In a former sugarcane field, Fiat is building a $1.7 billion auto
plant that will produce 200,000 cars a year in 2014. Chinese, South
Korean, Filipino and Russian companies are here as well.
Last year, Kraft joined them. The Chicago-based conglomerate is the
world's second-largest food company. Over the years, it has purchased
Cadbury, Toblerone and other rivals, but some analysts and investors -
including Warren Buffett - have criticized it for trying to grow too quickly.
Kraft's new factory here employs 700 Brazilians and churns out tens
of thousands of tons of Tang, chocolate wafers and Oreo cookies for sale
to northeastern Brazil's growing middle class. If all goes as planned,
expansions will triple the size of the factory and its workforce to
2,200 over the next five years. For now, this corner of Brazil is a
winner in globalization.
Cities and towns across northeastern Brazil competed to be the site
of the new Kraft plant. Each offered larger and larger concessions to
the company. In the end, the town gave Kraft the land for the factory
for free, and the state gave the company a 90 percent tax break. Kraft,
like other multinationals, is a big winner in globalization as well.
A tour of the factory was filled with surprises and lessons. Andre
Imianoski, a young, friendly and professional Brazilian engineer, told
me this was Kraft's first LEED environmentally certified facility in the
world. There were solar panels from Spain, high-speed packaging
equipment from Italy and German-made machinery that churned out tens of
thousands of sweet-smelling, chocolate-covered wafers.
Ninety percent of the machinery in the factory was made in Europe,
and there was little American-made equipment. European companies, it
seemed, had adjusted to the loss of manufacturing by producing complex
machinery for factories in emerging market nations.
After the tour, I learned that by far the largest foreign investors
in Pernambuco were European companies, not American ones. Between 2004
and 2011, Kraft, Alcoa, Pepsi and four other American companies invested
roughly $244 million in the state, according to Brazilian officials.
During the same period, Fiat, Nestlé, Novartis and two dozen other
European companies invested over $4 billion.
Doing business in Brazil is extremely frustrating, costly and
time-consuming, according to Brazilian and American officials. Success
requires patient, long-term investment. While European companies focused
on the long term have flocked to the northeast, American managers
focused on short-term profits and their companies' daily stock
price have focused on the saturated markets São Paolo and Rio de
Janeiro. That is a lost opportunity for the United States.
"They're missing out," says Usha E. Pitts, the senior American
diplomat in northeastern Brazil. "There is so much potential here for
American companies that are in it for the long haul."