Brazil
Brazil is expanding its position as a competitive global sourcing location, collaborating with local software companies to advertise its information technology worldwide. According to the Brazilian Association of Information Technology and Communication Companies (BRASSCOM), Brazil’s outsourcing market reached USD $1.4 billion in 2008, a 75 percent increase that year alone. According to Gartner Research, "Brazil's economic footprint, combined with the largest domestic IT consumption in Latin America, as well as international recognition as one of the most promising and rapidly emerging economies, makes it a natural destination to evaluate for IT services."
Brazil’s IT industry offers numerous opportunities for research and development centers, consultancy firms, and the ICT Industry. It has around 250,000 IT professionals, with an advanced telecommunications infrastructure that is a result of a billion dollar investment made in the late 1990’s. Brazil has minimal time differences to the U.S. making it more convenient for American companies specializing in data and call center operations. In addition, Brazil’s progressive domestic market for software services has a strong history of being receptive to new technology.
Brazil has a well-established global services industry, with Rio de Janeiro and Sao Paulo hosting most of the shared service centers for U.S. firms since 1980. Another smaller city gaining momentum is Curitubal, the capital of Parana.
Some of the major outsourcing players in the industry include Accenture, Wipro, Siemens, HSBC Global Technologies, HP, and Unisys. In June 2010, IBM opened its ninth new global research laboratory in Brazil, the first research laboratory in South America and the first new IBM research laboratory in nearly twelve years. This global research aims to develop technologies related to information technology, healthcare, and sustainability of natural resources, advanced semiconductors and human systems.
Country overview
Brazil is the largest country in South America and the only Portuguese-speaking country in the Americas. Brazil’s dominant religion is Roman Catholic, and the most widely-spoken language is Portuguese. During the 19th century Brazil opened its doors to five million people from over sixty countries, with immigrants mostly coming from the Middle East, Japan, Germany, Spain, Italy, and Portugal, giving Brazil a diverse cultural makeup.
Brazil has a free market economy, with one of the fastest growing and most dynamic major economies. Its Gross Domestic Product (GDP) exceeds USD $2 trillion, ranking eighteenth globally. Brazil is widening its economic reach and making its presence known in the world markets, since 2003 it has consistently improved its macroeconomic stability through debt profile reduction and foreign reserves accumulation.
During the recent recession, Brazil endured large fluctuations as many foreign investors pulled their resources from the country. Brazil faces two quarters of recession but was the first emerging market to see economic improvement, and in turn boosted consumer and investor confidence.
Source: CIA Factbook, 2009
Source: World Bank, 2009
Source: World Bank, 2009
Source: World Bank, 2009
Source: World Bank, 2009
Cost competitiveness
Employee compensation
Despite Brazil's IT market potential, outsourcing to Brazil is not cheap. It is more cost effective to outsource in the leading Asian countries such as India, China, and the Philippines. According to PayScale, a typical wage of a Brazilian software engineer or Web developer with one to four years experience is USD $25,600, or 43 percent of U.S. resources, compared to the Philippines (10 percent), India (12 percent), and China (23 percent). Senior software engineers with ten to twenty years experience earn up to 56 percent of their US counterparts’ salaries. IT project managers with similar levels of experience can expect to earn nearly 70 percent of US resources, at USD $71,000.
Skilled BPO resources in Brazil offer even less cost competitiveness, with salaries averaging more than 85 percent of similar US roles. Junior resources offer greater savings, but at USD $21,400 they still are averaging 50 percent of US wages. Operations managers in Brazil offer no savings, and in fact command wages nearly 50 percent higher than those in the US.
Real estate
According to Colliers International, office occupancy rates in prime downtown Sau Paulo average USD $84 per square foot annually, while comparable office space in Rio de Janeiro can command as much as 96 dollars. Moving outsourcing projects to the suburbs of these cities can offer large savings, with suburban Sau Paulo office space leasing at USD $70 per square foot, and Rio de Janeiro’s office space just 72 dollars.
Taxes
Corporate taxes in Brazil are high, averaging 34 percent, particularly when compared to Chile which has a tax rate of just 17 percent. Brazil’s indirect tax rate is 19 percent, with an SMB effective rate of 69 percent.
Source: PayScale, SourcingLine, February 2010
Source: PayScale, Sourcingline, March 2010
Source: PayScale, Sourcingline, March 2010
Source: PayScale, Sourcingline, March 2010
Source: PayScale, Sourcingline, March 2010
Source: PayScale, Sourcingline, March 2010
Source: CB Richard Ellis, Colliers International, SourcingLine, March 2010
Source: Colliers International, SourcingLine, March 2010
Source: KPMG, October 2009
Source: KPMG, October 2009
Source: Doing Business (World Bank), 2010
Note : Office occupancy costs are averages across Rio de Janeiro and Sao Paulo.
