The digital economy refers to the global network of digital economic activity, financial activities, and working relationships made possible by data and communication systems (Bukht & Heeks, 2018). A society founded on digital technology is the easiest way to explain it in a nutshell. Brazil achieved rapid economic expansion and significant social advancement from the beginning of the century until the recession in 2014 and 2015 (Grigoryev & Starodubtseva, 2021). The rate at which our world is being transformed by technology is unprecedented. The digital economy is expanding, and as a result, we may anticipate that ICT solutions and facilities will play a significantly more important part in the functioning of society. When we think of the future, advances in digital technology and the digital economy mean that we need to rethink how industries (and even our enterprises) are organized to accommodate these shifts.
Some Findings Regarding the Digital Economy of Brazil
Due to the absence of a legal structure in Brazil that allows for the consistent design of public policies, the Brazilian government has not conducted an official review of the Informatics Law (Kruchten et al., 2019). Numerous studies have been shown to investigate the consequences of the law, with results that are not always consistent. In general, the law has made it possible for Brazil to construct a local manufacturing capacity, which has led to employment opportunities. Now, there are even positions for highly qualified employees (more than 7000 working on R&D). By limiting eligibility for the tax break to only apply to domestically produced information and communications technology (ICT) goods, the law has been successful in attracting some of the most successful ICT companies in the world to Brazil.
This has led to increased employment and improved the sector’s added value, which have remained stable over the past few years. However, because PPBs (Planning-Programming-Budgeting System) is primarily concerned with manufacturing, the productive capacity is concentrated on the production phases that add the most negligible value. The industry continues to be reliant on the importation of digital products and materials, including those for telecommunications devices.
Additionally, the regulation has enabled businesses located outside of the Manaus Tax-Free Zone to maintain their level of competitiveness (Prochnik et al., 2015). Even though this was not one of the goals that the law was intended to accomplish, it did not impact exports. In contrast to countries in Asia, where the information and communications technology industry is an integral part of the global value chains and has significant international linkages, most businesses in Brazil sell consumer items on the domestic market. They are not focused on exporting their wares.
It is essential to invest in one’s expertise to drive the digital transformation and adapt to it. Over the past two decades, Brazil has made great strides toward modernizing its policies and institutions to encourage research, development, and innovation. It has successfully established itself at the forefront of technology in several destinations of economic excellence, including aviation, oil and gas, agricultural, and healthcare industries. On the other hand, the innovation system tends to disappoint. The efforts around development have not led to improvements in output or competition, nor have they led to a more prominent presence in the global value chain.
Implications of the Digital Economy
The most recent year for which data is available, 2017, saw research and development spending amount to 1.26 percent of GDP (Gross Domestic Product). This percentage was higher than other Latin America and the Caribbean economies but lower than most OECD countries. The National Strategy for Science, Technology, and Innovation has established the lofty goal of bringing the proportion of GDP spent on research and development up to 2 percent by 2022. The country’s research and development (R&D) funding has suffered due to the economic downturn and the austerity measures that have been implemented. Since expenditure on R&D has been on a declining trend since 2016, it is possible that this aim will not be achieved (MCTIC, 2016). The advent of a new financial regime in the Federal Constitution in December 2016, which demonstrates a no positive growth for federal “discretionary expenses” for the next 20 years, keeps those discretionary spending at the same levels as they were in 2016, and the only modification that is permitted is for rising prices. This rule was adopted. Because of this restriction, infrastructure expenditure in research and development and innovation is restricted; the primary organizations in the country responsible for supporting research have all suffered a reduction in their budgets in recent years.
References
Brazil: Informatics Law Concerning Policy of Market Reserve, Technology Transfer, and Foreign Involvement. (1986). International Legal Materials, 25(4), 868–883. https://doi.org/10.1017/s0020782900024967
Bukht, R., & Heeks, R. (2018). Defining, Conceptualising, and Measuring the Digital Economy. International Organisations Research Journal, 13(2), 143–172. https://doi.org/10.17323/1996-7845-2018-02-07
Grigoryev, L. M., & Starodubtseva, M. F. (2021). Brazil in the 21st century: A difficult path. Russian Journal of Economics, 7(3), 250–268. https://doi.org/10.32609/j.ruje.7.78432
Kruchten, P., Fraser, S., & Coallier, F. (2019). Agile Processes in Software Engineering and Extreme Programming: 20th International Conference, XP 2019, Montréal, QC, Canada, May 21–25, 2019, . . . in Business Information Processing, 355) (1st ed. 2019 ed.). Springer.
MCTIC (2016), Estratégia Nacional de Ciência, Tecnologia e Inovação 2016-2022 [National Strategy of Science, Technology and Innovation 2016-2022], Ministério da Ciência, Tecnologia, Inovações e Comunicações, Brasilia.
Prochnik, V. et al. (2015), “A política da política industrial: O caso da Lei de Informática” [The politics of industrial policy: The case of the Informatics Law], Revista Brasileira de Inovação, Vol. 14, pp. 133-152, http://dx.doi.org/10.20396/rbi.v14i0.8649103.
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