By Filipe Pacheco
Despite a slowdown in foreign direct investment in most other markets, Brazil has managed to maintain a steady stream of funding from international interests. The country received about US$33 billion in the first half of 2011, according to new data compiled by the United Nations Conference on Trade and Development. That puts the country on track with investments it received in 2010, when FDI tripled to US$36 billion.
Brazil Hot While Others Cold
About one-third of all foreign investment in Latin America went into Brazil. Among the BRIC countries, Brazil was second only to China in terms of attracting capital during the first half of the year. China investments rose by nearly 20% and are about double those destined for Brazil, UNCTAD’s Global Investment Trend Monitor reports. But the interesting data that should make the Brazilian industry happy is regarding India, which received only about 55% of the amount Brazil acquired, or about US$18 billion.
For years ago, FDI in Brazil was close to the level of Mexico. But during the period since, the country has surpassed Mexico
The United States, Germany, and France all experienced declines, UNCTAD reports. FDI in developed countries is down by 4%.
The UN numbers reflect investments in all segments of the economy, so unfortunately we can’t yet ascertain how much of that money has flowed into Brazil IT or BPO. But cash infusion into the country’s economy overall is bound to have positive effect on technology investments, and being in the spotlight of foreign investors is not exactly a bad thing either.
That spotlight and global investments make the economy more dynamic and more open to foreign trade. There is a direct impact on the “real economy” of the country, in the production of goods and in other segments of industry. Brazil has had GDP growth of about 7.5% in the past year and that is expected to register at about 4% growth this year. With such a heated economy, either Brazilian companies or foreign ones that operate here will end up naturally spending, hiring, or investing in information technology. If enough of that investment finds its way into R&D, this in turn will make Brazilian IT providers even more competitive globally.
According to data from IDC and Brasscom, the Brazilian IT industry had revenues of about US$85 billion in 2010, which is almost three times as much as the FDI in the country. This gives us an idea of how important the domestic market is for Brazil but also for foreigners looking for a place with prospects.
One example of that attraction is the recent investment by the French outsourcing group Osiatis in a mid-size Brazilian tech and outsourcing company, Interadapt.
And the more dynamic and investment-worthy the developing economies become, the more they trade among themselves and depend less on the old traditional and financially shaky economies. A good example is the huge deal between the Brazilian government and Taiwan-based Foxconn to manufacture iPads in Brazil. Foxconn has promised 100,000 jobs and investments worth billions of dollars.
M&A Action Jumps
When analyzing mergers and acquisitions separately — involving a foreign company that is either buying or being bought by a Brazilian one — UNCTAD says M&A value in Brazil has totaled US$14 billion, 59% higher than in the same period of 2010. Within those mergers, the telecommunications sector has seen the most investment, followed by the mining industry.
Stefanini IT Solutions is a good example of an outsourcing company that has taken advantage of this opportune moment in the Brazilian economy to expand its activities abroad through M&A. Within one year Stefanini has bought two IT companies in the United States, one in Colombia, and it recently announced the launch of a nearshore delivery center in Bucharest, Romania — where Stefanini last year acquired Akela Software, now called TechTeam Akela — to serve clients in Europe. The company is present in 26 countries today.
“Brazil is on an ascendent trajectory. . . In the past few years, we have observed that the annual growth is continuous,” Nicole Moussa, Latin America specialist at UNCTAD, told BBC Brasil. “This shows a clear tendency. Four years ago, FDI in Brazil was close to the level of Mexico. But during the period since, the country has surpassed Mexico.”
Effect on Hiring IT Workers
The impact of these foreign investments, along with those from the domestic market, can be seen in other economic measures that affect buyers of IT services. Yesterday the Labor Ministry released the latest employment numbers: In September alone, Brazil’s economy added more than 209,000 jobs. The official forecast for the end of the year is to have a positive balance of about 3 million new posts.
The IT sector feels how hot the labor market is. Data from Brasscom indicates that there currently is a lack of about 90,000 IT workers just for 2011. The projection is that by 2020, that number can grow to as high as 750,000 professionals.
Since there are so many companies arriving in the country and ready to surf in its wave of growth, they end up having to pay as much as the market will bear to retain a good technology employee. The shortage makes the IT area one where recently graduated professionals can earn the most.