Industry in North Brazil: Presentation of Rondônia’s Industry Sector

Interview with Denis Roberto Baú, President of FIERO (Rondônia Federation of Industries)

Let’s start by introducing FIERO. Can you tell me about the institution’s role, history and also what sets it apart in comparison to other national federations of industry?

The main role of the federation is to defend the interest of Rondônia’s industries. We work on a lot of fronts that can alleviate tax burdens, tariffs and taxes. We also work on fronts that can open up supply for our industry within the state’s economic context. We provide incentives in terms of implementing seminars, workshops and forums. We promote international fairs that promote our Madeira River waterway which handles most of our transportation. We understand that the possibility of waterway transportation is a great differential for our state. The International Industry Fair of Rondônia has been growing approximately 15-20% per year, and this shows the strength of our industry. Finally, we participate in technical missions; this is also one of the things which makes us different. We have been going on a lot of technical missions, including international ones. In the last three years, we have already participated in more than seven international technical missions because we understand that entrepreneurs need to insert themselves in a globalized world.

In the past, Rondônia was literally the end of the line; the entrepreneurs would have to stop because the road ended here and consequently they started to produce in this region of the Amazon. Today, now that the Interoceanic Highway, which connects us to the Port of Ilo and Matarani, has already been completed, we are actually located in the heart of South America. This is a huge paradigm shift for the entrepreneurial sector and for the society as a whole, because before we were seen as the corner of Brazil over there, and now we are part of the heart of South America.

With this new view in mind, the Federation of Industries has tried to speed up the process of the state’s economic behaviour in a manner where we are gradually boosting the commercial exchange within South America, because the five countries that border Rondônia have 120 million inhabitants. They have a GDP that is above one trillion US dollars. So there is a whole new consumer market that is right next to us.

In the past we had to transport products for 3500 km via highway to get to the Port of Santos or the Port of Paranaguá, and now we are only 2000 km from the Port of Ilo, the Port of Matarani and the Port of Arica in the North of Chile. All of these changes in this mosaic of logistics is attracting the interest of entrepreneurs, because the logistics of this globalized world have become a great and prominent aspect to be considered in any viability study. The federation is here to open the range of options; we have worked on several fronts trying to contribute to society by showing entrepreneurs and industries new segments and new skills for our business sector.

How important is the industry sector to Rondônia’s economy?

The industry sector has been growing a lot. Rondônia is a state that is highly agricultural, so we already have more than 20 meat processing plants within the state, and soybean production has also been growing a lot. Last year we beat a new export record, 1.6 billion, where the 3 main items on the roster were: boneless meat, soybeans and cassiterite. We are in first place in terms of coffee production in the Northern region. We produce large quantities of corn, rice and beans. This food front has attracted a lot of attention from Europe and Asia because today we export vast quantities of meat to Russia, the Middle East, Europe and Africa. The industry in the food sector has a tendency to grow. It has been growing and it tends to grow vigorously in our state. I just want to make it known that our soybeans are not genetically modified, they are natural; our cows are raised in pastures, they are known as “green” cows, so there is also this whole environmental aspect to be considered.

As you had mentioned, Rondônia is known as mainly being an agricultural state and the industrial sector is still developing. What are the sectors with the most potential to grow in the coming years?

The greatest potential for growth is in the food segment. We have the second largest herd of cattle in the Northern region and the eighth largest in Brazil. We are the greatest producers of milk in the North, there are more than 50 dairy farms that carry the Ministry of Agriculture’s approval which means we can export our meat to any other Brazilian state. We are starting with rice processing, and there are two rice processing plants in the state. Everything that is connected to food has been growing in large steps.

And with the arrival of the hydroelectric plants, the industries in the metal and mechanical area are setting up here so they can meet their demands. They intend to meet the demands of all of the hydroelectric plants that are emerging in the Amazon Basin, in the Northern region of Brazil. The two plants from the Madeira River initiated the usage of the Brazilian hydroelectric potential, which in our region represents more than 40% of all of the Brazilian hydroelectric potential, considering that the potential of the South, Southeast and Northeast are practically all used up. The new frontier of generating electric energy in Brazil is here in the Amazon region. With the start-up of these two hydroelectric plants, large industries started to set up in the region. An example of one of them, is Alstom which has already built one of its largest worldwide plants here with the aim to not only meet the demands of the dams here, but to also meet the demands of all of the other ones: of the Tapajós River and the Xingú River where construction work has already begun or that are in the procurement stage with federal government. There are also five hydroelectric plants in the south of Peru, for which the Peruvian government has already hired the viability studies. We also understand that this segment of the metal mechanical area will develop a lot because of our logistics and because we have the biggest clients of these industries close by.

What do FIERO and the state of Rondônia believe to be the greatest challenges regarding industry?

