Brazilian growth bottlenecks and digital ecosystem

Brazilian Digital Ecosystem

The Role of Technology to overcome Brazilian Economy Bottlenecks

Brazil – From sky-rocketing GDP growth…..

….. To the “Pibinho”

Brazil - missed chance of sustainable economic growth ?

2003 05 07 09 11 12 13

8

6

4

2

0

2 (-)

GDP% change on a year earlier

Brazilian structural bottlenecks and interaction with the digital ecosystem

INFRASTRUCTURE

EDUCATION

PRODUCTIVITY

TAX & SYSTEM

Brazil Growth Bottlenecks: Infrastructure

INFRASTRUCTURE

(Transport, Telecom, Energy)

EDUCATION

Disaggregated, isolated, private infrastructures(Brazil: 114th out of 148 countries)

Skilled labor shortage (high turnover and cost)(Brasil (190M): 37 mil engenheiros/ano. Coreia do Sul (48M: 92 mil) - Brazilian education still ranks 88th

TAX & ADMINISTRATION The Brazil cost: Tax burden and bureaucracy

INDUSTRIAL PRODUCTIVITY Industrial competitivity and productivity (Auto, Equipments…)

Productivity & Growth Bottlenecks Challenges

Brazil’s stock of infrastructure value to GDP is 4x less than in developed economies

Total Value of Infrastructure Stock% GDP

Brazil Growth Bottlenecks: Education

INFRASTRUCTURE (Transport, Telecom, Energy)

EDUCATION


Skilled labor shortage (high churn and cost) – education quality (55th/65th)*

(Brasil (190M): 37 mil engenheiros/ano. Coreia do Sul (48M: 92 mil) - Brazilian education still ranks 88th




* Program for International Student Assessment’s analysis of quality of basic education

Brazil Growth Bottlenecks: Competitiveness


EDUCATION






Productivity gains contribution to GDP is very low

Productivity contributed less to Growth in Brazil than in other rapidly developing economies

Breakdown of value-added growth, 2002-2012

China India South Korea Mexico Russia Chile Brazil

10.6 7.8 4.2 2.3 4.6 4.1 3.7CAGR

2002-2012 (%)

Source: Euromonitor, BCG analysis

Employment growth (%)

Productivity gains (%)

7

93

18

82

28

72

40

60

60

40

70

30

74

26

Brazil Growth Bottlenecks: Tax burden & bureaucracy


EDUCATION






Structural bottlenecks have shaped and impacted the digital ecosystem

INFRASTRUCTURE

EDUCATION

PRODUCTIVITY

TAX & SYSTEM

Digital landscape: France vs Brazil

FRANCE BRAZILGDP in million US$2,775 US$2,476

France and Brazil are the two first Latin economic powers

Brazil: High engagement but challenging affordability & environment

FRANCE BRAZIL26th 60th

• Digital readiness impaired by structural bottlenecks

• Business and Innovation environment is not supportive

• Accessibility is average and Affordability is still a challenge

• Engagement is high throughout individuals, businesses and governments

• Online spending are still lagging (e-commerce & online advertising)

Key takeaways about the readiness of the Brazilian digital ecosystem

Engagement

Affordability

AcessibilityEnvironment(Regulatory, Business & Innovation)

Worldwide Ranking:(World Economic Forum)

Brazil: an impaired digital environment

FRANCE BRAZIL

Regulatory, Business & Innovation Environment

World Economic Forum

Software Piracy rate

Laws related to ICT

Availability of latest technologies

Venture Capital Availability

Intensity of local competition

Quality of management schools

IP protection

Number of days – procedures to start a business

Total Tax rate (% profit)

Quality of education systemR&D Research

27th 107th

Skills

Business -Innovation

Regulatory

A V E R A G E T I M E T O S T A R T A B U S I N E S SI n d a y s

7 days

111 days

7 days

33 days

F r a n c eB r a z i l C h i n a

13 procedures 5 procedures

Digital environment

R & D I N V E S T M E N T S & J O B S

2 . 2 5 % G D P

1 . 1 6 % G D P

R&D technicians in France vsBrazil per 100 habs

3 x

TAX & ADMINISTRATION EDUCATION

FRANCE BRAZIL


Brazil: Average Accessibility

FRANCE BRAZIL

Accessibility


Acessibility of digital content

Mobile Network coverage

Mobile Internet Penetration

Secure Internet servers

Fixed broadband penetration

28th 62th

Digital Accessibility

FRANCE

BRAZIL

33 M

77 M

50%

38%

M O B I L E B R O A D B A N D P E N E T R A T I O N% p o p u l a t i o n

3 G C O V E R A G E% p o p u l a t i o n

90%98%

FRANCE

BRESIL

24 M

19 M

35%

10%

F I X E D B R A O D B A N D P E N E T R A T I O N% p o p u l a t i o n

INFRASTRUCTURE

€ 20 / month (1GB)

