Brazilian government to review all IT contracts

The government wants to reduce public spending in third party agreements by 20 percent

A review of all government IT contracts in Brazil will be carried out as part of a set of austerity measures announced by president Dilma Rousseff earlier this month.

Rousseff has stated her government will be aiming to reduce public spending in third party contracts in areas that include technology products and services by 20 percent, as well as introducing spending limits for all ministries.

Technology firms in the country have already felt the impact of the spending reduction in the public sector. This is the case of Positivo, one of the largest local hardware manufacturers, who attributed a sales drop earlier this year to a reduction in shipments to Brazilian governments.

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In addition, other government announcements made recently directly affect the technology sector, such as a review in fiscal incentives given to companies manufacturing technology products in Brazil, which could be reduced or even disappear.

The competitiveness of Brazilian IT services industry is also at risk as the government has more than doubled the social security contributions that sector companies have to pay.

Changes in the Ministry of Science and Technology were also announced last week with Celso Pansera, a politician with little business or sector experience, as the new minister. This is seen by the local tech industry as a hugely backward move.

The economic crisis in Brazil has negatively impacted the business of 62 percent of Brazilian technology firms in the first half of 2015, according to a report by Advance Consulting.

And industry prospects for 2015 are quite meagre when compared to previous years. According to IDC, the IT market in Brazil is set to grow by 5 percent, compared to the 8 percent growth in 2014 and the rise of 15 percent in revenues seen in 2013.

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