The Brazilian Texas - Edition - April 2012

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In this Issue Joaquim Barbosa

Brazil Supreme Court Minister

High Speed Rail in Brazil P:14

P: 8

Renato Bertani World Petroleum Council President

High Speed Rail in P:15

Editorial P:5

P:20

São Paulo

Forbes ranks Petrobras 4th largest oil company in the world P:6

Petrobras' CEO is one of the most influential people in the world, according to Time magazine

Petrobras and Vale sign carnallite lease renewal in Sergipe P:7

P: 6

World Petroleum Council

Mayor of Houston,Texas, visits Petrobras Research Center in Brazil

P:10

The Global Forum for Oil and Gas Science, Technology Economics and Management

P:26

“Made in Brazil” P:18

P: 22

Contromation

connecting U.S.A. to brazil and europe P:26

HEADLINE: P. 6

HEADLINE: P. 8

Maria das Graças Silva Foster

Joaquim Barbosa

Petrobras’ CEO, Maria das Graças Silva Foster, was elected as one of the 100 most influential people in the world by Time magazine. The magazine’s annual ranking is divided into categories that include artists, researchers, business people, political activists and heads of state.

The attitude of the minister also has been criticized for OAB, on the grounds that sometimes emergencies really justify reversing the order of the trials. Barbosa is opposed also to the privileged forum for authorities.

HEADLINE: P. 14 Steve Clark The TAV project has struggled to gain the support of the private market. After several failed procurement attempts by ANTT (Brazil’s surface transportation agency), the government has finally realized that the plan as it was envisioned is not feasible.

HEADLINE: P. 18 Ricardo Peduzzi When discussions emerged in the early 2000’s toward a re-birth of the Brazilian shipbuilding industry through federal government program PROMEF - critics balked.

Opponents adamantly professed that train to have left the station, Brazil having missed the opportunity back in the 70’s, too late now to play catch-up.

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HEADLINE: P. 10 Annise D. Parker Mayor of Houston Annise Parker, came to Rio to meet the mayor Eduardo Paes, which took place in the early afternoon of Wednesday, the 28th, at the City Palace. Accompanied by a delegation consisting of about 25 U.S. business leaders.

HEADLINE: P. 20 Acacio Costa We in Contromation understand that with the globalization of our services and products, we will be serving our clients better.

Contromation LLC was founded with a strong commercial link with Contromation Europe and Brazil which provide worldwide services including engineering, design.

Angus Grill Brazilian Steakhouse

6106 Westheimer Road, Houston, TX (713) 334-5206 angusgrillbraziliansteakhouse.com

Editorial Editor-in-Chief

We continuously strive to ensure our

magazine is providing interesting, relevant and informative articles to both Texan and Brazilian business development interests, providing pleasant articles for the reader to have a and productive reading time.

Sergio Lima

Brazil Representatives Sergio Luis Sergio@braziliantexasmagazine.net Rio das Ostras Leandro Lima Leandro@braziliantexasmagazine.net Rio de Janeiro

Sergio Lima

Mexico Representative Jobell Lima Jobell@braziliantexasmagazine.net Guadalajara

Special Contribution Valter Aleixo Otto Fanini Miriam Meira Steve Clark Joe Rondan Raulina Dathe

Cover

Joe Rondan

Brazilian Texas

AUGUST 2010

THE MAGAZINE FOR - BUSINESS - SOCIAL LIFE - NEWS - POLITICS

Photos

Jorge Gomes

Minerals & Services, Inc.

Email:vidabrasil@hotmail.com sergio@ braziliantexamagazine.net 19335 Cypress Peak Ln. Katy,Tx-77449

1.4

T U S -I A O NIT

(713) 505-0120 HOUSTON TEXAS

Members of Brazilian Press International Association

No.3 May/2005

PETROBRAS USA PETROBRAS CONTINUES TO EXPAND ITS ACTIVITIES IN THE UNITED STATES

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Phone: 954-548-5626 info@abiinter.

Petrobras' CEO is one of the most influential people in the world, according to Time magazine Photo: PETROBRAS NEWS AGENCY

Petrobras’ CEO, Maria das Graças Silva Foster, was elected as one of the 100 most influential people in the world by Time magazine. The magazine’s annual ranking is divided into categories that include artists, researchers, business people, political activists and heads of state.

Graça Foster is a chemical engineer and is the first woman to lead Petrobras. She took over as CEO in February 2012, after a 32-year career with the Company. She was also the CEO of Petrobras Distribuidora and the Director of Gas and Energy at Petrobras.

“Being chosen by Time magazine as one of the 100 most influential people in the world is much more than a reward for the battles I have won during my life, it is an acknowledgement of Petrobras’ importance, a reason for Brazilians to be proud. I am proud of the company I represent and have been a part of for 32 years. I would like to express my deepest gratitude on behalf of the more than 80 thousand workers at Petrobras, and I am aware that this recognition brings with it an even greater professional responsibility on my part”, said the CEO. Other Brazilians in the list include the President of Brazil, Dilma Rousseff, who was also in Time’s list in 2011, and businessman Eike Batista.

Forbes ranks Petrobras 4th largest oil company in the world

Petrobras and Vale sign Letter of Intent Last Friday, April 13, the CEO of Petrobras, Maria das Graças Silva Foster, and the CEO of Vale, Murilo Ferreira, signed a Letter of Intent on the joint projects that are underway in the areas of potassium; nitrogen fertilizers; thermal power; oil, gas and biodiesel assets; and logistics.

Petrobras

ranks Nº 10 on the list of the world’s biggest corporations and is fourth in the oil sector, according to Forbes Global 2 0 0 0 .

The ranking was released on Wednesday, April 18, and contains over 30 Brazilian companies, but Petrobras is the only Latin American company in the top ten. Forbes’ assessment is based on market value, sales, profits and assets. In 2011, Petrobras had a net income of R$33.313 billion, and its 2011-2015 investment plan is worth US$224.7 billion.

The letter has the goal of analyzing the technical and economic feasibility of the projects that are of common interest to Petrobras and Vale, to study the legal solutions to structure these projects, and to establish the business premises for the different projects. The studies that will be carried out by the two companies will include the preparation of a Work Plan with timelines that are compatible, well aligned and that detail the activities. The Letter of Intent was signed after a meeting held between the two CEOs and directors and managers from both companies at Petrobras' headquarters, in Rio de Janeiro. The executives watched presentations on the joint projects for over three hours, verifying how they are actually progressing. At the end of the meeting, Graça Foster and Murilo Ferreira said they are optimistic regarding the implementation of all of the initiatives and appointed, on each side, those responsible for monitoring each project.

