Brazil cloud computing sales to grow 74.3% over next three years

Brazil cloud computing sales grow
Info. Technology - Brazil
By Pedro Ozores - Wednesday, March 13, 2013

Sales of cloud computing services in Brazil will remain strong, growing at a 74.3% CAGR over the next three years and reaching US$798mn in 2015, ICT consultancy firm IDC forecasts.
In 2012, sales of cloud solutions expanded 68.4% year-on-year, while in 2011 they grew 57%.
However, due to particularities and the maturity level of the local market with respect to the technology, some cloud-based services are set to grow more than others, IDC general research manager for Brazil, Anderson Figueiredo, told reporters at the company's LA Infrastructure & Cloud Solutions Roadshow 2013, in São Paulo.
Such is the case with infrastructure-as-a-service (IaaS). Of the US$257mn IDC estimates will be spent on the cloud in 2013, most (US$123mn) will be spent on IaaS solutions, Figueiredo says.
"Iaas is the most visible part of cloud for corporates in Brazil, and also in the region, due to the growing virtualization process and increasing data center services being offered," said the analyst, adding that the recent tax exemptions for telecoms infrastructure, which includes data centers, should provide yet another boost to the market.
Another US$109m of the cloud expenditure forecast for 2013 will be spent on software-as-a-service (SaaS), with the remaining US$25mn going towards platform as a service (PaaS).
"Companies are still struggling to understand the PaaS offers and why they would need it. Furthermore, providers are having difficulty defining tailored PaaS business models and making their offers clear to customers. Anyway, PaaS utilization is very small," he said.
From 2013-2015, IDC predicts IaaS sales to expand at a 71.3% CAGR, SaaS at 81.2% and PaaS at 58%. According to Figueiredo, Brazil accounts for more than half of Latin American cloud expenditure

Brazil Cloud Computing - Companies Adaptation

Brazil Cloud Computing

21/02/2013 by Capital Information

Source: Digital Convergence - February 2013

A study conducted by Frost & Sullivan examined the intention of the companies to adopt cloud computing in the next two years in Brazil and Mexico, in particular with respect to Infrastructure as a Service (IaaS), Paas (Platform as a Service) or SaaS ( software as a service).

For Brazilian companies, 53% of interviews said they had a good knowledge, while 15% said they had a great knowledge. By the Mexican companies, 46.2% say they have good knowledge while 23% say they have a great knowledge about cloud computing .

Despite the good response, the consultant found that there are issues to be better explained to the market, especially regarding the safety of this new business model, which is still considered the main barrier to adoption. According to Bruno Tasco, an analyst at Frost & Sullivan, there is even confusion about providers really able to offer cloud computing solutions.

"When we asked companies about who would be the main providers of cloud solutions, we conclude that some companies had been cited by the simple fact possess a Datacenter, ie, there are still companies who believe that simply owning a provider to offer a Datacenter cloud computing, "he warns.

The survey finds that the consulting companies increasingly want to use solutions in the cloud, but the main focus is the private cloud environment. "We still have a long way to traverse to educate the market and reduce cultural barriers mainly related to security. Thus, companies have chosen to invest in private clouds for fear of having their infrastructure shared with other companies, " said Tasco.

Cloud Computing Users Prospective

Brazil - Who does what where?

Brazilian industry

Brazil has well-developed industries in sectors of agricultural, mining, manufacturing and services.

Brazil is the world's biggest producer of sugar cane and coffee, and a main exporter of soybeans, cocoa, orange juice and tobacco. Brazil is also one of the leading hydroelectric power producers of the world. Brazil's diverse manufacturing range from automobiles, steel and petrochemicals to computers, aircraft, and consumer durables. In the latest years the information and technology sector has gained major position in the Brazilian industry and accounts for around 30% of the country's total GDP.

Location

Due to historical reasons the Brazilian industry is mainly centralized in the southern part of this huge country.

