Professional Documents
Culture Documents
Brazil Digital Report - v1 PDF
Brazil Digital Report - v1 PDF
1st Edition
April 2019
The Objective
This report presents an overview of Brazil’s economy, including its innovation, digital and entrepreneurial landscape. The facts show that Brazil
offers many exciting opportunities and has many challenges – opportunities for innovation – to drive productivity, growth and social advances.
The Audience
This report is intended for all those who can play a part in driving the innovation agenda in the country – entrepreneurs, investors, public and
private institutions and business leaders around the world, and digitally savvy, intellectually curious Brazilians.
The methodology
This is a curated compilation of public information and selected proprietary McKinsey data. It can be revised annually, and we hope it will
generate many years of editions that will tell the ongoing story of Brazil’s digital and innovation evolution.
Acknowledgments:
McKinsey thanks the support it has received from Brazil at Silicon Valley, a student-led movement that started at Stanford
University and whose mission is to improve Brazil’s competitiveness and global relevance through technology and innovation.
More information at www.brazilatsiliconvalley.com. “
The Brazil Digital Report (“Report”) is based on information that has not been generated by McKinsey & Company, Inc. / Brasil Consultoria
Ltda. (“McKinsey”), and has not been subject to McKinsey´s independent verification. McKinsey does not attest that the information in this
Report is accurate or complete in every respect.
The analyses and conclusions contained in this Report do not purport to contain or incorporate all of the information that may be required
to make an informed decision. The reader should conduct a more detailed investigation and analysis before making any decisions or
entering into any transactions. McKinsey makes no representations or warranties regarding the accuracy or completeness of the
information in this Report and expressly disclaims any and all liabilities based on it.
This Report should not be considered and/or construed as strategic, financial, legal, tax or accounting advice and does not constitute legal,
accounting, tax, or similar professional advice normally provided by licensed or certified practitioners.
The analyses and conclusions in this Report are based on various assumptions that may or may not be correct, being based upon factors
and events subject to uncertainty. Future results or values could be materially different from any forecast or estimates contained in the
analyses.
McKinsey shall not be obliged to maintain, update or correct the report, nor shall it be liable, in any event, for any damage or loss caused
by the use of the Report, including, without limitation, lost profits or indirect damages.
Authors
With the
support of
8 7.5
7
6.1
5.8
6
5.1
5 4.4
4.0 4.0
4 3.2
3.1 3.0
3 2.5 2.7
1.9
2 1.4 1.2
1.1 1.1
1 0.5
-0.1
0
2003
2000
2001
2002
2004
2005
2006
2007
2008
2009
2010
2012
2013
2014
2015
2016
2017
2018
2019
2020
2011
-1
-2
-3 -3.6 -3.3
-4
Source: EIU, BCB McKinsey & Company 8
GDP
% of growth by component
Main driver of growth
2010 2018
Total 2.4%
Source: FGV-Ibre, EIU McKinsey & Company 10
Industry can tap its significant capacity to boost
production in the short term
83
82
81
80
79
78
77
76
0
10 13 14 15 16 17 18
110
100
93
Industry
90 confidence
Index
80 Consumer
80
confidence
Index
70
60
50
2010 2011 2012 2013 2014 2015 2016 2017 2018 Dec 18’
3.500
3.000
2.500
2.000
1.500
1.000
500
160
0
1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Feb/19
Bovespa Index
Score Mar 18th, 2019
100.037
100,000
90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000 4,354
0
1990 95 2000 05 10 15 19
Source: B3 McKinsey & Company 14
Brazil’s capital markets are developing and
diversifying funding for companies
177
+5% p.a.
12% 37%
Equities (IPO) 144
140
137 11% 14%
Equities 3% 10%
(follow-ons) 7% 13% 112 113 11% 12%
8% 5% 13%
Certificates of 1% 1%
13% 16% 9%
receivables
13% 27%
Corporate
82% 77% 67% 1%
bonds 70%
71% 63%
IPOs
Number of IPOs 2
2
US Stock Exchanges
Brazilian Stock Exchange 2
1
2
12
2
6
2 10 3
1 1
1 1 3
2014 15 16 17 2018
1 Azul has had an IPO on both B3 (Brazil) and NYSE (US). 2 Companies have had an IPO on US Stock Exchanges
Source: B3 McKinsey & Company 16
The “Brazil-risk” rate has fallen significantly since
2016
EMBI
Basis points
2,400
1,600
1,400
1,200
Brazil loses investment
1,000
grade rating
800 Brazil elevated to
investment grade
600
400
241
200
228
0
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
15
14
13
12
11
10
9
8.0
8
7
6
5
4.0
4
3
2
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
4.5
4.0 3.75
3.5
3.0
2.5
2.0
1.5
1.0
% Variation of last 12 months
30%
20%
10%
0%
2000 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 2020
3.5
Inflation-
3.0 2.90 adjusted
exchange
rate
2.5
2.0
1.5
1.0
0.5
95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
Source: Conference Board Total Economy Database (2018) McKinsey & Company 21
The country can no longer rely on demographics for
economic expansion
Annual growth
%
2.7
-45%
Workforce growth
2.1 1.5
0.8
Brazil
Average labor productivity - GDP per worker Malasia
US$ thousands China
50 2010 Chile
45 Korea
40
35 2010
30
1980
25
20 1980
15 1980 2010
2010 1980
10
5 1980
0
2 3 4 5 6 7 8 9 10 11 12
100% 95%
5%
Number of
commercial 400 27 9
agreements
1 Access to customer defined as population of countries which are part of the commercial agreements
IT Services 48 52 4%
2016 2018
Source: Charts/graphics created by McKinsey & Company based on Gartner research: Gartner, Forecast: Enterprise IT Spending by Vertical McKinsey & Company 26
Industry Market, Worldwide, 2016-2022, 4Q18 Update. R$/US$ exchange rates: 2016 – R$ 3.49, 2017 – R$ 3.19, 2018: R$ 3.64
Digital
Macroeconomics Perspective
Chapters
The Brazilian consumer is ready for digital But digital inclusion has only just begun:
disruption. In many ways, it has begun:
▪ Access and proficiency vary widely across
▪ More than two out of three Brazilians have regions, social classes and age groups
access to smart-phones and the internet
▪ Internet speeds are slower than in many
▪ Brazilians spend more than 9 hours per day developed and emerging economies
connected (among the highest rates in the world)
▪ E-commerce penetration is still low –entire
▪ They rank #2 or 3 in the world in using leading categories are still in their infancy
social media platforms including Facebook,
Instagram, YouTube, Netflix, WhatsApp and ▪ While Brazilians are avid consumers of
Pinterest digital media, they are not yet making many
transactions or spending money online.
