innovation in brazil: challenges, opportunies and barriers · innovation in brazil: challenges,...
TRANSCRIPT
Alex da Silva Alves College of Agriculture “Luiz de Queiroz” - Esalq
University of São Paulo
Innovation in Brazil: challenges, opportunies
and barriers
Presentation structure
• The context for innovation in Brazil
– Economic growth perspectives
– R&D spending
– Profile of entrepreneurs
– Innovation and entrepreneurship financing
– Barriers to innovation and entrepreneurship
• Islands of Excellence in Brazil
• Some final words
Economic growth perspectives
International Monetary Fund. World Economic Outlook. Washington, DC, April 2013.
Economic growth perspectives
• Real GDP growth in the LAC region declined to 3 percent in 2012, from 4½ percent in 2011, reflecting a slowdown in external demand and, in some cases, the impact of domestic factors.
• The deceleration was particularly pronounced in Brazil, the region’s largest economy, where large policy stimulus failed to spur private investment.
• The slowdown in Brazil spilled over to its regional trading partners, especially Argentina, Paraguay, and Uruguay.
International Monetary Fund. World Economic Outlook. Washington, DC, April 2013.
Economic growth perspectives
International Monetary Fund. World Economic Outlook. Washington, DC, April 2013.
R&D spending
World Ranking
Company Industry R&D-
2011 €m
R&D 1-year growth
R&D CAGR-3y Sales-
2011 €m
Sales 1-year growth
92 Vale Mining 1190,0 96,6% 4,2% 45590,8 46,0
96 Petroleo Brasiliero
Oil & gas producers 1149,6 67,9% 8,0% 101524,2 22,6
748 CPFL Energia Gas, water & multiutilities 88,6 10,2% 35,7% 5307,1 -1,7
763 EMBRAER Aerospace & defence 85,9 72,8% -23,4% 4098,8 10,8
998 Totvs Software & computer services
60,5 -3,0% 27,9% 531,9 13,3
1068 Weg Industrial engineering 56,0 33,7% 14,9% 2157,7 18,2
1347 Braskem Chemicals 41,2 25,8% 13794,1 30,1
The most R&D-intensive Brazilian firms
Battelle. 2012 Global R&D Funding Forecast. Bruxelles, 2012.
Company Beta
coefficient
Ibovespa 1,00
Vale 0,92
Petrobras 1,05
Totvs 0,84
CPFL 0,05
Braskem 0,66
Embraer 0,51
The most R&D-intensive Brazilian firms: impact on share prices
Profile of Brazilian entrepreneurs
• Since its first edition a decade ago, the Global Entrepreneurship Monitor (GEM, 2012) continues to claim entrepreneurship in Brazil as mostly driven by need than by the exploitation of a market opportunity.
• According to GEM, there are 27 million people in Brazil directly involved with some kind of entrepreneurial activity. – This is ¼ of the population aged 18-64.
Profile of Brazilian entrepreneurs
• Responsible for over 60 per cent of jobs in the country, SMEs generate 20 per cent of GDP and account for 99 per cent of the 6 million companies working in Brazil (GEM, 2012).
• The relative importance of these segments has grown consistently and the growth of its turnover exceeds the average of the Brazilian economy.
Innovation and entrepreneurship financing
• Credit market in Brazil is more targeted to the consumer than to the producer, to short than to long term, and reaches more high than low income borrowers.
• A market for private R&D investment is mainly available through public finding sources:
– Brazil’s innovation agency - FINEP www.finep.gov.br
– Brazil’s Development Bank - BNDES www.bndes.gov.br
– The Brazilian Research Council – www.cnpq.br
Innovation and entrepreneurship financing
R&D and proof of concept financing Entreprise financing
Brazil’s Innovation Agency (FINEP) provides funding on a sunk-cost or reimbursable basis up to R$ 1 million.
Public funding from the Brazilian Development Bank (BNDES) and other sources through the CRIATEC seed fund - up to R$ 3 million.
Brazil’s Ministry of Science and Technology (MCT), the National Research Council (CNPq) and States’ Research Support Agencies provide financial resources for business plan development, proof of concept and R&D on a sunk cost basis.
Private funding from seed funds (scarse but growing with the entry of FINEP and BNDES as general or limited partners). Private funding from business angels (still scarse and limited to larger and richer regions, but growing in importance) – up to R$ 1 million. Private VC funding –available but more scarse for firms after the 2008 turmoil.
On May 2013 FINEP and BNDES annouced a R$ 1 billion joint financing scheme with a mix of credit and sunk cost funding to projects that boost the Brazilian agro-industry value chain (Inova-Agro) – up to R$ 30 million per project.
