Fourth Industrial Revolution — Will Brazil miss this train?
May 24, 2018
“Brazil has already missed train of total competitiveness and should focus on relative competition, prioritizing investments in technology and innovation where we are already capable in relation to other countries.”
Jorge Arbache, secretary of International Affairs of the Brazilian Ministry of Planning
“Today, ideas that make a difference come more from ‘hackathons’ than at university research centers, and they couple products and services to create new business models.”
João Gomes de Oliveira, engineer and vice-president of the Brazilian Academy of Sciences
“Of the 3,000 Brazilian startups, there is a huge concentration in agribusiness, which is increasingly becoming a chain linking agricultural production, industry and services. The progress is there.”
José Roberto Mendonça de Barros, economist and business consultant
Brazil is already behind in incorporating concepts and technologies of the so called industry 4.0 or Fourth Industrial Revolution. So in terms of investing in technology and innovation, Brazil should focus its greatest efforts only in certain sectors, specifically those in which it has already revealed competitive advantages or greater potential for development. This was the consensus among the participants of the seminar “Fourth Industrial Revolution: Will Brazil miss this train?” held at the Fernando Henrique Cardoso Foundation.
“We missed the train of total competitiveness (lower overall production costs) to China and other Asian countries. What is important now is to strengthen our relative competitiveness in sectors where we already have some strength and are able to compete in good conditions” said economist Jorge Arbache, Secretary of International Affairs of the Ministry of Planning.
That is to say that the country must invest in adding value to the agribusiness chain, a sector in which it is already a leader but that is undergoing major transformations, as well as areas linked to sustainability, such as renewable energy (wind, solar etc.) and biofuels. (learn how about the seminar “Research and innovation in agribusiness: ‘new wave or stay behind?’ “). It is well positioned in the mid-sized aviation niche, because of Embraer’s success, and has extensive experience in deep-sea oil and gas exploration. There is also room to innovate in the financial sector (with fintechs) and in health care, said the economist.
“One thing is a fact: traditional Brazilian industry has collapsed. It’s no use putting cherry on a cake that has already crumbled”, said engineer João Fernando Gomes de Oliveira, a professor at the School of Engineering of São Carlos (EESC-USP) and vice-president of the Brazilian Academy of Sciences. Oliveira praised, however, the creative potential of young Brazilian entrepreneurs: “Today the ideas that make a difference come more from the ‘hackathons’ than from the universities’ research centers and they couple products and services to create new business models that involve big data, internet of things, artificial intelligence, etc. “.
Of the around 3,000 Brazilian startups, the vast majority are concentrated in agribusiness, where technological progress is “endogenized,” said consultant José Roberto Mendonça de Barros, former Secretary of Economic Policy at the Ministry of Finance (Fernando Henrique Cardoso Foundation). In this productive chain, which involves agricultural and livestock production, food and input, and defense industries. The research and innovation agenda is constantly being renewed by the market itself, in partnership with universities and research centers, “without depending on benefits from the government”.
The industry concept 4.0 originated from a high-tech strategic project of German government and industry. To learn more, read the book “The Fourth Industrial Revolution” by Klaus Schwab, founder and executive chairman of the World Economic Forum.
‘Network service platforms’
Although he has made it clear that he does not believe in industry 4.0 as a panacea for the many ills of Brazilian manufacturing, Arbache advocates a focus on “relative competitiveness”. He warned of the risk of excessive specialization, since the country obviously cannot give up its more traditional industry, even though it has found itself in a crisis for many years.
According to the secretary, “currently, having a super robotized and modern factory is not what makes a difference, because everyone can have that, but developing and making available the platform that manages this factory, charging well for such a service.” That does create “a mega asymmetry that favors the companies that own these platforms,” he said. Arbache stressed the importance of the country being a joint partner in the development frontier of these multipurpose digital platforms.
Sustainability
Oliveira cited “new technological drivers” like electric cars, additive manufacturing or 3D printing.” Type stations do everything — they use lightweight materials (such as carbon fiber, which exists in large quantities in the wild), produce little waste andrequire almost no labor — they are arriving with full force on the market and will even manufacture airplanes. The era in which metals were the basis of the industry is at an end. So the new protectionist policies announced by Donald Trump in the US are a misnomer”, he said.
“In China, economic growth is no longer driven by the construction of infrastructure (roads, railways, ports and airports), but by the concern for sustainability.”, Oliveira said. Just in Shenzhen (one of the largest Chinese cities) 16,000 electric buses circulate in the streets. By 2020, 5% of vehicles in China will be electric, ten years later they will be expected to reach 30%, he stated.
“A car with a combustion engine has 10 thousand to 30 thousand pieces while an electric car is much simpler, it has only about 200 elements. The traditional automotive industry is bound to disappear and it will happen faster than you think”, he affirmed.
The engineer also highlighted the internet of things — “by 2020 we will have 50 billion devices connected to each other” — and the big data — “through the cell phone, it is possible to monitor everything that each person does, what they need and what they intend to do “- as new frontiers of innovation.
“It no longer makes sense for Brazil to bet on making chips or smartphones, but rather to create new services that work around smartphones. For example, Uber, a disruptive service that has been hugely successful all over the world by exploiting people’s fatigue with traditional taxis, that are expensive and inefficient. It’s the young people who have the ability to invent things that will change everything”, he said.
Like Arbache, Oliveira pointed out that what is most valuable nowadays is the product connected to the service and vice versa. “The industry should not worry so much about selling the equipment, but about the whole range of services connected to it”, he explained. See his presentation, with a lot of information and data (in the Related Contents section, to the right of this page).
‘The city does not realize the revolution in the countryside’
Mendonça de Barros cited recent research by CNI (National Confederation of Industry) which showed that only 1.5% of 900 companies evaluated declared using technologies related to industry 4.0. “About 40% of them have nothing, and with the economic crisis (started in 2014), this process has delayed even more. We can count the number of companies that are industrial leaders on our hands. We also have a significant number of ‘zombie companies’, with huge liabilities and that block the credit market, like several contractors with no visible future”, he stated.
The economist also praised the “revolution that is happening in the countryside andis little perceived in the urban environment”. Founded by young people who are well-trained, talented and with experience here and abroad, agribusiness startups are focused on developing new tools that bring together a single production, service and industry chain. As an example, he cited equipments that analyze, plant by plant, and then determine how much fertilizer or defence each seed should receive.
“Precision agriculture will ensure evolution by integrating digital equipment and platforms and all that is connected to the Internet. Quality, low price and reliability have increased greatly in the agricultural areas due to low-altitude satellites. It’s easy to transfer a garment factory in any other place in the world, but you cannot take sun, earth and water; resources that are plentiful here” he said.
According to the consultant, there is also potential in the health area, as the country has excellent doctors and good hospitals, just as in the mobility and in the financial sector (with so-called fintechs). “Apart from this, there are few Brazilian companies with the capacity to compete abroad; Embraer (in the process of merging with Boeing) is one of them”, he recalled.
“We are at the end of an era, which also represents an opportunity. That is why the presidential succession is so important. If the next government does not get in the way, it will be a big step forward”, said the business consultant.
Otávio Dias, journalist, is the content editor of the Fernando Henrique Cardoso Foundation. He was the Folha’s correspondent in London, editor of estadão.com.br and chief editor of the Brasil Post, a partnership between the Huffington Post and Grupo Abril.
Translated by Thomas Garman
