from Brazil, wake up to my Brazil! by carf

A recent world-wide study on entrepreneurship in 43 nations showed that Brazil ranked second to last in its ability to develop and launch new products in the marketplace. This dismal ranking has a lot of Brazilians not only worried about the future but also working to improve the situation.

The Brazilian research was published as part of the Global Entrepreneurship Monitor (GEM). It surveyed 2000 Brazilians from every region and socioeconomic level. The GEM research project is conducted internationally by the Global Holding Entrepreneurship Research Association, with links to the London Business School and Babson College in Boston.

What researchers found was that Brazilians are very entrepreneurial. However, most entrepreneurial activity is generated by people who are struggling to survive financially. They typically replicate simple services and products that already exist—roadside snack bars, gardening, broom sales—rather than create products and services that are new in the market.

Only 3.3 percent of all the entrepreneurs interviewed in the study said that their product or service was something new and innovative to the market. That number is much lower than the other Latin American countries surveyed, and lower than the Russia, India and China, the other so-called BRIC countries.

There are many factors that cause this low rate of innovation. Because the levels of education and wealth in Brazil are relatively low compared to developed nations, and because the job market is so tight, many people start a small, informal business just to make ends meet. But financial limitations make true innovation difficult and risky. Low education levels reduce the knowledge base needed to produce advanced products.
The study also found that even many university graduates find it difficult to produce new and innovative products and services. Upon graduation most find it difficult to find a formal job. So they also start small businesses that replicate existing products and services.

“The young university student, for example, faced with very few formal employment opportunities, decides to open a small business, such as accounting, legal, or information technology support services,” says Simara Greco, of the Brazilian Institute for Quality and Productivity, the organization that conducted the research project in Brazil.

Another disturbing result found in the study is that established businesses and corporations in Brazil don’t appear to be stimulating an entrepreneurial spirit among their employees. According to the study, only six percent of those who work for a small business or large corporation said that they had worked to develop a new product or service for their company during the past two years. Instead, businesses seem to focus on maintaining or improving their existing products and services.

The GEM researchers specifically cited the need for Brazilian businesses to change their corporate cultures so as to encourage more innovation and creativity among employees.

The research project did not seek to scientifically identify the reasons why the Brazilian innovation rates were so low. However, Paulo Bastos Jr., one of the research team members, told me that, in his opinion, one of the main obstacles is the Brazilian education system. Brazilian schools typically train students to be employees, not entrepreneurs, Bastos said. Students are not given the tools, encouragement, or vision needed to become entrepreneurs.

Other specialists also believe that parents typically encourage their kids to find stable employment, often in the government sector, rather than enter a risky business venture. This tendency is somewhat understandable when you consider how unstable the Brazilian economy was during the decades of hyper-inflation.

Add to these factors the fact that the Brazilian government makes it extremely difficult to start a new business. The bureaucracy involved with registering a new business, or closing it, is thick and prolonged. High taxes and payroll obligations make it hard for new businesses to make a profit. Interest rates in Brazil are among the highest in the world, which is a major obstacle to those who might need a business start-up loan to launch a new product.

One of the primary objectives of the GEM research is to influence political and economic leaders, says Bastos. The hope is that these Brazilian leaders will develop new education and economic policy that helps foster more innovation. That, he said, is fundamental to Brazil’s economic growth and an improved quality of life.

Working for Change

Anyone who has tracked Brazil’s economic improvements in the past 15 years knows that the nation is advanced in many foundational economic sectors. It is a world leader in agriculture, biotech industries, aviation, energy and mining. Nevertheless, the innovation of new products remains low. So, numerous private and public sector efforts are underway to help change the largely non-entrepreneurial culture in Brazil.

Most universities now have “incubators” for students who have an idea for a new product or service. These incubators provide physical space, financial aid, and expert assistance from college professors during a period of two years. That’s usually enough time for the business to take root and survive on its own beyond the university walls.

Another private effort that has grown in Brazil is the international Junior Achievement program, which started in the U.S. nearly a century ago. In Brazil, this organization captures the effort and expertise of volunteer business leaders who teach, train, and encourage young people to become capable, creative, honest and ethical entrepreneurs. More than a million students have participated in the Brazilian program since it started here in 1983. According to the executive director for the state of Paraná, Fabrício Campos, there are more than 40,000 volunteer business leaders nationwide helping young people.

Hopefully these efforts, and others, will produce positive changes.

Questions for Reflection and Discussion

• How do you think the weakness in Brazil’s entrepreneurial innovation mirrors or contrasts with what’s going on in your national or regional economy?
• What steps can you imagine your business taking to boost innovation during the global downturn? At what cost? Anticipating what reward?
• The GEM study shows a correlation between entrepreneurial success and voluntary training—both formal and informal. What can you see yourself or your company doing to lend a hand to help early-stage entrepreneurs conduct business spiritually engaged?
• Fourteen generations before the birth of Jesus the prophet Jeremiah sent a letter from Jerusalem to his people exiled in Babylon, warning them not to listen to anyone who claimed God would bring a quick end to their captivity. Without trying to draw an unnatural parallel between struggling economies and the forced relocation of a population from its homeland, can you see ideas in this passage from Jeremiah’s letter that might guide businesspeople working under adverse conditions?

This is what the LORD Almighty, the God of Israel, says to all those I carried into exile from Jerusalem to Babylon: “Build houses and settle down; plant gardens and eat what they produce. Marry and have sons and daughters; find wives for your sons and give your daughters in marriage, so that they too may have sons and daughters. Increase in number there; do not decrease. Also, seek the peace and prosperity of the city to which I have carried you into exile. Pray to the LORD for it, because if it prospers, you too will prosper.” — Jeremiah 29:4-7

• Have you considered volunteering with Junior Achievement or some other program that helps school kids understand the basics of economic life?

Glenn McMahan is a frequent contributor to InsideWork from his home Brazil. Glenn is the author, with David Russ and Jim Petersen, of More Than Me: The 4 Essentials of Relational Wholeness.