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This report provides information about the market for broadband services in Brazil.
The Brazilian market for telecommunications equipment and services amounted to approximately US $25.3 billion in 2002, a 20 percent decrease as compared to the previous year.  Telephony services accounted for 59 percent of this amount, products for 27 percent and other services 14 percent.  This represents an 11 percent decrease as compared to the previous year.  The main reason for this was the unfavorable economic situation and the presidential election.  Furthermore, the majority of the investments in the sector were made in 2001 to comply with Anatel's goals - Anatel is the Brazilian Telecommunications Body equivalent to FCC in the United States.  As a result, the total revenue for the sector grew less than the national GPD (1.5 percent vs. 1.2 percent).  For 2004, however, market analysts predict that the sector will begin to accelerate, with an estimated growth of 13 percent.
In spite of these less than favorable results, growth forecasts for the Brazilian telecommunications market were optimistic at the beginning of 2003, with several segments of the market showing good opportunities for U.S. companies interested in expanding their sales to Brazil.  Growth areas include particularly the market for all broadband related products and services. 
OEMs are particularly optimistic about the Asymmetric Digital Subscriber Line (ADSL) technology.  This sector experienced significant growth in 2002 and enjoys good perspectives for the years to come, basically because it does not require large investments but can generate revenue for telecom carriers.  Currently, Brazil has approximately 40.9 million subscribers of fixed telephones, but some 2 million lines are disconnected.  With regard to the mobile market, according to Anatel, there are 41.3 million mobile phones; this means that Brazil currently has more mobile phones than fixed lines in operation.
Broadband services via satellite are still very limited due to high costs associated with this service.
Brazil is the fifth largest country in the world in terms of area, after Russia, China, Canada, and the United States.  It makes up nearly half the total area of South America, bordering every country except Chile and Ecuador.  With a population of approximately 170 million people, it is ranked as the sixth most populous nation in the world.  The only Portuguese-speaking nation in the Americas, Brazil has by far the largest economy in Latin America with an estimated GDP of USD 407.7 billion and an annual growth rate of 1.5 percent (2003 estimate). 
Brazil has the largest telecommunications sector in the region, but in the last two years the sector has been affected by the global downturn faced by the telecommunications industry.  Net revenue for telecommunications equipment and services in 2002 was approximately $ 25.3 billion, a 20 percent decrease as compared to 2001.  Telephony services accounted for 59 percent of this amount, products for 27 percent and other services 14 percent.
Since the privatization of the Telebrás system in 1998, competition has grown in all segments of the Brazilian telecom arena.  Several major players have entered the market, infrastructure was intensively built up, prices decreased, and telecom services are now more available than ever.  Brazil is Latin America's largest Information Technology (IT) market and the broadband segment in particular enjoys the best prospects for the near future.  For detailed information about the Brazilian market for telecommunications, please visit http://www.BuyUSA.gov/  document ID: 112822 - TELECOMMUNICATIONS MARKET IN BRAZIL
The broadband market experienced impressive growth in 2002.  Internet use and PC penetration in Brazil are the highest in Latin America.  In fact, the Internet is having a profound effect on Brazil, and Brazilians have rapidly become the Latin American leaders in technological innovation and Internet applications.  Today, Brazilian users are ranked even higher than Europeans in time spent and relative usage of audio-visual content, e-banking and e-commerce.
According to the International Data Corporation (IDC) there are 695,000 subscribers to broadband in Brazil for all types of technology.  This represents an increase of more than 100 percent as compared to the previous year.  By the end of 2003, the telecom carriers expect to have up to 1.3 million subscribers for this service, an impressive growth as compared to only 124,000 subscribers in 2000.  Just to have an idea of the huge potential for this market, as of August 2003, Brazil had 39 million telephone lines installed.  Of this amount, about 15 to 20 percent belong to subscribers in the upper-medium income to upper income households - 5.8 to 7.8 million people, which mean that there are lots of customers to attract if we take into consideration only this portion of the population.
