Transcript Finance and Knowledge 2003 Milano, 20th and 21st November

Workshop on "Internet Use in the Americas"
Panel 3: Business Use of the Internet
CIDE, Mexico City, 16-17 June 2005
Small is Digital? IT & Internet
Diffusion in Brazil's SMEs
Antonio José J. Botelho
Genesis Research Unit, PUC Rio,
[email protected]
1
Agenda
1. Overview
2. Ornamental stones cluster
3. Aeronautics cluster
4. Problems for SMEs in introducing
and utilizing IT
5. Policy responses
6. Conclusions
2
Agenda
1. Overview
3
Micro and Small Enterprises in Brazil, 2001
 From 1996 to 2001, micro and
small enterprises went from 3.1
million to 4.6 million
Going from 98.9% to 99.2% o
total
Generated 3.5 million new jobs
Whereas medium and large, only
686 thousand
Acounted for 14.5 million formal
employment, 56.1% of the total
4
Exporting SMEs
 Exports are 15% of GNP (2003)
 Growth rate 58% (2004 to August)
 Exporting micro and small enterprises
represent over 75% of the country’s total
export base, BUT account for less than
11% of exports by value
 This share is further reduced to 5%,
once excluded a select group of about
200 high exporting enterprises, made
up mainly of trading companies and
others
5
Source: Markwald e Pessoa, 2003
IT Development
Brazil accounts for 1.7% of total global
IT expenditures (contrast 1% world
exports)
4.7% of GDP (2002)
PC per 1,000 inhabitants of 7.5%
(smaller than world)
Mobile growth rate 30% (above world)
In 2003, electronic transactions in Brazil
(B2B, B2C, B2G, m-commerce and online retail) reached USD 47.2 billion
(about 4% of world)
6 B2B over 2/3; B2G = B2C
SMEs IT Diffusion
Less than 35% of the 5 million
formal firmss have a computer
Of these, less than 40% have
internet access
In São Paulo and other
developed states these numbers
are about 50%.
7 Source: FIESP, Pesquisa Perfil da Empresa Digital 2003/2004
SMEs IT Diffusion– São Paulo (FIESP)
Half of SMEs do not have any intention of
implementing Internet-based EDI
20% do not even have a website
Among Micro enterprises
only 8% make use of B2B for sales
16% use it for purchases
 8% do B2C.
Among Small enterprises
15% use B2B (purchases and sales)
11% do B2C.
8 Source: FIESP, Pesquisa Perfil da Empresa Digital 2003/2004
SMEs IT Diffusion– São Paulo (Sebrae-SP)
Progress: 47 per cent of sampled enterprises (2002)
make use of IT (“informatizadas”), versus 31 per
cent in 1997 and just 19% in 1993.
On the one hand, diffusion in small enterprises
reaches 61% and in services 47% of MSMEs have
at least one computer, against 43% in retail.
On the other, of the micro and small enterprises
without IT (53%), well over half (64%) indicated
they did not see a real need or perceive a benefit in
adopting IT tools
9 Source: FIESP, Pesquisa Perfil da Empresa Digital 2003/2004
SMEs IT Diffusion– São Paulo (Sebrae-SP)
54 per cent of SMEs access Internet;
Half of the IT users has only one
microcomputer
IT use is greater in older firms, in the
industrial sector and in larger MSEs
By contrast, IT use is smaller in MSEs in
the commerce and services sectors, in
traditional activities and in smaller and
newer enterprises
10 Source: FIESP, Pesquisa Perfil da Empresa Digital 2003/2004
SMEs IT Diffusion– São Paulo (Sebrae-SP)
Internet access main uses are:
1- Banking services;
2- Government services;
3-News;
4-Communications (e-mail);
5-Research on business deals, prices
and suppliers
6-Website for advertisement of
business.
11 Source: FIESP, Pesquisa Perfil da Empresa Digital 2003/2004
Barriers to IT diffusion
MSEs non-users of IT do not see a clear benefit in
use of IT
Find it expensive for their current level of revenues
Those opting not to invest in IT in the short term are
divided between
those that see no need,
those which already have the required IT resources or are
happy with their current level of use of IT.
