Amazon Prime a game-changer in Brazil

Amazon launched the Amazon Prime subscription service, including music, video streaming and the removal of shipping costs for purchases in the marketplace. Plans start at BRL 9.90—five times cheaper than it costs in the U.S.—in a clear strategy to gain market share.</p> <p><strong>Why it matters.</strong> Amazon got to Brazil in 2012, but didn&#8217;t manage to replicate the success it enjoys in the rest of the world, due to local obstacles and a well-established domestic market. One year ago, the company inaugurated two massive distribution centers, controlling its business from end to end. Now, the company has doubled down in Latin America&#8217;s biggest market. In the U.S., Amazon Prime accounts for half of the company&#8217;s sales.</p> <p><strong>Competition. </strong>It will be interesting to monitor how the stock market will react to the news. Magazine Luiza, for instance, has resisted previous Amazon initiatives, continuing to gain market value. Will it continue to endure?</p> <ul><li><strong><em>Go deeper:</em></strong><em> <a href="https://brazilian.report/money/2019/01/11/amazon-brazil-e-commerce/">Will Amazon ever crack the Brazil e-commerce nut?</a></em></li></ul> <hr class="wp-block-separator"/> <h2>Brazil opens trade talks with Mexico</h2> <p>The Economy Ministry&#8217;s Secretary for Foreign Trade Marcos Troyjo said Brazil has formally started trade talks with Mexico. &#8220;Brazil-Mexico trade has already been below desired levels,&#8221; said Mr. Troyjo. &#8220;Part of that is because Mexico gave preferential treatment to other partners, such as the U.S. and Canada.&#8221; He mentioned the recent U.S.-Canada-Mexico agreement as an inflection point, highlighting Brazil&#8217;s immediate interest in boosting agricultural exports.</p> <p><strong>Why it matters.</strong> This is the latest chapter of Brazil&#8217;s efforts to open its insular economy to the rest of the world. Earlier this year, the Bolsonaro administration announced similar talks with the U.S. Also, it oversaw the conclusion of 20 years of negotiations over the Mercosur-EU trade deal (which must yet be ratified).</p> <p><strong>Openness. </strong>Brazil started placing more importance on bilateral trade in 2016, when Michel Temer took office. In the 20 years prior, the country signed three trade <a href="http://www.mdic.gov.br/comercio-exterior/negociacoes-internacionais/796-negociacoes-internacionais-2">deals</a>: with Israel, Egypt, and Palestine (the latter is not yet binding). During the Workers&#8217; Party Era, Brazil opted for a strategy more centered around the Doha Development Round and the World Trade Organization.</p> <p>The country&#8217;s insular economy has excluded it from international production chains and has become a major deterrent to technological exchange and competition within the Brazilian market.</p> <ul><li><strong><em>Go deeper:</em></strong><em> </em><a href="https://brazilian.report/opinion/2019/07/15/brazil-new-era-of-trade-deal/"><em>What does Brazil need to enter a new era of trade deals?</em></a></li></ul> <hr class="wp-block-separator"/> <h2>President&#8217;s son: No change comes from democracy</h2> <p>Rio City Councilor Carlos Bolsonaro, the president&#8217;s second-eldest son, declared on Twitter that Brazil won&#8217;t experience the swift change it wants through democracy. &#8220;All I see is [&#8230;] those who have always dominated continuing to dominate.&#8221; The post drew criticism from all sides of the spectrum.</p> <figure class="wp-block-embed-twitter wp-block-embed is-type-rich is-provider-twitter"><div class="wp-block-embed__wrapper"> <blockquote class="twitter-tweet" data-width="550" data-dnt="true"><p lang="pt" dir="ltr">Por vias democráticas a transformação que o Brasil quer não acontecerá na velocidade que almejamos&#8230; e se isso acontecer. Só vejo todo dia a roda girando em torno do próprio eixo e os que sempre nos dominaram continuam nos dominando de jeitos diferentes!</p>&mdash; Carlos Bolsonaro (@CarlosBolsonaro) <a href="https://twitter.com/CarlosBolsonaro/status/1171201933891244033?ref_src=twsrc%5Etfw">September 9, 2019</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script> </div></figure> <p><strong>Why it matters.</strong> The Bolsonaro family has become notable for anti-democratic statements. Just last week, President Jair Bolsonaro praised the gruesome regime of Chilean dictator Augusto Pinochet. The move could further alienate moderate right-wing voters, which could become a problem come the 2022 election, as many conservative candidates will try to present themselves as toned-down alternatives to Mr. Bolsonaro.</p> <p><strong>Huck 2022? </strong>One such rival could be TV presenter Luciano Huck. Yesterday, he spoke before an audience of business owners, defending liberal economics—but highlighting that social protection networks are extremely necessary in a country like Brazil. Mr. Huck considered running last year, but his family feared the intense scrutiny that comes with a presidential candidacy.