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Located in the north east Brazil, Sergipe is the smallest state of the country and borders Bahia to the south and west as well as Alagoas to the north (with the Atlantic to the east).  The state is connected by the BR-101 and BR-235 highways and the main cities are Aracaju (the capital) followed by Estância, Laranjeiras, Capela, Simão Dias, Lagarto, São Cristóvão and Maruim.

Similar to the majority of the north eastern coast, the majority of the land is savannah with regions closer to the coast largely made up of swamps, mangroves, swaps, sandy beaches as well as some tropical forest.  Towards the west of the state are also some mountainous areas although these are comparatively small.  The main river of the region is the Fransisco which largely drains the northern part of the state (the south is drained by a number of smaller rivers).

The São Cristóvão municipality was the first region to be settled by the Portuguese in the late 16^th century which, for most of the following one hundred and fifty years, was serially invaded by both the French and the Dutch.  It was only by the 18^th century that the Portuguese were able to establish full control and the capital of Aracaju was inaugurated in 1855.

Today from an economic perspective – according to Governor Marcelo Déda (in late 2009) – the state is: “balanced, with healthy public finances and a strategic location near the Northeast’s main markets.  Sergipe has made the political decision to take advantage of the extraordinary opportunity the region and Brazil are currently experiencing.  That’s why we are adopting public policies that favour investment.  Nothing will stand in the way of our plans to attract those wanting to invest in a healthy economy and contribute to a new process of sustainable development.”

The state’s economy was able to remain relatively stable during the brief recessionary period the country experienced between 2008 and 09 – with over 4,000 employment positions created as a result of over R$ 500 million being invested in public and private related industries which, according to state finance secretary of, João Andrade: “strengthened the preservation and growth of income for Sergipe families.”

The state has several plans of interest which aim to have set economic and social development objectives.  Below is an outline of some of the main projects worthy of attention:

• R$ 250 million for the Sergipe Cities (Sergipe Cidades) programme which is mainly aimed for the state’s rural areas with focuses on community precinct development, sports facilities, childcare, squares, leisure areas, integrated business complexes, technological centres, markets and arts / crafts centres;
• R$ 166 million to offset losses to the State Participation Fund (Fundo de Participação dos Estados, FPE);
• R$ 51 million for the Program to the Combat Rural Poverty (Programa de Combate a Probreza Rural, PCPR) – considered fundamental in a state which has one of the lowest socio-economic profiles in the whole of Brazil with 47 percent of the entire population living under the poverty line.  The project has been financed by the World Bank and will benefit over 20,000 families through the means of the creation of community, social and business development programmes.  Some projects which have already been seeing visible results include agricultural mechanisation, bookkeeping, cattle raising, water management, drought management and crop generation;
• The Inter-American Development and World Banks have also provided the state with low interest loans aimed at expanding schools, hospitals, popular housing, industrial and technological parks as well as the port and airport in the capital;
• Launched in December 2008, the Develop Sergipe (Desenvolver-SE) project is also raising the investment profile of the state via the means of public-private partnerships strategized to develop a number of projects leading to 2017.  According to Lúcia Falcon, Planning Secretary: “the objectives range from raising the GDP to rural development, diversification and distribution of income in addition to a private sector commitment to competiveness and environmental sustainability.”  According to Falcon: “an economic development plan with social and environmental sustainability must promote distribution of income; that is, taking opportunities for income generation to rural areas and to more traditional industries that create jobs.  There must also be support for solidarity-focused economic programs that bring the population below the poverty line into labour and consumption markets.”

Sergipe, as with several parts the rural north, has long suffered from inadequate infrastructural facilities and, up to 2011, initial improvement funding to be invested is expected to reach R$ 1 billion – with the main focus being in its roads, highways, bridges and sanitation as well as the expansion of the Aracaju airport (including a new passenger terminal and four new departure bridges, boosting capacity by over 600,000 annually).  According to Valmor Barbosa, secretary of infrastructure: “with these policies, Sergipe will certainly become an attractive hub for investment in social and economic development projects.”  The road infrastructural programmes were deemed as the most necessary;  prior to 2007, 62 percent of the 1,771 kilometres of paved roads and 1,980 kilometres of highways were unpassable placing significant issues for mobility and industry growth.  By 2008, over R$ 200 million had been invested in improvements, including the Sertão highway which connects to the Bahia and Alagoas states (spanning nine municipalities whilst consuming 220,000 tonnes of asphalt and 150,000 cubic metres of gravel).  With over R$ 200 million also earmarked to be spent by the end of 2010, the secretary also commented: “our expectation is that the percentage of unpassable roads will drop from 62 to 27 percent by the end of 2010, increasing the number of roads in ‘good’ condition to 24 percent and those in ‘regular’ condition to 49 percent.”  Another interesting project is the construction and renovation of bridges including the Ponte Jornalista Joel Silveira over the Vaza Barris River – extending 1,080 metres and 14.2 wide with a R$ 51.1 million investment as well as a the bridge over the Piauí river (commenced in September 2009) which will reduce the distance between Salvador (Bahia) and Aracaju by 70 kilometres.  Sanitation improvements that have been put in place have also been deemed as highly necessary – prior to 2008, the state’s water coverage reached 74.5 percent of the population with the sewerage being significantly lower.  With over R$ 600 million being funded by the Growth Acceleration Programme (PAC), the Brazilian Development Bank (BNDES) and the World Bank – at the close of 2010, 95 percent of the population will have easy access to water and 75 percent will be in receipt of adequate sewerage (with further investments expected into 2011 and beyond).

