Fecomercio MT: Investment Opportunities in Mato Grosso

Interview with Pedro Nadaf, President of Fecomercio Mato Grosso

Can you tell us what you think a foreign investor should know about the economy of Mato Grosso? Let’s also talk about the strengths of Mato Grosso, in terms of services and industry.

The activities in the service and commercial sectors in this state are very focused on the primary sector of the economy of Mato Grosso. The agro-industry has been and is currently, the primary force of our economy. The state has the largest cattle herd in the country, numbering approximately 29 million. Our agricultural production represents a significant part of the Brazil’s economy. Approximately 25% of the country’s agricultural production takes place here in Mato Grosso. 50% of Brazil’s cotton and 30% of Brazil’s soya is grown in Mato Grosso and we are the second largest producer of maize in Brazil. All of which goes through processes of industrialisation that transform these crops into proteins for animal feed that gives extra weight to our trade balance.

Mato Grosso today represents nearly 52% of exports from Central-West Brazil. We have a trade balance with exports this year expected to reach 12 billion dollars. Eight years ago the trade balance was 1.7 billion reals and this year we should reach 12 billion reals. Last year we represented 36% of the primary trade surplus for Brazil, i.e. of everything that was surplus between exports and imports in Brazil, 36% came from this state. Our state exports a lot and imports little. Of the $24 billion of Brazil’s trade surplus last year, 8 billion came from Mato Grosso.

The Amazon region is the second largest contributor to Brazil’s GDP and Mato Grosso has the largest GDP per capita within the Amazon region. Our GDP seven years ago was 26 billion reals, today it is 59 billion reals with a population of 3 million people. All of which has driven the development of services and commercial activity in this state.

Our commercial transformation is happening very quickly because we are creating centres for consumerism in certain regions which are opening the way for industrialisation and businesses. There is a race to create networks, set up supermarkets and department stores etc. We are experiencing a property boom with an increase in civil construction properties and also a transformation of all the logistical aspects that go along with such commercial activity. Over the last 5 years, the state of Mato Grosso has received around 11 billion reals in private investment. Over the next two years for projects related to the World Cup, we should receive nearly 10 billion dollars of public and private investment.

We have heard a lot of businessmen talking about the challenges of logistics in terms of bringing in materials and transporting merchandise out of the state. Can you tell us about this?

Yes, the greatest challenge we have for production today is the logistics. If we continue to expand our production over the next two years with the same speed we have been doing so for the last 10 years, the state is not going to have the ability to choose where to increase production because there will be setbacks within the state.

We are working on developing the railways that go north towards Santarém and also the lines that go from east to west, which are both fundamental for our exports. We are investing a lot in mineral production which only becomes viable when there are the logistics in place to support it, principally the railways. Thus, the greatest challenge for the state over the next few years is the improvement of logistics.

However, we are seeing increased tax exemption in the state, because all raw material products exported have zero export tax, so the government doesn’t receive any tax from these exports. This in turn creates a problem between the economy and the government, as there is greater social demand for security, education, health, etc.

Does this mean that there is a place for foreign investment in the development of logistics? What other areas are open for foreign investors and businesses?

There are multiple options for international investment. There are many opportunities in the agro-industry and also in the area of logistics, which has seen great foreign interest here in Mato Grosso. We are in the process of beginning a joint venture with State Grid which is the largest energy network distributor in China and in the world for that matter. State Grid will be investing 1 billion dollars here in Mato Grosso in hydraulic resources which are being built in the far north of the state. This is one example of foreign investment and partnerships but many others exist also. We have many Indian companies that are investing here in the field of fertilisers and supplies for agricultural production. We have many European investors working in the production of animal proteins; two of the largest producers of gelatine in the world, one Dutch and one Belgian, have factories here in Mato Grosso. There are many examples of investments in areas of sub-products from the agro-economy.

In which areas would you like to encourage foreign investment?

In the southern regions of the state we need to invest in logistics and in industrialisation in various ways of the finished or unfinished product. In the central north of Mato Grosso there are many opportunities to invest, for example in bio diesel, the underutilisation of food products, the compressing of soya, maize and cotton, the textile and thread industry, etc. There are opportunities to invest in the whole productive chain of the agro-industry. We have a German company investing here in the underutilisation of bovine blood; they are dehydrating the blood to then be able to use it for animal feed products.

What would you like to achieve for the state over the next 2 years?

Firstly, I would like to say that Mato Grosso is going through a huge change in terms of logistics, particularly the cities, as we are going to be one of the host states for the World Cup. This event is going to really put us in the spotlight, in terms of our institutions but also our natural resources and our capacity of production. All of our agricultural production comes from just 8% of our region’s territory, so we have enormous potential for agricultural expansion. The international demand for agricultural products is growing and over the next couple of years our challenge will be to position Mato Grosso at the top of this growing international market.

The World Cup will really give our state huge visibility, particularly in areas such as our tourism and mineral potential. Our state has incalculable mineral resources; we are the largest producer of gold and industrial diamonds in Brazil. There are huge natural deposits of gold, zinc, copper, manganese and phosphates that have been detected in Mato Grosso for prospective mine production.