Automation around the world – Brazil
Estimates predict the worldwide market to more than double in size from its estimated worth of £10.24 billion in 2018 to £21.27 billion by 2025. When talking about such huge global trends, and how different nations will shape them, Brazil is a standout country that cannot be ignored.
Despite the International Monetary Fund (IMF) ranking Brazil as the ninth-largest economy in the world, with a GDP nineteen places above the next biggest South American nation economy, local optimism about Brazil’s economic future is often lacking. So much so, that there is a popular expression among Brazilians that goes thus:
“Brazil is the country of the future, and always will be!”
In terms of automation of its warehouses, it is true that currently Brazil is a country with more opportunity than actuality. While there are some ongoing obstacles to be concerned by, there are many good reasons why Brazil should be seen as a big player in the future of the warehouse automation markets.
Push Forward – Ecommerce market potential
Of the four largest economies in South and Central America (the others being Mexico, Argentina, and Colombia), Brazil has not only the largest ecommerce sector but the one with the most projected potential growth. Projections estimate that the £22.06 billion strong Brazilian ecommerce market of 2018 will have grown to £30.73 billion by 2022.
This presents a huge opportunity for the warehouse automation sector. B2C ecommerce is a major driver of the warehouse automation sector, as evidenced by some of the front-runners like Amazon and Ocado. With such large product ranges and so many different item variations, efficiency and accuracy in picking and packing become more vital than ever before. With Brazil’s ecommerce market poised to continue growing substantively, its potential for warehouse automation is notable in the South American region.
Hold Back – Custo Brasil
While the domestic ecommerce market has strong potential to grow, investment in all sectors of the Brazilian economy has been held back by a consistent nagging problem. One that the Economist has seen fit to cover in detail in eight separate articles across two decades. The Custo Brasil – or in English, the Brazil Cost.
Brazil has long been recognised as anomalously expensive to operate within, despite its status as a prosperous and major world economy. In 2019 the World Bank’s “ease of doing business index” placed Brazil at 124th out of 190, by far the lowest ranking for any of the word’s ten largest economies. A similar story emerges from the Heritage Foundation’s economic freedom index, which ranked Brazil as 144th out of 180 countries this year. The causes of this poor performance range from complex bureaucracy, to higher interest rates, and lower levels of education, as well as transport costs due to large territory, and many more areas besides.
While some nations have demonstrated that they can automate with home-grown technology, Brazil is not likely to be in this category any time soon. As a result, without some serious re-engineering of the Brazilian economy, the kinds of foreign investment necessary to make Brazil’s warehouses more automated is not likely to emerge in the near future.
However, while some costs can be a barrier to automation, others can be an advantage.
Push forward – Workforce value for money
A key factor that will push any economy to move towards automation is workforce-related costs. As the cost of a workforce grows, the incentive to maximise their business value also increases. The automation of certain tasks is a key area where this becomes possible, such as the long periods of time pickers spend walking between storage bins and shelves in a warehouse.
Possibly the single biggest driver of rising workforce costs is the relative cost of living. Of the major economies of South and Central America, Brazil has the highest cost of living. Using the Numbeo system of measuring living costs as a percentage of the costs associated with living in New York City (so NYC = 100%), we can see that on average, Brazil’s cost of living is measured at 40%. In contrast, Mexico is 36%, Argentina is 33%, and Colombia is 31%. With living expenses between 4-9% higher than the other largest economies of the South and Central American region, Brazil can be said to be something of an outlier.
With a more expensive living cost creating a more expensive workforce, automation becomes much more attractive. Automation makes it possible to turn the high percentage of the time picker’s labour involves walking between bins, and turn it into something far more valuable and productive. As Brazil’s cost of living remains higher, and wages adjust to compensate, the incentive for automation will remain strong.
Hold back – Low automation
By global standard’s, Brazil’s present levels of automation are noticeably low. In 2018 the International Federation of Robotics surveyed 44 countries’ levels of industrial robotic deployment. Brazil was ranked 39th, with only 10 industrial robots for every 10,000 employees of its workforce. In this area, Brazil was noticeably outpaced by Argentina who ranked 35th with 18 robots for every 10,000 workers, and Latin American rival Mexico with 31st place and 32 robots per 10,000 workers.
This present lack of automation technology presents a potential difficulty in the future. Without more investment, Brazil stands to fall behind in the knowledge ecosystem necessary to make robotic automation possible.
Knowing the situation, the Brazilian government is working hard to fix this. In 2018 a strategy was announced to ensure that a minimum of 15% of the Brazilian economy to be automated to the highly advanced levels assoiated with industry 4.0 by 2033. An investment worth £1.97 billion from a state-run bank, Banco Nacional de Desenvolvimento Econômico e Social, hopes to see this strategy reach fruition.
There is deep concern that without this kind of development, the Brazilian economy will lag further behind. “People fear the job loss that comes with automation. But if we don’t become more efficient, we will lose all jobs.” said Fernando Madani, head of the automation and industrial engineering department at Instituto Mauá de Tecnologia, in São Paulo.
Push Forward – Brazil is always online
While Brazil may not have a huge amount of automation, it does have a massive internet user base. Not only does Brazil have the fourth-largest population of internet users worldwide (beaten only by India, China, and the USA), and in addition to having the second-highest percentage of internet users by population in South America, Brazilians also spend more time using the internet on mobile devices than any other South American country.
A survey from We Are Social and Hootsuite reported that Brazilians are using their phones or other mobile devices for an average of four hours and 45 minutes per day. That represents more than half their total time spent online. As has been widely reported by many other publications, mobile ecommerce is becoming much more important to many B2C companies than the gradually declining desktop or laptop ecommerce. With more customers spending increasing time and money online, the opportunities for ecommerce in Brazil will become even greater.
As these opportunities advance, so will the pressure to automate. More customers will expect faster and cheaper online deals, and the savings that can be provided by automation will be too big to ignore. With many potential customers to provide for, Brazilian ecommerce will have no option but to automate.
Like so many other countries, Brazil is on the cusp of major economic changes thanks to the robot revolution. To learn more about what warehouse automation can do for your company, book a demo and arrange a visit to our display centre to see our robots in action.