HOT CITIES: Sao Paulo still draws IT vendors

HOT CITIES: Sao Paulo still draws IT vendors

A solid and modern telecommunication infrastructure, a technologically-driven population and an enhanced e-banking system make Sao Paulo, Brazil, the place where high-tech vendors want to settle

A solid and modern telecommunication infrastructure, a technologically-driven population and an enhanced e-banking system make Sao Paulo, Brazil, the place where high-tech vendors want to settle. The process of privatizing Brazil's telecommunications started at the end of the 1990s, opening the market to local and foreign companies. Since then, Sao Paulo has become not only the leader of that market in Brazil but also in Latin America. It is the city where IT and telecommunication vendors have set up operations to supply equipment to the Brazilian market and neighboring countries like Argentina and Chile that have also developed a solid and modern telecommunication infrastructure in their capital cities.

Sao Paulo houses 60 percent of the telecommunication infrastructure of Brazil, with Spain's Telefónica SA controlling 85 percent of the market, while the local Vésper controls the other 15 percent. Together they have tripled the size of the fixed line network in the city of Sao Paulo and Greater Sao Paulo in the last four years, said Juan Fernández, Gartner Inc.'s Dataquest Inc. senior analyst for public and mobile telecommunication infrastructure in Latin America.

Prior to the privatization, Paulistas, as the inhabitants of the city are called, had to wait months to get a fixed telephone line. Today, the installation is done in less than a week, Fernández said.

Broadband communication use and infrastructure have also risen and are very efficient, boosting e-commerce, especially business to business, as well as Internet adoption, noted Fernández. Of the 8 million Internet users in the country, 31 percent are concentrated in Sao Paulo, according to data provided last year by Brazil's American Chamber of Commerce. And 70 percent of e-commerce sites are based in Sao Paulo, said Andre Miyajima, Latin America networked business strategies analyst for Yankee Group

E-banking is another service enjoying rapid growth in the city, where 90 percent of the banks are based, most of them located on Paulista Avenue, the financial area. According to information provided by Miyajima, e-banking in Brazil is considered the second most popular in the world. Three million Brazilians access Internet banking on a monthly basis, according to the Brazilian Institute of Public Opinion and Statistics, (Ibope, for its Portuguese acronym).

Brazilians handle other financial matters online too.

"95 percent of Brazilians file their income tax forms through the Internet. People resent the anonymity of the Internet, but they will do anything to avoid lines," wrote Cassio Dreyfuss, Gartner's vice president and director of research for Latin America, in a study about technology adoption in Latin America.

Mobile phone services have also grown in the last decade. Currently, every home in Sao Paulo, a city of 18 million, has at least one cell phone, most of them using prepaid services, Fernández said.

Everything that happens in Brazil either starts in, or is influenced by, Sao Paulo in some way, said Dreyfuss, who is based in the city of Sao Paulo. Technicians in Sao Paulo are known for their innovative spirit, and in the midst of the technology slowdown, they have emerged with strong, widespread support services such as data centers and hosting, Dreyfuss said. Some businesses, especially in the financial sector, have learned to develop their own software.

The popular Vila Olimpia, the Brazilian Silicon Valley, was an important dot-com hub a year ago -- but now it is the center of the city's night life. Affected by the worldwide dot-com failures, most of these businesses today are closed or have merged with traditional companies or stores. The area of Berrini, the IT sector of the city, is where multinationals like Microsoft Corp., IBM Corp. and Hewlett-Packard Co. have their headquarters.

A year after the privatization of telecommunications in Brazil, IT spending grew 18 percent, but the worldwide IT slowdown has affected this sector. In 2001, IT spending grew by just 8 percent, the first time since the telecommunication privatization that it had fallen below 10 percent. Further reductions are expected by the end of 2002, when the indicator will drop to 5 to 6 percent, according to Dreyfuss, but a growth of around 6 percent will start showing by 2003, he said.

Traditionally, Sao Paulo has been an industrial state. This tradition started with the coffee industry, followed by the automotive industry, then the IT industry, which led to a faster development of the services industry, including finance, tourism, information, entertainment and utilities.

"This year we saw fewer companies start in Sao Paulo, but we observed growth in those that had already set their headquarters in the city or in Greater Sao Paulo," said Fernando Reis, general manager of the Brazilian unit of Concord Communications Inc., a management software vendor based in Marlboro, Massachusetts.

"Because of the expertise they find among the workforce in these areas, companies have learned to operate better since they know the market. They have the plus of a solid and updated telecommunication infrastructure that makes this possible," he said.

Reis, like many analysts, is optimistic about the future of Brazil despite the current devaluation of the Brazilian real, the local currency. The recently elected government has promised to open 10 million new jobs in the next presidential term of four years and has already started the process of approving policies to attract new investments starting in 2003.-- IDG News Service

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