Lack o human resources with specofic knowledge
on how to best use IT to improve SMEs managerial
processes
12
Barriers to e-commerce
Government regulations
Privacy of data or security issues
Lack of business law for ecommerce
Inadequate legal protection for
Internet purchases
Internet taxation
Staff with e-commerce
expertise
Cost of implemengting ecommerce
13
Agenda
2. Ornamental stones cluster
14
Characteristics
In Brazil 6.6% of SMEs exports
Brazil 7th largest exporter in volume
Exports growing faster than world
Espirito Santo: marble and granites (90%)
Largest producer (47% of total) and exporter ($ 222
million or 52% of total; 10 largest just 6% of that)
24 thousand employees in 1,200 firms, mainly
SMEs, of which 12% exporters
Horizontal cluster with ring structure governance
Most advanced technologically
15
Policies and Impacts
Sindirochas trade group (1973)
Organizes fairs
Training (Sebare/Senai)
Technological research (Cetemag)
Maqrochas (2004) : 20 associates
 Regional Action Program: vortal (Prossiga)
Static / Portuguese only
Other (private) websites:
Marble: on-line price quotes
The Way of Stones
E-commerce website: Marmoregranito
16
Barriers to IT use
•
•
•
•
•
Small production scale
Unfamiliarity with new technologies
Access to financial resources
Shortage of specialized workers
Vortal discontinued
Cooperate and share
Role for APEX and BNDES Prosoft and
Bank of Brazil IT deployment credit line
17
Lessons learned
Export promotion policies (PNPE) increased
value-added
IT could deal with low productivity
IT could also help overcome barriers to
exports:
foreign language,
lack of experience in foreign business
 information on export procedures
Emerging cooperative relations geared to IT
diffusion
18
Agenda
2. Aeronautics cluster
19
Characteristics
Embraer - One of Brazil’s largest firms
World’s fourth largest aircraft manufacturer
 Revenue: USD 3 billion (2003)
Located in São José dos Campos, SP. Share in the state’s
economy went from 6.5%, in 1996 to 11%, in 2001
Buys over USD 60 million from SME’s
50% in Brazil and 50% foreign companies
Over 30 small specialized suppliers located near
its plant
Goal of cluster: Capture 0.5% of $ 33 billion
market
20
Characteristics
Product
Firms
Manufacturing,
bashing in parts and
composite materials
Aeroserv (HTA), Autômata Industrial (HTA), Mirage (HTA),
Alltec (HTA), Graúna- Carpini & Marques Indústria (HTA),
Elane Ferreira Pereira, Metinjo Metalizacao Industrial Joseense,
Mirage (HTA), SPU Indústria e Comércio de Peças (HTA),
Status Usinagem Mecânica (HTA), Tecplas Indústria e Comércio
de Fibras (HTA)
Engineering projects
and software system
Akros, Dynamic Sollutions, Akae, Cenic, Compoende
Equipamentos para Ensaios e Serviços Especializados (HTA),
Fibraforte Engenharia de Softwares, LEG -Engenharia e
Comércio (HTA), New Plotter Engenharia, Poly Card Engenharia
e Comércio de Informática,
Decoration / Interiors C&D (USA),
Landing gear
ELEB/LIBERHERR
Sub-systems
Sobraer
Radar
Mectron
21
Policies and Impact
 APEX program: in 2002 (process began in 1999),
11 SME’s formed High Technology Association –
HTA, an export association
 Average of 15 years in the aeronautical sector
 Most companies founded by ex EMBRAER employees,
bringing 20 years experience in several areas
 Firms have complementary capabilities
 HTA is a trading company – High Technology Aeronautics
 Since then, the HTA has participated in several international
fairs and missions
 Participation in fairs and trade missions
 ISO 9000 certification
22
IT Use
Low level of Internet and e-commerce use
Relatively high level of IT use
Average:
11 PCs per company
1 PC per 7 employees
No use of EDI or any form of e-commerce
All information websites are available in 3
languages:
 Portuguese, English and Spanish
 HTA website is still in early stage of development.
