Digital Infrastructure: the key to increasing Brazil’s competitiveness – Episode 20

With the digital economy and social behaviors, it is fundamental that nations prioritize investments in digital infrastructure to create knowledge, inclusion and competitiveness.

Digital Infrastructure: the key to increasing Brazil’s competitiveness – Episode 20

In an increasingly data centric economy, the need for countries to invest in the improvement of their digital infrastructures increases. To understand their role in enhancing the competitiveness of countries, we have invited Carlos Arruda, professor of Innovation and Competitiveness at Fundação Dom Cabral.

For Arruda, the digital infrastructure is one of the four support pillars that leverage competitiveness in a digital age – alongside a regulatory framework, quality education and systematic investments by the public and private sectors.

“Education is an example of how important the digital infrastructure is for the development of a segment. Today, it fundamentally depends on internet access and availability at adequate costs so that teachers and students can interact in a more efficient and advanced way”, he commented. See the complete interview below:

Fabiano: Hello, welcome to another episode of our podcast greenTALKS here on Spotify. Remember that this content is also on our YouTube channel and on the blog INSIGHTS on the green4T website.

The topic of this podcast is: “Digital infrastructure, the key to increasing Brazil’s competitiveness”, and to talk about this subject we have invited Carlos Arruda, professor of Innovation and Competitiveness at Fundação Dom Cabral. I appreciate his time and availability and also the opportunity to share his knowledge with us. Professor, thank you for your presence!

Carlos: Thank you, Fabiano, for the invitation. Thanks to green4T for this opportunity.

Fabiano: Very well, let’s start the interview with an overview of the current scenario of digital infrastructure in Brazil and also give some time here for us to know a little more about the projects of Fundação Dom Cabral on this topic. Please, Professor.

Carlos: Thank you. At Fundação Dom Cabral, since the 1990s, we have been studying Competitiveness together with two Swiss organizations – one that analyzes Brazil and other 43 countries, and another, the World Economic Forum, which analyzes Brazil and 143 countries, totaling 144 countries. In these studies on competitiveness that emerged in the 1970s/80s, competitiveness was based on physical factors – the road and port infrastructure capacity –, on human conditions, on education, on science, technology, on regulatory environments and on the practices of countries. From the 21st century, this competitiveness analysis changed with the inclusion of the topic ‘digital’, the digital infrastructure, digital training, the regulatory framework that supports the digital activity, the digital government and the companies’ practices. So, our studies evolved from competitiveness to digital competitiveness, in which the digital infrastructure factor is one of the four fundamental pillars, together with the regulatory framework, education and the practices of the public and private sectors. Then we will talk a lot about digital infrastructure.

The second study in which we are involved and that started earlier this year is an analysis of the conditions that Brazil has and can develop and leverage for its growth in the digital economy. Considering then that digital will transform a country’s ability to compete and create conditions for sustainable development, the digital economy is a determining factor. And for this study on digital economy, published on the website, we invited specialists from various fields to analyze together this environment and Brazil’s conditions to compete in the digital economy. One particular section that we analyzed, with the participation of several experts, including green4T, is infrastructure. So, some of the reflections that we are going to make in this conversation, Fabiano, come from these two studies: on digital competitiveness and the digital economy in a broader sense, but I think it will help us reflect on our context, our reality and our transformation potential.

Fabiano: Very well. Taking this cue and considering the digital infrastructure as one of the four pillars, I ask: why is it so essential, professor, for Brazil’s competitiveness and above all for the development of a national digital economy?

Carlos: I’m going to answer by giving an example that, by chance, happened today, on the topic education. We know that education will undergo a revolution cycle with the use and access to technology and the pandemic has accelerated this. With the fact that children, young university students and graduate students, and executive education students, have mobility limitations, and with schools closed, technology gained a fundamental role. But in the case of education, unlike the retail and manufacturing sectors, the educational model is still very outdated, i.e. the pedagogical process of learning and teaching is still, I would say, in the Second Industrial Revolution – compared with the one that preconized seeking efficiency, mass production, which for the manufacturing sector happened at the beginning of the 20th century, with the Fordism. Education is still at this stage, had little progress in automation and everything else in the education process itself. Education depends mainly of access and availability at appropriate costs so that teachers and students can interact in a more efficient, more advanced way, using not only video (video conferencing), but also technological resources that are widely available, for instance, virtual reality, artificial intelligence. So, technology has already advanced, but education has not yet taken advantage of it.

Studies conducted during the pandemic found that 93% of students of public schools followed remote classes on the mobile phone, using mobile networks with limited speed and access. There’s that history that has been widely publicized of a boy climbing a tree to get a signal and attend classes, in a small house built by his father so that he could attend classes at the one place where he could get reception. This is a typical example of the importance of infrastructure for a segment: when we talk about agribusiness or health, it is even more critical.

