ICT to Brazil

(Last updated: 18 Jul 2011)

Trends and opportunities

ICT business opportunities

• Ambitious government plans to spend US$23 billion on science and technology programs as part of its Growth Acceleration Plan.
• Growing consumer sector driven by growing affordability expanding retail channels.
• As operators, both fixed-line and mobile, seek to keep ahead of each other through investment, lucrative contracts are being won.
• Telecoms regulator is looking at ways of accessing Brazil’s more remote areas with CDMA450 networks.
• Main fixed and cable TV operators now rolling out triple-play services and looking ahead to quad-play.
• IPTV launches have been rolled out but remain small part of the market.
• 3G licences were auctioned in December 2007 and carry requirements to deploy mobile services to regions with no current mobile infrastructure.
• Operators keen to use alternative technologies for rolling out broadband in order to overcome issues with distance.
• Three investment grade upgrades for Brazil will maintain solid foreign investment levels into the country, allowing a broader scope of foreign investors to become involved over the coming years. Combined with a competitive regional political outlook, this could stimulate large-scale infrastructure development projects across the country once global risk appetite makes a decisive comeback.
• Commitment to upgrade physical infrastructure is set to be boosted by the successful bid to host the 2016 Olympic Games in Rio de Janeiro, and the 2014 FIFA World Cup beforehand.
• Recent onshore and offshore oil discoveries could help Brazil become a global oil giant. This will help the country attract a wide range of investors and businesses over the long term.

(Source: Business Monitor International)

Why is this market attractive for Australian companies?

• By far the largest IT market in Latin America and also one of the fastest growing, Brazil’s strategic importance is undoubted.
• Despite fast recent growth in the PC market, a PC penetration rate of only around 25 per cent indicates substantial room for growth.
• Mobile market benefits from healthy competition.
• Broadband market growth on the up.
• Presence of key strategic regional investors in the market (such as Telefónica, América Móvil, Telecom Italia, Portugal Telecom and Telmex) means operators are steadily investing in networks.
• Major multinational manufacturers have key bases in Brazil, including Siemens, Motorola, Lucent Technologies, Nokia, Nortel Networks, Alcatel and Huawei Technologies.
• The smooth transition to a new president in 2010 reinforces the country’s democratic credentials, and reinforces the view that the new administration will remain committed to market-friendly policies.
• Although corruption scandals continue to plague the political landscape, a degree of accountability continues to prevail, underpinning Brazil’s democratic institutions.
• The government’s commitment to primary fiscal surpluses has instilled confidence in the economy.
• Confidence in the central bank and its response to shifting economic dynamics will help to keep long-term investment anchored.
• In complying with orthodox economic measures and encouraging financial intermediation, Brazil has won the support of the IMF and much of the business community. This has contributed to a more stable and welcoming business climate.
• The Brazilian economy is one of the largest in the world, and benefits from a rich abundance of agricultural and mineral resources.

Marketing your products and services

Market entry

Top tips to be successful in Brazil

Next generation convergent technologies to link old infrastructure network with new platform systems are in great demand. Systems integrators provide the link between software technology providers and other services providers to their final clients, the telecommunication carriers. Australian technology providers will be better off in partnering up with local system integrator to better market its products. As ICT is not an end-user sector (apart from consumer products such as mobile and other portable communication devices) the major decision factors are:

• Technology
• Price
• Service
• Maintenance
• Availability

Avoid at all cost:

• Focusing only on short term return
• Lack of principal ongoing support to local agents/distributors; especially for after sales services
• Failing to monitor in market trends and opportunities
• Thinking email, phone (not face-to-face) communications are enough – they aren’t

(Source: Business Monitor International)

How does doing business in Brazil differ from Australia and what do Australian companies need to do in approaching this market?

To show long-term commitment and to be able to understand the nuances of doing business in Brazil, the best market entry strategy is to open a local office. The second best approach is to appoint a representative, local agent, distributor, or systems integrator.

Local companies stress the importance of establishing a local presence, especially for software. The perceived major weaknesses of overseas suppliers are the lack of post-sales technical support and maintenance offered in country.

The practice of protecting domestic manufacturing through high tariff rates was reversed in the early 1990s, with current rates now in line within acceptable General Agreement on Tariffs and Trade (GATT) levels.

Principal duties and taxes are:

• Federal Import Tax – most data communications equipment have import duties ranging from zero to 20 per cent, some other equipment as high as 40 per cent. 
• IPI Industrial Products Tax – is a Federal Excise Tax levied on most domestic and imported manufactured goods. The current tax ranges from 10-34 per cent. 
• ICMS Tax on Merchandise Circulation and Services – is a State Government value added tax applicable to both imports and domestic products and rendered services. The ICMS tax on imports is assessed ad valorem on the cost, insurance and freight (CIF) value plus the Federal Import Tax plus IPI.

Anatel is the regulatory agency for the telecommunications sector. There are no special requirements, although carriers normally demand pre-certified suppliers by Anatel.

Key ICT events in Brazil

• Futurecom – www.futurecom.com.br
• Campus Party – www.campus-party.com.br

Links and industry contacts

Government, business and trade resources for Brazil

Brazilian Electric and Electronic Industry Association – www.abinee.org.br
Brazilian Information and Telecommunication Law Association – www.abdi.org.br
Brazilian Internet Operators Association – www.abranet.org.br
Brazilian Software Companies Association – www.abes.org.br
Brazilian Ministry of Communications – www.mc.gov.br
Brazilian Ministry of International Relations – www.braziltradenet.gov.br
Brazilian Ministry of Science and Technology – www.mct.gov.br
Business Monitor International – www.businessmonitor.com
The National Bank for Economic and Social Development – www.bndes.gov.br
National Mobile Operators Association – www.acel.gov.br
National Telecommunications Agency – www.anatel.gov.br