito Santo and I´m investing here, so it´s not only a dreamer´s vision, it´s a realist´s vision, because it´s one thing to say I believe but I´m developing all my businesses in this state, I´m doing this with words and actions.

Is there anything you´d like to add?

Our capital is Vitoria (Victory) and our state is Espirito Santo (Holy Spirit) so in an emotional way, they´re not just the names of a capital and a state, it´s practically a divine premonition and I would go even further, our flag says: Work and Trust. What does this mean? If we work as though everything depended on us and we trust as if everything depended on God we´ll definitely have a much better region with a much better quality of life and I would go as far as saying a city and a state that are great to visit, to live in, to invest in and to work in.