Paulo Hegg: The businessman’s projects

Is one of the more important economic links nowadays between Brazil and Africa and he considers this flow potentially strong in both directions

Credits: Iago Alencar / IBRAF

“I do not have the least interest in stopping what I am doing and there is still so much to do. I think I can contribute a great deal to Brazilian international commercial development”, states the businessman Paulo Hegg, 65 years old and from São Paulo and nowadays, he is one of the main Brazilian businessmen on the African continent. He is reaping the benefits from the work as a rural grower in Sudan now. Besides that, Hegg is leading the expanding business of the Cevital Algerian group. Developing new markets has always been the goal of Paulo Hegg, a Civil Engineering graduate, but while he was still young began to work in foreign commerce, so I learned by doing. Starting trading, learning, and accumulating knowhow”, he remembers.

After living in London for seven years, Paulo returned to Brazil, but with other proposals. I began actuating in the financial market and in the expansion of Tirolez, his family’s dairy product factory and later on, when I returned to Brazil, I joined forces with my brother focused on developing the international market for the exportation of cheeses”. From then on, I acquired expertise in strategic markets, such as Africa and the Middle East. In his position as the top executive of Tirolez, Paulo Hegg became a national reference in foreign commerce and also in agribusiness.

Paulo Hegg has spoken to ATLANTICO on two occasions, between one of his trips to Sudan, where he dedicates himself most of the time. He developed successful agricultural projects there from the financial point of view, but his involvement goes beyond just business. “I seek to contribute to improving the living conditions of a very needy population, who are good, fraternal and hospitable people and who have not had many opportunities for development”, he reveals. In this interview, he speaks about his experience as an agricultural grower in Sudan, the opportunities for Brazilians in Africa, the main challenges as a businessman, and about recent investments of the Cevital group in Brazil.

ATLANTICO — How did you arrive in Sudan? What made you invest there?

Paulo Hegg — It is a long story and it began in 2002. I was participating in a large worksite in India. It was a prefabricated building. In the meantime, I was called on my phone to know if I was interested in building metal bridges over the Nile River. The governor of Khartoum, who had been recently nominated, needed to build those bridges quickly. I spoke to the construction guys, who became interested, because I was finishing a bridge in Venezuela and they already had that expertise. Then, I invited the governor of Khartoum to visit Brazil at the beginning of 2003. It was the beginning of the President Lula office and he had emphasized an approximation to Africa. Then, we had a meeting with the Vice President at the time, José de Alencar, he suggested that the Governor would propose to the President of Sudan to open an embassy in Brazil. The governor was able and in a few months an embassy was opened in Brazil and afterwards we opened one (Brazilian) in Khartoum. From then on I began to cultivate that friendship and learn more about the country.

ATLANTICO — Did you begin with a cotton plantation?

Paulo Hegg — I began by exporting furniture. After that, I started importing irrigation technology. I brought a Brazilian company there to implement an office for working on starting an irrigation process in the country. Then I brought a project for a sugar and alcohol processing plant to Brazil. I even sent seed samples for testing there. That was when I showed photographs of the Brazilian soybeans, grown in a flowerbed to have a notion if the Brazilian soybeans would grow in that soil. I sent those photographs to several Brazilian soybean grower friends, and one of them became interested in visiting the country. We spent a few weeks together in Sudan, and he just fell in love with the pilot project, where there were 500 hectares of cotton and soybeans, all of it employing Brazilian technology, management, seeds, and equipment. The Agricultural Ministry agreed to fund that experiment using government resources. At the end of 2010 and the very beginning of 2011 and we harvested ten times more cotton then the Sudanese normally do. Due to that result, the government asked us to set up a partnership, partnering with the in 80 thousand hectares. Our participation was proving the management, technical responsibility for the project, resources, and institutional support. The farmlands were granted by an Arabian group. So, at that time, a partnership company was created named the Sudanese Brazilian Modern Agriculture Partnership (SBMAPA), where we have 50% of the capital and the other 50% is divided equally between the Agricultural Ministry and the Arabian group. We are harvesting from the 9 thousand hectares of cotton. The majority is assigned for exportation.

“Brazil is certainly a reference to Africa. I am sure that we have the knowhow, their friendship, and good will.”

ATLANTICO — How do you evaluate those results?

Paulo Hegg — The adverse economic conditions of the country, the stage of development, and democracy are a little backward. That interfered in the project, so that we could not achieve great results in the beginning. Nowadays, I am more conscious of the limitations in Africa. I would say that this is generally true in the continent, not just in Sudan. I already know Africa very well and it is a challenge for us, as Brazilians, we know the necessity for helping those brothers. The development level there is more backward than ours. We can contribute to improving their standard of living, we need to believe that and adopt that as an engagement strategy. Brazil is certainly a reference to Africa. I am sure that we have the knowhow, their friendship, and good will.

“There is no need for support from the Brazilian government in this initial phase, as it is a personal project. The Brazilian government has helped me though our embassy”.

ATLANTICO — The government of Sudan supports what you are doing there, but how has the Brazilian government granted you incentives in that way?

Paulo Hegg — There is no need for support from the Brazilian government in this initial phase, as it is a personal project. The Brazilian government has helped me though our embassy. But in the practical point of view, we do not need any help, any facilities from the Brazilian government. Even furthermore as the country is default in their payments to Brazil.

ATLANTICO — And how can we evaluate our international competitors? What is the role of Brazil in this context?

