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Innovation for

productivity growth
Fernanda De Negri
Director
Division of Production and Innovations Studies – DISET
Institute for Applied Economic Research – IPEA
PRODUCTIVITY
IN BRAZIL
Productivity estimates in Brazil: annual growth
rates, several periods.
Labor TFP using
Author Period of time TFP
productivity human capital

Bonelli (2014) 2003 e 2013 2,4% 1,3%

Ellery (2014) 1970-2011 1,6% 0,72% - 0,24%

Cavalcante e De Negri (2014) 2001-2009 1,17%


Cavalcante e De Negri (2014) 1992-2001 1,09%
Bonelli e Bacha (2013) 1993-1999 0,36% 0,24%
Bonelli e Bacha (2013) 2000-2009 0,67%
Bonelli e Bacha (2013) 2000-2011 1,03%
Bonelli e Veloso (2012) 1995-2003 - 0,8%
Bonelli e Veloso (2012) 2003-2009 1,2% 1,7%
Ellery Jr. (2013) 1992-2002 0,91%
Ellery Jr. (2013) 2002-2011 1,40%
Ferreira e Veloso (2013) 1993-2003 - 1,2%
Ferreira e Veloso (2013) 2003-2009 1,5%
Squeff (2012) 2000-2009 0,9%

Barbosa Filho, Pessôa e Veloso (2010) 1992-1999 1,4%

Barbosa Filho, Pessôa e Veloso (2010 1999-2007 0,11%

Source: De Negri and Cavalcante (chapter1) in De Negri, F. e Cavalcante. L.R.M.T. (2014)


Produtividade no Brasil: desempenho e determinantes
Labor productivity: annual growth rates (2000
to 2009)

Services 0.6%

Manufacturing -0.8%

Mining 2.0%

Industry (total) -0.4%

Agriculture 3.8%

Total 1.0%

-2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0%


Labor productivity: the distance between
Brazil and other countries

The most productive country /


Brazil / Less productive country
Economic Sector Brazil
1995 2000 2005 2009 1995 2000 2005 2009

Agriculture 5,0 5,4 4,8 4,5 16,4 21,0 24,8 21,7

Mining 9,2 4,7 3,0 2,3 6,2 5,9 3,6 3,9

Manufacturing 5,4 4,2 2,9 2,1 4,7 4,9 7,4 9,0

Construction 6,9 5,9 3,2 2,3 5,7 6,2 6,8 6,5

Services 7,9 5,7 4,0 2,9 5,6 5,9 6,5 6,4

Total 8,6 6,4 4,2 3,0 6,6 6,6 7,3 7,1

Miguez e Moraes (chapter 7) in De Negri, F. e Cavalcante. L.R.M.T. (2014) Produtividade no Brasil:


desempenho e determinantes.
Based on the World Input-Output Database (WIOD)
The main causes of low productivity are
related to:

 Technology and Innovation, but also


to:
 Infrastructure
 Education (also affect innovation)
 Competition (also affect innovation)
 Business environment (also affect
innovation)
INNOVATION POLICIES
IN BRAZIL
 The percentage of firms that have declared getting governmental
support to innovate increased from 19% in 2003 to 34% in 2011
 Most of public support (75%) is related to machinery financing
programs
 The percentage of firms benefited from specific innovation instruments
increased from 4,6% to 8,6% of innovative firms between 2003 and
2011
Main innovation policies in Brazil
Value in 2012 (current
Innovation and S&T policies and instruments (main sources of funding to S&T in Brazil)
Reais – mi)

Tax exemption created for companies who invest


in R&D, created by Law Nº 11,196/2005 (“Lei do
Bem”) 1,476.8

Tax Breaks Tax exemption for companies in the ICT sector,


created by Law Nº 8.248/1991 and Nº
10.176/2001 (“Lei de Informática”) 4,482.2
Other tax breaks 464.0
TOTAL (tax breaks) 6,423.0
Total volume operated by FINEP 1,800.0
Subsidized credit for innovation
Total volume operated by BNDES 2,200.0
(disbursements)
TOTAL (credit) 4,000.0
Subnational (State) investments 7,033.7

Central government (Federal) investments 18,387.9


S&T Public Investment
TOTAL (excluding post grad expenditures) 25,421.6
TOTAL public S&T investment 40,045.0
Electricity Regulatory Agency (ANEEL) R&D
Counterpart in R&D by companies in program (approximate values) ~ 300.0
regulated sectors (private compulsory The National Petroleum Agency (ANP) R&D
investment) program 1,226.7
TOTAL 1,526.7
Tax breaks to innovation: 2000 to
2013 (R$ bi)
8.00 0.20%

