The Taiwanese Cowboys of Brazil
Taking the Profits by the Horns
Amidst global food shortages, Brazil's fertile soil produces a bountiful blessing. It is here that Taiwanese entrepreneur Jerry Huang steered his way toward a business that is rooted and sustainable.
Taking the Profits by the HornsBy Monique Hou
From CommonWealth Magazine (vol. 425 )
In Brazil's ethnic-Chinese community, there's no one who doesn't know Jerry Huang. He was first agent for Taiwanese motherboards in the Brazilian market, and the Paraguay-based company he set up remains the South American agent for Asus. But he's now handed his entire electronics components business over to his daughter and gone off to raise cattle, earning him the moniker of "cowboy" among Taiwanese businesspeople here.
"The risks are high in the electronics business," Huang says. "Each day huge sums of money come in and go out, but you don't get to keep it."
When he first came to Brazil 30 years ago, he noted with envy the lofty social status of the big ranchers and farmers, vowing, "Some day that will be me." In Brazil, all of the big-time entrepreneurs, politicians and media celebrities own big farms or ranches.
After handing over his electronics business to his daughter, he began looking for land in the Brazilian state of Mato Grosso Do Sul, the country's second-largest center of cattle ranching. The state boasts fertile soil and a comprehensive production chain, and furthermore, his friend Huang Tsung Huang was already operating a ranch there.
Brazil's Only Two 'Taiwanese Cowboys'
Huang finally settled on a site with rich black soil and ample water resources to become, along with Huang Tsung Huang, not just the only two "Taiwanese cowboys" in the state, but in all of Brazil.
"All the two of us have to do is show up at the same livestock auction on the same day, and the prices go up," Jerry Huang laughs.
Huang Tsung Huang, who only handles the midstream portion of the business, even has on display in his home a number of plaques commemorating the most cattle purchased at Brazil's largest annual livestock auction.
The midstream portion of the business refers to the purchase of calves which are then raised until they are just barely mature before being sold to a third party to be fattened up for the slaughter. Jerry Huang's ranch, with its rich soil and abundant water and grasses for feed, is particularly suited for the fattening-up phase of the business, so he is able to handle the entire process from the birthing of the calves to fattening. The entire process from birth through maturity takes anywhere from two to three years – a major reason Jerry Huang passes his days in such a seemingly leisurely manner.
"Taiwanese people don't really understand ranching and think raising cattle is a dirty, tiring, laborious business," Jerry Huang says. "Actually, I don't really do anything."
Living in a villa surrounded by flowers and fruit trees out on the plains, "it's like heaven here," he says. He only goes out to the ranch once a month for a week of patrolling the grounds, reading reports and talking business. The rest of the time, if he's not with his wife in Sao Paolo, he's off traveling and visiting friends scattered around the world.
Know More than the Help
"One head of cattle needs to eat 10 percent of its body weight in grass each day, and you need to calculate how many head you can raise by the amount of grass available during the dry season," Huang says.
"The split rail fences must be redwood to withstand the knocks a 600-700 kg steer can dish out," he continues. "Once they're fattened up, you don't want them moving around too much, just eating their fill and sleeping. Calves are the opposite – the more they move around, the stronger their bones become, and the better it is for healthy growth."
Although he claims he doesn't really do anything, relying on his eight ranch hands to look after the herd, when it comes to raising cattle, his philosophy remains, "You've got to know more than the help."
Huang's ranch covers 2,000 hectares, about one-third the size of Jiayi City. Just three percent of Brazil's farms and ranches are 1,000 or more hectares. What about 2,000 or more hectares?
"I don't have the numbers on that," Huang says.
Huang's 4,000-plus herd generates revenues of about US$1 million annually – not a particularly vast sum.
"But that's nearly all profit," Taiwanese Chambers of Commerce in Latin America chairman Wei Yuan Chang reveals.
Huang candidly claims a profit margin of 97 percent. The grass the cows feed upon grows free. Costs for labor, veterinary pharmaceuticals, salts and minerals amount to just three percent. And the land value not only does not depreciate, it has continued to rise in value, quintupling over the past three years alone.
"Ranchers in Brazil don't calculate land costs, because the land appreciates. And that appreciation is far greater than the profit from raising cattle," Huang adds.
Super Low Agricultural Taxes
Brazil is famous for its relentless taxation. Rates are high in nearly every industrial sector. Levied from production line to store shelf, they often double the cost of commodities. In the ranching business, however, they are extraordinarily low, with just two to three U.S. dollars per head on small to medium-sized calves going to the state government for "road maintenance fees" and just 2.3 percent on the sale price of mature cattle sold for slaughter.
"And there's no inheritance tax in Brazil; asset transfers are subject to just four-percent taxation, so my son will get nearly the whole thing, not like in some other countries where the government takes the majority."
Translated from the Chinese by Brian Kennedy
Fazenda Paloma Ranch
Herd: 4,000 head
Annual Operating Revenue: NT$33 million
Profit Margin: 97 percent
Recipe for Success: Avoids fluctuations and short turnaround of electronics industry by turning to investments in ranching with low taxation and high profit margins; highly sustainable over long-term.