▪ Digital advertising continues to grow in double
digits…
▪ … as does e-commerce, the shared economy,
and home delivery services.
70 67 United Kingdom 95
61 Japan 93
60 58 South Korea 93
55
51 United States 88
49 Malaysia 79
50 46
41 Argentina 78
39 Russia 76
40
34 Italy 73
30 Turkey 67
Brazil 67
20 Mexico 65
China 53
10 Global Average 53
Indonesia 50
0 India 34
2008 09 10 11 12 13 14 15 16 2017
Source: We Are Social (2018); CETIC.br (2017); McKinsey analysis. McKinsey & Company 29
Smartphone penetration is already high and in line
with global and developed economy averages
China 83
1 15
USA 78
Turkey 77
United Kingdom 77
84
Chile 76
Colombia 75
Type of internet connection by
Argentina 73 smartphones in Brazil
% smartphone users; 2017
Mexico 72
Source: Google’s The Connected Consumer Survey; CETIC; Statcounter; McKinsey analysis (2017) McKinsey & Company 30
The typical internet user in Brazil is urban, under
45 years old, class A-C and accesses the internet via
mobile devices
Rural 5% +60 5%
15% DE 22% University 22%
45 to 60
34 to 44 16% Female 53%
Elementary
16 to 24 25% Male 47%
AB 31% Illiterate / 29%
10 to 15 10% Pre-school
1%
Geography Age Gender Social
Literacy
Class
90%
38% 37%
17% 12% 7%
Means of access
6.3
4.0 +17%
3.4 3.4
-41%
2.0 -5%
1.2 1.1
Internet (via any device) Social media TV (broadcast, Average daily time
(via any device) streaming and spent listening to
video on demand) streaming music
1 Data represents adult respondents only; Survey-based data: Figures represent respondents' self-reported activity
3.6
5.0
3.9
4.5
3.7
4.8
3.6
4.6
4.3 4.2 4.0
9
3.4 3.3 3.1
h/ Day
2.0 2.0 1.8
44%
Philippines Brazil Argentina Mexico India USA China Russia UK
Mobile
1 Survey-based data: figures represent users’ own reported activity
McKinsey & Company 33
Source: We are Social (2017); GlobalWebIndex; McKinsey analysis
Brazilian’s internet usage is highly concentrated on
social and content-related apps and sites
56 54 54
44
41
32
26 26
21 20
13
6 4
Online Social News Search Music E-mails Online Office Video/ Games Virtual GPS/Map e- Online
chat Networks engines videos Software voice call Assistants Learning shopping
1 Based on a November 2018 survey of an stratified sample of 2,477 individuals from urban areas between the ages of 15 and 60, from Class A to D in Brazil
Source: Google Consumer Barometer (2017); McKinsey Analysis McKinsey & Company 35
More than 7.5 million users - more users than NET
(Pay TV player)
Most active non-English speaking country in the world
for the platform
Video Larger revenues than SBT (TV channel)
network
(Facebook More than 50 million users
applications)
Second-largest user base in the world
Social
network More than 29 million users
(other selected
Third-largest user base in the world
applications)
+1.7K restaurants
+30 cities
+200% annual growth since launching (2017)
Strategic partnerships: McDonald’s, Subway, Ipiranga, etc.
Investment in 2018: US$ 480 million (global)
Audio
streaming More than 3 million subscribers
Partnership with TIM, creating the TimMusic cobrand
platform
Examples:
Google
environment #5 in global online visitors
Mobile app
creation/usage Average of 83 installed apps and usage of 12
apps per day
2x
(Compared
20 million downloads
Store in 2016
95
89
71
38
15
7
2 2
Television Mobile Smart- Laptop or Tablet Device for E-reader Wearable
(Any kind) phone phone desktop computer streaming device tech device
(Any type) computer internet
content to
TV
+207%
46
38 +300%
28
+400% -86%
15 14
7 10
2 2
34%
Internet 30% 12.2%
2014 2016
16
+7% p.a. 4% -16%
6%
3%
10%
11
25%
Print media
14%
Other 7% 35% 24%
Pay TV 4%
16%
Digital
TV 59% 45% 1%
2013 2018
5,55 3%
4% 2%
9%
22% 39%
29% 35%
Other
Video 1,87 4%
Social 13% 8%
Display 19% 43% 18%
Search 56%
2013 2018
Share of
mobile media 9 57
%
Source: Magna Global; 1 US$ = 3,192 RS$ McKinsey & Company 51
But there is still room for growth and penetration in digital advertising
58% 46%
52%
PayTV 10% 21%
1%
9%
Broadcast TV 45% 16% 38%
38%
22%
15%
2%
Brazil US China Russia India
Source: Magna Global (2018); 1 US$ = 3,192 RS$ = 6.759 CNY = 58,32 RUB = 65,12 INR McKinsey & Company 52
Brazil is a few years behind US in terms of digital media investments…
40 40
Digital
30 30 TV
20 20
10 Others 10 Others
Print Print
0 0
2013 14 15 16 17 2018 2013 14 15 16 17 2018
Brazil USA
Source: Magna Global McKinsey & Company 53
... not only in the total investment amount but also
in dollars per hour of user
4.9
26.4
Digital 5.3
28.6
1.6
Print 0.4
TV 3.3
Brazil US
67%
North 58
Midwest 76
Illiterate/Pre-school 9
Education
Elementary 45
completed
High School 85
University 94
of overall respondents have
Up to 1 51 accessed internet in the past
Income
1 to 2 64 three months
2 to 3 73
Number of
3 to 5 84
MW 1
5 to 10 88
>10 94
10 to 15 84
16 to 24 88
Age 25 to 34 85
Years 35 to 44 76
45 to 59 years old 54
>60 25
1 MW: Minimum Wage (monthly)
Source: CETIC.br (2017) McKinsey & Company 55
Across regions, households with the highest incomes are almost four times more
likely to have internet access than those with the lowest incomes
Asia Pacific 46
USA 46
North America 43
Global 39
Western Europe 38
Brazil 13
Latin America 12
