On May 5th, the Brazilian Government decided to fund 11 billion reais ($6.1 billion) into a plan to boost access to broadband Internet services among low-income households. Shares of state-run Telebras surged after it was picked up to handle the plan. The so-called National Broadband Plan includes reviving Telebras, the former state telecom monopoly, with a four-year capitalization plan worth 3.22 billion reais, the office of President Luiz Inacio Lula da Silva's chief of staff said in a statement.
"We are indeed reactivating Telebras and, of course, that will happen within such a legal and economic framework to enhance our plan to boost accessibility to Internet services," said Chief of Staff Erenice Guerra. Telebras will be tasked with operating a backbone network of 23,000 kilometers of fiber optic cable. The corporate structure of the company will be "thrifty," Guerra said, adding that the company's aim will be to provide wholesale support to other carriers.
The broadband plan is the latest in a series of steps by President Luiz Inacio Lula da Silva to enhance the state's presence in sectors he deems strategic for the country. Private telecom carriers, many of which paid for the right to operate in the industry in the late 1990s, allege the broadband plan could hurt them by creating a sub-market inside the market where they operate. Sector analysts say that this is a change of rules but want to see the plan carefully to assess the consequences.
The goal of the plan, known as Plano Nacional da Banda Larga (PNBL), is to quadruple the number of municipalities with Internet broadband access by 2014, or the equivalent to 40 million households but the success of the plan hinges on the ability of the government to bring in private companies to execute part of the program. Private carriers operate about 200,000 kilometers of fiber optic cable, about 10 times the size of the government's backbone network, according to Telecommunications Ministry data.
According to the Brazilian Government, the National Treasury will provide the funds necessary for the capitalization of Telebras. The state development bank BNDES will also provide Telebras and operators loans worth 7.5 billion reais. Parts of the Telebras system still exist to honor millions of dollars in labor-related liabilities, but it has no actual day-to-day operations. Recent glitches in the broadband network of Telefonica in Sao Paulo state have revived discussions about resuscitating Telebras. A national fund for telecommunications investments, known as Funntel, will finance 1.75 billion reais in research and development expenditures needed to kick off the program.
U.S. companies that sell products for the broadband market should pay close attention to business opportunities with the new Brazilian PNBL plan.
The global Information Technology (IT) market reached 1.3 trillion Dollars in 2007. In Brazil, the scenario has been positive. Some of the factors that support the growth of the IT industry in Brazil are a stable economy, strong local currency and availability of loans. In 2007, Brazil invested US$ 24 billion in information technology, which counts for almost 2% of Brazil’s GDP. Of this amount, US$ 12.5bi was invested in computer hardware, US$ 8.5bi in IT Services and US$ 3bi in computer software.
For 2008, projections remained positive. Investments in 2008 are expected to reach US$ 26.8 billion, an increase of 11% compared to the previous year.
According to IDC – International Data Corporation – the government is the second largest market in size and investments in information technology. IDC estimates that the global market will spend US$ 161 billion in 2008 and will continue to invest an estimated 6.6% per year until 2011.
These figures provide a very positive scenario for Brazil. Among all BRIC countries (Brazil, Russia, India, and China), Brazil positions itself in second place only behind China in terms of investments in information technology, says IDC. It is also estimated that investments in IT in Brazil will be three times larger than the country’s GDP growth (estimated by federal government at a 3.8% for 2008).
Investment in Computer Software, Hardware and Service
Today, large corporations count for the majority of IT investments in Brazil. IDC projects that in the next five years, there will be a diversification of the size of the companies investing in IT and a good percentage of small and medium size companies will participate more. According to IDC, 33% of IT investments in Brazil will come from corporations with over 500 employees. Small and medium size companies correspond to 13% of the total invested in country.
Another very important aspect that should be considered is that consumers/end-users is getting access to technology. Brazil is a market leader in regards to domestic consumption growth in technology. In the last two years, the market felt a surge in sales of personal computers/laptops and printers.
Retailers are considered today the best channel for this niche market as well as a facilitator of digital inclusion. Brazil counts today will 9% - 8.1 million users – with access to broadband internet access.
