BRAZIL: Recife -- the New Silicon Valley

RECIFE, Brazil -- Thirty years ago, the sugar business was Recife's biggest
source of income. That was until So Paulo started processing its own
sugar, and Recife was forced to diversify.

Recife, situated on the northeastern coast of Brazil, went through another
economic boost with expanded use of its local harbor, but the recent
opening of a new deepwater harbor, 40 kilometers (28.4 miles) to the south,
is putting the once thriving port in jeopardy.

Now, Recife is being given a technology makeover to make it a sort of
Brazilian Silicon Valley surrounded by the sea. Its goal is to lure both
international and Brazilian IT companies and startups to this digital port,
or DP.

Since the '90s, Recife has been well known as a provider of skilled IT
professionals, thanks to its computer science program at Federal University
of Pernambuco. But graduates of the program often get hired to work abroad
or in other Brazilian cities such as So Paulo and Rio de Janeiro.

For investors, one reason for the DP's quick success is that Recife is the
only tech cluster in northeastern Brazil, where wages are usually 30
percent lower than in the south. The state government has been setting up a
venture capital fund, and investments have been received from
multinationals, such as Motorola, Microsoft and Ericsson.

Microsoft recently opened a training center in Recife, the first and only
one that covers the whole northern and northeastern regions of Brazil.

"As we build a formation center capable of exporting people to any company,
at the same time we're creating a facility that allows our professionals to
remain working here, with reasonable wages and a much better quality of
life," said Slvio Meira, president and founder of CESAR, the Center of
Advanced and System Studies in Recife and one of the DP's arms.

Quality of life is what made professional designer H.D. Mabuse return to
Recife. He had been working in So Paulo since 1996 but came back with his
wife in 1999, when both decided to work at CESAR and invest in the Digital
Port idea.

"Right now, I can't think of anywhere else to work and live, especially in
a growing sector like this one," says mabuse, who's also in the maracatu
business.

Recife's ambitious strategy depends upon help from the government and the
booming IT industry in the state of Pernambuco, where Recife is the
capital. Founded in October 1999, the DP project has already started
changing the economic look of the harbor neighborhood.

The general tax on companies' profits in Recife is 5 percent, but those in
the DP area will pay a maximum of 3 percent. The state government is
providing financial incentives to those who create projects involving tech
innovation or human resources, and is also giving technological incentives
to those who create high-speed access for Brazilians.

So far, 26 IT companies, including Oracle, Motorola and some research
centers, have moved in or are in the process of settling in the area. About
100 companies plan to be situated there by the end of 2002.

Research by the Pernambuco Institute of Planning reveals that almost 600
local IT companies were responsible for profits of $72 million in 2001. For
2002, profits of about $223 million are forecast, according to the
institute. Since 1995, the number of IT companies has been growing at an
average of 10 percent each year.

"Our intention is to create a center for development, computer programming,
industry and commerce," says Cludio Marinho, science and technology
secretary for Pernambuco.

The area where the Digital Port stands has a peculiar architectural
heritage and a long history of bohemia and war against the
Dutch, who controlled the region in the 17th century until they were
expelled in 1654.

When the harbor entered an economic decline and businesses left, the city
gave space to a nearby favela called Favela do Pilar, a mix of disordered
wooden shacks where people live in poverty. One of the DP's objectives is
to train residents of the favela in computer programming so they can
provide their services to incoming companies.

With help from CDI (Committee for Democracy in Information Technology),
computer schools are being established, and fiber-optic cables are being
installed for broadband Internet access to all neighborhood startups.

Starting this month, the CDI's program will include 800 people from Favela
do Pilar. They will learn basic computer skills, including Windows, Word
and Excel, and go through modules of English, business, administration and
programming languages. At the end of the program, participants will receive
an Internet Security and Accelerator Server certification from Microsoft.

• 192 Technology & Telecommunications