&nbsp;</p> <p>If he chooses to run, the TV personality is a force to be reckoned with—he has immense appeal with popular classes, presenting a daytime show on Saturdays (watched by 20m people every week) filled with segments in which he helps poor viewers financially.</p> <hr class="wp-block-separator"/> <h2>The most valuable Brazilian brands</h2> <p>Consultancy cabinet Interbrands has published its ranking of Brazil&#8217;s most valuable marks—containing few surprises. Twenty-three of the 25 brands making up the list were there in 2018. Among the top ten, only one change: retailer Renner went from 11th to 10th, with Cielo dropping to 12th. To make the list, companies must be of Brazilian origin, publish their earnings … and be profitable.</p> <figure class="wp-block-image"><img src="https://brazilian.report/wp-content/uploads/2019/09/brands-1024x436.jpg" alt="brazil most valuable brands" class="wp-image-23826" srcset="https://brazilian.report/wp-content/uploads/2019/09/brands-1024x436.jpg 1024w, https://brazilian.report/wp-content/uploads/2019/09/brands-300x128.jpg 300w, https://brazilian.report/wp-content/uploads/2019/09/brands-768x327.jpg 768w, https://brazilian.report/wp-content/uploads/2019/09/brands-610x259.jpg 610w, https://brazilian.report/wp-content/uploads/2019/09/brands.jpg 1768w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure> <p>Banks and beer labels snatched up six spots among the top 10. Not coincidentally, Brazil’s four richest men operate in these two sectors, with three of them being partners in the same beverage company, Ambev—which produces the top 3 most valuable beer labels in Brazil.</p> <p><strong>Why it matters.</strong> The top 25 brands are valued at a combined BRL 129bn—an 8-percent growth from 2018. In an environment of sluggish economic recovery, major players are reinforcing their dominance—with 12 of them growing at double-digit rates. Many also benefit from a high level of market concentration in their sectors.</p> <p><strong>Challenges ahead.</strong> The top 5 companies (three banks, two beer labels) account for 75 percent of the total value of the list. But they could have their hegemony threatened. In the case of banks, fintechs and digital players are targeting Brazilians without bank accounts (nearly 55m people). Beer labels face <a href="https://brazilian.report/society/2018/11/30/brazilian-beer-companies-drinking/">changing consuming habits</a>—with drinkers increasingly opting for craft beer. And Magazine Luiza will have to face Amazon (more below).</p> <p><strong>Leap.</strong> For the second-straight year, retailer Magazine Luiza posted the biggest rise in value: 46 percent, an impressive feat, especially in a sector as brutal as Brazilian retail. With uniquely challenging logistical hurdles, companies must also face tax complexity and economic instability to make their tight margins.</p> <hr class="wp-block-separator"/> <h2>What else you need to know today</h2> <p><strong>China.</strong> Vice President Hamilton Mourão said Chinese leader Xi Jinping will visit Brazil in November, for the BRICS Summit. The event will happen on November 13–14 in Brasília, and will be used to strengthen ties with the country&#8217;s main trading partner. Also yesterday, Beijing cleared 25 Brazilian meat plants for exporting to China—boosting producers&#8217; shares on the stock market.</p> <p><strong>Startups.</strong> Investment behemoth <a href="https://brazilian.report/tech/2019/08/02/softbank-uber-banco-inter-investments/">SoftBank once again increased its position in Brazil</a>, this time by leading a USD 250m investment round on Quinto Andar, a startup that provides real estate services without agencies. The company now becomes a unicorn—meaning it is valued at over USD 1bn. Brazil has seen a &#8220;unicorn surge&#8221; since 2018. First came 99 (ride-hailing), followed by Nubank (finance), Arco (education), iFood (delivery), Stone (payments), Gympass (fitness), and Loggi (delivery).</p> <p><strong>Congress.</strong> The idea of a reform of Brazil&#8217;s public service is gaining momentum in Congress, with even centrist politicians (usually known for their non-committal stance on controversial issues) openly defending it. However, the civil servant lobby—one of the strongest in Brasília—has begun an aggressive campaign to block any attempt to reduce the perks enjoyed by federal-level servants, such as extremely high pay and job stability.&nbsp;</p> <p><strong>Lula.</strong> Operation Car Wash has offered complaints against former President Lula and his brother for corruption—accusing them of receiving BRL 1.1m in kickbacks from a construction company. The politician called the charges &#8220;absurd,&#8221; and said they are a retaliation for recent reports leaking private messages by prosecutors—which Lula claims prove his innocence.</p> <p><strong>Retail.</strong> The Brazil Week (<em>Semana do Brasil</em>), the patriotic version of Black Friday created by the government, saw underwhelming results this past weekend. According to retailers&#8217; associations, sales were marginally better than usual—which has more to do with the fact that many workers were paid last week.