To face the rising demand for broadband services, the telecom carriers have increased their investments in 2003 with the ADSL technology that is slowly replacing the dial-up service.  Most carriers have decided to generate extra revenue by focusing on the corporate segment with special attention to the small to mid-size companies (SMEs) and the SoHo (Small Office Home Office) market.  SMEs represent more than 80 percent of the business and there are excellent opportunities for U.S. companies supplying this technology. 
The major challenge for the telecom carriers is to decrease the price of services, but the competition between the OEMs that provide the infrastructure for these services is forcing prices down in any case.  As an example, the price of the DSLAM (Digital Subscriber Line Access Multiplexer), the equipment that interconnects the broadband client to the carrier, dropped from US $250 in 2002 to US $100 at present.  OEMs are thus preparing to satisfy the demand for equipment.  Alcatel and Siemens intend to start the production of DSLAN in country in 2003, and U.S. Robotics has invested one million dollars to start producing their modems in a partnership with Solectron.  This company is also studying the deployment of equipment devoted to the Wi-Fi (Wireless Fidelity) market.
Wi-Fi is considered the big emerging solution in terms of technology.  Just like any other revolution, curiosity, discussions and doubts surround this new service.  Creative companies that provide good solutions for Wi-Fi may enjoy good opportunities in Brazil.
The penetration rate of cable broadband in Brazil is very low as compared to other Latin American countries because the price of the service is considered very high.  According to Anatel, there are nearly 11.6 million residential Cable TV subscribers; of this number, 2.3 million pay-TV users are connected through MMDS technology.  The number of Internet users via cable modem increased from 88,000, in 2001, to 131,000 in 2002.  This amount represents 19 percent of the total broadband users in Brazil.
Until recently, the only benefit of broadband in Brazil was providing Internet access at speeds higher than those offered by dial-up connections.  Nevertheless, the emergence of new on-line services is transforming the demand for high-speed access.  In the past several months, there has been an explosion in the development of content specifically intended for broadband applications.  The transmission of television programs, video on-demand, on-line games, videoconferencing, etc., are but a few examples of the revolution in new services now being offered to Internet users.
According to market specialists, technology will pave the way for a true revolution in the ability of lower income segments to access information, an essential component in Brazil's quest to speed up the pace of its race toward development.  Similarly, once broadband has been made available in both public and private schools and universities throughout the country, it will turn bold educational projects, such as distance education, into a reality.
Today Brazil is the ninth largest Internet market in the world, and the first in Latin America with the most advanced Internet and e-commerce industries.  The Brazilian e-market continues to grow at a steady pace, thanks to the rapid expansion of the telecommunications sector in the past years.  The Internet is having a profound effect on Brazil, and Brazilians have rapidly become the Latin American leaders in technological innovation and Internet applications.  From e-gov to e-business, from real-time news to state-of-the-art software solutions, Brazil's profile in the Internet is growing. 
This sector continues to receive significant investments, especially in broadband.  Some of the factors influencing this growth are: (1) large user base, (2) state-of-the-art banking equipment, (3) large local retailers with strong brand recognition, (4) a wide array of Portuguese language content providers, and (5) the Brazilian Government's new project to extend Internet access to all citizens. 
Currently, dial-up connections using the public telephone network represent the primary method of Internet access in the residential and SoHo markets.  The low penetration rates among these segments stem primarily from the cost of the service and the unequal distribution of income in country.  Fierce competition among Internet Service Providers has caused access costs to fall, but the market penetration is still considered very low as compared to the size of the population.  Unequal income distribution limits the number of domestic users, but on the other hand, the web reaches more than 80 percent of the upper-middle and upper classes. 
Nevertheless, there has been significant growth in Internet use by lower income individuals, who now represent 17 percent of Brazilian net surfers, up from just 5 percent three years ago.  Besides the decrease of Internet subscription costs and the availability of free Internet providers, there are other reasons for the popularization of the Internet among lower-income users: initiatives to make computers available in schools and public places, and increased availability of credit lines for the acquisition of the first family computer. 