Source: Cisco VNI (2017), OOKLA – SpeedTest (2018) McKinsey & Company 57
E-commerce has grown quickly in the last five
years…
Average Spending
28.8 +13% p.a. 47.7
2013 2017
R$429
3.7% 5.1% # of orders
Penetration 111.2
million
Black Friday (2018)
31.3 55.1
Buyers million million R$2.6Bn
(+23% more than in 2017)
Source: Webshoppers e-Bit; Euromonitor; Press clippings; E-bit/Nielsen (2017/2018) McKinsey & Company 58
… but e-commerce penetration in Brazil still lags that of China and developed
nations…
e-Commerce penetration
%1
20
19
16
12 12
9 9
8 8 8
6
5 5
China South UK USA Netherlands Germany Australia Japan France Canada Brazil India Russia
Korea
Category
Penetration Leader penetration
%1 %1
Toys and games 29 72
Electronics 20 44
Appliances 10 37
Apparel 4 29
e-Commerce purchases
Share of mobile in online buying, % “Brazilian consumers adopt
new technologies early. As a
0.3
result, companies, especially
2011 retailers, have taken
advantage of apps as
extensions of their digital
operations. When we see the
different market segments,
71% of Brazilians use mobile phones retail is the one with the
32 to access the internet
highest penetration of apps.”
20181
Major retailers report 60% - 75% of
traffic from mobile devices and 35% - Felipe Almeida – Manager of ad
45% of total e-commerce sales products for apps at Google
87 2-71
44 1-5
37 22
1 The cities of São Paulo and Rio de Janeiro have special transport systems for products that offer "2-hour", "Same-day" or "next-day" delivery
2 90% of deliveries are due in two days
Source: Company annual reports (2017); Companies’ website McKinsey & Company 63
Digital
Macroeconomics Perspective
Chapters
Brazilians tend to be entrepreneurial: More than 39% of economically active people work in entrepreneurial
endeavors. But only a small share of those efforts are channeled towards innovation.
That said, more startups are pushing the digital and innovation:
▪ Entrepreneurial ecosystems are vibrant across the country
▪ Investments by angel investors and VC continue to grow at high double-digit rates
year on year, surpassing the US$ 1 billion mark in 2018;
▪ The country’s first eight unicorns were nominated in the past two years
▪ More unicorns are on the horizon.
Entrepreneur % of workforce ages 18-64 who are entrepreneurs Most common activities
14% Restaurants
2015 39% 2 Family work 9% Apparel
5 Employer
An entrepreneur is someone who,
rather than working as an Domestic
7% Catering
7
employee, founds and runs his or work Auto
her own business, assuming all the 7% Mechanics
risks and rewards.
2010 32% 5% Beauty
Saloon
Self-
26
employed 5% Snacks
2005 21%1
3% Cosmetics
Income
Age Number of minimum
Gender Years wages
10 3%
55< %
>4
17 25% 4
45-54 %
23
51% 49% 35-44 % 29% 3
30
25-34 % 29% 2
20
18-24 % 14% Up to 1
Education
No formal education Elementary High School Undergrad/Grad/PhD
27% 20% 46% 7%
2/3
12% of companies close within
five years
10% 10%
6%
4% 4%
3%
2%
1%
Lack of Lack of Lack of Labor Taxes Delinquency Competition Bureucracy Marketing Crisis Credit Other
clients capital knowledge
Resolving insolvency
Source: World Bank “Ease of Doing Business Index” (2018) McKinsey & Company 69
The cost of failure is high and closing a company in
Brazil is bureaucratic and expensive
Main challenges
Stages in closing a company in Brazil
Business owners must
provide documentation for
Cancellation of the company’s last five
Corporate Taxpayer years of activity
Federal
ID (CNPJ)
Further steps vary according
Registration of the Cancellation of to the type of company; it is
articles of association State Payer ID mandatory to have certificates
State in every area requested for
cancellation
the business activity of the
company
Cancellation of
Municipal
Municipal Documents provided often
Taxpayer ID
expire before the end of the
closure process and need to be
updated
The cost of higher than the
closing down a +44% cost of opening a
company can be company
Source: Sebrae (2016); Endeavor “Bureaucracy in the lifecycle of companies" (2017) McKinsey & Company 70
Despite Brazilian entrepreneurism, the country ranks at the bottom of the
innovation index compared to developed and other BRIC economies …
United States 6 13 21 24 1 8 6 14
France 16 21 11 10 11 19 19 12
China 17 70 23 29 25 9 5 21
Russia 46 74 22 63 56 33 47 72
Chile 47 37 61 53 54 48 48 58
India 57 80 56 77 36 64 43 75
Brazil 64 82 52 64 82 38 64 78
Ease of starting a business and Credit and tariff rate applied pulling
business environment the variable down
R&D
% of GDP
3.0
2.7
US
2.5
2.2
France
2.0 China
2.1
1.5 1.3
1.1 Brazil
1.0 0.8 Russia
India
0.5 0.4
Chile
0
2000 2008 2016
Patents by country
Patent applications / million inhabitants
220
217.6
207.2
200
180 173.1
160
140
120 117.2
60
40
20 15.2
9.0 7.9 7.1 3.4 2.0 1.7 1.5 1.2 0.5
0
Germany Netherlands United France United Canada Australia China Turkey Russian Chile Brazil Mexico Colombia India Argentina Peru
States Kingdom Federation
Source: World Economic Forum “Network Readiness Index” (2016) McKinsey & Company 73
Brazil lags in the efficiency of patent registration,
especially compared to countries like Japan
14 456
+65x
1
7
Brazil Japan Brazil Japan
153
138
+13% p.a.
