Currency rise, burdensome taxes and labor supply are formidable obstacles for new president

By Edileuza Soares

President-elect Dilma Rousseff and her team have stated that tax reductions, investment in innovation, and training of skilled labor are priorities of the new government. Whether those promises are upheld remains to be seen, but the Brazilian outsourcing sector is hopeful. At a time when Latin America professional services are more and more in demand, will Rousseff help or hurt Brazil’s chances for greater market share?

A representative of the Worker’s Party (PT), Dilma  was elected with 56 million votes in the second phase of the election, beating the Social Democratic Party of Brazil (PSDB) candidate Jose Serra. She takes on her new role with the challenge of leading the largest economy in Latin America, the second largest in the Americas after the US, with the eighth-largest GDP in the world.

Competitive stakes

The change in government has caused real optimism among Brazilian IT companies, especially those focused outwards on the US market. On assuming command of a nation of approximately 192 million inhabitants, Rousseff immediately announced measures to improve the position of national companies both at home and abroad.

She has committed to investing in research and innovation to improve the competitiveness of Brazilian companies, and also to provide incentives to increase exports and modify exchange mechanisms to reduce the cost of products and services commercialized outside Brazil. This will all have a direct impact on the country’s large ICT market, and expectations of the business sector are that these measures will increase their participation in the global sourcing market.

“We have advanced in research and technology but we need to advance much more. My government will strongly support scientific and technological development to have control over knowledge and use innovation as an instrument to aid productivity”, said Rousseff in her opening speech to the Brazilian nation on January 1st. She does recognize the importance of information and communication technology in bolstering the growth of Brazil, which has recently expanded faster even than other emerging market competitors India and China.

“We hope the promises don’t remain idle promises” – Antonio Gil, President of Brasscom

Economic reforms

A reduction of the tax burden is one of the priorities of Rousseff’s government; a theme that was in the plans of her predecessor Lula, but in which little progress was actually made. According to the president the implementation of a number of measures to modernize the tax system is urgent although she did not detail how the process would be carried out.

This theme was also discussed by the Minister of Development, Industry and Overseas Commerce (MDIC), Fernando Pimentel who recognized that the high tax rate in Brazil has a direct impact on companies’ competitiveness. The minister will assess tax relief to some sectors of the economy to boost exports.

Pimentel believes that even for development in Brazil’s domestic market, firms need to have an international footprint. But he is aware that for this to happen they need innovation and investment. Also addressing the lack of specialized skilled labor, the minister is committed to improving training for the youth, to better prepare for employment in the IT industry.

Today the Real is more valued than the dollar in Brazil, which increases the costs of contracts made in foreign markets, in effect penalizing firms that export IT services. One of the promises Rousseff and her team made was to curb that currency appreciation. Last week, the new president of the Central Bank of Brazil, Alexandre Tombini, announced that financial institutions who want more than $3 billion short on the dollar will need to keep 60% of the value of their positions in reserve. He intends to discourage bank short dollar positions and has stated that the new rule will go into effect on April 4th.

In December 2010, Brazilian banks were a net of $16.7 billion short on the dollar, against $2.9 billion in December 2009. The Central Bank hopes to bring that to around $10 billion.

Effective measures for IT

Rouseff’s plans pleased the association of tech companies who were already preparing for the new regime during electoral campaigns last year. They presented all candidates, including Rousseff, with a document serving as an overview of the sector called “The Strategic Value of IT”. The report shows that the Brazilian IT sector turns over $140 billion per year and has a weight of 8.3% on national GDP – it was meant to highlights the importance of the industry for Brazil’s continued growth.

“We hope the promises don’t remain idle promises”, says Antonio Gil, President of the Brazilian Association of Information and Communication Technology (Brasscom). He confirmed that everything announced by Rousseff’s team is on the IT agenda. He also said that tax relief is the main concern of companies that export services – the cost of labor in Brazil is one of the most expensive in the world because of benefits and other charges.

To ensure that companies become more competitive, the sector proposed to the government that they exchange a discount in social taxes for a 5% participation of the company turnover of those operating abroad. But Gil believes that only tax relief will not resolve things if the government does not implement a mass training program for professionals. To have skilled labor is essential for Brazil to reach its 2020 target of being one of the leaders in global outsourcing, with business value of $20 billion as compared to the present $3.5 billion.

Dilma Rousseff: Who is she?

Born in Belo Horizonte (Minas Gerais), Rousseff, 63, graduated in Social Sciences at the Federal University of Minas Gerais (FUMG). She took power after being the target of a series of allegations, one of which involved a lobby scheme in the government of Lula de Silva that led to the removal of her successor as Chief of Staff, Erenice Guerra.

Rousseff began her political life at the age of 16 and fought as a guerrilla during the Military Coup of 1964 in Brazil She was captured and condemned for her activities in which she was accused of armed fighting. Despite an early beginning to her political career she has not occupied many public seats. She has served as the Secretary of Mines, Energy and Communication for the State of Rio Grande do Sul; Minister of Mines and Energy in Lula’s government; and then as Lula’s Chief of Staff.

