Nearshore Americas

Brazil’s Big New Plan Should Make Brazil IT More Attractive

By Filipe Pacheco

After months of promises and expectations, President Dilma Rousseff anounced yesterday in Brasília a series of measures designed to boost certain segments of Brazilian industry, including the IT services sector.

The new project, Plano Brasil Maior, or Bigger Brazil Plan, proposes policies that could make Brazilian IT companies more cost-competitive globally and boost exports of Brazilian software and services.

Dilma made the announcement along with the minister of Sciences and Technology (MCT in the Portuguese initials), Aloízio Mercadante; the minister of Finances, Guido Mantega; and the minister of Development, Industry, and Overseas Commerce (MDIC), Fernando Pimentel — a clear demonstration that this is a government-wide policy and not an isolated effort.

One of the most important of the proposals cuts taxes on payrolls of sectors that require a high number of employees, like the clothing industry, shoe manufacturing, furniture — and the IT sector. The government lowered to zero the contribution of INSS, a tax to fund the social security program. INSS currently is estimated to be about 20% of the cost of production in those industries.

Antonio Rego Gil, president of Brasscom (Brazilian Association of Information Technology and Communication Companies), said in an interview with Computerworld that with implementation of the new plan, Brazilian IT firms will be more competitive in foreign and domestic markets because of lower employment costs.

Gil was directly involved in the negotiation of the terms of the plan in the past few days, and came back to São Paulo last night satisfied with the results. “This measure represents a turning point in the IT industry because it considers [some long-standing] demands of the companies, and shows that the government has given importance to the sector,” he said.

Djalma Petit, Business Development Director at Softex (Brazilian Association for Promoting the Software Export), who recently talked to Sourcing Brazil about the difficulties of software production in the country, was at the official announcement Tuesday morning. His summary: “The whole segment is very satisfied. Even though we do not know the details, the overall look is very positive,” Petit said.

Over the next few days the various players will become acquainted with the details of the package. Petit said there should be announcements soon regarding specific measures and incentives for the Brazilian software industry. The package of regulations includes measures that would lower taxation on exports, defend against foreign competitiveness, and offer ceasier access to credit lines.

With the new measures, instead of taxing the fixed costs of payroll, the government will require 2.5% of the revenues of the companies. That was one of the main priorities of the businesses that would be affected by the new policy.

According to information from Agência Brasil, the MDIC minister, Fernando Pimentel, calculates that the industries that would benefit from the plan would save about R$25 billion, or US$16.1 billion, by the end of 2012 because of the tax changes.

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Dilma’s announcement follows constant complaints by Brazilian industry, including the technology sector, about the difficulty of competing with imported goods at a time when the exchange rate is R$1.55 for every US$1. The president emphasized that the government’s challenge is to address the problems of international competition without giving away important tax contributions to the Federation, Agência Brasil reported.

The next big step that would have deep positive impact on the Brazil IT industry is the approval of “Pronatec,” a major national plan to face one of the worst problems of the Brazilian market: the lack of qualified workforce. The project, which waits for the Senate’s approval and is expected to be voted on in August, has a proposal to train and qualify 4 million people by 2014.

Kirk Laughlin

Kirk Laughlin is an award-winning editor and subject expert in information technology and offshore BPO/ contact center strategies.

1 comment

  • The reason Brazilian IT exports are not as competitive is the same reason that other Brazilian exports are not as competitive, it is the over valued Real against the Dollar. The exchange rate is taxing the industry much more than the INSS 20% tax. The other big problem is the growing domestic demand for IT professionals in Brazil that is driving up salaries. This plan does not address these challenges.

    Since the global financial crash the dynamics have changed. Given the strong Real and shortage of IT professionals in a booming Brazil economy, my company Vision TRE, Inc. is trying to convince partners in Brazil to now consider purchasing nearshore outsourcing from us out of facilities in lower cost areas in Central America. If not for the Brazilian government's protectionist controls, in this economy Brazil should be a global consumer of IT outsourcing, not a supplier.