May 28, 2008 - DCI

The federal government has recently announced a Production Development Policy (PDP) which may generate a boom in the export of information technology (IT) products and services. According to industry associations, by 2011 Brazil?s export sales will reach US$ 5 billion.

The president of the Brazilian Association of Information Technology and Communication Companies (BRASSCOM), Antonio Carlos Rego Gil, is optimistic about the possibility of international growth. ?I can confirm that we will export US$ 5 billion by 2011. This goal was endorsed by the Brazilian government,? he says.

According to data from the association, Brazil exported around US$ 800 million last year. ?Research shows that we are growing by over 40% a year,? he says.

Gil adds that Brazil is the eighth largest market for IT in the world. ?With this new policy the government is telling the world that Brazil is getting into the game. The world needs an alternative to India, this is a niche that will be filled by Russia, China or Brazil, and we have great advantages over the competition,? he explains.

José Curcelli, president of the Association of Brazilian Software Companies (Abes), has the same opinion, he is also confident in Brazilian progress. ?Brazil is world famous for its aviation and agriculture. It has less visibility in the service sector because our product costs are higher. For the IT industry 70% of the expenses are related to personnel costs, the tax relief policy will help propel the sector,? he says. Curcelli also believes that Brazil will soon feature among the largest service providers in the world.

Ricardo Kurtz, president of the Association of Information Technology, Software and Internet Companies (Assespro), is a bit more conservative about the growth possibilities in the next three years. According to data from the association, exports in 2007 were only US$ 200 million and the new government package does not focus on the needs of the sector. ?Growth is difficult in the current conditions. This new package will not bring any benefits. The government is only surveying a small number of companies, and that?s why it?s taking the wrong path,? he believes.

Kurtz claims that the IT industry is different form others and that government should support small businesses and ?create a differentiated policy for all who invest in qualification,? he suggests. The problem of the industry?s lack of identity was also mentioned. ?To date the government hasn?t evaluated our vocation. First we have to know what we are going to sell and then define the markets,? he states.

According to Kurtz, Brazil cannot compete with India and China when it comes to services, but he asserts that Latin America and Africa are markets with high growth potential. ?India exports almost US$ 15 billion per year because they started out with bolder policies 15 or 20 years ago,? he concludes.

Marco Land, vice president of operations for Atos Origin in Latin America, a company specializing in Information Technology (IT) services, thinks Brazil is well received in the international market due to its work force. ?We have to find a solution to the cost issue because China and India have more competitive prices. We also have to improve basic education and the English skills,? he points out.

Benefits
The industrial policy for the IT industry has brought about a reduction in payroll costs, including a reduction of half the Social Security taxes for exporting companies. Those companies that pay 20% in payroll deductions and SS taxes will pay only 10%. Another benefit is the deduction for double the amount of expenses related to accelerated personnel training programs in determining the tax bracket for income and social security taxes. The PDP also allows companies to use research investments as a deduction in determining the tax bracket for income and social security taxes.

Robson Gisoldi