Brazil industry: IoT decree a springboard, not the finish line

The Brazilian government's decree establishing a national plan for the internet of things (IoT) is an important milestone, but only a first step, according to local tech industry officials.

Werter Padilha, head of IoT at Brazilian software association ABES, says the decree issued on Wednesday gives legal security to IoT, but that the plan needs to be more specific about taxation. 

"The tax issue, especially in the context of Brazil's fiscal problems, was a critical point for economic authorities and the one thing that blocked this decree from being released for more than a year," Padilha told BNamericas.

One of the changes brought about by the decree was classifying IoT as "infrastructure that integrates the provision of value-added service," which puts IoT devices out of the reach of the ICMS tax.

It also paves the way to reduce or even exempt the devices from the Fistel telecom fees, although this wouldn’t be immediate.

"One of things we need clarification on is which fees if any will be applied to the equipment," Padilha said. “Our legal team at ABES is now looking at it.”

Padilha recalled that there is a separate bill in congress that looks to exempt IoT devices from the Fistel fee.

Padilha was one of the members of a public-private machine-to-machine (M2M) and IoT working group created in 2015, which ended up being the embryo of an IoT chamber created by President Jair Bolsonaro’s decree that will meet twice a year. Padilha says the chamber will meet in July to discuss next steps for the IoT plan. 

ABINC

IoT association Abinc is another entity that was involved in the discussions that led to the national IoT plan and chamber. 

According to its president, Flavio Maeda, the national plan gives legal security to IoT and will be pivotal for the development of the sector, while also praising it as part of Brazil's digital transformation strategy.

“Particularly for the segments of cities, health and agribusiness, which are heavily dependent on public policies and financing, the public sector plays a key role in generating demand as buyer and stimulator of large-scale projects that incorporate IoT solutions from their conception,” he told BNamericas.

ABES’s Padilha agrees that financing is vital for IoT development and stressed the role of development bank BNDES in the financing of projects, including over 50 IoT initiatives currently being analyzed.

Amid the general belt-tightening of the Brazilian state, and a struggling economy, do technology industry executives fear that the development bank will keep its purse closed? 

“On the contrary. There are new credit lines focusing on innovation. We now see a greater focus by BNDES on micro and SMEs, rather than on large companies that can stand on their own feet. And BNDES knows it must support software companies with new financing,” says Padilha.

A recent study by KPMG said IoT will be the main driver of business transformation over the next three years. The Technology Industry Innovation Survey asked 740 leaders in the technology industry about the top 10 tools that will change companies in the short term, and IoT came out on top.

A 2015-16 McKinsey-led study commissioned by BNDES, which served as the foundation for the IoT plan, found that IoT could generate a positive impact of US$190bn for the Brazilian economy by 2025. Padilha believes the figure is outdated and that the impact will be much higher.

IDC forecasts worldwide IoT spending to reach US$745bn this year, up 15.4%, with Latin America leading the growth, and Mexico (28.3% CAGR), Colombia (24.9%) and Chile (23.3%) driving the regional spending expansion.