Brazil stops exporting US$11 billion in engineering services

The largest Brazilian construction companies lost space in the Brazilian and global market from 2015 onwards, the year of the peak of total revenue and participation in engineering export services.

Brazil had only 0.5% of the global engineering services export market in 2020, according to an estimate by lawyer Evaristo Pinheiro. From 2017 to 2019 he was legal director at Odebrecht and president of Sinicon (National Union of the Heavy Construction Industry-Infrastructure).

Pinheiro surveyed global data on the evolution of engineering services exports in recent decades. In 2020, the year of the most recent data, the total reached US$420 billion, equivalent to R$1.4 trillion.

Brazil reached 3.2% of this market, in 2015, when the total was higher: US$500 billion (R$2.7 trillion). Had it maintained the same share, the country would have exported US$11 billion more in 2020, according to Pinheiro’s estimate.

The presence of Brazilian engineering in other countries began to grow more during the government of Fernando Henrique Cardoso (1995-2002), with export financing programs: it went from 1.5% to 3.2% of the global market in 2015.

But from 2015, construction companies had a drop in revenue due to the loss of contracts and punishments imposed by Lava Jato. The billing of the largest companies fell from R$108 billion in 2015 to R$12 billion in 2019, according to the most recent data available, according to a survey by Poder360. The drop was 89%.

The drop in the global export share of engineering services from 2015 to 2020 was 85%. The main reason for this was the reduction in official credit lines from 83% to 91%, according to Pinheiro’s survey.

Pinheiro considers it a mistake for the government to stop offering export credit focused on heavy construction. “All countries that have greater market share do this. The benefits are great, because, in addition to services, the works lead to the export of products with high added value,” he said.

The 1st place in the ranking of engineering services exports in 2020 was China, with 26% of the market. Most of China’s works abroad are in Africa. Spain was in 2nd place with 15%.

In Pinheiro’s assessment, it would be possible for Brazil to reach the level that Turkey had in 2020, of 4% of the global market.

Critics of financing engineering exports cite the fact that governments in some countries have defaulted. One example mentioned is the construction of Porto Mariel, in Cuba.

The installments that were not paid by the Cuban government to the BNDES (National Bank for Economic and Social Development) had to be settled by the National Treasury. But Pinheiro said this is a small portion compared to what the country earned from all the works that were paid normally.

The loans were paid to BNDES by the FGE (Export Guarantee Fund), linked to the National Treasury. In other words, the BNDES does not run the risk of not receiving funds. And the fund has a surplus by promoting these insurances.

Another criticism is due to the fact that the financing is destined to works abroad that in theory could be done in Brazil. The builders say that nothing is left undone in the country due to the existence of an opportunity abroad. The lack of works here is due to the absence of projects or government borrowing capacity

The current president of Sinicon, Claudio Medeiros, said that some Brazilian construction companies are able to carry out works in other countries with local credit lines for clients in the public and private sectors.

“In several countries it is possible to obtain financing with lower interest rates than in Brazil. But in others not. That is why it would be important to have greater access to credit in Brazil,” he said.

This report is part of the Brazil ahead series. It is a comprehensive survey of information from the digital newspaper Poder360 about the country’s challenges in this 3rd decade of the 21st century, in which democracy is in an advanced stage of consolidation, but institutions and various sectors of the economy still need improvement.

With information from Poder360