Toronto Potential Brazilian Investment Hotspot

by Mike Godfrey, Tax-News.com, Washington

02 May 2011

With Brazil's share of Canadian foreign direct investment (FDI) growing rapidly, a new report has shown that the Greater Toronto Area (GTA) could act as a potential hotspot for Brazilian investment, especially in the information technology sector.

The report, published on April 26 by PwC and the Greater Toronto Marketing Alliance (GTMA), shows that Canada could generate substantial FDI through the targeting of Brazilian companies. As the report shows, over the past 10 years, the BRIC countries - Brazil, Russia, India, China - have increased their share of total FDI into Canada from less than 1% to nearly 5%. In particular, Brazil accounts for about half of all BRIC FDI into Canada.

More specifically, the report picks out the Information Communications and Technology (ICT) sector, for, in 2008, USD139bn in revenue was generated by what PwC calls "Hot Sectors / Hot Markets", and, in particular, Brazil’s ICT sector.

The report cites the following reasons for why the GTA is well positioned to compete for IT investment from Brazil:

• The concentration of the financial services sector and Ontario government in the GTA;
• The GTA’s existing skilled and multicultural IT workforce;
• Current focus of the provincial government on e-services; and
• Competitive advantages in tax rates and withholding taxes.

More generally, several factors providing advantages for attracting FDI are highlighted:

• Canada offers not only a large market locally but also a gateway to the larger North American market. According to the report, Canada has a corporate tax advantage over the US, yet can also be a beachhead to the US market.
• Many established and thriving technology supporting and related industries exist. The report argues that the GTA’s strong financial services industry facilitates the pursuit of financing and venture capital.
• The presence of a skilled, multi-ethnic, multi-lingual workforce, driven in part by an abundance of academic institutions offering advanced programs directly related to tech sector opportunities.
• Significant government support is offered in the form of tax incentives and direct funding for this highly profitable and high-growth market.

Commenting on the report, Stephen Martin, partner in PwC’s Consulting practice in Toronto, stressed the opportunities afforded by those Brazilian IT companies looking to expand internationally, while remaining competitive."While Brazil’s economy is improving, IT has been a particular focus for their government, particularly in the financial services and e-government industries – two areas of potential opportunity within the GTA".

GTMA's president and CEO, George Hanus, added: "Brazil is seen as an important investment and trade perspective for GTA communities and at the same time, the GTA offers a compelling value proposition for each of these sectors".

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