Tech Roundup: How Brazilian e-commerce survives postal workers strike

E-commerce survives postal workers strike. TikTok cozying up to PagSeguro. A bill to foster telecom infrastructure investments

You’re reading The Brazilian Report’s weekly tech roundup, a digest of the most important news on technology and innovation in Brazil. This week’s topics: the impacts of a postal workers’ strike on Brazilian e-commerce; TikTok cozying up to Brazilian payments platform PagSeguro; a new bill to curb legal battles between telecom operators and watchdog Anatel.

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Is Brazilian e-commerce threatened by postal workers strike?

At a time Brazilian companies are heavily relying on e-commerce to make up lost revenue amid the pandemic, [restricted]a strike among workers of Correios — the state-owned postal service — is no minor inconvenience. However, vendors are now much less dependent on the nationalized company than they were just a few years ago.

What is happening. Employees at Correios started a nationwide strike on August 17, saying the company unilaterally revoked labor benefits such as maternity leave, or pensions to families in the case of death. They also ask for better work conditions during the pandemic. 

  • Workers unions claim 70 percent of the workforce has joined the strike, while Correios says the actual number is around “just” 20 percent. The company also said it is adopting contingency plans to keep operations flowing.

The impact on companies. A report by finance website 6minutos shows that, in 2016, 95 percent of small- and medium-sized businesses relied on Correios for logistics. Four years later, research from e-commerce solutions provider Preço Certo puts this rate around 60 percent. Still big, but much smaller.

Winners. Logistics startups have been popping all around Brazil and have stolen market share from Correios. According to Preço Certo, private operations are growing in importance, with new players such as startup JadLog already gobbling up 11 percent of the market. 

  • In urban centers, Correios face an additional competing segment: ride-hailing apps which saw delivery as a new niche. Giants such as Uber and 99 have turned drivers into couriers during the pandemic.

The Amazon effect. Brazil’s largest retailers are even less dependent on Correios. Most of them have adopted the Amazon model and created their own logistics networks. Magazine Luiza, whose e-commerce sales jumped by 182 percent in Q2 2020 — accounting for nearly 80 percent of overall sales — has converted stores in storage centers and beefed up its logistics network by acquiring startup LogBee. Per finance magazine Exame, Magazine Luiza’s fleet now has over 4,000 micro-transporters and drivers.

Is this the end for Correios? Not so soon. The company remains a major force, especially outside of major Brazilian urban centers. It is the only postal service to reach roughly 2,000 cities around the country.

Fintech meets social media: TikTok partners with PagSeguro

After WhatsApp Pay, TikTok is next in line to mix social media and finance: the Chinese app struck a deal with Brazilian fintech PagSeguro to allow users to receive money earned in the app online.

How it will work. TikTok users will be able to transfer money they receive by getting their friends to link their apps to PagBank, PagSeguro’s digital bank. From that point on, they will be able to pay their bills, charge prepaid cell phones, and even withdraw money from ATMs.

Business prospects. With over 2 billion downloads worldwide, TikTok is expanding in Brazil. Market research company 42matters listed it as the country’s third most-downloaded free app — and the fourth-highest grossing app. 

  • It remains unclear if the partnership will give PagSeguro access to TikTok’s international base of clients.

Top apps in Brazil

tiktok brazil pagseguro e-commerce
Source: 42matters

Laying low. So far, ByteDance — TikTok’s parent company — managed to stay away from local politics. But it hasn’t escaped controversy. U.S. President Donald Trump threatened to ban the app unless it was purchased by an American company. Soon after, Congressman Eduardo Bolsonaro, President Jair Bolsonaro’s son, called the app “a danger.”

  • Earlier this year, reporter Lucas Berti showed how Brazilian far-right discourse has found in TikTok a fertile ground for conspiracy theories.
  • Another Chinese giant, Huawei, has been affected by the U.S-China tech war. As we reported in our August 6 Daily Briefing, Communications Minister Fabio Faria started talks with 5G providers … but his meeting schedule did not include a sit-down with representatives from Huawei.

New bill wants to turn legal grievances into telecom investments

As Brazil grapples to boost telecom infrastructure investments, a new bill presented in the lower house wants to allow operators to convert fines of up BRL 50 million into infrastructure investments. The goal is to diminish long legal battles and improve the quality of services, says Congressman Marcelo Brum, who sponsors the bill. 

How it would work. Bill 4225/20 plans to change the National Telecommunications Law, turning fines for irregularities into investments, especially in rural areas. This would be possible through an agreement with Anatel, the sector’s regulator, obeying the following criteria:

  • Collective bargaining agreements (CBAs) would have to include a timetable to make sure the investments would be fulfilled;
  • Companies would not be able to sell new phone numbers if they fail to comply with the agreement.

Previous results. Since 2014, regulators have used CBAs as a way to beef up investments — but it wasn’t until June 2020 that the first one came into existence.

Why it matters. Telecom providers have been among the leaders in complaints in customer protection services for years, accounting for 10 percent of all customer grievances in the country. Fines applied to Anatel often lead to long legal battles and few are actually paid.

Take note

  • Angel investment. Brazilian online event startup raised BRL 1.1 million in an investment round led by and Gávea Angels. The company surfed on the boom of online meetings and, so far, has already organized over 100 events in 2020, up from 25 in all of last year; the goal is to reach 200 by the end of the year. now intends to invest the money to hire new employees, invest in technology and open new commercial fronts, it tells The Brazilian Report.  
  • Capitalization. WDC Networks, one of the biggest optic fiber equipment providers in Brazil, is preparing a BRL 1 billion capitalization with investors, after the Covid-19 pandemic derailed its plans for an initial public offering, reports finance website Brazil Journal. The company provides fiber optic modems in a technology-as-a-service model, renting these routers to internet providers. The money, according to the report, would be used to expand the model.
  • Data protection. Congress postponed voting on a provisional decree which would push the enforcement of the Brazilian General Data Protection Law (LGPD) back to May 2021. Specialized media outlets have mentioned an agreement to create the National Data Protection Agency (ANPD) and approve Constitutional Amendment 17, which grants data protection as a constitutional right. However, time is running out; if it’s not approved by Congress until August 26, the provisional decree will expire.
  • Europe’s Enron. PagSeguro acquired Wirecard Brazil, the local subsidiary of Germany’s Wirecard, for an undisclosed amount. The payments processing company became notorious for an accounting scandal that led to insolvency and the arrest of its CEO. The bad reputation caused liquidity constraints to its Brazilian unit. The purchase grants PagSeguro Wirecard’s 200,000 customers and BRL 120 million in revenues, plus new functions for e-commerce such as splitting payments. The deal still requires regulatory approval.[/restricted]

By Natália Scalzaretto

Natália Scalzaretto has worked for companies such as Santander Brasil and Reuters, where she covered news ranging from commodities to technology. Before joining The Brazilian Report, she worked as an editor for Trading News, the information division from the TradersClub investor community.