Financing the favelas: a shanty town in São Paulo. Photo: Getty
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Start-up finance and the Brazilian favelas

The country has embraced e-commerce since a series of tax reforms in the Noughties, despite stifling bureaucracy.

Parked under a tree in a cul-de-sac off the gleaming Avenida Brigadeiro Faria Lima in São Paulo, the strip that is home to Google’s new Brazilian headquarters, Deocleciano Tolentino sets out his wares, popping open the boot of his car to reveal a spread of cheeses, salamis, nuts, home-made jam and bottles of honey and cachaça. The epitome of a microempreendedor (micro-entrepreneur), Tolentino is one of a generation of Brazilians whose small businesses in the informal economy were regularised in a programme of tax reforms that began in 2003.

Twenty yards down the road stands a building whose beanbag-lined hallways and ping-pong table mark it out as an archetypal start-up HQ. Mansão Startup (“the start-up mansion”) was co-founded in September 2012 by Florian Hagenbuch of the online print-on-demand service Printi.

Hagenbuch, a 27-year-old German brought up in Brazil, left his job as a financial analyst in New York to set up in business in São Paulo in 2012. Printi was one of a wave of Latin American start-ups in the early-2010s which brought an influx of young, foreign would-be entrepreneurs into Argentina, Chile, Mexico and Brazil in particular. Hagenbuch is predictably upbeat about the opportunities for businesses like his, particularly given the enthusiasm with which Brazil has embraced e-commerce.

Yet it is not easy to infuse an emerging economy with start-up culture. Brazil’s formidable bureaucracy can make sorting even basic documentation expensive, time-consuming and unpredictable. As Hagenbuch says, “In places like London, you just start work. Here, it takes around six months to get going legally.” Most daunting of all is the labour legislation. “No matter how careful you are, if there’s a problem, people can sue,” he says. “The risks are huge and you are personally liable.”

Start-Up Brasil, the federal programme launched last year, shows how fragile new firms can be. A fifth of the 62 companies chosen in the second round of selections in December 2013 have already dropped out. The reported reasons include demands for 20 per cent of a company’s equity in return for investment.

Such statistics explain why some micro-entrepreneurs are “bootstrapping” – rejecting outside finance. Since Bruna Figueiredo launched her jewellery firm in 2010, she has held back from seeking external investment. She is targeting what is often referred to as Brazil’s “new middle class” but might be more accurately described as a growing, newly solvent, formally employed working class. “Our customers come from all walks of life,” she says. “Some of them are living in semi-favelas: we can tell from the addresses.” Her jewellery starts at R$200 (£53) for tiny, wafer-thin religious pendants in 18-carat gold – “We have all the saints, even the really obscure ones” – and goes up to R$5,000 (£1,300) for diamond bracelets and earrings. “They can pay in instalments, and it’s e-commerce,” says Figueiredo. “People don’t need to feel intimidated by a fancy storefront.”

Unexpectedly, the biggest-name foreign start-up in recent months is MoneyGuru, modelled on Britain’s MoneySuperMarket and backed by George Mountbatten, the Marquess of Milford Haven.

Hagenbuch confirms that despite the rise of a new, richer working class in Brazil, the tech scene is still dominated by people with wealth. “Creating a start-up has become a real career alternative,” he says. “They used to dream of being bankers.” 

This article first appeared in the 10 April 2014 issue of the New Statesman, Tech Issue

Photo: Getty
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Emmanuel Macron can win - but so can Marine Le Pen

Macron is the frontrunner, but he remains vulnerable to an upset. 

French presidential candidate Emmanuel Macron is campaigning in the sixth largest French city aka London today. He’s feeling buoyed by polls showing not only that he is consolidating his second place but that the voters who have put him there are increasingly comfortable in their choice

But he’ll also be getting nervous that those same polls show Marine Le Pen increasing her second round performance a little against both him and François Fillon, the troubled centre-right candidate. Her slight increase, coming off the back of riots after the brutal arrest of a 22-year-old black man and Macron’s critical comments about the French empire in Algeria is a reminder of two things: firstly the potential for domestic crisis or terror attack to hand Le Pen a late and decisive advantage.  Secondly that Macron has not been doing politics all that long and the chance of a late implosion on his part cannot be ruled out either.

That many of his voters are former supporters of either Fillon or the Socialist Party “on holiday” means that he is vulnerable should Fillon discover a sense of shame – highly unlikely but not impossible either – and quit in favour of a centre-right candidate not mired in scandal. And if Benoît Hamon does a deal with Jean-Luc Mélenchon – slightly more likely that Fillon developing a sense of shame but still unlikely – then he could be shut out of the second round entirely.

What does that all mean? As far as Britain is concerned, a Macron or Fillon presidency means the same thing: a French government that will not be keen on an easy exit for the UK and one that is considerably less anti-Russian than François Hollande’s. But the real disruption may be in the PR battle as far as who gets the blame if Theresa May muffs Brexit is concerned.

As I’ve written before, the PM doesn’t like to feed the beast as far as the British news cycle and the press is concerned. She hasn’t cultivated many friends in the press and much of the traditional rightwing echo chamber, from the press to big business, is hostile to her. While Labour is led from its leftmost flank, that doesn’t much matter. But if in the blame game for Brexit, May is facing against an attractive, international centrist who shares much of the prejudices of May’s British critics, the hope that the blame for a bad deal will be placed solely on the shoulders of the EU27 may turn out to be a thin hope indeed.

Implausible? Don’t forget that people already think that Germany is led by a tough operator who gets what she wants, and think less of David Cameron for being regularly outmanoeuvered by her – at least, that’s how they see it. Don’t rule out difficulties for May if she is seen to be victim to the same thing from a resurgent France.

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.