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Brazil’s Internet of Things

Study shows that connected environments have the potential to increase economic productivity and drive innovative companies

In a sensor-studded world connected to the internet, farmers are relying on algorithms to decide exactly when to plant seeds and spread fertilizers, equipment is collecting blood for tests and quickly processing diagnoses on a remote computer cloud, water leaks are being detected and corrected instantly, and industries are monitoring their assembly lines in real time, reducing inventories to a minimum and cutting logistics and maintenance costs. That world, that of the Internet of Things (IoT), is quickly migrating from laboratories to real life in countries like the United States, Germany, Japan and the United Kingdom, and it is palpable as well in Brazil, where it is beginning to be seen as an alternative for facing the difficulties of increasing economic productivity and dealing with health system inefficiencies.

That potential is quantifiable in the study “The Internet of Things: an action plan for Brazil,” conducted by a consortium of institutions at the request of the Brazilian Development Bank (BNDES) in partnership with the Ministry of Science, Technology, Innovation and Communications (MCTIC). Now in the process of winding down, the study cost R$10 million and is bringing state-of-the-art IoT to advanced and emerging economies.  Interviews were conducted in dozens of companies, events were held to promote discussions, more than 2,000 suggestions were contributed through public hearings and Brazil’s aspirations were charted in this technological frontier.

As a result, the document pinpoints the technological niches and economic segments in which Brazil could have more ability to compete.  Four environments were given priority status for investments: agribusiness, health, smart cities and industry.  “They are sectors that already have well-established companies in Brazil and there are good opportunities for developing innovations,” says engineer Maria Luiza Carneiro da Cunha of BNDES’ Department of Information Technology and Communication, one of the coordinators of the study conducted by a consortium that included the Center for Research and Development in Telecommunications (CPqD), McKinsey Consulting and the law firm of Pereira Neto Macedo.

Those environments have been identified as promising because they account for huge national demands.  “Most of Brazil’s population is urban, and smart city initiatives could mitigate mobility problems and improve quality of life,” explains Vinícius Garcia de Oliveira, a researcher at CPqD, tasked with the technological aspects of the study.  “The same logistics apply to health, given its potential for improving care to the population; to agribusiness, given its economic importance; and to industry because of its potential to create wealth.  We have the opportunity to develop technologies on the basis of the domestic market,” he says.

The idea of connecting things to the internet is almost as old as the worldwide computer network itself.  What has changed in recent years was the decreasing cost of microelectronics and sensing technologies and the massive expansion in connectivity.  According to information from the consulting firm Gartner, 8.4 billion connected devices operate in the world today.  These include such things as smart TVs, automobiles, smart lighting systems and industrial machinery.  The number is 31% higher than it was in 2016 and, according to Gartner, by 2020 it is expected to grow to 20 billion “things” connected to the internet.  “An application like Uber is the Internet of Things in its purest form.  Automobiles and passengers track each other using cell phones and meet up,” says Oliveira, by way of example.

The potential socioeconomic impact of the IoT on economic productivity and improvements in public services in Brazil was estimated by McKinsey Consulting to be up to $200 billion–equivalent to approximately 10% of 2016 GDP–considering its use in various economic segments as described in the plan through 2025.  In freight transport, real-time monitoring of goods could reduce costs up to 25% while intelligent choice of routes could reduce costs up to 20%, according to the survey, which also lists other possibilities.  For example, utilization of the IoT may help detect crimes and burglaries by using street cameras and automobile sensors, or help plan police actions by analyzing large amounts of data about locations and times of offenses. The use of mobile sensors to monitor air quality and warning systems in cell phones is expected to reduce expenditures on pollution control equipment by 90%.

Diagnosis in the cloud  
Brazilian companies and research institutions are working on solutions for a number of environments.  Exati, a company in Curitiba, has developed a platform for a street lighting management system that is being used in 200 Brazilian cities, through utilization of sensors and wireless communication that has now been upgraded in partnership with the CPqD. Hi Technologies, also in Curitiba, is testing diagnostic equipment it calls Hilab with four of its clients.  Hilab takes a drop of blood, subjects it to a reagent, and sends its data to a computer cloud that processes it and returns the results. “It can do a Zika test in 20 minutes and a pregnancy test in 10 minutes,” says company CEO Marcus Figueiredo. “The IoT’s potential in health products and services is huge and we’re going to introduce other products in the wake of Hilab.” In August 2017, BNDES approved R$13 million in financing for Inmetrics, an IT company based in São Paulo, to develop an Internet of Things platform to be franchised to other companies and independent providers of new applications.

