Strolling around São Paulo’s financial district has become something of a risky business is the past few months. To avoid the eternal traffic jams, executives have adopted scooters as their go-to means of transportation, riding alongside pedestrians, cars, and bicycles. As the first reports of accidents surfaced, the municipal government intervened, followed by Rio de Janeiro’s authorities, rekindling the debate about mobility and regulations in Brazil.

Electric scooters arrived as a much-needed option of micro-mobility in places such as the crowded Brazilian capitals. The model is user-friendly: most of the companies operate through apps and all you need is a smartphone to unlock the scooters. As the machines are dockless, it is easy to leave the scooters anywhere you want, without worrying about parking. Since they are electric, they’re environmentally friendly, helping air quality.

</span></p> <p><span style="font-weight: 400;">Also, riding on the sidewalk is much faster than facing traffic jams, and the system is relatively cheap. In São Paulo, where a bus ticket costs BRL 4.30, you can rent a scooter through Yellow—the Brazilian startup leading the local market—for BRL 3 and an additional BRL 0,50 per minute. In always crowded financial centers, there are rarely easy parking spaces, but the roads are flat and easy to walk on, making them fertile soil for electric scooters.</span></p> <p><span style="font-weight: 400;">It’s no wonder the local market became so profitable. Yellow, which also operates a bike sharing model, has just announced a merger with Mexican startup Grin, after receiving a USD 150 million capital injection from investors. The combined company, Grow, will offer 135,000 vehicles in 17 cities, </span><a href="https://exame.abril.com.br/tecnologia/yellow-e-grin-juntas-o-casamento-da-bicicleta-com-o-patinete-eletrico/"><i><span style="font-weight: 400;">Exame</span></i><span style="font-weight: 400;"> reports</span></a><span style="font-weight: 400;">.</span></p> <h2>Technology clashes with real life</h2> <p><span style="font-weight: 400;">But as business prospers and user adoption grows, so do the problems. São Paulo and Rio have been reporting a </span><a href="https://g1.globo.com/rj/rio-de-janeiro/noticia/2019/05/16/taxi-atropela-homem-em-patinete-eletrico-no-centro-do-rio.ghtml"><span style="font-weight: 400;">higher number of accidents.</span></a><span style="font-weight: 400;"> The problems range from riders and pedestrians fighting for space on the sidewalks to actual injuries.</span></p> <p><span style="font-weight: 400;">São Paulo’s city hall was the first to take action. On May 14, Mayor Bruno Covas, </span><a href="https://g1.globo.com/sp/sao-paulo/noticia/2019/05/30/empresas-de-patinetes-estao-operando-a-margem-da-lei-diz-secretario-de-mobilidade-de-sp.ghtml"><span style="font-weight: 400;">issued a decree</span></a><span style="font-weight: 400;"> to regulate the services in the city—with one provision forcing companies to register themselves. Two weeks later, when companies failed to comply, operations were suspended and hundreds of scooters were removed from the streets. By that time, the local secretary of Mobility and Transports, Edson Caram, told news website </span><i><span style="font-weight: 400;">G1 </span></i><span style="font-weight: 400;">that the companies were operating “outside the law,” but would be able to operate again as soon as they delivered their documents.</span></p> <p><span style="font-weight: 400;">The removal of scooters, however, sparked huge outcry on social media, with people accusing authorities of intolerance and backwards thinking. Companies took the city hall to court but eventually lost, with judges deciding that scooter hire activities must be regulated by local authorities instead of federal traffic laws, as companies claimed. The situation de-escalated, however, after authorities and companies reached an </span><a href="http://www.capital.sp.gov.br/noticia/nota-a-imprensa-557-patinetes-foram-recolhidas-em-sao-paulo"><span style="font-weight: 400;">agreement on May 31</span></a><span style="font-weight: 400;">, and announced a final regulation must be elaborated within 30 days. City hall representatives told </span><b>The Brazilian Report</b><span style="font-weight: 400;"> that negotiations are still ongoing.</span></p> <p><span style="font-weight: 400;">According to current rules, the companies must pick up the equipment, provide safety equipment, such as helmets, and inform local authorities about accidents on a monthly basis. Users cannot ride on the sidewalk; instead, they must use bike paths or streets where maximum speed is no higher than 40km/h. They must wear protective headgear and scooters may not exceed 20 km/h.