Breakdown: Why São Paulo Should Not be Your First Choice for Tech Services

Brazil is Latin America’s biggest tech market, and São Paulo remains the most popular and vibrant hub of IT activity in the country. And yet, macroeconomic pressures, plus São Paulo’s high price tag, are turning smaller, less-solicited Brazilian cities into attractive alternatives for sourcing and investment.  

The state of things in São Paulo: As one of the most popular tech cities in Latin America, São Paulo stands as an expensive destination in terms of wages and cost of living. 

• Annual tech wages in the city stood at around US$48,500 in 2022, according to the latest CBRE data on Latin American tech salaries. 

• While considerably more affordable than the average in the US (US$99,000 a year), tech wages in São Paulo are way above the average tracked by CBRE for the top 10 Latin American markets (US$38,000). 

• São Paulo ranked 9th in the Global Wealth And Lifestyle Report 2023, becoming the first Latin American city to crack the report’s top ten. It ranked 21st in the 2021 edition and 12th in 2022.

Rising contenders: All of the attention received by Brazil from the mainstream tech world has fostered other cities in the country to emerge as viable alternatives for talent sourcing, investment and entrepreneurship.  

Rio de Janeiro: Rio is a rising star in the global tech world. It boasts over 700 tech startups. Its startup ecosystem (valued at US$2.4 billion) was ranked third in Brazil and sixth regionally by policy advisor and research organization Startup Genome. 

• Annual tech wages stand at an average of US$35,000.

• The city has some of the top ranked tech colleges in Brazil, including the Federal University of Rio de Janeiro, the Pontifical Catholic University of Rio de Janeiro and Rio de Janeiro State University.

• In May 2023, the city hosted the first edition of Web Summit Rio, an event meant to foster Rio’s position as a key tech hub in Latin America, according to city mayor Eduardo Paes. 

Campinas: Located within the state of São Paulo, less than a 90 minute drive from São Paulo city, Campinas is catching some of the shine that comes from its bigger, more popular sister metropolis. 

• Campinas employs over 20,000 tech workers and saw more than 2,800 students graduate from IT-related careers in 2022, according to CBRE data. 

• Annual tech wages in the city average US$37,000.

• Campinas has been described by the Inter-American Development Bank (IDB) as an “innovation hub looking to maximize its potential”. 

• The local tech ecosystem came together in 2018, forming the organization Campinas Tech to promote its own development.

Recife: A coastal city famous for its Porto Digital initiative, a tech park launched in 2000 and described as an attempt to turn Recife into a “Quixotic tech hub”.

• The program provides a service tax reduction (from 5%, it is lowered to 2%) for companies operating within Recife’s historical center. Plus income tax reductions. 

• Over 350 companies operated from Porto Digital as of the end of 2022, with 17,000 people employed within its premises, according to the park’s official site. 

• Porto Digital President Pierre Lucena assures that, out of the total professionals employed in the park, around 600 hold PhDs.

• Accenture is among the most prominent companies operating in Porto Digital. It arrived at Recife in 2010 and now employs over 3,000 in the city. 

• The Porto Digital program aims to have 25,000 people working in Recife’s tech district by 2025, plus 600 businesses operating in the city.

Florianópolis: Another coastal city (almost an island, actually), Florianópolis has gained traction as a tech hub in Brazil and as an attractive place to live and work thanks to its high human development index (HDI), being the third highest in Brazil.

• The city hosts around 600 startups, which generate US$350 in annual GDP for the local economy, according to the Santa Catarina state government. 

• Its startup ecosystem was ranked sixth in Brazil and fourteenth in all of South America.

Where is São Paulo Going?: Market observers have spoken of saturation in São Paulo, while local operators argue that the tech ecosystem is too vibrant and the population too big to speak of a saturated market at the moment.

• “Hirings are lower [São Paulo]; there are many talents in the market,” commented Rubem Swensson, COO at Grupo GFT. “For now, the market is less aggressive […] I don’t think there’s saturation. The market’s moving. I don’t think São Paolo will be saturated, ever”.

• “The [COVID] pandemic changed the situation a bit; people moved out from big cities to others with better life quality,” Swensson added. “But the major tech hubs didn’t change much. São Paulo is the best situated as it is close to the clients, market and have talented people.”

NSAM’s Take: We are proponents of a diversification strategy. The Nearshore is rich in investment opportunities, and the popularity of superstar cities can put the region’s true potential at risk of being left on the table, going to waste. 

That being said, São Paulo’s value proposition is too strong to count it out. Almost 230,000 tech professionals are employed in the city, and its university ecosystem generates more than 15,000 IT graduates every year. 

Investors might find a surprising amount of value in Campinas, Recife and Brazilian other cities, but they’ll probably gravitate towards São Paulo eventually, if they’re not there already.