Brazil: The B in BRICs
David Neeleman, Founder and CEO of Jet Blue and Azul Linha Aereas
David Neeleman, founder and CEO of Jet Blue and, later, of Brazil-based Azul Linha Aereas, was born to U.S. parents in Brazil and lived there until the age of five, when his family moved back to the U.S. Before returning to Brazil years later as a Mormon missionary, Neeleman said he had seen only the privileged lifestyles of Brazil's upper classes: "I thought Brazil was all about beautiful people and sport clubs," he said. But, as a missionary, he got to know the other side â€” millions living in favelas (shantytowns), functionally illiterate, and unable to afford much above subsistence levels.
In Brazil, he explained, wages are typically much lower than in the U.S. (on average, $10,720 gross national income per capita in 2011), and prices are much higher. "I saw women carrying their babies everywhere because no one had the money to buy an umbrella stroller," said Neeleman. "I went into one of the stores and saw a cheap umbrella stroller that in the U.S. would have been $20, and it was $80; and I thought, 'If they would sell that for $20, they'd sell millions, and they'd have factories producing them, and everyone would have a job.'"
The middle class has been growing since those days, as millions of Brazilians have risen above the official poverty line (21 percent in 2011 vs. 35 percent in 2002). But there is still plenty of room for improvement in Brazilians' quality of life, both in increasing people's disposable income and providing them affordable goods and services. "When I looked at the air-travel market in Brazil [before founding Azul Linha Aereas], there were so few flights and so few airplanes; because of the lack of service that existed between big cities, and because the fares were expensive, there were very few air travelers," said Neeleman.
A dyed-in-the-wool entrepreneur, Neeleman saw a huge opportunity to not only start his own business, but positively affect other sectors of the Brazilian economy. "Each plane is like a small business: Each generates 30 million reals in revenue to the government; we have 100 people that work for us directly, and another 300 who work indirectly at jobs that are created through hotels, rental cars, and other businesses," said Neeleman. "The trickle-down effect created for the economy, just by Azul, is about 14 billion reals, while our revenues will be only about 4-5 billion reals."
Doing business in Brazil can be frustrating, he added, because of many inefficiencies built into the system. The country's procurement law, 8666, is an example: "To replace a light fixture takes a year and a half: You have to put it out for procurement, everyone bids, you can challenge it in court if you don't think the winner was doing the right thing," he said. He cited an airport being built in Vitoria, the capital of the coastal state Espirito Santo. "They started building the airport seven years ago, and stopped because, in moving the land around, there was an impropriety of a million reals; and now the money is completely gone, the dirt's been washed away, and the airport is not under construction after seven years."
For all its frustrations, Brazil remains a land of unbelievable promise and attraction, exemplified by a story Neeleman told about one of his HR directors who took an interest in hardwood trees. "These trees can take 40 years to grow in a cold climate, but only about 16 years in Brazil," said Neeleman. A Swiss investor financed the purchase of 10,000 acres and the planting of 360,000 teak and mahogany trees, about six years ago. "The total initial investment was about $3 million, and it costs about $5,000 a month to have ten people maintain the trees. When they're harvested in ten years, those trees could be worth $100 million," said Neeleman. "Brazil has great natural resources, and the best people in the world," he added. "Brasil sempre sera - but the future of Brazil will not be, it's here now."