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Photo: PETROBRAS NEWS AGENCY

Petrobras and Vale sign carnallite lease renewal in Sergipe This Monday (April 23), Brazilian President Dilma Rousseff

took part in a ceremony to renew the lease on potassium assets and mineral rights in the state of Sergipe. The lease was signed by the Petrobras CEO Maria das Graças Silva Foster and Vale CEO Murilo Ferreira. The ceremony was also attended by Sergipe State Governor Marcelo Déda,Mines and Energy Minister Edison Lobão, Planning Minister Miriam Belchior, Agrarian Development Minister Pepe Vargas and Petrobras' Corporate and Services Director José Eduardo Dutra. Under the agreement, Petrobras grants Vale a 30year lease in the sub-basin of Sergipe to exploit carnallite, a source of potash.

When fully operational, the Carnallite Project will be the largest potassium plant in Brazil. The initial phase is expected to increase Sergipe’s annual potassium output by 1.2 million tons. In the second phase, production is slated to reach 2.4 million tons per year.

Maria das Graças Silva Foster commented that the lease renewal is a reaffirmation of the close relationship between the two companies, driving growth in the northeastern state of Sergipe. "I am sure that this lease is in the safe hands of those with the knowledge and skills drive growth and achieve productivity. Our extensive studies have resulted in a satisfactory solution to a very complex equation."

Petrobras is supplying the project with over 700,000 m3 gas per day to offset the shortfall from Sergás, which has a daily output of 250,000 m3. Fafen Sergipe alone consumes some 1.4 million m3 gas/day. According to Graça Foster, in project phase 2 the supply will be stepped up by 800,000 m3 per day. "Sergipe is set to become one of the largest consumers of gas in Brazil,"she said. In total, 600,000 tons of potash are produced annually from sylvinite salts in the mine Petrobras has leased out since 1992.

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Brazil Supreme Court Minister Origem: Wikipédia, a enciclopédia livre.

Joaquim Barbosa Joaquim Barbosa was born in Paracatu, in the northwest of Minas Gerais state, the eldest of eight children.

His father was a mason, his mother, a housewife, and Joaquim became the breadwinner when they separated.

At age 16 Joaquim left on his own to Brasilia and got a job in graphic Correio Braziliense and completed high school. He has always studying in public school. He earned his bachelor’s degree in law from the University of Brasilia, and his Master’s degree in State Law. He was Chancery Officer of the Ministry of Foreign Affairs (1976-1979), having served at the Embassy of Brazil in Helsinki, Finland, and as a lawyer of the Federal Service of Data Processing ( Serpro ) (1979-84). At the age of 16 he passed the entrance exam and became District Attorney. He took leave from office to study in France for four years to obtain his Masters in Public Law at the University of Paris II (Panthéon-Assas).

Barbosa is opposed also to the privileged forum for authorities.

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Joaquim Barbosa Brazil Supreme Court Minister

In 1990, he began his doctorate in Public Law at the

University of Paris II (Panthéon- Assas). He returned to Rio de Janeiro in 1993, and took the office as prosecutor of Rio de Janeiro and professor of State University of Rio de Janeiro. He was a visiting scholar in the Human Rights Institute of University of Law at Columbia University in NewYork (1999 a 2000) and at the University of California at Los Angeles School of Law (2002 a 2003). He pursued additional studies in foreign languages in Brazil, England, the United States, Austria and Germany. Joaquim is fluent in French, English, German and Spanish. He also plays the piano and violin. Although it is said that he is the first black minister of the STF, he was actually the third, [5] preceded by Hermenegildo de Barros (1919-1937) and Pedro Lessa (1907 to 1921).

Principal positions Joaquim Barbosa holds firm positions on certain issues. He is the only minister to openly advocate for the legalizing of abortion. Barbosa opposes the administrative power of prosecutors to file away cases, or preside over police investigations. He argues that to transfer jurisdiction to try cases on slave labor for the federal court. Joaquim defends the thesis that lawyers should be dispatched with one exception, and not by routine, to the ministers of the Supreme Court.

Barbosa believes that judges should rule over cases directly with attorneys, only on exceptional cases, not as a routine practice. He argues that such practice may influence judges’ objectivity. The position of the minister, however, is criticized by lawyers and the Bar Association of Brazil, on the grounds that it is a right conferred by Law 8.906/94. That law specifically states the right of lawyers to “go directly to the magistrates in their offices, regardless of previously scheduled time or other conditions”. Barbosa also opposes that certain conditions allow privileges based on the parties’ purchasing power (“cut the line”). Barbosa’s view also has been criticized by OAB, on the grounds that sometimes emergencies do justify reversing the order of the trials.

Performance in the STF Barbosa took office in 2006 as Speaker for the case against corruption involving elected officials (“mensalão”). by the Attorney General’s Office. During the trial he accepted complaints against the forty defendants. Since its inception in 1824 the Supreme Court has never condemned a politician. This may be the first time the Supreme Court rules against a politician, making this a historical ruling.

In an article commenting that trial, Veja magazine wrote: “Brazil has never had a minister like him”. In the judgment of history in which the Supreme Court put the accused in the dock, along with the (federal government, the Workers Party - PT) - Joaquim Barbosa was the star. According to Veja Magazine, “Minister Joaquim Barbosa, 52, a black man who speaks German, the judge who loves history, and tailored suits from Los Angeles and Paris voted for Lula; but was relentless in denouncing “mensalão”..”