This index in USA represents only six percent. By 2012, it is estimated that 8% of Latin America population will have access to broadband connection.
The projection of investment to be made in Brazil shows that in 2008, 11% will be invested in the Northeast region. The Southeast region will remain with the largest market share, almost half of what is invested in the country, which represents US$10.3 billion. Southern and center-west regions of Brazil will follow the growth path.
The positive results of investment in information technology in Brazil reflect directly in the level of local companies using such technology. Ninety-five percent of companies with over ten employees have computers, and 92% of them have some kind of access to internet connection. 100% of the companies with over 50 employees have access to computers.
In 2007, the number of companies using wireless technology grew 64%. At the same time, companies using wired technology reduced from 87% to 77%. The research prepared by CGI – Comitê Gestor da Internet no Brasil – demonstrates that the larger the company the more diversified ways to implement some kind of internet connection.
The financial segment in Brazil has proven to be one of the largest investors in information technology and a world-class in sophistication and automation of IT processes, especially if considering initiatives like “internet banking”, ATM installation and SPB – Sistema de Pagamento Brasileiro (payment of utilities monthly bill via mobile/internet/authorized venues).
According to the Brazilian Association of Credit Card Companies, the number of credit cards reached 90 million, an 18% growth. At the same time, transactions using credit cards grew 19% reaching US$ 91.5 billion. The number of “ATMs-full” (full-service self-service terminals) that provide all sorts of banking transactions grew 14% in 2007. According to Febraban – Brazilian Federation of Banks, if we consider the total amount of self-service equipment in operation in Brazil, this number would be superior to 170 thousand terminals, which would be considered one of the largest in the world. A study prepared by Febraban shows that in 2007, Brazilian financial institutions invested R$ 3 billion (US$ 1.5 billion at R$2.00 exchange rate) in IT, a 16% increase compared to 2006.
Sales of PCs
Based on a research prepared by IDC, Brazil is considered the 5th largest PC (personal computer) markets in the world, which represents 47.3% of the Latin America market. In 2007 there were 10.7 million computers sold in Brazil following the USA (64 million), China (36 million), Japan (13 million and United Kingdom (11.2 million). It is expected that Brazil will reach third place in this ranking by 2010.
Sales of 10.7 million units of PCs in Brazil in 2007 – between desktops and laptops – represent a growth of 38% compared to 2006. Laptops alone presented an extraordinary growth of 153% in 2007, reaching a total of 1.5 million units sold.
The “gray market” According to IDC, the sales growth demonstrated in Brazil in the last few years follow a worldwide trend of legal products. The so-called “gray market” reduced from 50.8% to 46.4% in 2007. This figure was not smaller due to the increase of notebook sales, some of which were considered “counterfeited”.
The computer software segment is also affected by the illegal market. According to BSA – Business Software Alliance, there was a one-percent reduction in the software piracy index in Brazil, reaching 59% (US$ 1.617bi). From the 108 countries that were part of this study, the usage of pirate software was reduced in 64 and increased in 11 countries. The result is considered positive for Brazil as the country was able to reduce this figure for two consecutive years, reducing 5% in total.
A recent study shows that a 10% reduction in pirated software in Brazil could generate a stronger IT market reaching 11.5 thousand new jobs, US$2.9 bi in revenues for the local industry and an additional US$ 389 million in taxes.
Computer Software Brazil Leads Latin American Software Revenues
As the largest and most dynamic information technology (IT) market in Latin America, Brazil offers significant opportunities for U.S. suppliers of IT products and services. Five important sectors of the Brazilian economy — agribusiness, textiles, health, electrical appliances and auto making — lose about US$21.03 billion annually because of in their production chains, caused primarily by inadequate integration of IT systems within companies andbetween their suppliers and clients. Medium-sized businesses are beginning to leverage IT assets by adoptinnew applications designed to boost productivity and help them catch up with enterprising customers, supplierand competitors.
The above statistics are unofficial estimates.
Given the forecast for steady economic growth over the coming years, Brazilian IT spending should increase at a healthy pace. Demand for telecommunication software is expected to grow as data, voice, conventional, and mobile technologies converge. Most significant within this sector is increased data communication in cellular telecommunications, which is expected to continue growing for a number of years.
