Brazil’s IT sector remains steadfast despite economic decline
Business Management

Brazil’s IT sector remains steadfast despite economic decline

It’s been called Brazil’s worst recession in decades. The South American country, usually an economic giant for the region has been grappling with an economic downturn that’s plaguing the country and its industries.

The Dilma Rousseff-led government is contending with ongoing global criticism. In late February, Moody’s downgraded the country to junk status. This comes several months after Standard & Poor’s and Fitch downgraded the country respectively. Things clearly aren’t improving for Brazil as it gathers debt.

The recession has come at a particularly bad time for the South American country. It hosted the 2014 World Cup and the economic benefits that it promised haven’t quite come to fruition. Now Rio de Janeiro hosts the Olympics this summer and its budget for the games has been slashed by up to 20%. When it won the bid in 2009 Brazil was touted by economists as the economy of the future, one that would grow and one to watch, but things have drastically changed in the seven years since then thanks to a plummeting GDP and flailing exports. Not to mention the recent Zika virus scare in the country that has the tourism industry on edge.

No industry or sector is ever truly impervious to recessions and economic downturn but in 2015 the Brazilian IT sector was still going relatively strong with all things considered. The sector was adding IT jobs hand over fist. According to HR consultancy Catho, the Brazilian IT sector added 10,105 jobs in June 2015, which was over 3,600 more than the same month the previous year.

However that picture is supposedly changing. A report from IT4CIO says that IT companies are now being forced to reduce staff and cut costs, like lowering salaries. Growth is still happening but not at the same pace to account for the weak real versus the US dollar. And some 70% of bosses in IT companies are feeling the pinch. Up to 1,400 companies in Brazil were surveyed for the report.

The report does however acknowledge that for the last few years, IT has avoided some of the harsh conditions of the declining economy, at least somewhat. Now companies are beginning to get squeezed with the exception of a couple of niches within the sector such as cloud, security, and business intelligence.

Similarly another report from a different organisation, consultancy E-Bit, has made some stark warnings about the state of e-commerce in Brazil in 2016. Tightening budgets will means a slowdown in growth again for the industry.

Despite these warnings of a dangerous times ahead, IT companies are fighting to maintain their salaries, namely in the big cities like Sao Paolo. Unions in the city recently scored a big win for workers by securing a 10.67% salary increase even though the original demand had been for an 11.25% hike. Nevertheless, this is considered a victory by the unions.

“The national economic environment has created a smokescreen that the sectors do not see prospects, and this stimulates fear, distrust in recovery growth,” said Antonio Neto, president of the Sindpd union.

Sao Paolo, a city with a population of 11 million yet growing unemployment, is the epicentre of Brazil’s tech economy. The city is home to offices for major tech companies like Google, SAP, and Airbnb as well as native firms like Predicta, Kekanto, and Startup Mansion, a co-working space that houses several startups.

SugarCRM, a maker of CRM software, is currently in the process of readying its Sao Paolo office for opening later this year. CRM software is a tool that businesses will always need, says CEO Larry Augustin, and that’s why his company is remaining “bullish” on operating in Brazil this year and will “continue to hire aggressively” in the country.

“Factors in Brazil like the growth of cloud computing and SaaS model pricing, call centre growth and US Free trade agreements all make it the biggest market for CRM in LATAM,” he says. “We experienced 85% year over year, from 2015 to 2014, growth in LATAM in terms of annual recurring revenue. And, in 2016 we believe we’ll do even better.”

German open source helpdesk provider OTRS has opened a new subsidiary in Brazil to further develop its LATAM presence. The recession worming its way into the IT sector in Brazil could actually present an opportunity for open source provider, says its CEO André Mindermann, as it will drive more companies to keep their costs down and more manageable.

“That’s why we see Brazil as an excellent future market for our organisation, not only because for four years the country has continuously ranked as the fifth country in the world in downloads of our free-to-download Open Source help desk solution OTRS, but also because our sales team records way more interest from potential Brazilian customers then in any other countries,” he says.

“With new customer acquisitions like Brazil’s National Education and Research Network and a newly founded subsidiary in Brazil, we don’t see the recession in Brazil as a showstopper, just a game changer.”

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Jonathan Keane

Jonathan Keane is a freelance journalist, living in Ireland, covering business and technology

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