Dell EMC stays realistic on Brazil economy

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Thursday, December 1, 2016

In the eyes of Dell EMC Brazil, the country's economic recovery will not take place next year, but rather in 2018.

"We don't expect growth to come next year. Growth, if it comes, only in 2018," VP and general manager Luiz Fernando Gonçalves told BNamericas and other journalists at a press lunch in São Paulo Wednesday. "We expected a bad recession and so we were ready for any scenario."

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The country's economic recovery was expected for the second half of this year, but never materialized. Last week, analysts consulted by the Brazilian central bank once again downwardly revised their GDP forecasts for this year and the next.

The economy is now seen contracting 3.49% in 2016. Last week, the forecast was for a 3.40% contraction, while last month's projection was -3.30%. For 2017, growth of 0.98% is expected, down from 1.00% a week ago and 1.21% a month ago.

This Wednesday, national stats bureau IBGE reporetd that Brazil's GDP fell 0.8% in Q3 from the previous quarter. In Q2 and Q1, contraction had been 0.4% and 0.5%, respectively. Compared to 3Q15, the decline was 2.9%.

NAFTA, WTO

Two factors might impact Dell EMC operations in Latin America next year. If Donald Trump fulfils his promise of withdrawing the United States from the Nafta trade deal, the company's manufacturing plants in Mexico would be affected.

Meanwhile, a preliminary ruling from the World Trade Organization determined that Brazilian subsidies for the auto and IT sectors are illegal and should be dismantled. The end of tax breaks for firms with local manufacturing directly affects the Dell EMC's production in the country.

Gonçalves said that a positive collateral effect of the WTO decision is that it will "fix the distortions" in Brazil's economy and "force companies to become more competitive."

Gonçalves admits, though, that the loss of tax breaks in fiscal benefits in one fell swoop would be harmful, and recommended a gradual phasing out.

To Carlos Cunha, head of Dell EMC for enterprise solutions in Brazil, the WTO decision is "worrying." He said the company is preparing an appeal through industry associations, such as Brasscom.

Cunha said that, despite local woes, big companies continue purchasing storage solutions and Brazil remains a top 10 market for the group.

Dell EMC does not reveal its market figures in Brazil, but Gonçalves said that the company performed well this year in the consumer segment (hardware, PCs).

For 2017, the focus will be on go-to-market approach based on convergent solutions and virtualized datacenter solutions. "There are many IT infra still obsolete at the enterprises. We need to educate companies on convergent solutions," Cunha said.