Brazil’s Northeast Leads Growth Expectations

Brazil’s Northeast region is poised to rise to the fastest-growing area in Brazil from a history of lagging other regions. Massive investments in energy, transportation infrastructure, housing, automotive and other industries are pouring in from China, European countries, and multinational banks.

The region is a particular target of President Luis da Silva or “Lula,” who was born in Pernambuco state, one of nine states in the region. He has vowed to build the region into a middle-class economy, out of a state of near poverty now. To do so, he is reactivating projects he launched during his first term, including a regional rail system and a 15-year-old home purchasing program, “My Home My Life” (MCMV).

The architectural segment of the paint and coatings industry in Brazil has always led volume production by segment at about 75%, and includes major multinationals like Sherwin-Williams, BASF, PPG, and others. Domestic players include WEG, Color Quimica, Pintura, and others.

These players and all others saw a national increase in sales of 2.1% over the first half of 2024, while the Northeast posted the leading 3.6% growth rate, according to the Associação Brasileira dos Fabricantes de Tintas, Abrafati.

Among those with manufacturing plants in the Northeast, the top five listed by descending sales, are: Rochesa Tintas e Vernizes, in Quatro Barras, Parana, with over $66 million in annual sales; Tintas Iquine, in Jaboatao Dos Guararapes, Pernambuco, with $59 million in sales; Tintas Hidracor, in Maracanau, Ceara, with unidentified sales; Bonardi Industria Quimica, in Colombo, Parana, sales unknown; and Hydronorth, in Cambe, Parana, with sales unknown, according to Dun & Bradstreet.

Brazil: Larger Than Continental U.S.

The states comprising the Northeast include Maranhão, Piauí, Ceará, Rio Grande do Norte, Paraíba, Pernambuco, Alagoas, Sergipe and Bahia. Brazil’s Northeast region is huge, representing nearly 20% of the national land, which is substantial considering that Brazil is larger than the continental United States.

The region has a population of some 60 million people — or nearly 30% of the total population of the country — and contributes 14.2% of Brazil's gross domestic product (GDP). Nearly three quarters of the population live in urban areas clustered along the Atlantic coast, according to Wikipedia sources.

The economy of the region is expected to reflect a growth rate of 3.4% between 2025 and 2034, beyond Brazil's overall growth rate of 2.5% for the same period.

Home Building a Major Federal Priority

Lula’s Minha Casa Minha Vida (MCMV) program aims to contract 2 million homes by 2026, with a goal of half these under subsidized lines and at least 500,000 through financing, according to the organization. To date, the ministry has reached 1 million contracts, with plans to close the year with 140,000 units.

Changes to the program under Lula’s current term include lower interest rates for loans and preferential rates for the North and Northeast regions.

Automotive Investments Rise in the Northeast

The automotive industry in Brazil is expanding into the Northeast from the traditional Sao Paulo center to capture the lower rate in the former region. A recent announcement came from Stellantis, with plans to invest $2.6 billion in its plant in Goiania, Pernambuco state.

Among other recent investment announcements is one from China’s BYD, which plans a $620 million EV hub, in Camacari, Bahia, on land formerly occupied by Ford until its closure in 2021, according to Reuters.

To support the growth of EVs in the country, Bahia-based Bravo Motor is planning a $230 million factory to manufacture lithium-ion batteries and cells in São Sebastião do Passé, Bahia.

“With the arrival of BYD and Bravo, others will come, that's a guarantee. We are forming a green economy hub in Latin America in the state,” said Bravo CEO Eduardo Muñoz, according to BNAmericas.

Renewable Energy on a Roll

Brazil was slow to adopt the global move to renewable energy until prices fell, as they predicted. Now, solar, wind and hydrogen plant are the norm. The Brazilian Wind Energy Association (Abeeólica) reports that projects worth $26 billion — resulting in 18,000 megawatts of energy — have been approved but not yet initiated, according to an August report by iManagementBrazil Solutions.

Similarly, solar energy investments over $12 billion in both decentralized and centralized power generation are planned, iMB reports.

Airport Investment Taking Off

Silvio Costa Filho, Brazil's minister of ports and airports, suggested that the government is participating in the construction or refurbishment of 22 airports in the region, including Maragogi, in Alagoas, Aracati, in Ceara, and Balsas, in Maranhao, at a recent conference held by Valor and Editora Globo.

Paulo Câmara, former governor of Pernambuco and president of Banco do Nordeste (BNB), suggested that the airports and other infrastructure in the region will receive 42% of the national public and private resources provided for in the government’s broad Novo (New) PAC development program over coming years.

The Novo PAC is the latest version of the Programa de Aceleração do Crescimiento (program for the acceleration of development) announced in August 2023, anticipating investments of $10 billion per year.

Rail Links Across the Region

Northeast rail improvements along the coast, north-south and east-west have been re-vitalized by a $640 million loan to the Transnordestina freight railroad managed by development bank BNDES. With additional financing by the regional development bank Banco do Nordeste, the project is expected to receive $2 billion in financing.

The 750-mile-long rail project is being developed by Transnordestina Logística (TLSA), a unit of the CSN steel group, according to BNAmericas.

Ports

Lula also is building out the ports in the region in a program that will have seen $430 million invested in the leading port of Suape, in Pernambuco state, and others, over a three-year period ending in 2025. Another growing port in the region is Pecém, in Ceará state, where an estimated $1.4 billion green hydrogen facility is planned.

The 11 public ports in the Northeast region are: Itaqui, in Maranhão, Mucuripe, in Cea-ra; Natal and Areia Branca, in Rio Grande do Norte; Maceió in Alagoas; Cabedelo, Recife and Suape, in Pernambuco; Salvador, Aratu and Ilhéus, in Bahia.

Sanitation Earmarked for Expansion

At the Valor/Globo conference, Veronica Sánchez da Cruz Rios, the president of the Agência Nacional de Águas e Saneamento Básico (ANA, the National Water and Basic Sanitation Agency) suggested that there would be an acceleration of investments based on concessions and public-private partnerships (PPPs) already established in Alagoas and Ceará through the upcoming auctions of blocks in Piauí and Sergipe.

Multinational Investment in Infrastructure via PPPs

Among the multinational banks developing investment projects in the Northeast is the Inter-American Development Bank, which in December 2023 approved a $300 million loan for Brazil “to boost sustainable development in the country’s northeastern region by reducing infrastructure bottlenecks that affect strategic production chains,” the IADB said.

The program will be administered by the Productive Development Program for the Northeast Region (Proderpo), to strengthen states’ capacity to identify and design infrastructure projects and public-private partnerships (PPPs), the bank noted.