Brazil: A Country of the Future No More

brazil future


“For so long you were called a country of the future, told to wait for a better day that was always around the corner. My friends, that day has finally come. And this is a country of the future no more. The people of Brazil should know that the future has arrived. It is here now. And it’s time to seize it.”

No, these were not the inspiring words of a Brazilian leader. These were the words of U.S. President Barack Obama in his most recent visit to Brazil. These words can certainly represent the feeling, both inside and outside of the country, that Brazil is facing the greatest opportunity – perhaps ever – to consolidate its growing importance on the global stage.

Brazil has achieved macroeconomic stability and institutional maturity and is now undergoing broad and fast-paced expansion, driven by an increase in income and social ascension — 19 million people, or 10% of the overall population, joined the middle class in 2010 — as well as an increasingly important position in international trade. S&P’s recent upgrade of Brazil’s credit rating outlook from stable to positive reflects the country’s strengthening prospects for steady, long-term GDP growth — which has expanded 7.5% in 2010 and is expected to grow another 4.5% to 5.1% this year.

Brazil is expected to become the world’s 5th largest economy in the next decade, and besides its global prominence in commodity trading (both food and minerals), the country has a very innovative and diversified economy and is an exporter of sophisticated products like aircraft, automobiles, industrial equipment, software, and IT services. Brazil’s US$165.7 billion ICT market is the 7th largest in the world, and the IT-BPO sector turned over US$85.1 billion in 2010, up 44% from 2008.

Multinationals have been in Brazil for decades (IBM since 1917; GE, 1919; J&J, 1933) and have established a foundation of best practices and management excellence that, combined with Brazilian’s creative DNA, fostered an outstanding environment for business and trade.

Brazil is a global reference and a market leader in the production of renewable energy, particularly biofuels, but its oil and gas sector has the potential to become a US$1 trillion industry by the end of the decade. Petrobras, the world’s 5th largest oil company by production and 3rd largest by market capitalization, is a recognized leader in the development of ultra deepwater drilling processes and technologies with significant growth prospects fueled by the pre-salt oil reserve findings.

Brazil’s financial services sector is very strong and diversified, with significant presence of both local and international banks, well developed capital markets, and a solid regulatory foundation – more than 95% of the Basel Committee recommendations have already been implemented and capitalization levels are above international standards. The extensive automation in the sector — a silver lining of the hyper-inflation of the 1980s — has helped create one of the most advanced financial systems in the world, with sophisticated electronic payment systems and banking automation solutions, both web- and mobile-based. Brazilian banking institutions, particularly Itau, Bradesco, and Banco do Brasil, are strong local market leaders that are expanding globally.

IT Strengths Underlie Sourcing Opportunities

Brazil currently accounts for nearly half of the population and economic output of Latin America’s countries, and is commonly a hub for the regional headquarters of multinationals. A July 2010 study by Gartner shows that Brazil’s share of the overall Latin American IT market, including Mexico, is close to 40% for IT services, telecom equipment, application and infrastructure software, 45% for PCs, and 50% for servers and printers.

The country’s IT-BPO sector scale, excellence, experience, and ability to innovate set Brazil apart. A combination of factors makes Brazil particularly appealing for companies looking for investment and sourcing opportunities, including:

• the favorable business environment, fueled by economic strength and political stability

• the highly skilled workforce recognized for their knowledge, commitment, creativity, and flexibility

• the strong cultural alignment

• some of the best telecom, energy, and transport infrastructure among emerging countries

A recent study conducted by AT Kearney estimates that the 2014 World Cup and the 2016 Olympic Games will drive IT investments of US$3.5 billion, in television and data transmission systems, transportation, public safety, etc. This new infrastructure is expected to spur innovation and transformation in the country for years to come.

Challenges certainly exist, and there are many, but they also create opportunities. At the same time that the strong currency has an impact on exports, it also fosters the expansion of Brazilian companies globally. Many companies are taking advantage; Stefanini’s recent acquisition of U.S.-based TechTeam is an example. There is no question that this is a time of great opportunity for Brazil. And, like Mr. Obama said in Rio de Janeiro, it’s time to seize it.