Why Brazil needs foreign enterprise

Look ahead interviews the leading authorities on trends, challenges and opportunities in technology and innovation. This week’s Q&A is with Lourenço Bustani, founding partner and Global CEO of Mandalah, a global innovation consultancy started in São Paulo, Brazil. Mandalah helped develop Nike’s vision for 2014 FIFA World Cup, and has worked in Brazil with GM, Petrobras, and the Organising Committee of the Rio 2016 Olympic Games.

What’s your advice for multinationals seeking to deepen their engagement with Brazil? What are the most common mistakes they make?

Having commercial relationships and “engaging with Brazil” are two very different things, particularly in a country where so-called emerging middle class consumers (now sunk in debt, mind you) are deprived of the most basic public healthcare, education, security and transport. Multinationals need to be realistic about the current state of affairs in Brazil.

Limiting their role to opportunistically exploiting increased purchasing power will only get them so far. From a long-term perspective—which is the only way to envisage a true turnaround for Brazil—the only type of commerce that will withstand the test of time is the type that positively impacts the very fabric of the country, trickling down to people’s overall welfare, beyond consumption.

Given the economic slowdown in Brazil, why is now still a good time for foreign enterprises to enter Brazil or deepen their activities there? How should they change their approach?

We are in the midst of a business cycle trough in Brazil, but the long-term fundamentals are still very strong. While we have slow growth, worrisome inflation and a serious lack of investment, the country has a thriving democracy, with a young working population, strong institutions and a consistent improvement since re-democratisation 30 years ago. There are a few long-term problems that have to be dealt with urgently, such as a staggering lack of qualified human capital (due to a deplorable education deficit) and endemic corruption. When compared to global emerging peers, we are still a very attractive market. But there’s work to be done, no doubt.

Foreign firms’ approach needs to be long-term. Nothing in Brazil happens overnight. Partnering with local companies can help multinationals navigate the local intricacies and ecosystem, delivering a strategic upside.

How should multinationals seek to reconcile their immediate need for profits with a long-term strategy that addresses Brazil’s shortcomings?

Addressing these social challenges is precisely what will allow multinationals to seek—and sustain—profits over time. There is growing acceptance (not just in Brazil, but globally) that generating wealth at the expense of people and planet is, in fact, an illusion of progress and development. Compensating damage through peripheral corporate social responsibility initiatives that usually lack visibility and resources is too little and not responsible enough.

Now, when profit is derived from commercial activities contributing to their overall health and happiness, a vital spiral of prosperity is reached, where shareholders—and stakeholders—all stand to gain. At Mandalah, we call this “conscious innovation”.

For example, in 2010 we were invited by Nike to help develop a vision for the brand in Rio de Janeiro in anticipation of the World Cup and Olympic Games. The goal was to gain legitimacy among residents and initiate a long-lasting dialogue with them. We chose a bottom-up approach based on two principles: sport as a catalyst for social transformation and sport as an integrative force among residents of the city. The concept we developed – “inFusion”—is a play on words that refers to the city’s rapidly changing social dynamics as well as the role the Nike brand could play by infusing the city with its passion, energy and excellence in sport.

This article is published in collaboration with GE LookAhead. Publication does not imply endorsement of views by the World Economic Forum.

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Author: Greg Lindsay is a contributor for GE Look Ahead.

Image: Employees work on the assembly line at the Renault plant in Sao Jose dos Pinhais August 2, 2012. REUTERS/Rodolfo Buhrer.