Imagem: Hi Technologies Equipment collects blood samples and sends data to the cloud, which processes the diagnosisImagem: Hi Technologies

One premise of the study is that Brazil has neither the human nor the financial resources to seek a position of global leadership in IoT, a race highly contested by the United States, the United Kingdom and South Korea.  Nor does it have the muscle to be a part of the pack of countries seeking to distinguish themselves in specific fields of technology, much like Germany in advanced manufacturing or Spain and China in smart cities.  But Brazil could aspire to be a point of reference for emerging countries, and build up the manufacture and export of domestic products, improving the efficiency and competitiveness of public and private sector alike. The study also indicated a group of industrial sectors, such as oil and gas, mining, automotive and textiles, that deserve to be the target of specific policies and serve as models to be implemented later in other segments.  “They are sectors that have achieved a higher level of maturity than the others.  Oil and gas, for example, already has a solid history of investments in R&D,” says Maria Luiza Carneiro da Cunha.

BNDES and the MCTIC commissioned the survey to shore up the National Plan of the Internet of Things, which is scheduled to be released by the government in late October 2017.  It refers to a set of strategies and public policies that seek to involve companies, the government and research institutions in disseminating the use of Internet-linked devices in Brazilian industry and services.  Vinícius Oliveira of the CPqD Foundation notes that the IoT has more inclusive contours than previous technology trends. “The IoT is the third wave of the internet. The first was the advent of the commercial internet and the second was that of the mobile internet.  Both were quite homogenous and gave rise to technology giants such as Dell, Qualcomm and Facebook,” he says. “The Internet of Things is now establishing a heterogeneous scenario that is much more democratic. A solution for tracking a fleet of trucks is different from a solution for intelligent public lighting, and this is creating an environment replete with opportunities for companies.  It’s possible to have 10 medium-sized Brazilian companies working with IoT in street lighting, each with its own solution.”

Small technology-based companies are making moves to take advantage of that market.  In 2016, there was a significant increase in the number of projects involving innovations in the Internet of Things submitted to the FAPESP Innovative Research in Small Businesses (PIPE) program. There are currently 21 projects led by startups from the state of São Paulo that are currently engaged in developing IoT solutions applied to such things as health services, vehicle tracking, livestock management, building automation and energy management. Before that crop of projects, the PIPE program had funded only a dozen companies focused on the issue.

To sponsor the expansion of the IoT in Brazil, the national plan is going to propose a strategy of cooperation among development agencies and ministries that coordinate funds arising from tax exemptions from economic sectors, such as the MCTIC. According to Maximiliano Martinhão, secretary of MCTIC’s Informatics Policy secretariat, the synergy will help create an environment capable of leveraging Brazil’s investment in IoT.  “We’re hoping that private investment can fill most of our infrastructure needs,” the secretary says. But Ailtom Nascimento, vice president of Stefanini, a Brazilian multinational IT services firm, believes the future of the plan will depend to a large extent on the availability of public investment. “It’s possible to foster partnerships between government and business, but investments that pertain to public service infrastructure in the field of urban mobility or providing the internet to rural areas will necessitate government incentives,” he says. “Short-term prospects in the current economic scenario are not very encouraging.”

The Stefanini company entered the Internet of Things market with applications in the mining and agriculture industries.  For example, it is using sensors to monitor 529 kilometers (km) of slurry pipelines from the state of Minas Gerais to Porto Sudeste, the private port terminal in Itaguaí, in the metropolitan region of Rio de Janeiro. Data, transmitted to control rooms in various stations along the pipeline, allow real-time instant interventions in the event that something out of the ordinary occurs.  The drainage capacity of the pipeline, which is owned by Anglo American and runs through 32 cities, is 26.5 million tons of iron ore slurry per year. The IoT market does not yet constitute 7% of the Stefanini group’s revenue, but the company is betting it will increase. “A digital transformation in the worldwide chain of logistics is taking place and Brazil is already a part of this change,” says Nascimento. He cautions that investments in new technologies should not be seen as a panacea, however. “The Internet of Things may help increase the flow of production, but, if the highway is bad and the truck gets stuck, there’s no way to resolve the problem,” he notes.  “Investments in highway, port and airport infrastructure will continue to be as essential as they are today.”

Imagem: Nexxto Sensors monitor supermarket shelves and issue an alert when the temperature drops lower than recommendedImagem: Nexxto

Centers of expertise
Resource constraints are a concern of the plan, which proposes broad cooperation among companies, universities and funding agencies to prevent casting too wide a net of investments and isolating research groups. The proposed model is based on establishing centers of expertise, headquartered at institutions devoted to developing specific technologies, such as nanotechnology and connectivity, and in another field, the formation of virtual networks of innovation for the environments emphasized by the study that serve to bring together research groups scattered across the country. “The innovation networks will be geared towards the demand for solutions to major problems, and the centers for technological expertise will support and strengthen the chains of production,” says Martinhão. That structure should focus on a series of technological bottlenecks, such as in the development of security and privacy systems, of energy-efficient devices and those with long battery life, connectivity upgrades between systems and machines, and the capacity to work together.