6.99
% of GDP total tax breaks 0.18%
7.00

6.42 0.16%
6.00
5.81
5.67 0.14%
5.36
5.00 4.98 0.12%

4.00 0.10%
3.93

0.08%
3.00
2.66
0.06%
2.00

1.63 0.04%
1.31 1.24 1.23
1.00 0.94 0.02%

0.21
- 0.00%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Credit for innovation: 2007-2014
(R$ bi)
10.0
FINEP contracts FINEP disbursements
9.0 8.7
BNDES disbursements
8.0

7.0
6.2
6.0

5.0
4.5

4.0
3.3
3.0 2.7
2.5
2.2
2.0
2.0 1.7 1.8 1.7 1.8
1.5
1.2 1.4
0.8 0.9
1.0 0.6 0.7 0.6
0.4
-
2007 2008 2009 2010 2011 2012 2013 2014
FNDCT’s budget: 2000-12
3.5
Demand driven: Only
30% of the resources 3.11
2.98
are used in projects 3
2.77
with companies
2.5 2.36

1.99
2
No focus
1.52
1.5

1.10
1
0.78
0.63 0.63

0.5 0.37 0.33


0.18

0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
POLICY
RECOMENDATIONS
Some ideas for debate
1. Increase mission oriented S&T
spending
Public S&T spending in Brazil is not mission-oriented

MINISTRIES % DEPARTAMENTS %
Ministry of Science,Technology and Department of Defense (DoD) 49%
Innovation (MCTI) 36%
Department of Health (DHHS) 23%
Ministry of Education (MEC) 19%
Ministry of Agriculture (MAPA) 13% Departmente of Energy (DOE) 8%
Ministry of Health (MS) 11% NASA 9%
Ministry of Development, Industry National Science Foundation (NSF) 4%
and Foreign Trade (INMETRO and
Departament of Agriculture (USDA) 2%
INPI) 6%
Ministry of Planning (IBGE) 6% Others 5%

Only 30% of S&T investments are More than 90% of S&T investments
attached to institutions with are mission-oriented
problem-solving missions
2. Reformulate the Procurement Law including
the possibility of R&D acquisition
There is no clear regulation about the acquisition of R&D by
public sector in Brazil.
 The Brazilian Procurement Law (Lei 8.666) doesn’t mention R&D
acquisition.
 The law establishes, since 2010, a margin of preference for products
produced in Brazil (up to 20%) and for products with Brazilian technology
(up to 25%)
 There is no a special part devoted to R&D acquisition as there is in the
American Federal Acquisition Regulation.
 The Innovation Law (20th Article) prescribes that Brazilian government can
hire a company to do R&D to develop new products and process.
 However, this possibility has never been used up to now (difficulties of
implementation?)
 The Knowledge Platform Program (launched last year but not
implemented) is a good example of using public procurement to foster
innovation.
3. Diversify Brazilian S&T system
 The Brazilian S&T institutions are mainly public. It’s necessary to allow
and facilitate the operation of private research institutions.
 Reinforce different models of institutions, such the so called Social
Organizations (OS), that are Government-owned and privately-operated
institutions.
 Create different ways in which the public sector can foster innovation,
besides the existing ones (grants, credit and direct investment in
public research institutions): i) R&D acquisition; ii) Venture capital and
seed money funds; iii) Cooperation agreements and so on.
 Create different models of public agencies to foster innovation: the
recent creation of Embrapii (inspired in the Fraunhofer model) is a
good example of institutional diversification. Others examples are
necessary.
4. Improve Business environment to
innovation
 Besides improving general business environment, allowing more
competition and entrepreneurship, specific actions are needed:
 Reduce bureaucracy associated with research and development.
Examples: biological research; patent application mechanisms…
◦ One important improvement was the Biodiversity Law (recently approved).
 Reformulate and update the Innovation Law. Created in 2004, some
articles have never been used.
 Facilitate the ways for researchers and professors in public institutions
to work for companies.
◦ The S&T Code (now in National Congress) adress some of the legal problems.
5. Build a more open and competitive
economy

 Brazil is a very closed economy. It’s necessary (not


sufficient but necessary) to open the economy and to
import more technology and knowledge.
 Increase the internationalization of Brazilian Science (the
“Science without borders” program is a good iniciative)
 Facilitate imports of research equipments and inputs
 Increase the presence of foreign reserachers in Brazilian
Institutions.
6. Invest in big science and research
infraestructure
 Brazil needs scale up it’s research infrastructure
 Create new, big and mission oriented research institutions
 The size of Brazilian research laboratories is not enough to make a
competitive science.

7. Improve monitoring and evaluation


indicators
THANK YOU!
fernanda.denegri@ipea.gov.br