Brazil’s booming middle class fuels growth — in Illinois

But what will happen if the "Brazilian miracle" stalls?

By Nicholas Nehamas

Runners start the Chicago marathon in front of the city’s iconic Sears — now the Willis — Tower. Will Brazilian businesses and tourists come running too? (Reuters)

At over a point above the national average, 9.1 percent of Illinoisans are out of work. Governor Patrick Quinn has a plan to bring that number down: harness the power of Brazil’s growing middle class.

Quinn just wrapped up a six-day trade mission in Brazil — the first visit by a sitting Illinois governor to South America — with the goal of promoting stronger economic, educational and cultural ties.

“I am committed to building a growth economy in Illinois that is based on innovation and investment in physical and human capital,” Governor Quinn said in a statement emailed to Latitude News. “We want Brazilian businesses, Brazilian students and Brazilian tourists to feel welcome in Illinois.”

There’s a lot of overlap between the economies of Brazil and Illinois, including strong interests in agriculture, biotechnology, clean fuel and engineering projects. Brazil is already one of the most profitable export markets for Illinois. In 2011, the state sent $2.55 billion worth of goods to the fast-growing Latin American economy, a 23.5 percent increase from the year before. Illinois exports total around $65 billion, about a third of which goes to Canada.

Over the last 15 years, Brazil has moved around 50 million people out of poverty and into the middle class, which now numbers 95 million, according to official government data. With extra money in their pockets, Brazilian businesses and consumers are now starting to demand the goods Illinois specializes in.

That’s a good thing for Illinois’ workers, says Adam Pollet, Deputy Director of the state’s Office of Trade and Investment. There’s a strong link between a rapidly firing export economy and job growth, according to Pollet.

“There’s an enormous appetite from Brazil for the products and services Illinois sells,” he tells Latitude News. “Electronics, chemical products, heavy machinery, agricultural equipment — those are the things that an emerging economy in particular needs as its moves its infrastructure into the 21st century and a large portion of its population into the middle class.”

Increased trade with Brazil isn’t just happening in Illinois. This year, a business magazine named Brazil its “Floridian of the Year” for the contributions of Brazilian companies and visitors to Florida’s struggling economy.

Fun in the sun

Gov. Quinn took more than three dozen businesspeople and entrepreneurs along on his trip to Brazil, and several of them expressed optimism that trade between Illinois and Brazil would continue to grow.

Mark Staublin works for Garrett Brands, a Chicago-based gourmet popcorn firm with stores in the U.S., Asia and the Middle East. He tells Latitude News that Brazil is a natural fit for Garrett.

“Brazil, when you think about South America, it’s the big daddy. And popcorn is huge down there,” Staublin says. “You’ll see it on street corners in all the big cities. You know how we have hot dog guys in New York and Chicago? Well in Brazil, they’ve got popcorn stands.”

Garret plans to open a store in Brazil before the country hosts the World Cup in 2014.

Meanwhile, Michael Rosen, a senior vice president for Forest City Enterprises, says he tagged along with the governor in order to meet Brazilian pharmaceutical and biotechnology companies that might be interested in using Illinois as a “point-of-entry” into the U.S.

“There’s already a good relationship because so many Illinois companies like [food processing firm] Archer Daniels Midland, [and equipment manufacturers like] John Deere and Caterpillar already have operations in Brazil,” Rosen says. “Now there are a number of Brazilian multinationals that are emerging and setting up around the world. We’d like to attract them to Illinois.”

Is the Brazilian miracle stalling?

But there might be a problem: Brazil’s economic growth, so strong for so long, has lately hit a wall. In a recent article in The Atlantic called “Party’s Over: How Did Brazil’s Economy Get So Bad So Fast?” David Rohde examines how high taxes, a lack of infrastructure and byzantine regulations caused Brazil’s growth rate to fall to an “anemic” 0.6 percent in the first half of 2012.

Illinois Governor Patrick Quinn (right) shakes with Eduardo Campos, his counterpart in the Brazilian state of Pernambuco. (Courtesy: Governor Quinn’s office)

Erin Inman, a senior vice president for the Chicago-based engineering firm Primera, also accompanied Gov. Quinn on his trip to South America. She tells Latitude News that, from an engineering standpoint, working in Brazil is easy: it’s the business part that might be hard.

“There’s absolutely a ton of opportunity there,” she says. “But there’s a lot of intricacies in terms of their tax laws and the way they do business. You really need to spend some time there to understand it all and take advantage.”

Popcorn-maker Mark Staublin agrees high taxes and complicated regulations can be an issue.

“I’ll be honest,” he says, “the first time I had somebody walk me through it, I had a headache. There’s a lot going on.”

But he added Garret Brands has hired a new employee whose previous job was helping businesses get established in Brazil.

“There are definitely hurdles that exist but we will still be able to get through them.”

The heart of America

Another problem for Brazil: it doesn’t have enough engineers.

That’s something Illinois might be able to help with. Last year, Brazil’s government announced a program to give 100,000 Brazilian students the opportunity to study science, math and engineering at foreign universities.

“Brazil wants to train a whole new generation of engineers,” explains Michael Rosen of Forest City, “and we want them to come here, where we have two top engineering programs at the University of Illinois and the Illinois Institute of Technology.”

The state is also trying to attract Brazilian tourists, who typically congregate in New York, Miami and Las Vegas. In 2011, around 1.5 million Brazilians visited America, a 26 percent increase over the previous year. But only 56,000 of them stopped in Illinois.

Adam Pollet, who works for Illinois’ Office of Trade and Investment, bristled slightly at the suggestion that Chicago’s icy winters might not appeal to the typical warm-blooded Brazilian tourist. But he maintained his good humor, explaining that the city has “all of the shopping [of New York] but at a better price, plus incredible culture, wonderful architecture and top restaurants.”

And there’s a lot more to see in the state than just Chicago.

“Here in Illinois, we like to think that we’re the heartland of America,” he says. “And a lot of people from all over the world want to see what the heart of America looks likes. Start in Chicago, come see what this great country is all about.”