Noelia Barriuso made the career decision of her life when she moved to Brazil from Spain during the financial crisis in 2009, leaving behind record high unemployment for an economy in the midst of a decade-long boom.
“I bet on Latin America and Brazil and it paid off,” said the 34-year-old native of Burgos, who now works as a consultant for an affiliate in Brasilia of Bilbao-based engineering services firm Idom Consultoria SA.
Like Barriuso, a growing number of foreigners are flocking to Latin America’s biggest economy. The number of work visas granted jumped 26 percent last year to 70,524, the highest since at least 2005, led by applicants from the U.S., Labor Ministry statistics show. Brazil added 2 million jobs in 2011, half in the services industry, even as economic growth slowed to 2.7 percent from 7.5 percent in 2010.
The tight labor market has driven up average inflation-adjusted wages by 30 percent to 2,114 reais ($1,060) per month in the six years through December 2011.
A shortage of skilled professionals is contributing to that jump, said Haruo Ishikawa, who owns Haruo Ishikawa Engenharia e Construcoes Ltda construction company.
“Brazil wasn’t ready for this kind of growth,” Ishikawa said in a telephone interview in Sao Paulo. “We never invested in education and training.”
Demand in labor-intensive segments of the economy, from construction and oil and gas to commerce, has pushed down unemployment to 6 percent in April, the lowest on record for that month. Joblessness in the U.S. that month was 8.1 percent, while it was 8.2 percent in the U.K. and 10.9 percent in the euro zone in March, the last month for which data is available.
A mason in Sao Paulo earns 2,500 reais a month on average, according to the state’s construction chamber Sinduscon. Government-mandated benefits, such as a 13th-month bonus salary, a 30-day vacation and retirement pay, can double that amount to companies. Labor costs account for 55 percent to 60 percent of a construction project, up from 40 percent to 45 percent five years ago, said Ishikawa.
Consumer demand fueled by higher wages, more jobs and easier access to loans, particularly among the 40 million people who emerged from poverty into the middle class from 2003 to 2010, has been the engine of Brazil’s economy as it grew an average 4.2 percent annually between 2006 and 2011.
One such consumer is Joao Batista, an air conditioning technician, who saw his salary nearly double in five years to 1,500 reais and, at age 60, bought his first car ever in 2010.
“It’s a used car but it’s mine,” Batista said at a Brasilia construction site, one of several where hotels are being built for the 2014 soccer World Cup. “Without a doubt my life is better today than five years ago.”
Batista said he hopes to retire next year, while adding that he is “a bit worried” about how the recent run-up in prices would affect his ability to do so.
And wage increases are contributing to inflation. Service-sector prices rose 9.1 percent from a year earlier in April, compared with a 5.1 percent increase in consumer prices.
A jump in construction labor costs contributed to an increase in the IGP-M, the broadest inflation index, of 1.02 percent in May.
Salary increases are necessary not only to sustain consumer demand and keep Brazil’s economy running but also to make up for historically low pay, said Quintino Severo, secretary-general of the country’s largest union federation, known as CUT.
“For decades Brazilian workers earned little and contributed to corporate profits,” Severo said by telephone from Sao Paulo. “With the economy growing, it’s only fair they get a bigger share.”
Industry leaders argue that excessive union demands for wages threaten to put companies out of business. Already strikes are delaying construction on stadiums, public transport projects and airport renovations for the World Cup and the 2016 Summer Olympics in Rio de Janeiro.
“We’re not against better pay, but it’s gone too far,” Adauto Duarte, the National Industry Confederation’s labor relations councilor, said by telephone from Belo Horizonte. “With those unemployment numbers, our hands are tied.”
Former President Luiz Inacio Lula da Silva, who rose from shoe-shine boy to labor leader before taking office in 2003, brokered a deal with unions during his eight-year tenure that boosts the minimum wage every year by a formula linked to inflation and economic growth. Over the past eight years the wage rose 140 percent to 622 reais. Since this is the benchmark used to calculate government pensions, the jump has forced up federal spending.
A shortage of skilled professionals is driving the demand for foreign labor, said Frederic Ronflard, the local head of London-based recruitment company Robert Walters. The country each year has a deficit of 20,000 engineers, according to the Federal Council of Engineering, Architecture and Agronomy.
A treasury director at a multinational company in Sao Paulo earns 285,000 reais, compared with the equivalent of 249,000 reais in Shanghai and 185,000 reais in New York, Robert Walters said in a March report.
Even though a 14 percent depreciation of the real over the past three months has reduced Brazilian salaries in dollar terms, the country continues to draw professionals from around the world, particularly Europe, said Ronflard.
“I’ve been here for two years and every day I get 5 to 10 e-mails from candidates wanting to come to Brazil,” he added.
Business consultant Barriuso noted that it’s not just the prospect of higher wages that draws foreign workers. “Spain is not an entrepreneurial country,” she said. “In Brazil people sell all sorts of things in the street. That caught my attention. In life you have to take certain risks.”
Still, hiring foreigners in Brazil isn’t easy. Companies must demonstrate foreigners have unique skills not found locally and can’t have more than a third of their workforce made up of expatriates. Obtaining the necessary documentation to obtain work permits is cumbersome and can take months. In addition, state-run companies like Rio de Janeiro-based oil producer Petroleo Brasileiro SA are forced by regulations to favor suppliers that hire and train Brazilians.
Those same restrictions are forcing companies to hire workers lacking the appropriate skills, further eroding competitiveness, said Paulo Leme, chairman in Brazil for Goldman Sachs Group Inc. “The time it takes to train a bricklayer can result in a negative productivity response,” Leme said in an interview in Rio de Janeiro on May 21.
The skilled-worker shortage in the building industry and the consequent fall in productivity have resulted in longer completion times on some projects, said Ishikawa, the construction company owner.
To reduce red tape that can delay investments, the government is studying ways to make it easier to hire foreigners, according to an e-mailed statement from Strategic Affairs Secretary Wellington Moreira Franco.
“We need to train Brazilian workers to take those jobs but we’re not xenophobic either,” Labor Minister Carlos Brizola told reporters in Brasilia on May 22. “Within our needs, we’ll welcome foreign workers.”
To address Brazil’s skill shortage, President Dilma Rousseff last October created a program to boost technical training for workers, young students and welfare recipients. Last month she also visited Harvard University and the Massachusetts Institute of Technology in Cambridge as part of her program to send 101,000 students abroad by the end of 2014.
Demand will continue to increase for foreign workers, who should be required to transfer know-how to help foment domestic technology, said Jorge Ramos, who heads the South America branch of the International Society of Automation, a non-profit organization dedicated to technology standards and training.
“If projects are developed as planned, there won’t be time to develop sufficient skilled labor, and the shortage will get worse before it gets better,” Ramos said by telephone from Sao Paulo. “To get the most out of foreign workers, Brazil should require them to transfer their skills.”