The CEO Game

Following our latest article on Brazil, Brazil Only Second to the US, in which we discussed just how Brazil has become the leading and biggest economy in South America, The CEO Game moves the focus to the Brazilian communications and the possible effects of the 2016 Olympic games to be held in Rio de Janeiro, on them.

Brazilians are the world's surf champions.

Beside being well famous for their wave surfing skills, the Brazilian people are also the world’s record holders of web surfing. Why are we telling you this? Good question. The answer is that Brazil is booming in terms of communication, everywhere you look around there are investors who are bringing in big bucks. Take GVT’s acquisition for instance, GVT is a communications company operating in Brazil, which was bought last month for 4.2$ millions. Big bucks indeed. Their success is protruded by the country’s status ten years ago, when vast areas of Brazil lacked telephony infrastructure like the rain forests and the Amazonas.

Until a couple of years ago, the situation in the big cities resembled the one of a developing country in the 70’s: the citizens would have to wait for years in order to get a phone line in home and would suffer from poor and sluggish services. Today, Brazil has got 140 million mobile users, 40 million registered phone lines and more than 10 million broadband Internet users.

Considering the fact that 192 million people live in Brazil, these three “quotes” are still far from fulfilling their potential. In the field of mobile phones, the most satiated field of all three, 80% of the users- most of them belonging to the low class, do it by a prepaid card. If Brazil continues to grow, it is obvious that the number of users who pay monthly to the cellular companies will rise. In the end of the 90’s, the government had decided to expand the wired communications infrastructure in the country by increasing the competition.

Therefore, Brazil began creating “mirror auctions“, which allowed private companies to found all across Brazil, rival phone companies that will compete with the big government’s companies which ruled over all the place. “The transition that Brazil has made in the field of telecommunications, goes hand in hand with the vast changes the country is going through in the last decade”, explains the CEO of the aforementioned GVT. “What happened in GVT- couldn’t happen in a different developing country- the rise in the life quality of entire demographic layers, created a huge demand and market, which is growing on a daily basis” he added.

One of the reasons for the competitiveness in the field is the very existence of a strong and independent regulator. This regulator answers to the name of Anatel and is composed from 5 officials that where appointed by the Brazilian congress and cannot be fired. Sweet working conditions. “A strong regulator can make decisions that don’t serve the companies’ interests and no communications company can stand in the way“, the CEO says. The Brazilians are notorious for being web addicts, like mentioned above they lead in the number of surfing hours per person. Yet, only 10 million citizens are surfing via a broadband connection and even in the main cities it is sometimes hard to find wireless networks.

They surf by using a regular phone line. This antique method of surfing, has a different tariff from a regular phone call and in the weekends and nights the prices are real low. The Brazilians simply prefer this because the price for a broadband connection is 30$ a month. Many companies earn millions of dollars just from the customers who use the phone line in order to surf the web.

The Olympics and the World Cup soccer games are expected to give a huge bolster to the broadband connection. In fact, the government has initiated a new national project its goal- in the year 2014 some 90% of the population will have a broadband connection (hurray). The project is just another step for the telecommunication market in Brazil.

In conclusion, as far as the Brazilian communications go, there is still a huge potential. After the mobile phones and Internet bandwidth, the next profitable area will be cable TV. Because of legal problems, there is only a small infiltration of cable TV in Brazil. In spite of it, there are signs that things are starting to change and there is a big chance for profits.

Omer Shachnai

The CEO Game.

After the kick off article Focus on Brazil, we continue to cover the story behind Brazil’s economic boom. This time we focus on the roots of this financial revolution; Brazil’s financial carnival began in the middle 90’s when the inflation was lowered, foreign exchange and investments became available and many government institutions were privatized. Since then the financial boom gave its toll and over the years many Brazilian companies became giant worldwide corporations, such as the national oil company Petrobras, the mining company Vale or Embraer- one of the biggest private jets producer in the entire world. So, what’s the story behind the now so obvious Brazilian popularity and success? Where did it all start?

Coffee beans' high price helped Brazil

While the whole world is suffering from a decrease in foreign investments because of the financial crisis, the same kind of investments in Brazil grow by 30%. This is only one of the reasons why Brazil is the leading and biggest economy in South America and only second to the US in the entire American Continent. “There is consent between South American countries about Brazil: They all agree it is the leading country” according to experts. “If once Brazil, Argentina and Mexico disagreed about who is leading the flock, it’s now clear to both the latter that Brazil is the one”, they continue.

The success of this South American country also relies on luck and a lot of it. Brazil, the number one exporter of sugar canes and coffee beans in the world and a big exporter of cacao, tobacco and soy beans as well, has really enjoyed the continuing price rises of these commodities in the global markets in the last few years. Most of the wealth in Brazil, like other surrounding countries, is owned by a small part of society, while most of the citizens are living in poverty. According to the Gini inequality index, Brazil is located at the 10th place out of 126 countries, but it is a good improvement- in 1989 Brazil was ranked second.

