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Brazil Innovation Opportunities

by: Tatjana Guznajeva, Technopolis Group

 

Why should I read this document? 

 

When confronted with the differences between your own market and the market of Brazil you will likely feel that you have to adapt your product/service significantly to make it fit the preferences and expendable income of local people. While many may see this as a challenge this can also proove to be a great opportunity for your company! Adapting to a new market, like Brazil, will allow your company to innovate. Not only will operating in Brazil lead to new insights to be more successful in Brazil, you will most likely also pick up on ideas to be more successful in your home market. 

 

This document provides a short overview of innovation aspects, business opportunities and challenges in Brazil. It will also give advice on best practices for starting and developing an innovative business venture, considering Brazil’s country context. May it help you to explore Brazil and lead you to innovation and success.

 

Opportunities and tips for innovation and doing business in Brazil

 

  • The economy of Brazil is the seventh largest in the world and the biggest in Latin America. It has diverse and well-developed industries.
  • The parallel growth of income of the poorest share of population, of the middle class and of the wealthiest group of Brazilians results in simultaneous large demand of both cheap manufactured goods, as well as, the boom of high-luxury retailers. This leads to large business opportunities for a variety of companies and sectors. 
  • If you plan to produce for the local population, consider Sao Paulo and Rio Grande do Sul, as they are the most dynamic consumer markets in Brazil
  • Brazil has an abundance of energy resources – oil, hydro energy, solar and wind power, ethanol. The Brazilian government is searching for investors in the energy sector.
  • Agriculture is one of the major industries in Brazil, due to vast land resources and suitable climate. Currently, the market lacks fertilizers and farming equipment
  • The population of Brazil is very receptive to innovation. The country offers a large market for novel technologies, while social media can be effectively used for marketing purposes.
  • Innovation in Brazil is focused on the following sectors: defense and aerospace, healthcare, ICT, energy, social development and assistive technology. Consider one of these areas to get support from the Brazilian Innovation Agency (FINEP).
  • The Brazilian consumers are increasingly purchasing mobile and electronic devices, household appliances and decorations for home. The consumption of food and beverages, alcoholic drinks, apparel and accessories is expected to grow the most in upcoming years, whereas the market of these goods is not fully saturated.
  • With a growing middle class and a significant share (15%) of population in the age of 16-24, there is a high demand in education services.
  • Brazil’s real estate market is growing. It is a good time to enter this sector, due to competitive prices and good quality of offered properties.
  • The Brazilian government is currently working on improvement of infrastructure and tries to attract foreign investors. Brazilian Investment Information Network provides information on the types of programmes that exist to support investors and various projects.
  • Brazil’s ports are expanding, while the number of marine construction projects or port-oriented services are scarce and highly demanded
  • Brazil has well-functioning Internet banking and e-commerce is growing, providing large potential for business. The goods that are best sold online are consumer products (books, cd’s, etc.), travel services, electronic goods and supermarket items.
  • The Brazilian government launched “Investro Visa Program” that allows foreign investors to easily travel throughout Latin America and even gain Brazilian citizenship after four years of residency in the country. Consider Brazil as a central location for trade activities across Latin America.

 

On Level 2 you can find information about innovation climate in Brazil, while Level 3 will tell you more about business activities in Brazil.

 

 

This page will tell you about innovation ecosystem, major technology sectors, innovation and business practices in Brazil.

 

Innovation ecosystem

 

In contrast to Brazil’s dynamic economic growth, the pace of innovation, scientific and technological development in the country is significantly lower. The Brazilian government tries to spur innovation by financing various projects, supporting R&D collaboration across sectors and organisations, and stimulating technology transfer. Among the biggest public initiatives in the area of innovation is SibratecShop (Open Laboratory Programme) that allows the use of industrial equipment to turn new ideas into technological innovation, and the First Innovative Firm Programme (PRIMTE) that funds innovation in SMEs through grants, training programmes, and attracts venture capital for technology-based companies. Due to large inequality and poverty in the country, the government is actively stimulating social innovation and entrepreneurship.

 

One of the major challenges for innovation and scientific development in Brazil is a lower quality of education than in the EU, only a small share of the population has a university degree (around 11% in 2009). This results in various skills gaps and a deficiency of highly educated people. Brazilian research institutions are criticized for a relatively low level of scientific output and for a lack of collaboration with local and international research and business organisations

 

Innovation in Brazil is primarily driven by a few leading, business companies that design and export high-technology. Local SMEs are rarely engaged in innovation of products and services, due to lack of resources and a significant consumer demand of products with low level of innovativeness. Amongst other important drivers of innovation and scientific development are the so-called social organisations. They are private, non-profit entities that manage public research facilities under contract of federal agencies. Due to their autonomy in selection of researchers and topics they became a very effective and efficient means of stimulating research and innovation in the country. At the moment, there are six of such organisations: the Institute for Pure and Applied Mathematics, The institute for the Sustainable Development of the Amazon Forest, the National Centre for Research in Energy and Materials, the Centre for Management and Strategic Studies, the National Teaching and Research network, and the Brazilian research and Industrial Innovation Enterprise.

