McKinsey has released a comprehensive 191-page report on the Brazilian digital economy, including macroeconomic indicators, internet trends, investment facts and data on the big picture of entrepreneurship and innovation. The report was developed in collaboration with Brazil in Silicon Valley, a student-led movement that started at Stanford University and whose mission is to improve Brazil's competitiveness and global relevance through technology and innovation.
“Brazil is at an economic inflection point with GDP growth, higher consumer and industry confidence, lower country risk, strong capital markets performance and highly encouraging digital trends,” said Nicola Calicchio, partner at McKinsey. "While the startup ecosystem is showing strong signs of healthy growth, the country has yet to deliver on its promise on the global stage due to significant gaps in productivity and pro-business infrastructure."
The Digital Brazil Report can be downloaded at: www.brazilatsiliconvalley.com/brazil-digital-report.
Some of the main highlights of the report:
The Brazilian economy is improving again, with real GDP growth projected at 2.7% in 2020, compared to -3.6% in 2015, 1.1% in 2017 and 1.2% in 2018. Interest rates and inflation, as well as country risk created an investment environment. However, Brazil has only recorded productivity gains of 1.3% per year since 1990 (against 5% for India and 8.8% for China).
More than 2/3 of Brazilians have smartphones and spend an average of 9 hours connected to the Internet every day (against 6 hours in the US), one of the highest in the world. However, internet speeds at 13 Mbps are still far below developed economies and lags behind the global average of 31 Mbps.
Brazil has some of the most avid digital consumers in the world. By number of users, Brazil ranks second in the world for WhatsApp, second for Instagram, third for Facebook, third for LinkedIn, second for Pinterest and second for Waze. However, e-commerce still lags behind more developed nations with 6% of total retail sales (compared to 20% for China and 12% for the US).
Brazil's global startup ecosystem is growing at a rapid pace, with more than 10,000 startups – 46% of which are less than two years old – and 30,000 jobs. Venture capital investments in Brazil amounted to US $ 1.3 billion in 2018 (against US $ 859 million in 2017) and represent 66% of all investments in Latin America. As of 2018, there are eight startups with unicorn status of US $ 1 billion (compared to 13 in India and 92 in China). However, Brazil still ranks 109th for ease of doing business globally – for example, it takes an average of 79 days to start a business (versus half a day in the UK).
The Brazilian financial system has been a privileged territory for innovation. More than half of the population are active users of online banking, and 58% of all banking transactions are online. There are more than 400 fintech startups, and more than 7 million customers have opened digital-only bank accounts. However, compared to developed countries, Brazil still has low penetration of almost all financial products.
The Brazilian healthcare system still does not meet WHO standards, although mortality and other metrics have improved significantly. Brazil is still in areas such as electronic records, with only 23% of health facilities using electronic medical records and 45% still entirely on paper. Around 300 Brazilian startups have already faced the challenge and are driving the digital innovation agenda in the healthcare sector.
Despite the recent record number of high school and higher education graduates, less than 40% of the Brazilian population has completed high school and more than 10% are illiterate. More than 250 digital education startups are trying to achieve scale inside and outside the classroom – distance education companies are leading the way, with 25% of all applications for higher education.
“Brazil is at an economic inflection point with GDP growth, higher consumer and industry confidence, lower country risk, strong capital markets performance and highly encouraging digital trends,” said Nicola Calicchio, partner at McKinsey. "While the startup ecosystem is showing strong signs of healthy growth, the country has yet to deliver on its promise on the global stage due to significant gaps in productivity and pro-business infrastructure."
The Digital Brazil Report can be downloaded at: www.brazilatsiliconvalley.com/brazil-digital-report.
Some of the main highlights of the report:
The Brazilian economy is improving again, with real GDP growth projected at 2.7% in 2020, compared to -3.6% in 2015, 1.1% in 2017 and 1.2% in 2018. Interest rates and inflation, as well as country risk created an investment environment. However, Brazil has only recorded productivity gains of 1.3% per year since 1990 (against 5% for India and 8.8% for China).
More than 2/3 of Brazilians have smartphones and spend an average of 9 hours connected to the Internet every day (against 6 hours in the US), one of the highest in the world. However, internet speeds at 13 Mbps are still far below developed economies and lags behind the global average of 31 Mbps.
Brazil has some of the most avid digital consumers in the world. By number of users, Brazil ranks second in the world for WhatsApp, second for Instagram, third for Facebook, third for LinkedIn, second for Pinterest and second for Waze. However, e-commerce still lags behind more developed nations with 6% of total retail sales (compared to 20% for China and 12% for the US).
Brazil's global startup ecosystem is growing at a rapid pace, with more than 10,000 startups – 46% of which are less than two years old – and 30,000 jobs. Venture capital investments in Brazil amounted to US $ 1.3 billion in 2018 (against US $ 859 million in 2017) and represent 66% of all investments in Latin America. As of 2018, there are eight startups with unicorn status of US $ 1 billion (compared to 13 in India and 92 in China). However, Brazil still ranks 109th for ease of doing business globally – for example, it takes an average of 79 days to start a business (versus half a day in the UK).
The Brazilian financial system has been a privileged territory for innovation. More than half of the population are active users of online banking, and 58% of all banking transactions are online. There are more than 400 fintech startups, and more than 7 million customers have opened digital-only bank accounts. However, compared to developed countries, Brazil still has low penetration of almost all financial products.
The Brazilian healthcare system still does not meet WHO standards, although mortality and other metrics have improved significantly. Brazil is still in areas such as electronic records, with only 23% of health facilities using electronic medical records and 45% still entirely on paper. Around 300 Brazilian startups have already faced the challenge and are driving the digital innovation agenda in the healthcare sector.
Despite the recent record number of high school and higher education graduates, less than 40% of the Brazilian population has completed high school and more than 10% are illiterate. More than 250 digital education startups are trying to achieve scale inside and outside the classroom – distance education companies are leading the way, with 25% of all applications for higher education.
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