Friday, 27 January 2017

Micro Level Trends – Brazil's Automotive Sector – “Brazil 66”...Sixty Six Years of Economic Power Lifting (Part 4.7)

As the UK creates a new (apparently scant) Industrial Strategy 'Green Paper' regards national Research and Development, this web-log's focus provides a useful insight into similarly directed efforts of the past and present orchestrated by Brasilia.  

[NB the following two areas covered – Indigenous Sector Promotion and Indigenous Technological Research have been altered in sequence so as to provide greater continuity].

8. Indigenous Technological Research

Brazil's exposure to 19th century global capitalism and thereafter its need to become better self-sustaining throughout the 20th century under its Industrial Import Substitution policy, has meant that by default of its very size and successive political stances – internationalist learning and nationalistic self-sustainability - it has historically considered itself the technology leader within Latin America.

As seen previously in detail the need to industrialise saw much effort put into Ethanol fuel production, today a world leader in sustainable agrifuels, such advancement followed by policy-driven efforts to broaden national capabilities across an ever wider spectrum of technological disciplines which underpin economic strengths both inward and outward.

However, the determination to support new technological solutions for one's own people and with foreign export ambition has not been easy. In contrast to the success of agrifuel, as also seen with Gurgel SA, efforts to advance the low-cost construction vehicle model into a nationally and regionally scalable proposition became thwarted.

In its case, for two reasons. Firstly, directly because of the real-world performance limitations of what was perceived as an advanced technology seemingly ready to alter the very nature of 2nd and 3rd world vehicle build and use. Secondly, because the national integration of the global vehicle industry (VM and Supplier) ultimately provides not only better quality products but also allows for major FDI initiatives (factories, distribution centres, showrooms, after-sales service centres etc) which at the production hub and far beyond enormously expands local and regional economies. Those global manufacturers themselves becoming highly patriotic given the educational skills-base put into place.

As also seen, more directly attuned (than steel-based cars and heavy trucks) to the post-WW2 entrepreneurship drive and core competencies of managerial learning, enthusiasm and the availability of willing manpower has been the Bus and Coach sector.

With cyclically aligned created companies such as Marcopolo, Ciao Industries, Busscar, Mascarello and Neobus, the Brazilian body-building industry has prospered with only a few (ultimately integrated) failures over the last 70 years. Now so well recognised as beyond simply capable on the world stage that foreign marques, such as Irizar, have brought in FDI, whilst also deploying relevant developmental and build expertise.

This understood, and although indisputably – in its broadest sense - the LatAm technology leader (with examples such as the Itaipu and Belo Monte hydro-electric dams), Brazil still has a sizeable – though shrinking – 'Technology Gap' with the most progressive Western and Eastern countries.

Such a gap however looks to become ever smaller thanks to the fact that Brazil is reputed to have the 5th largest number of billionaires in the world (largely thanks to historical precedent of land ownership prevailing to broad industry and finance).

Very interestingly, the 2020s and 2030s may see possible leapfrog advances, these resulting from a shift in the mix of national Research and Development, as more and more of the private sector, with major foreign participation (perhaps even leadership), becomes increasingly merged with the public sector efforts that have been the historical paradigm.

Academia -

That paradigm has relied upon Government policy initiatives and a very closely aligned public University system to drive what have been deemed research projects vital to the national interest.

Unsurprising given the historical importance of trying to better balance Brazil's economy within the global construct and strengthen the regions within the national construct, Economics and Industrial Management has been a prime focus.

Complimenting this central pillar has been the historical insistence led by previous Military Governance, that because of historic LatAm socio-economic turmoil and possible external threat, that the nation's Defence is first and foremost. Thus much was previously done to create centres of intellectual excellence in Military Engineering and Strategy, with the recognition that this would indeed have an 'economic trickle-down' into commercial applications.

These foci led to resurgence of the few embedded establishments and creation of perhaps the best known and arguably most contributive universities: the 'FGV', the 'IME' and 'ITA'. These the initials of the Fundacao Gutelio Vargas (Economic/Mgmt) [1944], the Instituto Militar de Engenharia (Military, Civil and Other) [1792] and the Instituto Technologico de Aeronautica (Aerosapce)[1950].

