You’re reading The Brazilian Report‘s weekly tech roundup, a digest of the most important news on technology and innovation in Brazil. This week’s topics: How Brazil’s digitally excluded create their own internet, Kaszek Ventures raises USD 600 million to invest in Latin American startups. The long-lasting consequences of Brazil’s lack of innovation. Agritechs in Brazil. AT&T deal with Time Warner has the government’s blessing. Happy reading!


How Brazil’s digitally excluded create their own internet

About 30 percent of Brazil’s population had no access to the internet in 2017,

when the country&#8217;s official statistics agency made its latest survey. Getting out of this digital hole is not easy, as most of these people live in areas that are not economically attractive for broadband providers. But many have overcome technical hurdles, regulatory red tape, and the lack of cooperation from authorities to find themselves a way to connect to the web.</p> <figure class="wp-block-image"><img class="wp-image-23166" src="https://brazilian.report/wp-content/uploads/2019/08/fiber-optic-connections.jpg" alt="internet fiber optic connections" srcset="https://brazilian.report/wp-content/uploads/2019/08/fiber-optic-connections.jpg 669w, https://brazilian.report/wp-content/uploads/2019/08/fiber-optic-connections-300x296.jpg 300w, https://brazilian.report/wp-content/uploads/2019/08/fiber-optic-connections-610x601.jpg 610w" sizes="(max-width: 669px) 100vw, 669px" /></figure> <p>This &#8220;internet of people&#8221; comes about after residents scout their neighborhood to find out which houses want broadband connections. Then they buy themselves routers, cables, a computer to act as a server, and a metal structure and directional antenna to make a home-made transmission tower—to be erected in the highest spot of the community and capture a broadband signal from an ISP.</p> <p>The community must elect an administrator, who is responsible for collecting payments and dealing with the service provider. They also must find ways to control internet usage, which can be tricky when multiple houses are connected to a broadband plan that would usually serve only one household.</p> <p>This solution has been used by <em>quilombos </em>(ancestral slave communities, often in very remote areas), as well as in certain favelas in the state of Rio de Janeiro. The effects have been instant. These populations have been able to increase their access to basic services, as well as learn more about their rights. In the community of Cajari, in the countryside of Maranhão, the first use of the local homemade internet connection was the issuance of 400 individual taxpayer IDs to people who, until then, were completely off the grid of Brazil&#8217;s tax authorities. </p> <p>&#8220;There is a basic stage of citizenship that now goes through the internet,&#8221; said Oona de Castro, coordinator of the Nupef Institute, which measures how internet access impacts peripheral communities.</p> <p>Getting high-quality internet to the full extent of Brazil&#8217;s land has been one of the main challenges of Anatel, Brazil&#8217;s telecommunications regulator. &#8220;Eighty-five percent of Brazilians live in about 1 percent of the country—so we have to find solutions to get the remaining 15 percent who live outside denser regions,&#8221; said Anatel chairman Leonardo Euler de Moraes.</p> <hr class="wp-block-separator" /> <h2>Venture capital booming in Latin America</h2> <p>Kaszek Ventures, a venture capital fund created in 2011 by the founders of <a href="https://brazilian.report/newsletters/weekly-report/2019/05/25/e-commerce-shopping-malls/">e-commerce marketplace</a> Mercado Libre, has raised USD 600 million to invest in Latin American startups. The money will be split into two funds: USD 375 million will go to Kaszek Ventures IV—which is destined to spot companies in early stages of development—while the remaining USD 225 million will be poured into Kaszek Ventures Opportunity I—used for follow-on investments.</p> <p>The move caps a recent rise in venture capital financing in Latin America. According to the Latin American Private Equity and Venture Capital Association (LAVCA), almost USD 2 billion was invested in the region last year alone—from just USD 143 million back in 2011. The number of deals using venture capital also exploded, from 69 in 2011 to 463 last year. </p> <div class="flourish-embed" data-src="visualisation/634663"> </div> <p><script src="https://public.flourish.studio/resources/embed.js"></script></p> <p>Kaszek has certainly contributed to that trend, having invested in over 70 companies, many of which are from Brazil, such as Gympass (gym services), QuintoAndar (real estate), Nubank and Creditas (fintechs), and Loggi (deliveries).</p> <p>LAVCA also states that co-investments between global and Latin American investors are up, accounting for 59 percent of venture investment dollars. Earlier this month, we reported on <a href="https://brazilian.report/money/2019/08/02/softbank-uber-banco-inter-investments/">SoftBank&#8217;s newest USD 5 billion innovation fund</a> for Latin America. “One of the reasons Latin America was lagging behind was that the region was not at a critical mass inflection point technologically, but it was also the lack of capital,” said Hernan Kazah, co-founder and managing partner of Kaszek, to <em>TechCrunch</em>.