Brazilian Businesses Shackled by Low-Tech

IN the back room of an old house hidden away in an industrial neighborhood, a muscular young man pulls on a hand loom for eight hours every day. With each movement, a row of knitting emerges, slowly becoming part of an elegant sweater that will be handstitched together, hand-finished, hand-washed and ironed, and hand-carried into the front room, where store owners buy them. The Bruar knitwear factory's 10 workers painstakingly produce 100 pieces a day. ``Modern machines are very expensive, and loans are hard to come by,'' says factory manager Claudia Guedes. ``We work more using goodwill than with technology.''

Bruar's problems are only the tip of an iceberg that affects just about every sector of Brazilian business. Here, as in many developing nations, modern technology is sorely lacking. United States auto companies operating in Brazil see some car models that are 20 years behind Detroit.

``Our technology varies from state of the art ... to out of the ark,'' says James Donaldson, director-superintendent of Autolatina, a Brazil-Argentina joint venture between Ford Motor Company and Volkswagen AG. ``Some of our equipment dates from just after World War II.'' Mr. Donaldson blames Brazil's high taxes and import duties, plus a generally unstable business environment.

Latin America's largest economy, with a territory the size of the continental US and a gross national product of about $350 billion, has come a long way. Before World War II, Brazil imported almost all its manufactured goods. Today, it produces its own steel, automobiles, soft drinks, electronic cash machines, tableware, and telephones. It makes airplanes and tanks.

However, according to a study by the University of Campinas, the technology available in Brazil lags behind that of industrialized nations by about 10 to 15 years.

The problem, analysts say, has been a widespread belief that Brazil could develop technology the same way it replaced imports with local industrial output just after World War II. ``The last 20 years were a period of technological breakthroughs,'' says a long-time American consultant to Brazilian industry. ``During the same period of time, Brazil was trying to start from scratch and get up to state-of-the-art, and that equation just doesn't work,'' he adds. The government, he says, could not invest enou gh in education to provide training in high-tech research and development on a par with the US and Asia.

The start-from-scratch policy protects local computermakers, for example, but keeps out many state-of-the-art products and increases costs. ``I recently bought a new [computer system] from a smuggler,'' says a Sao Paulo computer user. ``It cost me $4,000, $800 over the US price. If I wanted to buy the same equipment in Brazil, I couldn't find it, and the closest thing to it would cost $7,000, without the monitor.''

The technology gap is evident even in the simple act of making a phone call. Callers must wait for dial tones, and put up with busy circuitry and frequent disconnections. That is because Brazil's 8.8 million telephone lines run on the old rotary system, instead of a modern digital one, and there is an immediate need for 6 million new lines. The cost of this would be $24 billion, says telecommunications consultant Luiz Carlos Morals R^ego. He notes that the cost needs to be funded by phone-rate hikes and foreign investment. But the hikes cause inflation, and Brazil's unstable economy isn't attractive to investors.

THE government of Brazilian President Fernando Collor de Mello is trying to remedy this. Mr. Collor has begun changing the policy that long kept out foreign computer technology, and recently announced a program to help business use more modern technology.

But so far, Collor has met with formidable obstacles.

``Brazilian legislation is very complicated, so the political decision to open up the computer market, for example, depends on congressional approval,'' says Jos'e Goldemberg, the national science and technology secretary. ``Also, there is [the opposition of] a technocracy that has been forming for the past 30 to 40 years and is firmly entrenched.''

To open up the country to modern processes, the government also faces resistance from businesses. ``Some companies are doing fine in the market, they're not really keen on changing,'' says George Hegedus, a business professor at the Getulio Vargas Foundation. For if everyone can get technology, ``where does that leave the big fish?''