Second International Workshop of the BRICS Project Rio de Janeiro April 2007 FINEP The Brazilian Innovation Agency Ministry of Science and Technology Science, technology and innovation policies in Brazil Odilon Antônio Marcuzzo do Canto President

Framework of the presentation The Brazilian ST&I System Recent Brazilian ST&I System achievements The National ST&I Policy Ministry of Science & Technology FINEP: The Brazilian Innovation Agency FINEP Programs for firms’ innovation

S&T Policy 1950 Individual grants Institutionalisation of research & post-graduation Policy stagnation Industrial Policy Based on foreign technology CNPq Capes Funtec/ BNDES FINEP FNDCT MCT lack of policy Evolution of the Brazilian Industrial Policy

Total of public HEI: 207 (83 federal, 65 state and 59 locals) Total of private or community IHE: 1,650 Graduation courses: 16,000 Master courses: 1,833 Doctorate courses: 986 Research institutions: 335 Researchers: 77,600 (48,000 Ph.D.) Research teams: 19,500 Qualified HR: –65% within universities –30,9% within industry Brazilian ST&I System: global framework

Brazil Source: OCDE, MSTI, 2004

Brazilian investment in S&T and percentage of GDP R$ billions * Source: MCT * Estimated

Ministry of Education UFTO Federal University System UFCG

Technological Institutes

Papers/Year PhD Graduates/Year

Brazilian Technological Innovation Survey* (PINTEC/IBGE, 2002 & 2005) –Universe researched in 2003: firms (10 or more employees) –Increasing the firms innovation rate from 2000 (31.5%) to 2003 (33.3%) –Decreasing of internal R&D activities as percentage of the revenue: 0,64% (2000) to 0,53% (2003) –Low innovation rate compared to other countries –Innovative pattern: high concentration in machine and equipment acquisition * Methodology based on EUROSTAT – Community Innovation Survey (CIS III) Brazilian industrial firms innovation

21,2 25,6 28,2 32,2 33,9 25,1 62,1 82,8 17,9 32,9 35,8 47,5 36,6 45,6 76,4 30,5 56,6 74,5 79,7 29,6 25,5 24,0 0,010,020,030,040,050,060,070,080,090,0 Organisational rigidity Consumers’ weak interactions Lack of technical services Lack of cooperation opportunities Lack of market information Technical standards adjustment difficulties Lack of technology information Lack of highly qualified HR Lack of financial resources High economic risks High innovation costs Brazilian firms innovation activities: main constraints Source: IBGE ( 3ª CNCTI

National ST&I Policy: innovation became a government policy priority Industrial, Technological, Foreign Trade Policy (2004) – re- insertion of these issues within the Governmental Policy Agenda Sectoral Funds (since 1999): innovative economic engineering to complement, expand and secure the financial sources for ST&I Transversal Actions (2004): utilizing more than one Sectoral Fund New regulatory and legal environment (2005): Innovation, Informatics and Bio-security Laws; grants for R&D HR in companies; regulation of FNDCT; and MSEs Law Decentralisation of federal governmental ST&I policies and their integration to the state and local levels Emphasis on MSEs’ promotion, regional development and social inclusion Recent Brazilian ST&I System achievements

15 Research Institutes Ministry of Science and Technology National S&T Council

The National ST&I Policy Designed and implemented by the Ministry of S&T 1. Strategic axes Social inclusion 2. Strengthening of agencies programs (CNPq and FINEP) 3. Broadening of sources of financial resources Expansion and consolidation of National System of Science Technology and Innovation Industrial, Technological & Foreign Trade Policy National strategic objectives

Sectoral Funds for Supporting Scientific and Technological Development Creation: from 1999 onwards Financial sources: financially fed from selected productive sectors through the contributions of companies’ invoicing and/or from the earnings arising from the exploitation of natural resources belonging to the Federal Government Aeronautics; Agro-business; Amazon Region; Biotechnology; Energy; Informatics; Infra-structure; Mineral; Oil & Gas; Transportation; Health; Space Activities; Telecom; University- Industry Cooperation; Water Resources; and Water Transportation and Ship Building.

