Bay Brazil 2015 – Bridging Brazil and Silicon Valley

The fourth annual Bay Brazil Congress was held last week at the Stanford Research Institue (SRI) in Menlo Park just a few miles from the Stanford University campus. Without a doubt, Bay Brazil has transformed this annual meeting into one of the best and most important Brazil business events in the US and certainly the premier one on the West Coast. Here is the link to the event program (http://us7.campaign-archive1.com/?u=b2b9ee63cc4b3a2161844bbcc&id=719a038a97&e=83cc0ea5bf) and Bay Brazil’s Facebook page that has pictures and commentary: (https://www.facebook.com/baybrazil?fref=ts)

The impact of the event goes beyond CVs of the speakers. What is really important is that the participants are actually doing business in Brazil. Given the current situation of negativism derived from the weak administration of President Dilma Rousseff and the still unfolding series of corruption scandals ranging from oil and energy to banking and finance, the companies represented at Bay Brazil prove that in spite of the difficult environment it is possible to operate in Brazil, grow and prosper without having to grease endless palms. In spite of the recession, sectors of the Brazilian economy are growing and these include: the rapid expansion of all forms of information technology in social networking, education, health care, hospitality, personal care, beauty and sports. Brazil is still on the stage after the made for TV success of the World Cup and now for Rio’s Olympic Games starting in less than a year from now.

The participants, even the government representatives, were sober and did not white wash Brazil’s problems. Everyone recognized the issues: Standard and Poor did downgrade Brazil to junk status. Inflation is running way ahead of the targeted 4.5 to 6.5 percent per year and the economy may shrink over 2 percent this year and again in 2016. The President is threatened with impeachment and Congress is a dysfunctional mess faced with the unhappy and unhealthy challenge of raising taxes and cutting spending. Beyond this, corruption in business dealings has become too pervasive and too common. Finally and perhaps most importantly, Brazil is floundering in defining how much freedom the private sector should have, the role of the state and the extent of its intervention in the economy.   Not knowing the rules and the government’s direction generates an uncertain climate not at all favorable for planning and investing.

However, even with the problems Brazil will come back and those who invest now will be positioned to their advantage. The wealth that Brazil has gained since monetary stabilization is undeniable. The demand of 200 million potential consumers is too big to ignore. The Brazilian aspirations in consumption as demonstrated by its middle class filling the shopping center of Miami can again be rechanneled to the domestic market. And more importantly, young Brazilian entrepreneurs in the IT sector and others are striving with great success in creating new businesses along the model of Silicon Valley. Two start up sessions with a wide range of new businesses paid testimony to the emerging levels of entrepreneurship independent of government support.

I would summarize the take away from Bay Brazil in two categories: the good and the bad.

GOOD

Young Brazilians have leveraged their education and access to internet technology not only for consumption but also for developing new businesses in the absence of enough accessible alternatives in the current job market. Lack of jobs forces some to become entrepreneurial.

Brazilian X-Gens and Millenials are looking to use Linked In (22 million Brazilian users) and alternative forms of gaining knowledge available on the internet to promote their careers and businesses.

There is a thriving start up culture in the country and Sao Paulo is the 12th largest start up hub in the world.

Brazilians want to develop businesses in Brazil for the Brazilian market.

Those in business, just like those with jobs, must get up every morning and strive for success in the market or to add value at work. This activity takes place somewhat independent of the socio-economic environment.

There are many disruptive technologies that can easily take root in Brazil. AirBnB has been cited as an example for becoming an “official” housing provider during the Rio Olympics as there are simply not enough hotel rooms available to meet the demands of such a major event. Uber, another disruptive application, has developed a significant presence in Brazil but is now being battled by taxi drivers with the support of their unions and local government officials.

BAD

Brazil’s crisis is visible on all levels creating angst and a milieu favorable to brain drain.

Start up capital is expensive and limited and more so now in the recession.

Entrepreneurial Brazilians often realize that their ideas have an equal or better reception abroad and thus many Brazilians are willing to pull up stakes. Many of the panelists at Bay Brazil are Brazilian transplants achieving success more easily in the USA.

Given the risks in Brazil, both foreign and native Brazilian investors are put off and would rather move their resources abroad.

Finally, Magarise Correa, Bay Brazil’s President and her staff, with their hard work and organization, deserve kudos for meeting their objective of bridging Brazil and Silicon Valley by bringing together seasoned business people, investment bankers, high ranking diplomats, venture capitalists, start ups, lawyers, accountants, consultants and academics in a relaxed, cordial and productive atmosphere for a day where Brazil’s potential and challenges can be objectively understood and acted upon.

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