Opportunities and Challenges
ICT INDUSTRY IN BRAZIL
OFFICIAL PROGRAM
PARTNER
ICT INDUSTRY IN BRAZIL This report provides an overview of the Information and Communication Technology industry in Brazil as of October 2013 with a focus on business opportunities and threats for small and medium sized enterprises from Switzerland. Language: English Number of pages: 85 Editor: Matthias Büttner – Swiss Business Hub Brazil Author: Nadia Gasparotto – South Partners (São Paulo) Liliana Conde – South Partners (São Paulo) Other Reports: Are you interested in reports for other sectors and countries? Please find more reports here: www.switzerland-ge.com/reports
Contents
3.10. Summary of Brazil’s ICT Sector in Numbers ______ 37
Summary
4. CASE STUDIES OF BRAZILIAN ICT COMPANIES 38 4.1. GVT 38
ACKNOWLEDGEMENTS ________________________8 EXECUTIVE SUMMARY _________________________9
4.2. Vesper ________________________________ 40 4.3. Prime Systems __________________________ 41 4.4. Peixe Urbano ___________________________ 41
KEY DATA OF THE BRAZILIAN ICT MARKET ______10 1. INTRODUCTION ____________________________11
4.5. Bematech ______________________________ 43
5. INTERESTING MARKETS FOR SWISS SMES ____ 44
2. CASE STUDIES OF FOREIGN ICT COMPANIES IN
5.1. ICT for the TV Market in Brazil _______________ 44
BRAZIL 12
5.1.1. Open Broadcast TV and Digital TV ____________ 44
2.1. Albis Technologies ________________________ 12
5.1.2. Subscription TV or Pay TV _________________ 45
2.2. Coresystem Brazil ________________________ 15 2.3. Citel Group ______________________________17
6. THE ELECTRONIC SECURITY MARKET IN BRAZIL50
2.4. Axis Communications _____________________ 18
7. DATA STORAGE & CLOUD SOLUTIONS ________ 53
2.5. Carenet _______________________________ 20
7.1. The Cloud concept maturing _________________ 54
2.6. Aremo ________________________________ 22
7.2. Datacentres ____________________________ 54
3. A BRIEF HISTORY OF BRAZIL’S ICT INDUSTRY
7.3. Personal Cloud __________________________ 56 7.4. Big Data _______________________________ 56
AND ITS REGULATORY AFFAIRS _______________25 3.1. The Emergence of the Telecom Sector in Brazil _____ 25
8. GPS & TRAFFIC DIRECTION SOFTWARE (M2M
3.2. The Development of Brazil’s Telecomm Sector Since
SOLUTIONS) _________________________________ 57
1998
8.1. M2M Solutions __________________________ 57
26
3.3. IT History of Brazil _______________________ 29
8.2. GPS and Traffic Direction Software Solutions _____ 59
3.4. Broadband in Brazil _______________________ 30
8.2.1. The GPS Market Drivers ___________________ 61
3.5. Interconnection __________________________ 32
8.2.2. GPS Market Trends ______________________ 61
3.6. Network quality __________________________ 33 3.7. Internet and the Law ______________________ 34
9. E-HEALTH _________________________________ 63
3.8. MVNO - Mobile Virtual Network Operator _______ 35
10. UTILITIES AND METERING __________________ 67
3.9. It-Telecom Integration and Convergence _________ 36
10.1. Water and Sewage _______________________ 67
Contents
10.2. Gas Metering ___________________________ 69
13.3. Intelectual Property and royalty payments _______ 90
10.3. Smart Grid / Smart Metering _________________71
13.4. Work Permits for Technical assistance and training staff91
11. MARKET ENTRY STRATEGIES _______________73
14. CONCLUSIONS ___________________________ 93
11.1. Market Analysis _________________________ 73 11.2. Startup _______________________________ 74
15. TABLE OF ABBREVIATIONS ________________ 94
11.3. Mergers And Acquisitions __________________ 75
16. APPENDIX ________________________________ 97
11.4. Local Partner ___________________________ 75
16.1. ANNEX I ______________________________ 97
11.5. Strategies for Swiss ICT Companies In Brazil _____ 76
16.2. ANNEX II _____________________________ 99
11.6. Import Authorization Application Support (RADAR) 76
16.3. ANNEX III ____________________________ 101
11.7. Import Procedure Brief Overview _____________ 77
16.4. ANNEX IV ____________________________102
11.7.1. Hardware ____________________________ 77
16.5. ANNEX V ____________________________ 104
11.7.2. Software _____________________________ 78
16.6. ANNEX VI ____________________________105
11.8. Main Associations________________________ 78
16.7. ANNEX VII ___________________________ 106
11.9. Main Events____________________________ 79
16.8. ANNEX VIII ___________________________ 107 16.9. ANNEX IX ___________________________ 108
12. BRAZIL´S ICT CLUSTERS ___________________81 12.1. Manaus Free Trade Zone ___________________ 81 12.2. The Computer Science ACT _________________ 81 12.3. Technology Parks ________________________ 82 12.4. Cities that have some sort of ICT Cluster ________ 83
13. LEGAL, TAX AND REGULATORY ISSUES ______85 13.1. A brief introduction into brazil’s tax complexity ____ 85 13.1.1. Some common pitfalls for foreigners in Brazil ____ 85 13.1.2. Overview of indirect taxes and ICT specific duties at federal level _______________________________ 87 13.1.3. Indirect taxes at state level_________________ 88 13.1.4. Indirect taxes at municipal level _____________ 88 13.1.5. Special tax considerations in the ICT sector _____ 88 13.2. Product Homologation by Anatel _____________ 89
16.10. ANNEX X ___________________________ 109
List of Tables