Whilst viewed as primary drivers of research and development progression, these obviously exist within a plethora of other public and privately funded higher education bodies – 197 or so publicly supported - with the most prominent ten being (in 2015 ranked order):

1. USP – University of Sao Paulo
2. UFRJ – University of Rio de Janeiro
3. UFMG – Federal University of Minas Girais
4. UNICAMP – University of Campinas
5. UFRGS – Federal University of Rio Grande do Sul
6. UNESP – Sao Paulo State University
7. UFSC – Federal University of Santa Caterina
8. UFPR – Federal University of Parana
9. UnB – University of Brasilia
10. UFPE – Federal University of Pernambuco

Like the former high profile three 'cornerstone' universities, the disciplines, faculties and overall curriculum of these institutions (as with many more latterly established) have expanded over the years, so as to embrace an ever broader spectrum of evolved old subjects and the introduction of newer disciplines.

Hence, whilst undoubtedly each has its own core for which it is typically recognised, instilled in their original ambitions is that Brazilian universities were to become multi-disciplinary; so as to ensure the Brazilian economy gains a broader activity base from a wider knowledge-base, and to also critically better serve the undergraduates and post-graduates of the respective regions to in turn increasingly develop those regions.

It was the Vargas and Kubitschek 'visions' of the 1940s and 1950s set the modern tone for Brazilian education and the importance of melding what were previously seen as distinctly different subjects; with their own inherent historic 'silo-effects', often seen in Europe and the USA.

Thus Brazil's places of learning were idealised as to be different, to 'cross-fertilise' so as to nurture Brazilian enterprise and industry.

One of the best known is Sao Paulo's Central University and its formation of independent yet aligned faculty departments.

The university was initially established as a specialist in Business Administration (the ESAN faculty) [est 1941 in Sao Paulo], but educational policy meant that original basis even early on was to become allied to the all important arena of Industrial Engineering (FEI) [est 1946 and reformed in 1963] which in turn was widened still as necessary to integrate an Information Technology faculty (FCI) [est 19

Centro Universitario da FEI (Faculty of Industrial Engineering) itself originated within the automotive heartland of San Bernardo de Campo as a seperate site so as to be located very close to the new major automotive factories, and thus to act as a supply feed for the next generation of staff engineers, managers and indeed Brazilian executives, who themselves were able to gain close contact with the likes of Volkswagen, Karmann, FIAT etc in their formative years.

The symbiosis of these three semi-integrated disciplines (Business, Engineering and latterly Info-Tech) crucial for the developmental growth of the industrial base of the nation. With just as important, the future integration of this triumvirate critical as Brazil itself looks forward to the commercialised age of 'the internet of things' – the shape of things to come..

But it is perhaps best known in recent years as attempting to create ever more definitive courses regards Automotive Industry Studies, with also vitally the need to create a culture of activities which enthuse the students.

To this end this section of the FEI has – even during tough budgetary periods, and with lesser facilities than top-tier international schools - obviously tried to maintain its cultural momentum. This done in both theoretic learning and practical learning.

From the early rudimentary days of basic mechanical engineering, the course has widened its automotive commercial consciousness, recognising that the sooner its students are able to think in a multi-disciplinary manner the more effective they will be in their careers in industry.

Thus, in the theoretical realm, what were many years ago narrow design-engineering projects have increasingly encompassed the greater breadth of commerce, to include as much of the automotive value chain as possible. So spanning 2-wheelers, 3-wheelers, cars, vans, trucks and buses, from early stage Marketing Research for the formation of a hypothesised new vehicle, right through the remainder of the full 'in-house' value-chain (ie Design-'Styling' to Manufacturing Production to Retailing Models to End-of-Life Disposal), with thanks the increased teaching regards the ESAn faculty and much self-teaching an approximated basic understanding regards realities of forming Business Models, Project Financing and project Budgeting.

However, it must also be understood that this exposure to the value-chain's other subject matter is for the moment still seemingly rather rudimentary; much depending upon the curriculum setter's and tutor's own professional exposure and interests.

But although deep exposure to the other conjoined disciplines is somewhat limited, the actual educational depth gained appears greater than the sum of its parts.

