“I think that Ford rues the day when they decided to build their newest plant in north-east Brazil rather than here,” says Zeca Moraes, secretary for development and international affairs of the government of Brazil’s southernmost state of Rio Grande do Sul. Sitting in his office in Porto Alegre in a modern building – built with curving lines, it is universally known as the skateboard – he is keen to make clear how his state was far more attractive to foreign investors than other parts of the country of 170 million people.

“Yes, Ford got a big government grant when they went to the northeast but when they set up shop, they found there were few people who’d ever worked in a factory before. There was no industrial tradition. Here, we’ve got bags of it,” he added.

Known as “Gaúchos”, the 10 million people of Rio Grande do Sul, like the Californians in the United States, have long considered themselves a bit special, both populations considering they could, if it came to it, split off from the country they are a part of and go it alone. With good education and health services that have all but eliminated illiteracy and reduced infant mortality, the state and the city, which have been governed calmly and intelligently for years, claim the best score on the UN’s Human Development Index of any state in Brazil.

Presidential jitters

Foreign interest in direct investment in Brazil has been dampened a little this year in the face of understandable uncertainty about who would emerge the victor in the October presidential elections and of some hysterical media comment about the possibility of the left-wing candidate Luiz Inácio Lula da Silva becoming president, which has now happened. But for those who want to establish a presence in Latin America, the largest economy in the region, whose long-term prospects are promising, has always been the leading venue for business. And while the advantages of the great industrial metropolis of Săo Paulo have been well known for years, those of the three states to the south, Rio Grande do Sul, Santa Catarina and Paraná are less internationally familiar. All three claim that their quality of life is superior to that of Săo Paulo.

As far as industrial investment is concerned, the Gaúchos have had something of a run of luck. This is exemplified by the General Motors plant at Gravataí, just outside the city limits, which can produce 120,000 vehicles a year. In a complex which needed investment of $554m, the large site accommodates not just GM but several dozen of its parts suppliers including Goodyear and TI which are integrated into what is effectively one plant.

According to Roberto Tinoco, its operations manager, Gravataí is teaching the latest manufacturing strategies to other parts of the company world-wide.

He adds that GM did not settle at its new site because of large government grants – though some local taxes were deferred. “We sited our plant here in Rio Grande do Sul because it was in the geographic centre of Mercosul”, he says.

Rio Grande do Sul

The South American free trade area, consisting as it does of Brazil, Argentina, Uruguay and Paraguay with Bolivia and Chile as semi-committed members on the sidelines, is a key to regional development. The capitals of Argentina, Uruguay and Paraguay are all nearer Porto Alegre than is Rio de Janeiro, 1560km away. Rio Grande do Sul will get a boost if Mercosul, as is likely, is promoted during the presidency of Mr da Silva.

The GM plant is only the latest in the Gaúchos’ industrial tradition. Varig, the country’s major airline has its headquarters there. This year, Varig is celebrating the 75th anniversary of the maiden flight of its first aircraft, a Dornier flying boat. The airline’s full name, Viaçăo Aérea Riograndense, is a reminder that it was born in Rio Grande do Sul. Varig is, like many other airlines, in difficulties, but its maintenance base at the city’s airport is a highly specialised operation which takes care not only of the company’s own aircraft but also those of the airlines from other parts of Latin America and from Africa. Norberto Hoffmann, Varig’s regional director in Porto Alegre, showed fDI how the plant can do everything from repair the landing gear of a jumbo jet to decipher the secrets of black boxes.

In a country which has been suffering power cuts because droughts have emptied the dams which produced the bulk of Brazil’s electric power the Gaúchos are unworried. “Whatever happens in other states, we are not likely to suffer power cuts,” Cláudia Hofmeister, the state’s acting secretary for Energy, Mines and Commu-nications, told fDI.

The Rio Grande do Sul state government, which successfully oversaw a rise in power consumption from 12,013 gigawatt/hours in 1990 to 19,977 GWh in 2000 and a current rate of more than 20,000 GWh, seems to have reason enough for its complacency. There is a good deal of locally gene-rated hydro and thermal power and the state government is also actively seeking partners for its big plans, to generated power from the winds which sweep along its 630 km south Atlantic coastline.

Rio Grande do Sul has begun consuming natural gas piped in from Bolivia through neighbouring states to the north, and it receives Argentine natural gas at its border with Argentina though the connection with Porto Alegre itself remains still to be completed. The state also buys power from neighbouring Uruguay and Argentina.

Trading figures

Reliable power supply is one of the reasons for the state’s healthy international trade figures: in 2000, exports totalled $5.8bn (including foot-wear, soya, chemicals and vehicles) to $4bn of imports (fuel, machinery and industrial equipment). GM’s Gravataí is unlikely to be the last big international investment to go to Rio Grande do Sul.

