In the wake of exporting companies and Brazilian diplomacy itself, the interest of financial market institutions in Arab Gulf countries, especially in the United Arab Emirates and Saudi Arabia, is increasing.
Countries such as the Emirates and Qatar, in the last two decades, and more recently Saudi Arabia, began to promote the opening of their economies, in an effort to diversify beyond the oil industry.
This involves incentives to attract foreign companies, labor and technologies, develop the real estate sector, trade and tourism, hold major international events and redirect part of sovereign investments abroad – which previously went almost exclusively to mature markets. – for emerging economies in Asia, Africa and Latin America.
A similar trend occurs in other Gulf nations. Bahrain is an important financial center, and was the first country in the region to host a Formula 1 Grand Prix, back in 2006. Oman is betting on logistics, mainly maritime, to attract investment to its coast, which has the advantage of being located outside the Strait of Hormuz. Vale, for example, has an iron ore pelletizing plant and a distribution center there.
Brazilian companies that export to the Gulf or that use countries in the region as export platforms began to physically establish themselves there at least two decades ago, through offices, distribution centers and even industrial units. In addition to Vale, there are names like JBS, BRF, Marcopolo, Weg and Tramontina, among many others. According to the Brazilian ambassador in Abu Dhabi, Sidney Leon Romeiro, there are around 40 Brazilian companies in the Emirates alone.
Now, still in small but growing numbers, financial market institutions are turning to the region, keeping an eye on the interests of corporate and individual clients, and on Arab capital, which originates mainly from oil.
Behind the customer
“We follow our customers. This is a good custom,” she told Broadcast (Grupo Estado's real-time news system) Adriano Borges, partner and managing director of investment banking at BTG pactual. “It’s a natural movement,” he added. The institution opened a representation in Riyadh, Saudi Arabia, this year and hired Saudi executive Sultan Olayan to head it. The Olayans are one of the most traditional and richest business families in Saudi Arabia.
According to Borges, the initiative follows the increase in capital flow between the Middle East and Latin America, especially Saudi investments in Brazil. The state-owned Saudi Agricultural and Livestock Investment Company (Salic), for example, is a shareholder in the meatpacking companies BRF (Sadia and Perdigão) and Minerva.
In 2019, then-president Jair Bolsonaro visited Saudi Arabia and met with the country's crown prince and de facto ruler, Mohammad Bin Salman. At the time, the Brazilian government announced that the Public Investment Fund (PIF), a Saudi sovereign wealth fund, intended to invest up to US$10 billion in Brazil. It hasn't happened yet, but this year Manara, a joint venture between the PIF and the Saudi mining company Ma'aden, announced the purchase of 10% of Vale's base metals division.
In this context, according to Borges, BTG's objectives are to attract Saudi investments for Brazilian projects and take Brazilian companies there. The idea is to take advantage of the Arab interest in Brazil and the momentum of the Saudi economic opening and diversification plan Vision 2030. “To take the country to the level of openness, strength and diversification that they want, Saudi Arabia needs to attract talent, technology and also capital in the form of validation”, he declared.
He says that the bank is a pioneer among Brazilian institutions in Riyadh. “We see Riyadh as the gravitational center of the region from now on”, he noted, highlighting, however, that BTG has expansion plans in the region. Competition, for now, comes from large foreign banks. “The difference is that I only sell Brazil, not the United States, Canada or China”, he highlighted.
For him, the visit that President Luiz Inácio Lula da Silva made to the region recently, passing through Saudi Arabia, Qatar and ending with his participation in the 28th United Nations Conference on Climate Change (COP28), in Dubai, in the Emirates, gave “traction” to business. In 2003, Lula was the first Brazilian head of state to visit Arab countries since Emperor Dom Pedro II, and he visited several countries in the region in his first two terms, including the ones he visited now in 2023.
Borges states that BTG is negotiating and receiving mandates to seek investments in areas such as agribusiness, mining, petrochemicals and aerospace. The Gulf countries are especially interested in investing in projects that can guarantee food security in the region and also in attracting companies that can bring technologies to the region, such as Embraer.
Another example of a recent transaction with Gulf companies, still in progress, is the one involving the purchase of Novonor's (formerly Odebrecht) stake in petrochemical company Braskem by Adnoc, a state-owned oil company in Abu Dhabi, in the Emirates. Other Abu Dhabi institutions, such as the Mubadala holding, have been investing in Brazil for a longer time.
Emirates
The Emirates are the Arab country in the Gulf that has attracted the most Brazilian companies and people in recent decades. According to data from Itamaraty, the estimated number of Brazilians residing in the Emirates was 9,630 in 2022.
With an eye on this audience, the manager GCS Capital decided to open an office in Dubai and hire a local executive. According to the company's CEO, Charluan Gamballe, the idea came up in 2019, when he participated in the Hotel Show fair, in the emirate, to present his business and a hotel development in Aparecida do Norte, in the interior of São Paulo.
Its objectives are not only to attract investment for projects in Brazil, but to help Brazilian companies to set up and manage their businesses there, in addition to identifying investment opportunities for Brazilians.
“The market is looking there, but there are few Brazilian financial managers and advisors physically present,” he said. In addition to capital, according to him, Dubai offers advantages such as a favorable location as an international distribution platform, first-class infrastructure, tax incentives, ease of opening a business and low interest rates.
“Money from the Emirates does not always come directly to Brazil. They want to take Brazilian companies there, so they can open branches and then make investments in those branches,” she noted.
According to market sources who follow business in Brazil and the Gulf, XP is another institution that has participated in events in the region or with investors there, and has shown interest in these countries. The company was present, for example, at Expo 2020, a world exhibition that took place in Dubai in 2021 and 2022, a year late due to the pandemic, and this year it received a delegation in Brazil led by the Saudi Minister of Investments, Khalid Al -Falih. When contacted, XP did not comment.
Attractions
“Almost a third of the volume [de recursos] of sovereign wealth funds [do mundo] it is in the Persian Gulf and Adia (Abu Dhabi Investment Authority) alone has more than US$990 billion in assets”, noted the Brazilian ambassador to the United Arab Emirates, Sidney Romeiro. “There is a lot of liquidity in the Emirati market at the moment. Not only from very important regional investors, such as Russians, Indians, Chinese or Iraqis, but from the Emiratis themselves,” he said.
He adds that in 2022 and 2023 the Dubai and Abu Dhabi stock exchanges were among the most active in the world in terms of initial public offerings of shares (IPOs), “outperforming the movement of traditional markets”.
The diplomat comments that Brazil and the UAE “are at the best moment in their relations”, with more and more Brazilian companies establishing themselves in the Arab country and the UAE investing more and more in Brazil. “The strengthening of Brazilian presence in the financial market seems to be a consequence of this scenario: it is possible that at the root of Brazilian interest in the financial market in the UAE is the raising of funds to establish or expand companies”, concluded Romeiro.
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