This is because of the students' subject enthusiasm and high familiarity with the history of the auto-industry at home and abroad, prior to even joining the course. This level of absorbed participation means that these 'hand-picked' 'chosen few' are the best of the annual intake, and that commitment is seen during their educational years. Thus even with the reality of university budget constraints affecting educational facilities and materials, it means that the educational quality (self)-gained appears higher than would be immediately imagined by Brazil's university world rankings

[NB its best being presently the University of Sao Paulo, ranked at 127th place, followed by the University of Campinas at 215 and the Federal University of Rio de Janeiro at 284; these seemingly low rankings resultant from Brazil's own erratic historical economic development. But not representative of the whole, especially regards specialist corners such as Auto-Industry Studies]

Herein the very indepth past case studies of companies such as Gurgel would prove very useful, as would examples of much else, from a globally sold GM or Ford hatch-back to other well known and typically forgotten studies, such as other historical Brazilian projects (previously summised), the fateful De Lorean sports-car on the premise of Northern Irish regional development and for the effectively still-born 1980s 'AFRICAR', which saw the ideology of continental development undermined by user, socio-economic and political reality.

As regards the practical slant of course education, the FEI has maintained this as a critical aspect.

A strong original foundation in Mechanical and Electrical Engineering at the practical level continues to this day, with the most high profile of many activities being participation in the Society of Automotive Engineer's 'Baja Competition'.

Inspired by the popularity of the highly professionalised California Baja races, students build and enter dirt-road/off-road racing buggies set to a specific SAE formula. The formula itself alters slightly every second year regards overall dimensions, engine capacity, etc, so providing a philosophical parallel to the changes that are ordained in top-end motorsport, such as the FIA's regulations in F1.

Just as the FIA is exposed to the broader global PESTEL agenda and has to balance the needs of fair inter-team competition with the sport's spectacle for audiences and vitally encourage a forward progression in the DNA of motorsport (so as to 'trickle-down' into the mainstream), so to a lesser extent the SAE devises changes designed primarily to broaden engineering knowledge within a diluted version of the same PESTEL backdrop.

So herein, it can be seen that Brazilian education – whilst still comparatively lacklustre regards top rankings – undoubtedly has a young student population from the burgeoning middle classes who themselves are keen to build upon the advantages that both their parents and their country afforded them over the last twenty-five years or so.

That determination of the student mass probably says much about the recent and future socio-economic propulsion of Brazil.

Furthermore – as seen with the Chinese Premier's discussion points at DAVOS 2017 – the industrial and research and development tentacles of the now very much emerged BRICs, MINTS, CIVETS, etc have become ever more inter-twined across AM and EM nations.

For Brazil and its peers much of the 60 years of learning from Western and Japanese industry and commerce has been absorbed, with only ostensibly the very latest progress in various scientific sectors, and especially IT relevant to the digital world, to be yet fully appreciated and absorbed.

Brazil, now itself well entrenched as a post-industrial, services-biased, economy appears far closer to broad AM parity than many would appreciate.

Remember after all that in many ways Brazil has historically always been technologically ahead of its BRIC peers, even if China has progressed enormously since the 1980s. Precisely because it was periodically propelled forward through effectively perminant ties with Europe and the USA and so modernisation influence.    
That history continues today relative to the urgency of mass education, the drive of the student body, and the engendered desire to match and lead technological research-work to be applied commercially and globally.

'Supercharging' Academia -

Whilst there is a growing trend regards privately run secondary schools and indeed further education centres, as with the historical precedence of most countries, education at al levels has been the responsibility of the public sector.

The national development model typically sees the societal fruits of industrialisation provided in most part by the government and central and local levels, the income gained from taxation used to bolster social amenities (from sewers to roads to a truly meaningful social welfare financial 'safety-net' to schools to leisure centres) which in turn provides greater economic efficiencies via better infrastructure and likewise a more capable and better motivated population.

[NB this stated, (as regards the 'flip-side' pertaining to many Western countries today) the administrators of countries or local indeed municipalities that over-burden the most marginalised sections of its population inevitably experience further socio-economic decline given the fragmentation and disenfranchisement effect, ultimately resulting in sociological and psychological damage].