€ 10 / month (1GB)

FRANCE BRAZIL


Brazil: Still a challenging affordability

FRANCE BRAZIL

Affordability


Mobile cellular tariffs

Fixed Internet Broadband tariffs

Smartphone price

Mobile Internet broadband tariffs

Internet and telephony competition

86th 76thFRANCE BRAZIL

Brazil: High usage and technological uptake

FRANCE BRAZIL

Engagement: technological uptake


Cellphone penetration

Internet users (% population)

Time spent online

Social networks penetration

Business Usage of internet

Governement usage of internet

E-commerce penetration (e-consumers)

Online advertising penetration (% total retail)

22th 44th

Source: Brasscom, WOF, McKinsey, Valor, IBGE, Comscore, eMarketer

Digital engagement is high

I N T E R N E T U S E R S

54M 96M

83% pop

49% pop

90% 91%361 mins 535 mins

€ 390 € 285

A V E R A G E S M A R T P H O N E P R I C E

P E N E T R A T I O N F E A T U R E & S M A R T P H O N E S

125%

99%

38%

18%

P O S T P A I D P L A N S% m o b i l e p h o n e s

78%

21% € 38 ....

€ 20 ...

2 GB DATA MOBILE PLAN

FRANCE BRAZIL

Digital spendings still shy

€ 45Mds

€ 8,6 Mds

8,7% of retail

3% of retail

31 M e-consumers

43 M e-consumers

E - C O M M E R C E

€ 2 , 7 B € 1 , 2 5 B

10%

27%

O N L I N E A D V E R T I S I N G

% t o t a l a d v e r t i s i n gr e v e n u e

A V E R A G E T R A N S A C T I O N C O S T F O R E - S E L L E R

( A c q u i r e r + F r a u d c o n t r o l )

40%60%

I N T E R N E T U S E R S T O E - C O N S U M E R S

% i n t e r n e t u s e r p o p u l a t i o n

A V E R A G E S H I P P I N G T I M E

A V E R A G E S H I P P I N G C O S T

Source: Brasscom, WOF, McKinsey, Valor, IBGE, Comscore, eMarketer

2.5% 6.5%

35% higher in Brazil

2x higher in Brazil

Role of the Digital landscape in unlocking Brazilian Growth

INFRASTRUCTURE

EDUCATION

PRODUCTIVITY

TAX & SYSTEM

Brazilian digital ecosystem still a low contributor to GDP growth

Internet – Digital Maturity and contribution to GDP

Technology to overcome Brazil Growth Bottlenecks

INFRASTRUCTURE

(Transport, Telecom, Energy)

EDUCATION

TAX & ADMINISTRATION

INDUSTRIAL PRODUCTIVITY

Productivity & Growth Bottlenecks

Technology can act everywhere throughout infrastructure supply-chains with high

efficiency / cost ratio and agility

E-learning platforms (distance education), Digital content production, job networks,

University / School efficiency

Public administration modernization and efficiency (E-gov, Electronic filling and

accounting system (SPED)

Technology solutions

From Price positioning to Value positioning, Lean processs & Automation

Brazilian “Tech forces” (Necessity drives innovation)

Financial Sector Agri-Tech Oil & Gaz - Mining

Aeronautical Mobile applications & Services Consumer Digital / Media

Brazilian “Tech forces”

Brazilian next tech forces ?

-

The ITC sector has constantly over-performed the GDP

0%

5000%

10000%

15000%

20000%

25000%

30000%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Brazilian GDP vs ICT sector (growth)

GDP ICT sector

3x

2.5x

2x

1.5x

1x

Source: Brasscom,, IBGE,

IT for Education & Health set to strongly over-perform their underlying sector

0

50

100

150

200

250

300

350

400

450

500

2011 2012 2013 2014 2015 2014 2016

IT for Health vs Heathcare sector (2011-2016)

Healthcare sector growth IT for Health growth

2011 2012 2013 2014 2015 2014 2016

IT for Education vs Education sector (2011-2016)

Education sector growth Education technology growth

% change on a year earlier % change on a year earlier

CAGR23%

CAGR24%

5x

4x

3x

2x

1x

Source: Brasscom,, IBGE,

Brazilian growth bottlenecks and digital ecosystem

Technology

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