The educational challenge facing the Brazilian rental market

Brazilian rental association Analoc has valued the country’s rental market at $12 billion and consists of 45,000 companies whose activities are dominated by rentals. And although this makes it an important market on a global scale – equal to the largest European countries – it remains immature.

Paulo Esteves, president of Analoc and a 35-year veteran of the Brazilian air platform and general rental market, as well as founder and current managing director of Nest Rental, said International rental news that rental remains a highly fragmented industry and is often run in an unprofessional manner.

“We have good companies with management, funds and access to capital, but every day we face two different problems,” Esteves said during a speech at the ERA Convention in Lisbon last month. “A very, very competitive market, but the business environment is ‘third world’.

“Most small and medium-sized companies were founded by entrepreneurs. They set up a company for some time and then stop developing because they have to create an appropriate management system and be guided by market indicators and the like.”

Esteves and his colleagues at Analoc are forming a federation of 11 state rental organizations and relevant bodies such as ALEC and Sobratema, which currently has 1,500 members and plans to increase that number to 5,000 within three years.

The association, based in Belo Horizonte, Minas Gerais, is expanding its international wings – it is a member of the Global Rental Alliance (GRA), a federation of rental associations around the world, currently chaired by ERA – but Esteves said the key to its growth and shaping the professional industry would be service delivery and training to its national members.

“We understand that the problem of small entities (companies and associations) concerns funds. They don’t like paying more (for membership) because they get few benefits. So I started developing some kind of e-learning system.

“We will start with three free programs to attract businesses. The first is sales strategy training. We have to work to find new opportunities, new markets, niches, different things, instead of fighting for the same customer.

Other courses will be offered on rental pricing and general rental management; “We’re trying to partner with universities to create rental-related courses or MBAs,” Esteves said, “It doesn’t exist. It is very important to develop this.”

Prices, interest rates
Esteves said education is essential in a market that is struggling with difficult conditions, with historically low rental prices, rising machinery prices (tied to the value of the Brazilian currency) and an economic context in which high interest rates (+10%) are used to reducing inflation, which is approximately 4-5%.

He said market growth this year will likely be around 6-7%, lower than 2023. That doesn’t sound too bad, although it becomes more modest when you factor in inflation.

He described the situation with higher machinery prices and apartment rental prices as “crazy” and said machinery costs had prompted more Brazilian buyers to consider Chinese equipment.

“We had an exhibition a few weeks ago – M&T Expo – and 60% of the exhibitors were Chinese. And on airborne platforms alone, there were 18 of them, of which 13 came from China and five from North America and Europe.”

He has reservations about the quality of services and products of some Chinese suppliers, but said that there are also very good companies; “and offer special conditions in terms of credit, long-term and interest-free payments. They are taking big risks.”

Despite the challenges, is he optimistic about the rental industry in the country? “Yes, absolutely. We need to educate the market and provide data to make the right decisions because the investment decision-making process is not always so rational.

“We have good, professional companies – like Mills and Loxam – that have processes in place to understand what’s happening in the market, but most companies don’t have a scientific approach.”

Esteves hopes Analoc will help change that.