Even with the present momentary economic contraction, Brazil obviously continues as a socio-economic expander, which even through present woes, appears well appreciated by all ages and demographics of its population

And even with the global economic pressures experienced now, those in Brasilia well understand their responsibility to best avoid long-term economic stagnation, (let alone the possibility of ongoing structural degradation, as seen in the past).

[NB This perhaps more vital than in recent times given the present tensions of a possibly less internationalist global interaction].

So as to maintain the momentum of the last three decades, and position itself ever higher up the worldwide 'value-chain' (with a retained ability for ongoing wide-span coverage) Brazil's thought-leaders previously created and nurtured a cyber-based academic forum so as to connect the geographically and disciplinary diverse research corridors of its universities.

Since 1999 'Plataforma Lattes' has been that federally operated IT search database, created to provide as much participation transparency as possible within (and increasingly beyond) Brazilian academia. Acting as a singular, easily trodden 'Main Street' for its multi-variant 'Research Roads'.

[NB It was named in tribute to Cesar Lattes the revered atomic physicist and contributor to work which gained the 1950. Arguably even more important, he was a major influence in the creation of the National Council for Scientific and Technological Development (established sixty-six years ago in 1951)].

Each university is responsible for keeping its database profile updated so that the plethora of research-work being undertaken at all levels (notional 'Bachelors', 'Masters' and 'PhD') across all well entrenched and newly arrived subjects. The information therein – in synopsis form - is readily accessible to all other university lecturers, students, managers and seniors.

The database connects those researching singular subjects, over-lap subjects (a major area of interest to generate close-coupled next generation advances) and indeed prosaically even different subjects (which themselves may provide direct or indirect philosophically enhanced research perspectives and areas).

The aim is to create fertile ground for:

- The ideal of 'Leap-Frog' intellectual advances
(via greater collaboration and cross-fertilisation).
- The shift from Theory to Practical application.
- Next era Commercialisation.

The obvious intent is to 'supercharge' the methods and outcomes of learning, with a prime ambition to identify the readily available and newly emergent 'white space' for prospective Pure and Applied research-work.

Resulting in more broadly spread and speedier academic development – given the pace of a much expanded academic international universe - so as to create better prospects for an ongoing academic pipeline and eventual 'spinning-out' into the external commercial world.
To date the focus appears to have been upon the actual inter-connections between different institutions and faculties, with much debate about the broad context of how to progress.

Additionally 'Plataforma Lattes' is linked to 'INPI' (the National Institute for Industrial Property) the agency which spans the legal aspects of Brazilian industry, with particular focus upon the granting of national and international protection – via registration of granted Patents – for much, including vitally that of industrial advances in methods, goods and services.

To that end INPI is the umbrella body for the safeguarding of technological and scientific advances, which themselves have been and are expected to even more so (in part) be channelled from the efforts of both universities and (as much if not more pertinently) the Research and Development functions of Brazilian located industry; whether truly indigenous or foreign-owned.

Industry and Commerce -

Although with an alternating history between the ideologies of capitalism vs socialism, Brazil has now been what is effectively a broad mixed-market economy for about three and a half decades.

That in turn has under-pinned the impetus of much improved social programmes that have provided support for the majority. Of major focus has been education, from the children of the comparatively comfortable middle-classes able to lengthen their time in higher education through to social care programmes that have provided basic home economics courses and self-improvement courses for “poor and trapped” young single mothers.

Yet such a responsibility and actions toward the betterment of its people has likewise been seen in industry, arguably to more immediate effect and per some instances for decades. The efforts of national blue-chip companies such as Marcopolo SA (and other long-lasted industrial peers far beyond in the Bus and Coach sector) has had a similarly long-lasting positive effect upon local neighbourhoods and far beyond.

[NB the industrial and wide social effect of Bus and Coach perhaps the archetype for a more interactive socially mobile society].

That post 1945 spirit of ever expanded industrialisation, social inclusion and cohesion of both homogeneous and diverse ethnicities remains in the high-conscience of company leaders, who in turn carry the mantle of the Brazilian ethos “prosperity for all”.

Though there is still much to be achieved for the mass-poor, much has obviously already been achieved to date with the broadening and deepening of its industrial and commercial activities, and the drive toward increased productivity and value-added.

