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Evolution of ST&I Policies in Brazil Presentation for DEIP Course_UNU-MERIT/2008
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DEIP – UNU/MERITMaastricht, 11/10-14/2008
Scientific and Technological (S&T) Policy and Industrial Development in Brazil
Alessandro Maia Pinheiro (UFRJ;IBGE)
Presentation Structure
1. Evolution of the S&T policy from 1950 to 2002
2. From 2003 onwards: focus on innovation
3. A few indicators
4. Concluding Remarks
1. Evolution of the S&T policy (1950-2002)
1950-1980Model of development: industrialization through substitution of import
IMPORTANT MEASURES•Protection for the infant industry, including transnational companies;
•State support for national and foreign private investment;
•Creation of State Enterprises, e.g.Petrobrás (1953)Embraer (1969)
Implicit S&T Policy – associated with an underlying belief:
• Based on the absorption of production capability of manufactured goods, this extensive industrialization model was supposed to be able to foster technical change.
MAIN AIMTo improve BoP
performance in order to foster economic growth
1950-1980 (cont.)Model of development: industrialization through substitution of import
Explicit S&T Policy
•R&D public support: creation of universities, research institutions and human resources for R&D;
•Science-push orientation: disconnected from the productive sector (linear model of innovation).
Main results from the import-substitution model
•High rates of growth in the decades of 60’s and 70’s (economic miracle);
•Diversified industrial structure with strong participation of foreign capital in the most dynamic sectors (e.g. automobile industry);
•Lack of international competitiveness (basically as a result of excessive and too long protectionism without political pressure on private firms to investment in innovative activities, especially R&D);
•Low capability to innovate and weak interaction between S&T System actors;
•High public debt, worsened by the oil crises in the decade of 70’s;
•High degree of poverty and income inequality.
1981 - 1990Debt Crisis - Stagflation
DEBT CRISISMAIN AIM
StabilizationTECHNOLOGICALRETROGRESSION
e.g. Between 1979-1984, the available resources of the National Fund for Scientific and Technological Development (FNDCT) were reduced by more than 2/3.
GENERAL FEATURES OF THIS PERIOD•The industrial policy left to be a mechanism of coordination and planning;
•Non-tariff restrictions were used to prevent access from import; exports were subsidized;
•Exchange and monetary policy were manipulated to combat inflation, damaging economic performance;
•There was a boom of informality;
•The degree of poverty and income inequality rose.
1990-2002Stabilization - Liberalizing Policies
Liberalizing ideas strongly supported elaboration and implementation of a set of industrial policy measures named General Guidelines for Industrial and Foreign Trade Policy (PICE). The intention was essentially to follow a schedule of elimination of goods entry barriers.
Tariff reduction was one of the most relevant changes. In four years, the average rate was lowered from 32% to 13%.
Other measures: privatization, deregulation and attempts to attract foreign direct investment
Domestic firmsunder pressure
Process of productive
restructuring
Industrialunemployment
Macroeconomic policy in the context of the Real Plan (1994) was not conducive to industrial development
Very high interest ratesVery high taxation
Local currency appreciation
1990-2002Stabilization - Liberalizing Policies (cont.)
Implicit S&T Policy
Expectations:•Liberalization would induce local firms to innovate;
•Market openness would cause an increase in the intensity and pace of the process of technology transfer to the country.
Explicit S&T Policy
•Expansion and consolidation of post-graduation;
•Actions to make primary and secondary education universal (quality has been not the main target);
•Strengthening of intellectual property regime (internalization of the TRIPS);
•Support for R&D, entrepreneurship and firms incubation;
•Innovation was introduced in the policy domain. Nevertheless, it was perceived more as a consequence of liberalizing policies than a central aim.
1990-2002Stabilization - Liberalizing Policies (cont.)
Situation at the end of the period
•Remarkable stock of high level human resources (PhDs, Masters) and high growth rates of scientific production;
•Great increase in efficiency and productivity of some industrial sectors. It was mainly based on defensive strategies, use of imported inputs, adoption of new methods of management and quality control and reduction of labor costs (part-time job, temporary job, outsourcing, informal relations);
•Commercial openness and stronger intellectual property system have revealed unable to effectively foster the development of a significant dynamics of innovation surrounding firms;
•Deterioration of exportation list (process called regressive specialization – natural resources and labor intensive products gained bigger share);
•Degrees of poverty and income inequality remained very high;
•Sectorial funds were created attempting at restoring the National System of Scientific and Technological Development (SNDCT), and the Innovation Law was proposed;
•In general terms, Brazil experienced a period of low levels of growth and technological development, including a weakening concerning institutional framework.
