Opportunities in
Brazil 2015

Opening international markets
for digital companies
Market Intelligence
Business Development
Sales Representation
www.latamconnection.com

Brasil Online 1995-1996
ZAZ 1996-1999
Terra 2000-2005
DM9DDB 2006
iG 2007-2013
Latam Connection 2013
caiquesevero@latamconnection.com
About the author
Caique Severo

Agenda
1. General data about Brazil
2. Internet and technology
3. Digital media
4. Challenges of doing business in Brazil

General data about Brazil

2014 203 million
people
Source: IBGE, december 2014 - http://www.ibge.gov.br/home/default.php

2014
7th largest country in GDP
US$ 3 trillionpurchase power parity standard
Source: Finance Ministry - http://www.fazenda.gov.br/area-destaques/economia-brasileira-em-perspectiva-30.12.2014

2014
Very small growth
+ 0.2%
Source: Finance Ministry - http://www.fazenda.gov.br/area-destaques/economia-brasileira-em-perspectiva-30.12.2014

2014
Low unemployment
4.8%
Source: IBGE December 2014 - http://saladeimprensa.ibge.gov.br/noticias?view=noticia&id=1&busca=1&idnoticia=2801

Big shift in economic classes
Million of people in each economic class
Source: Finance Ministry, December 2014 - http://www.fazenda.gov.br/area-destaques/economia-brasileira-em-perspectiva-30.12.2014
Class AB
Class C
Class D/E

Growth in higher education
% of people ages 25-34 with at least an undergraduate degree
Source: IBGE
2004 2013
15,2%
8,1%

Cars sales doubled in a decade
Number of new cars on the streets
Source: Anfavea, November 2014 - http://www.anfavea.com.br/tabelas.html

Domestic airline travel grew 164% in 9 years
Number of passengers
Source: ANAC, November 2014 - http://www2.anac.gov.br/estatistica/demandaeoferta/DemandaeOferta.asp
November 2005 November 2014
7.952.936
3.011.295

Inequality is lower but still high
% of income per capita by deciles of income
Source: IBGE - ftp://ftp.ibge.gov.br/Indicadores_Sociais/Sintese_de_Indicadores_Sociais_2014/SIS_2014.pdf
1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th
41,7%
15,3%
10,8%
8,3%
6,6%
5,8%
4,5%
3,4%
2,5%
1,2%
45,8%
15,9%
10,4%
7,7%
5,9%
4,9%
3,7%
2,8%
1,9%
1%
2004 2013
The 10% richer gets more than 41% of all income

Demographic bonus
Decrease in number of child per woman
Source: World Bank, Google, others

Demographic bonus
2010 2020
More people in the
economic active age
Men Women
Men Women

Internet and technology

Internet users in Brazil
Non-users
70
Users
95
Million of people over 12 years old
Source: F/Radar 2014 - http://www.fnazca.com.br/index.php/2014/12/16/fradar-14%C2%AA-edicao/

Internet users by social economic class
DE
7
C
48
AB
38
Million of people over 12 years old
Source: F/Radar 2014 - http://www.fnazca.com.br/index.php/2014/12/16/fradar-14%C2%AA-edicao/

Internet users by age
73% are under 35 years old
60+
3
46-59
8
36-45
14
26-35
24
18-25
24
12-17
20
Million of people over 12 years old
Source: F/Radar 2014 - http://www.fnazca.com.br/index.php/2014/12/16/fradar-14%C2%AA-edicao/

Mobile access: 62 million people
Millions of internet users (celular and tablet)
Source: F/Radar
2013 2014
62,5
42

Access through celular grows
% of internet users
Source: F/Radar
2013 2014
65%
48%

Access through tablets grows
% of internet users
Source: F/Radar
2013 2014
14%
9%

Tablet OS
3T sales
iOS
5%
Android
95%
Source: IDC Brazil

Best seller tablets
78% of sales are under US$ 200
51% of sales are under US$ 120
Semp Toshiba
US$ 79
Android 4.2.2
7” screen
8GB drive
CCE
US$ 128
Android 4
9” screen
4GB drive
Multilaser
US$ 87
Android 4.2
7” screen
8GB drive

Room for growth in mobile commerce
% of purchases made on mobile devices
Source: Criteo
Brazil US UK Japan
49%
41%
27%
10%

Mobile phones are the most used device to access
the internet at home
% of internet users
Source: F/Radar
Tablet Celular Portable PC Desktop PC
42%40%
52%
12%