Innovation Law (2005): strengthening the interaction between university and industry; promote the shared use of S&T infrastructure by firms and S&T institutions (emphasis on MSMEs); stimulate the creation of new technology based firms by researchers; create new financial mechanisms for grants to R&D and innovation in firms ‘Do Good’ Law (2005): create new financial mechanisms for grants to HR (M.Sc./Ph.D.) in innovation activities in firms MSEs Law (2006): invest minimum of 20% in MSEs Regulation of FNDCT (2007): resources flexibility and diversification of instruments New regulatory and legal environment

The Industrial, Technological, Foreign Trade Policy (PITCE) Creation in 2004 Re-insertion of industrial and technological issues within the Governmental Policy Agenda Innovation is crucial for competitiveness Pioneering convergence of industrial and technological policies PITCE is one of the strategic axes of the ST&I Policy FINEP: responsible for PITCE implementation

 Investing more than US$ 500 million in PITCE actions  Investing more US$ 400 million in S&T infrastructure  Designing new instruments and programs for innovation  Inducing and financing firms’ R,D&I activities  Establishing synergies with other financial institutions and relevant organisations  Working on the strategic sectors defined by the Federal Government FINEP : crucial importance within the Brazilian industrial and technological policy

Publicly owned company subordinated to the Ministry of Science and Technology (MCT) Mission To encourage and finance innovation, and scientific and technological research in business, universities, institutes of technology, research centres, and other public or private institutions, mobilizing funds and combining the (financial) instruments for the country’s economic and social development. FINEP

Financing Agency for S,T&I Research grants to non-profit R&D institutions Bank Loans at low interest rates for R&D in firms Investments FINEP’s main roles

Grants Grants provided through FNDCT for public R&D institutions or non-profit organisations,and more recently, for private firms Support includes every stage and dimension of the S&T development cycle: basic research, applied research, product, service, and process innovation. Incubation of technology-based businesses, implementation of technology facilities, structuring and consolidation of research processes, development and innovation in established firms and market development. FINEP: modalities of financial support

Loans Credit granted to firms for their innovative activities. Resources emerge from FINEP’s own funds or through on-lending from other financial sources. Loans may assume different shapes: standard loans; low interest rates and loans with profit sharing Investment Venture capital funds related to innovation Seed capital FINEP: modalities of financial support

I. Supporting firms’ innovation activities (credit, venture capital, economic subvention, RH, incubators, technological parks) II. Supporting cooperation between firms and scientific and technological institutions (R&D and technical assistance) III. Supporting scientific and technological institutions (modernisation of scientific and technological infrastructure, research in strategic areas) IV. Supporting S&T for social development (health, sanitation, housing technologies, popular cooperatives, family agriculture, etc.) FINEP Programs Reimbursable & non-reimbursable resources

FINEP total disbursements (reimbursable & non-reimbursable resources) R$ millions

FNDCT - Disbursements in

Sectoral Funds

FINEP investments in firms’ innovative activities ( )

Ex-post evaluation survey (IPEA, 2005) –The benefited firms of FINEP’s financial support present better performance, on average, related to R&D activities (50 to 100% more). –Brazilian firms invest 80,8% more in R&D/GDP, than MNC subsidiaries in Brazil. –Revenue, exporting value, salaries, job quality and productivity have been above average. Evaluation surveys on the performance of firms

Record budget: over US$ 750 million Broadening sources of financial resources capable of supporting an unforeseen portfolio of R&D project – 1,000 projects, totalling US$ 460 millions (demand of 5,300); Broadening credit portfolio for firms innovative activities - 67 projects, totalling US$ 290 millions; Broadening and improving FINEP’ programs and financing R&D cooperative projects established between scientific and technological institutes and firms, focusing on the priorities of the Industrial, Technological and Foreign Trade Policy. FINEP results 2006

FINEPs’ Programs Inovar (Inovar (Incubator-Funds) Venture capital Inovar (Forum) Capitalization of technologically intensive small and medium-sized firms Investments Inovar (Seed Money) Structuring of local seed money funds

FINEPs’ Programs Sanitation technology (low costs and easy applicability) HABITARE Housing technology (low costs and easy applicability) PRONINC Tech incubators on popular cooperatives Grants PROSOCIAL Development and diffusion of technologies with social contents and interests, low costs, easy applicability and social impact

