Local Apps Are Letting People Automate Brazil’s Notorious Bureaucracy
Residents spend over 2,000 hours, or over 80 days per person, just to file their taxes every year.
Eduardo L'Hotelier, founder of GetNinja. Image: Marina Lopes
Before Gabriel Braga designed an app that would cut through the red tape of renting property in Brazil, he emailed his closest friends for their thoughts.
"People wrote back not just a paragraph, but full pages ranting about their traumatic experiences," Braga, 35, told me. "They had to get it off their chest."
Renting an apartment in Brazil can take months and requires piles of documents, witnesses, and multiple trips to a notary. But the most maddening part of the process is the frequent requirement of a guarantor who owns property in the same city to co-sign the lease, a condition infamous for spinning an awkward of webs of favors between distant relatives, family friends or even ex-lovers.
As his friends' horror stories poured in, Braga, who was part of Airbnb's international growth team in Silicon Valley, realized he had stumbled upon a tremendous opportunity.
Like other developing countries, Brazil's dense bureaucracy creates a maze of hoops that can make everyday tasks a nightmare. These rigid rules steal thousands of hours of productivity from Brazilians every year. In Sao Paulo, the economic center of the country, residents spend over 2,000 hours, or over 80 days per person, just to file their taxes every year. The country ranks 123 on the World Bank's Ease of Doing Business Index.
But a new class of startups is trying to turn the burden into a competitive advantage. They're producing a swath of new apps uniquely suited to dealing with the daily headaches that plague developing countries. These apps have attracted millions of dollars in investment from venture capital funds who see their international potential. From starting a business to navigating the Brazilian justice system, processes choked with inefficiency are now a little more accessible. But can they make a dent in the system?
"There was already a whole generation of companies bringing in copycat apps to Brazil, but I thought, 'Here is a Brazilian problem, with a pain point affecting so many people, let's opt for a sustainable solution,'" said Braga.
In 2013 he launched an app called Quinto Andar, or Fifth Floor, which streamlines the renting process—from scheduling a visit to putting in an offer—into a single app. Instead of requiring a cosigner, the rent price on the app includes an insurance fee that kicks in if the renter defaults.Over three years, Braga shortened the time it takes to rent an apartment from one month to three days. Quinto Andar has since received $20 million in funding and is considering expanding to cities from Jakarta to London.
GetNinjas, another Brazilian app, has taken a similar approach to the labor market. An estimated 20 percent of Brazilians in major cities skirt the country's complex labor laws to work informally, according to government figures from 2015. As Brazil wades through its worst recession in history, thousands of unemployed workers are turning to the underground economy to scrape together a salary.
GetNinjas teaches these informal workers how to draft contracts, issue receipts, file taxes, and compete for customers online, all while avoiding the bureaucracy of establishing a formal company—which takes two and a half months on average in Brazil and can cost thousands of dollars. The app, which combines features from Angie's List and Taskrabbit, allows users to request services and receive three different bids from prospective employees, who range from electricians to nannies. Today the app has 250,000 users in Brazil and has registered $100 million in transactions per year.
"We're professionalizing informal work," Eduardo L'Hotellier, chief executive and founder of GetNinjas, told me. "In Brazil, many professionals may not have a diploma, but they are good at what they do and learned their trade from their fathers or uncles."
These apps are still gaining a loyal following from consumers desperate to do away with even a small part of bureaucracy
To be sure, apps like GetNinja and Quinto Andar only tackle a small part of the daily hassles of doing business in Brazil. Vast inequality and persistent unemployment are unfortunate fixtures of life for Brazil's working class, and unnecessary layers of bureaucracy are folded into processes as simple as buying a t-shirt at the mall. The apps also promise a solution that adapts to, instead of fighting, Brazil's recent crackdown on worker's rights.
But in Brazil's major cities, these apps are still gaining a loyal following from consumers desperate to do away with even a small part of bureaucracy.
"If you fix a pain point—and there are lots of them here—you'll tap into a loyal audience," said Rafael Ribeiro, Executive Director of the Brazilian Startup Association, which represents 5,000 startups.
The bureaucratic maze that makes these companies' solutions so appealing however, also creates unique cultural obstacles. Brazil's high crime, fraud, and corruption rates have created a culture of distrust that prevent apps like Yelp from catching on. Brazilians are much more likely to take on a realtor or hire a cleaner based on a trusted recommendation from a friend than to trust user reviews from an internet app. But as sectors like shopping and transport increasingly migrate online, the cultural jump to apps like Quinto Andar and GetNinjas becomes easier.
"These are bureaucratic habits that have no technical or legal justification," said Braga. "It doesn't have to be this way."
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