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Cláudio MarinhoPorto Marinho Ltd.

ICTSI IT ConferencePernambuco, BrazilJuly 15, 2008

The Digital Port of Recife: the best IT business and technology park in Brazil

Pernambuco: what place is this?

The new global geoconomy

Brazil’s greatest sustainability challenge...

...is the Chinese crowding-in effect on the world resources...

...but this is also Brazil’s greatest economic opportunity for growth in decades.

Brazil in the world contextBrazil in the world contextCountries with population Countries with population

> 150 million > 150 million Countries with areaCountries with area

> 5 million km2> 5 million km2

Countries with GDPCountries with GDP> USD 600 billion> USD 600 billion

Brazil is a BIGBrazil is a BIGcountrycountry

EUAEUA

BrasilBrasilChinaChina

RússiaRússia

ÍndiaÍndia

JapãoJapão

IndonésiaIndonésia

PaquistãoPaquistão

NigériaNigéria

BangladeshBangladesh

MéxicoMéxico

Países baixosPaíses baixos

Reino UnidoReino Unido

Coréia do SulCoréia do Sul

ItáliaItália

EspanhaEspanhaFrançaFrança

AlemanhaAlemanha

CanadáCanadá

AustráliaAustrália

Fonte: MIC (Brasil & Parceiros 2005)

[thanks to Mauricio Schneck, mauricio@portodigital.org,

www.portodigital.org, for the latest value added to the

original slides!]

A cluster-based, public-

private business model to

implement public policies

supporting IT companies,

bringing about economic

development and

revitalizing the old port

area of Recife

What is Porto Digital?

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17

18

19Graf Zeppelin at the Jiquiá field, circa

1933

Launched in 2000 and located at the historic center of Recife, Porto Digital is acknowledged today as the largest technology park in Brazil (AT Kearney, 2005) and the best technology park/innovation habitat in the country (Anprotec, 2007).

What is Porto Digital?

Number of companies

63

100 10394

86

2003 2004 2005 2006 2007

Number of IT professionals

2.000

3.700

1.100

3.000

2.500

2003 2004 2005 2006 2007

Porto Digital Companies X Employees

196 200 208233

310353

441

2001 2002 2003 2004 2005 2006 2007(*)

Source: IBGE, CONDEPE/FIDEM. (*) Estimated.

(US$ million)

IT EcosystemPernambuco Information Technology GDP

2004 2005 2006

Brazilian IT Market (US$ bi) 11,0 11,9 16,2

Software 2,36 2,72 3,26

Services 3,62 4,69 5,83

Hardware 5,02 4,49 7,11

World market share 1,1% 1,1% 1,3%

Latin America market share40,9

%39,0

%43,0

%

IT EcosystemBrazilian IT market – 2004/2006

Source: ABES, IDC.

2,6%

13,8%

21,1%

15,9%

36,1%

49,5%

8,3%9,6%

27,3%

19,3%

5,5%

0,0%

World USA Japan UK China Spain Brazil Russia Mexico India Israel Ireland

IT EcosystemComparative IT market growth – 2006

Source: ABES, IDC.

Software Development (solutions & products)

Management Finances Health Security Transportation & Traffic Management Software usability

GeomaticsBiometricsGamesNeural Networks / AIE-businessMobility and Wi-FiInformation SecurityInfrastructure and ConnectivityOutsourcingEducation & Research

Porto DigitalIT companies’ capabilities

RecifeRecife 2,660km away from São Paulo

(a 2:45-hour flight)

Less than 4,000km away from: Dakar, Rio de Janeiro, Belém, Belo Horizonte, Brasília, Assunção, La Paz.

Less than 9,000km away from: Chicago, New York, Miami, Montreal, Havana, Mexico City, Madrid, Lisbon, Rome

Why in Recife, Pernambuco?Strategic location

300km (~200 miles)4 state capitals3 international airports2 regional airports4 international ports12 million peopleMore than 35% of Northeast GDP

800km (~500 miles)7 state capitals5 international airports6 international ports20 million people90% of Northeast GDP

600km (~400 miles)

Why in Recife, Pernambuco?Strategic location

Northeast AREA – km² 1.5 millionPOPULATION 51.6 millionGDP US$ 124 billion

BrazilAREA – km² 8.5 millionPOPULATION 188 millionGDP US$ 1,655 billion

PernambucoAREA – km² 100 thousandPOPULATION 8 millionGDP US$ 28 billion

Why in Recife, Pernambuco?Strategic location

F orta leza

S ão Luís

M A

P I

C E

B A

Teres ina

P BJ oão Pes s oa

A raca ju

S E

A L

P E

M ac eió

R ec ife

R N N ata l

S alvador

Cam pina G rande

Caruaru

51% of all R&D groups in

the Northeast Region are at

a maximum 3-hour car-

drive distance from Recife(1).