</span></p> <p><span style="font-weight: 400;">In Rio de Janeiro, two laws on the issue were fast-tracked in the state’s legislative assembly. </span><a href="https://g1.globo.com/rj/rio-de-janeiro/noticia/2019/06/11/deputados-aprovam-regulamentacao-de-patinetes-eletricos-no-rj.ghtml"><span style="font-weight: 400;">The first</span></a><span style="font-weight: 400;"> was very similar to Mr. Covas’ decree, demanding companies provide helmets for users, collecting irregularly parked scooters and banishing them from sidewalks. The second, however, </span><a href="https://twitter.com/MBLivre/status/1139261673301323777"><span style="font-weight: 400;">sparked such an outcry</span></a><span style="font-weight: 400;"> that the bill’s own author, representative Alexandre Knoploch </span><a href="https://www.gazetadopovo.com.br/ideias/lei-repercute-mal-e-deputado-volta-atras-em-regulamentacao-de-patinete/"><span style="font-weight: 400;">asked governor Wilson Witzel to veto it</span></a><span style="font-weight: 400;">.</span></p> <p><span style="font-weight: 400;">According to the bill proposed by Mr. Knoploch and fellow representative Gustavo Schmidt, scooter users needed to have a drivers’ license or complete scooter training courses. Those who did not have insurance also would have to provide an escrow check of BRL 1.700 in case of accidents. Consulted by </span><b>The Brazilian Report, </b><span style="font-weight: 400;">government representatives said Mr. Witzel was still analyzing the bill.</span></p> <p><span style="font-weight: 400;">It is not the first time new transportation technologies have caused turmoil in the country. The arrival of ride-hailing apps a few years ago spurred debates and even strikes from taxi drivers. It took at least two years from the first regulation—a decree published in 2016 by then-mayor Fernando Haddad—to a national bill signed into law last year. Although the models change, the debate on whether—and most of all, how—the state should interfere with companies that are providing services where public systems are insufficient seems to be far from over.</span></p> <h2>“Ask for forgiveness, not permission”</h2> <p><span style="font-weight: 400;">The Brazilian case is more collateral than an exception. All over the world, scooter-rental services such as Bird and Lime—which are also </span><a href="https://epocanegocios.globo.com/Empresa/noticia/2019/06/exclusivo-lime-chega-ao-brasil-em-julho-nas-cidades-de-sao-paulo-e-rio-de-janeiro.html"><span style="font-weight: 400;">preparing to join the Brazilian market</span></a><span style="font-weight: 400;">—have been expanding services for the past two years, but not in the smoothest way. In cities such as Santa Monica, California, where the trend actually started, the unexpected arrival of hundreds of electric scooters caused problems, such as abandoned equipment blocking public spaces, while riders started to invade sidewalks and pose a danger to pedestrians. As </span><i><span style="font-weight: 400;">The Guardian</span></i> <a href="https://www.theguardian.com/cities/2019/jun/18/welcome-watch-or-ban-how-should-cities-deal-with-electric-scooters"><span style="font-weight: 400;">reports,</span></a><span style="font-weight: 400;"> Bird, the trend’s pioneers, was fined for operating without a city hall permit—and the overall cost of fines and license fees reached USD 300,000.</span></p> <p><span style="font-weight: 400;">Instead of learning from this, the startups—</span><a href="https://www.bloomberg.com/news/articles/2018-09-07/are-electric-scooters-the-future-of-urban-transport-quicktake"><span style="font-weight: 400;">which are now billion-dollar unicorns</span></a><span style="font-weight: 400;">—replicated their “ask for forgiveness, not permission” approach on a global scale, with astonishing popularity. As expected, it created backlashes and even San Francisco, home to the most advanced technology companies in the world, banished scooters for a while, before proposing its own regulation.</span></p> <p><span style="font-weight: 400;">Banishing them, however, is far from being the best solution. In the UK, the 1835 Highways Act determines that sidewalks are pedestrian-exclusive only. Meanwhile, scooters are classified as a motor vehicle by current legislation and, as such, riders need a drivers license as well as insurance and vehicle tax. As a result,</span><a href="https://www.bbc.com/news/uk-48106617"><span style="font-weight: 400;"> it is only possible to ride them on private lands</span></a><span style="font-weight: 400;">, such as </span><a href="https://www.wired.co.uk/article/london-electric-scooters-trial-bird-stratford-olympic-park"><span style="font-weight: 400;">London’s Olympic Park</span></a><span style="font-weight: 400;">.</span></p> <p><span style="font-weight: 400;">The throttling legislation—quite similar to Mr. Schmidt and Mr. Knoploch&#8217;s approach in Rio—has prevented London, one of the biggest and most crowded cities in the world, of a viable means of transportation and a profitable market.

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BY Natália Tomé Scalzaretto

Natália Tomé Scalzaretto has worked for companies such as Santander Brasil and Reuters, where she covered news ranging from commodities to technology. Most recently, worked as an Editor for Trading News, the information division from TradersClub investor community.