Brazilian humor is often the way to better understand the Brazilian psyche. A good joke told at the bar or at the corner pub, where Brazilians mix for a beer at the end of the afternoon, is a good way for foreigners to grasp what Brazilians really think about both big and small issues. One of the cleverest, albeit biting, jokes I remember hearing from time to time during the years I lived in Rio and São Paulo was that “Brazil is the country of the future! And it always will be!” In one insightful sentence, this nugget of somewhat self-deprecating humor conveys Brazilians’ pride in their country’s enormous potential while simultaneously dousing those same national aspirations with a cold shower.
The problem, of course, is that Brazilians have every reason to doubt their own ability to emerge as a formidable player on the world stage. Brazil has been one of the most volatile emerging markets over the past thirty years, with alternating periods of rampant growth followed by deep economic recessions. In some respects, just by virtue of the country’s size and its annual economic output of nearly $2 trillion, Brazil already struggles as a heavyweight, even though it has still underperformed relative to its real potential. And while many headlines tend to focus on Brazil’s role as a major force in global agricultural production, or in the promising oil and petrochemical industry, I believe the area that the global business community should be watching is the country’s emerging technology sector. It is such a tremendous opportunity that it could lift the entire Brazilian economy.
From above, Brazil’s current technology ecosystem has all the necessary ingredients for a major takeoff: a robust set of young, highly skilled talents, access to local and global venture capital, and a huge internal market filled with a population of over 200 million people. The country is generating a community of experienced, high-quality entrepreneurs who are as – if not more – sophisticated as those found in New York, London, or even Silicon Valley. And perhaps the best sign of all: many successful Brazilian entrepreneurs, after selling their companies, are looking to reinvest their earnings in the local Brazilian market. This redistribution of capital to the Brazilian market highlights a dramatic difference from previous prosperous cycles in the Brazilian economy, where companies yearned to exchange their profits for dollars to protect them abroad, locking in gains before the next economic crisis occurred. This new reality indicates a maturation in the institutional investment climate, which is setting the stage for a sustained technology boom in the Brazilian economy.
Like their counterparts in Europe and North America, the onset of Covid-19 accelerated the cultural shift of middle-class Brazilians towards the large-scale adoption of a digital and online lifestyle. And although the same obstacles that have defined the “Brazil Risk” for decades – corruption, unnecessary bureaucracy, and a very complicated legal and tax framework – still pose real challenges for technology start-ups, there are some reasons to be cautiously optimistic.
This optimism is why national and international investors are looking at Brazil as the next best bet in technology and innovation. Consider the following: Japan’s Softbank, the main shareholder of Uber, is investing $5 billion in Latin American start-ups, with most targeting Brazilian start-ups. Magazine Luiza – considered the most innovative in the country among large retail chains – is building an e-commerce, payments, and service platform to empower small and medium retailers that have been lagging in digitizing their businesses; indeed, Magazine Luiza’s platform alone will certainly spark a new wave of traditional retailers putting their businesses online in a manner very similar to what Shopify and Squarepace have done in the United States. Agribusiness, fintech, and digital health are other areas of high growth potential in the Brazilian technology sector.
The fact that Brazil lags behind other major economies in high technology, along with a local liquidity market, suggests that this time, perhaps, Brazil’s nickname as “the country of the future” may finally be colliding with its present.
ARICK WIERSON
CNN columnist, television producer & political advisor
Twitter: @ArickWierson