</p> <p>According to investors, political stability, pro-market reforms, and the rise of a new middle-class in countries such as Brazil and Colombia have been the main factors driving venture capital firms to the region. And while Brazil—the region&#8217;s undisputed largest economy—is always a powerhouse, Mexico, Colombia, Chile, and Argentina are making a push with vibrant innovation scenes of their own.</p> <hr class="wp-block-separator" /> <h2>Lack of innovation could be &#8220;catastrophic&#8221; for Brazil, says MIT professor</h2> <p>Speaking at an event in São Paulo, Ezequiel Zylberberg—a professor at the Massachusetts Institute of Technology&#8217;s Industrial Performance Center—highlighted the need for investments in research and development in Brazil. The sluggish economy will only find its path towards sustainable growth with more innovation and less reliance on basic products.</p> <p>&#8220;If the country wants to move on [from the recent recession, the worst on record], it needs to consistently invest in research. Authorities must make sure Brazil is not lagging behind. That would be a catastrophic loss for the country,&#8221; said Mr. Zylberberg. He said Brazil should invest in highly specialized industrial segments, mentioning Singapore as a useful benchmark for Brazil. The Asian state city became a leader in hard drive production. &#8220;If nothing is a priority, it is hard to be competitive. Some specialization is needed,&#8221; he continued.</p> <p>Mr. Zylberberg pointed out another glaring need for Brazil—that of integration into global production chains, which would allow the country to develop technology according to global demand. Embraer is a good example—but the planemaker is an exception to the rule.</p> <p>Meanwhile, the landscape of Brazil&#8217;s research sector is bleak, with 18,000 researchers living on government-sponsored scholarships and grants risking being left with no money to finance their projects beyond September. Earlier this week, Science and Technology Minister Marcos Pontes said he &#8220;begged&#8221; Economy Minister Paulo Guedes for the BRL 330 million needed to cover expenses until December.</p> <p>In July CNPq, the National Council for Scientific and Technological Development (CNPq) suspended selection processes for new grants and cut 4,500 researcher positions. Different groups of scientists have launched a <a href="https://www.change.org/p/somos-todos-cnpq?recruiter=921269920&amp;utm_source=share_petition&amp;utm_campaign=psf_combo_share_initial&amp;utm_medium=whatsapp&amp;recruited_by_id=73f179c0-f8be-11e8-93b6-cf7060b7717b&amp;utm_content=washarecopy_17240172_pt-BR%3Av7&amp;use_react=false">petition</a> to force the government to unfreeze research and innovation budgets—with almost 1 million signatures so far.</p> <hr class="wp-block-separator" /> <h2>AT&amp;T + Time Warner = continued lobbying</h2> <p>The Brazilian government struck a deal with the Senate&#8217;s Science and Technology Committee to change content production and distribution laws. The move aims at allowing the AT&amp;T merger with Time Warner to be approved in Brazil. At the moment, antitrust regulations forbid companies from being majority stakeholders in both production and distribution of content. </p> <p>The deal came after President Jair Bolsonaro met with Randall Stephenson, AT&amp;T&#8217;s global CEO. The executive said Brazil will be a strategic market for the company, and suggested that he would be interested in investing in Oi, Brazil&#8217;s fourth-largest telecom firm—currently struggling under a court-supervised restructuring.</p> <hr class="wp-block-separator" /> <h2>Eight years in jail for fake news</h2> <p>Congress struck down President Jair Bolsonaro&#8217;s vetoes of a law criminalizing the spreading of false information online. The president was against the harsh penalties in the original bill—which foresaw the possibility of up to eight years in prison for fake news—but he was defeated by 326 representatives and 48 senators. So far, it is unclear how authorities will monitor content sharing and enforce the law. In the 2018 election, for instance, the use of falsehoods for electoral purposes was a central point of the campaign, but electoral courts did nothing to stop it.</p> <hr class="wp-block-separator" /> <h2>Agritech radar</h2> <p>According to <a href="https://brazilian.report/money/2018/06/14/agricultural-research-embrapa/">Embrapa</a>, the Brazilian Agricultural Research Company, the country is home to 1,125 agritech startups. Two-thirds of them are concentrated in the four states of the Southeast (São Paulo, Minas Gerais, Rio de Janeiro, and Espírito Santo). The North—where the Amazon rainforest is located—is home to only 16 companies.

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TechAug 30, 2019

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BY Gustavo Ribeiro

Gustavo is the founder of The Brazilian Report, and is an award-winning journalist with experience covering Brazilian politics and international affairs. His work has been featured across Brazilian and French media outlets.