According to the Brazilian Distance Education Association (ABED), at least 1.27 million Brazilians completed coursework through distance learning technologies in 2005, taking courses accredited by the Ministry of Education and Culture (MEC) or through public and private initiatives. The number of institutions with MEC authorized courses rose 30.7% between 2004 and 2005, from 166 to 217.
Information security from hackers and viruses continues to be an area of interest for companies in Brazil, with medium-sized enterprises (MEs) particularly interested in data security and information backup/recovery technology. With increasing network and Internet-based connectivity, combined with frequent electronic attacks from viruses and worms, Brazilian MEs are realizing their vulnerability and have begun systematically implementing IT security measures.
Data Storage Should Surpass, US$1 billion in Latin America
Though the data storage market already has considerable business volume and technological development, it continues to expand. This year, Brazilian companies will increase spending on data storage by 10% to US$475 million. Investments in hardware should amount to US$311 million, and in software to US$164 million, according to an IDC study. In Latin America the sector should surpass US$1 billion for the first time in history, with revenues of US$728 million in hardware and US$305 million in software. The figures correspond to 14% growth in hardware and 12% in software.
Open Source Gaining Favor in Brazil
Several Brazilian companies are already using Linux. According to the research held by IDC in February 2006, Linux has reported more than 20% growth in server sales, while Windows grew less than 5%. Unix loses more than 6% per year. According to Novell, corporate clients are discussing options to increase the use of Linux, versus three years ago, when they discussed not using the system. Nevertheless, a study disclosed that most consumers participating in the government’s digital inclusion program choose to substitute free software that the came with a computer for another program, often pirated.
US Software Industry is Competitive
Industry experts predict US$13.7 billion in software sales in Brazil during 2007. Of this, US$5.9 billion will be imported, almost 70% from the United States.
Although Brazil is the world’s 7th largest software producer, only 2% of the industry’s revenues are earned through exports. Brazil’s government hopes to increase the country’s software exports to US$3 billion by 2007, assuming world software demand will triple over the next 5 years to US$900 billion. The development of an export-ready software market should create opportunities for US suppliers and consultants.
US IT companies with proven sales and export records can be competitive in Brazil. While some in Brazil see the presence of competing multinationals as a negative, the combination of a burgeoning local industry and international competition are indicative of a maturing software market.
Software Piracy is Widespread
U.S. software manufacturers should be aware that severe software piracy exists in Brazil. Illegal copies of software are made locally or come from Southeast Asia and enter Brazil through Paraguay or other border states. The Business Software Alliance estimates that 50 - 60% of all software used in Brazil is pirated, resulting in losses of US$500 – US$600 million. Brazil’s government has recently publicized stricter penalties, but uneven enforcement and judicial delays continue. The US government continues to follow this rend closely.
Import Regs.: Software
Protection of software in Brazil is regulated by Law No. 9609 of February 19, 1999, which provides mainly for (1) Protection of the software itself as intellectual property; (b) the rules for marketing software, creating mechanisms for government agencies to monitor this marketing with a view to protecting Brazilian software; and (c) penalties of a criminal nature, for cases of infringement of software copyrights and certain rules for marketing.
Software is protected for 50 years as from January 1st of the year following its publication, or if not published, following its creation in each country. As with copyrights, software owners that reside outside Brazil are ensured protection, provided that their country of origin offers reciprocal treatment, granting both Brazilian and aliens resident in Brazil protection equivalent in extent and time.
The protection of software doesn't depend on registration, and the author need not register it. Registration can be made at the Brazilian Institute of Industrial Property (INPI).
Infringement of software copyright is a criminal offense, which subjects the offender to detention from six months to two years plus a fine.
Unless the parties agree otherwise, the rights to any software developed during the life
of any agreement or statutory relationship, research or development, in which such activity is carried out by the employee, civil servant or individual hired to render services as expressly provided for in the respective agreemetns, or which results from the nature of the work for which he/she was hired, will belong to the employer or service principal.
However, if the software is developed independently of any agreement or statutory relationship, and without the use of any resources, know-who, materials, facilities or equipment belonging to the employer or service principal, the rights to such software will belong to the employee, civil servant, or individual rendering the services.