Having met the enormous pent-up demand for telephony that existed when they acquired their concessions, most of the telecom companies have settled on data communication as their top priority.  The telecom sector in Brazil has developed a diversified portfolio of products to meet the data communications needs of various markets, in particular the corporate niche and small and medium enterprises (SMEs.) 
According to recent surveys the rollout of broadband access can help bridge the "digital divide" that exists between SMEs and large organizations.  In Brazil, SMEs represent 98 percent of the total number of companies, and studies suggest that approximately 46 percent of their investments will be made to build the infrastructure for their data transmissions.  A recent survey conducted by Siemens-Brazil of more than 3,000 companies in country has demonstrated that fewer than 10 percent of the SMEs polled use call center systems, although such systems can enable significant revenue gains by enhancing their relationships with their customers.
Potential solutions that are considered best prospects for U.S. companies include the following:
  •  E-commerce and e-business applications,
  •  E-productivity applications for individuals (SoHo market) and organizations,
  • Infrastructure and access enhancing systems,
  • Knowledge management and distribution systems,
  •  Mobile (including satellite-based) applications and services for business,
  •  Long-distance learning and education to enhance management capabilities.

 The following data give an idea of why the SMEs market is so attractive to telecom operators:

  •  Brazil has 1.9 million companies with less than 250 employees;
  • 97 percent of the companies do not have human resources management solutions;
  •  Only 1.7 percent have permanent training programs for the employees;
  • The SMEs will double their use of corporate credit cards in 2003.

(Source: Sebrae, IBGE, Credicard and IDC)
ADSL:      Today in Brazil, broadband access is managed mainly by means of Asymmetric Digital Subscriber Line (ADSL) technology, which is dominated by the local telephone companies.  Their control of the telephone network gives them a virtual monopoly over the provision of ADSL services in country.  However, Anatel plans to adopt measures to foster competition that will allow for price reductions.  One of the alternatives being studied is unbundling.  So far the companies negotiate individually the cost of network access but Anatel intends to change this with a regulation to be put in place by mid 2004.
Due to the high costs associated with the acquisition of ADSL and the low income of most of the local population, the Brazilian telecommunications carriers have decided to focus on the corporate area, specifically on the small to mid size companies to increase their revenues in the broadband sector.
According to a recent survey conducted by Yankee Group, today 76 percent of the ADSL subscribers are domestic but when it comes to revenues, this amount falls to 63 percent, while the corporate market accounts for 37 percent.  For 2003 the Telecom carriers and ISPs believe that the market will double and may reach up to 1.3 million subscribers.
The companies are also interested in decreasing client churn for Internet use.  Although today the revenues generated by these services are not profitable, it is expected that this service will generate more data services and increased revenues in the long term.

