The Brazilian Way
Brazil offers both challenges and opportunities for Norwegian companies looking to establish themselves in the world's largest subsea market.
The oil and gas industry in Brazil has entered a period of rapid growth – this provides great opportunities for foreign companies. Norwegian crane manufacturer Palfinger Dreggen AS has become a major player in South America in recent years, and is an example to follow for others who want to gain a foothold in the Brazilian offshore market.
In 2013, Palfinger Dreggen and the Brazilian crane manufacturer Koch Metalúrgica established a joint venture for the production of offshore cranes in Brazil. The joint venture was founded following an initial collaboration agreement – a so-called consortium. The partnership includes production, assembly, testing, and start-up of offshore cranes in Brazil.
Morten Jervell Pettersen, Marketing Manager in Palfinger Dreggen AS, tells us that the collaboration with Koch is founded on Palfinger Dreggen's offshore expertise and Koch's local connection and years of experience in the Brazilian crane market.
– An vital prerequisite in choosing our original form of collaboration was our wish to make minimal investments, gain quick market access and not least – local production capacity. Local production is necessary to meet Brazilian requirements for "local content" in our future deliveries, he says.
JV Palfinger Koch Montagens Industriais Ltdais now building new facilities in Rio Grande do Sul. – The collaboration with Koch is part of what helped us land a contract to deliver 28 offshore cranes to Brazil – a contract worth over USD 90 million, Pettersen tells us. – The contract was a breakthrough for us and has since contributed to the expansion of our office in Rio, which now has six full-time employees, in addition to a sizeable project organisation with Koch and at Dreggen's offices in Bergen.
Brazil can be a challenging country for foreign companies to establish themselves in. Its social and hierarchical structures differ from Norway and wages in the industry are generally high. The country's taxation systems are extensive, complex and require in-depth knowledge. So-called "tax engineering" is often used – a type of sophisticated tax planning to navigate public tax regulations.
Brazilian bureaucracy is often demanding and most formal occasions require special expertise, which can and should be purchased if one does not have personnel with this kind of expertise. Pettersen notices that more and more companies want to follow their example and establish a presence in Brazil.
– The cultural differences were a bigger challenge for us than expected, he says. – A thorough survey of the market, the competition and local requirements for deliveries and services is needed if you want to establish yourself in Brazil. I recommend factoring in excess both in terms of time and money in the establishment phase. And last but not least – use local expertise instead of relying on your own presumed insight and experience. Brazil is a different market!
According to Pettersen, NCE Subsea and the rest of the Norwegian support network has pushed for a strong Norwegian oil and gas cluster in Brazil. He believes NCE Subsea's years of experience in Brazil can help establish valuable direct contacts.
– NCE Subsea has played an important role at trade fairs, on business delegation trips and other events. The specific industry focus at their events can at best provide a shortcut to relevant networks for subsea-oriented companies. Seek advice and guidance from those who have paved the way and use networks for all they are worth. In that respect, cluster events and business delegation trips are recommended as valuable tools, he concludes.
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