Author:Kogan, Lawrence A.
Position:Part 4

(883) "IT services will account for the largest share in technological investments, as acquisitions of infrastructure, software, and hardware have to a great extent already been made in the 2000-2003 period ... In Telecoms, the first set of interesting pockets of competence relevant to the software industry is associated with embedded software .... Siemens ... is one of the leading examples among foreign players ... [T]he company is now the largest ... in the electronics and electrical engineering sector ... in Brazil ... employing nearly 8900 people in 12 production facilities and 13 sales offices nationwide. The presence of Siemens in Brazil includes also a Telecommunications Technology and Research and Development Center with over a hundred full time researchers and an additional several hundred other affiliated through university grants and contracts. The research laboratory is a world competence Center for four product lines ... This means that the unit has global full cycle product responsibilities, including research, development, and manufacturing for these lines. Like Siemens, Ericsson has close to 500 people in its Brazilian research unit, ALL devoted to research and development in software. Among other [things], the Brazilian Unit is responsible worldwide for full cycle development of software for several systems in its fixed and mobile telephony. See Antonio Bothelo, Giancarlo Stefanuto, and Francisco Veloso, "The Brazilian Software Industry" supra, at p, 37.

(884) "The high-technology group Itautec Philco is one of Brazil's largest companies. Through a number of subsidiaries it is involved in a wide range of activities including the manufacture of PCs, computer components and consumer audio-visual equipment, as well as Internet security and telecoms services. "Itautec [recently] won a five-year outsourcing contract to handle computer operations for Carrefour (France). Itautec is an information technology subsidiary of Itau, a leading Brazilian banking group. Carrefour is the second-largest retail chain in the country, with 86 hypermarkets, 98 supermarkets, 13 distribution centres and one information centre." See "Brazil Technology: Itautec Wins Five-Year Outsourcing Contract", Global News Analysis, Global Technology Forum--The Economist Intelligence Unit Limited (7/12/05), at: (http://www.ebusinessforum.com/index.asp?layout=rich_story&doc_id =7451&title=Brazil+technology%3A+Itautec+wins+five%2Dyear+out sourcing+contract&channelid=4&categoryides=28). Another major local group is Splice, which was started in 1962 as a private telecoms operator and is now involved in technology manufacturing activities that range from communications infrastructure and traffic monitoring systems to "smart cards" and public telephones. Splice also holds two mobile telephone licenses. Abinee is an industry association that represents about 600 companies in the electrical and electronics industries. Its members include many overseas businesses with operations in Brazil. Camara-e.net is an association that was formed in 2001 to promote e-commerce in Brazil." See Brazil: Telecoms and Technology Background", Doing E-Business in Brazil, Global Technology Forum--Economist Intelligence Unit (2004), at: (http://www.ebusinessforum.com/index.asp?layout=newdebi&country_ id=BR&channelid=6&country=Brazil&title=Doing+e-business+in+Brazil).

(885) "Another industry where local industry is extremely sophisticated is telecommunications." See Antonio Bothelo, Giancarlo Stefanuto, and Francisco Veloso, "The Brazilian Software Industry" supra, at p. 33. "Brazil is by far the largest information technology (IT) market in Latin America, and has an industry producing a total value of computer and telecommunications equipment worth over US$30bn. The telecoms market has been transformed not only by the development of new technologies but also by the privatisation of the state telecoms operator, Telebras, in 1998, as well as by continuing liberalisation and state encouragement of the development of new technologies ... [T]he Brazilian telecoms market returned to growth in 2004 ..." Brazil: Telecoms and Technology Background", Economist Intelligence Unit, supra.

(886) See 2005 U.S. Commercial Service Guide to Brazil 'Investment Climate, at p. 20. See also, "The FDI--Employment Link in a Globalizing World: The Case of Argentina, Brazil and Mexico" Employment Strategy Paper 2005/17, International Labor Organization (2005), at: (http://www.ilo.org/public/english/employment/strat/download/esp2005-17.pdf). "The new outward oriented development strategy of the 1990s led to a FDI boom in Latin America ... Most investment, in particular in Argentina and Brazil went into already existing companies as a result of privatisation, deregulation and increased M&A, especially in the service sector. FDI in the service and manufacturing sector was often combined with modernization and rationalization measures leading to labour shedding. Nevertheless, FDI contributed, to a certain extent, to the modernization of the economy, a rise in competitiveness and In a better integration into the world economy ... Brazil, compared with the two other countries, was a late starter with regard to economic reforms, which is also reflected in the timing of FDI inflows. Such inflows only began to take off after the introduction of the Real in 1994 and the resulting macroeconomic stabilization ... peaking in 2000 at US$ 32.8 million. However, in 2003 they fell sharply to US$ 10.1 billion. The main reasons for this decline were the world recessions in 2000 and 2001, which also affected Argentina and Mexico, Brazil's poor economic performance, an unstable political and economic environment, the crisis in Argentina and the impending national elections." Ibid., at pp. 1 and 3.