The state of São Paulo has a strong focus on financial, manufacturing and agribusiness ventures, for example. Rio de Janeiro is the hub of the ongoing Oil, Gas and Energy boom taking place in the country, the main location for Shipbuilding and has strong service-oriented business opportunities as well.  Although some of these industries are located in both states, there is a growing presence of these same industries, and new ones developed, throughout the country as a whole. Few examples of Brazilian states that developed specialties in certain industries:

• Minas Gerais - Metal mining and Steel industry
• Rio Grande do Sul - Poultry farming
• Santa Catarina - Coal
• Ceara - Textile

Policy of Decentralization

For many years Brazilian governments have been doing intentional activities to decentralize the industry activity to other parts of the country.

Brasilia

The most famous acts of this decentralization policy, was moving the capital of the Brazilian republic from Rio de Janeiro to the rural area of Goias. The building of the city of Brasilia attracted a massive development to an area that previously was uninhabited, deserted and isolated. Nowadays Brasilia and the the Federal state is the third largest commercial center of Brazil.

Free Trade Zones

Free trade zones were created in order to promote the development of sparsely populated and remote areas, by creating special TAX regimes for import and export activities.

The first Free Trade Zone was declared in Manaus at the state of Amazonas on 28th of February 1967. The initial idea of the Manaus Free Trade Zone came from Deputy Francisco Pereira da Silva in 1951. For many years the project had very little national credibility and was realised actually with a single rented warehouse in the Port of Manaus. In 1967, President Castello Branco signed a law redefining the Manaus Free Trade Zone in more concrete terms. Following is the translation of the redefinition:

The Manaus Free Trade Zone is an area in which goods may be freely imported and exported and special fiscal incentives are offered for the purpose of promoting regional development, through the establishment of a thriving industrial, commercial, and agricultural center with the economic and financial conditions to foster local development in response to the area’s particular local factors and considerable distance from the major consumer markets

Decree-Law No. 288 of February 28, 1967

Nowadays, Manaus Free Trade Zone is an area with a radius of 10,000 km comprised of industrial and agricultural centers. The Manaus Free Trade Zone is directly responsible for approximately 100 000 jobs in western Amazonia, and additional estimated 400 000 indirectly related jobs outside the Free Trade Zone.

Following the success of this initiative, additional Free Trade Zones where declared in the northern part of Brazil:  

• Brasiléia and Cruzeiro do Sul in the state of Acre
• Bonfim and Boa Vista in the state of Roraima
• Guajará-Mirim in the state of Rondônia
• Tabatinga in the state of Amazonas
• Macapá and Santana in the state of Amapá

Along the years since the Free Trade Zones have been declared , more than 600 companies, including many of the world's largest enterprises, have established production in these states which by all means have some of the most disagreeable commercial locations in Brazil. Between the businesses established in the area, are companies like Nokia, Honda, Pepsi, Coca Cola, Panasonic, Harley-Davidson and many more.

Airports

Brazil’s land area is 8.514.876.599 km2 which obviously makes the distances between the various centers enormous, and even after many years of massive investments, in roads and transportation infrastructure, the country still suffers from poor land connectivity. To overcome this obstacle the brazilian government is in a process of building not less than 800 new industrial airports around the country,  to make distance areas accessible.

Brazilian Silicon Valley

In the last decades, due to the increasing costs of living in the main cities, and due to the high demand for professional, high educated human resources, many companies have searched for alternatives to locate their R&D centers. This search had led to the creation of several new high-tech industrial areas, called “Technology Parks”  mostly located near technology universities around the

country, facilitating the cooperation between the industry and the academic world. The federal and the states governments support this trend by providing various incentives such as low cost space and infrastructure, direct investments and  tax exemption. Each technology park has its own structure and benefits.