Table 1: Operators .............................................................................................................................................................................. 27 Table 2: Internet, Pay TV and Telephony Market Indicators ............................................................................................................37 Table 3: Pay TV Service Providers per Technology........................................................................................................................... 47 Table 4: Pay TV Subscribers Distribution per Technology. .............................................................................................................. 48 Table 5: Telecommunication and Pay TV Providers. ........................................................................................................................ 49 Table 6: GPS Market Main Players. ................................................................................................................................................... 60 Table 7: Current and Projected Revenues / Market Potential.......................................................................................................... 60 Table 8: Health Services in Brazil Registered with the MS. ............................................................................................................ 64 Table 9: Smart Grid Market Main Players. ....................................................................................................................................... 72 Table 10: Computer Science Goods and Automation in General ..................................................................................................... 82 Table 11: Computer Science Goods and Automation Developed in the Country ............................................................................. 82
List of Figures
Figure 1: Landline............................................................................................................................................................................... 27 Figure 2: Mobile Operators Market Share ........................................................................................................................................ 28 Figure 3: Vivo and TIM Mobile Coverage ......................................................................................................................................... 28 Figure 4: Claro and Oi Mobile Coverage ........................................................................................................................................... 29 Figure 5: Mobile Network Architecture............................................................................................................................................. 32 Figure 6: World Digital TV Standards ............................................................................................................................................... 45 Figure 7: Pay TV System. ................................................................................................................................................................... 46 Figure 8: Brazilian Datacentre Map. ..................................................................................................................................................55 Figure 9: M2M World of Connected Services ................................................................................................................................... 58 Figure 10: Distribution of Revenues Among the Value Chain Players. ............................................................................................ 60 Figure 11: E-Health Summary. .......................................................................................................................................................... 63 Figure 12: The Homecare Application is Accessed Using a Software-as-a-Service (SaaS) Model Residing in the Cloud. ............ 66 Figure 13: Sanitation Cycle. ............................................................................................................................................................... 67 Figure 14: Telemetering System. ....................................................................................................................................................... 68 Figure 15: Map of Natural Gas Distributors in Brazil. ...................................................................................................................... 70 Figure 16: Smart Metering / Smart Grid. ........................................................................................................................................... 71 Figure 17: Brazilian Technology Parks .............................................................................................................................................. 83
List of Graphics
Graphic 1: Brazilian IT Market ...........................................................................................................................................................37 Graphic 2: Pay TV Subscribers Distribution per Technology. .......................................................................................................... 48 Graphic 3: Leading Economic Groups Market Percentage. ............................................................................................................. 49 Graphic 4: Latam - M2M Subscribers Forecast 2010-2016, per Vertical Segment. ........................................................................ 59 Graphic 5: Latam – Projected Total Revenues per Application 2012-2015..................................................................................... 59 Graphic 6: Hospitals in Brazil. ........................................................................................................................................................... 64 Graphic 7: Brazil Market Entry. .........................................................................................................................................................73