Paulo Hegg — Brazil has state-of-the-art technology on seed development. There is even a similar cultural origin and the portrayal of a very positive impression. There is no impression as an exploiter, colonist, imperialist, or predator. Brazilians do not seek to deplete the wealth from any place. Brazilians have broader goals; including solidarity, transfer of technology, and the preparation of human resources. Those are the goals seeking economic overall development and increased revenues.

“I already know Africa very well and it is a challenge for us, as Brazilians, we know the necessity for helping those brothers”.

ATLANTICO — What are the challenges that Brazilian investors can benefit from in these positive aspects?

Paulo Hegg — It is necessary to get a lot of support from the Brazilian government regarding the establishment of connections to African governments. It is necessary to assure that countries to negotiate with Brazil so that they comply with agreements. And that is done only among governments. It is necessary, yes, that the Brazilian government looks more closely and more acuity at these opportunities, opening doors for more exportations in the next few years. Nowadays, the African continent has over 1 billion people. And in 35 years that will double.

ATLANTICO — What is the progress like for implementing the agricultural research institute in Sudan?

Paulo Hegg — We have prepared the entire knowhow package on seed technology, and in different stages of research development. That is an initiative that has to be funded by international banks or by the government itself, because it is a non-profit transaction. It is a transaction for the purpose of development. Financial resources are missing for investing in a research center, as this is fundamental for the overall development of African agriculture. Brazil has already achieved success in agriculture. Due to investments made years ago in research and development by Embrapa. But it is not our role to invest in this, but that is for the government or international sources. It is an institutional issue. It is necessary to get support from international entities to finance the project, which is not the case. With 7 or 8 million dollars, we will be able to radically change the future of the country through the implementation of this center of research excellence.

ATLANTICO — You have already worked in various economic segments in Africa. What sections nowadays offer the greatest opportunities for the Brazilian businessman?

Paulo Hegg — First-of-all, agricultural equipment. I also believe there is a big opportunity for civil construction now. Besides that, all manufactured goods, agro-industry, and the textile industry.

ATLANTICO — Sudan is in a strategic region, as it is near Maghreb and the Middle East. Why is it important for Brazil to approach Sudan and other countries in Northern Africa? How do you evaluate the changes the businessmen have made in the region?

Paulo Hegg — The Brazilian government and the Brazilian Arabian Chamber of Commerce have an important role, in all spectrums of activities. The importance of the geopolitical position of Sudan is very great because that region has a large consumer market and it is close to the European market, a big importer of foodstuffs, and Sudan can become the next breadbasket for the entire African region, as well as for the Middle East and even for Europe. And, why not talk about China? Because that region is on the route to China. So, I believe that Sudan can become an advanced agro-industrial Brazilian platform. There is enough water, irrigation water, underground, there is excellent soil and topography… So, what is missing? Only technology and management. We have been trying to implement this program for six years. We are really close to what we could do. Institutional support and cultural support are still missing. It is a slow process. I believe that our efforts will be dissipated and pulverized. There are many Brazilian businessmen who are doing the same thing.

ATLANTICO — Have you invested in other countries on the African continent?

Paulo Hegg — We have been invited to go to Ethiopia, Zimbabwe, Mozambique, and Angola. But we have felt for one reason or another that it was not the right time to go. Each country needs to believe in agriculture. I need to allocate human resources and funds for that, making that a priority. I believe that this is not a priority in Angola or Mozambique. It is a path; it is an assignment we need to do: gain experience, know how to deal with local manpower, to see what we need to invest in each one of these countries. Africans, in general, are open to receiving know-how, but they have a different standard of education, they have other ways of acting. Their timing is very different from ours. In modern agriculture, you need to have people who are prepared for acting based on plans and that failure is very evident in Africa: the lack of respect for planning.

“The importance of the geopolitical position of Sudan is very great because that region has a large consumer market and it is close to the European market, a big importer of foodstuffs”

ATLANTICO — How has your experience been in taking the Cevital group, from Algeria, and invest in Brazilian agribusiness?

Paulo Hegg — The experience has been gratifying because I am fortunate in being able to convince Algerians to believe in the potential of agro-industry and the logistic structure in an extremely important region for Brazilian agribusiness that is the Central-West and the Northern part of Brazil. Two years ago I brought them to Brazil and they were convinced that it was worthwhile to make that investment, in improving railway and fluvial transportation, adding value to agricultural production, creating jobs, offering improved incomes to Brazilians. That will even generate income for such states as Mato Grosso, Mato Grosso do Sul, Pará, and others.

ATLANTICO — Is there a perspective for new investments in Brazil?

Paulo Hegg — The expectations are very great. We are negotiating the initial step in building an industrial complex in Vera, in the State of Mato Grosso, for building port terminals and agro-industries in Villa do Conde, in Pará, a railway from Marabá to Villa do Conde. And the second step is from Santana do Araguaia to Marabá. This is what all Brazilians are expecting in the past few decades: regional integration and expansion of the railway and logistic network for transporting the wealth being produced in the Central-Western part of Brazil, increasing the feasibility of exporting our resources, and enabling the farmer to increase income. And due to this, it will decrease the cost of logistics, and that will benefit in increasing income. Allowing for the governments to cover the costs for this initiative through tax revenues generated by the agro-industry. It will create better quality jobs in agro-industry, generate divisions. Added value products are worth much more per ton than raw material. And this way, we will revert the development cycle in Pará State that is a big exporter of raw material, but the per capita income is very low. We can increase that per capita income through the industrialization of those raw materials that are being quoted, generating employment for the foreign market and not for Brazil.