Reliability through Experience

De Smet Engineers & Contractors (DSEC)

A successful Belgian-Brazilian Partnership Experience

Wallonia Export Invest Fair – Palais des Congrès, LiègeJeudi 5 décembre 2013

Reliability through Experience

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De Smet Engineers & Contractors (DSEC) is an international general contractor active in the agro industry with particular emphasis on Sugar, Ethanol, Biochemistry and Biomass to Energy,

Brazil is the world leader in cane sugar and ethanol production and a reference in related process technologies, particularly in South America,

Brazil has a definitive dedication to play a leading role in Bio Sourced Chemicals,

DSEC needed to be present in Brazil to offer engineering, technology and project management services,

DSEC has been sporadically active in the country as an equipment supplier in the passed and recognized that no progress could be achieved without a local entity (Import restrictions, market proximity, familiarity with local practices…),

Starting from scratch in a place like Brazil makes no sense : only a partnership with a local company can provide the necessary support and visibility in a market where strong competition is already present.

Introduction

Successful Partnerships in Brazil

Reliability through Experience

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Creation of De Smet Contractors do Brasil in 2008: a 60 / 40 partnership between DSEC and the Brazilian company Interunion (exporter of Brazilian sugar and ethanol equipment in Latin America).

Small team backed by Belgian HQ, ready to grow once a contract is signed,

Target Brazil and Latam with focus on foreign investors willing to feel at home with people more familiar with their way of thinking,

Gain of a visible presence on the market,

Acquisition of local knowledge, particularly of local suppliers and competitors,

Signing of several technical audits and engineering contracts,

Still very difficult to secure larger contracts as clients were reluctant to place orders to a company that had yet to be developed…

we had to move one step further !

First Phase

Successful Partnerships in Brazil

Reliability through Experience

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Creation of De Smet Empral in 2013: a 51 / 49 partnership between De Smet Contractors do Brasil and the owner of Empral (established Brazilian engineering company active in the sugar and ethanol field in Latin America for more than 30 years) through the acquisition of Empral’s assets.

Medium size fully operational company, forced to enlarge its range of activities from engineering to complete turnkey projects to answer the market requirements for larger mandates with the back-up of the Belgian HQ,

Target on Brazilian and Latam markets,

Fully recognized as a key player in the field,

Full local knowledge, established contacts with key accounts,

Ongoing engineering contracts and promising prospects list,

Ongoing reinforcement of the existing structure…

Second Phase

Successful Partnerships in Brazil

Reliability through Experience

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Lessons learned

Successful Partnerships in Brazil

A simple representation office is not enough if you are facing well established local competition : clients will trust what they can see locally,

Creating a company in Brazil is neither so critical nor costly if done properly,

Local partners need to be more than somebody that has been recommended to you. Real trust must be established, close to friendship level and it takes time…

Negotiation pace is often not the one expected but can suddenly accelerate up to the conclusion of a deal. These kind of momentum cannot be missed due to a long internal decision process, you must be ready to decide !

Be very careful with expats profile and adaptability to the country and to your partner… avoid expats when possible !

Salaries of Brazilian key employees are becoming higher and higher, social benefits more and more costly…

Reliability through Experience

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Use the assistance of professionals for contacts with the administration,

Use the assistance of professionals to guide you through the taxation system,

A “Limitada” is by far the most commonly used set-up, even though it can be internally managed as a SA,

Avoid installing a small business HQ in large cities like São Paulo or Rio where salaries, rents and services costs are very high and business life often very complicated: better organizing a one or two day-meeting trip in São Paulo regularly than being located there…

Avoid insisting on “nice to have” or secondary issues that will wear out your relationship with your potential partner, go to the essential having in mind that in Brazil you can always “dar um jeito” to solve small problems afterwards….

Recommendations

Successful Partnerships in Brazil

Reliability through Experience

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Thanks for your attention

Reliability through Experience

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Contact information

De Smet Engineers & Contractors SA Waterloo Office Park - Building O - Box 32Drève Richelle, 161B-1410 Waterloo, BELGIUMwww.dsengineers.comPhone: + 32 2 634.25.00Fax: + 32 2 634.25.25

De Smet Empral Ltda. Rua Santo André, 650, Nova Jaboticabal14890-000 Jaboticabal – SP, BRAZILwww.dsempral.com.brPhone: + 55 16 3209 1999Fax: + 55 16 3202 1515

De Smet Contractors de Argentina Quito 2618, Beccar B1643HBH Buenos Aires, ARGENTINAwww.dscontractors.com.arPhone: + 54 11 4719 6808