The fruits of mass education and ambition are plain to see with the size of the burgeoning new lower middle-class, itself far more closely aligned to the advances and wealth effects of 'national corporatisation' than its much small predecessor group which was itself far more reliant upon being within the lower echelons of government, military and state industry.

That said, the more easily picked fruits from the lowest hanging branches of globalisation have now been in most part well and truly exhausted, and over the last decade there has been increased recognition that Brazil must participate in the creation of the 'value-added', which thus means the shift from a a copy and indeed 'copy +' template of internationalised goods and services, and toward increased contribution of what might be termed 'additive and innovative' thinking and application across all its industrial and commercial arenas.

Dynamic Companies and Regions:
(Examples of...)

In the advanced materials space Bravox was amongst the first to utilise carbon fibre as a hi-tech USP when it created carbon fibre speakers. Whether for perceived consumer status reasons or indeed to better sound quality is not truly known, but herein the enterprise viewed an opportunity to both rebalance the costs of its intrinsically high labour content manufacturing base with the income from a highly esteemed artefact, even if ultimately the technology story is itself might be more style over scientific substance.

Using carbon fibre for the casing and part internals of such a simple item has provided the beginnings of familiarity with such a 'miracle' production material. In terms of a first foot on the bottom rung of the advanced materials ladder, this puts Bravox on par with the early efforts and learning and applications curve of the national GRP niche vehicle pioneers fifty years ago. Although the matt, mould process, vacuum process and curing process are different, this production method is most likely undertaken by engineering enthusiastic young people who themselves no doubt would like to be a future part of a much enlarged carbon-fibre design and production effort that allows Brazil to create not only its own F1 and niche production cars, but a myriad of B2B and B2C applications.

As regards IT, population use of the web, proliferation of mass-media broadcast, personalised social media and the idea of Brazil as an IT outsourcing hub, the country is still undergoing its IT revolution. About half the people are now frequently 'on-line' thanks to the positive price effects of scaled economies in hardware production across China, SE Asia and indeed S.America, with obviously the rise of smart-phones creating 24-7 connectivity for the more fortunate.

By 2010 Brazil boasted 4,000 IT companies, albeit most appearing to pertain to IT retail with only a small number operations understood to be true IT start-ups and ongoing concerns (most from the mainframe era). Nonetheless, the past 20 years has seen major GDP growth and with that the modern norms of IT adoption far beyond the office and into people's homes and hands, a prime driver of which has been for educational reasons when overseen by parents.

The lobbying of IT associations such as Brasscom meant that relatively early on Brasilia recognised the potential for Brazil to become the 3rd global IT hub for outsourcing, with obvious focus upon the early adoption needs of Latin and Central America, aswell as further afield into the maturity of North America and European markets.

During the 2000s government subsidies in terms of tax-breaks and other attraction incentives saw strong FDI from the likes of Hewlett Packard, Accenture, British Telecom and TATA Consulting Services, so creating the nodal links for a broader indigenous construct of Brazil's own firms to support such transformational foreign entrants.

But Brazil could never realistically compete as an IT hub on a cost basis against India and SE Asia.

Instead it has had to carve itself a position within the mid-value sphere in which advantages such as technical English provide a service advantage; thus spanning much from web domain housing for the many companies and people seeking themselves to have a growing presence on-line, through to major programming, re-programming and de-bugging exercises on behalf of major clients, aswell as the conventional growth of B2B and B2C IT infrastructure, from corporate firewalls to 3G and 4G roll-outs through to home-located wi-fi routers.

However, there has been recognised opportunity in specific higher-value areas of IT, such as Portals, E-Commerce, Gaming, Social Media, Lifestyle Apps specifically suited to smaller and nimble start-up enterprises. And to this end Brazil has sought to form its own version of Silicon Valley. Thus today names such as 'ClickBus', 'EasyTaxi', 'Passei Directo', Nubank' and many others have gained various funding ('Bootstrap' to renowned foreign VC firms) with their aim of disrupting the seemingly engrained corporate incumbents of everyday life.

[NB though of course most of their own business models are undoubtedly of high-priced 'planned exits' directly into the hands of these wealthy Brazilian and foreign corporations].