44 36%
118 35
99 25 12%
91 19
Civil engineering 17
Production engineering
84
14
18
15 13 17%
10 11 8%
Mechanic engineering 12 12 9 12
11 13
Computer Science 6 7 8 12 11
11%
10 10 8 10 3 6%
Eletric engineering 9 2
6 7 7 2
Computer engineering 2 2 2 47 49 52
40 40
42 6%
Other engineering majors
56 74 38
63
10.0 9.9%
France
5.0 5.0%
United States
4.5
4.0%
Russia
4.0
3.5
Startup
start·up·
noun
3 8
IPOs Unicorns
Years since establishment Size of teams (including directors) Annual revenue since 2016
% % R$ thousands
Less than 50 30
1 to 2 years 37 6-15 members 27
50 to 250 15
2 to 3 years 24 16-24 members 4
250 to 500 5
3 to 4 years 13 25-49 members 2
500 to 1,000 6
4 to 6 years 9 More than 50 members 1
1,000 to 2,500 2
Age
46% are less Team Size
63% have less Revenues
69% have an annual
than 2 years old than 6 members revenues of less than R$50K
Industry focus
%
16.2
11.0
9.3
8.8
8.2
7.5
7.1
5.7
4.4
3.9 3.7 3.4
2.8 2.6
2.0 1.7 1.6
Professional Telco FinTech Health Retail EdTech Mobility Media Agrotech Real Consum- Environ- Tourism Biotech HR Tech Lawtech Others
Services Estate ption ment
Gender Background
% %
Female
12
Business
35 32
58
Technical
Male
88 Age
65
33 years old on
average
Founders Teams
Source: Startse (2017), Technical Background = graduated in STEM fields McKinsey & Company 83
Founders say that the main obstacles to growth in the first three years are consumer
engagement, cost of acquisition, revenue and funding
Main obstacles
%
Technology 9%
Operations 9%
Client retention 8%
Client experience 7%
International expansion 6%
Others 5%
Source: ABStartups “Radiografia Startups Brasileiras” (2017) McKinsey & Company 84
Most startups are still in their early stages and rely
on funding from family, friends and angels
Other 5%
Bank Financing 1%
Venture Capital 1%
Public funds 4%
Accelerators 4%
Angels 9%
851
+14% p.a. 784
688
619
495
450
200 119
186 182
197 92
70%
143 111 of LatAm
VC activity
69
0
2011 12 13 14 15 16 2017 1H17 1H18
84,2
USA 0,43%
Source: World Bank, Press clippings, LAVCA (2017) McKinsey & Company 89
Many interesting deals were made in 2017…
Marketplace 135
FinTech 61
Heathcare/Life Sciences 50
Big Data 45
FinTech 39
Marketplace Private
Marketplace Private
Source: LAVCA; Crunchbase McKinsey & Company 90
And Brazil’s first unicorns were nominated in 2018,
followed by IPOs and exits
156
cap2
Startup1 US$ billion
8.8 unicorns
92 unicorns
8.4
4.0
8 1.8
16 unicorns
Unicorns 1.3
1.1
Private
13 unicorns
Private 10 unicorns
1 Considers disclosed private investments over US$1bn, recently IPOs from companies with market cap over US$1bn, and non-disclosed
investments with market perspective over US$1bn
2 For public companies, reference value on Mar 8 th, 2014
3 CB Insights criteria
4 unicorns
Source: CBinsights Unicorn Ranking, Crunchbase, LAVCA (2018) McKinsey & Company 92
Brazil has
many
innovation
hubs, with
most startups
in eight states
and Distrito
Federal
Detailed next
Investment / Support
Incubators/Accelerators Education institutions institutions
3,300+ 25+
startups incubators
15+ 600+
accelerators higher education
Startups institutions
1 São Paulo 2 Campinas 3 Ribeirão Preto 4 São Jose
dos Campos
3 Ribeirão Preto
Campinas
5 Piracicaba 6 Sorocaba 5 2
4
Piracicaba 1 São José
6
dos Campos
São Paulo
Sorocaba
Source: Crunchbase, ABStartup, Anprotec, Valleys' websites, Anpei; INEP (2017), SPConecta, Press clipping, McKinsey & Company 94
Not exhaustive
Investment / Support
Incubators/Accelerators Education institutions institutions
550+ 20+
startups incubators
5+ 90+
accelerators higher education
Startups institutions
Joinville
1 Florianópolis (Startups SC) 2 Joinville 3 Balneário Camboriú 4 Blumenau
Balneário do
Camboriú
Chapecó
Stup UX 2
4
5 3
Blumenau 1
5 Chapecó
Florianópolis
Source: Crunchbase; ABStartup, Anprotec, Valleys' websites, Anpei; INEP (2017), Mapa Startups.SC, Press clipping McKinsey & Company 95
Not exhaustive
Investment / Support
Incubators/Accelerators Education institutions institutions
890+ 15+
startups incubators
10+ 290+
accelerators higher education
institutions
Startups
Belo Horizonte Uberlândia Uberaba Juiz de Fora
1 (San Pedro Valley) 2 (Colméia /UberHub) 3 (Zebu Valley) 4 (Zero40)
Uberaba
Belo
Horizonte
3 (San Pedro
Valley)
2 1
Juiz de Fora
4
Uberlandia
Source: Crunchbase, ABStartup, Anprotec, Valleys' websites, Anpei; INEP (2017), Censo mineiro de startups, Press clipping, McKinsey & Company 96
Not exhaustive
Education
Incubators/Accelerators institutions Investment / Support institutions
750+ 25+
startups incubators
10+ 130+
accelerators higher education
institutions
Startups
1 Rio de Janeiro 2 Sul Fluminense
Sul Fluminense
2
1 Rio de Janeiro
Source: Crunchbase, ABStartup, Anprotec, Valleys' websites, Anpei; INEP (2017), Press clipping, McKinsey & Company 97
Not exhaustive
9+ 180+
accelerators higher education
institutions
Startups
1 Curitiba 2 Ponta Grossa 3 Londrina 4 Maringá Maringá
Londrina
4 3
Curitiba
2
1
Ponta Grossa