It shows only static information about
consortium, its products and services
23
Barriers to export
•
•
•
•
•
•
•
•
technology gap of about 30% from state of the art
distance from major markets
freight costs
high cost of inputs (often imported)
lack of working capital
lack of investment capital
lack of guarantees
Embraer does not award long-term contracts
– does not generate the necessary incentives for firms to
invest in technology and productivity
• grace periods, and finance rates are generally
unfavorable
24
Barriers to Export with IT
Websites does not have
A reserved area for associates or potential
clients
Possibility to register potential clients
Even links associated firms’ websites
Only 4 (36%) of the firms have their own
website.
Sites allows client registration, but some do not
even provide product and services information
25
Lessons learned
 SMEs in high-tech vertical clusters face particular
problems toward exports in so far as the nature of
the business exposes them to intense international
competition very early on
 Lead or anchor firm in a vertical cluster is a mixed
blessing
 subcontracting patterns has developed to the point of
relying on a limited number of first-tier suppliers.
 Breaking into this closed group, often made up of foreign
firms is hard task.
 A lead national firm could, in principle, assist SMEs
in this endeavor
26
Agenda
4. Problems for SMEs in introducing
and utilizing IT
27
Group 1:
High cost of purchasing equipment and
operating it,
Scarcity of affordable quality human
resources, and
Difficulty in identifying the company’s
IT needs ad designing and implementing
a strategy to meet them
28
Group 2:
Limited scope and administrative
burden of finance programs,
Availability of expertise on SME’s IT
functions and needs and
Lack of knowledge of sector-specific
network and export-oriented IT
processes
29
Main barriers that inhibit SMEs IT adoption:
Industrial structure (in the case of high tech
sectors),
Industry fragmentation (in the case or
ornamental stones) and,
One-size fits all format of existing support
programs and
Quality of the public activities /services
offered
30
Agenda
5. Policy responses
31
BNDES
Export promotion finance programs
 Program of Technology Support to Exports-PROGEX
 provide technological assistance to the micro and small enterprises
which want to become exporters or to those already exporting that
wish to improve their performance in external markets

Project National Network of Trade Agents –
REDEAGENTES
 Until December of 2003 trained more than two thousand agents of
foreign commerce and about six thousand entrepreneurs and
employees of diverse institutions such as cooperative, trade
associations, city halls and other similars. The agents of foreign
commerce, after the training, are integrated in a net based on the
Internet, the REDEAGENTES. In this net, they start to contribute in
the process of spreading the exporting culture and to give
orientations to other small business on how to export.
32
BNDES
PROSOFT-Comercialization
Acquisition of products and services
Funds up to 100% of qualified products
Funding of related services limited to
100% of product value
Demands certification of origin during
online accreditation process
(BNDES/MCT)
33
Banco do Brasil - Foreign Trade Platform  Balcão de Comércio Exterior allows an online
export operation and responds to a demand by small
firms willing to start exporting.
 Wweb site www.bb.com.br gives entrepreneur
access to a virtual international business room, with
no restrictions to a bank client (exporter).
 The service takes advantage of the streamlining of the
export process for values up to US$10 thousand.
 From its beginning in January 2003 until December
of the same year, the service registered 2.846
exporters and 680 importers and completed 173
operations valued at US$483 thousand.
 Today, there are 4.790 export product offers and 701
importing firms registered.
34
Web sites for SMEs that wish to export
Exporter´s Portal (Portal do Exportador in
Portuguese)
(http://www.portaldoexportador.gov.br/)
Exporter´s Window (Vitrine do Exportador in
Portuguese)
(https://www.exportadoresbrasileiros.gov.br/)
, both managed by MDIC
Brazilian Trade Net
(http://www.braziltradenet.gov.br/), managed
by the Ministry of Foreign Relation (MRE).
35
Postal Service - Easy Export
• Exporta Fácil (November 2000) aims to take Brazilian
products to the four corners of the world.
• In 2003, MSEs products accounted for 62% of total sales and
MSEs for 67% of the exporting firms in the program.
• Main results are:
– in 2001, 6,745 shipments were made to a total value of
R$ 8,670,349.89;
– in 2002 there were 11,440 shipments totaling R$
19,011,898.37, with a significant increase in the value of
exported merchandise;
– and in 2003 shipments reached 19,631 valued at R$
35,543,007.40, a growth of 87% in relation to the
previous year.