MAIN DIRECTIONS
•Broad concept of industrial policy:•active policy (strong State participation), a tool of coordination and planning;•systemic view of innovation;•high-technology sectors play a crucial role by spreading knowledge spillovers, including knowledge intensive business services (e.g. software);
•Institutional Organization
2. From 2003 onwards: focus on innovation
In the end of 2003, Industrial, Technological and International Trade Policy (PITCE) was launched
OTHERS
BNDES
MRE
SECTORIALFUNDS
MCT
FINEP
EXECUTINGINSTITUTIOS
Protection,Exports
Long-term financing
R&D/Innovation
Industrial, Technological and International Trade Policy (PITCE) (cont.)
2004: Innovation LawAmong other aspects:
•To allow federal government to have a minority participation in the capital of firms specifically engaged in innovations projects;
•Firms can be granted with financial resources (in the form of economic subvention, equity participation or financing) in order to develop innovative products and processes.
2005: Well LawAmong other aspects:
•Firms can be granted with economic subventions by hiring PhDs or Masters researchers in charge of undertaking R&D and innovations activities
Mid-2008: Productive Development Policy (PDP, a New Industrial Policy)
MAIN ASPECTS
•A much broader scope, if compared to PITCE, in terms of both tools of action and sectors involved. PITCE was concentrated on four sectors: software, pharmaceutical, capital goods and electronic components;
•Broadly speaking, it involves: Tax waiver; Grants towards investments, R&D and exports; BNDES financing destined for expansion, modernization and innovation in
industry and services sector; FINEP programs complement R&D efforts; Governmental purchase program (not specified).
3. Brazilian indicators
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Figure 1 – Per Capita Real GDP at market prices (constant 1990 US$ dollars, estimated from PPP calculations), 1950-2002, Selected CountriesSource: Viotti, 2006.
BRAZIL WAS CLEARLY ON AN UPWARD TREND FROM 1950 TO 1980
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Transformation Industry Machinery and Tractors
Electronic Devices Chemical Components
•In general terms, one can say there was a growing trend concerning all the components in the 90’s. In the case of transformation industry, this remained from the beginning of 1992 until mid-2001 (when Argentine crisis, terrorist attack in the United States and energy black-out in Brazil took place);
•The average coefficient for the Transformation Industry Sector as a whole was significantly smaller than those for each one of the segments investigated. This makes us believe that in recent years domestic demand has been supplied increasingly by national production from low-technology sectors (less inclined to knowledge absorption and value aggregation).
Figure 3 - Comparative of Evolution of the Penetration Coefficients of Imports for Transformation Industry and Selected Sectors – Brazil, 1991-2006.
Source: Ipeadata. Available at: http:\\www.ipeadata.gov.br.
As said before, productive restructuration has been mainly concentrated on defensive strategies,involving labor costs reduction along with acquisition of machinery and equipments. The later
has been specially induced by exchange appreciation from the mid-1990’s.
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Figure 4 – Labor Productivity Index for Transformation Industry – Brazil, 1982- 2002 (1991 = 100). Source: Ipeadata. Available at: http:\\www.ipeadata.gov.br.
SHARP INCREASE IN THE NUMBER OF BRAZILIAN PHD’s FROM 1990
3.1 3.0 3.3 3.9 4.7 4.5 4.7 4.9 6.0 7.0 8.5 9.3
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Figure 5 – Number of domestic Brazilian PhD’s and proportion in relation to USA PhD’sSources: NSF, USA; MCT, Brazil.
31,5
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Introduced innovations
Product and process
Only process
Only product
2003-2005
2001-2003
1998-2000
Weaknessesconcerning
flows of informationand knowledge
Lack of technologicalcompetences
+Difficulties to solvetechnology-related
problems
Innovation concentrated on
embodied technology
GENERAL PROFILE OF THE BRAZILIAN INNOVATION PROCESS – ACTIVE TECHNOLOGICAL LEARNING MUST BE THE MAIN TARGET, INCLUDING SUPPLY OF
LEARNING INDICATORS
Figure 6 - Percentage share of industrial firms that introduced innovation – Brazil, 1998-2000, 2001-2003 and 2003-2005. Source: PINTEC/IBGE.
3. CONCLUDING REMARKS
S&T policy has been successful in providing human resources for research;
With respect to its main aim, it failed given that it’s been unable to foster a meaningful innovation process;
Its main challenge still remains: to make firms and S&T system interact;
Another issue concerns the mismatch between macroeconomic policy and innovation policy;
We have enough institutions; however there are coordination and cooperation failures;
Once innovation (in a restrictive sense) is not the fundamental mark of the Brazilian industrial dynamics, innovation policy should pay more attention to learning processes, broad and informal innovation activities and underlying firms’ strategies;
Institutions in charge of producing statistics concerning innovation should do the same.