Source: Crunchbase, ABStartup, Anprotec, Valleys' websites, Anpei; INEP (2017), ParanáTech Mining Report – Distrito, Press clipping, McKinsey & Company 98
Not exhaustive
5+ 120+
accelerators higher education
institutions
Startups
1 Porto Alegre 2 Santa Maria 3 Caxias do Sul 4 Canoas
Caxias do Sul
Santa Maria
3
Canoas
2 4
1
Porto Alegre
Source: Crunchbase, ABStartup, Anprotec; INEP (2017), Press clipping; Report: Mapeamento de comunidades de startup – Porto Alegre McKinsey & Company 99
Not exhaustive
4+ 105+
accelerators higher education
institutions
Startups
1 Recife
Recife
Source: Crunchbase, ABStartup, Anprotec; INEP (2017), Press clipping; Report: Mapeamento de comunidades de startup – Recife McKinsey & Company 100
Not exhaustive
4+ 105+
accelerators higher education
institutions
Startups
1 Salvador 2 Feira de Santana Feira de Santana
Salvador
2
1
Source: Crunchbase, ABStartup, Anprotec; INEP (2017), Press clipping; Report: Mapeamento de comunidades de startups – Salvador McKinsey & Company 101
Not exhaustive
6+ 60+
accelerators higher education
institutions
Startups
1 Brasília
Brasília
Source: Crunchbase, ABStartup, Anprotec; INEP (2017), Press clipping; Report: Mapeamento de comunidades de startup – Brasilia McKinsey & Company 102
Digital
Macroeconomics Perspective
Chapters
A B C D
State of the industry ▪ The financial services industry continues to be attractive in Brazil, with assets growing faster
than GDP, controlled delinquency, reduction in cost to income, steady profit growth and ROE of 14%.
▪ The industry is highly concentrated, however, with plenty of room for financial inclusion.
Compared to developed countries, Brazil has low penetration of nearly all financial products, including
bank accounts, credit – particularly long-term credit – investments and insurance.
Digital trends ▪ Brazilian banking customers have gone digital – more than half are active online or mobile banking
users, and more than half of banking transactions are electronic.
Startup ▪ Around 400 FinTechs are active in Brazil, innovating and fighting for share across
environment segments and products but particularly in payments, where two to four unicorns
have emerged, depending on how you count them: Stone, Nubank, PagSegudo and
XP.
▪ Disruption continues in this volatile market. Digital wallets have emerged, some
credit- based FinTechs have gone through several funding rounds, and digital banks
are acquiring new clients by the millions.
▪ Some of this disruption is being led by incumbents, such as Bradesco/Next, Banco
Original, Caixa/Youse, SafraPay, BB/Cliclic, Santander/Openbank.
+3% p.a.
+11% p.a. 7.8
7.2 7.2 7.3
6.7
5.9
2013 14 15 16 17 2018
GDP -3%p.a.
growth
+9% p.a.
252
39
Life
154 981
VGBL
22
Health
60 42
Other P&C 21 33
19
Auto 32 41
2012 20181
1 3Q2018 annualized
Source: SUSEP; McKinsey Global Insurance Pools; press clippings, McKinsey analysis McKinsey & Company 107
107
Financial services revenues have been under
pressure due to spread compression
18.5 18.8
17.4 16.9
14.8
14.1
13.4
2011 12 13 14 15 16 17 2018
4.5 4.2
4.0 3.9 3.9
4.0 3.5 3.5
3.5 3.2 Individuals
3.0 2.7
2.3 Corporate
2.5 2.0
2.0
1.5
1.0
0.5
0
2014 15 16 17 2018
2010 11 12 13 14 15 16 17 2018
16.7
16.1
15.4
13.9 13.9
13.1 13.1 13.1
11.3
2010 11 12 13 14 15 16 17 2018
85.7 83.8
25.0 8%
23.4 24.0
66.4 65.7
61.4 8%
58.1 19.1
53.2 53.2 20.2 21.6
15.7 17.2
13.3
14.6
13.6
14.7 1%
12.9
11.0 12.0 15.1 14.4 11.0
10.0 11.4
15.1
10.4 13%
12.1 15.8 7.2 12.5
11.7 11.2 8.0 12.2
3.8 5.2
12.2
7.1
7.0 4.1 8.0 15%
3.9 3.6 5.6 6.7 5.5
2.1 2.2
2.7 16.6 13.6 16.7
Others 10.5 11.6 7.7 9.1 10.6 11.3 6%
2010 11 12 13 14 15 16 17 2018
2013 14 15 16 17 2018
Others 39% 40% 37% 38% 36% 36% 35% 37% 40%
Top 5 61% 60% 63% 62% 64% 64% 65% 63% 60%
2010 11 12 13 14 15 16 17 2018
1 Gross Written Premium
1 Specifically Acquiring
Source: ABECS, BCB, Companies’ reports, McKinsey analysis McKinsey & Company 115
115
Financial inclusion remains a big opportunity: 25%
of economically active people do not have a bank
account
State of the Industry
Brazilian bank account holders1
%
94
75
71 72
67 69
2014 15 16 17 2018
1 Number of individuals with active relationship registered in a financial institution over the total population
201.4 195.3
168.7
157.3 151.0
138.5
112.5
France China United Japan United Chile Italy Brazil Colombia India Mexico Argentina
Kingdom States
100
65 66 66
63
58
52
47
42
67
63
56
50
47 46 47
44
Source: ANBIMA, McKinsey “North American asset management in 2018: The New Great Game” (2018) McKinsey & Company 119
119
Insurance penetration is also low,
with significant room for growth via customer
education and product innovation
State of the Industry
Auto insurance penetration
% of total fleet
93
87
36
27
23
Source: McKinsey analysis; SUSEP; Companies’ reports; press clippings (2017) McKinsey & Company 120
120
The number of internet banking users has
increased dramatically, driven by mobile banking
Digital trends
Number of internet and mobile banking users
Millions
118
+32% p.a.