In March 2011, Barbosa ordered the breach of confidentiality for “mensalão”’ 38 defendants. In 112 votes during the trial, Speaker Barbosa’s vote was followed by that of his peers at all times and in 96 of them unanimously. Barbosa was also named Speaker in a case against the opposition’s “mensalão”. Federal prosecutors charged with crimes of embezzlement (theft of public money) and money laundering, allegedly committed in 1998 when Azeredo was governor of Minas Gerais .

http://pt.wikipedia.org/wiki/Joaquim_Barbosa

Mayors of Rio and Houston Sign Cooperation Agreement

Houston Mayor and delegation of 25 Houston business leaders attend event with Rio Negocios, visit Rio de Janeiro Business Operations Center Mayor of Houston Annise Parker, came to Rio to meet the mayor Eduardo Paes, which took place in the early afternoon of Wednesday, the 28th, at the City Palace. Accompanied by a delegation consisting of about 25 U.S. business leaders, Paes and Parker signed a Bilateral Agreement Partner Cities, aiming to increase the levels of cooperation and commercial activities between the two cities. The agreement is based on multiplying the business opportunities in education, health, logistics, sustainability and information technology in the energy sector and oil and gas. The mission was organized by BRATECC (Brazil-Texas Chamber of Commerce) and the Greater Houston Partnership (GHP) that works to build regional economic prosperity. Among the entrepreneurs were representatives of United Airlines and Aecom, and Odebrecht.

- Rio and Houston have common interests and are strengthening our ties in the areas of trade and exchange of knowledge and technology will bring benefits to the residents of both cities - said Paes.

- I know of many cities in the world that just discovered Brazil. But I remember that for us, this relationship is not new. Houston grew connecting businesses.

And we’re not only interested in investing in the country, but also to take Brazilian companies there - said Parker.

During the morning, the mayor of Houston was at the offices of AmCham-Rio (American Chamber of Commerce Brazil-United States), for a presentation of Rio Negócios and the American Chamber of Commerce, and exploring business opportunities between Houston and Rio. The chief executive of Rio Negócios, Marcelo Haddad, elaborated on areas of investment opportunities and the work Rio Negócios Agency does facilitating business: - Rio is a global city. Last year, 37% of work visas issued in Brazil came to the city. We see a strong correlation between lifestyle and innovation.

Jeff Moseley, president of the Greater Houston Partnership, a Houston organization that operates along the lines of Rio Negócios, welcomed the opportunity for interaction between the energy capital of Brazil and the United States – and members of the World Energy Cities Partnership, a group that gathers cities leaders in the Energy sector.After meeting Mayor Eduardo Paes, the Houston delegation visited the

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Operations Center. According to Mayor Parker, this is an initiative which has special interest, being a pioneer project for the operation of smarter cities. Received by the Chief Technology Officer, Alexander Cardeman, Annise Parker and a group of about 20 people from the City of Houston visited the Control Room, which is the heart of the project. The Crisis Room, where meetings are held in emergency situations, in addition to being used as a Press Room, which receives about 15 journalists per day. Impressed with the technology space, and with emphasis on the screen of the Control Room and interactive screens of the Crisis Room. The mayor praised the operational integration of the City Hall and the daily involvement of the press in disseminating information about the city.

Opened on December 31, 2010 by Mayor Eduardo Paes, Rio Operations Center is a sort of headquarters of the City Hall, which includes about 30 agencies (municipal, state, and utilities) in order to monitor and optimize the city operation on a daily basis, and especially at large events. By the use of more than 500 cameras, the center routine closely follows the municipality 24 hours a day, seven days a week.

Mayor of Houston, Texas, visits Petrobras Research Center in Brazil Press information: Rio Negócios

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oday (3/29), the mayor of Houston (USA), Annise Parker, visited the Petrobras Research Center in Ilha do Fundão, Rio de Janeiro. The mayor’s party, including representatives from the oil and gas industry and from Texan universities, was received

by Alípio Ferreira, General Manager of Downstream R&D and Biofuels.

After visiting the fluids and geological research laboratories and the Collaborative and Imaging Facility, the mayor spoke of the technological advances achieved by the energy industry over the past few decades. “The tools that we have today are very different from those of 20 years ago. It’s all very sophisticated and impressive,” she said.

Houston is considered the hub of the North-American oil and gas industry and all major companies in the sector, including Petrobras, have their US headquarters there. The relationship between Petrobras and this Texan city also includes technological cooperation. “We need to stay in contact with the world outside and not isolate ourselves. We have already collaborated on projects with Texan universities, including the National University, Texas University and Rice University,” said Alípio Ferreira.

Petrobras has been present in the United States since 1987, and in February this year started up production in the Cascade field, deploying the first FPSO (floating production storage and offloading unit) to operate in the NorthAmerican part of the Gulf of Mexico.

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“Petrobras has a firm commitment to produce in the region. We hope to see significant growth and investment there,” said Fernando Cunha, Petrobras Executive Manager for America, Africa and Eurasia. The mayor of Houston was very positive about the outlook. “Considering the work that Petrobras has been engaged in throughout the world and the concentration of oil, gas and services knowhow in Houston, we believe that our relationship will be lasting and fruitful”.

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Clockwise from top São Paulo Metro Line 4, Sao Paulo, Brazil; Cultural Complex Luz, São Paulo, Brazil ©Herzog & De Meuron; High Speed 1, United Kingdom ©Daniel Clements; Energia Costa Azul LNG Terminal, Costa Azul, Baja California, Mexico ©Sempra

High Speed Rail in Brazil As a provider of railway design services and frequent traveler to Brazil, I receive many questions about the “Bullet Train” planned between São Paulo and Rio de Janeiro. This project, called the TAV, or “Trem de Alta Velocidade”, has gotten off to a difficult start and many people are now wondering whether it will ever be built.

For those who may not be familiar with the project, the general plan is to implement high speed rail service with eight stations, including Campinas, Viracopos Airport, Campo de Marte (São Paulo), Guarulhos Airport (São Paulo), São José dos Campos, Barra Mansa/Volta Redonda, Galeão Airport, and Barão De Mauá (Rio de Janeiro).

Figure 1 – The Planned Route of the TAV (Image courtesy of Halcrow – Sinergia Demand and Revenue Forecast – Final Report)

The TAV route covers 511 km, and is estimated to cost

US$19 billion, or around US$37 million per km. Given the expanse of urban areas and difficult terrain along the project, it is difficult to say how accurate this estimate really is. By comparison, the planned California system of 917 km is estimated to cost US$68 billion, or US$74 million per km, and the fully operational 108 km HS1 system in the UK cost around US$9 billion, or US$84 million per km.

The ticket price is estimated to be about US$120 each way, which makes it competitive with the current air services between the airports of São Paulo and Rio. The government estimates around 60,000 to 70,000 passengers per day will use the system by the year 2024. The system is to be designed for trains to operate at speeds up to 350 km/hr, consistent with today’s technology, and provide 90-minute service between São Paulo and Rio. A key question is whether Brazil should be investing in high speed rail when there is so much basic transportation infrastructure still needed across the country. For example, anyone who has been in São Paulo or Rio de Janeiro

during rush hour knows how bad the traffic can be. Congestions studies consistently rank both São Paulo and Rio among the worst congested cities in the world.