The public health infrastructure of the state is also in the process of what has been termed by many officials as a ‘revolution’ including the creation of over 100 family health clinics as well as two large regional hospitals and the refurbishment of 12 existing ones (over R$ 100 million is being invested).

In recent years, the state has developed several fiscal, land and credit incentives which have resulted in a steady the number of business establishing and/or relocating throughout – particularly in the agribusiness, textiles, dairy, fertilizers, chemical mining, energy and service sectors – benefitting of 130 companies between 2007 and 08.  As at the close of 2009, over new 40 companies came to the region with estimated initial investment at R$ 500 million – according to Jorge Santana, secretary of economic  development, science, technology and tourism: “in our actions, we have sought to identify the main productive chains and find the key to their expansion.”  By the close of 2010, it is expected that 100 new factories will be opened (with the creation of 10,000 new employment positions).  A modern example of a successful company in the region is the AmBev aluminium factory which has recently invested R$ 122 million on expansionary plans.  The company arrived in the state in 1997 and, as at 2009, has a capacity of 5 million hectolitres at its main unit called Águas Claras do Norte.  According to president Rinaldo Lopes: “the north-east has benefitted greatly from government social programmes and today has more growth potential than any other region in Brazil.”

When taking into consideration the fact that the state currently has one of the lowest volumes of credit operations in the north east, the number of agencies (of all sizes) arriving into the region continues to grow.  The most prominent institution is the Banese – with over 61 branches, 25 service posts and 350 correspondence posts spread across the state – which increased its credit limit to R$ 700 million in 2009 with further extensions expected (allocated to various sectors including services, hotels and transportation).  According to Antonio César de Santana, CEO of Banco do Nordeste (Bank of the North-east): “the large groups have began to resume their projects in Sergipe and we are developing project finance for a client that will participate in the National Electrical Energy Auction (ANEEL) as well as in conjunction with Crediamigo, one of Brazil’s largest growing microfinance programmes which has drawn World Bank acclaim.”  Banco do Brasil have increased their presence in the state with their loan portfolio rising by R$ 417 million between 2005 and 2009 mainly allocated to financing agri-business related investments.  The Caixa Econômica Federal have also widened their scope in Sergipe – particularly with regards to the distribution of assistance funds, construction and various infrastructural projects.

Another industry that has assisted the state’s growth and looks set to continue to do so is oil and gas – Sergipe is the country’s sixth largest producer and from between 2009 and 2013 will be the recipient of US$ 1.3 billion from Petrobras – which will be allocated to the exploration of new wells and the expansion of existing projects.  In addition, water injection projects are also being installed in the Carmópolis, Sirizinho and Riachuelo fields.  The Pirnema, located 30 kilometres from Aracaju, is the first deep water field in Brazil’s north east and produces high quality light crude via the world’s first round platform – which is mechanically more stable in adverse weather conditions – nestled in a 1,090 metre deep site which will also connect to three other wells of further depth.  Petrobras also intends to develop further wells in the Sergipe / Alagoas basin.  With the assistance of the state and Sebrae (a small business support agency) the percentage of Petrobras’s purchases from local suppliers increased from 15 to 30 percent between 2008 and 2009 and the growth expectation is from a current 51,000 daily barrels to 68,000 by 2013.

