Innovation Policy around the World
Brazil Challenges and Achievements
The nation has rapidly grown its supply of scientists and engineers and is now meshing its research and economic development activities.
Until World War II, Brazil had a small number of scientists and only an incipient institutional research base. Its industry was at an embryonic stage and based only in traditional areas. Full-time employment for university teaching staff and graduate programs did not exist until the 1960s. Not until the 1970s did an institutional base devoted to science and technology (S&T) began to be effectively established. This situation, together with the business sector’s historical lack of appreciation for innovation, limited the possibilities for developing sectors that were potentially more dynamic in the national economy.
The first actions of the federal government to start building up the country’s scientific capacity were taken in 1951 with the creation of the National Research Council (CNPq) and the Commission for the Improvement of Personnel in Higher Education (CAPES). The CNPq and CAPES provided fellowships for Brazilians to pursue graduate studies abroad, mainly in the United States and Europe. Until recently, the main objective of this policy was the training of human resources for scientific research and expanding the academic S&T system. Now, innovation has become part of the agenda for federal and state policies and has attracted increased business interest.
The construction of a national system for science and technology began in the 1960s with the creation of a fund (FUNTEC) by the National Bank for Economic Development (BNDES) to support the establishment of graduate programs in engineering and hard sciences. In 1968, the Ministry of Education promoted a reform of the federal university system, introducing academic departments to replace the traditional chairs and creating full-time positions for faculty members holding postgraduate degrees. In 1967, a new funding agency was created, the Financing Agency for Studies and Projects (FINEP), which in 1969 became the managing agency of a new and robust fund, the National Fund for Scientific and Technological Development (FNDCT), which replaced the one established earlier by BNDES. This fund provided FINEP, the CNPq, and CAPES with ample financial resources to provide various forms of support to stimulate the large-scale expansion of the postgraduate programs and research activities in universities and research institutes that took place during the 1970s and most of the 1980s.
FINEP provided grants to academic institutes or departments and to research centers to cover all needs for institutional maintenance or expansion. The CNPq provided fellowships for undergraduate research and graduate studies, as well as research grants for individuals or groups, and also created new research centers or took charge of existing ones. CAPES, on the other hand, dedicated the majority of its efforts to supporting graduate programs, providing fellowships for students and establishing a national system for evaluating and accrediting graduate courses.
The Ministry of Science and Technology (MCT) was created in 1985, signaling the increased importance of S&T in the federal government. FINEP and the CNPq (as well as its research institutes) were absorbed into the structure of the new ministry, which consolidated two decades of federal initiatives that had made possible the establishment of a national system of S&T with several tens of thousands of researchers. The MCT managed to obtain substantial budget increases for the FNDCT and the CNPq. Because the system had developed in a spontaneous manner, its expansion had occurred in a very uneven way. Disciplines such as engineering, physics, mathematics, and some areas of biological and medical sciences, which had strong leadership, had attracted most of the students and financial support. This led the MCT to create the Support Program for Scientific and Technological Development (PADCT), partially financed by a loan from the World Bank, to develop strategic areas such as chemistry, biotechnology, advanced materials, and instrumentation.
The progress in the federal system for supporting S&T was followed by similar state initiatives, most notably the Foundation for the Support of Science in the State of São Paulo. One problem was that most graduate programs and research efforts were concentrated in the rich southeastern and southern regions. In addition, industry commitment to R&D was still weak, and there was a lack of interaction between S&T and industrial policies. As a result, research and innovation activities were strongly concentrated in universities and academic institutions and therefore had little impact on business practices.
There were, however, a few important exceptions to this scenario. The creation in 1972 of the Brazilian Agricultural Research Company (Embrapa), with experimental centers throughout the country, was decisive in making Brazil a world leader in tropical agriculture and the main producer of several crops. Another example of success in applying S&T to the conditions found in Brazil is the federal oil company Petrobras, which developed the technology for deep-water oil drilling that eventually led to self-sufficiency in fossil fuels. In the aeronautics industry, Embraer became one of the largest aircraft manufacturers in the world by focusing on specific market segments with high growth potential in commercial, defense, and executive aviation. Finally, another success story, and one of the most notable, is in the biofuel area. Research in this area dates back to the 1920s and was given new life in the 1970s when Brazil was hit by the oil crisis. The creation of the Proalcool ethanol program, which mandated that gasoline contain 25% ethanol and encouraged the automobile industry to manufacture vehicles that used pure ethanol, catalyzed rapid improvement in ethanol production technology and impressive growth in production. More recently, the development of flex-fuel engines, which can run on any admixture of gasoline and ethanol, and the improvements in the production of ethanol from sugar cane have boosted the ethanol market to equal the demand for gasoline.
