RIO DE JANEIRO, BRAZIL – Brazilian cities were put to the test in the pandemic, just like those of all countries affected by the crisis triggered by Covid-19. Many experienced strict quarantines. They saw unemployment soar and businesses shut their doors. They now experience the dread of a second wave of infections and the risk of being forced to again restrict part of trade and service sector activities.
The São Paulo state government has already reduced the capacity of street stores, shopping malls, and restaurants in the capital and other regions on Monday, November 30th. That same day, in Rio Grande do Sul State, cities such as Porto Alegre, Pelotas, and Novo Hamburgo banned the circulation of people in public places, such as parks and riverside amusement centers. Belo Horizonte is considering a new lockdown. Many others are studying the reinstatement of rules to again contain the spread of the disease.
It is also a fact that, amid one of the worst health crises ever, some municipalities have managed to stand out and continue to grow. In Camaçari, Bahia, the balance of jobs was positive by 1,000 vacancies in September, rendering the labor market in the city similar to the start of the year, before the pandemic. In Florianópolis, service tax collection (ISS) is expected to increase by 4%, largely due to the expansion of the technology sector, while most municipalities are suffering from a drop in revenue caused by the coronavirus crisis.
Juazeiro, a fruit producing center in the state of Bahia, should benefit from increased exports. These cities were able to stand out at a particularly difficult time in the economy not only because they posted good management, employment, or infrastructure indicators. They have taken a step forward. “Public management was skillful in identifying the main local vocations and building shields around them,” says David Kállas, coordinator of the Insper Business Studies Center.
In addition to Florianópolis, Juazeiro, and Camaçari, São Paulo and its neighbor, Barueri, were among the first places in the 2020 ranking of the best cities to do business, drawn by the Urban Systems consultancy. In the year that everything changed, the survey begun in 2014 was also forced to change. With most of the country impacted by Covid-19, indicators that take into account the impact of the disease, such as the total number of infections and the lethality rate, as well as issues related to the impact of the pandemic on the economy were developed. Data from all of Brazil’s 326 municipalities with over 100,000 inhabitants were analyzed.
The methodology has also been redesigned to offer greater insight on the strengths of cities, which made them more resilient to the crisis. Consequently, six categories were created: agriculture, trade, education, industry, real estate, and services. “Thus, it became easier to identify the vocations of each municipality,” says Willian Rigon, Urban Systems’ partner and marketing director, responsible for the study completed in October. “When analyzing the winning cities of each category, one can better perceive the sum of efforts made so shields could be built to pave the way for growth,” he says.
Take the example of Florianópolis. The capital of Santa Catarina created one of the first poles of technological innovation in the country in the 1980s. Programs developed jointly with universities and private enterprise made the city a pole for new business in services based on information technology.
With over 4,000 sector companies in the city, some of them in full expansion, Florianopolis managed to open jobs and should close the accounts in blue this year. Barueri, highlighted in the commercial sector, has achieved the feat of increasing by 7.2% the number of wholesale establishments.
Benefiting from the presence of large retail groups and distribution centers of some of the largest companies in the sector in Brazil, such as Mercado Libre, the city managed to maintain the employment rate of 1.57 per inhabitant, one of the highest in the country, and an average monthly salary of almost R$4,000 (US$800), 37% higher than the national average.
Unfortunately, these cities are the exception. Most Brazilian municipalities are faced with cash problems, with the recent drop in revenue. This is more serious for 35% of Brazilian municipalities unable to support themselves financially. Over 1,000 cities risk breaching the spending cap of the Fiscal Responsibility Law, which requires them to spend less than 54% of net current revenue on personnel.
In June, a rescue of R$60 billion was released for municipalities and states, and the government is studying a new round of support. “All Brazilian cities receive transfers from the federal government. The ones doing better are those that have not accommodated themselves and are constantly trying to innovate,” says Kállas. The teachings of the best cities to do business in 2020 are an inspiration for all municipalities – in times of pandemic or otherwise.
INDUSTRY
Formerly a hippie region, Camaçari in Bahia has become one of the most dynamic industrial poles in the country.
Five years ago, BASF, one of the largest chemical industries in the world, invested more than 500 million Euros to build one of its largest plants in the Camaçari industrial complex. “According to the evolution of the Brazilian economy, we are considering new investments on the site,” says Tânia Oberding, industrial director of BASF complex in Camaçari. Among the 90 companies that chose Camaçari – 37 km from Salvador – to install their plants, a dozen have arrived in recent years. Another four are expected to join the group in the medium term.
