Days ago an article by Reuters (http://goo.gl/uajjl) brought the issue about lack of available talent in Brazil. With heavy demand due to internal growth, the upcoming soccer World Cup and then the Olympics, Brazil is having trouble – and raising internal costs – to fulfill demands.
It looks like a typical globalization issue. Shortage is not just enough people; it’s about the rightpeople. Brazil is the 6th largest economy in the world. Has seen great transformation and capabilities: you can fly a Brazilian made airplane, fill your car with gas coming from one of the most productive energy operators in the world, drink a refreshing beer by one of the largest breweries in the business or eat a hamburger backed with Brazilian money (yes, that’s Burger King). All that requires special talent. Global Talent.
Brazil produces around 250.000 engineers a year. That’s almost the same quantity than in the US. But the “conversion” rate to productive, modern jobs is minimal. In fact, the article talks about the need for 20.000 more engineering candidates to fulfill demands. On top of that, more than 70.000 people migrated to Brazil last year.
But we believe this is not just a people issue. This is about how you truly embrace Globalization.
For example, if a company wants to service Brazil from outside, a big chunk, around 30% of the invoice will be kept in Brazil as withholding tax. This measure is clearly a protective measure to foster growth in the local industry and keeps away providers to serve Brazil from abroad in large numbers. As a comparison, the US keeps around 10%, so does Argentina or Uruguay. This causes an immediate raise in local prices, affects innovation processes and limits healthy competition.
And on the other hand, Brazilian service providers are facing challenges to export services from their own country. Raising domestic currency (although now under adjustment), lack of people, lack of English capabilities and strong domestic competition for talent are making these companies rethink the way they operate. This is why you see the larger ones, Stefanini, CMP Braxis and others, tap into other countries to expand their delivery capabilities. But that is still not solving problems at home.
We would like to see lower barriers to accept foreign services. We will also like to see larger amount of Brazilians learning English. If all that happens, not only Brazil will be cheaper and more competitive but it will also help the entire Latin America region to grow along.
“Virtual Immigration” is something you can implement quickly. Reduce your withholding tax, move that to around 10% and see how global competition makes a more competitive Brazil. The world is ready to outsource Brazil.