It has taken a while, but it has finally happened. After waiting for a little over a year we can now celebrate partial company tax exemption on payroll, to encourage exports of information technology software and services. On August 20th Brazil's President signed Decree 6.945, which regulates Law 11.774, of September 2008, which reduces the welfare tax rate on payrolls for companies that export from 20% to 10%. Valid for five years as of September, the benefit will require, in return, that the companies invest in training, research, development and technological innovation.

This is a victory for Brasscom and the other associations in the software sector who have gotten the measure included in the Brazilian Government's Productive Development Policy (PDP), launched in May 2008. The decree comes at a good time and signals the importance of the sector to Brazil's development at moment in which the country is gaining a profile and international interest is growing among potential investors in the country.

The decree will allow Brazilian companies in the sector to get more vigorously involved in the global competition for IT service outsourcing contracts. Analysis service providers, systems and games developers, programmers, data processors and even call centers will benefit from the tax reduction. Added to this new benefit is another one, which is already in play. Sanctioned by the President of Brazil in March this year, Law Nº 11.908 authorizes Information and Communication Technology companies to discount from their income tax twice the amount they spend on training people in software development.

With the eighth largest IT market in the world, Brazil needed an incentive to position itself on the global scenario and the President's approval is an important boost to Brazil's competitiveness. The incentive produces real gains in competitiveness for exports, an area in which labor costs could come down from a current average of 70% to 80% of companies' turnover to 60%. The reduction of taxes could be worth around US$ 70 million by the end of 2009. The government's immediate loss of welfare tax will be recouped in the medium term in greater collection of income tax.

We believe that this is a vitally important step which will be complemented by others that will expand the capacity of private initiative to operate with greater effectiveness on the global scenario. We are sure that in this way we are closer to our government-agreed target of achieving US$ 3.5 billion in exports by 2010.