In the late 1980s and early 1990s, Brazil suffered from political instability and uncertainties as well as economic difficulties, and the relatively new S&T system paid a price. The MCT was twice closed down and recreated. Rampant inflation corroded the budget. In spite of this and the irregular supply of funds, the essential elements of the financial instruments of FINEP and the CNPq were preserved.
The 1994 economic reform designed to control inflation was followed by a tight fiscal policy that led to budget constraints and modest economic growth. The S&T system suffered greatly from the lack of jobs for researchers and engineers as well as from budget cuts. The number of scholarships granted by the CNPq, which had increased steadily for four decades, began to decrease. In 1997, the CNPq program of grants for small groups was interrupted, and FINEP cancelled existing institutional grant agreements because of a drastic reduction in its funding. In 1999, the PADCT was phased out although it still possessed some resources from the World Bank loan. The net result was a serious crisis in the national S&T system (Figure 1).
Attempts to overcome the crisis
In the late 1990s, the government took several steps to deal with the crisis. The broad system of financial support for research projects spontaneously submitted to the CNPq was replaced by three programs designed to support a smaller number of more-targeted projects. One of these was the Support Program for Nuclei of Excellence (PRONEX), the aim of which was to give financial support to research groups considered to be highly competent and leaders in their areas of activity. Administered initially by FINEP, the program was transferred to the CNPq in 2000, being essentially replaced by the Millennium Institutes Program, which took the form of virtual networks of institutions coordinated by a main institution.
The most significant advance in the S&T sector at the end of the 1990s was the implementation of the Sectoral Funds for Science and Technology. These were first created in 1999 after the establishment by law in the previous year of the Sectoral Fund for Oil and Natural Gas. Congress approved several other draft laws proposed by the MCT that designated that the new funds would come from taxes on several sectors of economic activity (such as natural resources exploitation, petroleum royalties and specific industrial products, as well as from fees on licenses for the acquisition of technology from abroad). The sectoral funds provided a source of revenue to the FNDCT, making possible its resurgence (Figure 2). However, until 2003 most of these revenues were used to pay the federal debt rather than to support S&T programs. Nevertheless, the creation of the sectoral funds provided important legal instruments for implementing a new policy for science, technology, and innovation. The Second National Conference on Science, Technology, and Innovation, held in 2001, provided guidance for this new stage of S&T policy.
Despite all difficulties and the relatively short history of S&T policy, at the turn of the century Brazil had achieved significant successes in some areas and had built up a scientific community consisting of over 50,000 researchers with Ph.D.s, the largest and best-qualified such body in Latin America.
New policy and a plan for S&T
Science, technology, and innovation have enjoyed unprecedented support during President Luiz Inácio Lula da Silva’s administration. The respective budgets have increased severalfold in recent years (Figure 2), and the legal framework has been continuously improved.
The 2004 Innovation Law established several mechanisms to promote innovation in Brazil. It created the conditions for setting up strategic and cooperative partnerships between universities, public research institutes, and businesses aimed at increasing research, development, and innovation (RD&I). The 2005 Lei do Bem (Helpful Law) provided a set of fiscal incentives to promote RDI activities in businesses. The law also authorizes S&T agencies to subsidize the salaries of research staff with master’s or doctoral degrees employed in technological innovation activities in companies based in Brazil. The 1991 Information Technology Law, modified in December 2004, is another important instrument for industrial and technological policy within the context of digital connection.
In 2007, the government took the initiative of creating a set of plans and policies that were supported by an economic policy that has been very successful in several aspects and by a social policy that has helped to increase the domestic market. In January of that year, the government announced the Program for Accelerating Growth that was organized in terms of groups of investments in infrastructure. Subsequent to that, several sectoral plans have been announced, among them the Action Plan for Science and Technology for National Development. The Policy for Productive Development was also announced as a means of broadening and enlarging the Industrial, Technological, and Foreign Trade Policy that had been launched in 2004.
PACTI 2007-2010, which is coordinated by the MCT, involves investments of more than R $41 billion (U.S. $22.4 billion) during its period of activity. The Action Plan aims at training and mobilizing the country’s scientific and technological base with a view to encouraging innovation in the capacities and directives of the Industrial, Technological and Foreign Trade Policy. It facilitates strategic programs to preserve the country’s sovereignty and promote social inclusion and development, especially in the most deprived areas. The plan has four primary objectives:
Expansion and consolidation of the national system of science, technology and innovation. Its structure has been planned in conjunction with the business sector, states, and municipalities, taking into account those areas that are strategic for the development of Brazil and for the revitalization and consolidation of international co-operation. Other targets include increasing the number of scholarships for training and upgrading qualified human resources and improving the system to encourage the consolidation of the S&T research infrastructure in different areas of knowledge.