 


Innovation sectors and technology

 

In efforts to encourage innovation in multiple sectors, the Brazilian government is investing in development of defence, water, food, bio-economy, sciences and social technologies, climate change, ICT, energy, health, converging and enabling technologies. Among most advanced sectors in Brazil are bio-, nano- and environment-related technology. Brazilian technology for extraction of oil in deep water is one of most developed in the world. In contrast, technologies in the ICT sector are lagging behind, and the Internet access in the country is insufficient. Nevertheless, positive developments are expected in this sector, due to a rapid rise in fixed and wireless broadband subscriptions in the last decade. 

 


Innovation culture and practices

 

As a result of a lack of economic stability in the country, Brazilians tend to be risk-averse, not prone to experimentation and innovation. In addition, Brazilian culture does not promote setting up business partnerships in other countries and exploration of opportunities abroad. In contrast to the EU, the local entrepreneurs are very ineffective in turning innovative ideas into actual products or services. 

 

To transform local culture and practices, the Brazilian government increased public financing of R&D projects, established more than 400 vocational training centres, supports several business incubators and technology parks, and expanded the number of scientific competitions and scholarships. Business incubators and accelerators, in particular, serve as important instruments to support local start-ups, test new business models and design of novel products/services. As a result, in the last few years Brazilian business ecosystem has significantly improved.

 

Technology transfer from public research organisations to private companies is a very common innovation practice in Brazil. Previously tested innovative ideas or technologies are absorbed by local entrepreneurs. Hence, business partnerships could be initiated through affiliation to the same research institute

 

The attitude towards innovation and entrepreneurship is more positive in regions of higher level of industrialisation and scientific development, such as the Southern and Southeastern regions of the country. The State of Sao Paulo produces the highest level of scientific output and has the largest number of innovations. 

 

 

This page highlights major economic sectors and iconic products, shows business trends and explains how easy it is to do business in Brazil. In addition, you will find the list of websites, which provide some hands-on information. 

 

What is the country known for?

 

Sectors

The biggest sectors are: textiles, shoes, cement, chemicals, lumber, iron ore, steel, and motor vehicles.
 
The service sector accounts for 72% of GDP, hence, it dominates the economy and is the major contributor to job creation. Government services, retail, real estate and renting, and financial services represent almost 70% of all service output in 2015. The industrial and agricultural sectors account for 22.7% and 5.2% accordingly.

 

Iconic products

Sugarcane, coffee, tropical fruits, corn, poultry, beef, coffee, bio-ethanol, wood, cellulose, automobile and parts, machinery and equipment, textiles, cement, computers, aircrafts, steel and petrochemicals, and consumer durables.

 


How easy is it to do business in Brazil? 

 

  Brazil EU average Emerging markets average
Overall - ease of doing business 123 30 83

 

Brazil performs relatively poorly in the World Bank’s ranking for doing business, due to complex bureaucratic procedures for starting business, obtaining a construction permit, registering a property and paying taxes. For example, the process of company registration differs from one state to another: the easiest and fastest procedure is in Minas Gerais and Rio Grande do Sul, while most complex are in Sao Paulo, Ceara and Maranhao. 

 

Among other challenges in doing business in Brazil are corruption, special conditions for foreign companies to start a company in the country, complex employee protection legislation and a inadequate transport system. Foreign companies sometimes find it difficult to operate in Brazil, as only 3% of population speak English. Hence, the knowledge of Portugese is essential for doing business. Nevertheless, Brazil has a stable democratic system and institutional setting, effective macroeconomic policies, controllable inflation and moderate public debt. The infrastructure in the country is rapidly developing and the costs of investment, such as energy costs, taxes and interest rates, are lower than in other Latin American countries.

 


Business trends in Brazil

 

A growing number of local entrepreneurs decide to merge with other companies from the same business sector to enjoy the economies of scale and to improve their competitive position in the market. Competition in the Brazilian economy is growing, investors are taking an increasing interest in the country.

 

Brazil accounts for 42% of all B2C e-commerce in Latin America, e-commerce has grown by more than 20% in the last 3 years, and it is expected to show a positive growth trend. The success of B2C is attributed to use of aggressive marketing techniques by local entrepreneurs, such as sharp product discounts, online product coupons, to attract consumers.

 

The Brazilian consumers are becoming more demanding, they value the quality of services and extra services provided to them. The demand for delivery services has been growing as a result of rising incomes and a larger share of elderly population.

 

Brazilian consumers enjoy modern technologies and use them extensively before or during shopping. Around 72% of Brazilians do research on a product before buying it, therefore good reviews and effective marketing are very important for companies. 

 


More hands-on info

 

 


Bibliography

 

Level 1:

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Level 2:

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Level 3:

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