The newly-formed squad of players were easily beaten thanks to an early goal from Tottenham midfielder Sandro and a Neymar penalty, but the coach thinks they will get better
Goals from Sandro and Neymar sealed the win for the visitors, but it could easily have been more with goalkeeper for the second half, Jack Butland, on top form to block a host of chances.
And Pearce admits that the team are not yet ready for the Olympics, but believes they will be after a few more training sessions after facing one of the outstanding teams in the tournament.
"I think we will be [ready] next week," Pearce told the BBC.
"Do I think the team are ready [now]? No, but I would have answered the same before the game, we’re not ready at this moment in time.
"I think next Thursday we'll be a lot closer to being ready, we’ll have had two matches under our belt by that stage and maybe four or five training sessions between now and Thursday, and it’ll be all to play for.
"I think we'll get stronger and stronger as the tournament goes on but we knew that from the offset.
"We're not fully fit at the moment, we knew next week is the most important one for us. I think we've played against one of the outstanding Olympic sides, let alone an under-23 side and three overage players, I think they could take most international teams on. They're going to be one of the teams to knock over in this tournament if you're going to win the tournament.
"They're a very good side, well ahead of us in respect to fitness and games together and understanding but our players have got to come out and use the positives from that."
Pearce stated that his side were sloppy in possession, but was pleased with the way they tried to play the ball out from defence, and will try to take the positives from the performance.
He continued: "We passed the ball quite well, probably up to the final third. We gave a couple of sloppy goals away but we'll come on from that. It's down to me to try and draw the positives from it, we'll have a look at it over the weekend and we'll be a bit stronger for that performance.
"I think we gave the ball away slightly cheaply when we got it in advanced positions, I don't think we got enough numbers forward quickly enough to support it when we did get it forward.
"I asked them to pass out from the back and they endeavoured to do that for the full 90 minutes, certainly one or two of them needed the fitness and needed 90 minutes under their belt and a couple of these players have never played at this standard before.
"I think there's a great deal to be learnt. We knew where we were fitness wise, that's for sure. I think we need to find more of a punch in the final third and that'll come with fitness and getting players and numbers into the box."