Brazil electronic components crisis or opportunity? Brazil has a well developed electrical and electronics equipment industry.  Total sales of equipment are in the range $20 - 25bn per year for the period 1999 - 2003.  Of course, telecom equipment sales have declined dramatically from $5.5bn in 2000 to $2.9bn in 2003 but other sectors have been strong including industrial equipment and automation, computers and household appliances.  In this period most international producers have located plants in Brazil and Brazilian producers have invested in increased capacity.  Brazil has become a major worldwide producer in key sectors such as industrial motors, compressors and transformers, DVD players and mobile phone handsets.

So, how is Brazil managing the production of these products?  The real story lies behind the pattern of exports and imports.  Exports have risen strongly by 50% from 1999 - 2003 and stand at $4.7bn.  However, imports have remained stubbornly flat despite the devaluation and stand at $9.9bn in 2003 with an overall trade deficit of $5.2bn.  If we look at this deficit we see that it is a structural problem.  This is because $3.7bn consists of electrical and electronic components.  These are the fuel of the twenty first century.  Also, imports of electronic components are growing fast - up 50% since 1999. Electronic components account for 7 of the top 10 imported electronic products as shown in the table below.

* Identifying key components that drive products for which Brazil already has a world-class production and export sector such as in agribusiness electronics, mobile phones and industrial equipment.
* Building the infrastructure that equipment designers and developers need to develop and test the components needed for these products.  This infrastructure would include a semiconductor fabrication facility dedicated to rapid design and testing of components.
* A focused program to attract investments by the manufacturers of these key components from around the world.  This program needs to identify and address the opportunities and obstacles specific to the components being targeted.
* Coordinate with leading technical institutes a program to prepare exactly the required skill mix of engineers and technical personnel.

Brazil holds some enviable opportunities for key component manufacturers which will not only reduce the need to import, but will dramatically reduce design times and so enhance product competitiveness and exports.

If you are interested in this sector contact Jerry Owen at jerryowen@intrixcorporation.com

Brazil – Main Imported Electrical and Electronic Products (Based on 2003) in US Dollars (millions)
PRODUCTS	2000	2001	2002	2003
SEMICONDUCTORS	1,883.7	1,621.5	1,486.1	1,726.9
COMPONENTS FOR COMPUTERS	857.0	889.2	869.4	878.5
COMPONENTS FOR TELECOMMUNICATIONS	1,349.2	1,085.8	650.3	812.3
MOTOR-GENERATOR SETS	138.8	795.4	1,176.8	657.1
MEASURING INSTRUMENTS	553.8	651.1	531.3	510.5
ELECTRONICS FOR AUTOMOTIVE USE	409.4	451.8	423.8	454.3
COMPONENTS FOR INDUSTRIAL EQUIPMENT	196.5	362.0	312.7	316.6
OTHER ELECTRICAL MATERIAL FOR INSTALLATION	293.8	302.1	260.8	281.8
OTHER COMPUTER ITEMS	530.5	483.6	317.1	275.8
KINESCOPE	471.4	301.3	274.6	272.8
Total imports all electronic products	11,886	13,317	10,127	9,877
Source: MDIC/Secex

American consumerism in Mexico, as a result of many years of transnational companies entering the Mexican market with very aggressive and high-impact campaigns, many Mexicans have adopted American consumerism as a way of life. They are switching their traditional profile consumer habits to high consumption behavior.

This phenomenon is more notable in middle and high social classes, who are more exposed to the mass media and have higher disposable income. These people do not hesitate to buy imported products or do their shopping in the U.S even if there is a national alternative.
 
This "American consumerism in Mexico" does not mean that Mexicans have also come to admire American values. Mexicans remain strongly protective of their heritage and values.

There are certain high value products not often found in Mexico, but often purchased in the U.S. These products, such as personal electronics: palms, I-pods and digital cameras fall under the category of "cool novelty". There is a big opportunity for American investors who are willing to make their products accessible to the Mexican market