Brazil: A Hot Incubator For Tech Startups

Recife's business park is helping power a $10 billion industry in the country

In a darkened room in Recife, Brazil, a half-dozen youths peer at glowing computer screens, battling it out in a multi-user game. This is no cybercafé, but rather the offices of Jynx Playware, a budding Brazilian designer of computer games aiming for sales of $400,000 this year. "The first requirement if you want to work here is you have to be a gamer," says André Araujo, 32, one of Jynx's five founding partners.

Think of the global information-technology industry, and your first thought isn't of Brazil. Yet Brazil's IT industry has been growing at a 10% annual clip since 2000, according to São Paulo researcher E-Consulting Corp., and now boasts sales of $10 billion a year. Exports of high-tech goods and services should rise from around $500 million last year to $2 billion by 2007, predicts Trade Minister Luiz Fernando Furlan.

Recife's Porto Digital, a business park in the northeastern state of Pernambuco, shows how it can be done. The colonial town's once-crumbling port district is now home to Jynx and 84 other IT startups employing 2,000 people and generating combined revenues of some $100 million. "It has all grown much more quickly than we expected," says Valério Veloso, a former investment banker who in May became president of the public-private sector initiative, launched in 2000, to support new ventures. To get the project off the ground, the state government kicked in $18.3 million, while the city of Recife and the federal government have pitched in with tax incentives and cheap loans.


Porto Digital's startups can count on a ready pool of talent, courtesy of the Federal University of Pernambuco (UFPE), which boasts one of the best computer-science departments in all of Latin America. The school began teaching programmers to use Sun Microsystems Inc.'s (SUNW ) Java language in 1996, the year it was introduced. Professors at the school also teamed up to launch Centro de Estudos e Sistemas Avançados do Recife (C.E.S.A.R), a business incubator that has played a vital role in the birth of some 30 companies.

One of C.E.S.A.R'S star progeny is Jynx. The 20-person operation uses artificial intelligence and cutting-edge graphics software developed in-house to produce sophisticated virtual-reality games for use in business training. It has also developed so-called advergames for Coca-Cola Co.'s (KO ) Brazilian Web site and for Brasil Telecom, an operator partly controlled by Telecom Italia. Another C.E.S.A.R offspring is Meantime, a maker of games for mobile handsets whose clients include Motorola Inc. (MOT ) and Verizon (VZ ). "Games are one of the most complex areas of computer programming," says Roberto Soboll, Motorola's director of engineering for Latin America. "In Recife they understood that early on and began teaching games programming at the UFPE. The idea is not to create experts in games but to develop complete software developers."

Porto Digital won't turn Brazil into an India overnight. And many in the industry feel the government should be doing more to promote IT development. "If you look at South Korea, they have become the global standard for network games because the government decided to invest in connectivity and training," says Ivair Rodriguez, a São Paulo analyst at global IT consultancy IDC. Still, Rodriguez stresses that Brazil does have world-class talent, especially in Java, open software, and electronic security -- all fields in which the Porto Digital companies are strong. If high-tech startups can flower in one of Brazil's least-developed states, it's a sign Brazil may have a shot at creating a digital economy.

By Jonathan Wheatley in Recife

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