From the OEMs' perspective, ADSL represents excellent opportunities mainly due to the increase of new applications such as games and video on demand.  Main manufacturers operating in country are NEC (providing transmission of multimedia video content in conjunction with Brasil Telecom, one of the largest telecom carriers in country), Ericson (DSLAMs and modems to reduce costs for ADSL solutions to be provided to Brasil Telecom, GVT and Vant Telecom and other telecom companies) and Lucent, Siemens and Alcatel (DSLAMs) among others
Below are the most important telecom carriers offering ADSL broadband services in Brazil:
·                     Telefonica - Speedy (Telefônica Spain) is the leader in the sector with 350,000 subscribers and potential growth of 50 percent per year.  Of this total, 50 percent are corporate services.  In order to increase the number of subscribers Telefonica will launch three or four different packages and is looking for additional products to complement their mix of packages.  U.S. companies that can provide such solutions enjoy very good opportunities in the Brazilian market.
·                     Brasil Telecom - Turbo has 190,000 subscribers; 12,000 are corporate.  With the recent launch of a Virtual Private Network Internet Protocol (VPN IP) product with xDSL technology which permits the traffic of data, voice and multimedia, Brasil Telecom - Turbo expects to have at least 20,000 corporate subscribers by the end of 2003.   
·                     GVT - Turbonet has currently 8,000 subscribers (15 percent corporate) and hopes to have 15,000 by the end of 2003.
·                     Telemar - Velox has 20 percent of its subscribers (about 20,000 companies, most of them acquired since October 2002) in the corporate sector.  Furthermore, Telemar has another 80,000 companies using Digital Video Interface (DVI) technology with two channels providing voice and transmission of data and image up to 128Kbps.
·                     Embratel (MCI Worldcom) is another company planning to start offering ADSL broadband corporate services in the next three months.  It still does not have a commercial brand but plans to offer services in cities with high economic activity.
Cable:  In Brazil, the use of the Pay TV network (DTH, MMDS and Cable TV) is not exclusive of the network operator.  In 1999, Anatel approved a resolution to allow the use of that infrastructure by anyone wishing to provide Value Added Services (VAS), such as Internet access.  In addition, this resolution establishes that the network operator can only explore VAS through a separate company established especially for such purpose.  As a result, there was a substantial increase in the number of cable modem users in Brazil--from 88,000 in 2001 to 156,000 in June 2003.  This amount represents 19 percent of the total broadband users in Brazil and demonstrates that there is still a vast market waiting to be tapped by operators.

Although alternative technologies to ADSL currently provide only an incipient form of broadband access, they may in the medium term become an important vehicle for competition in the SoHo market. The licensed pay-TV operators have great potential for increasing competition in the big cities where fiber-optic networks are already in place.

Large providers of cable broadband services include Net Serviços (12 percent market share), Horizon (9 percent), Abril (6 percent), among others.

