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Brazil


Total Workforce Size: 190.7 million
English Proficiency: Low
GNI Per Capita: $7,440
Standard and Poor’s Currency Risk Rating: BBB+
Regional Wage Savings Rank: 19  / 19
Cultural Compatibility Rank: 2  / 19
Technological Readiness: 11 / 19
Ease of Doing Business Rank: 127 / 183
Economist’s 2010 Democracy Index: 47 / 167   (Flawed Democracy)
AT Kearney Global Services Index: 12 / 50
Selected as one of 8 Latin American countries to make the Gartner Top 30 Offshore Services Destinations

Due to the arrival of outsourcing companies like IBM and EDS (now HP) over 30 years ago, Brazil offers companies a mature outsourcing market.  The country has a strong infrastructure which will only improve as the region increases spending in preparation for the World Cup in 2014 and the 2016 Olympics.  Brazil provides an excellent array of IT and BP skills, creative flair, and specialized skills in the gaming industry.  Regional providers are highly regarded for their mainframe programming skills, and the county has the world’s 2nd largest pool of COBOL programmers.  Despite these strengths, bureaucratic and tax burdens increase the cost of doing business in Brazil, and 3rd party services may be inhibited by their weak English language skills.





Brazil's Sluggish Economic Growth

Latin America's largest economy grew a mere 2.7% in 2011, far below the 4.5% GDP growth rate predicted by analysts.  Last summer, when President Rousseff declared an official goal of 4% GDP growth in 2012, it seemed attainable.  However, after a sluggish year in 2011, it is evident that the Brazilian government will have to work to creatively stimulate the economy to achieve the growth goals. The country's interest rates have served as a major obstacle to growth, and the Central Bank predicted that it would cut interest rates to 10.5% to stimulate the economy.  However, after meeting yesterday and being presented with lower-than-expected data, the Central Bank president Alexandre Tombini decided to make even more drastic cuts, lowering the interest rate to 9.75%. In the past, Brazil has avoided lowering the interest rate because of inflation concerns, but the country leaders hope that the lower interest rate will stimulate growth and foreign investment.


Can Brazilian President Rousseff Achieve 4% Economic Growth in 2012?


As Brazil's summer holidays come to a close, President Rousseff has been 
busy planning goals for Brazil's economy in 2012.  The broad goal? 
Four percent economic growth, which means an increase of one percentage 
point from 2011.  Concrete measures for how exactly the government plans
 to stimulate this growth will be presented by Rousseff in the weeks to come. 
 The country's leaders claim that Brazil will make every effort to promote
 responsible economic growth, however the country faces worries of a 
decline in demand for manufacturing exports.  This leaves the bulk of the
 economy in the hands of consumer demand within Brazil.  The UN forcasted 
Brazil to see about 2.7 percent GDP growth in the upcoming year, so there 
has been speculation about heavy stimulus spending to boost growth and
 meet the four percent target.  The government might also postpone its 
annual budget spending freeze to ensure that the economy can continue 
to flourish. In general, Rousseff has made policy shifts during her first year 
that left foreign investors a little wary of Brazil's financial outlook.  Updates 
will come as Rousseff provides more details surrounding the measures by
 which Brazil will achieve four percent growth.

Looking Forward: Top Nearshoring Trends for 2012


When Patrick Haller from Nearshore Americas asked ThinkSolutions for insight into how the nearshoring space will evolve in the next year, here's what we had to say:

Nearshoring Trends for 2012

1. India’s total cost of outsourcing (TCO) continues to increase and the advantage gap over Nearshoring continues to close especially due to inflation and attrition differences. 

2. Remote sourcing from LatAm, such as remote monitoring, will increase as technology continues to support it and India TCO rises.

3. There will be an added impact of the recent Free Trade Agreements (FTA) that improve upon the WTO’s General Agreement for Trade in Services, especially in Colombia.

4. Brazil will struggle to increase export of services due to internal demand from domestic growth as well as attention in preparation for the Olympics and other events.

5. Colombia will have an increased profile, a growing economy, free trade, improving security and stability.

6. Crime in Mexico will stabilize due to increased government pressure and US attention but will remain problematic in localized areas.

7. Small and mid-size US companies will exploit the advantages of Nearshoring.

8. There will be a trend towards consolidation of smaller LatAm IT firms into medium and larger firms to meet the needs of US based clients.

9. More firms will seek out LatAm for shared service centers as an alternative to offshore locations.

10. Indian firms will continue to expand into the LatAm region as global IT delivery strategies more frequently include Latin America.