Almost 75% of phones sold are smartphones
4,7
15,1
Smartphones Feature phones
Source: IDC, december 2014, http://br.idclatin.com/releases/news.aspx?id=1777
Sales by type in third quarter 2014

15.1
million
smartphones sold
July - September
2014
Source: IDC, december 2014, http://br.idclatin.com/releases/news.aspx?id=1777

More than half of internet users have a smartphone
2013 2014
53%
33%
% of internet users
Source: F/Radar

Broadband penetration will grow
Brazil Chile Argentina
53,9%
49,6%
42,4%
% of households
Source: ITU, State of Broadband 2014 - http://www.broadbandcommission.org/Documents/reports/bb-annualreport2014.pdf

National broadband plan
• 1 Mbps for R$ 35 (US$ 13) monthly
• New frequency auctions: 2.5 GHz (3G) and 450 MHz (rural areas)
• Tax exemptions or reductions for
• Local production of smartphones, tablets, PCs and modems (zero tax -
PIS/Cofins)
• Profits generated from investments in telecom infrastructure (tax down to
15%)
• Satellite launch in 2016 to improve bandwidth
• New submarine cables linking Brasil to US, Europe and Africa
• Free 2Mbps access in 65,000 public schools
Source: Communications Ministry, May 2014 - http://www.mc.gov.br/programa-nacional-de-banda-larga-pnbl

Fixed broadband reaches 23 million subscriptions
Source: Communications Ministry, May 2014 - http://www.mc.gov.br/programa-nacional-de-banda-larga-pnbl
Number of subscriptions

Mobile broadband reaches 3,400
cities and 123 million subscriptions
Source: Communications Ministry, May 2014 - http://www.mc.gov.br/programa-nacional-de-banda-larga-pnbl
CitiesSubscriptions

4G
4.2 million
subscriptions in October 2014
Source: Teleco, October 2014 - http://www.teleco.com.br/4g_brasil.asp

Digital media

Digital ad spending
Brazil is by far the largest market
in Latam
Source: eMarketer

Social Media usage
% of internet users
Source: F/Radar
Facebook Whatsapp Skype/MSN Twitter Instagram
171719
37
88
9
22
27
7
85
Abr 2013 Abr 2014

Brazil is the second in time spent online
Source: Comscore, september 2014 - http://www.comscore.com/por/Insights/Presentations-and-Whitepapers/2014/2014-LATAM-Digital-Future-in-Focus

News sites reach 63% of users in Brazil
Source: Comscore, september 2014 - http://www.comscore.com/por/Insights/Presentations-and-Whitepapers/2014/2014-LATAM-Digital-Future-in-Focus

34 million people access government sites
Source: Comscore, september 2014 - http://www.comscore.com/por/Insights/Presentations-and-Whitepapers/2014/2014-LATAM-Digital-Future-in-Focus

64 million people access online videos
Source: Comscore, september 2014 - http://www.comscore.com/por/Insights/Presentations-and-Whitepapers/2014/2014-LATAM-Digital-Future-in-Focus

Ecommerce
US$ 6.15
billion (+11%)
1S 2014
Source: eBit

E-commerce
Fashion/Clothing Cosmetics Electronics
CarsAuctions/Trade Comparison
General

Media
Portals Verticals Legacy print

Mobile News about internet
Payment
Retargeting, DSPs,
Ad Networks and segmentation

Challenges of doing
business in Brazil

Bureaucracy
Days to open a business
OCDE
Latam & Caribbean
Brazil 102,5
30
9,2
Source: Doing Business 2015

Bureaucracy
Hours spent managing taxes
OCDE
Latam & Caribbean
Brazil 2600
365
175
Source: Doing Business 2015

Tax costs
Total taxes (% of profits)
OCDE
Latam & Caribbean
Brazil 68,9
48,3
41,3
Source: Doing Business 2015

Office space rent
(US$ / cubic meters)
Lima
Buenos Aires
Caracas
São Paulo 90,8
46
30
21,5

Big Mac Index (US$)
Mexico
2.86
Argentina
3.88
Colombia
4.48
Brazil
5.28

Traffic in São Paulo
5/23/2014: 214 miles (344 km)

Conclusions
Opportunities Challenges
• Growing consumer base
• Big mobile adoption
• Demographic bonus
• Bureaucracy
• High taxes
• High operating costs

Thank you
www.latamconnection.com
caiquesevero@latamconnection.com