McKinsey’s IoT strategy plan could boost Brazilian economy by $200 billion

25 June 2018 5 min. read

A plan by management consultancy McKinsey & Company in conjunction with a local innovative IoT solutions firm has been adopted by the Brazilian Government. The “Action Plan for Brazil” says that the widespread adoption of IoT technologies throughout the country could add up to $200 billion to the Brazilian economy by 2025. 

The study-turned-action plan was commissioned by the Ministry of Science, Technology, Innovation, and Communications (MCTIC) and the Brazilian Development Bank (BNDES). Initially the study was to identify which Brazilian sectors would benefit most from Internet of Things (IoT) technologies. However, with Brazilian President Temer signing a decree earlier this year, the McKinsey study has now become the country’s national IoT strategy.

The aspiration of the national strategy is to “accelerate the implementation of the Internet of Things as a tool for sustainable development of Brazilian society. One that is capable of making the economy more competitive, strengthen the nation's productive chains, and promote improved quality of life.”

The strategy looks at the application of IoT technology in both rural and urban areas as well as in sectors as wide ranging as health and industry. More specifically this translates to four main priorities which include; Smart Cities, Healthcare, Agribusiness and Manufacturing. It is within these areas which the collection of authors identified the greatest growth potential for the Brazilian economy.McKinsey’s IoT strategy plan

Due to Brazil’s rapidly urbanizing population – which currently sits at 86% of the total population and is likely to continue to grow – the government’s IoT aspirations for its cities is fundamentally important. The Government of Brazil would like to use IoT technologies and practices to enable the integrated management of services and the improvement of mobility, public security and resource use. 

These practices are in line with smart city plans which are already being implemented by just under 20% of municipalities throughout the country. However, building a base which will allow smart city initiatives to flourish is contingent on providing internet connections to the wider public. As a part of the IoT smart city plan, providing affordable and accessible internet is fundamental in the strategy’s success.

In line with the country’s plans, telecommunication companies are laying the foundations for IoT and smart city technology with the forerunners being Qualcomm Technologies and Ericsson. The two are laying a massive low-power wide-area connectivity leverage system which will enable the deployment of IoT in industries across the country, aiming for mass commercialisation of the network.

Smart cities

The head of Ericsson Brazil, Eduardo Ricotta said that broadband was the starting point for making cities smarter. “Mobile networks are the foundation for spreading connectivity to every sector of society, helping in essential questions such as traffic, security and education. We can’t lose sight that every time there is a 10 percent increase in broadband penetration, the country’s GDP increases 1 percent.”

“When we connect the agribusiness, we promote smarter cities and creating a platform for more diverse elements of the IoT ecosystem, all while making the country more economically efficient,” Ricotta continued. The deployment of IoT technologies across rural areas in Brazil will however be more difficult due to the sheer expanse of the country.

Being the fifth largest country in the world and one of the globes largest exporters, connecting rural areas and especially agribusiness to the network is an increasingly paramount. The strategy highlights the government’s aspirations in this sense to develop as one of the largest IoT agribusiness exporters on the global stage. The move is multifaceted and both aims to increase productivity within the country and also export the knowledge of how to leverage IoT tech to produce agricultural products which are of a high quality and socio-environmentally sustainable.

In the context of the Brazilian healthcare industry, implementing IoT is an imperative for the government. The country offers one of Latin America’s most comprehensive government-funded healthcare systems and the number of citizens over the age of 65 is projected to triple by 2050. To expand access to quality healthcare, Brazil intends to leverage IoT to create “an integrated vision of patients, decentralize the healthcare system, and improve the efficiency of health units” across the country.

Lastly, for industries across the country, the government aims to use IoT to increase efficiency and national productivity. This will be done via innovative business models and through greater cooperation in the production and supply chains. Brazil is the second largest manufacturer in Latin America after Mexico – with a growing automotive sector and production in steel, petrochemicals, computers, aircraft and consumer goods – which accounts for just under 30% of the country’s GDP.

Implementation entering phase 3

An update on the progress of the plan released in early 2018 during phase 3 of the implementation of the strategy states: “The Internet of Things field is an unique opportunity for Brazil to capture its value. By 2025, in the world, IoT will have an economic impact of $4-11 trillion, higher than advanced robotics, cloud technologies, and even the mobile internet. In Brazil, the potential impact is $50-200 billion per year, which represents about 10% of the Brazilian GDP.”

According to the report, the message of this integration is clear: “The Government wants to act as a facilitator, putting society as protagonist of this revolution.” Brazilian President Michel Temer said at a FutureCom Conference in late 2017 that “technology is something that must serve society. Nowadays technology is essential to participate in public debate and even in politics.” The government is hoping that IoT will help it recover from two decades of social and economic shortcomings and reinvigorate the Brazilian national agenda.