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investment

Advances and problems

Federal government creates research institutes, publishes measures to foster innovation, and releases funds for the CNPq, as an emergency measure

NEGREIROSA little less than three months from a change of command in the country, the federal government has announced the creation of three new research institutes in strategic areas – Bioamazon, Semi-Arid Northeast and nanotechnology – and tax incentive measures, to encourage domestic investments in innovation. Simultaneously, it found itself obliged to release, as an emergency measure, R$ 60 million for the Ministry of Science and Technology (MCT), of which R$ 50 million is intended to mitigate the dire situation which the National Council for Scientific and Technological Development (CNPq) is going through. It is an amount of funds that partly responds to the council’s urgent needs.

With 45% of the budget provided for this year subject to constraints – that is, R$ 279 million, out of a total of R$ 620 million -, the CNPq had been delaying the release of funds approved since 2001 for several research groups from all over the country, thus halting or slowing down of the pace of their activities. Now, it will be able to provide a solution for at least part of the finance agreed last year.

This small sample of the recent federal actions in the area of science and technology is a good illustration of federal policy for the sector in the current government. An unbiased balance shows that this policy was responsible for undeniable advances to guarantee science and technology the determinant role that it must have in national development, such as the creation and regulation of the 14 sectorial research funds, set up over the last two years, under the command of the MCT; the law on innovation sent by the administration to the Congress, which is likely only come into the agenda for debating and voting next year; and the expansion of the interchange between Brazil and nations that can become key partners to put the country in a better position in S&T internationally.

But, in parallel with the positive changes, chiefly in the legal framework that sustains the sector, the balance also reveals problems, such as, for example, the scarcity of funds for important groups and institutions in the national system for science and technology, and the significant reduction in federal investments in grants (from the CNPq and from Capes – Coordination for Perfecting Higher Level Personnel) in the State of São Paulo, from 1995 onwards (please see issue 63 of Pesquisa FAPESP, of April 2001).

Tax incentives
The federal government’s most recent decision to stimulate innovation expressed itself in three articles included in Provisional Measure 66, published on August 29, which authorize private companies to deduct from Corporate Income Tax and from the Social Contribution onNet Profits part of the investments in research and development (R&D). In the case of companies that have registered patents for products, the deduction will be even greater, because, besides the rebates already provided for, they will be able to deduct these expenses a second time, when determining the actual profit for the purposes of Income Tax. To do so, the patent will have to be registered with the National Institute for Intellectual Property (Inpi in the Portuguese acronym), or with the other three examining agencies recognized in Brazil: the European Patent Office, the Japan Patent Office and the United States Patent and Trademark Office. The deductions are only valid for the cases of payments made to companies or private individuals resident in the country.

In the calculations of the MCT, the tax deductions will be, on average, 30% of the total amount applied. “The world average for tax breaks is 10%”, Minister Ronaldo Sardenberg points out. He says that the tax incentive measures complete a package of actions adopted by the federal government since 2000, which have had the objective of stimulating companies in the country to invest in R&D.

The Law on Innovation should strengthen the incentives. The intention with it is to make more flexible the relationship between researchers, research institutes and private companies, and to speed up the development of new technologies for products, processes and services. The project for the law provides, for example, for innovative products and processes, obtained by research institutes, to be transferred to private companies interested in the production of goods and services; for companies to share laboratories and equipment with public research institutions, for which they would be paid, and when the partnership results in patents, for the researcher to share in the economic gains. Both the tax breaks and the Law on Innovation are included in a set of long term strategic guidelines, brought together in the White Book on Science, Technology and Innovation, also published last August.

It was drawn up following a broad debate sponsored by the MCT all over the country last year, which culminated in the National Conference for Science, Technology and Innovation. This took place in Brasilia in September 2001, and the book is a kind of synthesis of that meeting. It draws the lines for a national project for development in S&T over the next ten years. The document points out as one of the main challenges for the development of S&T and Innovation in the country a rise in investments in R&D, from the current 0.9% of the Gross Domestic Product (GDP) – adding in there the estimated R$ 300 million or so of the Sectorial Funds for this year, to a level of 2%, over a ten-year term. This forecasts a scenario of annual 4% growth in GDP. To meet this target, investments in R&D should grow at an average annual rate of 11% up to 2012, a task that the public sector needs to share with private companies, as it will call an increase in the order of 7% for annual expenditure. For the private sector, the average annual growth will have to be in the order of 15%.

