Brazilian Electronic Valley

Once an important producer of agricultural goods, the city of Santa Rita do Sapucaí is currently one of the main hubs for the electronic industry in Brazil. In this article we will present an overview of the history and discuss the role played by this city in the Brazilian technology industry.

Overview

Located in the south of the state of Minas Gerais, the city of Santa Rita do Sapucaí is known as the Vale da Eletrônica, or Electronic Valley, housing a few of the country’s most important companies in this sector, some of which brought great innovations to the Brazilian technology market. The city currently has 40 thousand inhabitants, and it is strategically positioned near three of the most important state capitals in Brazil.

The first undertaking in the direction of technology took place in the city in 1959, when a local citizen named Luzia Rennó Moreira, also know as Sinhá Moreira, created the first technical education institute for electronics in Latin America. Six years later Inatel, the Brazilian Institute of Telecommunications, was created in order to provide graduation scholarships and perform research on the telecommunications market. In 1971, FAI, the Centro de Ensino Superior em Gestão, Tecnologia e Educação, was created to follow the innovation cycle that started in the city at the time. All these institutions are still operational and are pushing forward the development of the region, making the city less dependent of employees coming from other cities.

Santa Rita do Sapucaí is now home to 153 companies, which are responsible for 14 thousand employees housed in the city and surrounding areas. The city presents a strong culture for entrepreneurship, which is encouraged early in schools, resulting in the creation of several incubation projects each year. The local industry had revenue of BRL 3 billion in 2014, generated by the products manufactured for several segments of technology industry. The companies export their products to more than 40 countries around the world.

Companies operating in the region are from the following industries:

• Telecommunications
• Security
• Electronics
• Computing
• Broadcasting
• Home Appliances

There are some incentives given by the state government and municipality in order to attract companies and investment to the city, and there are also some types of incentives for new undertakings in the region, noting that the last two benefits are no longer available:

• Infrastructure services for building a company’s headquarters
• Donation of plot of land for construction
• Discount on municipality taxes
• Discounts of up to 70% on the rental price for industrial warehouses

It is estimated that around 14 thousand products manufactured in the region are being distributed across the country and to foreign markets. The city was responsible for developing important technologies such as the direct-recording electronic voting machine, the chip for the electronic Brazilian passport and the transmitters for the Brazilian Digital TV System.

The Future of the Tech Industry in the Valley

The 2015 economic crisis in Brazil is pushing the companies operating in the Electronic Valley through a period of reductions in investment and expenditures, and most important: profits. Sindvel, the syndicate that manages the companies in the region, estimates a decrease of 30% in revenue in 2015 compared to last years results. Companies with lower working capital tend to take more impact due to the instability in the market. Even with the crisis, the Electronic Valley will be capable of growing 500% over the next three years if the investments continue, according to research from Sindvel.

Foreign investors are already interested in the potential that companies from the Brazilian Electronic Valley can offer. Five of the largest companies are already in negotiations to be sold, and this trend is expected to follow through the next few years. Specialists point out that the Electronic Valley region needs large investments in order to continue to house the 15 new companies that start operating each year, and maintain the competitivity of the existing ones in the market.

Another important region in Brazil for the manufacturing of electronics is attracting several of these companies: PIM, the Pólo Industrial de Manaus, or Industrial Pole of Manaus. The end of tax incentives previously provided by Santa Rita do Sapucaí may encourage the companies to move to PIM according to Sindvel. The PIM region is already consolidated with an operational infrastructure and offers attractive incentives for companies.

This transfer would also lead to more competition in the global market, since not all the companies in the Electronic Valley have benefits on basic manufacturing processes, and product prices are not as competitive as they were in the past in the technology market. Moving to PIM would represent a difference of up to 50% on the final price of a product for these companies due to tax reductions. Sindvel expects that 40 companies will migrate to PIM in the next few years and five are already operating in the region since 2007.