C o u n t r y

b r i e f i n g

Brazil
Politics/Economy
Brazilians have long quipped that Brazil is the country of the future, and then they add: and it always will be! But, at last, it appears to be coming close to fulfilling its promise. The countrys Ministry of Finance is optimistic about the economic outlook for 2010, signalling a return to the kind of robust growth it saw during most of the last decade. The ministry expects GDP growth of around 5%, compared to -0.5% in 2009. And investors have seen the countrys stock market the Bovespa rebound, with six months of consecutive growth to January 2010. The governments statistical office, IBGE, reported overall growth of 5.8% for industrial output for the final quarter of 2009, compared to a fall of 14.6% in the first quarter of last year, when Brazil was in the throes of a what turned out to be a short-lived recession. Brazil also hit its inflation target of 4.3% at the year-end 2009. As that ability to bounce back demonstrates, Brazil sometimes seen as the odd man out in the line up of BRIC countries (compared to Russia, India and China) is confirming its status as a future economic powerhouse. A lot of the credit goes to President Luiz Incio Lula da Silvas government, which has helped to generate strong domestic growth with policies for labour force, wage

South americas largest economy is shaking off recession and investing in the future
and credit expansion. It also introduced industrial tax breaks to stimulate sales of cars and durable goods such as electro-domestic appliances, even if it is now looking to stop those as economic pressures ease. Rising demand is evident across a broad set of sectors and regions, from consumer goods to services, with optimism further fuelled by Brazils selection as host nation for the FIFA World Cup in 2014 and the Olympics in 2016. But perhaps most significant of all was the discovery of a vast oil field off the countrys southern coast in 2008. Those factors have been a fillip to the popularity of President Lula. After the maximum two terms in office, he will be standing down in 2010, and is positioning his chief of staff, Dilma Rousseff, against Jos Serra of the centralist Partido da Social Democracia Brasileira (PSDB) in the October run-off. recession, up marginally from 7.9% in the boom year of 2008. And although the job market was squeezed during 2009, income levels rose on average by 3.2%. While experts point to ample workforce numbers, fluent English language speakers with IT skills are still scarce and, to meet the pace of growth, multinational IT companies active in Brazil often provide their own in-house training.

Telecoms / IT
According to Carlos Rego Gil, president of Brasscom, Brazils ICT industry group, the country has the worlds eighth largest internal IT market. Analyst group IDC forecasts spending of $32.6 billion on hardware, software and services in 2010 compared to $30 billion in 2009. IDC explains that IT projects last year focused on saving costs such as virtualisation and outsourcing; this year, spending will be influenced by an expanding economy as well as continuing investments to ensure efficiencies. Brazil is also turning into a hot outsourcing destination especially for US companies. Estimates for 2009 show $3 billion in offshore outsourcing services exports a fraction of Indias $50 billion, but growing at about 36% annually. Thats something the government is happy to support Law 11,774 (passed in 2008) reduced labour taxes across the board for employers in the IT and BPO sector. In telecoms, the country has become the worlds fifth largest mobile phone market, with 174 million subscribers by the end of 2009. Although around 80% of the market is dominated by less lucrative prepaid users, the competition between mobile phone operators is fierce. Vivo, the largest mobile phone operator, which is jointly owned by Spains Telefnica

Population/Skills
Within its population of 198 million, Brazil has a young workforce centered in the southeastern industrial heartland of So Paulo and Rio de Janeiro. Young workers (aged 17-29) already represent a quarter almost 25 million of the economically active population. According to IBGE, unemployment rose to 8.1% of the workforce in 2009 during the

brAZiL: Key inDiCAtorS

2008 GDP growth Consumer price inflation Current-account balance (% of GDP)
Source: Economist Intelligence Unit

2009 -0.3% 4.9% -1.0%

2010 4.8% 4.3% -2.2%

2011 4.5% 4.2% -2.9%

5.1% 5.7% -1.7%

48 issue five I

Photos: Corbis

From left: Brazils President Lula steps down this year; industrial farmland in the Forest of Iguau National Park; So Paulo is the countrys largest city; the only place for Mardi Gras: Rio De Janeiro

and Portugal Telecom, competes head-to-head (in order of market share) against Mexicos Claro, Italys TIM and Brazils landline giant, Oi. The telecoms sector is likely to engage in strong spending as the economic upswing kicks in and more sophisticated devices are adopted. IDC estimates $87 billion in telecomsrelated spending in 2010, up $2 billion on last year, as the economy picks up and the build up to the World Cup and Olympics gets underway. These events will need heavy investment the World Cup in particular will span many cities with outdated telecoms infrastructure. Mobile broadband is already surging ahead of fixed internet. Julio Puchel, an analyst at Yankee Group, foresees 14 million people using 3G services in 2010, more than the 12 million using fixed broadband line connections. This compares to six million mobile and 11 million fixed connections in 2009.
Sources: Dow Jones Newswires, Anatel, IDC, Yankee Group, Valor Economico, Ministry of Trade and Development, Economist Intelligence Unit, Teleco, IBGE, Brasscom

View Point

An expert analyst predicts a bright future for enterprise IT in Brazil

Reinaldo Roveri, Enterprise solutions research manager, IDC Brazil

brAZiLS SoftWAre AnD it SerViCeS eXPortS

$3 billion $2.2 billion $3.5 billion

$604 million
*estimated

$800 million

Enterprise demand for ICT products and services eased in 2009 as the downturn forced companies to trim spending. But IT and telecoms spending continued on tools designed to reduce costs, such as voice-over-IP (VoIP), outsourcing and virtualisation, and even though the countrys short recession prompted many companies to reset their priorities, IT and telecoms spending in 2010 should recover to pre-crisis levels. Companies will seek to benefit from Brazils economic growth and to prepare for the World Cup and the Olympics. For instance, telecoms operators are likely to hike investments in triple play to boost voice, data and video revenues. This year should also be the watershed year for smartphones, as fast-rising adoption triggers spending on projects needed to tie devices to IT infrastructure. Data centre service providers will pump resources into cloud computing to offer business intelligence, VPN, non-mission critical ERP and CRM services. As well as a rekindled demand for hardware (PCs, notebooks and servers), areas of growth will include collaboration (especially videoconferencing) and business intelligence and governance software, to balance cost-cutting with measured expansion.

2006

2007

2008

2009*

2010*

D o W n L o A D t H i S At

Sources: Banco Central do Brasil, IDC, Brasscom

www.i-cio.com/datafeed

I issue five 49