Major industries across a number of traditional sectors in Latin America are undergoing revolutionary changes in the name of technology. Digital transformation is changing the way people do business. Empires are emerging from startups, mobile applications, software iterations and cryptocurrency.
Technology feeds into unforeseen innovation and spans previously unsurmountable distance with speed, precision, and reliability. Within Brazil’s business climate, technology is guiding change towards better access and regulation of emerging local markets.
Overview: Brazilian economy
Brazil is the fifth largest country in the world, and the largest in Latin America. It houses a staggering population of just under 212.4 million people. Brazil has the ninth highest GDP in the world, run by significant manufacturing, oil and gas, agriculture, and iron and steel industries.
The nation is a member of many international trade agreements and fora, including MERCOSUR, BRIC, the G-20, and the World Trade Organization. Commercial hubs such as Sao Paolo are hives for business activity and innovation, and continue to draw in increasing amounts of foreign investors.
Brazil holds a reputation for commercial bureaucracy and complexities that some view as a barrier to business. However, the country is working hard to open the doors to technological innovation.
Emerging tech solutions
As the Latin American giant’s economy grows, so too does its high-consuming middle class. Additionally, companies driving access to technology is pushing an increase in digital literacy of the country’s population.
Sustainability and efficiency agendas continuously drive improvements and open the playing field for innovation, especially in technology. We outline some of this regional power’s burgeoning tech-savvy industries.
Brazil, along with Mexico, leads the region in terms of highest number of mobile users. Recently, the University Fundação Getúlio Vargas/FGV has published its thirtieth Annual Research of IT in Brazil. In this research they report that there are more than 420 million devices in Brazil. These devices include notebooks, computers, smartphones, and tablets. That’s about 2 devices per person in the country. 230 million of these are just smartphones alone.
An increasing digital and online presence is broadening the market for mobile commerce. As individuals and households come online, applications offering easier customer service experiences are in high demand. In 2013 alone, usage of mobile devices to purchase goods in Brazil skyrocketed 84.2%.
Popular online commodities for Brazilians include fashion, cosmetics and electronics.
Services such as Rappi, iFood, and Uber streamline food delivery and transportation, offering people convenient alternatives for accessing day-to-day needs.
Well-established Brazilian companies are now leaning on these contemporary solutions to retain and boost their client base. A big supermarket net company Carrefour is forming a partnership with Rappi and other start-ups to review and renew its own operations. These partnerships are increasing the electronic and mobile commerce revenue of Carrefour, reducing costs and increasing profits.
Financial institutions such as banks are under renovation by solutions geared towards customer service efficiency. Financial tech or ‘fintech’ is sweeping Brazil’s traditional banking sector.
Companies offering microcredits, instant payment platforms, and insurance sales carry the promise of convenience. NuBank, for example, interacts with customers through an electronic application. NuConta, a digital banking account free of charges, now has 3 million users. Nubank draws in around 6 million customers and in 2019, made world top rankings in World’s Best Banks 2019.
Historically, a large population of Brazil (and throughout Latin America) did not own a bank account. Fintech now reaches into smaller communities and isolated regions to bring unbanked communities into the financial connectivity fold.
Fintech no doubt still has its challenges – notably, that the sector is advancing so quickly that the government is struggling to keep up in terms of establishing clear regulatory frameworks for the parameters of fintech innovation. However, this area is definitely one to watch for investment opportunity in Brazil.
Agribusiness technology (agritech)
Brazil attributes its climb out of recession to the booming agribusiness industry. In 2017, agribusiness represented 23% of the country’s GDP. As a core pillar of the country’s economy, agribusiness is drawing attention from agricultural tehnology (agritech) businesses who are looking for ways to further improve the industry’s efficiency.
Popular solutions trending in Brazil include:
- Precision agriculture
- Sensors and crops
- Geolocation and navigation.
4.4 million family farms generate 85% of Brazil agricultural activity. Therefore, finding practical and cost-effective ways to enhance operations doesn’t always offer up a ‘one size fits all’ solution.
From a national perspective, Brazil’s economic reliance on agriculture encourages innovation towards greater performance security. The country is therefore positioned to respond well to solutions that can bring consistency, productivity and sustainability to the market.
Transactions between businesses is being made easier with online services. Note that this sector also feeds into the ‘mobile commerce’ section mentioned above.
Business-to-business (B2B) is considered a gap in Brazil’s digital infrastructure overhaul. Largely undiscovered, the opportunity to reach businesses servicing domestic and international customers with online marketplaces is lucrative for new actors and investors.
Some success stories in Brazil’s online B2B scene include Americanas, Submarino, and Mercado Livre, who at this point are competing in a relatively uncrowded industry. The salient feature to note about these three businesses is their scale; small and medium B2B enterprises are still largely absent in Brazil’s tech domain.
Early movers will definitely benefit from the lack of saturation in Brazil’s B2B environment, and have an opportunity to find their niche with little competitive risk.
Opportunities for business
Allying with customers’ demands for new products and technological ‘value-add’ solutions, the government has adopted some measures to incentivize new business, and bring startups to Brazil.
President Jair Bolsonaro recently waived certain bureaucratic measures for forming small and medium enterprises through a provisory law called the MP of Economic Freedom.
In addition, the newly established Empresa Simple de Credito (ESC) business structure enables people to establish a private company with their own financial assets and lend to others. This makes sourcing loans easier for small businesses; they can now access funds with competitive interest rates.
We can help you get started
Brazil’s responsiveness to technological innovation makes it a worthwhile investment destination. Embracing disruption and advancements offer new opportunities for early movers. With a progressive, business-focussed government at the helm, now is the time to get involved.
For help getting started, consider seeking accounting and legal support from local experts. With the right strategy, your Brazilian expansion can achieve long-term success.
At Biz Latin Hub, our Brazil team offers comprehensive market entry and back-office services. We provide customized business solutions to suit your needs. To find out more, contact our Brazilian business experts at [email protected].