Resources and skills
Outsourcing sector
The size and maturity of a nation’s IT sourcing industry can be measured by the volume of its IT services exports. While India leads the world with exports totaling USD $50 billion, Brazil trails with just USD $209 million. Brazil’s exports of miscellaneous business services however, are high ranking fifth after the U.S., China, India, and Canada.
Education and skills
According to the OECD Programme for International Students (PISA) survey, Brazil ranks low in reading achievement, only beating Argentina. Canada, Poland, and the Czech Republic have the highest rating in the survey. Brazil's Math achievement, an essential to the foundation of IT skills, is scores lowest at just 370 compared to Canada (527), the Czech Republic (510), Poland (495), Hungary (491), and Russia (476). Similarly, Brazil ranks lowest in Science competency.
Brazilian literacy rates are around 90 percent, placing low among leading international markets. The government spends just 4 percent of its GDP on education. Brazil’s universities graduate 820,000 students annually, and of these just 13 percent each science or technology degrees.
Brazil's educational system needs major improvement, with many deficiencies attributed to regional and racial disparities, and deficient resources. Brazil has taken steps to improve its public education, particularly by offering more in-depth education for students with special needs, and by teaching according to the standards set forth by the U.N. Development Goal of Universal Primary Education.
Source: CIA Factbook, 2009
Source: IMF, 2008
Source: IMF, 2008
Source: UNESCO, 2009
Source: UNESCO, 2009
Source: OECD PISA, 2006
Source: OECD PISA, 2006
Source: OECD PISA, 2006
Source: UNESCO, 2009
Source: UNESCO, NASSCOM, SourcingLine, 2009
Source: UNESCO, 2009
Source: International Telecommunications Union, 2009
Source: International Telecommunications Union, 2009
Business and economic environment
Economic competitiveness and stability
Brazil has above average economic competitiveness, although the clear leaders in the category are the U.S, Canada, Malaysia, Israel, and China. Brazil's macroeconomic stability, such as government surplus or deficit, interest rate spread, inflation, national savings rate, and government debt is low, with a 3.9 GCI score compared to China (5.9), Chile (5.5), and Thailand (5.4).
Infrastructure
Brazil’s infrastructure, particularly in transportation, is deficient with a 2.9 quality index. According to Banco de Brasil, more than USD $85 billion is required to finance the expansion of its transportation infrastructure. Several infrastructure projects are currently underway in anticipation of the World Cup in 2014 and the summer Olympics in 2016.
Electric supply in Brazil is average with an index of 5.1, similar to Egypt, China and Panama. Mobile phone penetration is average, with 79 users per 100 citizens. Just 34 percent of Brazilians have Internet access, and a meager 5 percent have broadband access.
Labor market efficiency
According to data from the annual Doing Business survey co-published by the World Bank, Brazil's rigidity of employment index is 46, which is the lowest in the study. It also cost forty-six weeks’ salary to fire employees, which is an average figure.
Regulation
Start-up procedures in Brazil are often costly, time-consuming, and complicated. These procedures are not streamlined, making it difficult for involved agencies to know all the steps and costs involved. For example, the procedures to start a business in Amazonas include nine different federal, state, and municipal governments. It takes an average of 120 days to register a start-up company resulting in many companies being hesitant to formalize their businesses.
The government recognizes these problems, and it is taking steps to merge procedures and introduce online systems to the public. Provisions are also being developed by Congress to simplify business registrations by implementing standardized registration requirements across the country.
Legal protection
Sao Paulo is the easiest state to enforce a contract, which normally takes 18 months. However, this is still slow compared to Russia and Vietnam, which takes half the time. Other regions have contract procedures which can take four years to enforce, longer than Guatemala, the nation known to have the most delays in contract enforcement. Enforcing a contract in Brazil typically will cost 17 percent of the initial claim, below the global average.
Source: The Global Competitiveness Report, 2009
Source: The Global Competitiveness Report, 2009
Source: The Global Competitiveness Report, 2009
Source: The Global Competitiveness Report, 2009
Source: International Telecommunications Union, 2009
Source: Doing Business (World Bank), 2010
Source: Doing Business (World Bank), 2010
Source: Doing Business (World Bank), 2010
Source: Doing Business (World Bank), 2010
Source: Doing Business (World Bank), 2010
Source: Transparency International, 2009
Source: Doing Business (World Bank), 2010
Source: Doing Business (World Bank), 2010
Source: Doing Business (World Bank), 2010
Source: The Global Competitiveness Report, 2009
Source: BSE-IDC Global Software Piracy Study, 2009