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Brazil aims to be outsourcing giant

By Todd Benson
The New York Times

WEDNESDAY, MAY 18, 2005
From: http://www.iht.com/articles/2005/05/17/business/outsource.php

On a recent trip to California, Luiz Fernando Furlan, the Brazilian trade minister, went out of his way to plug his country as the next stop in the global rush for software services and information technology.

"The image of Brazil is soccer, coffee and samba, not sophisticated technology products," Furlan said on a stop in Silicon Valley, the center of California's technology industry. "But that's out of date."

In the past decade Brazil has come a long way in shedding its image as an exporter of commodities like coffee, sugar and iron ore. Today, the country is a fledgling industrial power with expertise in advanced technology, making products like commercial airplanes and so-called flex-fuel cars that run on ethanol and gasoline.

Hoping to follow other developing countries like India, Brazil's government is trying to turn the country into an outsourcing center. It has joined with local software companies to promote Brazil's information technology overseas. Furlan has made dozens of trips abroad to talk about the cause.

Furlan announced Tuesday that the government would suspend federal taxes on exports of computer hardware and software and telecommunications services for five years. Already, Brazil is offering special credit lines to technology companies that are focusing on foreign markets.

"The government is finally waking up to the fact that we have a software industry that can compete globally," said Djalma Petit, who is in charge of promoting exports for Softex, an association of Brazilian software companies.

Brazil is a newcomer to outsourcing. The country exported only about $400 million in software and information technology services last year, according to industry estimates. Though the government expects that to rise to $2 billion by the end of 2006, it would still be low, compared with an estimated $15 billion in Indian outsourcing last year.

Brazilian government officials and software industry executives in São Paulo say they are not out to take on India, but to meet the demand for affordable outsourcing closer to the United States.

"We are selling ourselves as an alternative to India, not a competitor," said Marco Stefanini, chief executive of Stefanini IT Solutions, an information technology firm based in São Paulo that is doing outsourcing for 15 companies in the United States, including Johnson & Johnson, Kimberly-Clark and Lucent Technologies.

"This market is expanding rapidly, so we don't need to steal customers away from India," he said. "There's plenty of business to go around for all of us."

In its annual world investment report last year, the United Nations Conference on Trade and Development said the global outsourcing industry was still in its infancy, and that the trend was approaching a tipping point "from which cascades of new offshoring will spring." As the world becomes more dependent on information technology, the report added, dozens of countries will step up to fill the void as expertise in new areas and geographic concerns come into play.

Many people in the industry have said that Brazil is in position to take a good share of that market. The country's telecommunications infrastructure is already state of the art, after receiving billions of dollars in investment since it was privatized in the late 1990s. Another advantage is that the time difference between Brazil and the United States is minimal. A rising number of American companies are taking this into account, especially when they outsource data centers and call centers.

Brazil also has a thriving domestic market for software services and there is a history of rapidly embracing new technology. The country's banking sector is among the world's most automated, having developed sophisticated fund-management software in the early 1990s to help quick calculations while dealing with hyperinflation. A few years ago, the country also switched to electronic voting machines in all elections, and tens of millions of Brazilians now file their tax returns on the Internet.

Brazil still has obstacles. Brazilian universities are churning out tens of thousands of engineering graduates a year for jobs in the information technology business, but most are not fluent in English. In addition, most Brazilian software companies are much smaller than their Indian counterparts, limiting the services they can offer clients.