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sectoral funds

Incentive for innovation

Decree incorporates more funds in the Green-Yellow Fund

The federal government has expanded resources for the Green-Yellow Fund for University and Company Interaction (CT-Green-Yellow) and created new instruments for supporting R&D activities in the private sector. The new measures were approved by the National Congress in December last year and regulated by decree on April 11 last.

CT-Green-Yellow is made up of a portion of the funds from the Contribution of Intervention over Economic Domain (Cide) which is charged on companies remittances abroad for the payment of royalties, and on technology transfer services, amongst others. Last year, the fund invested R$ 152.2 million in 231 projects. It has now started to incorporate amounts relating to tax breaks regarding to the Tax on Industrialized Products (IPI in the Portuguese acronym), provided for in the new Law on Information Technology. This year, these funds will add another R$ 70 million to CT-Green-Yellow, and, by 2009, they will add up to R$ 2 billion, intended to subsidize research and development projects.

The expansion of CT-Green-Yellow has made it possible for new ways of encouraging business innovation to be adopted, such as the granting of a economic subsidy to any company carrying out Technological and Industrial Development Programs (PDTI) or Agricultural and Cattle Raising Technological Development Programs (PDTA). Until now, the two programs have been ensuring the companies taking part in them exemption from Income Tax (IR) and the IPI for their investments in research, which favors mainly the large companies that have taxes to pay. With the subsidy policy provided for by the decree, small and medium companies will also be benefited.

The decree also authorizes a reduction in the costs of the finance operations for technological innovation carried out by the Financier of Studies and Projects (Finep), which at the moment works with the cost of the Long Term Interest Rate (TJLP in the Portuguese acronym) plus 2%, and will now be operating with a lower TJLP. “The difference will be covered by the fund”, explains Carlos Américo Pacheco, the MCT’s executive secretary. Finep has a portfolio of R$ 1.8 billion in credit for companies. “The expectation is for this amount to double with the equalization of interest rates”, foresees Jorge Ávila, from Finep.

The expansion in the resources for CT-Green-Yellow will also finance acts of incentive for forming Venture Capital Funds. The decree authorizes the use of money resources from the fund, through Finep, for a direct participating stake in the company’s capital, particularly those that have been born recently, or by means of venture funds. “There is a repressed demand for this kind of incentive for innovation in Brazil”, explains Mario Bernardini, who represents the industrial sector in CT-Green-Yellow.