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Business in Brazil: still giant automation potential in the tropics?

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Yesterday, Brazil's Senate voted to impeach President Dilma Rousseff for manipulating the budget. Yet despite the country being in the midst of a recession, Brazil is still a huge market for automated solutions, writes J. Rizzo Hahn, CEO of Brazilian automation company, Pollux Automation

Less than a decade ago, Brazil made the covers of the most important business magazines worldwide – ‘The giant had awoken’. A good deal of positive news and economic data supported the belief that the country had finally started an upward and robust growth trend that would change its future for good.

But something went wrong. The Brazilian economy shrank by 3.8 per cent in 2015 and inflation reached more than 10 per cent. This year will go down in the country’s history as being its deepest recession ever, producing 11 million unemployed workers.

To explain the reasons for such a setback is complex and goes beyond the scope of this article. It has to do with a sharp decrease in the price of commodities, which had fuelled completely irresponsible government spending. The problem was amplified by a profound political crisis as corruption scandals linking the big Brazilian construction companies to political parties and public administration authorities were exposed by the so called ‘Lava Jato Operation’.

So, what’s next? The impeachment of former President Dilma Rousseff could be the reset that the country needs to start its recovery. Although too early to say, the hope is that the market will respond well to the new administration and its plans to create positive conditions for investment to return. The damage has been severe, and even the most optimistic believe that it will take a minimum of four to five years for the country to get back to the position it occupied in 2011.

Now allow me to get personal and provide my heartfelt opinion on all that and the consequences to the industrial automation market in Brazil, including machine vision. Brazil was not quite the prodigious country on the verge of greatness back in 2008, however much Brazilians wanted to believe otherwise. There were still important gaps in education, infrastructure, ethics and overall business environment then, and there still are.

But Brazil is also not the widespread failure that has been depicted more recently in the world news. There are many problems to be solved, but the fact that corruption is being fought and exposed is a very positive point that should leave permanent effects. The population is much more politically engaged, which gives Brazilians hope that important political changes will take place over the next few years.

The global pessimism about the recent Olympic Games in Rio, which was then slowly replaced by positive sentiment as the competition moved on, is a very good representation of the reality of the country: not perfect, but not a disaster. Definitely a developing economy.

The truth is that Brazil is a very large market with more than 200 million consumers. The country has a very diverse and large industrial base, as most of the products purchased in Brazil, from computers to cars, are made within the country’s borders. The current recession has decreased the market for industrial automation by as much as 30 per cent, depending on the technology. But most of the players that do business in Brazil are already sensing there will be an increase in sales towards the end of the year, as companies have, more than ever, a tremendous need to be more competitive.

Depending on a few factors, Brazil normally represents about 3 per cent of the world GDP. For anyone planning to build a business in the largest South American country, it is fair to consider the market size for industrial automation to be anywhere from 10 per cent to 20 per cent of that found in the USA. It might be worth it or not, depending on how big and global the company is. Most of the large industrial corporations in automation have established operations in Brazil decades ago.

Industry 4.0 and the Industrial Internet are also hot topics in the tropics. I believe that suppliers and customers will start implementing solutions in that field as soon as early 2017. We are so convinced about it, that Pollux has recently founded the Industrial Internet Brazilian Association (ABII) to follow in the steps of the Industrial Internet Consortium (IIC).

Talking specifically about the machine vision market in Brazil – in which Pollux has been involved for the past 20 years – there was a noticeable decrease in sales this year. But business is picking up again with the political scenario becoming more stable. The local solutions are predominantly based on smart cameras, with little use of more sophisticated PC-based systems. Most of the applications involve code reading (ID), but there are also a variety of quality inspection applications and robot guidance.

The most active industrial sectors for vision are automotive, consumer goods and pharmaceutical, in that order. Although there are no formal statistics, it is clear that most of the market share goes to two well-known leading vision companies from the US and Japan.

Brazil is still a complex country in which to do business, because of its bureaucracy and intimidating tax system. Once concentrated in São Paulo, the factories are now spread across many different parts of the country, requiring more travel to reach potential clients. Some purchase decisions are made locally, but there is strong influence from the international headquarters on which technology to acquire.

So, there are challenges. For any company considering this market I would have two pieces of advice: find a local partner and think long term. It is definitely worthwhile.

The insights shared above might be useful and give a fresh view about the situation here. But no editorial will be able to fully communicate the reality of such an incredible and diverse country. Brazilians are very good at making people feel at home right away. So get on a plane, come over and see for yourself! Forte Abraço!

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Founded in 1996, Pollux Automation is an industrial automation company with headquarters in Joinville in southern Brazil. It designs, builds , and implements custom automation solutions in automated assembly, inspection and test, robotics, and traceability.

http://www.pollux.com.br/

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