Welcome to this week’s Brazil tech and innovation round-up. Here is a selection of three key developments in Latin America’s largest economy: first up, a key story from the week that was: the Brazilian Senate has passed a legal framework for startups. Next, the government is warned about the dangers of the upcoming sale of a state-owned technology company, and an estimate of the cost of 5G to operators is announced.
Senate Passes Legal Framework For Startups
The Brazilian Senate has passed a Legal Framework for Startups, which sets out the regulatory environment to stimulate the creation of innovative companies and establishes incentives for those who invest in new, tech-based firms.
Unanimously approved on Thursday (25), the latest version of the framework had significant changes in relation to what had been passed by the Congress back in December. After months of lobbying, actors in the Brazilian startup ecosystem consider the latest version of the framework to be a backward step despite the clarity the framework brings to a number of areas.
Among the highlights, the framework sets out the protection of investor rights, as well as the creation of a special government purchasing regime that simplifies the process for startups to compete for pubic sector contracts. On the other hand, the framework has suppressed a number of points the startup community considered as necessary to drive the segment’s development, as well as the ability for startups to establish themselves under a simplified tax regime. Another major point that has been excluded from the version approved by the Senate is the use of stock options to reward employees in lieu of cash.
The Legal Framework for Startups now returns to the Congress, where the changes made by the Senate will be approved or vetoed, preventing the discussion to move forward.
Serpro sale could jeopardize national security
The Brazilian Ministry of Economy has been warned about the potential risks to national security relating to the upcoming sale of the Federal Data Processing Service (Serpro). The dangers have been outlined in a document sent to the Public Prosecution Service in relation to the government-owned company, due to be sold later in 2021 as part of a national privatization plan. Serpro handles all kinds of sensitive data on behalf of the government, with a scope ranging from processing tax returns of the entire population, to developing critical systems in use by the Armed Forces.
The document poses a range of questions focused on the future of the data handled by Serpro in a scenario of privatization. Among the points raised, the Prosecution Service argued that the general data protection regulations currently in place in Brazil prevent data relating to public and national security as well as defense to be handled by a private sector organization. Moreover, it argues that handing over sensitive data or revealing details about technologies or data processing automation platforms to governments or companies is a threat to national security.
“In the privatization process, Serpro may be controlled by a foreign company, so foreign governments could control it directly or indirectly, having access to data and technologies under development in Brazil that are essential for its defense, security and economy”, it said. The document has been sent to the National Court of Auditors and to the National Development Bank (BNDES), which is currently working on the privatization plan for Serpro and Dataprev, the technology company responsible for the Brazilian social security system, also due to be sold later this year.
Cost of 5G in Brazil to exceed US$ 6 billion
Brazilian national telecommunications agency Anatel has approved the contents of the notice for the country’s upcoming 5G auction. The agency estimates the opportunity cost” to operators will reach 35 billion reais (US$ 6.2 billion) to use the 3,5 GHz frequency bands. Additionally, companies will need to invest an additional 80 billion reais (US$ 14 billion) on 5G through the next 20 years.
Within the compulsory investments is the allocation of resources operators will need to set aside to roll out optical fiber in locations in the North and Northeast that remain digitally excluded, as well as mobile connectivity to 14,000 locations nationwide. In addition, telcos will need to connect all federal highways with mobile internet, implementing a fiber optic cable that will cut across the Amazon rainforest, and roll out a communications network to be used exclusively by the government.