Growing at double the average rate of the Brazilian IT sector, the state of the Santa Catarina, in the south of Brazil, has become a breeding ground for startups. The technology sector in Santa Catarina grew 15% in 2015 compared to an average growth rate of 7.3% of the Brazilian IT sector, generating $3.5 billion.
The IT companies are mainly located in five cities in the state: Florianopolis, Joinville, Blumenau, Chapeco and Criciuma. These companies have grown at a rate of 20% per year and employing about 20,000 workers. There are roughly 700 IT companies in the Florianopolis region alone, totaling about 3,000 to 4,000 enterprises in the state, most being small- to medium-sized firms, according to the Santa Catarina Association of Technology Companies (Acate), which comprises 700 members.
Aiming to attract IT companies, the government of Santa Catarina launched the Invest SC. “The goal is to support startups, providing strategic information and better opportunities for entrepreneurs,” said Carlos Chiodini, secretary of sustainable economic development for Santa Catarina.
The region has already attracted IT multinationals, which have acquired local companies in Florianopolis in recent years. In 2014, Alstom acquired Reason Tecnologia, a provider of measurement and substation automation network products. The Israeli company Verint Systems, a leading provider of intelligence solutions for work and security force, bought Suntech, a Brazilian company that specializes in communication intelligence. Arvus, a Brazilian manufacturer of agriculture solutions, was acquired by Swedish Hexagon, a leading global provider of design, measurement, and visualization technologies.
With the presence of tech clusters such as Inovaparq and recognized universities in IT area such as Univille, the city of Joinville has also become a hub for software companies. It is home to Brazilian multinationals Totvs (the largest integrated management system, ERP, developer in Latin America), NeoGrid, which specializes in software for supply chain management), and Link (focused on management software, ERP and POS, for the retail market). “The main appeal of the region of Santa Catarina is not the tax incentives, but the qualified workforce and high quality of life,” said Guilherme Bernard, CEO of Acate.
Founded by European immigrants, these cities have collectively emerged as an important IT hub in Brazil, offering good conditions for entrepreneurship with 16 technology clusters, 16 incubators, excellent urban infrastructure, a high-quality workforce, universities, and public financial incentives for startups.
Known for its natural beauty and wonderful beaches, Florianopolis is the capital with the best Human Development Index (HDI) in Brazil. The city was one the pioneer in creating incubators such as Celta and Midi Technological, and there are currently two tech parks, Alfa and Sapiens, as well as the innovation center Acate Primavera.
With an area of 435 hectares and capacity to host about 200 companies, Sapiens Park is the latest tech center. Softplan — which provides ERP software for the construction industry, public sector, and judiciary— is one of companies that will set up at Sapiens Park this year. Founded in 1990, the company has 1,500 employees and achieved a turnover of almost 250 million Brazilian real ($62.5 million) in 2015, a 10% increase from the previous year. “With economic recession there is high demand for solutions that help customers to increase their income,” said Ilson Stábile, executive director of Softplan.
Another company that was born within an incubator and which has gained international recognition is Audaces. The company, a regional leader in the technology segment for fashion, developed its first modeling software in a laboratory of the University of Santa Catarina (UFSC). Currently, this solution is being used in the footwear, fashion, and security industries.
Audaces has four units in Brazil, with operations in the rest of Latin America in Argentina, Colombia, and Peru. The international market accounts for about 40% of revenues and contributed to growth of 10% in annual turnover last year. “We plan to expand sales, especially to Europe and Asia,” said Jorge de Paula, marketing manager of Audaces.
Santa Catarina, Focusing on the International Market
With the economic recession in Brazil, domestic IT companies are looking to the international market to expand their sales. International projects account for around 10% of annual turnover for Involves, which totaled 5.4 million Brazilian real ($1.35 million) in 2015, an increase of 158% compared to one year before, said Rodrigo Lamin, commercial director of Involves.
Currently, Involves has customers in Brazil, other countries in Latin America, Africa, and Portugal, which use its trade marketing management software as a service (SaaS) Agile Promoter, including multinationals such as L’Oréal, Motorola, Samsung and Red Bull.
Incentives and Financial Support in Santa Catarina
In order to promote the entrepreneurship, the government of Santa Catarina launched a program to create innovation centers, managed by the states secretary of sustainable economic development (SDS). In total, 13 innovation centers will be launched, of which eight are under construction, totaling an investment of around 100 million Brazilian real ($25 million) thus far.
Another state government initiative was the launch of Santa Catarina Innovation Program, in 2014, which involves others projects such as Generation TEC, which aims to train workers, and Sinapse of Innovation, a program that offers financial support for innovative business.
The startups in Santa Catarina also count on financial support provided by Banco Regional de Desenvolvimento do Extremo Sul (BRDE), a development bank for the southern region of Brazil, which offers funding for innovative projects. The program has already financed 75 companies in Santa Catarina, totaling investments of 180 million Brazilian real ($45 million). “To be eligible for the financing program, the company has to fulfill some criteria, notably, it must invest in innovation, be either into an incubator or hosted in a technology park and have registered any patent,” said Nelson Ronnie, superintendent of Santa Catarina BRDE agency.
The state government has also provided tax incentives for technology companies that manufacture hardware, which will pay a lower state tax (ICMS) in order to invest in research and development. Some cities have also offered tax incentives to attract entrepreneurs to the region.
Due to the booming IT sector in Santa Catarina, finding talent to meet the demand has been a challenge for IT companies. In 2015, a survey conducted by SDS pointed to the lack of qualified workforce in areas such as e-commerce, social media, and digital marketing. The monthly wages in the IT industry in the state vary from 2,000 Brazilian real up to 25,000 Brazilian real.