The biggest Technology Park is located at the city of Campinas. A modern city, located just outside of the giant metropolis, São Paulo. It has a vibrant, high-tech university and research environment, Campinas boasts a researcher/population ratio equal to those of the most advanced technology centers in the world.

Other cities have created technology parks, and are all aiming to become the next Brazilian Silicon Valley:

• Araraquara and São Carlos, both at the State of São Paulo, with high technology industries and Universities
• Recife at the state of Pernambuco, with a budding Digital Port and many collaborative ties with the UFP (Universidade Federal de Pernambuco)
• The Vale do Sapucaí and Belo Horizonte both located at the state of Minas Gerais, not properly a Silicon Valley because it has mostly a software industry, but the upcoming BHTec along with possible semiconductor industry developments in its metropolitan area could change this situation.
• Florianópolis at the state of Santa Catarina, also has mostly software industry.
• Rio de Janeiro, Porto Alegre, Curitiba, Blumenau and Londrina, all in the Southeast and South.

Summary

The increased investments in infrastructure and tax incentives in different states, along with the increasing and spreading of the population with more money to spend and consume new products and services around the country, created new opportunities and new locations for foreign companies to  invest in, or for them to establish their headquarters in the country. or in other words São Paulo and Rio de Janeiro are not the only Business cities in Brazil.

Brazil - Taxation and Location

By Vered Nets - CEO and Luiz Cezar Giacomazi - Financial and Tax Consultant Brazil

A country’s tax regime is always a key factor for any business considering moving into new markets. What is the corporate tax rate?   Are there any incentives for overseas businesses?    Are there double tax treaties in place?    How will foreign source income be taxed?

Brazil is a Federative Republic, and each of the 26 states and the Federal District have their own legislation. This gives rise to 27 regulations on indirect state taxes, meaning varying application, administration and compliance rules in each state. Brazilian taxes are regulated in three levels: Federal, State and Municipal. In this article illustrates the structure of tax payments levied on corporates doing business in and with Brazil.

Most Important Taxes charged on a Federal level

IRPJ corporate income tax

The tax consists of a base tax of 15%, and additional surtax of 10% on annual income over R$ 240,000.00. Tax is charged on worldwide income for residents of Brazil. Some foreign tax relief and credits can be allowed under specific tax treaties.

CSLL Social Security 

The contribution is levied at a general rate of 9%.

For financial institutions, private insurance companies and capitalization

companies, the rate is 15%.

PIS  social contribution tax

Social Integration Program (PIS) tax; levied on gross income at a rate of 1.65%; the tax is a non-cumulative tax for certain taxpayers; certain companies, including local financial institutions and companies that manufacture goods in the Manaus Free Trade Zone, are subject to the cumulative regime and make the contribution at a 0.65% rate; the tax is also levied on imports of goods and services at a rate of 1.65%

COFINS Contribution for Social Security Financing tax

Social security financing contribution (COFINS); levied on gross income at a rate of 7.6%; the tax is a non-cumulative (VAT-type) tax for certain taxpayers; certain companies, including local financial institutions and companies that manufacture goods in the Manaus Free Trade Zone, are subject to the cumulative regime and make the contribution at a 3% rate; the tax is also levied on imports of goods and services at a rate of 7.6%

IPI federal “production” tax.

Brazil does not have VAT as such. Two types of value added type taxes exist in Brazil: State value added sales and services tax (ICMS) and federal excise tax (IPI). This federal tax is levied on industrialization of products when sold by industrializing establishment. Its rate is around 20% depending on the product manufactured, top rates applies to luxury or superfluous goods, such as alcoholic beverages and cigarettes  

CIDE  Economic domain intervention contribution Tax

Levied on payments to non-residents. Applies to royalty payments, technology transfers and compensation of technology supply, and technical assistance. Rate at 10%.

IOF financial transaction tax

Foreign exchange transaction levied at varying rates on loans and credit operations, certain foreign exchange transactions, insurance and securities transactions. Rated between 0.36% to 6% depending on the type of the transaction.

