Opportunities inBrazil 2015

Opening international marketsfor digital companies

Market Intelligence Business Development Sales Representation

www.latamconnection.com

Brasil Online 1995-1996 ZAZ 1996-1999 Terra 2000-2005 DM9DDB 2006 iG 2007-2013 Latam Connection 2013

caiquesevero@latamconnection.com

About the authorCaique Severo

Agenda

1. General data about Brazil

2. Internet and technology

3. Digital media

4. Challenges of doing business in Brazil

General data about Brazil

2014 203 million people

Source: IBGE, december 2014 - http://www.ibge.gov.br/home/default.php

20147th largest country in GDP

US$ 3 trillion purchase power parity standard

Source: Finance Ministry - http://www.fazenda.gov.br/area-destaques/economia-brasileira-em-perspectiva-30.12.2014

2014Very small growth

+ 0.2%

Source: Finance Ministry - http://www.fazenda.gov.br/area-destaques/economia-brasileira-em-perspectiva-30.12.2014

2014Low unemployment

4.8%

Source: IBGE December 2014 - http://saladeimprensa.ibge.gov.br/noticias?view=noticia&id=1&busca=1&idnoticia=2801

Big shift in economic classes

Million of people in each economic class

Source: Finance Ministry, December 2014 - http://www.fazenda.gov.br/area-destaques/economia-brasileira-em-perspectiva-30.12.2014

Class AB

Class C

Class D/E

Growth in higher education% of people ages 25-34 with at least an undergraduate degree

Source: IBGE

2004 2013

15,2%

8,1%

Cars sales doubled in a decadeNumber of new cars on the streets

Source: Anfavea, November 2014 - http://www.anfavea.com.br/tabelas.html

Domestic airline travel grew 164% in 9 yearsNumber of passengers

Source: ANAC, November 2014 - http://www2.anac.gov.br/estatistica/demandaeoferta/DemandaeOferta.asp

November 2005 November 2014

7.952.936

3.011.295

Inequality is lower but still high% of income per capita by deciles of income

Source: IBGE - ftp://ftp.ibge.gov.br/Indicadores_Sociais/Sintese_de_Indicadores_Sociais_2014/SIS_2014.pdf

1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th

41,7%

15,3%

10,8%8,3%

6,6%5,8%4,5%

3,4%2,5%1,2%

45,8%

15,9%

10,4%

7,7%5,9%4,9%

3,7%2,8%1,9%1%

2004 2013

The 10% richer gets more than 41% of all income

Demographic bonus

Decrease in number of child per womanSource: World Bank, Google, others

Demographic bonus

2010 2020

More people in the economic active age

Men WomenMen Women

Internet and technology

Internet users in Brazil

Non-users70

Users95

Million of people over 12 years old

Source: F/Radar 2014 - http://www.fnazca.com.br/index.php/2014/12/16/fradar-14%C2%AA-edicao/

Internet users by social economic class

DE7

C48

AB38

Million of people over 12 years old

Source: F/Radar 2014 - http://www.fnazca.com.br/index.php/2014/12/16/fradar-14%C2%AA-edicao/

Internet users by age

73% are under 35 years old

60+346-59

8

36-4514

26-3524

18-2524

12-1720

Million of people over 12 years old

Source: F/Radar 2014 - http://www.fnazca.com.br/index.php/2014/12/16/fradar-14%C2%AA-edicao/

Mobile access: 62 million peopleMillions of internet users (celular and tablet)

