Despite challenges, BH still seen as ‘ten times better’ than Sao Paulo to do businessBy Patrick Haller
Belo Horizonte (BH), the capital of the southeastern state of Minas Gerais, might be booming but should it be preparing for a bust?
With problems evident in all Brazilian cities such as demand outpacing supply and infrastructure, tangled traffic jams, a dwindling talent pool, rising costs and a lack of tax incentives, the third most populous city in Brazil with nearly 2.5 million inhabitants in the city proper, and 4,000,000 in 34 municipalities which make up the metropolitan area known as Grande BH, might be an attractive destination, but one that needs to keep up with the pace or risk an implosion.
Getting the Facts
Even though the city has hundreds of higher learning institutions that offer bilingual programs, there are no official statistics tracking the number of bilingual graduates. This lack of information makes it difficult for multinationals to gauge the availability of talent. However, corporations such as Google and Infosys have found it to be a beneficial place to establish locations. Humberto Andrade, Head of Sales and Client Services – Latin America for the BPO office of Infosys, said that there is a problem with English proficiency in BH, despite the fact that there is a growing consciousness about the importance of being bilingual. Infosys requires all of the upper management and support staff to be bilingual and offers on-site English training to their employees every other night.
Many of the software companies in BH known for quality and innovation, such as Incode Software, are Brazilian born and bred, and it is difficult to communicate with them in languages other than Portuguese. One reason for this is that the industry has focused mainly on Brazilian customers, and is only recently starting to look at international opportunities. This phenomenon is also evidenced by the websites for the groups serving the IT industry in Minas Gerais, FUMOSOFT (an incubator), Assespro-MG (a lobbying organization) and SUCESU (a trade association), none of which provide language options, sending perhaps an unintentional message that non-Portuguese speakers are not important to industry in BH.
BH is still an attractive destination for other reasons. “In early 2009 we were negotiating a large deal based out of Sao Paolo, a city of 16 million people,” says Andrade, “but the numbers weren’t working and we had to go to a second tier city to make numbers work. We looked at ten cities and excluded seven based on connectivity, scalability and security. Belo Horizonte was chosen because of the quality of life, connectivity, number of universities and the fact that it is second in the IT talent pool.” Additionally, BH is a metropolitan hub between the vast regions of Brazil.
With over 200 employees in BH, Infosys serves local clients across different industries. Even though Infosys hasn’t experienced many bumps with establishing their presence in BH, and hiring their current workforce, “The big question mark,” Andrade says, “is what happens when we need 1,000 to 2,000 people. That will demand much more training and stronger collaborations” with the government and educational institutions.
Iguinaldo Norguaera, Chief of Information and Knowledge Management with INDI, the investment agency for Minas Gerais, said, “At the moment it is especially difficult to find enough employees. The unemployment rate is decreasing and we have a small number of employees available for many sectors. Salaries in Brazil are increasing, especially in terms of the US dollar.”
BH is only a one-hour flight from Sao Paolo, with around seven flights leaving daily. Andrade says that BH is ten times better than Sao Paolo, which is not practical because of traffic congestion and “the cost of living is absurdly high.” With three airports serving international and domestic traffic, several well-maintained highways that connect BH to the rest of Minas Gerais and the country, a sophisticated mass transit system including a metro and a bus network which is being improved with the implementation of dedicated bus lanes, the current infrastructure in BH is sound. However, Andrade sees trouble ahead, “There’s not one city in Brazil that is ready to absorb what is coming. Belo Horizonte will get worse; the demand and growth is way bigger than the infrastructure.”
In general, Andrade observes, the political system in Brazil is not the best one, “but they understand the importance of capital and foreign investment. Creating jobs, reducing regulations and taxes. I believe they will continue in a similar pattern.” The administration of President Dilma Rouseff, he says, is better than that of former president Luiz Inácio Lula da Silva in its commitment to the business sector. “The government helps with the training for services companies, they also speed-up the process of forming a company.” Much of the assistance in BH is provided through INDI.
Question of Incentives
Since the Brazilian Supreme Court considers incentives based on tax to be illegal, says Norguaera, Minas Gerais prefers to consider other incentives, like assistance with a company’s infrastructure. With global players like Walmart and Carrefour competing for real estate, finding adequate and affordable space can be extremely difficult. Norguaera has noticed that the demand for space is increasing because there is a lot of investment from Brazilian and foreign companies. “In Belo Horizonte it is difficult,” he says, “it is so expensive to buy property and there are a few areas to install big companies. There is the tech park for IT companies, and it is easier, but it is difficult in the commercial areas of Belo Horizonte. However, there are a great number of areas of available for rent or purchase in the metro region.” Infosys took advantage of this when they chose to operate from Nova Lima, a city close to BH.
BH is known as a hub for manufacturing and services, such as health, education and biotech. And IT companies are important, with Google and Infosys being the most well known. The BH Technological Center, says Norguaera, has been created to help small to medium companies from around the world with facilities and knowledge management. Call centers like Atento, Oi and Oma Viva are also an important sector that INDI fosters mainly because of the employment such operations create.
“They have been investing a lot into education,” says Andrade, “If you look at what Brazil was 20 years ago and what it is today, the change is amazing.” BH is representative of this change, but also the challenges the nation must meet in order to continue on its trajectory of growth and global importance.