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Foundation stone

Federal government launches program that offers R$ 450 million in non-reimbursable funds for innovative companies

JAIME PRADESThe federal government has put into practice the provisions of the Law on Innovation that allows non-reimbursable public funds to be set aside for companies that develop innovative products and processes. On September 6, the Ministry of Science and Technology (MCT), through the intermediary of the Financier of Studies and Projects (Finep), launched the Economic Subvention Program, which comprises two public invitations in which R$ 450 million is offered over the next three years. The main invitation offers R$ 300 million to the areas considered strategic in the government’s Industrial, Technological and Foreign Trade Policy (Pitce), such as the sectors of drugs and medicines, semiconductors and capital goods with a focus on biofuels and solid fuels, besides promising areas like biotechnology, nanotechnology, biomass and alternative energies. “But companies from any areas can present their projects, because R$ 90 million of the total available will be reserved for actions in areas not considered by the Pitce” says Rogério Amaury de Medeiros, Finep’s planning superintendent. “It is very important for the companies to present themselves, because the demand for this notice will help us to map the demands and plan new public notices. Our expectation is great, but we don’t know whether 100 projects will appear or 500” Medeiros says.

The second notice, which is worth R$ 150 million, will not involve the distribution of funds to begin with. It is going to support the Research in Companies Support Program (Pappe), operated by Finep in partnership with regional agents, such as research support foundations, state secretariats and development banks. The objective of the notice is to identify and to accredit the regional partners, in order to distribute the funds to the companies through them, at a second moment.  Still in this year, a third notice, with R$ 60 million, should be issued, for subsidizing the contracting of masters and doctors by companies. Part of the costs of the companies with the salaries of these professionals may be reimbursed by the government for a period of three years at the most, as established by the so-called “Lei do Bem”, a set of tax incentives for R&D to boost innovation (11196/2005). The measure is trying to fight another blemish: the still small presence of scientists working in company research and development. According to a survey carried out by the IBGE in 2002, there are fewer than 29 thousand researchers working in companies in Brazil, against 94 thousand in companies in South Korea and almost 800 thousand in those of the United States.

The application of non-reimbursable public funds in companies was not viable before the Law on Innovation. The legislation used to allow investment in the private sector only in an indirect way, by means of a stimulus for partnerships between scientific and technological institutions and the private sector. “Brazil is now beginning to use a public policy mechanism that has already been used for a long time by developed countries” said Finep’s president, Odilon Marcuzzo do Canto. “The publication of the notices is a step that took time, but even so is a positive sign of support for research in companies” says FAPESP’s scientific director, Carlos Henrique de Brito Cruz. “This expedient is widely used by all the developed countries and seeks to create the conditions for the companies to be able to face up to the high risks of investing in innovation” he says.

Right direction
Subvention for technological activities in companies is one of the few spaces allowed countries, in the midst of the restrictions on subsidies in the productive sector imposed by the World Trade Organization, observes Sérgio Queiroz, a professor from the Scientific and Technological Policy Department of the Geosciences Institute of the State University of Campinas (Unicamp) and deputy secretary for Science, Technology and Economic Development of the State of São Paulo. “The public invitations are just a first step, but they are concrete initiatives and are in the right direction” says Queiroz.

Innovation is crucial for giving companies competitiveness and developing the economy. The Brazilian indicators show that the country’s private sector has a low capacity for innovation. The National Technological Innovation Survey (Pintec) of 2003 recorded a fall in the number of Brazilian companies that are doing research and development on an ongoing basis – there were 2,432 in 2003, against 3,178 in 2000, in a universe of over 10 thousand companies surveyed. Amongst them, only 1,200 had differentiated products capable of putting them in the leadership of the Brazilian market, and only 177 boasted innovative processes with a worldwide impact. The percentage of the companies’ sales invested in research and development also dropped, from 3.8% in 2000 to 2.5% in 2003. This performance set the alarm bell ringing amongst authorities and businessmen. In June 2006, the National Confederation of Industry (CNI) established targets to be met by 2010. Amongst them, the number of innovative companies up to the national standard must grow to at least 4 thousand, and those up to the international standard to over 500. For the CNI, at least 50% of the public incentive intended for scientific and technological development needs to be allocated directly in the companies, in the form of subventions and financings, if the country wishes to reach these targets.

It is reckoned that the Brazilian state would need to invest around R$ 3 billion in encouraging research inside companies, in the form of subsidies and technological orders. “Except that this R$ 3 billion must be injected in such a way that for each R$ 1 billion invested by the State, the companies put in R$ 4 billion” says Brito Cruz, from FAPESP. It is the federal government’s intention to issue, from now onwards, at least two subvention notices each year. “This first experience privileges the sectors considered strategic, but this criterion is not necessarily going to be repeated in the next notices” says Rogério Amaury de Medeiros, from Finep.

Anyhow, Finep’s expectation is that this initial R$ 450 million have a measurable impact on the capacity for innovation in some areas. “I believe that we have the conditions for making a lot of headway in areas like software and drugs” Medeiros says. Finep admits that its effort left out a weak point in the companies. chain of innovation: the absence of a national policy on technological orders, in which the public authority contracts and partly subsidizes research in the public interest carried out by the companies.

By means of this instrument, the state, instead of buying indiscriminately for the lowest international price, opts for the development of the product by a domestic company. In the United States, about US$ 20 billion a year is spent on technological purchases by government agencies. “Brazil was once strong in this, but has moved away from this path” says Sérgio Queiroz, from Unicamp. The telecommunications industry developed a lot thanks to the power of state. Embraer, today an example of an innovative Brazilian company, would perhaps not have consolidated itself without the orders that the government made with the company, particularly in its early days.

Another promising bit of news in the field of innovation was the launch of the Technological Investigation Program (PIT), which brings together Unicamp, the University of São Paulo (USP), the Institute for Technological Research (IPT) and the Institute of Nuclear Energy and Research (Ipen). The objective of the program is to map the commercial viability of innovative technologies developed by these institutions and to train pupils to investigate and to qualify these technologies. In the next two years, each institution will choose technological innovation projects under way in their laboratories, in a total of 120 technologies.

The process will be conducted with the support of student scholarship holders, and will take its bearings on the first experience of the PIT, carried out recently in Campinas, which evaluated 60 technologies produced by Unicamp in the areas of New Materials, Ecobusiness, Health and Agribusiness, amongst others. “The activities performed by the PIT act as support for disseminating the technologies generated in the institutions” says Roberto Lotufo, a professor and the executive director of Unicamp’s Innovation Agency (Inova), who leads the carrying out of the program. “The idea is to turn each technology studied into what we are already doing in the Innovation Agency at The State University of Campinas (Unicamp), when we look for companies to license patents. The businessmen are looking for basic information about the commercial viability and the application of a given technology, and their creators are not always prepared to respond.”

After being trained, the pupils responsible for the advancement of the project are beginning to investigate the technologies by means of interviews with researchers. The intention is to map the differentials and limitations of each project. At the end, there will also be an economic viability study of the initiatives, dimensioning them to the domestic and international markets. All the projects with a good potential may be transferred to society by two routes: by generating small companies born in the research institutions themselves, or by means of licensing that will be done with already constituted private groups. “This is a measure to improve the quality of the patents of the academic institutions in São Paulo” says Brito Cruz.