Brazilian IT market loses momentum

Dollar increase and high salaries are some of the factors impacting the technology market negatively, says research.
Written by Angelica Mari, Contributing Writer

The Brazilian IT market has seen a decrease in spending in the first six months of the year as macroeconomic conditions worsen — and the forecast for the rest of the year is not positive either, according to recent research.

The local technology market overall has seen historic growth of 10 percent. However, expectations have been reduced to 6 percent since 2012 and local analyst firm IT Data has seen a 1 percent drop in spending in the first half of 2014.

According to the analyst, IT spending in the corporate space has been hit by factors such as the increase in the US dollar value, which has in turn affected the purchasing of products and services.

"We are seeing a situation where Brazilian CIOs are fighting internally to avoid further reduction of their budgets and also trying to put more pressure than ever on vendors to get more value for money," says Ivair Rodrigues, research director at IT Data.

"At the same time, we hear from vendors that it is getting quite hard to sell and even negotiate better pricing," the Rodrigues adds.

The analyst adds that the corporate IT market has been affected by the salaries of tech professionals, which have been growing above the inflation rate.

"The fact that the cost of manpower has been growing means that the buying capacity of CIOs has reduced. That's because a considerable chunk of the extra budget for new projects they might have ends up going towards salaries," says Rodrigues.

Within the consumer space, the IT market has been affected by behavioral changes in terms of technology use. According to Rodrigues, Brazilian consumers who used to replace their home PCs every three to four years are less interested in doing so as smartphones become more relevant. IT Data does not consider mobile devices as part of the IT market. 

"Brazilian consumers continue to buy PCs, but less so than before as smartphones have become the priority in terms of personal tech. We predict that even tablets will lose space to smartphones with bigger screens in the next few months," the analyst says.

For the second half of 2014, the prospects for the Brazilian IT market are bleak, according to IT Data.

That is due to the financial difficulties faced by consumers and corporations alike. It is also due to the price hikes caused by the increase in the value of the dollar and uncertainty around the future of the Brazilian economy caused by the current general elections.

Separate research by IDC predicts that PC sales in Brazil will see an overall drop of 24 percent in 2014 — the sharpest decline to date and a lot worse than the 10 percent previously predicted.

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