But I would like to go back, Fabiano, if you allow me, to the first question about the current scenario, just so we can paint a picture. I remember that we based this study on a project conducted by a business school in Switzerland called IMD, where 64 countries are analyzed. In a ranking that we call Digital Competitiveness Ranking, when we analyze the factor infrastructure, last year Brazil was in 50th place among the 64 countries. This means that Brazil is among the ten worst countries in the world, among those 64 countries analyzed in this report, with respect to digital infrastructure.

But what does this mean? If, on the one hand, Brazil is in a good access position – 89.2% of the Brazilian population has access to mobile broadband, which places Brazil in the 23rd place in the world. I would say that it is a good position, good for the country, on the other hand, we came in 49th in broadband speed, 46th in internet access and 59th in the overall assessment of telecommunications technology, in 2020.

What do we see in this report? That our infrastructure falls short of our needs, of our potential. With the analyses made by the experts invited for the digital economy project, we saw the access and network availability challenges that we have and, more clearly, one critical point of delay, i.e. the 5G. So we invited a specialist in that technology to conduct two analyses: one, which is very interesting, involved understanding what happened in China in recent years. There was a combination of 5G availability with services that promote inclusion there. China was the only country in the world that met the UN goals of poverty eradication and this was done mainly through access to digital technology, to credit, to shopping, to education, to resources and services made available by technology.

Brazil is overall answering your first question, ranking 50th, and we can use China as a comparison: it shows that the digital infrastructure is essential, not only to include Brazil in this digital economy, but essentially to reduce inequalities that are a characteristic of our country.

Fabiano: Very well. We understood all the issues, we have seen what is related to these issues, but how can we meet these challenges and lead Brazil to this all-digital future?

Carlos: I would say that we have only two options: concessions for access and investment. Without investment in digital infrastructure – and investments shared by the public and private sectors, systematically – I will go back to the analysis of how China made digital inclusion an instrument of poverty reduction, by transforming its digital infrastructure. It is on the website I mentioned, in Volume 2 of our project. What we observed was a long-term commitment. That is, we want to be an inclusive and digital country with systematic investments by both the public and private sectors.

Naturally, if we look from a wider perspective, nothing happens without technological development. This shows another gap here: innovation. In studies about innovation, Brazil ranks 63 among 153 countries globally, showing an urgent technological gap. I would say that it takes a combination of concessions and regulatory approval, definition of 5G auctions and other agreements that are fundamental, and systematic investments with a long-term vision.

Fabiano: Just a pun here: does Brazil innovate little because it is not very competitive, or is it not very competitive because it innovates little?

Carlos: It is not very competitive because it innovates little. As a professor of Innovation and Competitiveness, I participated in a very interesting project in 2001/2002 promoted by an American professor – who is in Columbia University today – in which he made exactly the same question: what are the factors that determine the competitiveness of a country? And the only variable that determined a significant correlation was innovation, that is, I need to innovate to create competitiveness and I generate results with this and invest more in innovation.

The typical example is China, but we can include South Korea and other countries such as Israel, for example: with the benefits generated by innovation, I feed back into this cycle by investing more and by seeking solutions. An interesting fact, Fabiano, is that Brazil is the 13th country in the world in Science. Therefore, the country has an admirable scientific and technological potential for innovation. And why are we 63th in innovation and 13th in Science? Because our Science, despite being connected with the world, generating knowledge, researchers, high-quality scientists, is not applied! Knowledge stops in patents or even before that, in scientific papers, in master’s and doctoral theses, in good scientists – and many of them don’t even stay in Brazil, they go to other countries. And we have many examples of this in various sectors. But the fact is that Brazil is benchmark in Science. The challenge is this: the business community, government and Science working together to apply this knowledge in a differentiated way. And then we will have potential to rock too.

Fabiano: Wonderful. Now, back to the infrastructure issue, we know that energy is essential for social and economic development, particularly in the digital area. And Brazil has a huge potential for clean energy generation in the territory: wind, solar, and the Brazilian energy source is mainly hydroelectric. We have a lot of energy from renewable sources. How do you correlate these two topics? Can this be seen as a competitive advantage for Brazil in this new context?

Carlos: Before that, we must define “competitiveness”. This matter spiked in the 1970s when, in the last century, two researchers – an American and a Swiss –, without knowing it, were separately studying how the regions and countries could be evaluated and booming with their development. One of them was looking for indicators of prosperity that went beyond the GDP, which is the annual growth of a country. And the other was looking for macro and micro practices that could generate development. One was analyzing clusters and segments and the other was checking macro indicators.

The Swiss, called Stéphane Garelli, came to the conclusion that the ability of a country to grow is the result of a combination of factors, i.e. the conditions that a country creates for society and companies to generate wealth. Competitiveness is not the result of a game: it is training for the championship, the capacity that a country creates to explore and, consequently, generate wealth. So, Brazil is a country with potential. And Stéphane Garelli showed that this ability can be potential or realized. For example, we may have a fantastic deepwater oil wealth, but we may not have the technical capacity to explore it. In other words, we have positive competitiveness in assets (deepwater oil – or renewable energy), but we need technological capacity, a human factor, to explore this wealth.

