The document discusses trends and challenges facing IT investments in Brazil. It notes Brazil experienced a "macroeconomic rollercoaster" in the past 7 years, with high expectations giving way to weak economic growth. Key issues include falling commodity prices, a weakening currency, high inflation and interest rates, and reduced consumption and investments. Digital transformation opportunities exist but the economic outlook remains challenging without policy and economic reforms.

1. Brazilian Scenario - Trends and Challenges
to keep IT investments
Jayme Faria - ICT Consulting Manager Latin America
Frost & Sullivan
February - 2016
xxx
Presented to:

2. 2
2009 2013 2014 2015
Macroeconomic “rollercoaster” in the past 7 years
High Expectations Path errors
Weak political
leadership to change
Issues Foreseen
• Commodities Boom helps exports
• Strong R$ X USD
• Decreasing inflation/interest rates (Selic and Public
Banks)
• Increasing middle class and consumption
• World Cup + Olympics to boost GDP
• Petrobras pre-salt investments (Oil US$110/barrell in
2011)
• Respect for investors
• Fiscal superavit
• Commodities Low Prices (China < demand)
• Weak R$ X USD
• Increasing inflation/interest rates
• Consumption reduces significantly
• World Cup as explanation for lower GDP
• Petrobras corruption scandals and reduced investments (Oil US$40/barrel in 2015)
• Downgrade of Brazilian debt to junk status from Fitch and Standard & Poor’s (end of 2015)
• Optimistic forecasts indicate a 2.5% shrinkage for Brazilian economy in 2016
• The finance minister quit in despair after less than a year in the job (end of 2015)
• High inflation rates and unemployment rates tending to get even worse during 2016
Source: The Economist, Frost & Sullivan
2016
Policy and economy
at the edge of the
precipice

3. 3
Brazil’s perspective is not so encouraging...
•Consumers are
indebted
•Consumers confidence
index decrease
•Social conditions
deterioration
•Exports reduction
•Drop on investments
grade
•Commodities price
decrease
•Shortage of credit
•Petrobras crisis
•Fall in president’s
popularity
•Lack of Government
actions
•Difficulty on comply
the budget
•Unemployment rates –
6.8% in 2015
•Higher inflation rate –
10.7% in 2015
•Currency devaluation –
1USD = 4BRL
•Increase in interest
rates – SELIC 14.25%
•GDP shrinkage: 3.8% in
2015
Economy Politics
ConsumptionTrade
Source: Frost & Sullivan

4. 4
Diversify the agenda is the solution for exports and to the overall
economy in Brazil
Source: Frost & Sullivan and OECD-FAO Agricultural Outlook 2015
• Growth rate expected is
‘just’ 7% for 2015
• Stock market crash of
values
• Lower commodities
prices globally
China’s lower growth
path • China accounts for 27,2%
of total Agriculture sector
exportation of Brazil
• 35% of Brazil’s total
oilseed production
exported to China
Brazil’s exports
dependency on China
• Directly through bilateral
trade
• Indirectly through
changing world prices
• 33% of decrease on
exportations in first
semester of 2015
Brazilian agriculture
affected
• Brazil has stimulated the
consumption, but forgot
about the production
capacity
• Commodities vs
manufactured products
Recent years brief
overview

5. 5
Productivity is what sustained the growth of the agriculture business
in Brazil, and is the necessary diversification to overcome the current
situation
Source: Frost & Sullivan and cepea.esalq.usp.br
2010 2011 2012 2013 2014
Total (excluding Agribusiness) 7.5% 2.0% 2.2% 2.1% -0.3%
Agribusiness 7.5% 5.4% -2.8% 3.9% 1.6%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
GDP growth comparison
Technology leveraged the
grains productivity
• Harverters and Irrigation
techniques boosted the growth –
6.4% from 2014 to 2015
More productivity with no area
increase (just 1.7% of growth)
• The acreage grew from 57 million to 58
million hectares from 2014 to 2015
IOT could take Agriculture to the
next level
• Predictive data analytics , Sensors,
Smart meters, Precision seeding,
Fertility and disease management and
weather accurate forecasts
2012 was a bad year
due to the
unfavorable weather
conditions which
affected mainly corn
and soybean crops

6. 6
Budget pressures generate important incentives for increased
productivity in different sectors
On-demand instead of
peak capacity
Opex instead of Capex
Don't just invest your budget, optimize it
Source: Frost & Sullivan

7. 7
Digital transformation will take place in this context
Big Data
Cloud
Mobile
Social
IOE
The Brazilian
Big Data
market was
expected to
end on
US$400
million in
2015
The Brazilian
Cloud market
was expected
to end on
US$668
million in
2015
The Brazilian
users of
smartphones
with a mobile
broadband
have surpassed
70 million
during the
1H2015
The Brazilian
WhatsApp
active users
were more
than 50 million
in 2015
The Brazilian
M2M market
was expected
to end on
US$190
million in
2015
Source: Frost & Sullivan

8. 8
Industry executives recognize that change is here and see new
challenges in IT
New, disruptive
competitors
Digitalisation New Business
Models
Servitisation
Forces Driving Change
36% 27% 18% 12%
Perceived Rate of Industry Change
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
2010
Now
Not changing at all
Changing only slowly
Changing at a moderate pace
Changing fast
Changing very fast
Source: Frost & Sullivan survey
of 1,500 executives, 2014
Source: Frost & Sullivan

9. 9
And need to transform the business with strategic and tactical
initiatives
Strategic Focal Points Tactical Focal Points
Business Model
Cost
Customer
Experience
Partnership
Innovation
Supply Chain Management
Operational Excellence
Risk Management
Workforce Empowerment
Reducing Cost
Service Excellence
Digital Products and Services
Source: Frost & Sullivan