The state is also taking advantage of the increased demand and ideal production conditions for ethanol.  In 2008/09, the Campo Lindo (in the Nossa Senhora municipality) and the Taquari Vassouras (in Capela) mills were inaugurated with an investment of R$ 200 million and ability to produce 1.3 million litres of ethanol daily, sugar, bagasse energy as well as creating over 3,000 direct and indirect employment positions.  According to Jorge Santana, state secretary of economic development, science and technology: “the prospect of an increase in ethanol demand in Brazil and abroad has opened the door to the possibility of other rural producers adapting their properties / land holdings to grow the crop.  This means a very positive scenario for the state.”  Moving forward, the Maratá and JPessoa de Queiroz groups – both well established agricultural producers in the north east – are looking to create ethanol based operations in the state.  Another project, in conjunction with Petrobras, is the production of biodiesel via sunflowers which had over 1,500 producers in the state at the close of 2009.

A fundamental installation within the state is the Xingó hydroelectric plant which is located in the São Francisco river canyon which has a flow rate of 33,000 cubic metres per second and installed capacity of 3,162 megawatts, supplying 25 percent of north-eastern Brazil’s energy consumption (it began operating in 1997 with a total investment of R$ 3.4 billion).  The plant has also had a complementary effect in the surrounding region – for example, via the fact that the dam has raised the groundwater level (previously water had to be pumped from 140 metres deep).  Xingó is also part of the CHESF federal government network (Companhia Hidro Elétrica do São Francisco, Hydro Electric Company of São Francisco) within Brazil’s largest energy generation complex.  Another important energy producer in the state is the ‘Energisa Sergipe’ company which was formed in 1997 under the Energisa Cataguazes Leopoldina group (who also have operations in Paraíba, Rio de Janeiro and Minas Gerais).  The company serves over 563,000 customers with an annual turnover of R$ 640 million.   All energy companies are also being witnessed placing emphasis on the long term sustainability of the plant (R$ 37 million was invested between 2003 and 2008) for example via social and environmental preservation programmes – such as those managed by the São Francisco and Parnaíba Valley Development Company (CODEVASF) who work on the conservation and revitalisation of the basins in the region, covering 11 states of the north and the north east (the budget for 2010 solely for Sergipe state is R$ 1.8 billion).

The state also has rich mineral resources and the huge deposits of limestone which are assisting the state becoming recognised as a prominent cement producer (particularly in line with the country’s rising construction industry).  As at the close of 2009, mineral extraction and processing formed over 20 percent of the states GDP – according Aldemir do Vale Souza, economist and partner of Economic and Planning Consulting (CEPLAN): “the synergy created by the start of the Xingó plant and the recuperation of investments in the mineral extraction industry fostered the dynamism of Sergipe’s economy, particularly in the construction and transformation industries.   Petrobras’s investments in the natural gas pipeline connecting Bahia’s production fields with the states of Sergipe and Alagoas also attracted resources destined for the transformation of the industry, especially in the energy-intensive segments.”  The Votorantim group also have a factory in the state producing 2.2 million tons of cement annually.

Vale (the world’s largest iron company, operating in the Rosário do Catete municipality) is expanding its fertilizer arm in the region including the development of potassium production, already heavily used in the region as well as the ‘Carnalita’ project which will mine the carnallitic rock in the Taquari-Vassouras municipality with an expected production level of 850,000 annual tons and an investment level of US$ 2.1 billion (the project remains in the pilot stages and is expected to continue to do so until 2011).

The main agricultural produce are citrus fruits, corn, livestock, dairy cattle, sugarcane, coconut, rice and coffee and Sergipe’s farming sector is also demonstrating very encouraging signs – for the 2009/10 harvest season, under the Nacional de Fortalecimento da Agricultura Familiar (National Programme for Strengthening Family Agriculture, PRONAF), the federal government offered over R$ 132 million by the close of 2010 to farmers in the form of cost-offsetting measures and investment / commercialisation funds.  Such family based agricultural businesses are being applied for the benefit of wider communities such to ensure that all young people are receiving adequate school meals.  According to Argileu Martins da Silva, of the Family Agriculture Secretariat of the Agrarian Development Ministry: “PRONAF resources coupled with the actions undertaken by the Sergipe state government such as technical assistance, rural extension and seed programmes will be an important instrument for the advance of family farming.”  Almost R$ 9 million has been allocated solely in research for furthering the sustainable development of the state’s agricultural industry – particularly focused on the citrus fruit sector as well as developing seeds that are pest and disease resistant – much of this work is being done in conjunction with EMBRAPA (Empresa Brasileira de Pesquisa Agropecuária, the Brazilian National Agricultural Research Institute).  The states milk sector is developing a reputation as being a production hub of the north east with the new centre inaugurated in late 2009 in the Tobias Barreto municipality.  Brazil’s third largest coffee producer, Café Maratá, invested R$ 50 million for its new factory in the Lagarto municipality which started producing in late 2009 as well as expanding on its Itaporanga and Estância units with an investment of R$65 million which now also produce tea and soft drinks.

