“Israel is a technological superpower and that interests us,” Brazil’s new President, Jair Bolsonaro said in a December tweet, and with the sun set on 2018, a new dawn is rising in the relationship between Brazil and Israel. “Brazilians are early adopters and open minded on new technologies, while Israel has developed research seeking new markets,” says Silvia Brand, Executive Director at the Israel Brazil Chamber of Commerce.
Last month, Brazil and Israel signed an agreement to invest USD 5 million in technology cooperation and innovation over the next five years. This programme to support large-scale tech collaborations was established between the Israeli government’s tech investment arm and the Brazilian Agency for Industrial Research and Innovation. “This is just one of many planned initiatives between the two governments, to encourage investments in local start-ups. Given the explicit interest of Brazil's new president, Jair Bolsonaro, in Israeli technologies, this promises to be a year full of new developments in this area,” said Hanan Haviv, Head of the Technology Sector at Israeli law firm, Herzog Fox & Neeman.
“One of the most important similarities between the two countries is the level of talent, creativity, capital and entrepreneurial passion. Similar to their Israeli counterparts, there is less emphasis on hierarchies and Brazilian entrepreneurs demonstrate a fearless, can-do attitude,” Haviv added. While Israeli tech has always been focused on export, “recently Brazilian entrepreneurs are increasingly focusing on export to other markets, and could probably learn valuable insight from Israeli entrepreneurs on export focused strategies,” says Osnat Firstater, Head of High-Tech and Technology at Israeli law firm, Agmon & Co., Rosenberg Hacohen & Co.
Israel is the world leader in terms of number of start-ups per capita, making it an attractive destination for Brazilian investors. While the U.S. represents 35% of the high-tech investments by total value in the last 5 years, the involvement of Latin American investors is also rising now. In 2018, Israeli high-tech companies raised a record USD 6.47 billion, according to the latest report by IVC Research Center, with the total capital raised up 120% on 2013. “The majority of investments are in the IT, software sectors, with artificial intelligence and cyber companies taking up a big stake, adds Yaniv Aronowich, Co-Head of M&A at Tadmor Levy & Co. With Brazil facing various challenges in these sectors, as well as agriculture, water, mobility, and more, firms are responding and tapping into the expertise in Israel.
Agriculture and Water at the forefront
In January, Brazilian defense firm Santos Lab Comercio E Industria Aerospacial LTDA (Santos Lab) signed an agreement with Israel’s largest aerospace and defense company, Israel Aerospace Industries Ltd., to receive drones equipped with advanced analytics tools for large-scale precision agricultural purposes. The deal, which is expected to generate hundreds of millions of dollars in the coming decade, will allow farmers to better manage crops and have a positive impact on the whole cycle of food production. While Israel did not invent the concept of drip irrigation, it has innovated the process and taken it to the next level, attracting investment from Mexichem, the third largest chemical and petrochemical company in Latin America, which last year paid USD 1.9 billion for Israel’s Netafim, a leader in drip irrigation.
Water technology is another area of great interest. As Dr. Ziv Preis, Head of Cross-Border M&A and Banking at Israeli law firm, Lipa Meir & Co, points out: “Brazil has a water crisis due to its large population and inequalities in access to safe water in certain areas of Brazil. Israel has extensive knowledge in this area in water desalination, water purification, and water transport systems.”
Brazil to profit from the smart transportation revolution
Brazil can be a leader in automotive and smart mobility and tap into Israeli expertise. “Israel is undoubtedly a driving force behind the autonomous car revolution, thanks to utilisation of the comparative advantages of Israeli high-tech, among them technology in the field of machine vision developed by the Israeli defence industry,” adds Haviv. Israel’s automotive industry raised USD 814 million in 2017, according to Start-Up Nation Central, with companies in the fields of autonomous and connected vehicles raising the highest amount out of all sectors in 2018.
Automotive conglomerates such as General Motors, BMW, Ford, Daimler, Volkswagen, Renault-Nissan, Volvo, Honda, China’s SAIC Motors have established R&D centres in Israel. “They are actively sourcing technologies and possible investment and acquisition opportunities,” points out Haniv. In 2017, there was the biggest ever acquisition in Israel’s history when Intel paid USD 15.3 billion for Israel’s Mobileye, which develops cutting-edge vision technology relating to autonomous driving. Such acquisitions are also notable as they demonstrate the moving from an ‘early exit’ strategy to ‘building a large company strategy,” pointed out Preis. The five-year old Israeli smart car start-up Argus Cyber Security, whose technology guards connected cars against hacking, was bought by Germany’s Continental for around USD 400 million. “It is no surprise then that leading OEMs and Tier-1 companies are regular visitors to Tel Aviv, attempting to be the first to tap into Israeli technology in this area at an early stage,” says Aronowich. Various Israeli companies have had to come up with programmes aimed at alleviating road congestion, something some of Brazil’s crowded cities can also benefit from.
There are multiple events Brazilian investors should be aware of. The Fuel Choices and Smart Mobility Initiative holds an annual summit in October or November, attracting industry experts from around the world. Israel's smart mobility start-up community, EcoMotion also organizes multiple events throughout the year, with a main event in June, focused on all levels of the industry: start-ups, investors, strategic players, potential partners to those operators in Brazil looking to climb to the next level.
Smart Leaders in Artificial Intelligence and Big Data
Brazilian companies can also benefit from working with or investing in Israeli expertise in artificial intelligence (“AI”), and tap into its cutting-edge data analysis, software and hardware engineering talent, AI developers and data scientists. While there will be fierce competition facing Brazilian investors from domestic crowdfunding companies, VCs and angel investors, “there is a real opportunity here for Brazilian parties, who will need to be aware of the increase in regulatory requirements, especially with respect to privacy and data protection,” says Firstater, adding that “as some of this technology is the result of academic work, it is sometimes necessary to engage universities and their technology commercialization companies for licenses to inventions.”
“Besides Brazil’s ‘Silicon Valley’ near Sao Paulo, Minas Gerais, Florianopolis, Recife and Rio are all growing ecosystems,” says Brand, and with such inventions and technology available, this relationship is heading to new heights.