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Enhancing technological innovation in Brazil

In his bestselling book on globalization, The World is Flat, New York Times columnist Thomas Friedman stresses the importance of increasing investment in technological innovation in the United States and stimulating greater interest among American students in pursuing advanced degrees in math and science to contribute to the technological advances needed to stay ahead in today’s globalized world.

Friedman is not alone in his call for a renewed focus on technological innovation, as similar sentiments are echoed the world over. In Brazil, this call has especially been heeded over the last decade, which has been marked by a reprioritization of science, technology and innovation (ST&I) in the public policy agenda.

However, despite making progress, Brazil still has a low innovation rate compared to other countries, producing about 1.7% of international knowledge, versus the 8-9% produced by the United Kingdom, for example. This is due to a variety of interwoven factors, from the high cost and risky nature of investing in innovation in Brazil to the lack of highly qualified human resources to the basic fact that Brazil is a latecomer within the realm of science and technology.

Making headway

Considering these constraints, dramatic changes have been made in the legal framework and funding situation surrounding ST&I, including the establishment of the Science and Technology Sectoral Funds in 1999, a tool to provide secure funding for ST&I using resources from select productive sectors. The Funds have invested about 4 billion reals (US$1.8 billion) in over 4,000 projects to date. New innovation laws calling for the convergence of technological and industrial policies and for the enhancement of ties between industry and universities in carrying out research and development (R&D), have also helped to shape Brazil’s efforts to make innovation a policy priority.

One of the agencies at the forefront of this reprioritization of ST&I in Brazil is the Financiadora de Estudos e Projeto (Research and Project Financing), or FINEP, a public firm under the Brazilian Ministry of Science and Technology established in 1967.

FINEP serves a dual role in its mission to encourage and mobilize innovation and scientific and technological research in businesses, universities, technological institutes, research centers, and other public or private institutions: it provides grants for innovative projects through the National Fund for Science and Technology and it serves as a bank, issuing loans to firms investing in innovation.

Grants provided by FINEP to selected proposals can cover all aspects of the ST&I development process and have traditionally been geared towards non-for-profits and research institutions, though recently, they were also made available to private firms. Out of the 3,700 grant applications received through 26 calls for proposals in 2005, 1,021 projects were selected for funding.

Total disbursements of grants and loans are earmarked at about 1.2 billion reals (US$560 million) for 2006.

Linking the academic community and industry

According to Odilon Marcuzzo, President of FINEP, a key element of FINEP’s strategy for the inclusion of innovation in the Brazilian public policy agenda is to forge links between the academic community and industry. As it stands, about 80% of students who graduate with Masters or PhDs in the sciences continue to work within the university system, in part because it is quite difficult for them to find jobs in the industrial sector in Brazil.

However, FINEP is working to break this pattern by stimulating and funding cooperative partnerships between private and public companies and universities, whereby the scientific and technical knowledge of qualified people can directly contribute to innovation in the business world and boost the competitiveness of Brazilian companies.

For example, through FINEP, the Brazilian oil company, Petrobras, has worked in conjunction with the Federal Universities of Rio de Janeiro and Bahia on projects focused on developing technologies for deep-water drilling. In 2005, FINEP put about 50 million reals (US$20 million) towards cooperative projects and in 2006, funding is set to triple. 

While these cooperative projects have been highly successful, they are generally carried out by public universities. Even though private higher education institutions greatly outnumber public—at over 1,600 versus 224—and account for 75% of all graduate students, their general quality is concerning.  Only 86 private institutions are classified as universities by the Ministry of Education, meaning that they also have the capacity to undertake research.

Considering the imbalances between public and private institutions, it is difficult for the private schools to compete with the public in FINEP’s calls for proposals, a pattern which FINEP hopes to change by increasing private school insertion into the National System of Innovation through targeted grants and other mechanisms.

Supporting technology start-ups and ST&I for social development

In conjunction with financing from the IDB’s Multilateral Investment Fund (MIF), FINEP created the Inovar Project in 2000, a financial mechanism to support small high-tech start ups through venture capital funds. The project has since established 24 funds, half of which have been invested in by the MIF, and has also created the Inovar Seed Money program (Inovar Semente) to stimulate the generation of seed and early stage funds for small entrepreneurs.

Additionally, Inovar has created the first venture capital website in Brazil, a tool to help entrepreneurs connect with each other, thus contributing to the creation of a more receptive environment for entrepreneurs and venture capital in the country.

FINEP has also been placing greater focus on promoting investments in ST&I for social and urban development, focusing on areas like health, sanitation, education, housing technologies, popular cooperatives and family agriculture.

Overall, furthering the integration of ST&I into the public policy agenda boils down to strengthening the scientific base in Brazil, which will in turn serve to enhance Brazil's position as a global competitor.