86 59
75
56 46
42
39
31
59
Internet banking 27
33 40
25
Mobile Banking 12
2013 14 15 16 2017
Source: Febraban McKinsey & Company 121
121
As a result, the number of bank branches is
declining – a trend that is accelerating
Digital trends
Number of bank branches
Thousands of branches
-1% p.a.
-4% p.a.
23,0 23,1 22,6
21,5 20,9
Digital trends
Transactions by channel
Billions of transactions, % of total transactions
Digital trends
Breakdown of payment transactions
% of transacted volume
25% 22%
31% 28%
Check 38% 36% 34%
11% 12%
10%
8% 9%
Debit card 7% 8%
17% 17% 18%
15% 15% 16%
Credit card 14%
FinTechs
FinTechs
Number of FinTechs
404
332
+96% p.a.
244
130
54
FinTechs
Share of number in Latin America 20% -2%
FinTechs in database1 Banking segment’s share
of total banking revenues
10% -5%
11% -1% <5% 7.5%-10%
15% +3% 5%-7.5% >10%
Customer 9% +5%
4% -6%
segments
8% Share of FinTechs
…%
Retail +1% identified in
5% 0% each bucket1
5% +2% 4%
-2% Difference in
Commercial2 …%
percent vs. rest
2%
0% of world
Large 1% -1%
corporate3
Products
1 153 LATAM FinTech companies in our database; includes double counting as FinTechs present in more than one segment or product are counted twice
2 Includes Small and Medium Enterprises
3 Includes Investment Banking, Sales and Trading, Securities services, retail investment, Non-CA deposits and asset management factory
4 Revenue share includes C/A deposit revenue
Source: McKinsey Panorama FinTech database (2016) McKinsey & Company 126
Moreover, in the last few years, we have seen the
birth and rise of a number of digital banks
FinTechs
Number of digital accounts
Thousands 2017 2018
2,500
1,600
1,500
1,452
620²
542
500
435¹
379 400
86
38
Source: Companies’ reports; Press clippings (2018) McKinsey & Company 127
127
Map of the Brazilian FinTech ecosystem
FinTechs
FinTechs
A B C D
State of the industry Brazil, the home of SUS, one of the most inclusive public health care systems in the world, has seen
major changes in the health sector in the last decade:
▪ Significant improvements in key indicators such as mother and infant mortality rates
▪ Double-digit growth in per capita spending driven by the private sector
▪ The growth, consolidation and profitability of the main insurance providers.
Brazil’s healthcare does not yet meet WHO standards, however, and quality is far from universal:
▪ Brazil still lags some countries and WHO minimums in infant mortality, number of doctors and
hospital beds per capita and other important metrics
▪ Standards vary widely across regions, states and cities
▪ Healthcare costs have risen much faster than inflation, which is particularly worrisome
in a population that is aging fast.
Digital trends Brazil’s health industry is falling significantly behind in the adoption of
digital technologies such as electronic patient charts, electronic health
care records and online consultations.
Startup
environment More than 200 startups have risen to this challenge, pushing the digital
innovation agenda with new business models around big data, IoT
medical devices, health marketplaces, and health education, among
others.
24.5
-5% p.a.
19.8
15.1
60
-10% p.a.
48 46 44
Coverage
extension
supported by
government
Source: McKinsey analysis; Instituto Coalizão Saúde referencing the World Bank; London School of Economics study and Commonwealth McKinsey & Company 134
134
Fund (2017)
Health spending as a share of GDP is in line with
OECD, but spending per capita is still lower than
developed countries
State of the Industry
OECD average 9% 9
7.5 9% 20.4 12 3
34% of
6.8 7% 18.6 12 4 market
3% share
5.8 13.6 10 3
2.5 3% 4.9 4 1
2.3 2% 4.7 4 1
2.0 4.3 4 2
2%
1.7 4.1 4 2
2%
1.7 3.9 4 2
1.6 2% 3.6 4 2
1.4 2% 3.3 3 1
Others 51.0 60% 97.8 Others 40 -20
13.5 13.1
12.6
9.9
8.0
7.0
RR 18
AP 18
PI 16
BA 16
AM 16
SP 11
PR 11
DF 10
64
52
441
39 38
22
15
AP 110
MA 98
PB 87
TO 84
PI 81
SE 47
PR 44
ES 37
RS 36
SC 30 ~ 3. 5x
1.8
Chile 1.6
Turkey 1.7
1.4
Brazil 1.8
Mexico 2.2
Canada 2.4
USA 2.5
UK 2.8
Australia 3.5
Spain 3.8
Italy 3.9
Germany 4.1
1.0
Minimum recommended
2000 2017 by WHO
436 415
Mexico 1.7
Brazil 2.0
Chile 2.1
Turkey 2.5
Private 68.0 64.0 Canada 2.7
UK 2.8
Spain 3.0
USA 3.1
Italy 3.3
Australia 3.7
36.0 Germany 8.2
Public 32.0
Japan 13.2
4.7
2009 2016 OECD
Average