(887) See 2005 U.S. Commercial Service Guide to Brazil, Executive Summary at p. 3. A recent United Nations report confirmed that the FDI increase enjoyed by Brazil in 2004 was experienced globally. "On account of a strong increase in foreign direct investment (FDI) flows to developing countries, 2004 saw a slight rebound in global FDI after three years of declining flows. At $648 billion, world FDI inflows were 2% higher in 2004 than in 2003." See "Transnational Corporations and the Internationalization of R&D", United Nations Conference on Trade and Development (UNCTAD) World Investment Report, UNCTAD/WIR/2005 (Sept. 2005), at p. 1, at: (http://www.unctad.org/en/docs/wir2005_en.pdf). "Following four years of continuous decline, FDI flows to Latin America and the Caribbean registered a significant upsurge in 2004, reaching $68 billion--44% above the level attained in 2003. Economic recovery in the region, stronger growth in the world economy and higher commodity prices were contributing factors. Brazil and Mexico were the largest recipients ..." Ibid., at p. 12.

(888) According to a recent media article, the actual 2004 amount may have been $18.17 billion. "The [Brazilian] central bank also reported that foreign direct investment in 2005 fell to $15.19 billion from $18.17 billion in 2004." See "UPDATE 2-Brazil '05 Current Account Surplus a Record $14 Bln", Reuters (1/19/06), at: (http://yaboo.reuters.com/financeQuoteCompany NewsArticle.jhtml?duid=mtfh79053_2006-01-19_13-31-32_nl9284727_newsml).

(889) Ibid.

(890) Ibid. For example, "Japanese investment into China in 2005 hit a record $6.5 billion ... The Beijing office of the Japan External Trade Organization said ... that Japanese foreign direct investment into China rose 19.8 percent to $6.5 billion last year, driven by car manufacturers and electronics companies. Total FDI into China during the year was around $60 billion." See David Ibison, "Japanese FDI In China At Record $6.5 Bn", Financial Times (4/4/06), at p. 4.

(891) See "Prospects for Foreign Direct Investment and the Strategies of Transnational Corporations, 2005-2008", UNCTAD/ITE/IIT/2005/7 (2005), at: (http://www.unctad.org/en/docs/iteiit20057_en.edf). According to a recent report produced by the United Nations Conference on Trade and Development (UNCTAD), Brazil ranked among transnational corporations (TNCs the fifth most attractive FDI location in the world after China, India, the U.S. and the Russian Federation. Brazil was also ranked by TNCs as the MOST attractive FDI location in Latin America. Ibid., at pp. iv-v, Table 1 'Summary of Survey Results Regional Prospects--Latin America and the Caribbean' at p. vi, p.13. "More than 80% of TNCs and 90% of FDI experts believe that the county [Brazil] will be one of the region's five most attractive investment locations in the short term. This may be due to a recent upturn in the economy, led by the dynamically expanding export sector ... FDI growth in Latin America and the Caribbean is expected to be the highest in service industries ... The industries with the most positive prospects are hotels and restaurants, construction/infrastructure related and real estate, tourism and computing and ICT services. In the manufacturing sector, the majority of Latin American IPAs expect no significant change in FDI flows, The only exception to this is the food and beverage sector, for which the outlook is more promising. This suggests that the region's manufacturing industries are still in the process of restructuring." Ibid., at pp. 41-43.

(892) "Heavier dollar inflows from exports have allowed Brazil's central bank to triple its hard currency reserves over the last few years to $53.8 billion, in part by buying dollars on the spot foreign exchange market. That has paved the way for Brazil to recently repay all debts owed to multilateral lenders like the International Monetary Fund." See "UPDATE 2-Brazil '05 Current Account Surplus a Record $14 Bln", supra.

(893) On December 23, 2005, the Brazilian government announced that it would pay off in advance ('anticipate') the $2.6 billion debt it has owed to the Pads Club since 1983. This followed a $15.5...

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