The city of Recife sits within the region of Pernambuco located on the NE tip of the coastline. Its the 6th largest municipality with much Portugese, Dutch and British history and is notionally named 'the Venice of Brazil' given its cultural importance. Economically it is a prime business centre with a wide range of industrial activities (Brewing, Canning, Shipbuilding, Automotive, Electronics, Tube production, Chocolate and Textiles), aided by 2 ports and an international airport; thus creating a Logistics hub. Latterly it has become the 2nd most important Medical centre (after Sao Paolo) and in recent years has nurtured itself as a national 'hot-house' regards IT Software development; this in no small part thanks to the activities of the University of Pernambuco.
This is centred around 'Porto Digital' with strong business connections to the US, India, Japan, China and elsewhere, the international interaction of the students and faculty of Pernambuco University providing the interactive backdrop with leading efforts such as the business incubator C.E.S.A.R. Supporting the 'spinning-out' of 30 start-up companies.

However, this IT revolution was only thanks to the initial backing of Sun Microsystems two decades ago in 1996 when it provided the hardware and software for the University to start the flourishing learning process that led to 'Porto Digital'.

Yesteryear's Educational and Research Collaboration
Informs Tomorrow's Cyber-Mobility Age -

Thus as described previously private and often foreign-owned industry has been the motive power of educational improvement in Brazil. From the mid 1960s onward since the new Volkswagen, Mercedes-Benz plants in Sao Bernardo do Campo took on graduate engineers from across Sao Paulo, and directly helped guide the local academic curriculum, through to Renault-Nissan's promise to create a major Design and Development centre in Brazil (and India) which exactly mirrors in IT and staff capabilities their lead centres in France and Japan.

Indeed it was that relationship building between the automotive sector and local academia has resulted in the area of Sao Bernardo do Campo boasting 14 higher education institutions.

Trucks, Buses and Cars then could be said to have not only mobilised Brazil, but also – because of their industrial complexity (from Commodities to Chemicals to Mass and Niche Production) and their socio-economic importance (from Marketing to Point of Sale) - been the 'Vehicles of Education' for the country at large.

Vehicles themselves have obviously become increasingly efficient in manufacture and use, and long since become 'mobile computers', so that confluence of 'efficient mobility' continues forward at a faster pace in the 'networked' digital-age.

Thus just as manufacturers have embraced ever greater electronics content (from diagnostics to hybrid-powertrain to full EV propulsion to context-mapping with scanners and toward local area network mobility ordering) so that relationship between the auto-industry and the research arms of respected academia has become increasingly critical, so as to robustly create 'tomorrow's world'.

Although much improved since the mid 1990s, given the still sizable infrastructure and socio-economic challenges of EM nations (from the rise of MegaCities to problems of remote rural mobility) the collaborative agenda moves ever forward.

That next phase regards the mobility dimension of Socio-Economic Planning is well upon us, the achievements of the last 15 years turning what was once science fiction into science fact.

Brazil then must re-orientate itself so that its academic establishments can absorb and expand the cyber-mobility breakthroughs made by the numerous Californian university and private laboratories, themselves often quickly absorbed in the Advanced Engineering Departments of the world's major automotive companies.

Given the immense future potential of Brazilian economic growth and the need to plan and actualise that future, even other countries seek to participate. Hence, the British government, having already funded a new vehicle certification office in Sao Paulo to assist import/export potential, more recently allotted £2.4 million via 'Innovate UK' for projects that use 'cutting-edge' solutions to improve cities in Brazil.

If the original development of Brasilia City was the planners' modernist dream in the 'internationalist style' sixty years ago, so the modernising, e-connectivity and 'future-proofing' of all Brazil appears to be the present internationalist agenda.

The global convergence story continues...with Brazil's Regional and Transport Planning clearly centre-stage.

It is here then that Brazilian Government (through the BNDS fund for development), Academia (via Plataforma Lattes and planned 'spin-outs'), Industry (through sponsorship and co-incubation) and Intenational Finance (from 'seed funding' to 'tipping-point' acquisition) should be practically ambitious in seeking to help plot the future across ever distant time-frames.