In response to its massive traffic congestion problem, the State and City of São Paulo recently completed the first phase of São Paulo Metrô Line 4, with a total price of around US$2.5 billion. As part of the public-private partnership contract, ViaQuatro invested in the rolling stock and systems to implement the project, and is serving as the operating and maintenance concessionaire. ViaQuatro is reporting over 600,000 riders per day, or roughly 10 times the estimated 2024 patronage of the TAV. When the second phase of Line 4 is completed, ViaQuatro estimates that over one million people will use the line per day. For anyone who has spent an hour or more traveling between Faria Lima and Paulista during rush hour, making this trip on Line 4 in eight minutes is welcome relief. This is just one example of the impact good transportation infrastructure can have on a city. Both São Paulo and Rio need much more of this.

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Figure 2 - São Paulo Metrô Line 4 It is interesting to compare how these investments stack up to each other, if both were funded today under PAC 2, Brazil’s infrastructure investment program.

PAC 2 has a planned government investment of approximately US$530 billion for the years 2011 – 2014.

So, let’s take a look at the two systems.

The current plan for the TAV is that 60% of the financing will come from the government, and the remaining 40% will come from the private sector. This means that if purchased today, the government share of the TAV would consume approximately 2.2 percent of the total PAC 2 budget. This is for a project which is estimated to serve 60,000 to 70,000 people per day.

On the other hand, São Paulo Metrô Line 4 would have consumed less than 0.5% of the PAC 2 budget for a project that is now serving over 600,000 people per day in Brazil’s most congested city and where few good transportation alternatives exist. In fact, when complete, Line 4 will serve almost 16 times more people per day than will the TAV, for a much smaller percentage of the government’s infrastructure investment budget.

I’m not suggesting that the TAV shouldn’t be built, but I do think there is a better way. I also believe that there are other more important transportation needs that should be considered and implemented first. These include additional rail transit and commuter services in São Paulo, Rio, Belo Horizonte, Porto Alegre, Salvador, and many of the other growing cities in Brazil where people have few alternatives other than heavily congested roadways.

Figure 3 - São Paulo Rush Hour The TAV project has struggled to gain the support of the private market. After several failed procurement attempts by ANTT (Brazil’s surface transportation agency), the government has finally realized that the plan as it was envisioned is not feasible. They have now divided the program into two phases. The first phase is to select the technology of the trains and the operator who will also be responsible for the preliminary design of the railway.

The second phase will be to select the constructor of the civil works.

It remains to be seen if this plan will be any more successful than the previous ones. There are those who say that the project should be led by the contractors. While there is interest from the rolling stock suppliers, the supply of trains and systems will only account for about 10% of the total implementation cost of the project. The government will likely find suppliers interested in participating in the first phase, but this still doesn’t solve the problem with the private sector’s willingness to accept the risk of implementing the second phase that carries 90% of the investment burden.

Let’s step back for a moment and look at where the population centers are along the Campinas/São Paulo/Rio corridor. The combined metropolitan areas of Campinas, São Paulo, and São José dos Campos contain around 25 million inhabitants, with Rio having a population of around 11 million people. The section between São José dos Campos and Rio contains mostly smaller cities and rural areas.

The greater metropolitan areas of São Paulo and Rio both need major transportation infrastructure investments, and in my view, more roads are not the solution. A rail line of approximately 200 km could be constructed that would serve the combined metropolitan areas of Campinas, São Paulo, and São José dos Campos, including the domestic and international airports. This 200km section is about 40% of the total length of the TAV project and has the potential to improve mobility for over 10% of the population of Brazil at a price tag much smaller than the total price of the entire São Paulo/Rio connection.

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Figure 4 - Building the TAV in a Phased Approach Likewise, an additional rail line could be constructed in the Rio metropolitan area designed so that in the future, the two systems could be connected to form the complete TAV line between São Paulo and Rio. The initial trains would not need to travel at high speeds to provide excellent service, and the railway infrastructure could be designed to accommodate 350 km trains in the future.

Developing such railways will immediately serve the major metropolitan areas and airports, and will likely be much more attractive to the private market. Furthermore, a portion of the revenues from the first two phases could support the future development of the Phase 3 segment that will complete the TAV line and connect São Paulo and Rio with a world class high speed rail line.

On April 2, 2012, ANTT announced that the solicitation for the first phase will hit the streets sometime in April 2012, and the selection will be completed in October.

President Dilma Rousseff has asked for more studies on the TAV and BNDES is anticipating some additional delays to the new schedule put forward by ANTT. While it is difficult to say how the TAV project will end up, one thing is certain, it is off to a very slow start.

Steve Clark and Arup Steve is the Rail Business Leader for Arup’s Americas region, covering both North and South America.

Steve has 30 years of experience in major infrastructure, and has worked on passenger and freight rail projects in North America, South America, Australia, Europe, United Kingdom, and Africa. steve.clark@ arup.com Arup is a global multidisciplinary firm of professionals working together to be the creative force at the heart of many of the world’s most prominent projects in the built environment and across industry.

Arup offers a broad range of professional services that combine to make a real difference to our clients and communities. From 90 offices in 35 countries, our 10,000 planners, designers, engineers and consultants deliver innovative projects across the world with creativity and passion. Arup is committed to the future of high-speed rail, offering intelligent solutions that transform transportation, improve lives, and create opportunities for stakeholders and communities.

Our work includes design of the Channel Tunnel Rail Link (HS1), California High-Speed Rail, and Texas High Speed Rail.

For those who want more information, please visit the following websites. http://www.tavbrasil.gov.br http://inter.bndes.gov.br/english http://www.bndes.gov.br/SiteBNDES/bndes/bndes_pt

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“Made in Brazil” Impressed by the economic activity going on in Brazil these

days, a group of visiting foreign manufacturers recently asked how to find potential customers there. Their Brazilian hosts pointed to one alternative, Local Content (LC).

Visitors were encouraged to examine the possibility of local manufacture, where that subsidiary would be granted the same treatment and privileges of any Brazilian-origin corporation – i.e., once establishing a local sub that company automatically qualifies as a Brazilian company, regardless of origin.Actually, LC as a theme has been in the playbook going back to 1776, when Adam Smith enquired into the nature and causes for the wealth of nations – “If a foreign country can provide us with a commodity cheaper that we ourselves can make it, better buy it from them...”