Brazil's Emerging Middle Class



These Brazilians, Osmar and Maris Ferreira are part of the emerging lower-middle class (named the C Class) who are rethinking their roles and expectations for the future.  Cheap credit allows people like the Ferreiras and other members of the lower-middle class to participate in the tourism industry.  In fact, the C Class now accounts for half of the passengers traveling by plane in Brazil.


From the outside, it looks like another step for Brazilians on the path towards a stronger economy, but Brazilians from the upper classes aren't exactly celebrating. Many upper echelon Brazilians complain that they're experience overcrowding in airports, and that their favorite vacation spots are being inundated with less refined clientele.  Call it frustration with change, or just plain snobbery, or whatever you like, but anthropologist Robert DaMatta calls the Brazilian "resistance to equality."  Traditionally, titles and hierarchy are woven into the Portuguese culture, so Brazilians naturally want to be seen as set apart.  In a poll taken by Data Popular, 48% of the A and B Classes said that "the quality of services has worsened now that they are more accessible," and about half admitted their preference sharing experiences and places with those in the "same social level."  As a third party spectator, this appears to be a natural step towards economic strength for the BRIC member.  


Read it here at BBC.


Brazil Admits to 'Race Against Time' for FIFA Infrastructure Improvements

President Dilam Rousseff admitted that several host cities are in a "race against time" to complete the infrastructure improvements needed to sustain the millions of World Cup tourists expected in 2014.  Consultancy Ernst & Young along with the Getulio Vargas Foundation reported that Brazil will need to pour $11 billion into road repairs, boosted hotel capacity, reinforcement security, and telecommunications network improvements.  Brazil has received several warnings from FIFA over delays in construction projects that must be ready by 2014. An estimated $3 billion will be spent increasing airport capacity at both Sao Paulo and Rio de Janiero International Airports.  Rousseff has signed off on the most costly infrastructure improvements, which entail the improvement of underground transit systems in all of Brazil's host cities (shown below).
File:Sedes 2014.PNG

Expect major upgrades in transit, accommodations, and mobile networks for these cities by 2014.

Read it here at Times of India.

Brazil Inflation Forecasts Up for 5th Consecutive Week


SAO PAULO -(Dow Jones)- Brazilian financial analysts and economists raised their 2012 inflation forecasts for the fifth consecutive week, according to a survey published Monday by the Brazilian central bank.
The weekly survey showed that economists raised their 2012 year-end forecast for Brazil's inflation rate slightly to 5.53% from 5.52% in the prior week's survey.

Brazilian President Proposed $3.25 billion in Tax Breaks for Telecomm Networks

In an effort to strengthen Brazil's telecommunications network in the midst of the global financial crisis, President Dilma Rousseff plans to propose 6 billion reais ($3.25 billion) in tax breaks for construction in the industry.  This is just one in a series of tax breaks and other incentives aimed at protecting strategic industries in Brazil from feeling the impact of the global crisis.  It's also an expected part of the infrastructure improvement process as Brazil prepares to host for the 2014 World Cup and 2016 Olympic Games.  An auction for 4G telecommunications networks is planned for the end of April, but some companies have asked for a delay.  Analysts have warned that Brazil's existing networks will need a major overhaul to keep up with booming domestic demand, and the promise of an influx of tourists for the sporting events will put pressure on the country to make the improvements quickly.

Brazil Industry Losing Out to Lower-Cost 
Mercosur Members

Brazilian industry leaders are complaining that the strong growth of the Brazilian economy and the Super Real are acting as a disincentive to Brazilian investment.  Brazilian companies are turning instead to less expensive options like Argentina, Paraguay, and Uruguay.

With the Super Real, manufacturing in Brazil has become very expensive and Mercosur partners offer comparative advantages: Paraguay, cheap energy; Argentina, natural gas at competitive prices and Uruguay qualified labor.  On top of this, the total cost of taxes is significantly higher in Brazil compared to other Mercosur members.

Brazil's Economic Growth Must Slow to be Sustainable


With an average economic growth rate of 5% since 2003, Brazil's economic strength has increased its appeal as a nearshore destination, contributing to job growth, advanced technological expertise, and safer investments for buyers. However, Tony Volpon, a managing director at the Nomara Group, predicts that for Brazil's economy to stabilize, annual growth must slow to 4% or less.

