Recife's Waterfront Is Going Digital...And Its Favela Is Staying Put

Amidst a sea of architects and city blueprints, Fabio da Silva is a whirlwind of activity. Meeting with officials as they stream in and out of his office, and phoning local high-tech entrepreneurs to discuss investment plans, da Silva is orchestrating the biggest transformation Recife has ever seen: turning the port into a tech mecca. "This area used to be rundown and full of brothels. But we are building it into a high-tech ecosystem," says da Silva, head of Pernambuco State Technological Institute.

Beginning in December, the local tech community, from the state technology ministry to the local university's computer science department, will be moving en masse to the harbor area as part of the $17 million Digital Port program. State officials and local tech leaders are betting that they can capitalize on the area's growing IT industry--which posted annual sales of $150 million in 1999 and may have doubled that amount in 2000--to turn their struggling town into a regional tech powerhouse.

Once dominant in Brazil's sugar industry, Recife has fallen on hard times since the state of Sao Paulo started producing its own crop 30 years ago. The recent opening of a new deepwater port 40 kilometers to the south has lured away most of the container industry. Farming and heavy industry have steadily shrunk to 43% of the economy, down from 50% in 1985, and joblessness rose from 3.1% in 1996 to 6.4% in 1999.

That leaves service and tech companies to take up the slack. Since 1995, the number of IT outfits has been growing at an average of 10% a year, leading many local officials to believe that high tech may lay the foundations for a new life. "When we founded our company in 1995, there weren't many tech companies here. Now, things are starting to accelerate," says Jairson Vitorino, president and founder of Mundi Multimedia, a leading Internet marketing and Web site development company, with $750,000 in sales last year. There are now 257 IT startups in Recife, turning out everything from cell phone technology to computer games. Many companies got their start in one of three incubators founded in the mid-1990s to connect universities with the business world.

FAST HOOKUP. The Digital Port, planned jointly by the incubators, IT companies, and local government, aims to concentrate the growing tech community into an area of 52 hectares. By the end of 2002, it's expected to house at least 100 companies, incubate an additional 70, and provide training for aspiring programmers. To lure companies into the port, the government is offering tax incentives, technological inducements--the harbor will soon boast the city's fastest Internet connections--and the promise of a collaborative high-tech community.

With some 15 other Brazilian cities boasting tech centers, does Recife really stand a chance? Most definitely, says Pedro Coneicao, a researcher at IN+ Center for Innovation, Technology & Policy Research in Lisbon. He points out that Recife is the only tech cluster in the northeast, where wages are 30% lower than in the south, and that "a number of Portuguese companies have already made big investments." So the Digital Port just may float.

In one corner of Recife's port lies the Pilar favela, a jumble of wooden shacks where 2,000 people live in abject poverty. About the size of a city block, the slum lacks water, electricity, and basic sanitation. Most residents dropped out of school long ago to earn enough money to survive.

While the shantytown lies within the bounds of the Digital Port, officials are planning to integrate it into the new community. Until recently, it was common practice in Brazil to level favelas if they stood in the way of progress. This time, new housing units will be built on the site, and computer science will be taught in schools for slum dwellers. State leaders say that favela residents can fill the need for skilled workers in the computer manufacturing facilities moving into the port--and thus get a foothold in the New Economy. "We decided to take on this challenge to show we can bridge the digital divide with these poor people," says Claudio Marinho, Pernambuco State secretary of science and technology. If the Digital Port succeeds, it may not only boost the economy but ease social strains as well.

By Kristina Shevory in Recife


    Before it's here, it's on the Bloomberg Terminal.