Other examples of the production growth of the state include toy manufacturing – with the Estrela group investing R$ 10 million in its factory in 2009 – as well as shoe manufacturing: the Vulcabras / Azaléi, in recent years, expanded its four factories in the state from 40,000 to 60,000 pairs per day whilst also taking advantage of anti-dumping tariffs on Chinese products and bottle production.  The Leite de Rosas factory, moved to Sergipe from Rio de Janeiro and witnessed a doubling of production levels between 2008 and 2009.

The growth of the retail sector is also particularly noteworthy.  The GBarbosa supermarket chain is the largest in operation in the state with 27 stores.  Another, created by a Sergipe family, is the Bompreço – which was bought by Wal-Mart due to its success and now has two hypermarkets, four supermarkets and four neighbourhood markets (with further expansion to be expected).

The strategic growth in the state is carefully monitored by the SEDETEC organisation (Secretaria do Desenvolvimento Econômico, Ciência e Technologia e do Turismo, Economic Development, Science and Technology and Tourism Secretariat) and, in recent years, a number of new establishments have been created to achieve the organisation’s objectives.  Examples include the FAPITEC (Fundação de Apoio a Pesquisa e Inovação, Foundation of Research Support and Innovation), the Sergipe-TEC technology park as well as a number of vocational centres.  As a result, the amount of investment allocated by SEDETEC has increased by a yearly total of R$ 4.3 in 2007 to R$ 14.7 million in 2009 (with a similar amount expected in 2010).  The local productive agreements, also administered by SEDETEC, are directly connected to many of the state’s economic activity and work in conjunction with the state government, ministries and the SEBRAE small business network.

As with most regions of the country, the housing market in Sergipe has witnessed solid growth in recent years despite the effects of the global recession.  The civil construction industry union SINDUSCON indicated a 15 percent annual growth rate between 2006 and 2009 which, whilst some have questioned the figures, is expected to maintain a steady growth trajectory for the medium term future due to wider mortgage credit being made available and the growth of the state as a whole.  As well as the Minha Casa, Minha Vida (My House, My Life) programme and the Federal Workers Severance Pay Fund (FGTS), other state-run housing initiatives have been put in place – including the Casa Nova, Vida Nova (New House, New Life) which will see the construction of 22,000 housing units which has been funded by a collective of financers: the Banco do Nordest (North East Bank), INCRA (Instituto Nacional de Colonização e Reforma Agrária, National Agrarian Reform Institute), Caixa Econômica Federal, PAC (Programa de Aceleração do Crescimento, Growth Acceleration Programme) and the Fundo da Pobreza Estadual (State Poverty Fund).  At the same time, however, many developers have been challenged in making projects feasible, particularly with regards to home buyer affordability – according to Teixeira: “without government subsidies, the numbers do not add up.  Programmes need to be very well planned to guarantee housing for this segment of the population.”  Teixeira has been heavily involved with the Feliz Cidade project, subsidising homes valued at under R$ 100,000.  Luciano Barreto of the Celi also highlights the need for the public and private sectors to work together: “the city hall will have to work on urbanisation projects to promote expansion – no one wants to live in areas without infrastructure.”  The Cosil developers, who have been established in the state of São Paulo for over 14 years, are also heavily investing in the state capital.

The state’s tourism industry is also considered to offer huge future potential with over R$140 million being invested in 2010 alone as well as a further US $100 from PRODETUR (Programa Nacional de Desenvolvimento do Turismo, the National Programme for the Development of Tourism) for the next 5 years.  Sergipe is well recognised for its beaches, festivals (such as the ‘Festas Juninas’), historical cities (São Cristóvão is the country’s fourth old city, founded in 1590) and its mineral spring in Salgado Balneário.  The majority of visitors are Brazilians from the states of Bahia, São Paulo, Minas Gerais and Pernambuco and, in turn, the number of hotel developments has steadily increased – including large chains such as the Radisson (Atlântica) and the Mercure.  One of north east Brazil’s largest Eco Resorts is currently under construction on a 300,000m² plot on the Mosqueiro beach which will have 169 rooms, 25 bungalows, a water park, sports recreation areas, a convention centre and four restaurants.

Please click here to access the full ‘Sergipe Santo Real Estate and Land Investor State Guide’ with in-depth information on each of the 75 municipalities of this north-eastern state (including an interactive map, area descriptions, industry backgrounds, population figures, a range of statistics related to GDP, local enterprise numbers, salary / per capita income levels, gini coefficients, human development index ratings and more). Note you will have to be a subscriber to the Brazil Real Estate and Land Investor Guide, which can be done in under a minute by clicking here.