Tech Roundup: Latin America’s digital divide

. Nov 01, 2020
digital divide latin america Image: Cienpies Design/Shutterstock

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: the digital divide in Latin America, AliExpress pushes for Singles’ Day in Brazil, and “algo-trading” takes hold in the country. 

Rural population hit worst by Latin America’s digital divide  

Seventy-seven million Latin Americans living in rural areas have no access to adequate internet connections, according to a new study by Microsoft, the Inter-American Institute for Cooperation on Agriculture (IICA) and the InterAmerican Development Bank (IDB). This translates into 63 percent of the entire population living outside of urban regions — a sign of inequality that is set to deepen even further as the economy becomes increasingly digitalized after Covid-19

  • When Brazil is excluded from the sample — due to the size of its population — the situation becomes even worse. Seventy-five percent of inhabitants of rural areas do not have access to a basic internet connection. 
  • Jamaica, El Salvador, Belize, Bolivia, Peru, Honduras, Venezuela, Guatemala, Nicaragua, and Guiana comprise a cluster of poor connections, as between 71 percent and 89 percent of the rural population in those countries are unable to access standard quality connections. 

Gender gap. The report also shows that women in rural areas have less access to the internet than men, as they often do not have their own source of income. In countries such as Bolivia and Peru, men own more cellphones and access the internet more often. 

Challenges. The troubling situation of rural areas is explained by difficulties to reach remote regions, high costs of internet access — a broadband connection can cost as much as 14 percent of poorer families’ monthly income — the lack of digital know-how within the population, as well as the absence of data to design public policies that comprise the different realities of countries in the region.   

How to get Brazil connected? Though Brazil appears in the report as one of the countries with the smallest gap in internet access, recent studies by the Organization for Economic Cooperation and Development (OECD) indicate that there is still room for improvement. Among the OECD’s leading recommendations to reduce the digital divide are:

  • Merging oversight bodies — such as regulatory agencies for communications and cinema — and making licensing easier;
  • Merging sectoral funds into a single pot to support further development of the digital economy, and considering abolishing all sectoral contributions in the long-term;
  • Carefully designing Brazil’s upcoming 5G auction to ensure competition in the market;
  • Supporting the digital transition of companies by introducing tax breaks for technological upgrades, training, and ICT investments for all firms;
  • Increasing funds for STEM scholarships; 
  • Strengthening privacy rules and cybersecurity policies, highlighting the role of the National Data Protection Authority (ANPD);
  • Reinforcing efforts to develop a data-driven digital government.

Algorithmic trading the new frontier for Brazilian brokerages 

As competition heats up in Brazil’s brokerage market, algorithmic investing — involving making orders using pre-programmed algorithms — may become a competitive difference-maker, according to experts consulted by The Brazilian Report. The latest step in this direction came with brokerage Terra Investimentos announcing a partnership with fintech TradeMachine to provide “algo-trading” services to their customers. 

Market penetration. A TradeMachine survey in August showed that only 6 percent of Brazilian investors use some form of automated investment strategy, while almost 60 percent are wary of using algorithms to execute orders. 

  • On the other hand, a recent survey by the Brazilian Securities Commission shows that investors are becoming increasingly independent, potentially making them more open to automated tools. Forty percent of them started investing within the last five years, especially with the help of digital channels provided by brokerage firms. 

What are the advantages? João Pádua, on the board at Terra Investimentos, explains that algorithmic investments reduce the emotional factor in trading — such as the euphoria of making a profit — which is particularly useful for inexperienced investors. 

  • “One of the hardest things to teach a retail investor is the discipline to start or finish a trade and this is solved by automatized investing. It removes the emotional aspect of trading, which may increase the investors’ continuity in the market”, he tells The Brazilian Report

Baby steps. Despite being used heavily by large funds and banks, algo-trading is not a tool that is commonly provided to retail investors. According to Mr. Pádua, that is down to its high investment demands in both infrastructure and research teams that can fine-tune algorithms, which many brokerages see as too costly. 