Get to know your play ground

Get to know your playground 

There are three major economic centers in Brazil, each has its own specialities and advantages, in this article you will find a briefe description of each of these centers and who can you find there.

São Paulo, the money state

São Paulo city, the capital of São Paulo state, is the largest city in South America with more than eleven Million residents. The commercial boom in São Paulo began on 1696 when coffee started to be planted in the area. In a few years, São Paulo became the major exporter of coffee in the world.
Nowadays São Paulo is the one that most contribute for the development of Brazil economy, concentrating more than 30% of the national GDP. São Paulo is also the economy hub of Brazil, especially when talking about business and technology.
In the last years, some of São Paulo industries are migrating to other areas in the countryside of São Paulo state, such as Campinas, Sorocaba and São Caetano in order to reduce taxes payment, yet there is a good transportation connection from all these areas to the capital.
Hosting the major business fairs of the country, a big number of offices and the major stock exchange, São Paulo considered a mandatory destination to any entrepreneur that wants to know what the Brazilian business is.

Rio de Janeiro, only leisure?

Differently from São Paulo, Rio de Janeiro, or just Rio, as natives use to call it, is important to the Brazilian scenario since the country's foundation. The city was the second country’s capital from 1763 until 1960 until the foundation of Brasilia.
Known as the wonderful city, Rio attracts more than three million tourists per year and in carnival period, the number of tourists outweighs the World Cup numbers. What enchants anyone that goes to Rio is the mix of urban life and beaches lifestyle.
For those who think that Rio is only a cultural and leisure destiny, the surprise happens when petroleum is mentioned. The biggest petroleum area of the country is in Rio de Janeiro, and companies as Petrobras are investing on studies to develop the area and qualify labors.
Rio de Janeiro is the second biggest city of the country, contributing for the economic development with the second Brazilian GDP. It is not difficult to find a foreigners that still takes Rio de Janeiro as the Brazilian capital.
Planned to host the coming world’s biggest sport events, world cup in 2014 and the Olympic Games in 2016, Rio is a target for major investments mainly in infrastructure and security.
latest news is that the plan for a bullet train connecting Rio to São Paulo was just approved, that will reduce the time to pass those 300 miles from 6-8 hours by bus to only 50 minutes

Brasília, the political city
Brasília is a different city from the major ones in Brazil. Planned by the architect Oscar Niemeyer and ordered by President Juscelino Kubitschek in order to be the new Brazilian Capital, the city was founded in 1960. More than sixty thousand workers constructed the city in only four years in order to comply with a determination of the Brazilian constitution.

Interesting fact : Brasilia is the largest city in the world that did not exist at the beginning of the 20th century.

Nowadays, all Brazilian government activity is concentrated in Brasília, situated at a special state names Distriro Federal (“federal district”), being reference for anyone who talks about politics or for those targeting their business to work with the government and it’s subsidiaries.

There are others yet smaller economic centers in Brazil we will discuss more about them in future articles. Next article will describe the connection between location and taxation. stay tuned ..

Where should I be in Brazil?

Where should I be in Brazil?  

Being the fifth country in the world both by population, economic influence and geographic area, the decision on where to locate your business in Brazil is very important. There are many factors in taking such decision, such as transportation, taxation, line of business, natural and human resource availability etc...
Following is a serie of 3 articles to explain in a nutshell some of these factors. 


(1) Get to know your playground - This first article gives general description of the major economic centers of Brazil

(2) Taxation and location - Brazilian taxation has its own specific characteristics and your location in Brazil can significantly impact the amount of tax you pay. The second article will describe the correlation between location and taxation and some of the governmental programs for reduced taxes in specific areas. 

(3) Who does what where? - Brazilian industries are spread around the county, but naturally there are some areas attracting specific industries. The third and last article of this serie, will map these areas, especially those concentrating in industries related to the ICT.