One of our greatest challenges is to get a skilled labour force. Here at SENAI, which is one of the areas we deal with, we enrolled about 10,000 students five years ago, and now in 2013 our goal is to enrol 53,000 students and this is just in professional-technical education. We understand that due to accelerated progress, Rondônia’s GDP is growing at Chinese rates, especially because of the investments in the electrical sector. In order to stay ahead of this cultural change and the transformation of the state in terms of industrial potential, we need a skilled labour workforce. I think this is our greatest challenge.

The second greatest challenge is to improve our logistics, it’s evident that this is already being done due to the will and desire of the “bandeirantes” (pioneers) that came and migrated to Rondônia from all of the regions of Brazil about 20 years ago. Our waterway, in the Madeira River, is transporting approximately 85% of what was transported in 2011 in the Paraná-Paranapanema waterway. If we only talk about grain, we transported five million tonnes of grain. The rest of Brazil has no idea that around here we are already transporting so much grain. In fact, 3% of the whole Brazilian production is being transported via our waterway. So what is the challenge? We are going to improve the port structure; we are going to generate more potential to transport containers; we are going to improve the transportation of refrigerated containers to give flow to this deboned meat which is going to São Paulo today and is being exported via São Paulo.

The challenges are also to reduce the tax burdens, to be able to improve the environment of generating business, and also the environment of providing incentive to the business sector in regards to production and competition.

What is your message for national and international investors that would like to come to Rondônia? How can FIERO help these investors?

The people in our region are very hard working, those that crossed Brazil and that came here 20-30 years ago came with the resolve to grow and to improve their lives and this is a great differential. We are growing a lot in the food sector, in the mineral sector (there are a lot of minerals in Rondônia) and in the metal mechanical sectors. What I can say is that the government works with private initiatives in an articulated manner. There are areas in the Industrial District that the government offers as an attraction to new industries. There is also the exemption of taxes because we are a part of the Free Trade Zone of Manaus. There is the Banco da Amazônia, which has the lowest interest rate on long term loans in all of Brazil. And we also have labourers in our society that are keen on gaining new knowledge and that are used to challenges, especially since they left the regions in which they were born in and moved to Rondônia in order to be able to improve their lives and their family’s lives more and more. We believe that these are all relevant aspects when you consider investing somewhere.

How do you view the state’s industrial sector in two-three years?

I envision that the food segment will grow a lot, and in the midst of this, it will bring greater enrichment to the municipalities, because the state of Rondônia is divided in small rural properties. There aren’t any huge agricultural estates around here and this enables the economy to move in the municipal headquarters. Rondônia is the only state of the Northern region of Brazil where the GDP of the interior is greater than the GDP of the capital. The production strength of our state is in the interior of the state and one of the main reasons for this is due to the small properties that were planned by the World Bank. More than 30 years ago, the World Bank placed a bid and invested more than 250 million dollars in the state in order to build a socio-economic and ecological plan/zone. This area was mapped out, our whole road network and the division of all of our properties were designed so that there would be a large quantity of small properties. These small properties activate the economy of the interior with more relevance than the vast agricultural estates that exist in neighbouring states where the big producer gets raw materials from São Paulo, or Rio de Janeiro. The small producers get all of their supplies from the municipal headquarters. Because of these characteristics, such as the planning made with international assistance 30 years ago, we are able to seek the results.

Today we are being congratulated and awarded for everything that was taken into consideration for Rondônia in the past. And that is why it is a state that stands out, with a vast probability of growth, possibly even larger than the average Brazilian growth.

Is there any other differential that you would like to discuss?

We have the conditions to develop and attract investments without harming the environment. We are talking in rational terms, not even sustainable terms, because it is rational to explore the potential of the area and at the same time to preserve the environment for future generations and we are prepared for this. In the last ten years, if we look at a graph of our growth, our GDP is inversely proportional to deforestation. So this shows that from ten years onwards we have been increasing production in areas where there already was a possibility to advance in agricultural production. We don’t need to deforest anymore land. It is rational development. We are using the space in a rational way, without harming the forest so that we can increase production.

If investors come here with the will to develop, they will be able to develop and to preserve the environment at the same time. It’s completely possible to do that around here. We have managed to develop within the state and everything has been well thought of, so this is a good region where investments can be made. We have a demarcated zone where people can invest and there is a part that we do not interfere with, our state has preserved 65% of its natural forest, because it was planned and developed according to zones. We only sought to increase our productivity within these authorized areas. The metal and mechanical area qualifies Rondônia as well; there is no rainforest in this part because it was unconsciously burned by indigenous groups in the past to produce. One of our main objectives is to protect the diversity of the forest. Our federation disseminates how concerned we are about the environment and the importance of our mineral wealth. Do we have conditions to mine minerals? Yes, we do. We have one of the largest mineral reserves of tin concentrate in the world, which is cassiterite (mineral that is used to make the touch feature in computers). So the tendency is that there will be a greater use of this mineral too.. In the past, people would mine and would leave back a desert; today we extract the mineral straight from the rock with high tech equipment without any minimal harm to the environment. We extract the riches while we preserve the forest.