Brazil’s information and communications technology (ICT) market could reach U.S. $300 billion to $400 billion by 2022, according to the Brazilian Association of Information Technology and Communication (Brasscom). This would help Brazil climb to fifth place among the world’s most powerful economies in 10 years.
The ICT market represents a huge opportunity for Brazil, which has been featured for several years as “the country of the future” (read previous story). “Brazil is prepared to do that, but we have issues to deal with,” said Antonio Carlos Gil, Brasscom’s executive president.
Rogério Oliveira, Brasscom’s chairman and a former IBM president for Latin America, noted three major aspects boosting the country’s transformation: an emerging middle class with about 35 million people, representing an opportunity for small and midsize companies; the convergence of IT and telecom in a developing mobile society; and the level of IT adoption in companies, which is similar to those in development countries.
Among main barriers, the big issue — as noted by several executives during the Brasscom Global IT Forum at the Economist’s Brazil Summit last week — is related to the high costs of doing business with Brazil. But government has been doing its part, Gil said, pointing to recent programs such as Science Without Borders, related to innovation skills; Pronatec, which aims to improve human capital; several announcements addressing infrastructure, such as the National Broadband Program (PNBL); and the Brasil Maior program, which is looking to make costs more competitive.
Among governmental measures, Gil highlighted a three-year exemption from payroll taxes that change pension contributions in the IT sector, which exceeds 20% of payrolls, to 2.5% of company revenues. As proof of the exemption’s positive impact, Brasscom pointed to an increase of formal contract, which today accounts for just half of all jobs. Brasscom expects that the proportion of formal contracts will reach 80% by the end of the program, which will increase government revenues.
In September, the telecom sector and Brazil’s Ministries of Finance and Communications reached an agreement on tax exemptions that could speed up the process for construction of telecommunications networks. The exemption could represent tax expenditures up to $2.34 billion by 2014, with the estimated benefit climbing as high as $11.7 billion in investments over the same period in fiber-optic networks or radio equipment. The government is expected to sign the legislation this week.
Another measure approved by the Brazilian Chamber of Deputies offers companies incentives to manufacture tablet computers in the country. The measure reduces to zero the PIS and Cofins taxes on the sale of tablets produced in Brazil, which is expected to reduce the final price of equipment by 30%. Measure No. 534/11 will now go to the Senate for vote.
Government is also working in tax exemption to incentive the local manufacturing of liquid crystal display (LCD) and light-emitting diode (LED) displays. During the Brasscom Global IT Forum, the secretary of the Ministry of Science and Technology, Virgilio Almeida, said there will be changes in the Padis program, which is focused on supporting for the technological development of the semiconductor industry. Padis was created in 2007 to boost the sector, but it has not been effective in attracting companies. Almeida noted that until the end of the year government may release changes that could include a measure that will reduce taxes practically to zero to stimulate the industry.
In addition, Gil noted the need of training more 750,000 people in order to meet the increase of demand. “The Pronatec program may impact 400,00 IT professionals. I see a positive government agenda, with improvements.”
However, there are still many issues to solve. One topic is related to currency exchange rates, which Gil said are more favorable for the competitiveness of Brazilian enterprise. “Exchange rate has been negative for exports,” Gil said, referring to the strong real versus the U.S. dollar. Although this imbalance could make it more difficult for Brazilian companies to sell their products abroad, there remains considerable growth to be realized within the country.
The Brazilian IT market is growing at a rate of 12% to 13% a year, which is a higher rate than gross domestic product (GDP) and more than global IT. “It is much easier to grow in Brazil than to go international. This could have reduced some export momentum, but companies must have more impetus to be part as a strong player in this industry that will globally reach $3 trillion in coming years,” Gil said.
Related story
– Brazil: Is the country of the future arriving?
– Brazil’s feature report: Challenges with data, opportunities on the worldwide stage
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