Experts highlight strategies to drive innovation in Brazil

Initiatives should include more integration with the world economy and promotion of strategic sectors, according to US researchers from MIT and Brazilian authors of a recently published book.

By Elton Alisson  |  Agência FAPESP – In the last 20 years Brazil has implemented several policies and programs designed to strengthen industry’s innovation capabilities. It has stepped up investment in science and technology (S&T), encouraged research interaction between academia and business, and fostered the creation of new institutions whose mission is to facilitate research and development (R&D) in the private sector.

Despite many successes, such as Embraer’s consolidation as a global leader in the production of regional jets, deep-sea subsalt oil production by Petrobras and the development of flexible-fuel cars powered by gasoline, ethanol or any blend of both, the innovation agenda has not advanced at the requisite pace. More recently, however, knowledge-based companies founded by entrepreneurs trained at the nation’s top universities have turned out to be “unicorns” – tech startups with a market value of US$1 billion or more.

Brazil needs to opt for a number of strategies if it is to promote innovation, raise productivity, and drive economic development at levels appropriate to the current century, according to the authors of Innovation in Brazil: Advancing Development in the 21st Century. The book was launched in April in the United States and in May at Museu de Arte Moderna in São Paulo (MAM-SP), where a panel discussed these pro-innovation strategies and the challenges they pose.

The strategies recommended by the authors include growing Brazil’s participation in the global economy, aligning industrial and innovation policies, facilitating collaboration between private enterprise and universities, supporting institutional innovation, and promoting key sectors.

The book, which resulted from a project funded by Brazil’s National Industrial Training Service (SENAI), is a collection of articles by researchers affiliated with the MIT Industrial Performance Center (IPC) in the United States and Brazilian academics, business leaders and S&T policy experts. The focus is on the challenges to be surmounted in fostering innovation in Brazil. A Portuguese-language edition is due in October.

“It’s a binational book in the sense that American and Brazilian authors contributed about half each. It’s also interdisciplinary, with economists, sociologists, engineers, physicists and entrepreneurs among its authors. As a result, it offers a range of perspectives on innovation,” said Ben Ross Schneider, a member of IPC’s advisory board, Director of the MIT Brazil Program and one of the book’s editors, during the São Paulo launch event.

The book’s authors include Carlos Américo Pacheco and Carlos Henrique de Brito Cruz, Executive Director and Scientific Director of FAPESP respectively. Its introduction notes that Brazil leads Latin American investment in R&D with more than double the regional average, and accounts alone for close to two-thirds of total spending on R&D in the region. 

The authors also highlight the fact that although at 1.3% of gross domestic product (GDP) expenditure on R&D is only about half the OECD level, Brazil is a top investor in R&D among middle-income countries, alongside Malaysia and Russia.

Nevertheless, Brazilian investment in R&D in recent cades has had little impact on productivity, the number of patent applications remains low, and most of the innovations produced by the private sector relate to products and processes for the domestic market.

One of the reasons innovation is predominantly local, according to the authors, is Brazil’s low level of integration with the world economy. In this respect it resembles many other middle-income countries.

“Brazil continues to have one of the most closed economies. For innovation to advance, it will be necessary to increase integration with the world economy in order to leverage technology and enter new markets,” said Elisabeth B. Reynolds, IPC’s Executive Director and another of the book’s editors, during the panel session at the launch event.

Brazil’s imports and exports correspond to only 25% of GDP, about the same proportion as Myanmar’s. Although Brazil liberalized trade in the 1990s, it continued to protect sectors such as automotive vehicles and textiles, partly because they employ many people.

These industries invest significantly in innovation. The automotive industry, for example, accounts for about 25% of aggregate investment in R&D by Brazil’s manufacturing sector. However, investment in R&D by the automotive industry in this closed economy and protected market results in innovations that are new to the Brazilian market but not necessarily to the world. “This limits export opportunities for Brazil”, according to the book.

To surmount these obstacles, it argues, Brazil should lower tariffs on inputs relating to R&D and on technology for use in industry, implement policies to attract investment in R&D by multinationals, foster spillover from foreign direct investment (FDI) in innovation, and reduce the entry barriers for skilled immigrants, especially scientists and engineers. 

Despite some success in encouraging multinationals to establish local R&D centers in recent years, policies designed to foster spillover from FDI in innovation have been less successful. This limits the flow of knowledge and critical inputs from abroad to facilitate innovation by Brazilian firms.

“The exchange of goods, services, ideas, capital and people between Brazil and the external market needs to be more fluid,” Reynolds said.

Role of universities

According to the authors, Brazil can learn from the efforts of other countries to boost innovation. The strategies to be emulated include strengthening the role of universities as partners of industry and government in research that boosts economic development.

Brazilian universities have increasingly, albeit unevenly, endeavored to associate the pursuit of excellence in educating their students with initiatives relating to economic development and entrepreneurship.

However, academic and research institutions face challenges in attempting to translate the scientific and technical knowledge they develop into new products, processes and services for the market. Such challenges include the small number of engineers who graduate in Brazil, the high cost of R&D inputs due to protectionist policies, and too few private-sector partners willing to make seed investments in tech startups.

“Some Brazilian universities, such as USP, UNICAMP, UNESP and UFRJ, now collaborate intensively with private enterprise. One way to assess the intensity of university-industry research collaboration is to measure the volume of financial resources allocated by private enterprise to universities to support collaborative research: the level is the same as for the best American universities. Other criteria include the number of co-authored publications, and the number of patent applications filed with shared ownership. There’s ample scope to increase such interactions. This seems to me to be the time to seek initiatives that universities can undertake, exercising their autonomy, to become more effective in education, basic research and research in collaboration with companies,” Brito Cruz said.

“A great many companies are constantly reaching out to FAPESP, especially from abroad, in search of opportunities for advanced research collaboration with universities in São Paulo State. This shows that the quality of our universities is recognized worldwide.”

For Fernanda de Negri, Director of Research and Industry Innovation at the Institute for Applied Economic Research (IPEA) and one of the book’s authors, the knowledge produced by universities and research institutions can be applied in many areas, such as health, urban mobility and energy, which should be prioritized via specific funds.

“In Brazil we lack stable investment funds to support science and technology, so it’s hard for universities to plan investment in research,” she said.

“The creation of research funds that target specific areas could be a good strategy to prioritize or optimize the use of S&T budgets.”

Other areas or strategic sectors in which Brazil should offer more innovation incentives, according to the authors, are renewables such as wind, solar and biofuels.

“In biofuels, second-generation ethanol and green chemistry, Brazil is closest to the technological frontier,” said Bernardo Gradin, founder and CEO GranBio, a Brazilian industrial biotech company.

Innovation in Brazil: Advancing Development in the 21st Century can be purchased at www.routledge.com/Innovation-in-Brazil-Advancing-Development-in-the-21st-Century-1st-Edition/Reynolds-Schneider-Zylberberg/p/book/9780367146894.