In the 2008 study abroad trip to Brazil, we assessed various organizations’ readiness for implementing Information Technology. We visited many locations like a coal mine company, a tile manufacturer, a software company, and many others. One organization we visited in particular was the Associação Comercial e Industrial de Floranópolis (ACIF), which was formed in 1915 and is roughly equivalent to an American municipality’s chamber of commerce. ACIF provides public information about businesses in Santa Catarina, such as access to marketing information and a public job bank. It also provides services to businesses such as insurance, legal assistance, and access to business-oriented seminars and training courses.
While we were guests at ACIF, we heard presentations by Ricardo Valls (the director of ACIF), Dilvo Vincente Tirloni (the president of ACIF), and Mr. Valls who provided some highlights of ACIF’s ongoing contribution to major economic initiatives in Santa Catarina. One of the most important initiatives supported by ACIF is the sponsoring of national tax reform in the Brazilian Congress. ACIF sponsors tax reform because approximately 70% of all collected taxes go to the federal union, while states only receive 20% and municipalities have to make do with the last 10%.
The Chamber of Commerce in Florianopolis gave great insight on the history and economy of Brazil. They mentioned that the discovery of Brazil was found on accident when Portuguese explorers were intending to land in India when they stumbled upon Brazil. At first, the founders noted that “the food was bad,” and the Portuguese used Brazil for fruits, resources, and other means. Brazil declared their independence without any violence but instead with a peaceful negotiation. Currently, Brazil is considered to have a young economy while ranking the 10th biggest economy in the world.
The country is divided into multiple states, reinforcing a federalism-like government similar to the United States. The northern regions of Brazil are mostly covered by the Amazon Rainforest and are generally poor, while southern states like Santa Catarina have the highest standard of living in the country. The representative noted that although each unique region is important, they vary too drastically causing a weak infrastructure and a desire need for a democratic wealth distribution. It was mentioned that due to the wealth of Santa Catarina, it is highly influential to Brazil’s national economy. Although Brazil as a nation is almost entirely self-sufficient, sometimes their internal communication is inefficient and inadvertently harms some of their industries. There is a long list of outdated taxes that hover over Brazil, and the always-changing legal system makes it difficult for business to prosper. This internal problem has slowed the development of more modern technologies from developing – like Information Technology. Brazil relies mostly on domestic industries and products making it a very self-reliant nation. Despite Brazil’s dependence on domestic products, it does export products like rice, cotton, sugar, and grains which increases their global relations.
ACIF also commissions studies that deal with environmental concerns in the state. For example, a project concerning usage of the rivers in the region has been launched with the goal of improving the state’s natural resources. In order to compete more effectively with three existing shopping malls in the region, ACIF has started an initiative that will permit a pedestrian shopping district where no cars are allowed to drive. Finally, ACIF is in the process of publishing a comprehensive economic history of the city of Floranópolis, which will be available on their website (http://www.acif.org.br) and in book form.
Carlos Eduardo Nascimento, the IT director of ACIF, gave a presentation on the history of IT in Brazil and in the state of Santa Catarina. This presentation focused on the technical incubators and IT clusters which have been developed in Brazil, and the issues that have historically prevented growth in the Brazilian IT sector. The first IT company in Santa Catarina was founded in Blumenau in 1969. The company was named CETIL and was focused on the textile industry, and is important because many workers from CETIL went on to become technology entrepreneurs. In 1986, the first technology incubator was formed (named ACATE) and in 1992 another technology incubator was formed in Blumenau (Blusoft). In 2000, a project nicknamed Gargalos (“bottleneck”) was started to help identify issues and obstacles in the growth of the IT industry. The results of this study concluded that hardware was sometimes hard to find, software wasn’t user-friendly enough for many users, and that the growth of professional services was hampered by a lack of experience. In addition, getting financing for IT was considered to be very difficult.
Many of these challenges have been addressed in various ways since the 2000 study, such as a group called The Society for the Promotion of Excellence in Brazilian Software (SOFTEX) that works to foster the export of Brazilian software. However, the most serious technical problem faced today is a lack of access to basic infrastructure. 90% of southern Brazil is covered by fiber optics (under railroads and privatized highways), but only 30% has been made available. A related challenge concerns the costs associated with network traffic. At the time the study was commissioned, it cost about R$2,000 to transmit 2 GB of data. Now the cost has been brought down to about $R59, but this is still too high in an age of high-bandwidth applications. The most difficult challenge unrelated to technology concerns dealing with outdated labor laws and tax codes. Brazil’s labor laws are more than 60 years old, and were created to protect old industries from outside capitalists.
These outdated labor laws and tax codes do not facilitate outsourcing of IT jobs to Brazil. In addition, IT jobs in Brazil are greatly impacted by tax implications because of the higher salaries commanded by these positions. As a result, it can be very difficult for Brazilian businesses to utilize their high intellectual capital. As an example, IT industries in Floranópolis (which are classified under finance and professional services) paid 3rd highest of ISS taxes. Even with the multitude of challenges facing the IT industry in Santa Catarina, the sector has managed to grow. Today, there are 300 software companies and 100 hardware companies in Santa Catarina. The IT sector is an R$800 million dollar industry responsible for 4,000 direct jobs (and 60,000 indirect jobs). The IT industry in Santa Catarina is now growing by 20-30% a year. For more information about the state of Santa Catarina, visit http://www.santacatarina.com.br.