Acknowledgements Switzerland Global Enterprise would like to thank the following persons and companies for their valuable contributions to this report (in alphabetical order of last name):
Roberto Furtado Senior Sales Consultant for Albis Technologies Brazil Lucas Hubacher General Manager of coresystems Brazil Harald Jung CEO of Albis Technologies AG Zürich Switzerland Maria Inês Fuzita Karakanian Partner and lawyer of Dannemann Siemsen, São Paulo, Brazil Dr. Nilson Lautenschlager Jr. Partner and lawyer of Lautenschlager, Romeiro e Iwamizu, São Paulo, Brazil Immo Paul Founder and CEO of Carenet, São Paulo, Brazil Renê Ramos Partner at EMDOC São Paulo, São Paulo, Brazil Dominique Schweingruber and Lodovico Brioschi Founding Partners of AREMO São Paulo, Brazil
ICT INDUSTRY IN BRAZIL
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Executive Summary It took surprisingly long until, perhaps around the year 2008, the world at large really started to notice Brazil’s economic rise in the last two decades. A lot of foreign investments have poured into the country to the point of overvaluing the currency, which is one reason why many foreigners travelling to Brazil perceived Brazil as surprisingly expensive. Yet, many foreign ventures have failed in Brazil, large ones and minor ones. Brazil is definitely quite a difficult country to do business in, let alone to startup a new business. This report will not hide this reality and will not make any fabulous claims about business opportunities in Brazil. However, one always has to be cautious when generalizing about Brazil or using any kind of “average” to describe this huge and diverse country. While economic growth was rather disappointing as of late, the ICT sector has been growing around 7% per year, and many foreign and local companies have seen growth rates of 20% or more per year. Also, there is a widespread consensus that emerging markets will be the main contributors to global growth in the next decade. Yet, only 1,5% of Swiss exports go to Brazil, which ranks 19 in Switzerland’s export statistics, all the while Brazil may soon be the world’s fifth biggest economy. This does not seem to be right for a country like Switzerland that exports half of its GDP. There are interesting opportunities and niches to be found in Brazil, and this report will outline some of them but not all of them in the ICT sector. Mobile Virtual Network Operators may find here “fruits” as low hanging as they can possibly be in the Brazilian context. E-commerce is very promising in a country that has a rather fragmented and inefficient supply chain of wholesalers and retailers, let alone the tax burden. E-learning looks like a very promising solution for a country where most citizens feel scorn for the way (public) schools have prepared them and their children for life, and where the lack of skilled employees on all levels is perhaps the biggest growth bottleneck for the economy. E-health can provide interesting solutions in a country where the constitution promises universal health care to its citizens but falls short on delivering emergency care, let alone prevention and treatment of chronic diseases. Brazilians’ passion for watching TV provides many interesting opportunities in this age of conversion and quadruple-play packages. Brazil’s sad prevalence of violent crime and thefts creates an ever growing demand for access security solutions. The allegations around the NSA spying on the nation’s president and one of its “flagship” companies Petrobras has profoundly changed the perception of internet privacy, the need of safe iCloud solutions and they will probably even lead to a new law requiring that servers with data about Brazilian citizens (e.g. Facebook) have to be located in Brazil. To use a metaphor, Brazil’s economy has long been like a classic car’s engine that lacked electronic fuel injection and computer chips. But this is changing rapidly and is generating many interesting opportunities for foreign ICT companies (and people with advanced ICT knowledge). The main obstacles to doing business here are the stifling bureaucracy (also with regard to regulatory affairs) and the Kafkaesque tax and labor laws, about which all Brazilian business men from small to big also bitterly complain. But the good news is that they are not as difficult to overcome as many Swiss companies commonly believe, if (IF!) the Swiss get good advise, find an experienced Brazilian business partner or key employee, have a lot of patience and are rather conservative in their financial planning. This is perhaps the most important message of the case studies in chapter 1. Swiss companies have advantages not only due to their innovative technology, but also with their different perspective, business values and ways how to manage a business. If they are able to blend this with some necessary adaptations to the Brazilian context, the chances for success are actually surprisingly high.
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