Recife’s tech hub takes on Brazil’s wealthy south

Recife’s tech hub tried to take on Brazil’s biggest players in Sao Paulo and Rio de Janeiro. What happened next is a cautionary tale for digital start-ups thinking big.

It’s one of Brazil’s biggest tech hubs, but Recife’s Porto Digital (Digital Harbour) is no gleaming expanse of shiny metal and glass. Instead, this tech park of more than 200 firms is located within the city’s historical neighbourhood.

Launched with much hype in 2000, Porto Digital made headlines in the likes of Wired and Bloomberg Businessweek, a regional hub making a concerted effort to become a big noise. The big international companies have not flocked to Recife; but the hub’s steady growth, far from the wealth of Brazil’s southern cities, may be a salutary lesson for other tech centres aiming to take on major players. But after 13 years exporting products and services to the world, the hub still has to overcome a barrier no amount of high-speed internet connections can overcome: geography.

Those behind the original concept of Porto Digital knew about the challenges ahead, trying to attract new companies to a city few non-Brazilians could place on a map. It took longer than expected; the hub’s direction has changed from the original vision, partly because politicians did not believe Porto Digital would make that much of an impression in the global economy.

Even today, if a foreign company or multinational chooses to open a branch in Brazil, it will first go to southern Brazil, where much of the country’s wealth is concentrated. Compared to southern cities such as Sao Paulo and Rio de Janeiro, Recife lags behind in economic and political power. The northern region has always been poorer than southern Brazil. As the country prepares to host both the World Cup and the Olympics, the north/south divide still remains.

Skilled workforce

Evandro Curvelo Hora, director and one of the founders of Tempest, a security intelligence firm in Porto Digital, recalls how hard it was to reach new clients some years ago. "Today, it's still an issue for newcomers. We faced the same issue but eventually overcame the geographical distance [to Brazil's economic core] with our expertise,” he says.

Tempest also has branches in Sao Paulo and London and it needed them to raise its profile. "We are making business there and coding here,” says Hora.

For many tech firms in Porto Digital, opening branches in Sao Paulo is still the only way to expand. Usually, the southern branch means they are commercially viable (and available) to potential clients, who tend to be a bit distrustful of firms confined to Recife.

"Truth be told, our market is not in Recife yet, not in our northern region. It's in Sao Paulo, Rio de Janeiro and abroad. We've been sending our CEOs to Sao Paulo, indeed, but our 200 firms are developing and coding here in Recife. They are based here,” says Sergio Cavalcante, CEO of the Recife Center for Advanced Studies and Systems (Cesar), a private institution launched in 1996 that is by far the largest business in Porto Digital.

The highly skilled workforce is perhaps Porto Digital’s secret weapon. Since the '90s, the city has been regarded as one of the hubs for skilled IT professionals, in great part thanks to its computer science program at the Federal University of Pernambuco (UFPE). But until Porto Digital came to life, many would leave the campus for Sao Paulo, or leave Brazil altogether.

Recife’s computer science department ranks among the top five in Latin America and is considered the most prolific in Brazil in terms of academic publications, postgraduate dissertations and theses. According to Brazil's Institute of Geography and Statistics (IBGE), while the average income is amongst the lowest in the country, the northern region of Pernambuco is showing a steady increase in nominal GDP, beating other states in the past few years.

"We are an open, urban tech park, located exactly where the city itself was founded. There's no such thing in any other place in the country", says Guilherme Calheiros, the innovation director of Porto Digital.

And some tech workers are finding that attractive. Frank Urben, for instance, left the huge metropolis of Sao Paulo and came to Recife to work in a more laid back environment. "I was born and raised in Sao Paulo, never left the city. Here in Recife we have the same problems as any other big city in Brazil, that's true; but we [in Recife] are much better off than the rest of Brazil in terms of coding, software development and games, you can count on that,” says Urben, who is the art director and project manager at music software firm D'Accord.

‘Good for innovation’

The director of D'Accord, Americo Amorim, was only 17 when he decided to open its own business, called SomBrasil.com. The website helped spread the MP3 format in Brazil in the late 90s. In 2001, SomBrasil was already the most visited music-related website in Brazil, beating MTV.

One year later, Americo Amorim was invited to become a partner at D'Accord after a successful incubation from UFPE. The 32-year-old is now a figurehead for entrepreneurship in Porto Digital. "We know the big bucks are to the south [of Brazil], but I don't even think about leaving this place,” he says.  “Besides the skilled workers we have, there's no other place in where you have such a good network of IT professionals as we have. It's good for business; it's good for innovation, good for development. We don't live far away from here, we live in the city and Porto Digital lies in the city as well.”

D'Accord followed the usual drill – set up an office in Sao Paulo and do everything else, especially the coding, in Recife. Porto Digital has recently opened a branch office in Sao Paulo to offer space for newcomers who can't afford to have their own offices in the city. They can rent space for a very low price and hold meetings there.

Pernambuco’s former secretary of science and technology, Claudio Marinho, says Recife’s IT culture is unique in Brazil. One of Porto Digital’s founders, Marinho says most companies are essentially offering services with world-class quality, and perhaps some innovative products, but the cluster as a whole still lacks scale. "So far we haven't been able to attract companies with a higher level of growth and innovation. Most are smaller companies; or small branches from the big ones, such as Microsoft. There's no Google, Facebook or anything similar here,” says Marinho.

Porto Digital is estimated to be worth around $1bn. "It's not that much, but it's unique. There's not an even remotely similar initiative in Brazil. We are not isolated from the citizens, not in the outskirts of the city, not in an industrial part, not at the university campus. We have no frontiers and no borders. We have no closed membership. You just open your company in this area and you are one of us,” says Marinho.

The tech hub is also attracting investors and CEOs because the average wage of a skilled IT professional is usually 30% lower in Recife than Sao Paulo or Rio de Janeiro.

Social conscience

Local leaders talk about whole buildings being given to Porto Digital in order to be able to house more companies. The lack of physical space is becoming an issue.

"Porto Digital was not raised to be only a technology park, but also a social and economic development plan, a project for urban requalification,” says Guilherme Cavalcante, one of the founders of Recife's branch of The Hub. "I don't even consider this as a neighbourhood. We are an environment. Where people meet, work, innovate and lately we're implementing public policies of creative economies,” adds Cavalcante.

Porto Digital stands in an area originally controlled by the Dutch, who were expelled from this part of South America in 1654.  The harbour’s fortunes  declined and businesses left, with the city’s nearby favelas increasing in size. It is  not only trying to export services and tech, but social awareness as well. Many children and residents in poorer districts like the city’s favelas are enlisted in programming courses and other schemes supported with the help of  NGOs.

In the future, Porto Digital may no longer worry about competing with different regions of Brazil and even attract skilled workers from abroad. It could, instead, become a role model for merging creative economies with social development solutions using their IT skills. For some, this trend has already started.

Foreign delegates from the 30th IASP World Conference of Science and Technology Parks, who have been visiting the city this month, had probably never seen anything like Recife. This innovation hub with its vibrant nightlife and charming urban landscape right on its doorstep may not have delivered on the initial hype, but its story is far from over.

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