Infrastructure advances in the industry

Over the next three years, the wind power industry will produce about 4,000 wind turbines and 4,000 towers; in the shipyards, 278 vessels are already under construction and another 65 will yet be contracted; in the railroad industry, by the end of the decade, production is expected to reach 40,000 cars and 2,100 locomotives. Unlike traditional industry, these manufacturers do not have to complain about: they are with the wallet full of orders and making money as ever.

In Brazil, they are taking the opportunity to cash in on the low supply of infrastructure in Brazil, which represents numerous investment possibilities. The railroad industry is one of them. In the last five years, the production chain of this industry has gained 78 new companies, says the director of the “Negócios nos Trilhos” (Business on Rails), Gerson Toller, noting that the segment has now 428 suppliers with domestic production. One of the first to see the potential of the industry was GE, which has retaken the production of locomotives in the country in 2008.

Guilherme Melo, CEO of the transport division for Latin America of the American multinational, recalls that the 90s was very difficult. At that time, there was only demand for re-boosting old machines. With the privatization, the market has come back. Today we have 120 requests for locomotives, twice the requests of last year.

For the executive, the business opportunities are enormous. He recalls that the 28,000 km of railroad in Brazil – not much for the size of the country – transport only 26% of the domestic freight, most grain and ore. These numbers already entered the radar of other manufacturers, such as Japanese Hitachi and American Caterpillar. The two companies have announced in July the construction of plants in Sete Lagoas (State of Minas Gerais) and Araraquara (State of São Paulo).

The interest of investors, however, goes beyond freights, says the CEO of the Brazilian Railroad Industry Association (Abifer – Associação Brasileira da Indústria Ferroviária), Vincent Abate. According to him, the lack of passenger transport in major cities has motivated several expansions and the construction of new plants in the country.

In addition to Canadian Bombardier, which will produce monorails in Hortolândia (State of São Paulo), Brazilian MPE will open a unit in Rio de Janeiro in four months. The CEO of the company, Renato Abreu, says there are plans for plants in Manaus (State of Amazonas) and Cruzeiro (State of São Paulo). The group has won, in consortium with debutant Scomi, from Malaysia, the bidding for construction of the monorail that will connect the Metro’s São Judas station to Congonhas airport, in Sao Paulo.

Asians also are looking out for Brazil’s wind potential. Since the 2008 crisis, which practically reduced to zero the orders from the United States and Europe, manufacturers from all continents landed in the country with a voracious appetite. In three years, they managed to transform Brazil’s wind power into a source as competitive as hydro power. About 6,000 MW were contracted, which represent an investment of R$ 26 billion (US$ 14.37 billion), says the CEO of Abeeólica, Ricardo Simões.

They pointed out that, when he arrived in the association, it had 54 members. Today, that number is 91. Since they are large equipment and sensitive to transport, manufacturers seek to settle close to the wind farms. In addition, to get financing from the Brazilian Development Bank (BNDES – Banco Nacional de Desenvolvimento Econômico e Social), the plants need to hire domestic equipment (60% of the value must be manufactured in the country).

According to data from Abeeólica, today Brazil has four wind turbine plants in operation and another four under construction. But there are plans for new units. Argentinean company Impsa, for example, built a plant in Pernambuco, with capacity to produce between 8 and 10 turbines per week, and is already looking for a place to build a new plant in the South or Southeast region of the country. It will also invest in an electronic component plant for wind farms, says José Luis Menghini, CEO of Impsa.

Until 2014, the country may have 7,000 MW of wind energy in the system. This means getting out from the current 0.8% to 3% of participation in the Brazilian electrical grid. Among the 30 countries that use wind power, Brazil has become the nation with the lowest tariff of wind power in the world, says the CEO of Indian manufacturer Suzlon, Arthur Lavieri. The company is building, in partnership with the Brazilian Aeris, a wind blade plant. The plant not even begins to operate and the company is already thinking in duplication. If all goes as we plan, we will have to increase production next year.

In the naval industry, only the expansions do not resolve anymore. The way has been to open new shipyards. There are seven projects under construction in the states of Rio Grande do Sul, Pernambuco and Rio de Janeiro. Insignificant in the early 2000s, Brazilian naval industry already accounts for 4% of the total volume of ships under construction worldwide. This industry employs 56,000 workers. By 2014, 15,000 new direct jobs are expected to be created in the industry.

According data from the National Association of Naval Building and Repair and Offshore Industry (Sinaval – Sindicato Nacional da Indústria da Construção e Reparação Naval e Offshore), in May, the Board of Directors of the Merchant Marine Fund approved priority in the funding of 217 vessel works and six shipyards for a total of R$ 9.8 billion (US$ 5.41 billion). Most of these projects still are not in the order books of the shipyards.