Majors Invest in Brazil
Deere & Co., AGCO Co. and CNH Global N.V. are making important investments in Brazil and are already reaping huge regional sales, according to Medill Reports.
In June 2012, Brazil’s President Dilma Rousseff and Ribeiro Filho, the minister of agriculture, livestock and supply, announced their new Agriculture and Livestock Plan for Brazil.
The plan provided for a $55.5 billion government investment to support the 2012 and 2013 crop seasons, $41.9 billion of it to fund the marketing of crops, and $13.6 billion to support farmer investments.
All three equipment makers have benefited from Brazilian crop subsidies and lower interest rates. Rousseff’s plan to stimulate agri-businesses in her country includes a 7.5% crop credit increase and a countrywide reduction in the controlled annual interest rate, down to 5.5% from 6.75%. Coupled together, the measures reduced financing costs 18.5% for farmers.
In March 2012, CNH announced a R$600 million investment in a plant in the northern region of Minas Gerais. The plant is scheduled to begin operations in 2014 generating 2,700 manufacturing jobs. CNH already has five manufacturing facilities, in Belo Horizante, Cuiaba, Curitiba, Piracicaba and Sorocaba. In fact, last year Latin America received 24% of CNH’s capital investments, second only to North America.
Similarly, in October 2011, Deere announced a $180 million investment in two new construction-equipment manufacturing facilities in Sao Paulo. The factories are set to open in late 2013. Deere already manufactures in Sao Paulo and five other cities: Catalão, Horizontina, Montenegro, Barueri and Uberlândia.
AGCO already operates seven Brazilian facilities, in Sao Paulo, Sumaré, Judiaí, Mogi das Cruze, Ibirubá, Santa Rosa and Canoas. In January 2012, the Georgia ag-giant announced that it acquired 60% of Santal Equipamentos, a Brazilian manufacturer of sugar cane farm equipment, for $31 million. The company’s South American sales grew 5% to $1.83 billion last year. South American sales comprised 19% of total worldwide sales in 2012.
CNH increased Brazilian revenues to $2.4 billion in 2012, up 3% from $2.36 billion in 2010. Sales in Brazil are second to the United States and ahead of Canada, France, Australia and Germany. Latin American revenues were 15% of CNH’s total sales in 2012.
Last year Deere increased sales in Central and South America by 37%, to $3.59 billion from $2.62 billion. While the agro-giant does not provide revenues by country, its unit sales for both tractors and combines were highest in that region. In 2012, Deere sold nearly 53,000 tractors and 5,800 combines in Brazil compared with just 3,600 and 719, respectively, in Argentina and 9,800 and 37, respectively, in Mexico. Still, Central and South American sales represented just 5 percent of Deere’s revenues in 2012.