ELDORADO: BUSINESS OPPORTUNITIES IN RIO GRANDE DO NORTE.

Carlos Rosemberg *

When the first explorers arrived in the Americas, they were lured by the local legend of Eldorado, a city made of pure gold replete undreamt of treasures. Now, centuries later, the continent is still an object of the Old World’s desire. Only now, in an ultra-globalized world, business opportunities are the attraction.

There is one part of South America that is experiencing enormous economic growth and has great riches to offer. This Eldorado is the Northeast of Brazil, especially the States of  Pernambuco, Ceará, Rio Grande do Norte and Bahia. In order to narrow down this broad vista and its extensive prospects, we will focus on the State of Rio Grande do Norte and its investment oportunities.

Rio Grande do Norte (RN) extends over an area of approximately 52 million km² (about the size of Costa Rica), and its population is estimated to be around 3,000,000. According to the IBGE¹ (Brazilian Institute of Geography and Statistics)(1), The Gross Domestic Product of this State almost doubled between the years 2001 and 2005, leaping from R$ 10 billion to R$ 18 billion over this period. Between 1999 and 2004, the State grew at a rate of 5% a year. Another figure that is worth noting is the Human Development Index, which stands at 0.705, the second best in the Northeast. Exports reached US$ 371.5 million in 2006, representing a 66% growth between 2002 and 2006². What then has given rise to this enormous growth? The answer is that most of it has been generated by the mining, fruit-growing and tourist industries.

The potiguar state, as Rio Grande do Norte is known, has the second largest petroleum reserve in the country – producing 81,000 barrels a day – and the forth biggest natural gas reserve, pumping 3.6 million cubic meters a day. The Brazilian oil giant, Petrobrás, plans to invest R$ 2.9 billion in the State, increasing production to 115,000 barrels a day by 2011³. The number of perforated wells is set to reach 407 by 2008.

Apart from oil and natural gas, significant quantities of LPG, diesel and aviation fuel are also produced. The State has also wind power stations and favorable conditions for the development of solar energy. In 2008, the Vale do Açu thermo-electric plant, with a capacity of 340 MW, is due to be completed.
In its efforts to support and improve industrial development, the State offers fiscal incentives to investors. The PROADI (the Industrial Development Support Program) ensures financial support for new or existing companies in the form of a loan agreement with periodic disbursement. PROGÁS (The Gas-Salt Cluster Activities Support Program) seeks to furnish incentives for companies that use gas, by way of subsidizing the price of gas for industry.

As for tourism, more than 2 million people visited Rio Grande do Norte in 2006 alone, bringing the turnover for this sector to more than US$ 570 million, and further increases are expected. Veritable hordes of European investors are flocking to the real state sector, with building developments sprouting up all along the 410 km of coastline and the 140 beaches with which the State is endowed. The tourist resortsand the huge overseas demand for a ‘holiday home’, especially among Europeans, is attracting more and more investment. Recently, Veja Magazine published an article on the scale of foreign investment in the region. It is also worth bearing in mind that Rio Grande do Norte is the Brazilian state that is geographically closest to Europe (the flight from Lisbon to Natal takes only 7 hours).

The agribusiness sector, especially fruit-growing, is another outstanding sector in the State’s economy. Melons, sugar-cane, cashew nuts and bananas are the most heavily exported products in a sector that enjoyed a turnover of almost US$ 50.0 million in 2007. Fresh fruit is exempt from ICMS tax charges, along with other agricultural products.

In short, the State of Rio Grande do Norte is an extremely attractive region for investment, owing to its geographical location, its expanding and diverse market, its wealth of natural resources and the tax incentives offered to investors.

There is no longer any need for a long sea voyage. Commerce is now driven by the quest for opportunities, business diversification and risk reduction. An enterprising attitude is essential for success in this race and Rio Grande do Norte is pleased to open its doors – by sea, road or air –to any kind of responsible, safe and profitable development.

Fortaleza, March 2008

* Carlos Rosemberg is a lawyer at TRIGUEIRO FONTES  Advogados.

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