I visited Brazil in the spring of this year, but wanted to go back and explore more areas of the country. Brazil has faced some hard times but appears to be bouncing back from a prolonged recession, so I was interested to gauge the mood of the people and businesses there.
I had my reservations about flying in a small prop plane amid rainy weather to the town of Sobral in northeastern Brazil, but the short flight turned out to be smooth and my colleagues and I landed at the small airport without incident.
Our itinerary included visiting a shoe manufacturer in the area. The company’s huge complex included a number of large buildings and we spent the entire day looking at the company’s operations. The raw materials for its polyvinyl chloride (PVC) footwear included the plastic and plasticizers from Brazilian and international suppliers. It was fascinating to watch as the PVC was fed into 230 injection machines operated by thousands of workers. I was surprised to learn about all the hundreds of different shoe designs, some of which were created by famous designers across the globe.
The plant is very important to the community where it is based, key to its economy and responsible for a large share of employment there. We asked how it was possible for the company to compete with Chinese manufacturers and other footwear manufacturers benefitting from very low-cost labor. We calculated that the cost per worker was likely above that of China.
The northeast part of Brazil is considered an underdeveloped area, so the government granted a number of tax concessions to the company. In addition, Brazil also levies a very high tax on imports of plastic shoes, so imported shoes are more expensive.
The company we visited does export its footwear, which has unique designs and competitive pricing. Entering the factory, we noticed machines made in a number of different countries including Italy, Spain, Germany and China. Some of the equipment was very sophisticated. For example, the company had injection-molding machines capable of injecting two colors.
For printing designs on the shoes, there was a sophisticated machine which automatically sprayed various colors on the shoes with great precision, replacing an old system of using hand-operated silkscreens. In many parts of the plant we visited, we saw robots handling tasks such as picking up shoes from the assembly line and stacking them into boxes. In the warehouse, the company also had installed sophisticated systems to read bar codes on boxes and sort them according to their destination.
In a warehouse with a very high ceiling, pallets with boxes of shoes were lifted and placed in rows and rows of steel shelving using electric-powered forklifts capable of lifting boxes as high as six stories. This proved another example of a general theme we’ve been following—how technology is changing the way many companies in emerging markets do business.