Promoting technological innovation in business. The key activities are encouraging technological innovation in production chains by means of actions carried out in conjunction with government organs and institutions and partner bodies in the public and private sectors; developing and publicizing technological solutions and innovations aimed at improving the competitiveness of the products and processes of national industries; and favor the increased Brazilian participation in the international market.
RD&I in strategic areas. Priority will be placed on studies and projects aimed at including Brazil in space research, either on its own or in partnership with other countries; in the peaceful use of nuclear energy; and in the complex interactions between the environment, the climate, and society in terms of encouraging the conservation and sustainable use of Brazilian biodiversity, paying particular attention to the Amazon region and activities involving international cooperation.
Science, technology, and innovation for social development. The goals are contributing to the proliferation and improvement of science teaching, providing universal access to the goods created by S&T, increasing economic competitiveness, and improving the quality of life of people in the most deprived areas of the country.
A crucial aspect of PACTI is that it incorporates the concept of innovation into the country’s scientific and technological policy as reflected in initiatives such as the Brazilian Technology System (SIBRATEC). This effort was inspired by Embrapa’s successful agriculture policy as well as in foreign institutions such as the German Fraunhofer organization, which brings together 60 technological institutes working on specialized projects. SIBRATEC consists of existing institutions bent on R&D activities aimed at developing innovation projects for products and processes according to industrial, technical, and foreign trade priorities. During the period from 2009 to 2010, the system will benefit from resources of about R $120 million from the FNDCT. These funds will come both from the government and from the productive sector. The recipient institution must provide at least 20% of the total funding. SIBRATEC’s activity will be decentralized, and individual states will have the task of interfacing with participating institutions.
The resources for financing PACTI activities are mainly those available within the MCT budget and include the budgets for the CNPq and the FNDCT/Sectoral Funds. The FNDCT is the main financial instrument for the MCT’s wider involvement in the National System for Science, Technology, and Innovation. Previously, the FNDCT supported only sectoral activities, but we have introduced significant changes in the management of the fund, emphasizing the possibility of using resources from various funds to support a wider range of initiatives rather than merely sectoral ones. The implementation of these actions has been possible thanks to the substantial increase of FNDCT funding. In recent years, mainly since 2004, public calls for the selection of projects to be financed have been regularly published. PACTI also receives significant funding from other ministries and institutions such as Petrobras and Embrapa.
The MCT carries out its activities through its 22 research centers and institutes. Among these, the CNPq and FINEP are especially important as agencies that encourage research. An increasingly important role is being played by the Center for Management and Strategic Studies, created in 2001, in planning and evaluating the work of the MCT and its agencies. Whereas the CNPq gives priority to supporting individuals by means of scholarships and other forms of aid, FINEP supports science, technology, and innovation in public and private institutions.
The National Council for Scientific and Technological Development operates a number of programs, the three most important of which are:
- The Program for Qualifying Human Resources for Research, which has a fixed timetable and includes granting scholarships (for junior scientific initiation, scientific initiation, master’s, doctoral, and postdoctoral qualifications).
- The Program for the Expansion and Consolidation of Knowledge, which is directed toward financing the projects of research groups in all areas (through general public announcements) and of specialized networks (nanoscience and nanotechnology, among others), absorbing and stabilizing the supply of human resources (grants for productivity in research, grants for regional development, and grants for development in technology and innovation and encouraging the formation of nuclei of excellence, such as PRONEX and the National Institutes for Science and Technology), as well as making public announcements of opportunities related to the sectoral funds.
- The Program for International Cooperation, the main aim of which is to stimulate international exchange and encourage partnerships in the process of absorbing and disseminating knowledge and technology. This program supports bilateral and multilateral initiatives involving developed and developing countries.
In order to guarantee the presence of the Brazilian government in international scientific work in science, technology, and innovation, the MST is a signatory, through the CNPq, to several cooperation agreements, and it finances group research projects (scientific and technological exchanges) and scientific visits. One of the most successful examples of this cooperation is Prosul: the South American Program to Support Cooperative Activities in Science and Technology.