There is more to Rio Grande do Sul than a location for industry though. Porto Alegre is the seat of the annual World Social Forum which brings together observers from all over the globe who examine the state of the world as globalisation proceeds. The event brings in thousands of young people who are accommodated in a tent city.

Porto Alegre will, too, be the venue for the next gathering of the World Council of Churches.

Santa Catarina

The state to Rio Grande do Sul’s immediate north, Santa Catarina with its five million people, is such a different place that it is sometimes difficult to recognise that they are both in Brazil. On arrival in Florianópolis, the capital of Santa Catarina you could imagine you are in the Caribbean.

Situated on an island ringed with 100 beaches and blue sea, the pace of life in the city is slower, gentler and more relaxed than that of Porto Alegre. It should be – favoured as it is as a year-round resort of holiday-makers from all over South America. The waterfront of Floripa, as the city is known, now teems with hotels and high-rise apartment blocks along the Avenida Beira-Mar. They look across the bay to the mountains of the mainland to which is it linked by two bridges. Tourism is Santa Catarina’s main business, coming second only to Rio de Janeiro in the number of foreign visitors to Brazil. The population of the island, ordinarily 300,000, rises to nearly a million in holiday time. Before the recent severe financial crisis in their country, Argentines flocked to the coast of Santa Catarina.

And for those visitors who want more than a beach, the interior of the state offers a great deal, including white-water rafting and an Oktoberfest in the German-settled town of Blumenau. But the beaches of Santa Catarina have a special advantage: whale-watching. The state has decreed a five-mile strip winding along 130 kms of shoreline a whale haven, and in the south, they and their young are visible from land, without visitors having to take a boat to observe them.

The sharp fall in the value of the Brazilian real in 2002 has offered particular opportunities to those with hard currency and an eye for real estate in Santa Catarina with reports of big hotels changing hands for no more than $1m-$2m, and investors deciding to launch building schemes along one of the many beaches which remain unspoiled. “It often takes some time for property prices to adjust to the fall in the value of the currency. The end of 2002 is certainly one of those valuable moments when real estate can be picked up extremely cheaply,” said one expert in Florianópolis.

Paraná

To the north again is the state of Paraná, home to the world’s largest electricity scheme. The Itaipú dam is one of the things which has brought a growing amount of foreign investors’ money. On the River Paraná, it holds back 29 billion cubic metres of water, needed 15 times more concrete in its construction than was used to build the Channel Tunnel between France and England and contains enough iron and steel to construct 380 Eiffel Towers. It is in the process of expanding its capacity from 12,600 MW to 14,000 MW and produces a quarter of Brazil’s power, having turned out a world record of 93.4 million MWh in 2000. A 40-minute drive from Itaipú brings you to the state’s big tourist attraction, the Iguassu Falls, one of the wonders of the world. When Eleanor Roosevelt, wife of President Roosevelt, visited it, she summed the situation up in two words: “Poor Niagara!”

Quality of life

Again, the contrast is sharp with its southern neighbour. The state capital, Curitiba, is a drizzly place set inland on a group of hills with an airport which, almost uniquely in Brazil, is often closed by mist. Yet the city claims, not without some justification, to have the highest quality of life in the whole country. Its system of town planning, whose headquarters is at the IPPUC, the Research and Urban Planning Institute of Curitiba, has attracted visitors from all over the world. The public transport network is subsided in the poorer areas of the city. There is efficient rubbish collection but the poorer inhabitants are paid for the rubbish they bring in themselves, a fact which helps to explain the city’s neatness. Poorer families are also paid if they keep their children at school. Developers get access to building land on condition they turn over a fifth of the lots they develop to the municipal housing fund. IPPUC is there to assist new investors in their relations with the organs of the city and the state.

Public spaces are carefully tended. As the southern spring starts, for instance, the Botanic Gardens is a mass of blue pansies while virgin forest is visible everywhere on the horizon. Behind the government buildings, a vast new cultural centre is about to be inaugurated using buildings erected by Oscar Niemeyer, one of the world’s outstanding architects.

Like Rio Grande do Sul, its state and city governments have good records. The state authorities have concentrated on education and health for its nine million inhabitants and is, for instance, installing an internet connection to its schools. In Curitiba, free public access is available at 26 sites to its 1.6 million inhabitants.

Foreign arrivals

The state has attracted much European investment, from Volvo and Electrolux of Sweden to Renault from France and DaimlerChrysler of Germany.

In the agricultural sector, farmers from a number of countries have taken land, recalling the times a century ago when the state made efforts to attract immigrants from Poland, Germany, Italy and Ukraine. Paraná is Brazil’s prime producer of soya, maize, wheat, beans and oats. It has long-since diversified away from the coffee which used to keep it prosperous. Given today’s price of coffee, that diversification was no bad thing.

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