Source: OECD; SUS (2016) McKinsey & Company 142
Access to private health plans and beds varies
widely across the country
State of the Industry
Private plan beneficiaries Private bed beneficiaries
For every 100,000 inhabitants For every 100,000 inhabitants
SP 38.0 RS 1.7
RJ 31.7 GO 1.6
DF 30.2 PR 1.5
ES 27.4 DF 1.4
PR 25.0 RJ 1.4
MG 24.3 RO 1.4
RS 23.4 SC 1.3
SC 21.4 MT 1.3
MS 17.2 PE 1.3
MT 16.5 SP 1.3
GO 15.7 PB 1.3
RN 15.0 MS 1.2
SE 14.5 MG 1.2
CE 14.1 BA 1.2
PE 14.0 MA 1.2
AM 12.8 CE 1.1
AL 11.4 PI 1.1
PB 10.7 ES 1.1
BA 10.5 AL 1.1
PA 9.5 RN 1.1
PI 8.7 PA 1.1
RR 8.2 TO 1.0
RO 8.1 RR 0.9
MA 6.7 AC 0.9
TO 6.1 AM 0.8
AP 5.7 SE 0.8
AC 5.4 AP 0.6
-86% -62%
Source: FBH and CNSaúde “Hospital Overview in Brazil" (2018) McKinsey & Company 143
143
Medical inflation far exceeds baseline inflation and
rates in many other economies
State of the Industry
6.6
4.7
4.0
3.0 2.9 2.6
Source: McKinsey; IESS, Viewswire (2012 – 2017) McKinsey & Company 144
144
Demographic pressures will raise health care demand
and spend: people over 60 will account for 20% of the
population by 2030
State of the Industry
Population by age Average cost of public
Millions,% hospital treatment
195 212 223 R$
60+ 10% 14% 1,786
19%
40-59 22%
25% 1,522
28%
15-39 42%
40%
36% 840
5-14 17%
14% 824
12%
0-4 8% 7% 6% 1,677
2010 2020e 2030e
Source: McKinsey analysis; Instituto Coalizão Saúde referencing the IBGE; Datasus; Press clipping (2017) McKinsey & Company 145
145
Will the private sector reinvent itself in time? In
2030, only about 10% of the elderly will be able to
afford private plans
State of the Industry
No salary 0 11
1 Recital: only 1 elderly person in the family; Midpoint within the income range; Same proportion of households in each income range and
same average real price of health plans in 2030; R$1,233 as the average monthly price for health plans for people over 60 years; 40%
of family income for payment of health plans
2 Considers the same distribution of elderly in all income ranges. Proportion of people 60+ years of age in the Brazilian population in 2014
was ~11%
Source: IBGE (2018) McKinsey & Company 146
146
Brazil has a long way to go in health innovation and
a digital future
Digital trends
Future Index
Score
UAE
Netherlands 58.9
65.3
24%
of health units use
China 58.1 electronic medical
records
USA 57.4
United Kingdom 56.4
France
Germany
54.6
54.5
85%
of cities do not have the
Brazil 50.6 necessary equipment to
implement electronic
Japan 49.0 medical records
1 The Future Health Index (FHI) measures the perception of readiness of 13 key countries to realize the benefits of connected and
integrated medical care
Source: Future Health Index Philips (2016) McKinsey & Company 147
147
Digital trends
Charts are entirely Charts are Most charts are Most charts Don’t know/did
paper-based fully electronic paper-based, although are electronic not answer
some are electronic
1 How records are kept according to the answers provided by the healthcare facilities visited
Source: TIC Health Survey; Regional Center for Studies to Develop Information Society (2017) McKinsey & Company 148
Brazil is home to more than 200 HealthTech
startups across hubs
2017
HealthTechs
+263
São Paulo
39%
startups Belo Horizonte
9%
17% 15% 7%
Recife
are the sectors with the most startups ...are the cities with
the most HealthTechs
Source: Liga Insights Health Tech (2017) McKinsey & Company 149
Map of the Brazilian HealthTech ecosystem
HealthTechs
A B C D
State of the industry The recent history of education in Brazil is one of quantity more than quality.
▪ Despite a record high number of high school and college graduates, fewer than 40% of the
population has completed high school, and more than 10% are illiterate.
▪ Moreover, the dramatic increase in years spent in education has had little effect on average
hourly earnings.
▪ Although private and public investments in education – absolutely and as a share
of GDP – have risen significantly, Brazil is performing worse in international
education scores and rankings.
Digital trends Digital technology can help achieve scale inside and outside of classrooms.
▪ Distance learning is leading the way, with strong growth. Up to 25% of applications
to higher education institutions are for distance learning.
