Weaker Currency Benefits Brazilian IT Sector

It is a well-known fact that the Brazilian IT and outsourcing industry caters mostly to the domestic market. Yet the Brazilian IT industry is well positioned to take …

Gon at Ci&T: Currency isn't everything

It is a well-known fact that the Brazilian IT and outsourcing industry caters mostly to the domestic market. Yet the Brazilian IT industry is well positioned to take bigger profits from exporting service because  the country’s currency (the real) continues to decrease in value against the U.S. dollar. At the same time, the weak currency has negatively impacted the country’s importing sector. During most of 2010 -2011, the real was a lot stronger in comparison with the dollar.

The strong real had a negative impact on Brazilian exporters in different industries and was considered quite damaging for the country’s economy. After taking office, President Dilma Rousseff made it clear that she wanted the real to be weakened to support the exporters. As a result, the Brazilian Central Bank has taken a series of measures to drive down the value in the local currency.

The ever declining value of the national currency seems to have strengthened the hands of exporters, particularly those who are offering IT services to foreign clients.  Brazilian IT industry generated a revenue of US$112 billion in the year 2011, but all it earned by exporting IT services was just US$2.65 billion during the year. Interestingly, the United States accounted for nearly 80 percent of this export revenue, according to Brasscom.

According to Antonio Gil, Brasscom’s president, the Brazilian IT industry improved its competitiveness considerably in 2012 due to a combination of factors, including the weak currency and incentives offered to IT companies. the federal government’s decision to impose fewer taxes on payroll also contributed to growth in the domestic IT sector. “The more favorable level of the currency and a healthier industrial environment for business must boost the Brazilian exports to US$ 3 billion in 2012 and to US$ 20 billion in 2022,” he said.

The Pride of Brazilian IT

For Cesar Gon, CEO of Ci&T, a leading Brazilian IT firm focused mostly on the foreign market, that equation is not so simple. He says the weak real has a positive impact on the export sector as it makes the Brazilian products more competitive in the international market. But, he adds, the industry cannot expect to profit from the weak currency for very long.

“In the broader view, exporting software services is a business directly related to the long term, and companies’ strategies must not be based on a constantly fluctuating currency situation. They need to prepare for long-term strength based  more on competitiveness and differentiation,” he said.

Sign up for our Nearshore Americas newsletter:

Gon explains that when the ‘real’ was stronger, it was the right moment for the local players to invest outside of Brazil. “At that time, it was easier, for example, to send local executives abroad, fundamental to spreading our DNA in our units,” he said.

Ci&T has two development centers in Brazil, one in Argentina and another more in China. Most of its clients are in the USA, Japan and the European countries.

Ci&T’s success proves the point that Brazilian companies can excel in foreign lands. The IT company expects to grow 35 percent in 2013 and hopes to expand operation into the European countries.

The Brazilian IT firm is planning to launch new digital services for the pharmaceutical industry. And, in Japan, the company hopes to capitalize on the growing demand for mobility, big data and cloud computing services.

“On a much broader perspective, I believe our biggest challenge, even more than the currency rate, is to integrate Brazilians, Americans, Japanese, Chinese, Argentineans, Indians, all in the same working environment,” he adds. “Our intention is to generate value by creating high performance teams in this global chain.”

Tags