Brazil is the sixth largest economy in the world with well diversified manufacturing, mining and agricultural sectors. It’s Gross Domestic Product is two and half trillion dollars per year and has grown every year since 2005. About half the people in Brazil have access to the internet but over 85 percent of the population lives in cities so access is still limited considering the relative ease of availability. The gap between wealth and poverty is closing slightly over the last decade due to low unemployment and growing exports. In general the economy is healthy and expanding with only modest inflation and has been this way ever since the currency was allowed to float freely in 1999 after a severe economic crisis. Previously Brazilian currency was unofficially pegged to the US dollar, which ultimately caused a disaster.
So what does a strong economy mean in terms of computers and internet usage? Brazil is the largest economy of South and Latin America. But like all the countries of South America it has a need for technical skills that are most easily obtained by encouraging immigration. The standard pieces of the Silicon Valley puzzle that so many other countries are now trying to recreate are: technology, government support, education and technology consumers. To induce the take-off of a high paced digital sector Brazil needs to import computer scientists, entrepreneurs and professors.
If you look around the world at all the places where countries are attempting to foster the next Silicon Valley, you find an incredible number of different strategies. In Brazil the strategy is now beginning to coalesce around the oil industry. In the last five years there have been dramatic new offshore oil discoveries. Along with these discoveries comes a renewed interest in petroleum drilling and production from many big oil companies around the world. The restriction on this new oil is that it is located in deep water, which makes production dangerous and difficult.
The answer thus far to the challenges of deep water drilling and production are digital answers. Big data is the newest feature in the smart oil field, sometimes called the “digital oil field” and Brazil’s new offshore oilfields are prime candidates for the use of big data. The big international oil companies bring with them new digital technologies that are based on big data generated from data sensors and analytical software.
Almost all of the new oil discoveries are in the ocean off the Southeast region of the country. 98% of the discoveries thus far have been by Petrobras, the Brazilian national oil company, but that is now changing. In the next five years it is expected that as much as a quarter of new oil drilling discoveries will be by big international oil companies. All of these companies have made a commitment to big data as part of their discovery process because it makes exploration and production safer, faster and more accurate. Big data in oil opens the door to a new digital economy in Brazil or at least in Rio de Janeiro.
If you study how Silicon Valley grew up in the San Francisco Bay Area, you learn that it started with radio tubes. A small but intense group of radio operates and enthusiasts needed specialty radio tubes to allow them to contact ships in the Bay and out to sea. They built tubes and designed methods that allowed for higher performance and higher standards than other commercially available radio tubes. Those Californians were in competition with the radio industry back in the Eastern part of the US.
A Regional Advantage
Brazil’s great advantage in their digital growth is that their technical growth is now tied to an underlying industry that guides the shape of its needs. The oil industry is certainly not just a Brazilian industry, but the problems that are encountered in the deep water fields off their coasts will give shape to how the digital industry expands in Rio de Janeiro. Elsewhere around South America other countries attempt to foster their own digital industries, but none has a specific industry driving the development. The combination of Brazil’s large prosperous economy and their oil fields should give their digital efforts positive substance.
Argentina, Chile, Colombia, Ecuador, Mexico and Peru are all now battling to cultivate their own technical communities. None of them, including Brazil has the technical people to make this happen. All of them are devising ways to both educate their own people and also encourage migration to their Universities and digital start ups. Migration is not a popular cause among any of the South American countries after long histories of abuse from European immigrants –from the conquistadors on. Nonetheless, Brazil with its large cities, and substantial population has possibly the best resources for encouraging the migration needed to foster digital growth.
The real advantage is that international oil companies are bringing their own people to Brazil with highly sophisticated digital expertise. The combination of these oil people with Brazilian government and academic technical people is now expanding digital expertise in Rio de Janeiro. Here is the foundation of a uniquely Brazilian digital economy with its own digital cycle. The big data used by petroleum companies is stimulating and supporting local start ups that form that foundation.
Up until now digital developments in Brazil have been largely influenced by the overwhelming technical presence of US companies and US servers. The petroleum industry also has strong ties to US software, but whatever is unique about the Brazilian petroleum fields and the fact that it is convenient to use local expertise for on site work, encourages Brazilian digital growth. The fact that the Brazilian consumer economy is not completely engaged in digital commerce, ecommerce, leaves a window for slower paced digital development. With only 50% of Brazilians online there is still opportunity for local servers to establish themselves for search and other commercial digital activities.
An Upsetting Development
In September 2013, a glitch occurred in this digital story. Due to revelations of U.S. spying on Petrobras and also on Brazilian President, Dilma Rouseff’s, personal email account by the U.S. NSA, President Rouseff strongly denounced the U.S. She said she intends to build a Brazilian fiber optic network that will take Brazil off of U.S. exchange routers and U.S. fiber optic networks. Ostensibly the idea is to protect Brazilians from U.S. digital spying. Similarly, she said she urged Brazil’s Congress to demand Google and Facebook to locate servers that handle Brazilian clients in Brazil. At first these statements seemed like strong policy choices that could redirect Brazil’s digital development. But in October a political poll revealed that President Rouseff had gained traction in her re-election ratings for next year’s Brazilian Presidential election.
After a long difficult summer of mass street protests and complaints about corruption and low quality of Brazilian public services Rouseff was probably looking for a target that would lead public focus away from her domestic policies. The bounce in re-election polls suggests she succeeded in shifting heat off her domestic political failings, but probably didn’t really intend to disconnect Brazil from its current digital networks. In the past weeks her proposals have lost steam, even as she has successfully gained re-election strength and support for condemning the United States digital espionage.
Brazil’s digital cycle between servers and local small business catchments will grow up around the technical community that is now establishing itself in Rio de Janeiro. In time a digital economy will integrate with the industrial and agricultural sectors that have some local servers and some international servers. At this point, Google, Amazon and other large international servers aren’t going away, but as the Brazilian indigenous technical community takes hold and grows it will give Brazil its own unique digital flavor.