Innovation in industry is essential to economic growth in Brazil

The importance of innovation was stressed by participants in the ninth FAPESP 60 Years Conference, who also highlighted the fall in public-sector investment in R&D in recent years.

By Elton Alisson  |  Agência FAPESP – Innovation in industry urgently needs to be revitalized if Brazil is to develop its economy while making it more dynamic and competitive. For this to be feasible, the state must expand, stabilize and enhance the predictability of funding for research and development (R&D) by companies, and create mechanisms to stimulate the formation of an ecosystem that favors innovation.

This assessment was arrived at by the participants in the ninth FAPESP 60 Years Conference on Industry and Innovation, held online on March 23.

Part of a cycle of conferences organized to commemorate FAPESP’s sixtieth anniversary, the event featured experts discussing the relevance of technological innovation and its centrality to the agendas of many institutions, including FAPESP.

“Everyone recognizes that the origin of innovation is science. The latest report on the outlook for science, technology and industry from the OECD [Organization for Economic Cooperation and Development] stresses that as knowledge-intensive sectors continue to expand and competitive pressures grow, government funding for basic research becomes a key element in support for corporate R&D,” said Marco Antonio Zago, President of FAPESP.

Brazil contrasts with other countries in this regard. Public funding for innovation-oriented research has fallen sharply in recent years, noted Pedro Wongtschowski, a member of FAPESP’s Board of Trustees, Chairman of the Ultra Group, and Leader of Corporate Mobilization for Innovation (MEI), an initiative of the National Confederation of Industry (CNI).

“Public investment in R&D in Brazil is declining,” he said. “Many countries have increased their investment in R&D in the past ten years in proportion to the size of their economy and gross domestic product [GDP]. Brazil is an exception.”

Brazil currently invests 1%-1.2% of GDP in R&D, in terms of the aggregate public and private expenditure on innovation, Wongtschowski added. “That’s very little for a country as large and important as Brazil and for the ambitions we should have with regard to science and technology here.”

R&D expenditure by industry has also declined in proportion to sales. The latest Survey of Technological Innovation in Industry (PINTEC) conducted by IBGE, the national bureau of statistics, shows a drop from 2.37% in 2011 to 1.65% in 2017.

The manufacturing sector accounts for 12% of Brazil’s GDP, half of its exports, and two-thirds of corporate investment in R&D. “Industry is important to the national economy and will survive in the long term only if it innovates and modernizes, particularly in light of the sustainability requirements imposed by the market at present,” Wongtschowski said.

Industry also supports two other important sectors of the economy, he continued: agribusiness and services. Brazilian agribusiness would not be competitive without industrial assets such as tractors, harvesters, irrigation systems, sensors for precision agriculture, and fertilizer. In the service sector, the novel solutions recently developed in the financial system, for example, depend on computers and data transmission networks supplied by industry, Wongtschowski added. “The dynamism of Brazil’s agribusiness and service sectors is directly linked to the existence of a competitive industrial sector. And industry will remain competitive only if it innovates,” he said.

Lack of an entrepreneurial state

For Carlos Américo Pacheco, CEO of FAPESP, innovation is a fairly recent item on the public and private agendas in Brazil but is now central for the Science and Technology Ministry and Economy Ministry, and for research funding agencies worldwide, including FAPESP.

“Innovation has become a permanent agenda in Brazil, and yet we have to acknowledge that our country isn’t doing well in this regard,” he said. “For all the significant effort to innovate made in the last 20 years, Brazil’s innovation performance hasn’t been satisfactory.”

One reason for this may be the lack of an entrepreneurial state, according to Jorge Guimarães, head of the Brazilian Company of Research and Industrial Innovation (EMBRAPII).

“Since the end of the Second World War, Brazil has established the main pillars [to stimulate innovation], such as a supply of talented professionals, strong academic institutions and transnational corporations, which already existed here in the 1950s. Yet at no time in this period have we had an entrepreneurial state,” Guimarães said.

“We keep shirking the need for the state to participate heavily in subsidizing and extending reimbursable funds for innovation, which entails risk. Companies won’t take out loans and run the risk of creating innovations.”

The main research funding agencies, such as the National Council for Scientific and Technological Development (CNPq), the Education Ministry’s Coordination for the Improvement of Higher Education Personnel (CAPES), and FAPESP, were established in the post-war period, when countries like the United States were pledging to increase investment in R&D.

“These funders of basic research and human resource formation tackled the challenges with great efficiency, and we now have a strong group of entities in Brazil with substantial capacity to pursue this mission,” Guimarães said.

For Fernando Galembeck, principal investigator for the National Institute of Science and Technology in Functional Complex Materials (INOMAT), Brazil’s entire innovation ecosystem needs to be strong.

“The most important element of this ecosystem is talent – people who know how to work in diversified teams. To have innovation, we need to bring together many competencies,” he said.

INOMAT is one of the National Institutes of Science and Technology (INCTs) funded by FAPESP and CNPq in São Paulo state.

A recording of the event (in the original Portuguese) can be watched at: fapesp.br/15350.