The current picture is far away from this ideal scenario. Today, about two thirds of Brazilian spending on R&D stems from the public sector, with one aggravating factor: the budgetary resources of the Union are subject to cuts and constraints – of the kind that have the budget of the CNPq -, jeopardizing any attempt at planning, even in the short term. Next year, at least, this problem will, in principle, be abated: the Law on Budgetary Guidelines (LDO) for 2003, already approved by the National Congress, contains a provision that prevents any constraint on funds for science and technology that have been approved by the Legislative. This is something that already happens with areas of health, education and social welfare. The MCT’s budget for 2003, if approved by the Congress, will be R$ 2,6 billion, taking into account the four new funds that will start to work (health, agribusiness, aeronautics and biotechnology).

It is true that, even before the publication of the provisional measure, the federal government had already adopted some measures to stimulate private investments in R&D. These include the new Law on Information Technology, law 10332, of 2001, which allows fiscal funds to be invested in equalizing interest rates, in direct subsidies for technology-based innovative companies, and in encouraging venture capital – and the creation of the University-Companies Interaction Fund, known as the Green-Yellow Fund, in 2001. Anyway, these instruments have proved insufficient for meeting the demands of the companies, and the government’s intention is that private investments by the market should be more spurred with the new tax break measures and the mechanisms provided for in the Law on Innovation.

New institutes
Regarding the research institutes created to start to work in 2003, it is worth pointing out that they are a result of the government adoption of some recommendations of the Tundisi Report. This is a document drawn up by a commission made up of 72 specialists – under the coordination of researcher José Galízia Tundisi, former president of the CNPq and now a director of the International Institute of Ecology, headquartered in São Carlos -, which, during a year and a half, analyzed and assessed the missions of 21 research institutes linked to the MCT, with the objective of proposing new work policies.

The MCT’s budget for 2003 has set aside R$ 25 million for the creation of two new institutes and for incorporating the Bioamazon Institute, a social organization [RJS14] for research into biodiversity, currently supervised by the Ministry of the Environment. “We are performing a script”, says João Evangelista Steiner, the secretary of the MCT’s Coordination of Research Units. But, like the Law on Innovation, the creation of the new institutes also depends on the National Congress accepting the budgetary proposal put up by the Executive.

The Bioamazon Institute will be able to rely on R$ 10 million a year. Its task will be to transform the results of research carried out by the local laboratories and universities into products and wealth for society. The MCT now has three research units in the Amazon region: the National Research Institute for the Amazon [RJS15] (Inpa), the Emilio Goeldi Museum of Pará [RJS16], and the Mamirauá Sustainable Development Institute. The Tundisi Report points out, however, that one of the MCT’s main priorities should be to put together jointly with other organs, a strategic S&T plan for the region. It stresses that one of the most dramatic challenges “is the shortage of qualified human resources, fixed in the region”.

The Institute of the Semi-Arid of the Northeast, with a budget of R$ 8 million, will have as its main mission the coordination of research for developing technologies in the areas of water resources, desertification control, climate and poverty. With over 25 million inhabitants, the region has immense potential for production, in spite of being one of the areas most deprived of science and technology resources in the whole country, according to Steiner. He recalls, for example, the results of the work by the Tropical Semi-Arid Center of the Brazilian Agricultural Research Corporation (Embrapa), which has fostered “a veritable revolution” in cultivating irrigated fruit in the regions of Petrolina, in the state of Pernambuco, and Juazeiro, in the state of Bahia.

In spite of the presence in the region of the Xingó Program, a further education center that acts in 29 municipalities from the lower São Francisco river, the Tundisi Report suggests that the MCT make “an additional S&T effort for the semi-arid”, and proposes the creation of the institute, to be headquartered in Juazeiro, and with its work concentrated on water resources and biodiversity in the caatinga (the semi-arid vegetation in the area) and for institutional support to the Millennium Institute for the Semi-Arid. The third institute, for Innovation in Nanotechnology, will have a budget of R$ 7 million a year. It will have a decentralized network, to operate in a network, connecting research institutions and industries. “It won’t be a basic research industry, properly speaking, but one aimed at ventures in the area, so as to generate wealth for Brazilian society”, says Steiner.

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