From the perspective of potential, Brazil is highly competitive. But look at what is happening this year: a blackout risk due to climate changes, changes in rainfall, etc. That is, despite this fantastic energy potential – wind, solar and other renewable sources of energy, and even ethanol –, Brazil still depends on nature to support its energy matrix. And, back to what we talked about earlier, the potential infrastructure exists but perhaps the technology infrastructure needs to advance more rapidly.

This combination of dimensions makes Brazil potentially competitive, as in the case of our human potential. We are a country with very positive human potential, but outdated education generates loss in talent competitiveness or in technological and innovation competitiveness. Here I see the same thing: we have an extraordinary energy potential in many aspects, but we need to align technology to use it and actually be sustainable. To give an example for our listeners to understand, if we think of a country like Japan, which is made up of islands with few natural resources – there is no oil, steel, iron ore –, with an aging population, a country with low competitiveness in assets. But technologically, it is a very advanced country, with very high technological competitiveness. It is this combination of assets, i.e. the assets and potential that a country has, the human factor, technology, education and Science, that makes a country more competitive.

Fabiano: Excellent, professor. Another comparison here: we have the cheese, but we don’t have the knife to distribute the cheese (knowledge). This is what happens with Science. But let me make the last question. Unfortunately, we need to close: you mentioned China and the investments that the country has made in the last decades in various areas to meet UN’s ‘no poverty’ goal. When we consider Brazil, can, investments in education and innovation be a game changer for our reality, preparing us for the digital age that is coming?

Carlos: The good news is that Brazil invests a lot in education: it is the ninth country in this ranking of 64 nations in total spending in education. The bad news is that this is not transformed into quality education. Brazil needs not only to include, because this has taken place since the end of the last century, i.e. increase in public and private investment in education, which is very positive, and it was an instrument for inclusion at schools. Brazil has been progressing in this regard. But what we need now is to improve the quality of education And here we must go back to digital infrastructure, because in the 21st century, education no longer takes place in traditional classrooms, with knowledge transferred from teacher to students in that context. We will increasingly see hybrid education, combining access to teaching materials, videos, exchange between students, teachers and other educators. Interchanged with activities at schools, that has the social nature of exchange, using teaching models that promote interaction between people.

Education in Brazil has potential, but there is a gap in the quality of the educational process that makes Brazil, in terms of education, one of the five worst countries in the world. In the digital competitiveness report, we are 61st to 64th; in the competitiveness report – which includes traditional, physical factors, etc. – we come in 64th place among 64 countries. This shows the urgency of our conversation. If something is urgent in Brazil, this is advancing the quality of education and this advance in the quality of education depends, fundamentally, on the digital infrastructure. Today, there is no quality education anywhere in the world without the use of technological resources available through access to networks, telecommunications. This is perhaps the most urgent message that the public and private sectors should put on their agenda. We have disclosed and disseminated the importance of technology and digital in transforming our society. In other words, combining digital with ESG, these much talked about three letters referring to environmental, social and governance impact. The social – and the environmental as well – will increasingly depend on the advancement of digital. And I think that the companies that are listening to us, the public administrators, should look and say: “this is how we will reduce inequality, through access to networks, digital access, access to technology that is available”, often at costs that are much lower than we could imagine.

Fabiano: Its relationship with innovation is the same, I mean, focusing on stimulating innovation in the country is important.

Carlos: It is what I said, a virtuous circle. Innovation gives that, because it puts Science and Technology in practice. The fact is that we are now using a technology that was once Science and has now become an instrument for our telecommunications. At the same time, the virtuous circle uses innovation to improve the quality of education. I think that more qualified human beings will invest more, which is conducive to generating and exploring Science, technology and producing innovation. In that study that I mentioned, with the American professor, we saw that there is an innovation value chain that starts in elementary schools. I need qualified people who will generate Science and technology, and absorb it from the rest of the world. A country is not isolated, it is part of a global ecosystem, so absorbing technology is fundamental. This feeds back the entire process, creating more people, more talent and more capacity to support wealth and reduce inequality.

Fabiano: Very well. Well, unfortunately we will have to end this conversation, this greenTALKS, but we can certainly come back to this topic again, if the professor accepts our invitation. I talked with Carlos Arruda, professor of Innovation and Competitiveness at Fundação Dom Cabral, about Digital infrastructure: the key to increasing Brazil’s competitiveness. Professor, thank you again for your presence, your time, and for sharing your knowledge here on this podcast.

Carlos: I should thank you.

Fabiano: That’s all, if you enjoyed this episode, post a like, share it, and follow our channel on our social networks, which always bring relevant content about technology. Thank you for hearing and see you next time!

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