Source: F/Radar

2013 2014

62,5

42

Access through celular grows% of internet users

Source: F/Radar

2013 2014

65%

48%

Access through tablets grows% of internet users

Source: F/Radar

2013 2014

14%

9%

Tablet OS

3T sales

iOS5%

Android95%

Source: IDC Brazil

Best seller tablets

78% of sales are under US$ 200 51% of sales are under US$ 120

Semp Toshiba

US$ 79Android 4.2.2

7” screen 8GB drive

CCE

US$ 128Android 4 9” screen 4GB drive

Multilaser

US$ 87Android 4.2 7” screen 8GB drive

Room for growth in mobile commerce% of purchases made on mobile devices

Source: Criteo

Brazil US UK Japan

49%

41%

27%

10%

Mobile phones are the most used device to access the internet at home

% of internet users

Source: F/Radar

Tablet Celular Portable PC Desktop PC

42%40%

52%

12%

Almost 75% of phones sold are smartphones

4,7

15,1

Smartphones Feature phones

Source: IDC, december 2014, http://br.idclatin.com/releases/news.aspx?id=1777

Sales by type in third quarter 2014

15.1million smartphones sold

July - September 2014

Source: IDC, december 2014, http://br.idclatin.com/releases/news.aspx?id=1777

More than half of internet users have a smartphone

2013 2014

53%

33%

% of internet users

Source: F/Radar

Broadband penetration will grow

Brazil Chile Argentina

53,9%49,6%

42,4%

% of households

Source: ITU, State of Broadband 2014 - http://www.broadbandcommission.org/Documents/reports/bb-annualreport2014.pdf

National broadband plan

• 1 Mbps for R$ 35 (US$ 13) monthly

• New frequency auctions: 2.5 GHz (3G) and 450 MHz (rural areas)

• Tax exemptions or reductions for

• Local production of smartphones, tablets, PCs and modems (zero tax - PIS/Cofins)

• Profits generated from investments in telecom infrastructure (tax down to 15%)

• Satellite launch in 2016 to improve bandwidth

• New submarine cables linking Brasil to US, Europe and Africa

• Free 2Mbps access in 65,000 public schools

Source: Communications Ministry, May 2014 - http://www.mc.gov.br/programa-nacional-de-banda-larga-pnbl

Fixed broadband reaches 23 million subscriptions

Source: Communications Ministry, May 2014 - http://www.mc.gov.br/programa-nacional-de-banda-larga-pnbl

Number of subscriptions

Mobile broadband reaches 3,400cities and 123 million subscriptions

Source: Communications Ministry, May 2014 - http://www.mc.gov.br/programa-nacional-de-banda-larga-pnbl

CitiesSubscriptions

4G

4.2 millionsubscriptions in October 2014

Source: Teleco, October 2014 - http://www.teleco.com.br/4g_brasil.asp

Digital media

Digital ad spending

Brazil is by far the largest market in Latam

Source: eMarketer

Social Media usage% of internet users

Source: F/Radar

Facebook Whatsapp Skype/MSN Twitter Instagram

171719

37

88

9

2227

7

85

Abr 2013 Abr 2014

Brazil is the second in time spent online

Source: Comscore, september 2014 - http://www.comscore.com/por/Insights/Presentations-and-Whitepapers/2014/2014-LATAM-Digital-Future-in-Focus

News sites reach 63% of users in Brazil

Source: Comscore, september 2014 - http://www.comscore.com/por/Insights/Presentations-and-Whitepapers/2014/2014-LATAM-Digital-Future-in-Focus

34 million people access government sites

Source: Comscore, september 2014 - http://www.comscore.com/por/Insights/Presentations-and-Whitepapers/2014/2014-LATAM-Digital-Future-in-Focus

64 million people access online videos

Source: Comscore, september 2014 - http://www.comscore.com/por/Insights/Presentations-and-Whitepapers/2014/2014-LATAM-Digital-Future-in-Focus

Ecommerce

US$ 6.15billion (+11%)

1S 2014

Source: eBit

E-commerceFashion/Clothing Cosmetics Electronics

CarsAuctions/Trade Comparison

General

Media

Portals Verticals Legacy print

Mobile News about internet

Payment

Retargeting, DSPs, Ad Networks and segmentation

Challenges of doingbusiness in Brazil

BureaucracyDays to open a business

OCDE

Latam & Caribbean

Brazil 102,5

30

9,2

Source: Doing Business 2015

BureaucracyHours spent managing taxes

OCDE

Latam & Caribbean

Brazil 2600

365

175

Source: Doing Business 2015

Tax costsTotal taxes (% of profits)

OCDE

Latam & Caribbean

Brazil 68,9

48,3

41,3

Source: Doing Business 2015

Office space rent(US$ / cubic meters)

Lima

Buenos Aires

Caracas

São Paulo 90,8

46

30

21,5

Big Mac Index (US$)

Mexico 2.86

Argentina 3.88

Colombia 4.48

Brazil 5.28

Traffic in São Paulo5/23/2014: 214 miles (344 km)

Conclusions

Opportunities Challenges

• Growing consumer base

• Big mobile adoption

• Demographic bonus

• Bureaucracy

• High taxes

• High operating costs

Thank youwww.latamconnection.com

caiquesevero@latamconnection.com