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EF: Will 2023 be a year of transformation and strategic growth for the MedTech sector in Brazil?
FF: In 2023, we will experience various transitions. Initially, there are many expectations surrounding the actions of the new government in regard to the financial sector of the economy. They are currently developing a proposal to present to Congress in order to adjust the public accounts. Their goal is to implement these changes within the next two years, but the process is expected to be lengthy before the new model is in place.
Another big issue for our sector is the tributary reform in Brazil. MedTech is in the middle of a long supply chain process. Here in Brazil, we have local producers, importers, multinational companies, a wide range of distributors, and small dealers. Anything that happens or comes from the tax reform may affect the sustainability of the business model. Many of these companies established themselves in the last 20 to 25 years with tax exemptions and special regimes, if they are altered, we may have problems with the supply and survival of certain companies.
Therefore, the tax reform is ABIMED´s number one priority. We have been successful in addressing what we expect of the reform, but there is still a significant amount of work to be done before it is implemented. Recently, a presidential decree was issued, creating a new department to oversee the Medtech policy for the industrial health complex in Brazil. ABIMED expects to be involved in these discussions, as it is a significant issue for the industry, particularly for multinational companies operating in Brazil. ABIMED has a comprehensive understanding of the origins of companies in the sector and anticipates market growth in the coming year. While 2022 numbers are still being collected, projections for 2023 will be available in the coming days or weeks.
The outcome of the tax reform and the development of the Medtech policy in Brazil's industrial health complex will affect Latin America as a whole. With significant geopolitical movements around the world and supply chains shifting to have nearshoring facilities in various countries, it is essential to consider how these developments in Brazil may influence investment distribution in the region. It is vital to address these issues carefully to ensure that Brazil and the wider Latin American region remain attractive investment destinations.
EF: How can infrastructure and product chains in Brazil be improved to raise the country’s competitiveness?
FF: Over the past 10 to 15 years, Brazil has experienced a decline in industrialization, with industrial GDP participation dropping from around 25 percent in the mid-to-late 1990s to 12 percent today. This decrease suggests that there is much work to be done in the industrial sector to address the internal market. In addition, Brazil's "Brazilian cost," which includes taxes, regulatory trading tariffs, and internal costs, adds pressure to companies' abilities to participate in the international market. The lack of innovation in Brazil exacerbates this issue.
Despite being a large country with a significant population, high healthcare spending, and the same GDP as any other big country, Brazil is not yet on par. It faces challenges in becoming an international player, including a lack of export for technological advancements. However, there are opportunities for growth in the future, particularly with the Ministry of Industry's push to increase health technology exports. The government's focus on improving the export agenda is a positive development for the future. The first part of the year will see discussions on addressing the economy, with various tasks taking place.
EF: How does Brazil attract investment to help young entrepreneurs carry out innovative ideas?
FF: In Brazil, there is a strong link between industry, academia, and research and development centers. This connection is crucial, and we have a great network of research and development centers affiliated with SENAI (National Service for Industrial Training) located in different regions, including Sao Paulo, Ceara, and the Southeast.
Moreover, the government has made significant investments and established credit lines to support innovation in Brazil. Without a way to develop the industry, progress becomes challenging. Having in mind the size of the country and its importance worldwide, there is a lot that needs to be done to push innovation in Brazil, but the elements are there. We are likely to witness more investments and production in the country.
So far, Sao Paulo accounts for 70% of the MedTech industry, with the majority of companies located in this area due to its excellent infrastructure and market. However, there is an opportunity to expand to other areas and develop other regions.
EF: If you could choose three main topics you wanted to resolve in the next couple of years, what would they be besides tax reform?
FF: Innovation is a crucial factor that needs to be prioritized. The next step would be to create a comprehensive plan for the healthcare industry industrial complex while considering the national capital protection measures that were discussed previously. ABIMED in Brazil has important multinational companies in the MedTech industry associated with it. Although our position has been satisfactory, we need to remove any barriers to capital to move forward with the project.
The most innovative companies own patents, and they own the development of technologies. If barriers to capital are introduced on a multinational or global level, this could lead to difficulty in attracting big players to invest in Brazil. We need to ensure that the development and investment process in Brazil is accessible to anyone who is interested.
As a third topic, we need to consider how to position Brazil in the international market, which is not a sudden process. We still have to address many other regulatory aspects of international business, such as tariffs, while we work to further improve the Mercosur agreement. We are also currently in negotiations with the European Union and have recently signed a trade agreement with the United States.
EF: Could you give us some insight into how international companies have been driving innovation in Brazil over the last year?
FF: Due to the elections last year, there have not been any significant new investments. ABIMED conducts a thermometer survey every three months to gauge how affiliates are performing in the market, their expectations, and their plans. Regarding tax reform, 45% of respondents indicated that they would invest more in Brazil if the conditions were favorable.
There have been positive advancements in data innovation and management related to healthcare. During the pandemic, ABIMED's associates were proactive in preparing for the expected changes. This year, all healthcare stakeholders in Brazil are adjusting to the new situation. The government has a significant backlog in vaccination, elective surgeries, and primary care, and its focus this year is on getting things in order while other programs develop. In 2023, we can expect significant efforts to be made in these basic areas of healthcare, with other projects following suit. Their maturity will be seen in 2024.
EF: How do you see the digitalization trend and its adaptability in Brazil?
FF: The Brazilian Ministry of Health has established a new secretary to focus on the development of technology related to artificial intelligence and data management in the healthcare industry. The government's objective is to achieve digital health in the country.
There is currently a significant discrepancy between the various data management systems being used, and the effort put into achieving their synchronization. The SUS (Sistema Único de Saúde) public health system is used throughout the country, serving nearly 170 million people. Given this situation, the Ministry of Health is in a prime position to take the lead in improving data management and has appointed a new secretary for digital health to address this issue. As for clinical research, Brazil has efforts underway at various levels to improve this using data from the public sector to drive such studies.
EF: What would be the recommendation that you would give to future executives in the MedTech sector?
FF: Our focus is on reindustrialization in our country, which we believe should prioritize enhancing competitiveness among companies and leveraging the government's substantial purchasing power in the healthcare sector. By doing so, we can optimize procurement planning and enable the industry to plan ahead.
For executives exploring opportunities in Brazil, the current climate presents favourable conditions for investment, not just because of the market's size, but also the potential for Brazil to serve as a hub for Latin America and other regions. We must learn from our mistakes during the pandemic and spread out production and distribution globally to protect ourselves from future similar events. Despite the challenges in Latin America, it is important to remain optimistic and focus on the opportunities available. We must approach the situation with a positive mindset and keep moving forward.