In Brazil, one of the greatest obstacles to expanding business on the Internet of Things is telecommunication infrastructure deficiencies, notes engineer Antonio Rossini, one of the founders of Nexxto, a São Paulo company that offers services on the IoT to monitor temperature and humidity in the food chain.  “Brazil is a huge country and it’s not unusual to leave the city and lose cellular connectivity.  That is a real problem for expanding our services to agribusiness,” Rossini says. Nexxto, which received FAPESP funding through the PIPE program, has more than 1,000 sensors that conduct real-time monitoring of the operations of 25 clients, like supermarkets that control the temperature of their shelves, and pharmacy chains that monitor the distribution of medications.  The problem became evident in a pilot experiment Nexxto conducted with a meat producer that hired the firm to preserve R$400,000 worth of vaccine lots that had to be kept at temperatures between 2 and 8 degrees Celsius, distributed to producers in cities all over Brazil.  “Where there is connectivity, it’s possible to use high-gain antennas and signal repeaters, but to offer high-quality service, we would need to have seamless connectivity.”

Startups
The training of human resources is a challenge for Brazil, according to a study conducted by BNDES and MCTIC:  only 0.9% of all Brazilian employees work with information and communications technology, compared to 3.7% of those in European Union countries and 3.3% of those in the United States.  But the scarcity is not yet having an impact on the current phase of IoT implementation.  “Our universities graduate a good number of engineers and IT specialists, yet many companies, in a situation of economic crisis, resist hiring this labor, which they consider expensive.  Maybe that’s why so many professionals establish startups that offer products and services,” reports mechatronic engineer Fabiano Corrêa, a professor in the Department of Civil Engineering at the Polytechnic School at USP, who is leading a research study to assess the impact of IoT technologies at construction sites. The trend for hiring services from startups is already visible in the field of advanced manufacturing (see the report).

For Herlon Oliveira, vice president of the Brazilian Association of the Internet of Things (ABINC), the focus should be on training computer scientists, the professionals capable of creating the algorithms that process the mass of data produced by sensors and, thus, support decision-making.  “Brazil does not need to develop technologies that are already established and have become commodities–today, there are sensors being sold for pennies on the dollar.  Algorithms, however, are the key to offering quality services and we need to have critical mass to produce them,” says Oliveira, who is president of Agrus Data, a company founded in 2015 that offers IoT services in agriculture.  The company flagship is a software program that, from data collection through sensors in large agricultural areas in combination with meteorological predictions, uses an algorithm to suggest the best time to plant seeds, or to use fertilizers or agrochemicals.

If it is necessary to train specialized professionals, there is also a need to be concerned about the impact the Internet of Things is having on low-skilled labor. The BNDES study recognizes that the IoT could lead to the disappearance of some jobs due to automation of industrial activities and services and asymmetries between the number of jobs extinguished versus those generated by new activities.  And he cautions that other countries have addressed the problem through income transfer programs and professional retraining or reduction in working hours.

Imagem: vivintServices for smart homes

In a 24-month period, from the 4th quarter of 2014 to the 3rd quarter of 2016, U.S. venture capital and private equity funds invested $7.2 billion in companies offering Internet of Things solutions or services. One highlight is Vivint, which sells systems for smart homes, identified as an IoT startup that has attracted the most investments in the country in the past five years, according to the CB Insights database. In April 2016, investor Peter Thiel, founder of the online money transfer system PayPal, and venture capital firm Solamere, invested $100 million in Vivint, headquartered in the U.S. state of Utah, whose business model is based on service provision.  More than a million Americans and Canadians subscribed to the firm’s monthly plan, which costs from $40.00 to $80.00, and installed a smart home system for lighting, thermostats and locks, with cameras and sensors that can be controlled onsite or by remote control using a cellphone app.  “We don’t just sell a piece of hardware and walk away,” said company founder Todd Pedersen to the news site Business Insider. “Clients want a service that works.”  Sales are boosted by an army of 2,500 door-to-door salesmen.

Architecture of the Internet of Things

Networks that will provide support to the Internet of Things in Brazil use different technologies and frequencies than the commercial internet.  The frequency band reserved for data transmission in IoT in the Americas is 902 megahertz (MHz) to 928 MHz–the new 4G internet frequency in Brazil, for example, is 700 MHz. Data captured by sensors are transmitted in packets of around a few dozen bytes, much lighter than information and images transmitted by conventional internet.  This, together with the need to operate at a low cost, has led to the development of specific technological standards for the IoT, which are the Low Power Wide Area (LPWA) networks. There are standards being tested in Brazil, such as Sigfox, from France, as well as the U.S. LoRa standard.  Their antennas are small–the size of a toaster–and in rural areas are able to cover up to a 40-km radius.  “We still need to determine which frequency Brazil will transmit IoT data on because the 908 MHz to 915 MHz range, which is within the band utilized internationally, is owned by a telephone carrier in Brazil and is not available,” explains Herlon Oliveira, vice president of the Brazilian Association of the Internet of Things (ABINC). Oliveira, who has a company that provides IoT services on rural properties, says that his clients always ask whether the internet quality on farms will improve when the Internet of Things networks are installed. “They are disappointed when I explain that they are parallel architecture,” he says.