Smith argued everyone’s economic gain to be better served when countries specialize in activities where they clearly enjoy an advantage over others providing those same goods. What remained to be clarified was how those advantages came about, or what makes the manufacture in one country more cost effective than elsewhere, allowing countries that comparative edge. Can that advantage be changed?

The answer, according to LC advocates, is a resounding YES!, as images of economic growth in China, India, Singapore, et al come to mind. Yes, that advantage can be changed around, but will require a strong dose of political will.

Content means Jobs The alternative (not doing anything about it) isn’t pretty either. A study recently released by leading local think-tank Fundação Getulio Vargas, indicates close to 66 million people in Brazil earn less than $200 a week. With that significant portion of its 190 million population still in the poverty brackets, Brazil desperately needs to create jobs. With huge investments underway for the next decade, Brazil can hardly afford maintaining a social structure so rife with inequalities, ranking 84th in the U.N. Human Development Index 2011, way behind Chile, Uruguay, Argentina, and Mexico, barely ahead of Iran, Belize, and the Dominican Republic. Further, Brazil faces daunting challenges from infrastructure, to education and healthcare, hindered by a maze of taxes and

an entangled judicial system – “the last thing we need right now is to offshore our proletariat - like a sultanate in the Gulf…” – says a local observer, the opportunity for Brazil thus equals the challenge. And while it all might ring like a buzzword proposal, LC walks like market reserve, quacks like market protection, and looks like old-fashioned plain protectionism. More than the much needed local jobs, LC enables new competencies, diversifies the vendor base, while retaining technology and talent. The retention of intellectual capital has become a priority, almost a national industrial policy. Such guidelines prevail now and will very likely guide future business developments in Brazil.

Made in Brazil When discussions emerged in the early 2000’s toward a rebirth of the Brazilian shipbuilding industry through federal government program PROMEF - critics balked. Opponents adamantly professed that train to have left the station, Brazil having missed the opportunity back in the 70’s, too late now to play catchup. Later in 2007, announcements of Pre-salt reserves brought a sense of urgency to what had until then remained the realm of far away possibilities - The vision for LC became a priority to leverage that opportunity. One would readily admit any one country to be unable to satisfy all of its procurement needs solely from local sources. Thus, LC requirements may represent the beginning in a long journey toward that unattainable goal of self-sufficiency, but creating local jobs nonetheless.

You are not in Kansas anymore Observers on both sides correctly agree on one point: Brazil has been down that path before. In different instances LC produced both brilliant and lackluster consequences.

For instance, when President Getulio Vargas founded CSN – the first local steel mill - in the early 1940’s, resistance fired back. Opposition came from the local moneyed and the landed gentries who preferred not to rock the boat, to foreign groups who of course opposed the potential competition. After privatization in the 90’s, Brazilian steel today is one of the important items in the Port of Houston imports.

18 Brazilian Texas Magazine 2012

“Made in Brazil” Then, back in the ‘70’s Brazil chose to protect the domestic manufacturers of computer electronics. It formed a “Special Informatics Secretary” to review import permits on all such equipment and imposed severe controls on imports of any and all electronic hardware using a chip. Results were disastrous, as the new rules constrained local evolution to the limits of the domestic electronics capacity, then in the Dark Ages. Brazil finally welcomed the revoking of such law in the early 90’s. As a result, while the global market was entering the pentium era, Brazil was still dueling XT computers. Brazil’s auto industry also “benefited” from a long-dragged market protection. Lagging so far behind in tech advancement ‘protected’ by regulations, it eventually led Brazil’s president to label the locally-made automobiles ‘stage-coaches’.

Opponents also argue that besides costing potentially more than the imported alternative, LC incurs in other costs beyond the very obvious, measurable bottom line. Costly delays it is argued, may severely impact a project’s success, to make it unfeasible.

Resistance also comes from companies transplanting the technology to Brazil. Recently, one such partner attempted to delay the transfer, hoping to bring the project back to home turf. Eventually that partner had to abandon the project; an alternative is now being sought from more diligent competitors.

To complicate matters, local opposition may include friendly fire from companies that exist today only as a result of LC requirements. These “entitled” beneficiaries can bite the hand that brought them to life in the first place, and whine “Foul!

That requirement level hurts!”, when trying the same shoe on the other foot...

(cont’d)

Still, the proposal to favor local industry over imported competition carries its risks. But, let’s face it, the criteria Brazil currently uses to reward a minimum level of manufacture or service be provided locally, is quite likely to stay, even evolve into a whole new set of full blown regulation to preserve, foster local jobs. It is highly probable that LC requirements may expand to permeate other areas in the Brazilian market beyond Oil & Gas. Challenged to maximize competitive import substitution the government tries to conciliate urgencies with domestic capabilities, LC policies with industrial capacities.

The path ahead Recent statements by Brazilian officials and the leadership at Petrobras, have clearly defined LC to become an even more essential tool for growth, intellectual capital production, and the empowerment of a local labor force. As the industry “will need kill a lion a day”, one concludes only the constant dialogue may clarify issues, objectives, to mitigate risks associated with LC requirements. All involved have skin in the progress of initiatives currently underway. More than ever, flexibility, integration and cooperation become instrumental to the success of partnerships the Brazilian market currently explores with labor, industry and government, and a strong dose of political will.

By Ricardo Peduzzi

The Author is Executive Director of Brazil-Texas Chamber of Commerce, and President of Peduzzi & Company, Inc., The views exposed herein are the Author’s own

LC requirements usually find solace among those concerned with the migration to, and the resulting concentration of, industrial activity in Asia. “There simply is no Physics law that rules all industrial fabrication need take place in only one world region alone – they argue. Advocates point out that potential savings from imports to carry hidden social costs that by far outweigh the apparent short term benefits all indications pointing toward the permanent preference for the locally produced availability.

19 Brazilian Texas Magazine 2012

Renato Bertani World Petroleum Council President

Renato T. Bertani holds a PH. D. in Sedimentary Geology and Geochemistry from the University of Illinois, USA. He has over 35 years of international experience in exploration and production projects, acquisitions and divestments in several Latin American countries, (particularly Brazil, Colombia, Bolivia, Peru, Ecuador and Argentina), West Africa, UK, and the USA Gulf of Mexico.

