Sun, Dec 13, 2015 - Page 14 News List

For coffee entrepreneur, troubled Brazil still worth the grind


Austalian Duncan Hay dries Brazilian coffee before opening his coffee shop in Rio de Janeiro on Dec. 4.

Photo: AFP

Opening a gourmet cafe in a country deep in economic and political hot water might seem risky, but like many foreigners, Australian entrepreneur Duncan Hay still thinks Brazil is a tasty investment.

The 44-year-old went through the grinder getting ready for this month’s planned opening of Kraft Cafe, specializing in high-end cappuccinos and the like, in Rio’s swanky Ipanema neighborhood.

After a spell a few years back as Latin America’s economic poster child, Brazil has slid from gentle decline to nosedive, with a biting recession, gaping budget deficit, a massive corruption scandal and the start of impeachment proceedings against President Dilma Rousseff.

Hay’s worries are more down to earth. Unscrupulous suppliers, officials needing months for paperwork that in some countries would take only a week, and constant, alarming cost overruns — the headaches have been continuous.

“It has cost me two times more than I thought it would,” Hay said, as a crew put finishing touches to the cafe. “People tell me that’s normal in Brazil: that you take a figure and double it.”

Hay’s experience will be familiar to anyone who has faced the overregulation, graft, high taxes and other self-inflicted damage in the world’s seventh-biggest economy.

It is the bitter brew, known as the custo Brasil, or Brazil cost, that has pushed Brazil down to 116 on the World Bank’s ranking of business-friendly countries.

Nonetheless, a surprising number of foreign investors, Hay among them, have kept faith. In fact, by some measurements, foreigners now believe more in Brazil than Brazilians themselves.

Data from PricewaterhouseCoopers shows mergers and acquisition deals signed by Brazilians falling 23 percent in the first nine months of this year, compared with a year ago.

Foreigner-signed deals, by contrast, rose 3 percent and now outnumber domestic signings.

With a population of 204 million, an emerging middle class and diversified economy, Brazil is just too full of potential to ignore, despite the crisis.

Even if total foreign direct investment is down — US$62.4 billion last year against US$65.3 billion in 2012 — Brazil is still the main target for foreign direct investment in Latin America and the fifth biggest in the world, Santander bank says.

Gradual Investimentos chief economist Andre Perfeito said the crumbling economy presents “a real opportunity in a key market,” especially for foreigners buying into the national currency, which is down a third against the US dollar this year.

“It’s very cheap to buy any assets here now,” Perfeito said.

PricewaterhouseCoopers’s Rogerio Gollo also says that for “strategic buyers,” it’s the right time to take advantage of the weak real and buy Brazilian.

Hay’s start-up investment of 700,000 reais, or US$187,000, is a tiny drop in a US$2.3 trillion national economy, but his Kraft Cafe adventure says a lot about why foreigners fear — and still love — doing business in Brazil.

Hay was laid off by oilfield services giant Schlumberger in February as the oil industry downturn rippled through Brazil. Not wanting to leave the country, he looked about and saw what seemed like an ideal niche.

Although Brazil is the world’s biggest coffee grower, it is hard to get a really good espresso in Rio, let alone one of those fancy lattes with decorative leaves poured into the milk.

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