To cope with the complexity and diversity embodied in the innovation issues (nature, policies, politics, etc.) To expand human, material and financial resources To stimulate firms to be engaged in innovative activities To improve partnerships, decentralising resources and operation To explore potentialities of new regulatory and legal environment To improve national and international strategic alliances To consolidate FINEP’s participation in the design and implementation of S,T&I policies To improve the internal organizational development. Challenges

Thanks for your attention Odilon Antonio Marcuzzo do Canto

Loans for projects focusing on product, process and service innovation, aiming at contributing to the improvement of entrepreneurial competitiveness. - Standard financing: TJLP (9%year) + spread (2 - 6% year) - Reduced taxes financing: up to TJPL – 5% year (up to 4% year) Reduced taxes application:  Priorities and PITCE’s strategic options Capital goods; pharmaceuticals & medicines; software & semiconductors; biotechnology; biomass; nanotechnology  Broadening the research team Recruitment of masters and PhDs (at least 10% of the R&D team) PROINOVAÇÃO voltar

PAPPE 20 out of 27 units of the federation 606 research projects developed by researchers 11% in biotechnology, 12% in health, 13% in energy, 18% in agro-business (related to Sectoral Funds) 46% in other sectors supported by the University-Industry Interaction Fund. 549 MSMEs all over the country, being: –62% micro, 21% small, 14% medium and 3% of large firms –37% incubatees and 63% not incubatees. voltar

Economic Subvention - R&D activities and HR Innovative firms (any size) Strategic sectors (pharmaceutical, ICTs) Calls for proposals in 2006 (US$ 150 million): firms’ proposals Micro and small firms Decentralizing the operation and application of resources in partnership with state foundations, regional development banks, Sebrae, etc. Calls for proposals in 2006 (US$ 75 million) for selection of states partners. HR absorption Subvention of part of the salaries of doctors and masters employees in firms’ innovative activities voltar

Credit granted to MSEs for their innovative activities  no interests rates  no firms guarantees  no burocracy Juro Zero voltar

Coopera: STIs and large/medium-sized firms Non-reimbursable financing for projects focusing on PITCE priorities (pharmaceuticals & medicines, capital goods, semiconductors, software) and potential areas (biotechnology, nano-technology and biomass). Total research cooperative projects US$ 300 millions (FINEP) + US$ 100 millions (firms) voltar

Coopera: STIs and MSEs (p artnership FINEP/Sebrae) Non-reimbursable financing for projects focusing on innovation or technological diffusion of interest of MSEs (APLs, PITCE’s sectors and strategic options) Calls for proposals ( ) Value of the call: US$ 38 millions (Finep + Sebrae) for supporting projects between US$ 100 and 250 thousands, with firms’ counterpart of 5 to 30% (according to size and region) Approved: 167 projects, involving more than 700 MSEs voltar

PROGEX Partnership MCT and Ministry of Development, Industry and Trade (MDIC) Technological assistance, consultancy and services provided by technological institutes for supporting MSMEs exporting activities More than US$ 16.5 millions driven to more than 650 firms for the improvement of more than 1,000 products Evaluation: increasing of 153% exporting performance from a sample of 270 firms Increasing of 36.5% yearly compared to 18.5% from those not supported firms. voltar

INOVAR Program Incubator of Funds: Since 2001, 24 Funds implemented in Brazil, 12 invested by FINEP/IDB-MIF Seed money - Inovar Semente: 24 local seed-funds, R$ 300 millions, (40% FINEP, 40% other investors, 20% private), private management, incentives to private investor Portal Venture Capital Brazil – First website of venture capital in Brazil (2000) entrepreneurs registered and consultations. Venture Capital – training of 100 professionals for the market INOVAR Network for business prospecting and development (FINEP, SEBRAE, CNPq, IEL, ANPROTEC e SOFTEX) voltar

FINEP – Investment in social development (US$ 150 million) Areas Value (R$ million) Projects 1. Health and nutrition108, Sanitation24, Housing technologies11, Education7, Coop economies11, Family agriculture11, Local and regional development5, Water resources12, TICs for social development74, Culture1, Sports4, Assistance technologies11, Social technologies5, Others5,6212 Total295,54514 VOLTAR