Main funding sources for entrepreneurship and innovation
Innovation and entrepreneurship financing
2011 2012 Venture Capital
Mezzanine Private Investments
In Public Equity - PIPE
Others
Modes of Private Equity Investments in Brazil
ABVCAP – Brazilian Venture Capital Association. Available at http://www.abvcap.com.br/Download/Estudos/2325.pdf
Brazilian R$ (billions)
Innovation and entrepreneurship financing
ABVCAP – Brazilian Venture Capital Association. Available at http://www.abvcap.com.br/Download/Estudos/2325.pdf
Percentage (%) of Private Equity Investments in Brazil – by Sector
Innovation and entrepreneurship financing
ABVCAP – Brazilian Venture Capital Association. Available at http://www.abvcap.com.br/Download/Estudos/2325.pdf
Percentage (%) of Private Equity Investments in Brazil – by Exit Strategy
IPO/Mezzanine Sell to strategic investor
Others/Not Informed
MBO Other VC/PE Funds
Private Equity Fund
Periodo of time
Cumulative return since IPO
Performance of Private Equity-backed Companies in Brazil
Innovation and entrepreneurship financing
Barriers to innovation and entrepreneurship
Entrepreneurship Barometer 2013 & Valor Econômico (Oct, 7th 2013).
2600
347
0
1000
2000
3000
Brazil G20
Time spent with tax issues - hours (2010/2012)
Taxes and regulation Brazil G20 Time frame
Number or procedures to start a new business (number) 12,0 7,6 2010/2012
Time to start a new business (days) 119,0 22,0 2010/2012
Costs to start a new business (% of per capita income) 5,8 9,4 2010/2012
Minimim capital required to start a business (% of per capita income) - 17,9 2010/2012
Cost of firing employees (weeks and salaries paid) 46,0 50,0 2007/2009
Tax and labour contributions (% of profits) 40,8 24,0 2012
Total tax rates (%) 69,3 49,7 2012
Total sales taxes (%) 19,0 14,2 2012
Barriers to innovation and entrepreneurship
OECD. Brazil STI Outlook. Bruxelles, 2012. Available at: http://www.oecd.org/brazil/sti-outlook-2012-brazil.pdf .
Barriers to innovation and entrepreneurship
• Before joining the WTO in 1995, the Brazilian patent office, INPI, could cap royalty payments and demand that local partners gain rights to imported know-how.
• The discovery of oil in ultra-deep waters offshore has helped to change attitudes. Firms drilling in the new fields must spend 1% of gross revenues locally on research and development.
The economist. Brazil: Getting serious about patents. November, 2012. Available at: http://www.economist.com/news/americas/21565606-getting-serious-about-patents-owning-ideas.
Barriers to innovation and entrepreneurship
• During the 1970s state investment made Brazil a world leader in sugar-cane ethanol. But that wave of innovation petered out.
• Mr Ávila of INPI hopes that more effective, and swifter, patent protection and a 2004 law granting universities greater rights to exploit spin-offs from publicly funded research will mean that innovation will now bear more fruit.
The economist. Brazil: Getting serious about patents. November, 2012. Available at: http://www.economist.com/news/americas/21565606-getting-serious-about-patents-owning-ideas.
Barriers to innovation and entrepreneurship
World Intellectual Property Organization (WIPO). 2012 World Intellectual Property Indicators. available at http://www.wipo.int/export/sites/www/freepublications/en/intproperty/941/wipo_pub_941_2012.pdf.
Based on WIPO data.
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10000
20000
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40000
50000
60000
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10000
12000
14000
16000
1998 2000 2002 2004 2006 2008 2010 2012 2014
Onl
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All
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Number of Patents Granted as Distributed by Year of Patent Grant
GERMANY
TAIWAN
UNITED KINGDOM
FRANCE
KOREA, SOUTH
ITALY
ISRAEL
CHINA, PEOPLE'S REPUBLIC OF
FINLAND
INDIA
SPAIN
RUSSIAN FEDERATION
BRAZIL
TURKEY
JAPAN
Barriers to innovation and entrepreneurship
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Number of Patents Granted as Distributed by Year of Patent Grant
TAIWAN
CHINA, PEOPLE'S REPUBLIC OF
INDIA
RUSSIAN FEDERATION
BRAZIL
TURKEY
Based on WIPO data.
