Brazilian IT industry navigates through economic instability

Despite an "extremely difficult" first half of 2015, things will start looking up later in the year, says IDC
Written by Angelica Mari, Contributing Writer

The Brazilian technology sector will start seeing some signs of improvement in the second half of the year after an "extremely difficult" 2015 so far, according to analyst house IDC.

At an event where heads of most key technology vendors in Brazil were present, the country manager at IDC Brazil Denis Arcieri said the current situation of the Brazilian market is one of "complete instability" and that scenario has forced companies across all sectors - particularly technology - to make "sacrifices."

"The GDP forecast for 2015 was 2,5 percent last year and now we are talking about something like -1,3 percent," Arcieri told delegates, adding that the inflation rise and the fluctuation of the dollar in relation to the local currency, the real, has also hit local companies hard.

However, Arcieri also said that things will start looking up for the local technology industry in the second half of 2015.

"With the uncertainty sparked by the 2014 elections and the volatility of the dollar, local companies started 2015 with extremely tight budgets and a conservative approach, as opposed to the multinationals, which are now feeling the crisis and should reduce investments in the coming months," the IDC head told delegates at the event, adding that local businesses started to invest more once the economic scenario post-election became clearer.

According to the analyst house, there is a clear correlation between GDP growth and IT investment. In Brazil, technology represents about 2,5 percent of GDP whereas the percentage in developed countries such as the US reaches up to 3,5 percent. This has been improving despite the challenging climate.

IT spending in relation to the GDP in Latin America. Credit: IDC

"Brazil is the fifth largest country in the world in relation to consumption of technology and telecommunications. In 2014, a challenging year, we saw approximately $160 bn in investments in the sector, growth of about 7 percent above countries like Japan, Germany, United States and the actual world average," IDC's Arcieri said.

Focusing on technologies other than hardware will be a key challenge for the development of the local industry going forward. Consumption of tech in Brazil is still very much hardware-oriented, according to IDC, representing 58 percent of all IT investments (with services representing 23 percent and software 19 percent) . This compares to mature economies where hardware represents about 45-40 percent of all IT investment.

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