Brazilian IT companies expect to increase their exports this year due to the recovery of the US economy and local currency devaluation, which has made their products more competitive. In 2012, the Brazilian software and IT service exports totaled US$ 2.2 billion, 14.67% higher than in 2011, according to the survey published by the IDC and Brazilian Association of Software Companies (ABES). In 2013, analysts estimate that Brazilian exports increased between 12% and 14%.
“For this year, we should repeat the same performance as last year and export growth will exceed domestic market rates”, said Jorge Sukarie, Abes CEO. The IDC forecasts a growth of 9.2% for the Information and Communication Technologies (ICT) sector this year.
The main markets for Brazilian software exports are Mexico, with a 14.1% share, Colombia (7.7%), the United States (7%) and Argentina (6.3%). The US accounts for almost 39% of the IT market and it is one of the main destinations for Brazilian exports, especially in the services area.
Targeting the US Market
Many companies have taken the opportunity to expand their operations in the US since the crisis of 2008. One such company is Stefanini, a global provider of IT infrastructure outsourcing, application development and integration, which made three acquisitions in the US (Teach Team, CXI and RCG Staffing) between 2010 and 2013. “The U.S. market is the number one priority in our international expansion,” said Marco Stefanini, the company’s CEO. The US accounted for 19.17% Stefanini’s total revenue in 2013, totaling US$ 1.2 billion. Five years ago, this country accounted for less than 7% of the company’s revenue.
In the US, the company provides Business Process Outsourcing (BPO) services and applications outsourcing.
Aside from local operations, Stefanini uses other platforms to export to the US, such as its plants in Brazil, Philippines, China and India. “As the Brazilian real devaluates, Brazil becomes more competitive to export,” said Stefanini. In total, Stefanini has operations in 33 countries and the international market accounts for 40% of its annual turnover.
Aiming to stimulate Brazilian exports in the IT area, Softex – in partnership with the Brazilian Agency for the Promotion of Exports and Investments (Apex) – launched a customized internationalization and competitiveness program, known as Inter-Com, focused on companies from this sector.
The selected entrepreneurs will participate in a program developed by Dom Cabral, a famous business school in Brazil, dedicated to assisting them in formulating internationalization strategies. For the first group, which started in March, 30 companies were selected. A second program will be held in the US, in Silicon Valley. “The US is the main target market for Brazilian companies,” said Gláucia Critter Chiliatto, international executive manager at Softext.
Apex opened an office in San Francisco (US) last year, aiming to provide support for companies in the technology sector. “Apex has helped companies to grow in their target markets,” said Sérgio Pessoa, general manager from Apex-Brazil in San Francisco.
Since 2005, Apex and Softex have had a partnership in a project to spur software and services exports, aiming to promote the expansion of Brazilian companies in foreign markets.
More than 250 companies have already participated in this program. One of these companies is Interact Solutions, based in the state of Rio Grande do Sul, in the southern region of Brazil. “The program allowed us to identify the markets which we can access and meet companies which are in advanced export stages,” said Fernando Estrada, international business manager at Interact.
The company, developer of the corporate management suite called Strategic Adviser (SA), has operations in 10 countries, mostly in Latin America, and plans to start a business in the US and Europe this year. “Our software is compatible with several technologies,” said Estrada, from Interact. In 2013, the exports accounted for 13% of the company’s revenues, which totaled 6 million Brazilian real (almost US$ 2.55 million).
Services Dominate Exports
Brazilian exports are concentrated in the service segment, which account for 91.8% of total exports. “The international software market is very competitive, dominated by multinationals and I think Brazilian companies should have a competitive advantage in the service area,” explained Gláucia, from Softex.
Sukarie, from Abes, believes that Brazil has a competitive advantage in offering customized solutions, with expertise in developing software for the financial sector and for mobile applications. “I don’t believe that Brazilian companies have to develop ERP software to compete with the largest multinational companies. They have to develop solutions which use these platforms,” Sukarie said.
However, the share of exports in the Brazilian IT market is still small compared to other Latin America countries. According to the Brazilian Federation of Information Technology Companies (Assespro) survey, which has 500 associates, only 18% of IT companies export. This number is lower than in other countries in the Southern Cone region, where almost 65% of IT companies export.
Exports account for almost 15% of these Brazilian IT companies’ annual turnovers. For this year, 75% of these exporting companies forecast a 10% growth in their international sales. “The recovery of the US economy should help boost Brazilian exports, but it won’t be immediate”, said Roberto Mayer, public relations vice president at National Assespro.
According to specialists, the largest domestic market is one of the main reasons for the small share of exports in the IT market. Brazil is the seventh largest IT market, totaling US$123 billion in 2013.
Another factor which affects the competitiveness of Brazilian exports is the high taxes and costly workforce in Brazil, and the high level of bureaucracy when doing business in Brazil. Moreover, more than 90% of the IT market is made up of micro and small enterprises, which need incentives to expand their operations in the international market. “We are working on reducing taxes for the IT sector and we have launched a development and innovation agency to identify financial sources for companies,” said Sukarie from Abes.