Brazil: Looking Inward or Facing Outward?

São Paulo, Brazil: Nearshore Americas is part of a group of US delegates visiting the country this week, with guidance from the folks at Brasscom. Two days on the ground and I have found a country that is compelling, complex and also inhabited by people who  embrace the big advancements  going on here. A key question: Is Brazil going to have its hands full with a vast and rapidly expanding outsourced services sector internally, or does it have room to accommodate the demands of global customers, especially in the US? 

Market Observations:

1. The difference between Brazil circa 2010 and India circa 2000: Don’t make the mistake of believing Brazil’s emergence as a global services hub will mirror the growth path of India over the last ten years. Brazil’s much vaunted internal market is vast, and unlike the India of the past, the global services industry comprises just one of many powerful growth engines. Yes, outsourcing has its place, but it’s not going to automatically take priority over super-sectors like oil and gas, financial services and infrastructure development – which are all claiming global capital attention. Why this matters: Yes the federal government as well as individual states in Brazil have rolled out the welcome mat to sourcing players – but they have plenty of other channels that are consuming their attention.

2. Brazil’s positioning in the Nearshore: Brazil will never win any awards as the lowest cost option in the Americas. But some of the countries services capabilities – like remote infrastructure management and strong technical depth in mainframes – are going to keep Brazil high on the radar for many US-based clients doing nearshoring.  On the issue of scale, the state of Sao Paulo alone (with a GDP equivalent to all of Argentina), churns out about 12,000 PhD educated students a year, placing the state on par with many major cities/ regions in the US and Western Europe.

Yes, outsourcing has its place, but it’s not going to automatically take priority over super-sectors like oil and gas, financial services and infrastructure development

3. The Brazil mystique: Without question, Brazil has a certain allure – and despite its higher prices and often mentioned onerous labor laws, the country’s massive upside coupled with hard-to-duplicate cultural charms definitely influence the propensity of US buyers to commit to the market. The multinationals “have to” be here because of the fact that over 50% of the IT spend in Latin Americas takes place within Brazil – and those players, like Dell, Accenture, IBM, TCS and Wipro – will continue to pour money into nurturing delivery capability for both domestic and global clients. The fact that Brazil entices the US buyer only adds to the sales proposition.

4. In Brazil vs. Mexico who wins? : Both Brazil and Mexico global services promoters have begun to argue that their respective countries are well positioned to be #2 in total global services outsourcing in the next few years. A major factor in the ability of either of these countries to capture that ranking will be how well domestic based providers do in elevating their game to be on the multinational playing field, supporting more demanding (and high value) research and development, FAO and shared services capabilities. We’ll be keeping a particularly close eye on CMPBraxis, which has its attention fixed on becoming a Top Ten player globally and has, along with Softtek, Neoris other locally emerging players, taken market share from multinational over the last year.

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– Kirk Laughlin, Editorial Director