Mr. Bertani took over as the CEO of Barra Energia, a new E&P company with focus in oil and gas industry of Brazil in May 2010 and has since then developed the company’s strategy, assembled a team of high quality and experienced industry professionals and implemented an aggressive program of business development. Under his leadership Barra Energia established a significant position in the new pre-salt exploration play offshore Brazil.

Prior to his current position he served as President and CEO of Thompson & Knight Global Energy Services, LLC, a subsidiary of Thompson & Knight dedicated to render business development and portfolio management services to the energy industry.

A large list of projects completed includes: • Technical and economic evaluation of over 130 fields, discoveries and exploration prospects located in 15 countries for a large Asian client evaluating a potential acquisition opportunity with an approximate value of US$ 12 billion; • Technical and economic evaluation of E&P assets and companies in several Latin American countries for Asian and Middle East clients interested in participating in competitive bids or direct negotiations to acquire such properties, each one with an approximate value of US$ 1 billion; • Strategic advice, preparation and assistance in the implementation of a business plan for a large company seeking to build a significant portfolio of exploration assets offshore Brazil and abroad; • Life cycle evaluation of the investment returns for the whole Gulf of Mexico oil and gas industry, as well as comparison of the fiscal and contractual terms of the GoM with other jurisdictions.

20 Brazilian Texas Magazine 2012

World Petroleum Council President

Renato Bertani He also developed and delivered the E&P Business Management short course, which consists of a series of presentations, debates and real life simulations of companies competing for oil and gas assets while managing exploration risks, market volatility, tax and finance issues.

The program was already delivered, with huge success, in Houston (five times), Rio de Janeiro four-times), China, Nicaragua and Uruguay. He previously served for 31 years in various technical and high level managerial positions with Petrobras, the Brazilian state oil company. Among such positions were President of Petrobras America, Inc., a subsidiary of the Brazilian state company based in Houston, where he was responsible for a very successful investment plan and the construction a valuable portfolio of exploration and production assets (2001-2006), Managing Director of Petrobras UK (1998-2001) and Director of International E&P activities for the Petrobras Group (1992-1997).

In these various assignments he was directly responsible for the innovative strategies and team leadership that led to major oil and gas discoveries, including San Alberto and San Antonio gas fields of Bolivia, Akpo and Agbami oil fields offshore Nigeria, and Cascade, Chinook and Saint Malo in the Lower Tertiary play of the Gulf of Mexico. Cascade and Chinook are on track to become the first fields ever to be brought onstream in the GoM with a floating, production, storage and offloading development concept.

Among his many achievements while with Petrobras he repeatedly implemented investment plans which led to substantial increase in reserves and production, and creation of significant value, in all the E&P jurisdictions that came under his responsibility.

Mr. Bertani is President of the World Petroleum Council, an organization that congregates 66 member countries whose main objectives are to promote the development of oil and gas resources to the benefit of mankind and promote the debate of the global energy issues.

He previously served as Vice President of the WPC and was responsible for the technical program for the World Petroleum Congress that took place in Doha, Qatar, in 2011, and Madrid, Spain, in 2008.

He serves in the advisory board of the board of the Maguire Energy Institute of the Southern Methodist University, Dallas, Texas. He served as a trustee of the Museum of Fine Arts of Houston from 2003 to 2006, as President of the Brazil Texas Chamber of Commerce from 2002 to 2007, and as Director of the Brazilian Petroleum Institute from 1995 to 1997.

21 Brazilian Texas Magazine 2012

World Petroleum Council The Global Forum for Oil and Gas Science, Technology Economics and Management Challenges and Opportunities in the Petroleum Industry and the role of the World Petroleum Council The World Petroleum Council is a non political not for profit organization with the mission of promoting the sustainable exploration, production and consumption of oil and natural gas and other sources of energy for the benefit of mankind.

Currently with 65 member countries, representing over 95% of the world’s production of oil and natural gas, the WPC is uniquely positioned to promote a forum for the debate of the key issues that the industry is facing and the dialogue with all its stakeholders.

WPC Member Countries

MISSION The mission of the World Petroleum Council is to promote the sustainable development, production and consumption of oil, gas and other energy resources for the benefit of mankind

The petroleum industry has never failed society on what respects delivering affordable and reliably supplies of oil and natural gas, except for relatively minor disruptions caused by natural disasters or manmade conflicts. However, the challenges that the industry is now facing require that new paradigms be established with respect to the level of cooperation with the industry’s stakeholders, development and deployment of breakthrough technologies and social responsibility in doing business.

The challenge: sustainable supply of the ever growing energy demand Several studies prepared and regularly updated by companies, government and non governmental agencies, even if based on somewhat different economic growth assumptions, agree on two main projections for the next twenty years: growth of energy consumption by about 35% to 40% and the predominance of fossil fuels in the world’s energy matrix, with coal, natural gas and oil accounting for approximately 80% of the energy supply.

th

World Petroleum Council, Suite 1, 4 Floor, 1 Duchess Street, London, W1 6AN Tel +44 (0) 20 7637 4958, Fax +44 (0)20 7637 4965, renato.bertani@barraenergia.com.br

www.world-petroleum.org

World Petroleum Council The Global Forum for Oil and Gas Science, Technology Economics and Management

World Marketed Energy Use by Fuel Type MMboe/day

Liquids Natural Gas Coal Nuclear Renewables

120 90 60 30 0

1980

1985

1990

1995

2000

2005

2010

2015

Liquids: Conventional (oil, condensate, natural gas plant liquids, refinery gains) Non-Conventional (oil sands, extra heavy oil, biofuels, GTL, CTL)

2020

2025

2030

Source: EIA Outlook Issue: October 2011

Global oil reserves and production, currently respectively at 1.4 trillion barrels and 87 mmb/day, have been growing steadily over the last decades. The main challenge going forward will be not only to meet the increasing demand, which according to most estimates will reach about 110 mmb/day by 2030, but, most importantly, to offset the natural decline of the current reservoir productivity. Even if a moderate decline rate of 3.5% per year is assumed by 2030 the production of the reservoirs currently onstream will decrease to about half of today’s rate. In summary, the production gap to be met with new field and reservoir developments is of around 65 mmb/day, a daunting task.