Recife is the 11th city in

Brazil in number of Masters

an PhD (2)

1(CNPQ, 2002)2(IBGE, 2000)

Why in Recife, Pernambuco?Academic base and human capital

+ 3,000 PhDs and masters, 50 PhDs at UFPE-CIn (Federal University Computer Science Center) 2,336 nationally certified researchers CIn is one of the top-five IT institutions in Latin America 14 technical schools, many of them with IT classes 29 colleges and universities offering IT courses + 60 courses in IT, including master and PhD programs approx. 2,500 students graduated in IT courses in 2006.

Why in Recife, Pernambuco?Academic base and human capital

• Recife– Annual university education labor pool

estimated in 16-17 thousand people.– Annual IT and Administration labor pool

estimated in 3-4 thousand people.– Total annual operating cost per FTE for IT

delivery centers: US$40.000 – US$43.000.

Source: Everest Research Institute Analysis, April- 2006.

Why in Recife, Pernambuco?Academic base and human capital

2.117 1.995 2.1373.692

2.5571.2711.2711.271

0

2.000

4.000

6.000

8.000

10.000

analista de

segurança

Programador administrador

de banco de

dados

supervisor de

operações

São Paulo(1)

Recife(2)

•The value includes salary + governmental taxes. For each job position it was considered a level distribution as follows: 35% junior, 40% mid, 25% senior.

Sources: (1) Manager Consulting, April-2006. (2) Site Location Analysis. Deloitte, August- 2006. (3) Global Service Delivery Location Analisys. Everest Research, 2007

Total IT labor costs in Recife are 12% smaller than in São Paulo (3).

Why in Recife, Pernambuco?IT labor costs

• Recife _________ US$ 40,000-43,000• Curitiba _______ US$ 43,000-45,000• Brasilia ________ US$ 43,000-45,000• Belo Horizonte _ US$ 44,000-46,000• Rio de Janeiro __ US$ 48,000-50,000• São Paulo ______ US$ 51,000-53,000

Source: Global Service Delivery Location Analisys. Everest Research Institute, 2007.

Why in Recife, Pernambuco?Total annual operating cost per FTE for IT centers, 2006

Recife has a significant number of head-hunting companies. They provide cost-efficiency to recruiting/selection processes.

• Deloitte• PWC• E&Y• RH Brasil • C.E.S.A.R.• Gelre• Espro• Pleno• Pádua Consultores

Why in Recife, Pernambuco?Recruiting and selection

Reduced ISS (Tax on sales): Regular rate – 5% Porto Digital – 2% for ICT and BPO services

IPTU (Tax on real estate) - 2%Exemption, in case of refurbishing historical buildings

Corporate Income Tax: Regular rate - 15%

Employment taxes and legal costs (Brazil): approx. 54%

Why in Recife, Pernambuco?Taxes and regulatory costs

• Office spaces to be refurbished with low rent prices and short delivery time.

• Growing market for built-to-suit options at the Porto Digital area

Porto DigitalAvailable spaces

*Average price for occupied office spaces

São Paulo Porto Alegre RecifeUS$17 US$27 US$6

Porto DigitalOffice spaces rental cost (per sq. meter *)

• Microsoft

• Borland

• IBM

• Nokia

• Motorola

• Oracle

• Samsung

Porto DigitalPresence of global IT players

Restaurant & bars Coffee shops Banks Government

offices Mail office Drugstores Bakery Beauty parlors Theaters Book stores Shopping Mall Tourist attractions Art galleries

Porto DigitalFacilities

The Porto Digital bank (building of the former state bank Bandepe,

now office space for IT companies)

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Go glocal

Imago

by Flickr

We are happy you are here, ICTSI!

Cláudio Marinhocmarinho@gmail.com