Developments of Internet of Things in Brazil

In 1960, computers performed around four thousand calculations per second, weighed tons and would cost today USD 1.5million. Nowadays, a basic smartphone accessible to a significant part of the world’s population contains a coin-sized processor that produces one billion calculations per second.

The technology development led to a miniaturization of processors and hard drives. Today, the integrated circuits use semiconductors of 10 nanometers, which allowed its components to consume less energy, the cost of production to fall sharply and processors to become faster and more efficient1. In 1965, Gordon Moore predicted that the number of transistors in an electric circuit would double every two years. This exponential growth of the processing capacity and data storage became one of the basic pillars of the current digital revolution.

The statistics are staggering, and so are the forecasts for the next years. The digital world has been doubling in size every two years2, global data traffic on the web will triple by 2021 reaching 3.3 zettabytes, and the number of internet users is going from 3 billion to 4.1 billion3.

The Internet of Things (IoT) is, therefore, a natural evolution of the scientific-technological progress in several fields. This technology enables an interconnected network of objects that can communicate with each other, store and distribute data from virtually any device, anywhere in the world.

Regardless of the fact that IoT is considered a revolution, effectively it is already part of the reality of the society. There are right now, billions of devices interconnected to the network, collecting and storing data: houses, cars, home appliances, and countless others products that are part of the daily life of the population. Besides that, public policies for a planned sustainable development with the use of IoT are gaining more and more traction in large cities, as a way to improve public management, public services, and urban planning.

It is estimated that within a few years, as result of the constant advance of technology, that microchips are going to be imperceptible and incorporated into almost any object and even people, creating a society where the standard will be everything connected to the network. This is effectively the paradigm shift provided by IoT.

According to reports from Goldman Sachs4 and Cisco5 , the projections for connected devices in 2020 are approximately 20 billion, going up to 100 billion by 2050. The economic impact of IoT, including indirect gains, is predicted to be between USD 3.9 trillion and USD 11.1 trillion by 2025 as specified by a study published by the McKinsey Global Institute . Also according to Cisco, Brazil has a potential economic gain with IoT up to USD 352 billion by 2022, with USD 70 billion from the public sector and USD 282 billion from the private sector.

Considering that IoT is a technology that allows storage, processing and instant access to endless data, the entire chain of production should be affected, consequently opportunities in all areas of the economy will emerge.

It is worth highlighting some areas of applicability of IoT:

• Health: efficient hospital beds management, diagnoses, remote monitoring of patients, inventory, and drugs expiration date management;
• Agriculture: precise irrigation, pests control, soil monitoring;
• People: health monitoring, quality of life and well-being;
• Smart cities: Emergency monitoring, integration of public health and safety services, traffic control, resources management, monitoring of water supply network with leakage points detection, weather forecast, implementation of smart grids;
• Factories and Worksites: operation and processes optimization; preventive maintenance; inventory optimization; healthy and safety, energy management.
• Infrastructure: control and administration of energy, water, and elevators use, and security automation
• Retail environment: payment methods, layout, and inventory optimization
• Transport and logistics: navigation routes optimization, autonomous vehicles; driver behavior monitoring, preventive maintenance of vehicles.

Due to the importance of IoT, the National Bank for Economic and Social Development (BNDES) and the Ministry of Science, Technology, Innovation and Communication (MCTIC) are fostering a technical study called “Internet of Things: A plan of action for Brazil” which will be the basis for a National Development Plan for IoT and will seek to promote the use of IoT to overcome the country’s economic and social difficulties.

Additionally, the IoT plan aims to improve the management of cities’ resources providing smart services as well as strengthening national production chains, increasing Brazil’s export potential, whereas
The priority areas chosen to receive BNDES support were: public administration, health, agriculture, and livestock.

On the other hand, the role of the public and private sector on the digital economy should not be limited to promoting the socioeconomic development. There are others issues to be addressed in order to provide a development that is sustainable and respects the constitutional guarantees.

Firstly because billions of devices connected to the network are storing and sharing personal information, what enables an environment for incidents of security and inappropriate processing of personal and sensitive data – something already frequent in the digital world.

For this reason, the Brazilian Government must play a vital role in the creation of standards and guidelines regarding security and privacy of data collected and stored, including ones from IoT devices. Brazil, however, does not have a general data protection law, what causes a regulatory scenario out of phase with technological reality leading to a scenario of legal uncertainty that discourages investors in several fields. This is why the approval of Bill of Law 5,726/2016, that regulates the processing of personal data in Brazil, is so important.

Others legal issues about the IoT ecosystem are being discussed. Recent debates promoted by the MCTIC to establish the national plan of IoT raised questions about regulatory and tax impacts. For example, companies in the telecommunications sector have been claiming for the permanent international roaming but the current regulation from the National Agency for Telecommunications – Anatel does not allow devices in Brazil to operate with a SIM card permanently connected to telecom operators that are not organized under Brazilian law.

Another relevant topic is which Anatel license would be applicable to the IoT system and if one is even necessary, considering that IoT devices could potentially encompassed by both telecommunication services and value-added services regulations.

Others subjects such as certifications; importation and hardware taxes; public-private partnerships; foreign capital investments; and intellectual property are also part of the debates concerning IoT.

Brazil is part of a select group that leads IoT sector in the world. Thanks to its continental dimensions and population size, Brazil is one of the countries that can benefit the most from IoT. A unique opportunity for a sustainable socio-economic development.

The Brazilian government, by means of Decree 8,234/2014, sought to stimulate the development of IoT with a tax exemption for SIM cards used in Machine to Machine (M2M) communication devices. In 2014, Brazil was the fourth country in M2M connections . Today Brazil has 20 million M2M connections, and the number of connections is expected to surpass 42 million by 2020.

For all these reasons, we can see that IoT has the potential to change social paradigms, enabling and improving the quality of life of Brazilians citizens, contributing to the socioeconomic development. However, risks related to the inappropriate processing of personal data must not be underestimated.

It is clear that the State has a crucial role that goes beyond regulatory and fiscal aspects to mitigate these risks, without this meaning bureaucratization or obstacle to investment in the sector. An adequate public policy, together with a modern regulation in consonance with the technological reality, can lead to a great development of the IoT ecosystem in Brazil.

*This article was written with the valuable contribution of Vitor Koketu da Cunha, legal trainee of Azevedo Sette Advogados.

1 – Available at Columbia website
2 – Available at EMC website
3 – Available at Cisco website
4 – Available at Goldman Sachs website
5 – Available at Cisco website
6 – The Internet of Things: mapping the value beyond the hype, p. 9.

Azevedo Sette Advogados