Developing countries
Barriers to innovation and entrepreneurship
Country
CAGR
1999-
2012
Total Patents
granted
(1999-2012)
CHINA, PEOPLE'S REPUBLIC OF 36% 21.922
INDIA 23% 8.932
TURKEY 22% 426
SINGAPORE 14% 7.129
KOREA, SOUTH 11% 112.247
ISRAEL 10% 25.326
SPAIN 8% 8.489
BRAZIL 8% 3.087
TAIWAN 8% 125.749
AUSTRALIA 6% 29.236
AUSTRIA 5% 16.652
RUSSIAN FEDERATION 5% 3.593
CHINA, HONG KONG S.A.R. 5% 11.972
CANADA 4% 101.448
DENMARK 4% 13.866
FINLAND 4% 18.799
JAPAN 4% 904.801
NETHERLANDS 4% 42.143
GERMANY 3% 313.675
UNITED KINGDOM 3% 119.359
ITALY 3% 53.095
SWEDEN 3% 41.735
SWITZERLAND 3% 49.227
FRANCE 3% 119.182
Compounded Average Growth Rate for Selected Countries – Patents Granted 1999-2012
Based on WIPO data.
Barriers to innovation and entrepreneurship
Context
• Despite the aspects discussed so far, there are “islands of excellence” in Brazil.
• These are sectors and areas that gained scale by exploiting positive economic externalities derived by past state investments in agriculture, oil & gas, and infrastructure provision to universities.
Context
• The comprehension of innovation as a lever of competitiveness has increased in Brazil and contributed to the creation of a more receptive environment to entrepreneurship.
• Unprecedented levels of R&D investments (public + private):
– 2000: R$ 12 billion (€ 6,5 billion – money of the day)
– 2011: R$ 50 billion (€ 20,5 billion – money of the day)
Support institutions
The National Research Council (CNPq) is a federal support agency created in 1951. CNPq provides research grants to universities, researchers and firms cooperating with universities in science, technology and innovation projects. Funds provided are on a sunk cost basis. More at www.cnpq.br
Support institutions
The São Paulo Research Foundation – FAPESP – is an independent state foundation with the mission to foster research and the scientific and technological development of the State of São Paulo. FAPESP is the most important state research foundation in the country. It provides funds to researchers, firms and universities on a sunk cost basis. More at www.fapesp.br
Support institutions
.
“The Brazilian Development Bank (BNDES) is the main financing agent for development in Brazil. Since its foundation, in 1952, the BNDES has played a fundamental role in stimulating the expansion of industry and infrastructure in the country”. More at www.bndes.gov.br
Support institutions
The Brazilian Innovation Agency – FINEP – provides universities and firms with financial resources on a sunk cost and reimbursable basis. The aim of the Agency is to advance the country’s technological and entrepreneurial development through the financing of collaborative or individual projects. More at www.finep.gov.br
Research facilities
The Centro de Pesquisas Leopoldo Américo Miguez de Mello - Cenpes - is the Petrobras’ research unit responsible for R&D and engineering in simulation and production for energy-related areas. Created in 1963 in a area of 300000 m2, Cenpes is one the world’s most important applied research facilities. More at http://www.petrobras.com.br/
Research facilities
http://www.vale.com/PT/aboutvale/initiatives/itv/Documents/index_en.html
Research facilities
http://www.vale.com/PT/aboutvale/initiatives/itv/Documents/index_en.html
Research facilities
The Sugarcane Technology Center - CTC - is the largest research center for sugarcane in the world. CTC operates in the entire production chain of the sugarcane industry: from cultivation to final production of sugar, ethanol and energy. In one of its core areas, CTC performs the mapping of areas with low productivity and develops sugarcane varieties for these regions within eight years at most. In the past this period of time ranged from 12 to 14 years.
http://revistapesquisa.fapesp.br/en/2013/07/22/from-bagasse-to-innovation/
Agriculture
Develops Plene Cana that, according to the company, eliminates the need for nursery areas and reduces the use of heavy machinery harvesting, thereby preserving the soil. The company also claims that its product resists to some typical sugarcane pests.
http://revistapesquisa.fapesp.br/en/2013/07/22/from-bagasse-to-innovation/
Agriculture
http://revistapesquisa.fapesp.br/en/2013/07/22/from-bagasse-to-innovation/
Agriculture
http://revistapesquisa.fapesp.br/en/2013/07/22/from-bagasse-to-innovation/
Agriculture
http://revistapesquisa.fapesp.br/en/2013/07/22/from-bagasse-to-innovation/
Some final words
• The short availability of private money is still a concern for innovation take-up in Brazil. Macroeconomic aspects also contribute.
• (Private) investors complain about the scarcity of good projects.
• Although significant gains emerge, here and there, the participation of universities in the creation of internationally competitive startups is still very modest.
Some final words
• Government participation is fundamental. But the size and scale of some agencies end up inhibiting the willingness of the private sector to taken on more risks.
• The geographical mobility – a prerequisite for the attractiveness of bright professionals from inland and abroad – is reduced due to several factors (disadvantageous law, social aspects, urban disorder, poor infrastructure, education…).