The industrial center, responsible for 30% of Bahia’s exports and 22% of the state’s manufacturing industry GDP, is experiencing a moment of genuine growth. “A number of attractive features, such as the pipeline infrastructure built at the site for the flow of raw materials to the nearest port, Aratu, has been attracting more investments,” says Mauro Pereira, superintendent of the Camaçari Industrial Development Committee.
With an annual turnover of over R$60 billion, the Camaçari pole was not forced to shut down its activities because of the coronavirus crisis. Most companies chose to implement four or five-hour work shifts, with a lower flow of employees in the plants. Other companies chose to reduce wages and working hours. In September, when the demand for raw materials began to heat up in the country, the industries in Camaçari opened 239 new jobs of the 1,000 generated in the city.
Currently, the complex employs about 15,000 people, whose average salary stands at R$5,200 per month. The figure is 55% higher than the national average, due to the need for specialized labor. Founded in 1978, the complex is strategically located near the largest port in the region and the capital Salvador. The development of the infrastructure has made the region, which for many years was known as a hippie stronghold, even more attractive.
Today, the city of about 300,000 inhabitants lives off the pole’s success: 37% of formal jobs are industrial and 10% of tax revenue comes from industries installed there. However, it faces deep social and urban challenges: only 60% of the city’s streets are paved and the sewage network serves only 20% of the population.
In August, the city government launched a campaign to attract new companies to the city and boost the post-pandemic rebound. A fiscal incentive program and simplified licensing will be offered to expedite the implementation of new businesses. “The benefits of operating in Camaçari are incomparable,” says Carlos Alfano, Braskem industrial director in Bahia, a company that received state incentives when implementing its project. With 1,100 employees on site, Braskem invested R$450 million in the plant last year and is considering a new expansion stage.
The experience in Camaçari has encouraged the government of Bahia to replicate the initiative in other regions. The plan is to build another industrial center, focused on the sugar-alcohol sector in the west of the state. “We must repeat the model implemented in Camaçari, which combines good infrastructure with labor supply and fiscal incentives,” says João Leão, vice-governor, and secretary of Economic Development. “It has everything to work out.”
AGRIBUSINESS
In the Bahian hinterland, the city of Juazeiro tamed the climate and the soil to create a successful fruit growing center.
In 1983, when rural producer Suemi Koshiyama moved from Mogi das Cruzes, a fruit and vegetable producing region in São Paulo, to Juazeiro, in Bahia, it was difficult to find stores selling fertilizers. Most streets were dirt roads and many people used donkeys for travel. “The city is unrecognizable,” he says. With the investments in agriculture, which began with the project to capture the waters of the São Francisco River, the 150,000-inhabitants municipality was transformed.
Koshiyama’s business, Special Fruit, has grown along with local development. Today, the São Paulo company is one of the largest mango and grape producers in Brazil. In the 1,200-hectare area, about 20,000 tons of fruit are harvested yearly. Despite the crisis, revenues should reach R$250 million, 25% more than in 2019.
A good part of the fruit farmed in the Bahia hinterland is directed to exports. “With the favorable exchange rate, turnover will grow for all producers this year,” he says. The combination of currency appreciation and increased productivity will result in fruit farming in the region to yield R$4.5 billion, 21.5% more than in 2019.
Placed first in the agricultural sector in the 2020 ranking of the 100 best cities to do business, Juazeiro found its vocation for agribusiness four decades ago. Public policies in partnership with institutions such as EMBRAPA (Brazilian Agricultural Research Corporation) have provided one of the largest irrigation programs in the country. And the development of fruit varieties adapted to the region’s soil and new planting techniques helped bring high agricultural potential to the desert vegetation. Moreover, the second-placed city in the agro ranking is the Petrolina, in Pernambuco, across the São Francisco that creates the border between the two states.
The region has also become attractive for companies like Miolo from Rio Grande do Sul. The winery concentrates the production of sparkling wines, one of its flagships, in the 200 hectares where it harvests 400,000 kilos of grapes yearly. In 2021, Miolo intends to expand the area. “The local climate and cultivation techniques, based on drip irrigation, allow two harvests of grapes per year,” says Adriano Miolo, the company’s superintendent and grandson of its founder. “This year, it was important to quickly conceive strategies in order not to be held hostage by the pandemic.”
