Latin America’s most innovative companies have one trait in common: they’re all Brazilian

. Apr 18, 2019
Latin America's most innovation companies have one trait in common: they’re all Brazilian

When it comes to innovation in Latin America, Brazil is paving the way, having eight of the 20 most innovative companies in the region, according to a new report by Visa Innovation Center.

The leading companies in the study are not concentrated in one single sector, but all have something in common: they consider innovation as part of their culture, aiming to change and disrupt traditional mindsets. The report shows that 80 percent of them have a dedicated innovation team, and use application programming interfaces (APIs) as a means of integration; they also show increasing collaboration with startups, known for their leaner and more nimble structures.

</span></p> <p><span style="font-weight: 400;">Particularly in the case of the Brazilian companies, they also focus heavily on new technologies: “In comparison to other markets in the region, Brazilian firms are leaders in high-tech innovation. Their businesses have incorporated advanced technologies such as machine learning, </span><a href=""><span style="font-weight: 400;">artificial intelligence</span></a><span style="font-weight: 400;">, and big data into their DNA at a much faster rate than in neighboring countries,” says the report. </span></p> <p><span style="font-weight: 400;">The country’s financial sector receives a special mention in the report, with </span><a href=""><span style="font-weight: 400;">Brazilian fintechs</span></a><span style="font-weight: 400;"> and financial institutions being praised as blockchain pioneers in Latin America. Banks Itaú, Bradesco and Santander, payments firm Cielo, and credit card company Trigg were considered innovative names in this field. But there are advances in other areas as well, such as ride-hailing app 99 and retailers Magazine Luiza, O Boticário, Ponto Frio, and Netshoes. </span></p> <p><span style="font-weight: 400;">The Visa Innovation Center sees the country as poised to continue to lead innovation in Latin America. One of the reasons is funding: data shows that Brazil attracted 90 percent of the 570 million dollars invested in Latin American fintechs in 2017. </span></p> <h2>Innovation: room for improvement</h2> <p><span style="font-weight: 400;">Despite being an </span><a href=""><span style="font-weight: 400;">innovation leader</span></a><span style="font-weight: 400;"> in Latin America, Brazil still lags behind the most innovative countries in the world. Currently, the country ranks 64th in the </span><a href=""><span style="font-weight: 400;">Global Innovation Index</span></a><span style="font-weight: 400;">, behind fellow developing nations such as India and the world&#8217;s top economies, the U.S. and China.</span></p> <p><span style="font-weight: 400;">A recent report by consultancy McKinsey shows that the lack of investments in research and education may be at the center of this, coupled with a </span><a href=""><span style="font-weight: 400;">hostile environment for entrepreneurs</span></a><span style="font-weight: 400;">. Currently, Brazil spends only 1.3 percent of its GDP on research and development, less than the USA, China, and France. As a result, Brazil has only 3.4 patent registrations per million inhabitants, while Germany has 217.6, the USA has 173.1, and China 15.2.  </span></p> <h2>Why some funds don&#8217;t invest in Brazil</h2> <p><span style="font-weight: 400;">Venture capital firm Sequoia has invested in companies that now control over USD 1.4 trillion of combined stock market value. Just last week, it has invested—alongside Tiger Global—a total of USD 26 million in a Mumbai-based company. In Brazil, though, Sequoia is shy, only paying attention to a few companies, such as food delivery service Rappi and fintech NuBank. During the Brazil at Silicon Valley conference, Doug Leone, a partner at Sequoia, explained why.</span></p> <p><span style="font-weight: 400;">&#8220;Back in 2013, we didn&#8217;t see much innovation from Brazil. Most players are lookalikes—which tend to have a shorter life span.&#8221;</span></p> <p><span style="font-weight: 400;">Another barrier is the sheer lack of software programming engineers. &#8220;Brazil has about 170,000 new graduates in STEM careers (science, technology, engineering, and mathematics) every year. In the U.S., which is no benchmark country, there are 600,000—and China has 6 million. So we may invest in Brazil, but having a local team could be too much of a headache.&#8221;</span></p> <p><span style="font-weight: 400;">Despite the still problematic lack of skilled labor, Brazil has made strides in recent years in entrepreneurship. Local startups are more focused on solving Brazilian problems—instead of replicating what it is being done in the U.S. and Europe—which explains the blossoming of the agrotech and fintech ecosystems.

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