Brazil as natural future economy

I visited Brazil in December 2011 for the first time in three years. In 2007 I lived more than a year in Brazil, learned speak fluent portuguese (after living two years in Argentina learning spanish and making Latin American Business studies) and worked in Finpro Brazil. I visited University of Sao Paulo (USP) Instituto de estudos Avançados (IEA) to understand better the historical development of Brazilian innovation system and future prospects.  During the flight back to Finland I decided to write on recent developments in Brazil.

Brazil is the only emerging BRICS (Brazil, Russia, India, China, South Africa) country that have not been discussed widely in Finland from innovation perspective. This is understandable as Brazil is seen distant geographically, culturally and linguistically to Finns and Finland poses weak historical political and economic relationship with Brazil. Other reason is that Brazil has been performing relatively weak in innovation performance caused by lack of coherent innovation policies, and protective legislation have been creating challenges for foreign investment (Brazil ranked 129th out of 183 countries in the World Bank’s latest Doing Business report) and innovation cooperation. However, there are signals on emerging innovation culture in Brazil and context related systemic approach need to be taken to increase strategic cooperation between Finns and Brazilians. This blog focuses on Brazilian innovation system and policy from social, economic and environmental perspectives to understand educational, scientific, technological, business model and service innovations emerging from Brazil and its fellow Latin American countries, mainly Chile.

Brazil has many times in its history praised to be the land of the future. Let’s look first on some recent developments in Brazil why it might finally fullfil the promises. First, Brazil with population of 190 million, the past eight years “Bolsa Familia” social program have lifted over 40 million Brazilians out of poverty and into middle class. This creates interesting platform for creating context related innovations and scaling bottom-of-the-pyramid innovations (disruptive and reverse) globally. Second, Brazil was almost non-effected by financial crisis 2008, a signal for strong and stable macro-economic policies. This means that Brazil, first time in its history, is becoming an interesting country for long term investment and strategic cooperation. Third, Brazil is hosting Football World Cup in 2014 and Summer Olympics in 2016. This will increased investments on infrastructure development and pressure for Brazil to show its true nature internationally. Growth Acceleration Program (PAC) 2011 – 2014 invests US$526 Billion to sanitation, crime prevention, basic health clinics, savings and loan systems, electricity and water for all, logistics, and energy. Fourth, deep sea oil field discovered 2007 will double or in most optimistic estimates tenfold Brazil’s current 16 billon barrel oil resources. Combined with bioenergy and wind energy production and hydroelectric resources Brazil is becoming a global energy power and profits from these resources create funds for future investments and development. End of 2011 U.S. finally opened its markets to Brazilian ethanol which will boost the sales in the future. Fifth Brazilian climate change law requires reduction of greenhouse emissions by year 2020: 36 – 39% below 2005 levels and 80% reduction in deforestation puts Brazil in forefront on fighting against climate change. And last strong primary economy from iron ore to soy beans will continue to boost national financial resources driven by explosive demand growth in China and India. In 2005 there were only 3 companies (Petrobrás, Banco Bradesco and Banco Do Brasil) in Fortune Global 500 list as in 2011 there were total 7 companies (4 new companies Vale, JBS, Itaúsa-Investimentos Itaú and Ultrapar Holdings). Other primary economy companies are Aracruz, Votorantim and Gerdau. Emerging higher technology Brazilian companies are aeronautic company Embraer, automobile part producer Marcopolo, cosmetics company Natura and Information technology provider Totvs.

To change course from primary economy to knowledge based economy Brazil have implemented several science, technology and innovation (STI) policies. Brazilian innovation, technology and international trade policy including Innovation Law was launched in 2004 and it followed Good Law 2005, PAC da Ciência 2007 and Productive Development Policy 2008. Innovation Law is designed to university-industry research relationship, promote shared use of R&D infrastructure, allow direct government grants for innovation in firms and increase mobility of researchers within the system. Good Law provides fiscal incentives for private R&D investment and funding for firms hiring Masters degrees and PhDs. The subsidy can reach 60% of the salary in remote underdeveloped are such as North East and Amazonia and 40% in rest of the country up to 3 years. PAC da Ciência growth action plan for science and technology funding has increased R&D funding from 1.0% of GDP in 2006 to 1.13% of GDP in 2009. This percentage and growth can be considered remarkable as 30 years ago there was almost no infrastructure for scientific research.

Corruption referred as “mensalão” is the only single threat slowing down the Brazilian development and cause of high inequality! In end of 2011 Brazil passed UK becoming 6^th largest economy globally. Continuing these developments, Brazil is expected to become the world’s fourth largest economy by 2030, behind China, US, and India. All this have not been and not will be possible without improvements in innovation performance. Future blog posts weekly will focus on different aspects of innovation in Latin America. Even “innovation” is considered many times confused term refering to political, economic, social and environmental development, I will carefully follow state-of-the-art academic and intellectual stream on using this term and provide insight on using this term in development rethorics.

I hope the Finnish approach to Brazil will change and take strategic stance when Finnish education-research-business delegation lead by Minister for European Affairs and Foreign Trade of Finland Alexander Stubb and Prime Minister of Finland Jyrki Katainen will visit Brazil in second week of February!

Please comment and add your insight on recent develpments in Brazil!