Since the start of the pandemic, Juazeiro has recorded 5,300 cases of covid-19. Local entrepreneurs and public authorities have designed policies to curb the virus. To ensure social distancing, the bus fleet that takes the 30,000 workers from downtown to rural areas was expanded. Workers’ health is now closely monitored, with testing and removing those who show symptoms of the disease.
“Without this care, we wouldn’t have been able to increase production in the pandemic,” says Guilherme Coelho, a rural owner in the region and president of the Brazilian Association of Fruit and Derivatives Exporting Producers (ABRAFRUTAS).
TRADE
Despite the pandemic, retail and wholesale trade continued to grow in Barueri.
Between January and August, at the peak of the pandemic, the São Paulo municipality of Barueri, with 277,000 inhabitants, closed only 137 jobs. The city maintained an average of 1.57 jobs per economically active inhabitant. This is a record among cities with over 100,000 inhabitants. Not even the São Paulo capital, its neighbor and responsible for 10.6% of national GDP, with 0.6 vacancies per inhabitant, posted similar results. With more jobs than professionals available to fill them (which attracts people from neighboring cities), the job market in Barueri has not been impacted during this year’s economic setbacks.
The city’s average salary, of almost R$4,000, is one of the highest in the country. None of this was mere chance. For 15 years the city has been striving to cut red tape for the conduction of local business – a fact that has earned the city prominence in previous editions of the Urban Systems ranking. Since 2005 licenses to operate new establishments can be obtained online.
After the serious economic crisis that hit the country between 2014 and 2017, the city also invested in job placement programs, such as a job bank with thousands of registered résumés. The city also directed efforts to free professional qualification programs.
This set of factors, coupled with the strategy of maintaining one of the lowest service tax (ISS) rates in the state of São Paulo, around 2% to 3%, has proven to be key for attracting investments in trade. Cut by the beltway, which connects ten highways in the greater metropolitan area, Barueri has become home to large retail companies, such as Walmart, and to merchandise distribution centers, among them Mercado Libre, Latin America’s most valuable company.
“We are reaping the results of a strategic planning adopted some time ago,” says Rubens Furlan, mayor of Barueri, re-elected in this year’s municipal elections. In the first semester, amidst the most severe phase of the pandemic, Barueri recorded an increase of 1% in the number of retail stores and of 7.2% in the number of wholesalers.
SERVICES
With a qualified workforce, Florianópolis stands out for its technology companies and innovation ecosystem.
Pixeon, manufacturer of management software for hospitals, clinics, and laboratories in Florianopolis, had been long considering joining the telemedicine segment. Then came the covid-19 pandemic and the company founded in 2002 and controlled by the American fund Riverwood decided to turn the plan into action: in late September, Pixeon bought the São Paulo startup Boa Consulta, specialized in telemedicine, with one million registered patients and 58,000 healthcare professionals.
The onslaught in the new area required the opening of dozens of jobs to meet the high demand. The year 2020 is expected to close with a turnover of R$ 95 million, 16% more than in 2019. “Pixeon is far from being the only Florianopolis company to post a good performance even in a difficult period, as the one we are living now,” says Iomani Engelmann, the company’s co-founder and marketing director.
“Several other IT companies based in the city have not felt the impact of the crisis.” With over 4,000 technology and innovation companies installed in Florianopolis, the sector represents 14% of the city’s GDP, according to city hall data. This created a buffer in the crisis. Tax revenue on services, for instance, should post an increase of around 4,5% this year. “Accounts will close in blue, largely due to the positive performance of the information technology sector, our main growth engine,” says Mayor Gean Loureiro, re-elected in the first round of this year’s elections.
Technology companies and a qualified workforce walk hand-in-hand. About 50% of jobs in the capital of Santa Catarina are taken by professionals with higher education. The average in the country is only 22%. As a result, the average salary is high in the city: R$4,875 per month, compared to R$2,900 in the remainder of Brazil.
This path has been paved for some decades. In 1986, the city created one of Brazil’s first technology companies incubators. Concurrently, the Federal University of Santa Catarina expanded the technology training center and began to direct the best students to companies in the sector. “At a time when there was hardly any talk of technology, Florianópolis began to attract professionals in the area and became one of the largest poles for the sector in Brazil,” says Engelmann. “In 2020, when we were hit by an unprecedented worldwide crisis, that was what saved us.”
