Tech recruiters in Brazil are having a hard time. The talent market is a no-holds-barred contest of wages, benefits, and work-from-home offers. The country’s vast internal market is pitting national rivals against one another, while Portuguese firms circle above, searching for choice talent willing to offshore their labor.
But increasingly Nearshore players, traditionally uninterested in engaging with the beauraratic, tax heavy process of incorporating or hiring direct in the country, are joining the fight too, say stakeholders.
The obstacles that once seemed too time consuming to mount with other, more foreign investment-friendly markets plentiful in Latin America, and no longer appearing so large.
Isabela Lorenzi Tori, a tech recruiter at Vissionaire, an international software development company based in Curitiba, is witnessing first-hand the entrance of Nearshore players. While Portuguese firms remain the strongest competition, US firms are muscling in too.
“Recruiters can lose up to 50% of our candidates to Portuguese companies. For engineers that speak English, we lose one in every three or four,” said Tori.
A Major Local Market
Brazil’s economic potential needs little explanation. The country’s population of 212 million, its vast and diverse geography, and GDP (PPP) of US$3.2 trillion – the highest in Latin America by a distance – sets the scene.
But such was the strength of Brazil’s internal market, as well as the difficulties for outsiders to set foot in the country, that until recently national companies and national talent had far less of a reason to push for Nearshore development.
Change has happened slowly. As previously reported by Nearshore Americas, cities like Curitiba, Brazil’s eighth-largest metropolis at a reasonably sized 2 million inhabitants, have been attempting to position themselves as regional tech hubs for the last few years. A two-year recession in 2015 turned the heads of some tech leaders towards the export market for the first time. In 2020, the Covid-19 pandemic resulted in the country’s worst GDP decline in decades. Interest in work beyond Brazilian borders has increased.
With the talent shortage pressing hard, the slow shift has taken on a sense of urgency. Bernardo Carvalho Wertheim, CEO and chief happiness officer at The Bridge Social, a global staffing firm, and originally from Brazil, has seen a huge jump in international interest for talent in his home country, as well as an increase in those looking for work outside.
“It’s exploding”, he said.
On its database alone, The Bridge Social has approximately 120,000 Brazilian tech, data and design professionals. The company hires and outsources some 200 Brazilian profiles per month for clients all across Latin America and the US. The tech talent pool is huge and it is well educated, Carvalho Wertheim points out.
“Brazil is an absolute gold mine in terms of talent,” he said.
The middle-classes tend to dominate the tech industry, and English-language teaching is standard in private schools. The demographic history of Brazil means people may also speak Italian, Spanish or German, and some even hold passports for these countries. Global companies like IBM, SAP and Microsoft have used the country as their mainstay in the region for years.
Tiresome Tax, But Worthwhile for Those Who Do
The obstacles that have traditionally kept the Nearshore away from Brazil remain, says Douglas Davis, COO at Latin America-focused market entry firm, Biz Latin Hub.
“In simple terms, Brazil is just not that easy to enter. Brazil is still one of the most bureaucratic countries to start a business in Latin America,” he said.
Tax is one problem for international companies to solve.
“Initially, foreign investors find it difficult to understand the entire Brazilian legal system, and not just its tax aspects. It is important to mention that Brazil is a Federation, divided between the Federal Government, the States, and the Municipalities. Each of the 3 federative entities has the power to institute their taxes in accordance with the Federal Constitution,” Davis explained.
Incorporating a business takes significantly longer in Brazil than in other Latin American cities, and there are multiple unique legal restrictions that must be understood by companies venturing there. Direct hiring appears no easier. Despite all of this, companies are barrelling in.
“The English-speaking talent pool is already drying up,” said Davis. “Six months ago, it would take us a few weeks to find talent. Now it’s taking us months. Wages are a large part of that.”
Wages On the Up
In Curibita in 2020, the average salary for a software engineer was 5,681 Brazilian reals (BRL) per month. The pandemic and interest from international clients has had the same flattening impact on wages seen elsewhere: though in 2020 wages in Sao Paulo or Rio de Janeiro would likely have been much higher, the difference between wages throughout the country is shrinking.
In 2020, the exchange rate was 5.1942 BRL for every USD. Today, it’s 5.0592 BRL to USD. However, wages are climbing.
A senior React Native engineer, is likely to earn around 10,000 BRL to 15,000 BRL per month (about US$1,980 to US$2,970), while a mid level engineer will earn around 10,000 BRL to 12,000 BRL (US$1,584 to US$1,980). Project managers can earn between 15,000 BRL and 20,000 BRL (US$2,970 to US$3,960), Lorenzi Tori estimates.
And there’s a big difference for tech professionals working for international companies rather than local competitors.
“Entry level professionals working for international companies are earning the equivalent of mid level salaries within the national market. Mid levels are earning senior salaries,” said Lorenzi Tori. “The dollar makes a big difference.”
No Change for Brazil’s Nearshore BPO
The same increase in activity cannot be said for Brazil’s BPO industry. Never part of the Nearshore strategy but more focused on Portugal and to a lesser extent Spain, BPOs in Brazil remain outside of the picture.
Fluency in English is not a given in all sectors of society, and wages remain comparatively high when compared against other countries.
Mark Hillary, a CX and technology analyst and writer, compares Brazil to China: “very focused on the large local market.”
“Brazil isn’t a low cost environment,” he said. “This may change for freelance and gig workers, but traditional outsourcing from the US doesn’t seem to be that big.”
Brazil: Part of the Nearshore Puzzle
An industry that long considered Brazil some form of pariah is now making its voice heard in the country. Whether this change was born of necessity or the realization that Brazil’s tech offering is too good to pass, Carvalho Wertheim has some advice for Nearshore players.
“Don’t think of Brazil in isolation but as part of the puzzle, part of the strategy for Latin America. Yes, it’s a challenging market politically, but that’s the reality for most of the region. Brazil is becoming more digitized and there is not as much red tape as there was before,” he said.