Wireless Access:  Due to Brazil's continental dimensions, wireless access systems are of fundamental importance for the country. The huge national territory and insufficient wireline networks make Brazil a natural candidate for the implementation of wireless networks.
Fixed Wireless Access (FWA):  In April 2003, Brazil started auctions for frequency bands 3.5 GHz, 10.5 GHz and 28 GHz intended for broadband FWA applications.  According to Anatel, the market for these bands is estimated at five million subscribers by 2010.  The tender resulted in the authorization of 56 blocks of 2 x 1.75 MHz, in the 3.5 GHz band, and 16 blocks of 2 x 7 MHz, in the 10.5 GHz.  The tender for the 28 GHz band will be held after a public consultation presently under way.
The initial operation of these frequency bands is expected to give a new breath to the sector, especially in the niches of the SoHo and SMEs.  The companies that purchased the licenses were Embratel, Direct Net, Grupo Sinos, Vant Telecomunicações and WKVE.
Mobile Services (3G):  Brazil usually supports ITU recommendations, mainly those related to the development of coordinated systems worldwide, with the intention of having the advantage of economies of scale and, therefore, lower prices for consumers.  Following this policy, Brazil supported the specifications and spectrum allocation recommended by ITU for 3G systems.  The 3G spectrum in Brazil is in the "core band" of the IMT-2000 (1920-1980 MHz and 2110-2170 MHz), where it was allocated 2 x 55 MHz. The standard can be either W-CDMA or CDMA, since Anatel regulations do not require a specific technology.
Competition in the wireless segment is intense in Brazil, since Anatel has given four licenses in practically every city.  In terms of spectrum planning and availability for mobile services a total of 285 MHz is allocated in the following frequency bands:  800 MHz (50 MHz), 900 MHz (15 MHZ), 1800 MHz (110 MHz) and the IMT-2000 "core band" (110 MHz).  All operators that purchased the licenses to offer the service have a free spectrum roadmap to offer 2G, 2.5G and 3G services. 
Most of the large telecom operators, including Vivo (Portugal Telecom), TIM (Telecom Italia) and others are already studying the best options to move forward to 3G and expect to start the implementation of this service by mid 2004.
Wireless Fidelity (Wi-Fi):  In Brazil, fully unlicensed spectrum does not exist.  However, there are bands allocated for restricted radiation equipment use.  These bands are allocated on a secondary basis, spread spectrum technique has to be used, and the Equivalent Isotropically Radiated P (EIRP) is limited to 6 dBW.  In these bands, the radio station needs no license or frequency assignment.  The frequency bands are: 900 MHz (18.5 MHz), 2.4 GHz (83.5 MHz) and 5 GHz (125 MHz).
The most popular Wi-Fi system in Brazil is based on the 802.11b standard, operating in the 2 GHz band.  Local operators have been very active in applying for licenses to provide Wi-Fi access to Internet.  The service providers have sought market niches, thus increasing overall competition.  However, these systems have been causing harmful interference to the Service Ancillary to Broadcasting (SAB) and Program making (SAP).
Practically all telecom carriers are offering Wi-Fi services and U.S. companies that offer unique products can enjoy excellent opportunities in this market.  As an example, U.S. tech manufacturer Hewlett Packard is the new addition to the McInternet project in Brazil, together with McDonalds' existing partners, Internet Service Provider AOL and Brazil's Banco Itau, to provide Internet access in the McDonalds restaurants either via Internet or using Wi-Fi technology.  The investment should boost the number of McDonalds stores with computers and Internet access from 75 in São Paulo state to all 582 units across Brazil by the end of the first quarter of 2004.
Meanwhile, in a separate initiative, Brazilian coffee shop chain Fran's Café is planning to install wireless Internet access (Wi-Fi) systems at 80 percent of its 80 locations by the end of 2004.  The company has already installed Wi-Fi systems at 30 locations, in partnership with Brazilian Wi-Fi operator Vex.
Satellite Services:  Marketing satellite services in Brazil, including broadband services, involves two levels of regulation:  1) a license to provide telecommunication services, and 2) authorization to provide satellite capacity.  Therefore, in Brazil, satellite capacity can only be offered to companies holding a telecommunications license.  The service operators, subject to landing rights authorization given by Anatel, can also use foreign satellites.  To authorize landing rights, one of the requirements is the existence of reciprocity between Brazil and the foreign country.  Due to high costs associated to the use of satellites for broadband, this service is still very limited in Brazil and no statistical data is available.  Comsat, StarOne and Impsat are some of the companies operating in country.

(million units)






Fixed Telephones












Internet Users






Broadband Subscribers (all technologies)






*        39.0 million effective in use
**           Statistics are unofficial estimates, for the end of year 2003 and 2004.
Source: Anatel

ADSL - BROADBAND MARKET  - # of Subscribers







Home Connection












        (*) Statistics are unofficial estimates, for the end of year 2003 and 2004.
                               Source: Yankee Group Brazil









Source: IDC Brasil
Advanced technologies and high quality products are always excellent entries for multinational telecom companies to bring to Brazil's market, but this does not necessarily mean that it will be easy for foreign companies to export to Brazil.  Before entering the market, a foreign company has to observe and address issues including policy changes, mandatory technology transfer, and certification of products.  The average import duty for telecommunications equipment is 15-17 percent, but this amount may go down to zero in cases where Brazil does not manufacture similar products.  There is also a federal tax on industrial products (IPI), with an average of 4 percent, and an average State Sales Tax (ICM) of 18 percent.  Local manufacturers also pay the IPI and state sales taxes.
Certification of Products:  ANATEL has released a list of accredited laboratories that will perform tests required for the certification of telecommunications products.  Renewal of current and prior certificates will also be granted after testing to make sure they comply with ANATEL rules.  For detailed information on this subject, please visit http://www.BuyUSA.gov/ document ID: 113203 - CERTIFICATION OF PRODUCTS - ACCREDITED LABORATORIES IN BRAZIL.  
Technology Transfer:  Less dependence on telecom imports has been a longstanding goal of the Brazilian Government.  Brazil's initiatives in international cooperation are all aimed at developing its own national industries and reducing imports where possible.