As she is assuming command of Brazil at a moment when inflation is under control and the economy is booming, there are high hopes for her government. Economists, business leaders, and indeed the Brazilian people are hopeful of a good term in office. Her promise in her opening speech was to continue the work of her predecessor, who remained in command of the nation for two mandates, from 2003 to 2010. “I have come first and foremost to bring continuity to the greatest process of affirmation this country has ever lived. I have come to consolidate the transforming work of President Luiz Inácio da Silva”, she declared.

By Dennis Barker.

Brazil is a nation on a mission.

The country, with the fifth largest population in the world,  is generating major momentum in the global trade and technology arena. The country’s domestic IT market is the eighth largest in the world and over 100,000 technology professionals join the nation’s workforce every year.

The rising influence of Brazil as a trading and exporting partner also brings with it a host of reasons to better understand the country’s unique culture.

If you’re hungry for more data, insight and knowledge about Brazil – then scroll on and click below – learn about cybercrime, soccer fanaticism, exports, Giselle, Teddy Roosevelt’s strange ride on an Amazonian river and a lot more!

GO TO SLIDESHOW: CLICK HERE

SAO PAULO and RIO DE JANEIRO, June 1 /PRNewswire/ — The Brasscom Global IT Forum, one of the largest IT industry forums in Latin America, will be hosting more than 50 global enterprise leaders, analysts and investors on June 8 – June 10 in the Brazilian cities of Sao Paulo and Rio de Janeiro.

Organized by the Brazilian Association of Information Technology and Communication Companies (Brasscom), the forum will be co-located with the Gartner Outsourcing Summit 2010 – Latin America. It will showcase Brazil’s IT infrastructure and how the nation has emerged as a prime locale for offshore IT and outsourcing services.

Confirmed panelists and presentations on the agenda include:

• Panel discussions with Julia Santos, head of Worldwide Strategic Outsourcing of Johnson & Johnson, and Jairo Avritchir, IT site director for Dell’s Brazilian operations
• Outsourcing success stories presented by Ribeiro Neto, engineering director of Google
• Insights on Brazil’s IT and foreign investment opportunities from Gartner, IDC, Forrester, and The Economist Intelligence Unit
• A guided tour of the nation’s premier technology parks, universities and Brazilian IT companies.

“The goal of the IT Forum is to reinforce Brazil as a strategic IT powerhouse to a new generation of business investors,” said Antonio Gil, President of Brasscom.  ”Attendees will get a firsthand look at Brazil’s strengths in software and IT services right from the source.”

Brazil has the eighth largest domestic market in the world for IT and business process outsourcing (BPO) services, generating a total IT spend of $60 billion in 2008. The nation is investing $273 billion back into its infrastructure to facilitate innovation and IT growth. It currently operates one of the most sophisticated financial systems in the world, handling intra-bank transactions in real-time for 514 million credit and debit cards, and employs over 1.7 million IT professionals.

The Brasscom Global IT Forum is part of the IT export and investment promotions project – a joint initiative by Brasscom; the Brazilian Trade and Investment Promotion Agency (Apex-Brasil); the Ministry of Development, Industry and Foreign Trade; and the Ministry of Science and Technology, with support from the Brazilian Development Bank (BNDES).

For more information: www.gartner-brasscom.com

SOURCE: THAINDIAN.COM

Infosys Technologies Tuesday said it has opened a development centre in Brazil to service clients in that South American country as well as Brazilian subsidiaries of global customers. The company’s wholly-owned subsidiary, Infosys Tecnologia Do Brasil, is located in Belo Horizonte, the third largest metropolitan area in Brazil after Rio de Janeiro and Sao Paulo, Infosys said in a statement.

This is the third development centre of Infosys in Latin America. It has two centres in Mexico.

“The company has been investing and strengthening its position in Latin America to expand its footprint in the region and also to leverage the near shore advantage of similar time zones for global clients,” the statement said.

Infosys chief executive and managing director S. Gopalakrishnan described Brazil as the largest IT and BPO services market in Latin America, with the eighth highest IT and BPO services spend in the world.

“The growth forecasts for the IT-BPO sector in Brazil have remained high despite the global economic crisis,” Gopalakrishnan added.

“Along with our centres in Mexico, our presence here will strengthen our ability to address both Spanish and Portuguese speaking markets in Latin America, driving our business growth in the region.”

According to V.G. Dheeshjith, the company’s head of new markets and services division, the Brazilian centre would offer full range of IT consulting, IT services and BPO for global and Brazilian clients across industries.

“The development centre, which has already begun operations, is currently serving several clients. In this center, most of the employees will be Brazilian nationals complemented by our employees deputed from our global development centres,” Dheeshjith said.

The US-Brazil IT-BPO Summit (sponsored by the Brazil-American Chamber of Commerce) kicked off this morning at the W Hotel in Midtown, Manhattan

LIVE POSTS:

10:45 AM A Panel Discussion with several Brazil-based providers, analysts and advisors focused on the upward migration Brazil’s BPO sector is taking to drive higher value for clients and developing competencies in new delivery areas, such as cloud and managed services.There is an increasing emphasis on “domain-led” expertise, where providers have developed specialized talents which directly relates to their value and, in turn, makes them more marketable to major corporate clients.

