Brazil, Russia, India and China (known as the BRIC countries) have been the epicenter of growth and technical innovation over the last few years, although India and China have been the favorites among the technological giants IBM Corp. (IBM) and Hewlett-Packard (HPQ). But of late, IBM has decided to take a closer look at Brazil, as it believes that country will be the next big technological destination.

IBM is expected to announce its expansion plans for Brazil very soon. To stimulate the country’s technological growth, the company is arranging to meet venture capitalists, entrepreneurs and Brazilian government agencies involved in funding technological development in the country.

Brazil has a number of good technical colleges and universities producing good quality technical graduates and engineers every year. IBM will be able to attract this technical talent pool and for a lower cost. The company will be able to take the exchange rate advantage as US$1 = 1.85 Brazilian Real.

Claudia Fan Munce, managing director of IBM Venture Capital Group, and Steve Mills, senior vice-president and group executive of IBM’s Software Group, will be addressing the event in Brazil, and believes that this is the right time to enter the Brazilian market. International investors are increasingly showing their interest in Brazil, and approximately 150 local and international venture capital and private equity companies have committed around $28.0 billion in investments for the country.

Brazil has high tax rates and preventive labor laws, which may stand in the way of business growth, but IBM is trying to work through these issues. This will in turn help IBM’s partners in Brazil, since the company is witnessing the highest growth in partner companies in the country. We believe high partnership growth and access to the local talent pool will positively impact IBM’s revenue stream, while prohibitive labor laws may pose some short-term challenges.
Read the full analyst report on “IBM”
Read the full analyst report on “HPQ”
Zacks Investment Research