University complete
University incomplete
8.9%
3.5%
12.1% 3.2
4.6%
High school complete 20.8% 1.1
23.8%
High school incomplete 6.2% 3.0
Elementary complete 9.5% 6.9%
7.9%
59.4% % of population didn’t
finish high school
Elementary incomplete 37.7%
33.9%
2012 2018
Source: “Evolution of the Brazilian education sector” from Falke empowered by EMIS (www.emis.com) (2018) McKinsey & Company 154
154
Employees with university degrees earn
twice the national average – the highest salary
increase across levels
State of the Industry
11
6 6 5
3
Source: OECD; Our World in Data (2017) McKinsey & Company 156
156
Education in Brazil is unevenly distributed
22% 22%
22% 21%
5.3
High school complete 27%
8% 7%
13% 16%
Illiterate 8% 10% 8%
SE CW S N NE
Source: The Economist Intelligence Unit (2017) McKinsey & Company 157
157
Educational spending is low compared to developed
economies and even within Latin America
State of the Industry
Spending on education
% of GDP
6.65
6.26 6.23
5.76 5.62 5.48 5.36 5.28
4.92
4.45
3.78
3.31
UK South USA Belgium Argentina Chile Mexico France Brazil Japan Hungary Russia
Korea
China 546
2 533
2 0
France 497 496
25 26 -1
US 496 488
26 31 -5
Russia 468 492
40 28 12
Chile 439 443
45 44 1
Brazil 401 395
54 63 -9
OECD Avg. 497 OECD Avg. 492
1. 65 participating countries in 2009; 2. 70 participating countries in 2015
0
0 20,000 40,000 60,000 80,000 100,000 120,000 140,000
7.1
5.9 20%
Non-distance 25%
Public
learning 75%
90%
80%
75%
1,466
124 8%
931
182
1,342
49%
Public
749
50
Private 45
5
2003 2010 2017
Source: “Evolution of the Brazilian education sector” from Falke empowered by EMIS (www.emis.com) (2018) McKinsey & Company 163
163
Brazil’s many education startups aim to address a wide range of topics, mostly in
content management (1/2)
EdTechs
Educational Management 28 25 5 24
System
Educational games 16 4 24 3 10
Adaptive Platform 3 17 3 4 4
EdTechs
A B C D
The Colab-i initiative is part of the Audit Court’s In the e-Proinfo app, students can view their courses and
Research and Innovation Center, which supports detailed information on institutions, courses and classes,
innovative projects through cooperation and as well as participate in discussion forums
skill-building
The CAIXA Bolsa Família app shows payment dates for
state welfare and lets citizens see what payments have
been made
iGovLab seeks solutions to increase efficiency
and scope of state management policies. It is In the Educação Conectada app, users can see a school’s
linked administratively to the São Paulo state technology adoption on a scale of emergent, basic,
government. intermediate or advanced
The Receita Federal app helps people file income tax
Inovagov seeks to foster creative solutions, returns. The free platform automatically stores user data
promote a more humane focus on user and allows forms to be filled out in stages
experience and integrate the efforts of different
sectors, resulting in better processes and
services in the public sector’s innovation culture. Others
UK 90
France 88
USA 88
Russia 80
Chile 74
Brazil 73
China 68
India 57
USA 73
France 69
Chile 68
India 57
Brazil 57
Russia 49
China 43
Obtain electricity 64 18
Fulfill an average
company’s tax
85 3
obligation
Source: World Bank, Ease of Doing Business (2017) McKinsey & Company 173
173
Many countries invest in digital innovation to improve citizen satisfaction (1/2)
Examples
Examples
Transparency Communication
Transportation
Statistics and data analysis
Efficiency / Operations
Area 5 HDI 79
Source: Press clippings, UN, OECD, World Bank, FAO (2017-2018) McKinsey & Company 178
Brazil’s growth has lagged that of most developed and BRIC economies
160
150
140
130 Chile
120 US
Russia
110 France
Brazil
100
2010 2011 2012 2013 2014 2015 2016 2017 2018
Total population
Millions of inhabitants
250
2.9% 1.7% 1.2%
200 209
150
100
50
0
1950 1960 1970 1980 1990 2000 2010 2020
Habitation
Inflation rate per segment Education
% Health
18 Transport
16 Communication
14
12
10
8
6
4
2
0
-2
-4
2013 2014 2015 2016 2017 2018 2019
65+ 4 5 7 10 2.6% 8
40-64 13 14 17 17 1.0% 7
0-15 11 11 9 8 -1.0% -5
Economically
active person 8.2 3.7
per retiree
A 5% 5% 2% -10%
B1 9% 12% 5% -6%
1 Note: households were classified according to the Critério de Classificação Econômica Brasil, defined by ABEP. According to ABEP, the
average household gross monthly income per social class is: Class A: RS$ 20.272,56, Class B1: BRL 8.695,88,Class B2: RS$ 4.427,36,
Class C1: RS$ 2.409,01, Class C2: RS$ 1.446,24, Class D/E: RS$ 639,78
Source: IBGE McKinsey & Company 183
Income inequality has declined but the country is
still among the most unequal in the world
France 31 33 2
India 35 35 N/A1
Russia 40 38 -2
United States 41 42 1
China 43 42 -1
Chile 52 48 -4
Brazil 58 51 -7
1 Not possible to calculate since there is just one data point in the interval
Source: World Bank; McKinsey analysis McKinsey & Company 184
Brazil has lagged on the Human Development Index
0.95
US
0.90 France
0.85 Chile
0.80 Russia
Brazil
0.75
China
0.70
0.65
India
0.60
0.55
0.50
0.45
2000 2002 2004 2006 2008 2010 2012 2014 2016
34.9
R$ 252
12.3
A D/E
GDP per capita per region GDP per capita for the top 20 cities by
R$ thousands/inhabitant GDP/capita 2016 population Population
xx R$ Thousands per year
CAGR 2011-2016 Millions
Brasília 79 3
19 16 São Paulo 57 12
4.9%
Rio de Janeiro 51 6
7.7%
Campinas 50 1
Porto Alegre 50 1
Duque de Caxias 45 1
Curitiba 44 2
Guarulhos 40 1
Belo Horizonte 35 3
40 Manaus 34 2
7.5% Goiânia 32 1
Average Recife 30 2
Brazil 39 Campo Grande 29 1
30
São Luís 26 1
4.9%
Natal 25 1
Fortaleza 23 3
Maceió 21 1
36 3
6.0% 7.5%
Salvador
Belém
21
20 1
São Gonçalo 16 1
-72%
Unemployment rate
% of total economically active population
Region Unemployment
16 Labor rate
15 law 14.4
Northeast
reform
14
13 North 11.5
12 11.9
Southeast 12.5
11
10 Southt 7.9
9
8 Center-west 8.9
7
6
5
4
3
Q3 Q3 Q3 Q3 Q3 Q3 Q3
2013 2014 2015 2016 2016 2017 2018
Source: IBGE McKinsey & Company 189
Informality is high in many sectors of the economy
Sector Informality
% of occupied people
Construction 64.2
Agriculture 60.5
Other services 47.4
Lodging and restaurants 41.9
Transportation 33.6
Retail 33.4 Total informality
Manufacturing 27.3 Share of workforce
39%
Real estate 21.6
Public administration & social services 21.2
Extractive industries 16.0
Finance 9.0
Utilities 7.5
Source: IBGE (2015); PNAD; McKinsey analysis McKinsey & Company 191
McKinsey & Company 191