World Crude Oil and Liquid Fuels Consumption MMb/day

120

Non Conv Conv Non Opec Conv Opec Current Prod Proj

100 80

Source: EIA Outlook Issue: October 2011

60

40 20

0 1990

1995

2000

2005

2010

2015

2020

2025

2030

th World Petroleum Council, Suite 1, 4 Floor, 1 Duchess Street, London, W1 6AN

Tel +44 (0) 20 7637 4958, Fax +44 (0)20 7637 4965, renato.bertani@barraenergia.com.br

www.world-petroleum.org

World Petroleum Council The Global Forum for Oil and Gas Science, Technology Economics and Management Natural gas demand will also steadily increase, particularly in the developing countries, with the current global consumption of approximately 112 tcf/year expected to reach 160 tcf/year by 2030.

While the world natural gas resources are plentiful, at about 6,600 tcf total reserves plus at least the same amount of resources from unconventional sources in the USA only, delivering these to the consuming markets will require innovative solutions in production, processing and transportation, and stable geopolitical relations between producing and consuming countries.

Natural Gas Consumption tcf/year

180

Source: EIA , International Energy Outlook Issue: October 2011

Non OECD OECD Asia OECD Europe OECD Americas

160 140 120 100

80 60 40 20 0 2005

2010

2015

2020

2025

2030

2035

To continue meeting the world’s demand of oil and natural gas the industry will have to invest massive amounts of capital and venture into ever more challenging and costlier production provinces, such as the ultra deep waters, ultra deep reservoirs, unconventional resources, and in inhospitable environments like the Arctic, remote deserts, jungles, mountain ranges and conflicted areas. It is estimated that the E&P activity only will require a total capital deployment of over $20 trillion in the next 30 years.

One of the main challenges that the industry is already facing is to continue attracting the skilled human resources, both in the technical and managerial areas, to successfully implement such massive projects. In order to attract these talented professionals the industry will need to improve its overall image, tarnished by the lingering memory of past poor records some recent highly visible accidents, and reach out to all pools of professionals, particularly the youth and women.

And all of the above will have to be accomplished in a sustainable way, which implies: ensuring attractive returns to investors, operating with increasingly higher standards of safety and care with the environment, returning a fair share of the wealth to society and local communities, and doing business in an ethical and regulatory compliant manner.

th World Petroleum Council, Suite 1, 4 Floor, 1 Duchess Street, London, W1 6AN

Tel +44 (0) 20 7637 4958, Fax +44 (0)20 7637 4965, renato.bertani@barraenergia.com.br

www.world-petroleum.org

World Petroleum Council The Global Forum for Oil and Gas Science, Technology Economics and Management The opportunity: long term returns to all stakeholders Oil and natural gas have been utilized by humankind for thousands of years. Industrial scale exploitation of these resources is considered to have started in Pennsylvania about 150 years ago. It is impossible to predict how long the petroleum age will last, but the projections above clearly indicate that for next several decades fossil fuels will continue as the main source of energy for the world development.

If the challenges are huge so are the opportunities that lie ahead. Very few industrial activities have the breadth of opportunities that the petroleum sector offers to develop and deploy new technologies, promote development and well being, and remunerate huge sums of capital, all of these at the same time and sustainably in the short and long term.

The list of ingredients for the continuing success of the petroleum industry is not long, and is fairly obvious: -

People, Innovation and Technology: the combination of skilled human resources, innovative thinking and new technologies has been and will continue to be the key factor in finding and developing new sources of hydrocarbons in the most challenging environments. It is for this reason that time and again ingenuity unlocks enormous new pools of resources that were unknown or not viable even in well explored provinces.

Recent examples are the huge shale gas resources being developed in North America and now being target around the world, and the vast amounts of oil discovered only in the last 10 years, in spite of over 50 years of exploration activity, in the Lower Tertiary of the United States Gulf of Mexico and the pre-salt layers of the Santos and Campos basins offshore Brazil;

-

Dialogue, Cooperation and Level Ground Competition: one peculiarity of the petroleum industry is that very often bitter competitors in one area establish partnerships and cooperate in other ventures. A clear trend of increasing dialogue has been established between consumers and producers (OPEC and IEA, for example), business areas (producers, refiners and automobile industry), and corporate organizations (IOCs and NOCs, majors and independent oil companies). It is important that this dialogue be kept at all levels, so that regulators establish fair and balanced terms under which companies may compete in level ground conditions, earn the right to exploit natural resources, generate profits for their shareholders and return a fair share of the wealth to local societies;

-

Highest Standards of Health, Safety and Environmental Protection: more than ever HSE considerations must be an intrinsic component of any upstream or downstream project that companies decide to carry out. Even though these may, in the beginning, imply higher implementation costs, in the medium and long term the companies with the highest HSE standards are the ones that will benefit more from productivity gains and that will earn from society the right to continue doing business; conversely, as we see more stringent scrutiny and regulations being implemented around the world, non compliance and low HSE standards will be extremely costly to companies with poor performance;

-

Social Responsibility and Business Ethics as Part of the Business Model: there is already ample evidence that companies that are socially responsible, transparent and adhere to

th

World Petroleum Council, Suite 1, 4 Floor, 1 Duchess Street, London, W1 6AN Tel +44 (0) 20 7637 4958, Fax +44 (0)20 7637 4965, renato.bertani@barraenergia.com.br

www.world-petroleum.org

World Petroleum Council The Global Forum for Oil and Gas Science, Technology Economics and Management high ethical business conduct have more access to capital and tend to be more successful in the medium and long term, as is the case with those listed in the Dow Jones Sustainability Index. Also, already almost 200 companies, including most majors, national oil companies and services companies, committed to the 10 principles of the United Nations Global Compact. Going forward, the most successful companies in the oil sector will be those that will strike the right balance between profitability and sharing the wealth with the local society in the form of taxes, royalties, jobs and promotion of local businesses, that operate in full compliance with the law and the culture of the community, and that adopt strict ethical business conduct, transparency and anti-corruption practices.

The WPC supports the 10 principles for business sustainability of the United Nations Global Compact.

Human Rights •Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights; and •Principle 2: make sure that they are not complicit in human rights abuses.

Labour •Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining; •Principle 4: the elimination of all forms of forced and compulsory labour; •Principle 5: the effective abolition of child labour; and •Principle 6: the elimination of discrimination in respect of employment and occupation.