These cracks in the Brazilian society are right there on the surface for everyone to see. Take Sao Paulo for instance, out of the city’s 10 million residents, 30 thousand are millionaires. It is hard to miss all the choppers which are swirling between the city’s skyscrapers, which nearly all of them have a landing spot. The millionaires simply prefer to skip the unbearable traffic jams by traveling by air and it shows: Sao Paolo is the leading city in the world in terms of private helicopters, surpassing New York and Tokyo. On the contrary, residents of the poorer neighborhoods can’t even pay a taxi ride.

Nevertheless, in the last few years the social gap is narrowing gradually. As mentioned in the previous article, the middle class has grown and then some. With more than 20 million Brazilians who joined it lately, it is a big impact. Still, millions of others remained poor but have managed to improve their financial status to some extent. The Global Bank also reported that between 2002-2006 the social deficits have narrowed by 6%. The man in charge is no other than Brazilian President, Luiz Inacio Lula da Silva, also known as “Lula”.

Born in the north, the Brazilian president had a poor childhood and had to work since the age of 14. He was elected as a candidate of the Brazilian labor party, while promising profound reforms. Because of political arguments and compromises he didn’t fulfill his promise to the end, but he did make a mark. The most significant step was a massive investment through loans by the government, in the citizens themselves.

Following the government, the private market also increased its credit eligibility. Ten years ago, only few Brazilians had a credit card, even fewer had a mortgage. Today, more and more Brazilians use and enjoy both. This in turn has helped the Brazilian market: millions of citizens became potential consumers of different merchandise, which in turn influenced investors to come flooding in.

Omer Shachnai

The CEO Game.

Brazil’s economy is on the up and growing rapidly as the swift pace of the samba, the national icon: the investments are flowing in, the investors are enthusiastic, the market is getting stronger and the gap between rich and poor is closing gradually. The CEO Game launches a special series of articles about Brazil, one of the hottest countries in South America and a rising powerhouse in the global scene, in order to shed some light on this Latin wonder and answer why all investors are going crazy for Brazil?

The ninth economy in the world

In Brazil, the land of the samba, even rallies appear like a carnival: balloons in all sorts of colors are flown into the air, bands are playing to the beat of the drums and the protesters are making themselves heard through singing altogether. That’s just how the 50 thousand workers of the major banks of Brazil, looked like when they assembled to protest three weeks ago in front of the parliament in Brasilia, the capital. They requested to minimize the working week to 40 hours of work and to improve the labor conditions.

“Our economy is growing in the recent years, partially due to the oil, which is a national resource that belong to all the Brazilian people. It is not understandable why all the profit is going only to the investors and the rich. The workers, the ones who are behind the wheel, who put the wheels of the economy in motion, also are entitled to some of the wealth”, that’s the reason for the protest according to one of the protesters. This rally, which might seem trivial to the Western “eye”, says something about the new club that the Brazilian worker is gradually joining.

That worker, is no longer demanding work by itself, he wants privileges too. It is another symptom for the change that Brazil is undergoing in the last few years- millions of people who have gone from the poor layer of society to the middle class and are changing the face of the country. You can notice the change everywhere, from Sao Paulo, the largest city in Brazil and financial capital of it to Rio de Janeiro (the host of the 2016 Olympic Games), where each weekend thousands of Brazilians are swarming to Copa Cabana, the most prime and well known beach location in the city.

In the last few months, Brazil became the hottest name in the global economy. Approximately two weeks ago, the “Economist” magazine published that in five years, Brazil’s economy will become the fifth largest economy in the world, while surpassing France and the UK. This optimistic estimation lit a fire under this already hot potato and increased the buzz surrounding the country through the global markets.

Brazil is currently the ninth economy in the world in size and is one of the four countries who are lucky enough to be a part of “BRIC”, a term that refers to the fast-growing developing economies of Brazil, Russia, India, and China which are meant to be the fastest growing economies of 21st century. The acronym was first coined and prominently used by Goldman Sachs in 2001. In the twenty-one century, these four countries will consist 40% of the world population, while only 12% of the world population will live in the Western countries.

Brazil’s ace and uniqueness in this pack is its democracy which treats foreign investors gracefully and in dignity. Moreover, hosting the 2014 Mondial games and the 2016 Olympics and the 20$ billion that the government is expected to spend on these ventures will definitely and significantly increase the financial boom and is surely another reason for foreign investors to come a knockin’.

Omer Shachnai

The CEO Game.

In the last few years, more and more leading companies have started realizing that not taking advantage of possible business collaborations between them will harm their goals of gaining a strategic advantage and achieving rapid growth fast. The key for quick and substantial growth is first and foremost the ability to share strategically with other organizations, including rivals.
What made this change happen?

Sharing Resources

The Global Economy- means that wares, ideas, people, cultures and services are moving freely across national borders. When you look closely at the factors that caused globalization to spread so rapidly in the last decades, you find that technology was the main factor. Technology has shortened distances, created large communication networks, allowed us to be exposed to different cultures and even improve our lifestyle. Dealing with this tremendous global space required collaboration between many business corporations around the globe, mainly to ease development and distribution efforts.