In this context, we must also mention the great step forward in the form of the National Science and Technology Institutes Program. Begun in 2009, it has already enabled the creation of 123 institutes, investing total resources of R $581 million ($330 million) from various sources: the FNDCT, the CNPq, state foundations for supporting research, CAPES, the Ministry of Education, BNDES, the Ministry of Health, and Petrobras. It uses resources from many financial agencies in order to bring together the best research groups in the country that are working at the frontiers of science and in areas that are strategic for the country’s sustainable development. It is a very effective instrument for pushing forward basic and pure scientific research and making it internationally competitive. One of its important features is its close cooperation with SIBRATEC.
FINEP promotes and encourages innovation and scientific and technological research in universities, institutes of technology, research centers, and other public or private institutions. More recently, FINEP has begun to offer the possibility of economic support for business. This is the greatest innovation in the MCT’s range of instruments to encourage innovation. This support involves nonreturnable investment in companies, which was previously forbidden by law. The new initiative was made possible by the regulation based in the Innovation Law and the Lei do Bem. This instrument works in three ways: the development of products and processes related to strategic and important components of the National Productive Development Policy, aimed at businesses of any size; the accreditation of partners for the decentralized implementation of the instrument in various states of Brazil, with a view to increasing access on the part of micro- and small businesses to support funds for developing products and processes, carrying on the work done by the Support Program for Research in Business; and encouraging the hiring of qualified people (with master’s and doctoral degrees) by subsidizing a part of their salaries.
The programs involve several lines of action:
Financial support for RD&I projects. Institutions in strategic sectors whose competence has been recognized may have their projects supported by means of special funding. This support comes mainly from the FNDCT but may also come from other ministries.
Finance for R&D projects in business. This type of support has become possible thanks to the Innovation Law. It allows nonreturnable public funding to be invested in companies, thus sharing with them the risks inherent in R&D activities.
Loans (credit) for R&D and innovation projects in business. These are low-interest loans with resources coming from the FNDCT and other federal funds.
Zero-interest loans. Rapid funding without bureaucracy and without requiring substantial guarantees. These are aimed at innovative and marketing activities of small businesses that are operating in areas that are priorities for the Productive Development Policy.
The Support Program for Research in Business. Operated in partnership with state-based foundations that support research, it encourages interaction between researchers and technology-based businesses to develop innovative projects.
Inovar (Innovating). This program consists of creating and sustaining an environment favorable for innovative companies using venture capital. Its activities include Innovating Funds and Innovating Seed Funds, both aimed at attracting investors, and organizing Seed Forums and Venture Forums for business training and attracting investors.
The National Program for Business Incubators and Technology Parks. This supports the planning, creation, and consolidation of incubator organizations for innovating businesses and technology parks.
In recent years, with the support of the National Congress, the federal government has set up new instruments that, after the crisis of the1990s, have enabled it to again take up its crucial role in encouraging the expansion and improvement of the National System for Science, Technology, and Innovation. Just as or even more important than this is the task of making Brazilian society aware of the strategic value of S&T.
We may state with conviction that for the first time in the history of this country, there exists in many areas of S&T a sufficient “density of competences” to make a decisive contribution to carrying out ambitious development projects using local knowledge. Equally, over the past 40 years it has developed a complex system which today contains more than 200,000 researchers. Thanks to the granting of fellowships that began in the late 1980s, by 2008 Brazil had 46,700 people with graduate degrees, including 10,700 with doctorates.
Brazil is in an intermediate position in the world in terms of productive and academic capacity but has the critical mass necessary to gradually draw closer to the technological levels of developed economies. Between 1981 and 2008, the number of scientific papers by Brazilian authors published in international journals grew at an annual rate of 11.3%.
The challenges are not simple. The total Brazilian science, technology, and innovation investment is still only 1.3% of GDP as compared to a rate of about 3% in industrialized countries. Business is currently investing no more than 0.5% of gross domestic product in R&D, and the aim is that this should come up to 0.65% by the end of this decade.
It is important to continue the expansion of programs to train personnel in all areas of knowledge, because to reach the same proportion of such individuals as is found in industrialized countries, Brazil should have about 500,000 researchers. However, it is also necessary to give greater emphasis to training personnel in areas that are strategic in terms of economic and social development.
The STI Action Plan unites the public policies that have been developed in various ministries, government bodies, and startup agencies. The aim is to make it possible for initiatives to move out from the academic world and the government to become vigorous change agents for development in the widest possible variety of productive areas, both private and public. By treating questions of science, technology, and innovation as questions of state, Brazil is taking a definitive step forward in its role as a player on the international stage.
Sergio Machado Rezende is Brazil’s Minister of State for Science and Technology. He received his Ph.D. from the Massachusetts Institute of Technology and is professor of physics at the Federal University of Pernambuco.