M2M’s flop in Brazil

Author: Ricardo Tavares
Published: 2014-03-18

Brazil was one of the very first countries anywhere to introduce legislation specific to M2M communications, and as a result gained global attention amongst connected-car aficionados. It introduced two significant policies of global significance:

  • In 2006, Congress passed Legislation, endorsed by former President Lula da Silva, stipulating that every car coming out of Brazil's automobile manufacturing plants should have a built-in SIM card. Back then this was mainly seen as a security measure.
  • In 2012, Congress passed another law, signed by President Dilma Rousseff, which reduced SIM-card-activation tax for M2M to less than half the rate for a standard connection.

Despite the great optimism raised by these apparently-pioneering measures, both in Brazil and elsewhere, nothing actually happened. The laws were simply not implemented – something which can and does happen in the Brazilian political system.
But because they had been voted in, many companies invested in hardware for connected cars in Brazil, but then had to phase out their plans. The connected-car mandate never fully engaged the automobile industry because it gave the government too big a role in implementation. It stipulated that Government-owned data centers should centralize the data processing of a large, nationally-unified technical system.
But the practical reality of connected-car implementation is quite different. Alliances of carmakers, mobile operators, and systems integrators typically develop integrated software/hardware tracking systems, with little government intervention. Even when governments have broad policy requirements, they do not get enmeshed in technical implementation or procurement of equipment.
The supposed tax break for M2M connections got stuck at the Ministry of Finance in Brasília. The tax-break legislation – even though endorsed by President Rousseff – is a casualty of fiscal policy shifts. Between 2008 and 2012, Brazilian policy makers used tax breaks to fight recession. But policy preferences changed when the primary fiscal surplus that sustains credibility in Brazil's macroeconomic policies shrank.  So, in spite of a law approved by federal legislators and signed by Brazil's President, the Ordinance required to make it effective is still under analysis at the Ministry of Finance.
The result of these two failures is that Brazil's ambitions to be a world-leader in M2M regulation have flopped. The connected-car market will ultimately develop in the country, but in all likelihood be driven by the private sector rather than government schemes.

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