John McCarthy, vice president, Forrester Research: Clients are looking closely at where to go and how to manage the ratios.  Everything is on the table as companies rethink our strategies in the wake of the economic crisis. It’s not just a low cost body story anymore.

GENERAL POINTS:

Marika Lulay, Chief Operating Officer, GFT: We learned over time that working in Brazil involved an “extra tax”  and it took us a while to figure out how to deal with that. Lately, there is a perception that the taxes have been reduced. I must say the tax thing is something that is difficult. It’s a problem and it’s complicated.

McCarthy: Physical security is a concern. It’s a issue clients mention to us all the time. You see aspects of it when you are there.

David Tapper, VP outsourcing and offshore services, IDC: Companies need to incent aggressiveness, when trying to compete with India-based providers.

McCarthy: If Brazil is going to become part of the top three worldwide players, there needs to continue to be an expertise-driven story. Cost is not the appeal of Brazil, it’s the technical domain-skills.

Tapper: I would like to go to Bangalore and see a Latin American company in Bangalore. That is what’s going to get people’s attention.

McCarthy: I think you going to see a lot fewer ITO companies in Brazil in three-to-five years as part of massive global consolidation, driven around new delivery models.

9:45 AM An executive  from  Equaterra, who is one of the event’s attendees commented about taxes: “My observation is that taxes  imposed on the government on services are  extraordinarily high, especially if they come from India,” he said. “This is a huge imposition on Brazil companies and puts enormous pressure on cost structure if you compare it to other countries worldwide.”

Response:

Antonio Gil: “We are looking very closely on the impact to Brazilian companies. We are looking to find ways to reduce this tax burden. The tax burden is too big. It’s impacting our success.”

9:09 AM:

“We are now running for second or  third place in the worldwide outsourcing race,” said Antonio Gil, president of Brasscom, in characterizing the emergence of Brazil as a major worldwide player in offshore services. With India taking the lead position, Gil believes Brazil and the Philippines will battle for second place worldwide. He dismissed China and Russia as not having the technical leadership and talent levels to match the potential performance of Brazil and the Philippines.

He commented on the frequent criticism that Brazil does not have the English-language skills of many of its Latin American competitors: “We need to invest in English skills,” he said.

“Brazil is investing in English and hopefully when we are good at that,  you will be able to understand us on the telephone,” said Gil, jokingly.

The Brazilian Association of Information Technology and Communication Companies (Brasscom) invites you to attend the US- Brazil IT-BPO Conference, organized in partnership with Apex-Brazil – the Brazilian Trade and Investment Promotion Agency and the Brazilian-American Chamber of Commerce of NY.

The summit will focus on Brazil’s rise as an economic powerhouse with growth projections tied closely to ICT advances and government investments in education, infrastructure and technology. The combination of market maturity, political stability, cultural affinity and highly qualified professional result in Brazil being able to offer outstanding opportunities for business development at a competitive cost.

When: November, 10, 2009 8:00 am – 2:00pm

Where: W Hotel, 541 Lexington Avenue, New York, NY

About the Event: The Brazilian IT-BPO market is among the strongest and most mature in the world, having evolved in size, coverage and complexity over the past few decades. Brazil’s cultural affinity to the U.S. and overall market strength make the country an ideal choice for companies looking to expand their global footprint.

This timely summit will focus on information technology and business process outsourcing. A line up of speakers with leading roles in government, industry, media and research will provide critical insight for decision-makers in the IT-BPO sector.

The presentations will include:

– US-Brazil Economy: Outlook

Douglas Smith, Chief Economist, Americas, Standard Chartered Bank

– Brazil: A safe harbor for IT-BPO Sector

Antonio Gil, President, Brazilian Association of Information Technology

and Communication Companies (Brasscom)

– US-Brazil IT-BPO Trends, Opportunities, and Challenges

With representatives from Apex-Brasil (Brazilian Trade and Investment

Promotion Agency), Forrester Research, IDC and GFT

– Successful Case Studies with: Dell, CPM Braxis, C.E.S.A.R

Nearshore Americas will be actively covering two major conferences this week in New York City – the US-Brazil ITO BPO Summit at the W Hotel on Tuesday and the Global Sourcing Forum and Expo on Wednesday and Thursday. This is a great chance to connect and share feedback and ideas about our growing online brand.

NSAM Editorial Director Kirk Laughlin

Highlights of the Brazil ITO event include a market overview from Brasscom President Anotonio Gil, a case study featuring Johnson and Johnson and a panel discussion on  opportunities and challenges in the Brazil tech sector with speakers from Stefanini, Forrester and IDC, among others.

The GSFE event kicks-off at Jacob Javits Center and will features speakers and attendees from over 25 countries. Our eyes will be sharply focused on the contributions Nearshore players are making to support US and global corporations.

We look forward to meeting you and learning about ways to increase the visibility of Nearshore services and top performing providers. Feel free to drop me a note kirk@nextcoastmedia.com