Brazil Opens Computer Market
END OF PROTECTION
BRAZIL is blazing a new and bewildering trail in high technology. After six years of restricting computer imports, Brazil has suddenly flung open its doors. United States and other multinational computer companies are rushing in to sell equipment. By the end of 1992, Brazil promises to lift all its restrictions on computers.Skip to next paragraph
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The case of Brazil is a classic example of the dilemma developing nations face in high technology. Should they join the technology race? Or protect their market and risk being left out?
The answers aren't easy.
``There is no one model for all developing countries,'' says Andrew Morrison, a Tulane University professor of economics and Latin American studies. Mexico, with the second-largest computer market in Latin America after Brazil, has fewer restrictions, perhaps because it relies so heavily on trade with the US, he says.
Brazil decided in 1984 to build its own computer industry and rely on its own large, internal market.
Until recently, Brazil's so-called market-reserve policies made it difficult for foreign computer companies to sell all but the most advanced machines there. Digital Equipment Corporation, for example, had to sell kits of its VAX 750 system to a Brazilian company, which would assemble the machine and then resell it. The markup could be quite high - sometimes 100 percent or more.
For a while, the system seemed to work. Brazilian computer companies sprung up. They sold locally made machines in a domestic market that in 1989 stood at $4 billion, according to the US Commerce Department. Brazil has the world's sixth-largest computer market and represents by itself two-thirds of the entire Latin American computer market.
Then-President Jose Sarney called the restrictive policies ``fundamental for our survival as a sovereign nation.''
But strains developed. The US began to initiate trade sanctions against Brazil because of its computer policies. Brazilians grumbled at the high prices of locally made computers and the unavailability of faster, foreign-made machines. (Treasury agents would raid offices and schools to confiscate foreign computers, fax machines, and other electronic equipment.) ``It didn't make sense anymore because Brazil had lost'' the high-tech race, says Ehlio Barros, planning director of Brazil's Secretariat for Sc ience and Technology. After five years of protection, the country didn't have a local company that could challenge high-end foreign competitors.
Brazil began to relent. It passed new copyright laws for software in 1988. Then it allowed software imports and, eventually, joint ventures between local Brazilian companies and three US computer makers: IBM, Digital, and Hewlett-Packard.
A year ago, Brazil elected reform-minded Fernando Collor de Mello as its new president. He has promised to scrap the country's computer restrictions by October 1992. ``We want to stop being the leading country of the third world to join the group of the first world,'' Mr. Collor said one month before his inauguration.
Even now, US computer companies say the restrictive policy is dead. ``Effectively, it has gone away,'' says Tom Ashe, Digital's marketing manager for the region. ``The new government wants very much to open the market. Most businesses want the market opened.''
While long-term prospects are generally bright, it's not clear what multinational computer companies will gain in the short term. Inflation last year stood at a whopping 1,794 percent - despite a government program to stop spiraling prices. There's little confidence that Collor's two-month-old anti-inflation program will have more success.
``If Brazil was going to compete, it couldn't afford to stay behind and use outdated technology,'' says Paul Pastrone, director of international research services at International Data Corporation. ``It means that the Brazilian industrial policy has changed in favor of having more computers and better technology to produce more worldwide competitive products.''