A Tech Renaissance in the Heart of Northeastern Brazil

Recife is one of the oldest cities in Brazil – the capital of the Northeastern state of Pernambuco was the main port for the exportation of sugar back …

Recife is one of the oldest cities in Brazil – the capital of the Northeastern state of Pernambuco was the main port for the exportation of sugar back in the XVII century. Now, this historical city has some of the most buzzing digital scene of the country. Since 2000, “Porto Digital do Recife” has been established itself as one of the most strategic digital centers in the country — and it is important to highlight the city is located hundreds and hundreds of miles north of the economical heart of the Brazil, the Southeast.

Back in 2000, in a 100 acre location in the heart of historical downtown Recife and with eight kilometers of optical fiber, this location aimed to attract tech companies and research firms from different parts of the country and the world. Twelve years later, 6,500 people work in 200 different companies from areas that include software and games production, business intelligence, systems analysis and development, and technological research. Together, they had earnings of about R$ 1 billion in 2011. And besides, it also is a rich environment for startups to flourish.

Conquering those impressive numbers was not an easy task. Guilherme Calheiros, innovation and competiveness director at Porto Digital, explains that it was created as a partnership between the State government, local universities and corporations, all of them interested in creating a reference tech center in the region.

Preventing Brain Drain

The Northeast is the region where colonial Brazil was born – but the development of the country happened down south, which is what made a great part of the local population migrate to states like São Paulo, Rio de Janeiro and Minas Gerais looking for jobs and better conditions of living, especially between 1950 and 1980.

“We kept seeing our minds go away. We had to retain them somehow,” said Calheiros. Porto Digital was then created as a local partnership to boost and attract tech companies.

Porto Digital will inaugurate an office in São Paulo in April, focused in bringing attention and money back to Recife.

One usual way to attract business to a region is by lowering taxes – and that was the first thing done. ISS (Imposto Sobre Serviços), a tax collected by the local government everywhere in Brazil from third sector business, was lowered from 5% to 2%. Then, IPTU, a tax over the physical structure of the business and its local size, was zeroed for any company that remodeled an historical building where they were establishing their new base — that way, the local government also revitalized a traditional region of Recife that was basically forgotten.

After the scenario was built up, the big players started to come. Even though 92% of the companies that today make up Porto Digital are small and midsize tech companies, the other 8% include names such as Stefanini, IBM, Microsoft, Provider, Proseng and Accenture.

The newest name to arrive in “terras pernambucanas” is Avanade. The company was founded in 2000 as a joint initiative of Microsoft and Accenture, and will open a software factory in the location, that will also provide Microsoft development solutions (.NET), collaboration solutions (Sharepoint), Customer Relationship Management (Dynamics CRM) and infrastructure.

The operations will rely on 40 professionals working from Porto Digital, but the objective of the company is to double work with at least 160 professionals by the end of 2013. “We believe in the potential of the Northeast, and in the qualified workforce found in Recife, due to the good quality universities in the city,” said Jun Endo, country manager of the company, in an official statement.

One of its founders, Accenture, just had one office in the country, located in São Paulo, until 2010, when it expanded its presence in Brazil. It decided to go all the way north to Porto Digital, and today it employs around 300 people, the majority of them locals, and the aim is to grow to 1,000 employees in three years.

Companies like Accenture, IBM and Avanade went to Recife looking for qualified workforce, one of the main problems for the Brazilian tech industry to grow. With a strong tradition in technical courses, the region has around 27 different universities from which 1,000 students from different tech courses major every year. The Universidade Federal do Pernambuco (UFPE), which was among that group that first created Porto Digital, is one of the most recognized in the region and among the best research centers in the country. Today, about 80% of the professionals acting at Porto Digital are under 35 year old.

And Pernambuco has always had its own tradition of a local game industry. UFPE was the first university in the country to create a class of game designing, and today, Universidade Católica do Pernambuco offers a whole major course just about game and software design and production. “Currently, 11 different game companies established at Porto Digital are responsible for 30% of the national game industry,” explained Calheiro. The production goes from games to advertising, marketing viral campaigns, mobile and web designing.

Funding Obstacles

Even though the idea of Porto Digital has proved itself in a very good way, there are challenges to come. Calheiros explained that funding for the new companies to grow in the region is still an obstacle for the creation of new ideas and projects. “Most part of the capital is still focused in the Southeast, it is hard to make it come all the way here,” he said. With the objective of getting closer to the money, he said that Porto Digital will inaugurate an office in São Paulo in April, focused in bringing attention and money back to Recife.

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The second main problem – curiously, he explained – is the physical space for new players to arrive since the initial space designated to Porto Digital has already been fully occupied. “If a new company wants to arrive, with 100 employees, there is not a building for it to operate today,” he said.

Calheiros has said that the administration of Porto Digital is already in conversations with the local government to expand it to new regions of Recife, and that way allow, literally, the digital expansion in the region.

 

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