The Need For Knowledge – is growing rapidly and the knowledge to be gained is now more diverse, multidisciplinary, faster and complex. This need requires that we share with others in creating data sources that are needed in the business world. We need external feeds from different sources to enrich the organization’s knowledge, and without it the organization won’t survive in the modern business world.

The Demand for Immediacy- This is a critical factor in global economy. Everybody wants everything, faster, sooner, and quicker. In this age, when a technology can become dated faster than it was developed, it’s crucial for different organization to collaborate. A firm that insists on doing everything on its own will soon find out that it’s already too late and it missed the market. Companies that participate in these collaborations will always be faster in reaching the market, dealing with changes and empowering their synergy.

The complexity of Technology- This is the simple fact that, if we take a look at the products that we use today, we will find that most of them were not here in the same configuration only few years ago. Every product now has new features, new capabilities or is totally new. There is always a human hunger for newer and better technologies and that is why the complexity is always growing. So what is the easiest and fastest way to produce this new technology? You probably guessed it right: create business collaborations that allow the merging of different technologies and ideas to new and improved products.

Now one might ask what are the factors for a successful collaboration? The main factors are:
• Mutual interest in which each partner knows what he is getting from the collaboration.
• Organizational culture that embraces changes.
• Preliminary planning for setting the collaboration goals.

The same concept applies in the CEO game as well. It will prove to be very hard for one company to research new products, produce them, advertise them and sell them around the globe without the assistance of different companies in different ways.

Ailon.

The CEO Game.

The world standstills, dazed and confused as news break out about a new possible Chinese-Japanese alliance. China and Japan, long time sworn rivals began to seriously discuss their unification, one so strong according to experts, that it could make them the strongest financial force ever seen in the entire world. This comes as a shock, since Tokyo and Beijing’s main concerns over a century were fighting and humiliating each other over more than a couple of wars. Now they talk business and propose creating and joining both a wide “East Asian Community” instead of poking each other with sticks just for the kick of it.

A New East Asian Community?

Although the plans to build this East Asian Community are in their primordial stages, the result of this oriental holy matrimony may pose a threat to major economic powerhouses worldwide including the parallel European Union. Current talks revolve steps to reduce the suspicions and the contention between the two countries. Among this initial steps you can find measures such as canceling the long time obligatory entrance permit (thus, making traveling visa free) and cooperation on environmental issues and energy, as well as public health. If all goes well, the dual countries will be tackling more complex issues from regional agricultural understandings to politics and defense and military cooperation. Another hot issue, and what might be an attempt to strike at the European Union’s foundation stone the euro, is a possible East Asian common currency.

This change in decades long tensions, is possible due to the newly elected Japanese democratic party just a couple of months ago. It is believed that the Japanese PM was the one who started the talks, on his first meeting with Chinese President Hu Jintao in New York. The new Japanese prime minister, Yukio Hatoyama, who won by leading and recruiting brilliant campaign strategists, has brought the winds of change with him, and he focuses his energies at rebuilding the relationships with neighboring China and other countries too. These efforts were previously chopped down by rightist governments, and now they represent a backlash against Washington, some may even say a slap in the face of Japan’s most persistent ally since the Second World War, one that could threaten Obama’s foreign and economic policies.

The effects of an orient economic alliance would be humongous, with Japan and China being the world’s second and third largest economies appropriately. Media observations pointed out it was Japan’s will behind the wheel that revived the talks. However, why does Japan want the alliance so much? Like the old saying says “if you can’t beat them, join them”, the global economic crisis has shown Japan that it needs to aspire to garrison its economic strength, which China might soon surpass, by actually aligning with China and some newly emerging economies in the area. They also want to establish a powerful, influential Japanese leadership in East Asia, don’t forget this once was an Empire, and a shot at solving territorial issues such as who will hold significant areas of the East China Sea, which contain oil and natural gas.

It seems like if they do actually form this union that the West will suffer a blow. But, will the western world gain any profit from the alliance at all? The West could actually enjoy from a closer relationship between Japan and other surrounding Asian countries, which may help US interests in the region. The US administration also believes that more involvement from China’s side in the global stage would help world economics. However, many obstacles still lay ahead: to ease the tension that dates back to the first Sino-Japanese war in 1894, when Japan led an offensive campaign against China and destroyed it’s military under less than a year. There were more wars to follow, with the protruding World War II when 300 thousand Chinese innocent civilians were killed by the Japanese occupying troops. Over the years, the Japanese colonial rule became like a thorn in China’s side, pervading from relations to improve.

Furthermore, some polls show that two thirds of the Chinese are in favor of a wider Asian cooperation like the one being discussed for quite some time now, which will include more countries such as Indonesia, South Korea, Singapore, New Zealand and mighty India. Nevertheless, experts agree on communist China’s unwillingness to jump into a swift arrangement. Especially a wide agreement, that might include another one of China’s traditional rivals- India as mentioned above, with China already fearing the India-Japan space alliance; suspecting that the US is masterminding this regional space alliance, behind the curtains. But, according to the Chinese, they are still advocating and engaged at setting up an East Asian Community and its integration process. We suggest continuing following this hot topic, when talks resume on October 10 in Beijing.

Omer Shachnai

The CEO Game.