Demand-side Innovation

Policies in Brazil

Fernanda De Negri

Director

Division of Production and Innovations Studies –

DISET

Institute for Applied Economic Research – IPEA

INNOVATION POLICIES IN BRAZIL: THE BIG PICTURE

The percentage of firms that have declared getting governmental

support to innovate increased from 19% in 2003 to 34% in 2011

Most of public support (75%) is related to machinery financing

programs

The percentage of firms benefited from specific innovation

instruments increased from 4,6% to 8,6% of innovative firms

between 2003 and 2011

Public support for innovation

1 219 8 1 036

34

141

594

6

383

11

193

11 760

160

11 185

17

398

3 642 72

3 071 22

477

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Total Extractive Industries

Manufacturing Electricity and Gas

Services

Other support programs

Financing of Machinery and equipment to innovate

Financing of R&D with colaboration with universities

Financing of R&D without colaboration with universities

Economic Subsidy

Informatics Tax Incentive

R&D Tax Incentive

Main innovation policies in

Brazil Innovation and S&T policies and instruments (main sources of funding to

S&T in Brazil)

Value in 2012

(current Reais – mi)

Tax Breaks

Tax exemption created for companies

who invest in R&D, created by Law Nº

11,196/2005 (“Lei do Bem”) 1,476.8

Tax exemption for companies in the ICT

sector, created by Law Nº 8.248/1991

and Nº 10.176/2001 (“Lei de

Informática”) 4,482.2

Other tax breaks 464.0

TOTAL (tax breaks) 6,423.0

Subsidized credit for innovation

(disbursements)

Total volume operated by FINEP 1,800.0

Total volume operated by BNDES 2,200.0

TOTAL (credit) 4,000.0

S&T Public Investment

Subnational (State) investments 7,033.7

Central government (Federal)

investments 18,387.9

TOTAL (excluding post grad

expenditures) 25,421.6

TOTAL public S&T investment 40,045.0

Counterpart in R&D by companies in

regulated sectors (private

compulsory investment)

Electricity Regulatory Agency (ANEEL)

R&D program (approximate values) ~ 300.0

The National Petroleum Agency (ANP)

R&D program 1,226.7

Credit for innovation: 2007-2014

(R$ bi)

0,6 0,8

1,7 1,5

2,0

2,7

6,2

8,7

0,4 0,7

0,9 1,2

1,8 1,8

2,5

4,5

0,6

1,4

1,7

2,2

3,3

-

1,0

2,0

3,0

4,0

5,0

6,0

7,0

8,0

9,0

10,0

2007 2008 2009 2010 2011 2012 2013 2014

FINEP contracts

FINEP disbursements

BNDES disbursements

S&T Federal Investment MINISTRIES R$ MILLION %

TOTAL FEDERAL BUDGET TO S&T 18.387,9 100%

Ministry of Science, Technology and Innovation

(MCTI) 6.640,2 36%

Ministry of Education (MEC) – mainly CAPES 3.479,9 19%

Ministry of Agriculture (MAPA) – mainly Embrapa 2.448,3 13%

Ministry of Health (MS) – mainly Fiocruz 2.072,3 11%

Ministry of Development, Industry and Foreign

Trade (INMETRO and INPI) 1.041,5 6%

Ministry of Planning (IBGE) 1.013,6 6%

MINISTRY OF SCIENCE, TECHNOLOGY AND INNOVATION – DETAILED BREAKDOWN

MCTI - TOTAL 6.640,2 36%

FNDCT (Sectoral Funds) 2.981,4 16%

National Counsel of Technological and Scientific

Development (CNPq) 1.515,9 8%

Headquarters and MCTI research institutions 1.265,5 7%

Space program (Brazilian Space Agency - AEB) 278,1 2%

Nuclear program (National Nuclear Energy

Commission - CNEN) 515,5 3%

FNDCT’s budget: 2000-12

0,18

0,37 0,33

0,63 0,63

0,78

1,10

1,52

1,99

2,36

3,11

2,77

2,98

0

0,5

1

1,5

2

2,5

3

3,5

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

FNDCT’s breakdown

RS MI

Total FNDCT 3.056,1

Support to research and development in

Universities and Research Institutions 2.004,9

Scholarships (Science without Borders Program) 307,6

S&T infrastructure 367,0

Equalization 308,3

Grants to firms 345,0

Support to MCTI research institutions 320,1

Other actions 77,8

FNDCT’s evaluation

Only 30% of the resources are used in projects with companies: the program is not demand driven

There is no focus on concrete results: the public notices (official announcement) are mostly generic

The objective of the program is to foster S&T in general

There is no integration with public procurement

There is a positive impact on the firm’s R&D investment: additionality effect.

DEMAND-SIDE POLICIES IN BRAZIL

Public S&T spending in Brazil is not mission-oriented

Obstacles

MINISTRIES %

Ministry of Science, Technology

and Innovation (MCTI) 36%

Ministry of Education (MEC) 19%

Ministry of Agriculture (MAPA) 13%

Ministry of Health (MS) 11%

Ministry of Development, Industry

and Foreign Trade (INMETRO and

INPI) 6%

Ministry of Planning (IBGE) 6%

DEPARTAMENTS %

Department of Defense (DoD) 49%

Department of Health (DHHS) 23%

Departmente of Energy (DOE) 8%

NASA 9%

National Science Foundation (NSF) 4%

Departament of Agriculture (USDA) 2%

Others 5%

Only 30% of S&T investments are

attached to institutions with

problem-solving missions

More than 90% of S&T

investments are mission-oriented

The Brazilian Procurement Law (Lei 8.666) doesn’t mention

R&D acquisition.

The law establishes, since 2010, a margin of preference for

products produced in Brazil (up to 20%) and for products with

Brazilian technology (up to 25%)

There is no a special part devoted to R&D acquisition as

there is in the American Federal Acquisition Regulation.

The Innovation Law (20th Article) prescribes that Brazilian

government can hire a company to do R&D to develop new

products and process.

However, this possibility has never been used up to now

(difficulties of implementation?)

Obstacles

There is no clear regulation about the acquisition of

R&D by public sector in Brazil.

Recent advances

National Knowledge Platform Program

• Program created by Presidential Decree 8.269 /

2014, using the article 20 of the Innovation Law.

• Public-private partnerships that articulate research

institutes and enterprises.

• Platforms are problem solving oriented and driven

by the country’s STI strategic demands

• Up to now, no platform was launched.

Recent advances

The development of the KC

390 by the EMBRAER was

contracted by Brazilian Air

Force

The bidding was not necessary

(following public procurement

law)

This was possible only

because EMBRAER is the only

aircraft manufacturer in Brazil.

In other sectors, such contract

would not be possible.

The development of the KC 390

Recent advances

The production of a drug used by the Brazilian

Public Health Care system is contracted from a

Public Research Institution.

This institution will make a partnership with

private sector to develop and produce the drugs

It’s foreseen in Public Procurement Law that a

research institution has preference in a public

bidding

Therefore, this is a mechanism that allows a

limited participation of the private sector.

The Productive Development Partnerships in Health

THANK YOU!

fernanda.denegri@ipea.gov.br