Information Technology in Brazil: New Plan to Boost Innovation
Technological innovation is the foundation of a new industrial policy that the Brazilian government will deploy to improve the country’s competitiveness in domestic and foreign markets. The program will provide a variety of financial incentives for Brazilian innovators in IT as well as other industry sectors between now and 2014.
The new Competitive Development Policy (CDP) will be presented to entrepreneurs by President Dilma Rousseff at a meeting expected to take place on August 2. The initiative is coordinated by the Ministry of Development, Industry, and Overseas Commerce (MDIC) and promises to continue the Productive Development Policy (PDP), which prevailed from 2008 to 2010 under former president Luiz Inácio Lula da Silva.
Since Dilma took office in January/2011, representatives of the information and communication technology industry and other segments of the economy have pushed for measures to improve production capacity and expand exports, which have been heavily affected by aggressive competition from Asia and overvaluation of the Real.
IT companies could be a major beneficiary of the new Dilma policy. If businesses are given incentives to invest in innovation, they will in turn need to invest in more technology solutions, including business intelligence, development tools, ERP, supply chain management, security, and cloud computing. The new government measures will certainly boost the domestic software market.
According to the Ministry of Science and Technology (MCT), Brazil invested US$24.2 billion in R&D in 2010, equivalent to 1.19% of GDP. The rate is still low compared with the amounts applied in this area in Japan, China, and Germany. “We need more innovation to stop exporting commodities,” said the minister of MCT, Aloizio Mercadante.
In parallel with the new industrial policy, the MCT is drawing up the second edition of the Plan of Action on Science, Technology, and Innovation (PACT 2) for the period 2011-2014, which includes measures to expand R&D efforts in Brazil.
As a practical matter, the MCT increased by 50% the resources of FINEP (Financier of Studies and Projects), an agency similar to MCT that finances innovation in small companies. Its budget for R&D in 2011 rose from R$4 billion to about R$6 billion.
MCT also has a plan to transform FINEP into a public bank that has more capacity to finance innovation. This project still requires approval by the Central Bank of Brazil (Bacen).
The change would endow the institution with more money to fund research and innovation in small to medium-size enterprises, which are not as well served by the National Bank for Economic and Social Development (BNDES), a public bank directed more toward working with big companies. The expectation is that by 2014 FINEP will have $50 billion available for funding innovation.
These measures taken by the government can help Brazil improve its role and reputation as an innovator. The country’s ranking climbed 21 positions in the 2011 Global Innovation Index, produced by INSEAD (an international business school): Last year, Brazil’s environment for innovation was rated 68th in the world. This year, Brazil is rated 47th. The Latin American country that scored highest on the list is Chile at 38th. (Switzerland was ranked number 1.)
Going forward, Brazil’s ability to develop innovative products and services, and prosper from exporting its technology skills, will depend greatly on how much the federal government and entrepreneurs are willing to invest in the country.