Non-tariff trade barriers
:  Non-tariff barriers such as procurement policies and technical standards can still make importing difficult.  Government and industry can be expected to put hurdles in the way of foreign telecom vendors' exports to Brazil in order to develop their own market.  Foreign suppliers should always remember the primacy that the government places on local production, and should pay attention to licensing and/or joint venture options to counter non-tariff barriers. 
Import Costs:  The table below shows the taxes and fees applied to an imported product exported from the east coast of the United States to the port of Santos in São Paulo, Brazil.

Import Costs - Description

US Product Imported into Brazil


Price - Ex-works




U.S. in land freight


Handling Fee




FOB US Factory (Sub Total)


Freight US - Brazil


Bunker charge / container (BAF)


Cost with Freight Subtotal


Insurance (0.5% on price FOB)


Price CIF


Import Duty (14% on CIF)


Subtotal with insurance and import tax


Tax on Industrial Product (4%)


Subtotal with IPI


State Tax (18% of subtotal with taxes)


Subtotal with state tax


Merchant marine fee


Terminal handling charge


Handling Fee - Freight Forwarder


Customs Clearance (R $ 300.00)


Broker union fee


Warehouse - handling fee (R $ 120.00 / container)


Warehouse up until 15 days (0.5% of CIF)


Inland freight + insurance to customer


Total Imported Cost


Source: Association for Manufacturing Technology Mercosul office using exchange rate: US$1.00 = R$2.40
Brazilian and foreign companies, as well as their products, must be pre-qualified to bid on government procurements.  This qualification addresses both technical and financial capabilities and must be reestablished with each bid submitted by a private company. Generally, these pre-qualifications are available in supplier application forms or public bid documents generated by each government entity.  The criteria vary among government entities according to their specific standards and applications, i.e., telecommunication products, water, wastewater, petrochemical, etc.  In general, due to short procurement lead times, U.S. exporters are better positioned to bid on public procurements if they have a locally established presence through a representative, distributor, or sales agent.
Brazilian Consumer Law states that all equipment and products sold in Brazil must have operation manuals and specifications in Portuguese.  Aftermarket and technical assistance including spare and replacement parts must also be offered.
Foreign manufacturers usually sell through a local agent or distributor or through a locally established office.  Selecting a representative, distributor or manufacturing partnership with locally established companies can facilitate U.S. exporter entrance into the market, since market knowledge, end-user contacts and qualified management are very important in obtaining market share in Brazil.
U.S. firms should consult with local law firms when signing an agent or distribution contract with a Brazilian partner.  General Brazilian commercial law regulates commercial distribution contracts; however, specific legislation regulates the relationship between the foreign company and the Brazilian agent.  Although the U.S. company and its local agent are free to negotiate contract clauses, there are laws that govern this relationship.  By law, the indemnity payable to the agent in case of contract termination is usually favorable to the agent.
Due to the large size of the country, agents and distributors usually cover specific regions. In some cases, depending on the company's sales structure, an agent or distributor may have nationwide coverage.
The most usual payment terms are:
·         Payment in Advance,
·         Cash Against Document,
·         Confirmed Letters of Credit for higher value imports,
·         Open Account (although not generally recommended.)
Multilateral Development banks like the World Bank and the International Development Bank are important sources of long term financing for the public sector.
Brazilian Development Bank - BNDES provides long term financing of investments for private companies in all areas, including foreign companies established in Brazil.  Its activities include financing and co-financing, security subscriptions (stocks, debentures) for the capital markets, and structured operations (such as project finance), including:

  • Export of goods and services,
  • Acquisition and leasing of new machinery and equipment,
  • Civil projects and installations, and projects directed to improve the level of technology, quality and productivity, including training, information technology, and environment and energy controls,
  • Other fixed investments, excluding land and existing improvements.

Additional information about BNDES may be obtained at http://www.bindes.gov.br

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