Without a clear policy to contain the spread of Covid-19, however, this city’s strength might not be enough. And Florianopolis decided to use innovation to help fight the pandemic. One of the main initiatives was the tracking of its residents. A service called Covidômetro allows the city’s inhabitants to check in the places they pass.
Once registered on the platform, citizens points the cell phone’s camera at a QR Code sticker installed on public transports or in commercial establishments. By crossing-checking data with the health surveillance, residents are notified by SMS if the area has a high, medium or low concentration of cases. If citizens have passed through a region with a higher incidence of Covid, they will be directed to be tested for the novel coronavirus. These and other initiatives enabled the capital of Santa Catarina to record one of the lowest lethality rates in the country, of 0.79%.
Florianopolis-based Smart Tracking was the company in charge of developing the technology. With a branch in Portugal and another in the United States, the startup should grow 600% this year, reaching a turnover of R$4.5 million. “We are opening jobs and helping the city tackle the pandemic, which is fundamental for the economy”, says Jucelha Carvalho, Smart Tracking’s CEO. “This shows how much Florianopolis was right to bet on its greatest vocation.”
EDUCATION AND REAL ESTATE
São Paulo has the largest number of university students in Brazil and the most dynamic real estate market in the country. And both have reinvented themselves in the pandemic.
Few Brazilian cities have been as impacted by the pandemic as São Paulo. With over 400,000 infections and 14,000 deaths by late November, the São Paulo capital is experiencing the second wave of covid-19 transmission and the tightening of rules to open economic activity. On Monday, November 30th, the São Paulo state government placed the capital and other regions in the so-called yellow phase of quarantine, which, among other measures, reduces the capacity of street trade, shopping malls, and restaurants to 40% (previously 60%).
“There is no room for the alarmist discourse that we will have a new lockdown or that the pandemic is over,” said re-elected Mayor Bruno Covas. The current economic crisis, which has already forced the loss of 100,000 jobs in the formal market, may increase unemployment in the country’s largest city. But São Paulo has also been witnessing intense changes on several fronts due to the health crisis.
Two areas are highlighted by Urban Systems’ Best Cities to Do Business ranking: education and real estate market. In the city concentrating the largest number of university students in the country and the most dynamic real estate market in Brazil, 2020 was a year of learning that should endure after the pandemic.
Universities and colleges in the city concentrate 15% of the country’s higher education enrollments. With the pandemic, all were forced to quickly adopt distance learning – only 18% of students studied remotely before covid-19. With nearly 10,000 undergraduate and graduate students, the Insper business school had to develop an online model in ten days in March.
Since then, Insper’s management daily monitors the 140 classes that the institution offers to control students’ learning. “We detected issues caused by the pandemic and others that existed even before quarantine,” says Marcos Lisboa, president of the institution. Only part of the activities returned to the in-person model with the relaxation of the teaching sector activities in October.
Despite the pandemic, Insper launched a new law course, which had been planned for two years. Without clarity on when the routine can be restarted, the school is assessing what can be incorporated in the post-pandemic. “There are classes and activities that need to be held in-person because interaction leads to innovation. But there are others that allow distance learning without being harmed. There is room for a hybrid model in education,” says Lisboa.
Similar challenges are faced by the real estate sector, which suffered a heavy blow in the first months of quarantine. But shifting to the home office forced families to rethink the domestic space, in which it was also necessary to find areas for remote work. “In September, we saw an explosion in residential demand in the capital. From luxury real estate to the middle class, the market is moving,” says Marcelo Pessoa, president of Locke Engenharia, which will start 2021 with nine developments under construction.
In October, 5,542 new properties were sold, an increase of 38% over the same month last year. Interest at its lowest level in the country has encouraged investment in the city’s real estate sector, where housing is lacking. It is estimated that there is demand for 200,000 new homes for families with an income of up to R$4,000, and another 150,000 units for those with an income higher than that amount.
On the other hand, the behavior changes produced by the pandemic have affected the corporate market, in which there are offices being returned and high vacancy rates in commercial towers. “There are many innovations in urban space that should result from the pandemic. Buildings with empty parking lots can be directed to more productive and innovative activities,” says Tomas Alvim, coordinator of Insper’s Future of Cities Laboratory. One way or another, the city will adapt.
Source: Exame