Is there a credit bubble in Brazil? Volpon says no, but rings some alarm bells anyway. “Excessive optimism on the part of creditors and inexperienced banks combined with inadequate prudential policies lead to excessive leverage,” he wrote. “The explosive growth of loans for cars, which already exceeds 4% of GDP, and the acceleration of housing prices are warning signs that we are on the way to creating an unsustainable structure of liabilities within the economy,” he wrote.

The decline in productivity shows that the irrational exuberance of the current job market is about to end, he wrote. “Entrepreneurs may individually believe for a time that the laws of supply and demand do not apply to them, and of course there will always be sectoral distinctions that have to be taken into account. But for the economy as a whole, lower economic growth lowers corporate revenue. If they continue to hire and award wages increases they will see their net profits decrease. A falling rate of profit must then bust the bubble in the labor market. The slowing credit growth should limit the strong growth of recent years,” he wrote.

Mexico vs. Brazil


The conventional U.S. wisdom today is that Mexico is a problem, and Brazil is an opportunity.  The reality is that Mexico is less of the bloody, drug ridden mess that the media would lead the US to believe, and Brazil faces some serious issues that shouldn't be dismissed.   For Brazil, underlying economic weaknesses like its huge income gap, high inflation, and a higher crime rate than Mexico (25 per 1000,000 homicide rate to Mexico's 14 to 100,000) threaten to undermine the country's recent economic boom. And too much negative attention surrounding Mexico's crime rates draws attention away from the country's positive economic growth and political reforms.  Shannon O'Neil, Latin American Studies Fellow, gives a fair take on these two popular nearshore destinations.   

Ankur Prakash Discusses TCS Latin America

As part of the Thought Leaders in Cloud Computing Series, Ankur Prakash, VP and COO of Tata Consulting Services Latin America, gives insight into the Latin American outsourcing market. To give a background on TCS Latin America, they began operations in Mexico City in 2003, and have since expanded into Ecuador, Colombia, Peru, Chile, Argentina. Brazil, and Uruguay.

Prakash gives his take on the talent in Latin America, the strategy behind seeking first tier cities, and recriuting from the Latin American labor pool.  When asked about the cost advantage of the region, he replied, "As for the Latin American cost advantage, cost arbitrage, I don’t think that any company that works just on cost arbitrage in Latin America can provide any kind of value additional and advantage to local customers."  He also explains that because of the vastly different economies that exist in the region, it is difficult to generalize on cost savings.  Indeed, companies will find most regional generalizations unhelpful when examining Latin America.


Cyberattack in Brazil

Just one week after Brazillian IT buff Mark Hillary posted an article on IT Decisions expressing concern over Brazil's lacking cyber security measures, the country experienced its largest cyber attack in history.  

The worst part of this attack occurred Friday, when hackers briefly posted an ominous message on the IBGE (Brazil's main statistical institution) website:

"This month, the Brazilian government will suffer the highest number of virtual attacks in its history.  These attacks are a protest by a nationalist group that desires to transform Brazil into a better country."  


Apparently, hackers from Fail Shell and the Brazilian arm of LulzSec took down the government site through use of robotic computers, using billions of access requests to bombard the site until it finally shut down.  The Brazilian government reported no evidence of data loss, but websites that have suffered attacks include the Brazilian Tax Authority, the IBGE, the Brazilian Senate, and the Ministry of Sports.  

Displayed below, LulzSec won a hacking competition and placed its mascot on the Black & Berg Cybersecurity Consulting homepage.


Brazil received below average marks from the Global Competitiveness Report in the Cyber Security and IP Protection category, ranking 89th out of the 139 scored countries. To date, all attacks have been directed towards governmental agencies, but such vulnerability in Brazil's cyberspace could mean trouble for the country's reputation for world-leading financial and banking software.  

Indian Outsourcing Vendors are not 
Very Competitive in Brazil

David Shpilberg , co-founder and vicechairman of CPM Braxis Capgemini, talks with Shruti Sabharwal about the local market in Brazil and competition from Indian service providers. With Brazil's market for outsourcing and software services set to cross $10-billion mark this year, top India tech firms are looking for a piece of the industry. The country's biggest IT vendor , CPM Braxis, was a hot acquisition target for many Indian tech firms until European outsourcing vendor Capgemini picked up 55% stake last year.

Chile Invests in IT Future

IT spending was at $2 billion last year and is projected to increase to $3.4 billion by 2014.  Their IT growth of 5.7% makes them the LATAM leader, ahead of Argentina at 4.7% and Brazil at 4.5%.  Students are choosing tech careers over business careers, with majors in electric engineering, software studies, and computer science.

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