Environment •Principle 7: Businesses should support a precautionary approach to environmental challenges; •Principle 8: undertake initiatives to promote greater environmental responsibility; and •Principle 9: encourage the development and diffusion of environmentally friendly technologies.

Anti-Corruption •Principle 10: Businesses should work against corruption in all its forms, including extortion and bribery.

The World Petroleum Council is committed to promoting the sustainable growth of the industry, serving as a forum for discussion of the key issues, promoting the dialogue of all stakeholders involved, and disseminating the best technical, managerial and business practices of the petroleum sector.

th World Petroleum Council, Suite 1, 4 Floor, 1 Duchess Street, London, W1 6AN

Tel +44 (0) 20 7637 4958, Fax +44 (0)20 7637 4965, renato.bertani@barraenergia.com.br

www.world-petroleum.org

CONNECTING U.S.A. TO BRAZIL AND EUROPE Introduction

D

uring the years 2009 to 2012 the owners of Contromation S.A. had the opportunity to know personally the engineering market in Houston, working in a high technology and high investment project representing the owner of a high tech refinery to be built in an African country, in the supervision of the FEED (Front End Engineering Design) phase of the project for the disciplines of Instrumentation, Electrical, Telecommunications, Automation and Systems integration engineering. The project has been developed by a major engineering company located in downtown Houston where the Contromation´s engineers worked integrated in a group of professionals dedicated to take part in the project´s main decisions, technology definition and to adequate the engineering company’s technical proposals to the needs and reality of the owner.

Telecommunications, Automation and Systems integration engineering.

We in Contromation understand that with the globalization of our services and products, we will be serving our clients better.

Company´s main goals Contromation LLC was founded with a strong commercial link with Contromation Europe and Brazil which provide worldwide services including engineering, design, procurement, project management, construction and construction management, management consulting, quality assurance and quality control, information management, operations and maintenance, and process technology development.

In the beginning of the year 2011 the board of the company, foreseen the opportunities in the North American and Central American markets, and recognizing the capital importance of Houston in the Global engineering market, decided to open Contromation LLC based in Houston, Texas.

Contromation LLC is an American Company linked by common partners to Contromation Spain and Contromation Brazil and has been created with the main purpose of assisting the North American and Central American markets in complement to the markets in Europe, Asia and Africa assisted by the Spanish headquarters and the South American market assisted by the Brazilian branch. The goal is to achieve in a very short time the seamless integration of the company´s services and products for the global markets using the company´s seasoned expertise and implementing associations with selected local companies in complement to the disciplines of Instrumentation, Electrical,

IN THE BEGINNING OF THE YEAR 2011 THE BOARD OF THE COMPANY, FORESEEN THE OPPORTUNITIES IN THE NORTH AMERICAN AND CENTRAL AMERICAN MARKETS, AND RECOGNIZING THE CAPITAL IMPORTANCE OF HOUSTON IN THE GLOBAL ENGINEERING MARKET, DECIDED TO OPEN CONTROMATION LLC BASED IN HOUSTON, TEXAS.

Scope and Expertise Contromation S.A. has been founded in Spain at the beginning of 2001 and has been growing steadily and getting several mentions and quality prizes in its area of actuation.

The mission of Contromation LLC is to establish a strong presence in the US to implement all provisions of Feasibility Studies, Planning, Conception Design, Basic Design, Detailing Design and supply of Automation and Control Systems and Industrial Instrumentation for manufacturing processes and industrial installations.

CONTROMATION mission is to become a major player in rendering - Feasibility Studies, Planning, Design, and supply of Automation and Control Systems and Industrial Instrumentation for manufacturing processes and industrial installations.

- Technical Coordination of licensed technology transfer and absorption..

- Technical evaluation, debottlenecking of industrial processes, Owner’s engineering, FAT and SAT coordination..

- Coordination and preparation of Technical proposals for turn-key projects - System’s Integration, development of PLC’s programs, SCADA, LAN/WAN, proprietary protocols, instrumentation for package units, DCS implementation, development of communication drivers, Auxiliary programs, and training.

- Coordination and inspection of Industrial construction and Control Systems assembly, commissioning, and start-up.

- Inspection of Control Systems, Instrumentation,

Electrical and Telecommunication projects (Owner’s engineering), Projects, Pre operation, and Start-up of Integrated Systems ( DCS, PLC, TMR, PAC), Supply of Telecommunication, Electrical and Instrumentation equipment.

- Technical evaluation of proposals - Supply and integration of telecommunication equipment - Design, Integration and supply of telecommunication and radio communication for stationary and portable equipment for industrial, naval and aeronautics applications including turnkey systems.

- Commercial operations with and representation of telecommunication, radio communication and Control Systems Manufacturers.

- Research and development of Control Systems strategies and equipment, telecommunication and radio communication equipment.

Competitive Edge CONTROMATION's overall competitive edge is that it brings the worldwide expertise and market penetration of its linked companies which will create a favorable scenario for joint operations with American companies in the US and abroad at the same time.

Another key factor in CONTROMATION's competitive edge is its expertise in providing access to the trade financing from the countries where it operates, as follows:  Facilitate low-cost financing specific to the buyer's country.  Preparing grant proposals and feasibility studies required by the funding institution when a company moves into new markets.  Conducting feasibility.

studies

to

establish

project

 Support arrangements for the best available financing through private national and international banking institutions.

The establishment of joint ventures or temporal associations between CONTROMATION and strong, experienced local companies is the most strategic step to reduced production costs as well as to improve flexibility in penetrating the markets in developing countries, especially the Central America, South America, Africa and Asia Regions.

Sales Strategy CONTROMATION sales strategy is based mainly in the following items:  Proven expertise arrangements, 

alliances

Competitiveness in pricing.



Creative payment terms.



Proven expertise

LLC IS TO ESTABLISH A STRONG IMPLEMENT ALL PROVISIONS OF CONCEPTION DESIGN, BASIC DESIGN, DETAILING DESIGN AND SUPPLY OF AUTOMATION AND CONTROL SYSTEMS AND INDUSTRIAL INSTRUMENTATION FOR MANUFACTURING PROCESSES AND INDUSTRIAL INSTALLATIONS.

with



THE MISSION OF CONTROMATION

FEASIBILITY STUDIES, PLANNING,

project

financing

Direct negotiation approaches with the clients.

 Strategic companies.

PRESENCE IN THE US TO

in

By Acacio A. Costa

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