Addressing Brazil’s Competitiveness Problem: Where is the Confidence?

Just as investors and multinational companies are questioning Brazil’s ability to regain confidence from foreign players, the World Economic Forum (WEF) has released a report that does not help the country to improve its image. However its findings do shed light on the general mood among managers and decision makers in Brazil right now.

According to the recently published WEF report, which analyses the competitiveness of 148 different countries all over the world, Brazil has fallen from the 48th position in 2012 to the 56th this year. The three main factors that resulted in this drop are the lack of basic infrastructure, pessimism from local businessmen and the macroeconomic deterioration, the report states.

Deflated Optimism, Inflated Prices

Carlos Arruda, who coordinated the WEF research in Brazil, has outlined two main factors that impacted Brazil’s competitiveness in the past 12 months, as reported by local newspaper O Estado de S.Paulo. Arruda says the fact that most influenced the final result was the pessimism seen among local businessmen and entrepreneurs. A second point is a long-term problem of inflation.

Arruda explains that although prices have not risen as fast in the last year as they did in 2012, other countries have had more success when fighting inflation than Brazil did. He also noted that the rise of costs is a problem that impacts all industries based in the country.

The lack of confidence of both local and foreign businessmen and investors is a major problem in the tech industry as well, since many plans have been put on hold due to the lack of clarity regarding upcoming economic growth. “There is a huge potential growth for the tech and tech services industry, but nobody knows if such potential will become reality in the near-term,” a source, who asked not to be named, added.

By way of context, Brazil was never expected to be ranked in one of the top positions – Switzerland is ranked first, followed by Singapore, Finland, Germany and the US, countries that have far better rules regarding competitiveness and taxation, just to name a few, than Brazil. Among the BRICS countries, the South American giant stands right in the middle: below China (29th) and South Africa (53th), but above India (60th) and Russia (64th). In Latin America, Chile ranked 34th, the best in the region, while Panama ranked 40th in the list, Costa Rica 54th and Mexico 55th.

Improving Competitiveness  

The problem of a lack of competitiveness, often cited as a decisive factor in a country’s ranking in such lists, is addressed directly by a governmental entity created to improve business conditions in the country. “Movimento Brasil Competitivo”, which literally means “Competitive Brazil Movement”, was created in 2001 by the federal government to focus on discovering, analyzing and providing potential suggestions and solutions for the country’s business environment.

The idea is basically to bring together different segments of local and national government to talk to investors, companies and businessman. The topics in debate range from taxation to improvement of the workforce, for example. Among some of the names associated to the entity are technological giants such as Accenture, Cisco, IBM, General, Microsoft, SAP, Siemens, Electric and Intel, to name a few, besides several major players in the local economy.

The entity created a system to recognize local governments all over the country that were successful in implementing technological solutions to improve local management and decrease the level of bureaucracy. After selecting the most successful cases in the country, the agency diffuses the idea among other mayors and indicates potential solutions in similar. The initiative is a partnership between Movimento Brasil Competitive, Microsoft Brasil and Intel Brasil.

Rio’s ‘Knowledge Spaceships’

In the 2013 edition, the city of Rio de Janeiro was awarded for implementing a project called “Knowledge spaceships” in the local government’s technological networks. The project combines cloud computing with electronic visual arts to improve the development of local industries.

Another initiative led by Movimento Brasil Competitivo in which technology plays a major role is the partnership composed by the Brazilian Agency for Industrial Development and International Computer Sciences Institute (“ICSI”), located in Berkley, California.

Through the agreement, the partners promote joint projects in computer engineering for commercial and industrial solutions, computer linguistics and applications for information systems and entrepreneurship. Movimento Brasil Competitivo is currently selecting local companies to take part in the project.

A local tech industry source who knows Movimento Brasil Competitivo well says that the conception of the entity and the conversation it establishes with major players in the country is quite important, but many times, practical changes are not realized as quickly as they could be. “When it comes to making improvements and new regulation, such as a simplification of taxation in the country, it seems like everyone knows what problems we have, but there is a lack of confidence that changes will really happen. That affects the confidence that companies and investors have in the country,” the source said.