Is Singles’ Day coming to Brazil?

In an interview with newspaper O Estado de S.Paulo, Yan Di, the Brazil manager of Chinese online retail service AliExpress, announced that the company is aiming to bring China’s biggest shopping frenzy Singles’ Day to Brazil. The unofficial holiday celebrates bachelors and bachelorettes every November 11 and is the largest physical and online retail event in the world. AliExpress plans to launch Singles’ Day this year — a mere two weeks before Black Friday — with an aggressive marketing strategy to “get inside the Brazilian e-commerce customer’s mind.” 

  • AliExpress aims to turn “Double 11” into an entertainment extravaganza in Brazil, pushing a “live commerce” strategy with social media influencers and a partnership with reality TV show A Fazenda.
  • The company has also cut its threshold for free shipping to USD 15. To speed up deliveries and reduce shipping times to less than 30 days, AliExpress now offers three weekly flights from China to Brazil. Local infrastructure, however, remains the bigger roadblock. “It takes longer to move a product inside Brazil than it does to bring it to the border”, said Yan Di.  
  • The company is also working to allow Brazilian sellers to join its marketplace and build its own distribution center in the country. 

Will it work? After the success of introducing Black Friday ten years ago, retailers have been trying to introduce other shopping sprees to the domestic calendar, such as “Brazilian Week” in September. However, they have yet to be properly successful. 

  • For Luan Gabellini, a partner at Betalabs, specialized in managing e-commerce solutions, “the fact that Singles’ Day will happen in a month that is naturally heated could help to establish the date in Brazilians’ minds.”   

Will Brazilian retailers join the party? Mr. Gabellini believes that AliExpress’s mighty investments may act as a catalyst for Singles’ Day to grow organically in Brazil. If the event becomes an established date on the domestic calendar, he says, “many Brazilian companies of all sizes will add it to their strategies.” 

Take note

  • Connected cars. Fiat Chrysler announced TIM Brasil as its partner for connected cars in the country. From 2021 on, Fiat, Jeep, and RAM connected cars will be delivered with TIM SIM cards in order to access native onboard Wi-Fi connections, allowing the car to be connected with Fiat and the driver. The partnership also inaugurates a new segment for TIM’s B2B unit. 
  • WhatsApp Pay. During Cielo’s quarterly conference call, CEO Paulo Cafarelli said the payment systems company expects WhatsApp Pay to be launched in Brazil by November. However, he was unclear whether the service will operate before the launch of PIX, the Central Bank’s instant payment system. Cielo was the sole acquiring company chosen by Facebook to process transactions on WhatsApp Pay, but the firm’s stocks plummeted 40 percent after the Central Bank blocked the launch, demanding more information about the service. 
  • Sandbox. The Central Bank launched Brazil’s first regulatory sandbox, which will allow fintechs to test their products with real customers under specific regulations before taking them to market. The Central Bank will open applications for the sandbox in 2021 and approved companies may use the program for up to three years.   
  • Anatel. Carlos Baigorri was sworn in as the latest board member of Brazil’s telecom regulator Anatel, replacing Aníbal Diniz. He will have a four-year term, in which he will have a say on key issues, such as the upcoming 5G auction. His appointment coincides with the telecom sector being designated as a priority area in Brazil’s Federal Development Strategy for the next 10 years.  
  • Electric vehicles. Forty students from the University of Peru’s Universidad de Ingeniería y Tecnología (UTEC) created the first electric vehicle designed in the South American country. The prototype will be ready by February 2021 and is shaped like a raindrop, inspired by the Incan god Kon, who is said to have created the Earth and humankind, and travels through the rain. The car will compete in the Shell Eco-Marathon, which gathers students from all over the world in the pursuit of cleaner energy solutions.[/restricted]
Natália Scalzaretto

Natália Scalzaretto has worked for companies such as Santander Brasil and Reuters, where she covered news ranging from commodities to technology. Before joining The Brazilian Report, she worked as an editor for Trading News, the information division from the TradersClub investor community.

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