36
Infocenters of Information and
Business
Goals
 Qualifying entrepreneurs and workers in the use of the
technologies of the information,
 Promote emergence of new enterprises,
 Increase exports,
 Enlargement of partnerships
 Productive and service quality improvement
 strengthening of projects of productive arrangements.
 By July of 2004, 400 infocenters were operating and 10
cooperation terms were signed to implant more 163 units.
 The project’s goal is to implement one thousand infocenters
up to July of 2005 and at least one unit in each of Brazilian
5,567 municipalities up to 2007.
37
Enterprise Informatization Program
Credit line to SMEs that want to buy
computers
Operated by the Brazil Bank (BB).
 purpose to finance the acquisition of
computer and peripherals to the micron
and small companies, being aimed at
modernizing its management and to make
possible the electronic communication of
the customer with the BB.
38
New networks or websites
In June of 2004, the federal government has launched
a new program to promote SMEs exports
 Finances the exporter of goods produced by SMEs, in the
phase pre-embarkment, through credential finance
institutions
 Credit can go up to 100% of FOB value and will be
related to the long rate term rate, plus 1% a year of
BNDES remuneration (the program agent) and
remuneration of credential finance institution (of no more
than 4%).
• These exporters will operate as Anchor Enterprises,
making possible the indirect export
– Trading companies, commercial exporting firms or firms
in the supply chain that acquire the production of a
significant set of SMEs looking for exportation.
39
Agenda
6. Conclusions
40
Lessons learned
 Experiences analyzed show us the importance of paying
attention to the nature of the industry and its structure.
 In the case of aeronautics parts, the small number of firms,
their highly specialized production capabilities and the
critical role played by the lead firm Embraer in the vertical
cluster requires:
a tighter cooperation between firms to negotiate better
and more long-term contracts with the lead firm
to develop foreign niche markets which are often part of
national industry supply chains.
 Need a marketing strategy aimed at building trust with
potential clients,
Long-term process.
Firms need to integrate their complementary capabilities
and fill in absent ones in order to offer foreign customers
a more solid solution platform.
41
Lessons learned
In aeronautics proto-cluster, non arm-lengths
forward linkages to first-tier suppliers might
be more important than backward linkages to
even smaller firms, and in complement to the
current direct strictly business linkages to the
lead firm.
For these first-tier suppliers, pressured by
end buyers will be always pursuing cost
reductions, including in services provision
and new parts development.
42
Lessons learned
 In the ornamental stones, the cluster is more horizontal and
centerless.
 The relatively large number of firms and the length of the
supply chain with several levels of inputs and equipment
suppliers, make the formation of stronger and denser
networks more difficult to achieve.
 The cluster is very active in exports, particularly when
compared to other industry-like clusters and in other regions.
 Success partly due to previous export promotion policies.
 The challenge ahead is to sustain its momentum and to
increase exports’ value-added
 An emphasis is being put by the new administration in a
wholesale policy of expansion of telecenters, which while
needed may be a setback to the in relation of the previous
orientation of IT diffusion of targeted local empowerment
43
Assessment of the experiences
 SME export promotion policies in Brazil are entering a
second-generation, those for IT are still in their infancy.
 Beginning to gain an understanding of the SMEs IT needs
and uses individually.
 Do not yet fathom possibilities for IT use in SME networks.
 Beyond the basic goal of achieving widespread diffusion, there has
been little policy development in this area.
 In regard to broad diffusion, the new government initiative
of developing a cheap computer could be part of the answer
SMEs will still face problems adequate software
and, most important, qualified IT personnel aware
of the organizational and strategic challenges facing
SMEs
44
Assessment of the experiences
The full potential of Internet-based instruments has
not yet been fully grasped by export promotion
Full interactivity and high-quality graphic interfaces
are critical into breaking into an overcrowded
export market.
 Marketing is often the weak or lacking export
capability in exporting SMEs.
Either because of the type of specialized training
in the case of high-tech firms or a lack thereof in
the case of traditional industries’ clusters.
Internet tools can be employed effectively in
building missing capacities
45