10. 10
UBER, a transportation services or a Big Data company?
Source: Frost & Sullivan and expandedramblings.com/
Fare, Route, Traffic
conditions and time
are crossed after a
‘taxi’ is requested
Predictive analysis
to previously
determine time and
price
Combining Uber’s
data with personal
data provided by
customers
Mutual evaluation
system enhance
customer loyalty
and experience
The database is
increasing and
becoming a smart
tool
Simplicity: One app for all countries
and cities
Visionary Thinking: First
market participant to
establish trust by
sharing driver
information
Adaptability: Tailor-
made solutions for
different markets to
cover niches
Cashless Solution: Fares
automatically charged
to credit cards
Reliability:
Transparent—feedback
by mutual rating of
drivers and customers
on a 5-star scale
What makes Uber different
What makes Uber disruptive on Big Data
 60 countries
 + 8 MM users
 Expects to hire 1 MM drivers in the next 6
months
 + 1 MM trips daily
 51% of drivers work 15hs or less a week

11. 11
Source: Frost & Sullivan
Bradesco has successfully implemented a mobile solution
Solution
• Bradesco has negotiated with the 4
major carriers a standard offer providing
a free access to its clients through
mobile application and web-site
Business impact
• The number of mobile banking users has
doubled, achieving 25% of the entire
database
• ROI 3 times superior to the initial
investments
Challenge
• Enhance mobile banking adoption
• Guarantee deployment ROI
• Offer a service to the whole clients
database
Why free data?
• Lower cost on each transaction by
mobile banking
• Rapid payback due to clients’ adherence
and higher perceived value to
differentiate from competitors

12. 12
Market
Demand
•Sao Paulo is the
financial center of
Brazil
•High consumption
•Proof of concept to
future rollout in the
whole state
Opportunity
for Innovation
•Create an
environment of
continuous
innovation
•Evaluation of new
concepts and
solutions
Effectiveness
of Investments
•Customers
interaction
•Alternative supply
•Loss reduction
Productivity
•Smart Meters
•Process Automation
Source: Frost & Sullivan and Cisco
Cisco and Eletropaulo are partners on a Smart Grid project in
Barueri
Reduce technical and
commercial losses
(fraud)
Improve the service
quality
Reduce operational
costs
Improve planning of
grid expansion
Improve assets
management
Promote energy
efficiency
Grid suitable to
connect micro-
generation (Eolic and
solar)
Customers manage
their own
consumption using
Client Portal
Main Benefits
Main Motivations

13. 13
Source: Frost & Sullivan
Lessons that Brazil could take from European countries which
retook growth path after the financial collapse: Spain
How the crisis
started?
- Spain also saw the boom and bust that accompany a
housing bubble
- During the economic boom, 800 thousand apartments
were built in the country every year
- Too many projects were financed on credit, and
as result, private debt was twice as high as the entire
Spanish GDP in 2008
How Spain
faced the
crisis?
- In 2012, Spain also received billions of dollars from the
European Union to rescue the banking system
- The Spanish government undertook a tough policy
of fiscal austerity prompting protests among ordinary
citizens
How is Spain
nowadays?
- The government expects economic growth of 3 percent
in 2015
- The situation is much better than some years ago, but
the main problems still remain unresolved
- Almost one in five people in Spain remain unemployed,
lower rate than the highest of 27% which were seen
during the worst crisis’ period

14. 14
Source: Frost & Sullivan
Lessons that Brazil could take from European countries which
retook growth path after the financial collapse: Portugal
How the crisis
started?
- Portugal joined the Eurozone in 2002
- Investments flowed into the country immediately
after its entry
- In a short period of time government spending and
public debt grew, so the international lenders lost
confidence in the country
How Portugal
faced the
crisis?
- In May 2011, Portugal received a loan package from the
Eurozone countries
- The European Central Bank (ECB) and the IMF allocated
78 billion euros to support Portugal
- Thereby, Lisbon lowered the salaries of state
employees, cut social benefits and increased taxes
How is
Portugal
nowadays?
- In May 2014, after three years of help, Portugal left the
European rescue fund
- For the first time, the economy showed slight growth
of 0.9 percent
- The government is promising to continue reforms,
but the situation is complicated due to demographic
challenges, particularly, the aging population

15. 15
The opportunity is here…
0
1
2
3
4
5
6
7
2013 2018
GlobalRevenues(US$Tn)
Smart Grids
Smart Manufacturing
Healthcare
Smart Cities
Smart Buildings
Connected Car
Traditional
$3.8 Tn
$6.3 Tn
2014 2018
• There is a need to evaluate the strategies and options towards a focus on
business needs, innovation and transformation.
The need for change is now
Smart and connected
industries
Cloud and enterprise
application
Orchestration,
Collaboration,
Enablers
Programmable
Infrastructure
Programmable
Network
SDN, SDS, SD-
WAN & NFV:
Data centers
orchestration
and
automation,
mobile network
virtualization
SaaS, BAaaS,
PaaS, IaaS,
ERP, CRM,
SCM, HCM,
mobile apps
BPM, BRM,
Big Data
Analytics, IoT
Smart: cities,
homes, health,
transport, etc
Digitally-Enabled
Business Services
Source: Frost & Sullivan

16. 16
Conclusions
In an increasingly competitive scenario, and restrained by economic
crisis, companies should assess co-operation relationships, alliances
and acquisitions to effectively monetize emerging opportunities.
Integrate disruptive and emerging technologies. Be Proactive, new
ideas create new businesses and generate more revenue sources.
Source: Frost & Sullivan