According to the Software Law, the following situations will not violate software copyright:
- reproduction of a copy of that has been legally acquired, provided it is essential to the proper use of the program; partial quotation for educational purposes, provided the author and the software quoted are mentioned; similarity of two copies, provided this similarity stems from functional features in their application, from compliance with legal, regulatory precepts or technical standards, or a limitation of alternative forms for their expression; and integration of software and its basic features into an application or operating system that is technically indispensable to the user's needs, provided it is used exclusively by whoever undertook this integration.
Documentation related software medium and related items should be fully vetted with te Brazilian importer's broker. The Brazilian customs broker should have a "pro format" invoice and any license agreement or service agreement involved with the transfer of the software products to present to the import licensing authority. Shipments not using the "Simplified Import Regime (only for shipments valued between US$501 and US3,000) require an import license. The application of the PIS/COFINS tax to software, which was effective May 1, 2004, was reduced from 9.25% to 3.65% in September, 2004.
The commercial invoice should include all details about the merchandise being shipped. It should be prepared by the manufacturer or the seller in the country of origin not by a seller who is not established in the country of shipment) or a buying agent of the Brazilian importer. Usually, this doucment includes the full address of the shipper, seller and consignee. If other than the seller, the import permit number; other reference numbers; date of the order; shipping date; delivery and payment terms; a complete description of the merchandise; and export markings.
A declaration of origin that is combined with a declaration of correct price should be made on the commercial invoice, which in turn should be certified by th eforeign exporter or local chamber of commerce.
The exporting company should send to the import handler all the documents relevant to the purchase, mainly the original invoice with the company stamp or seal and the signature.
In addition, the payment of Brazilian taxes must be previously agreed to between the exportign company and the importing company. The payment for the merchandise has to be done through a bank.
Finally, when the product arrives in Brazil, the import handler will obtain the declaration of import (DEI),
that includes all the information about the importation.
Digitally Delivered Software:
The document requirements for the electronically delivered import of digitized products over the Internet are the same requirements used for physical shipments of software. The importer must present an invoice and pay the appropriate taxes.
Import Regs.: Taxes on Software
The ICMS tax (similar to a VAT tax) is paid on the CIF+duty+Misc. taxes (including the value of the medium). The ICMS tax is paid at the border. The documention designates the State to which the tax is paid. The ICMS tax is levied on intra-state transactions with appropriate credits assessed.
Under licensing arrangements, federal withholding taxes are applied in Brazil - 15% for royalty remittances plus a CIDE 10% surcharge on overseas transfers. In addition, the PIS/COFINS taxes are now applied to the total value of the transaction, but a reduced rate of 3.65% applies.
Under Law 10.332 of December 19, 2001 and Law 10.168 of December 29, 2000 and subsequent modifications and implementing regulations, the GOB applies a 10% tax on services provided by foreign entities to domestic entities made through contractual arrangements. This tax, technically referred to as a "social economic development contribution" (CIDE), imposes an additional 10% surcharge on the current 15% withholding tax on technology companies' royalty remittances.
Professional's Visa - available to individuals comign to Brazil to work for a temporary period no longer than 2 years initially, and may be renewed for an additional 2-year period. This type of Visa is available to foreign nationals who will be temporarily employed at a Brazilian company in a positio nrequiring special knowledge. The candidate shall receive at least part of his salary in Brazil. This type of Visa will also require proof that the candidate has at least two year of experience in the acitivity he will perform in Brazil, if he has a college degree, or three years of experience if he does not have a college degree. The income earned in Brazil is subject to local taxes.
Technician's Visa - Available to individuals coming to Brazil to render technicla assistance according to a technical assistance agreement executed by a foreign company an da Brazilian company.
Documentation required for working VISA:
- Work permit petition;
- Information about the company the candidate works for;
- Voucher of the payment of the individual immigration taxes - DARF
- Articles of incorporation of the petitioning institution
Internet sales and the associated contractual obligations are subject to registration requirements and also subject to the above mentioned withholding taxes.
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a sandsculpture on the beautiful Copacabana beach in Rio de Janiero, Brazil