In the last post –Brazil as natural future economy –  I promised to observe Brazil from different perspectives. To respect the tradition of evolutionary economics, in this post I investigate Brazilian innovation from first aeroplane flight in 1906 to Innovation Law established in 2004. This period highlights the Brazilian potential for innovation and how it missed almost a century on global development caused by the lack of strategic approach to innovation. The Story of Science clearly states that innovations does not happen over the night and requires balance between passion for science and research, political power, and open global collaboration and rivalry as Michael J. Mosley shows in my favourite documentary!

Brazil gained the independence from Portugal in 1822.  Portugal legacy left Brazil underdeveloped as country had been mainly used as a source for raw materials to feed the parent country. There was no investment on education system, universities or scientific organizations. Many international and internal conflicts kept Brazil underdevelopment for many decades. Only innovation policy highlight comes from establishment of Instituto Butantan biomedical research center to Sao Paulo in 1901 and innovation highlight from year 1906: If you went to European or North American school you most probably have learned that the Wright Brothers invented and flew the first aeroplane in 1903. However if you look on Brazilian school books you can find that first actual flight with “real” airplane was made by Alberto Santos Dumont with 14-bis aeroplane in 1906. This is a many times praised as one of the global achievements of innovation in Brazil. Brazilian basic education, university and science and research system remained relatively underdeveloped until 1930s.

Brazilian recent political history can be divided to three phases based on Rosanis (2011) dissertation on Brazilian innovation system. 1930 – 1980 is named as “state-led protective industrialization” or “milagre econômico brasileiro”. Protectionist policies contributed to high GDB growth and high levels of local industrial expansion. The policies culminate on Singer-Prebisch thesis in 1950, dependency theory and import substitution industrialization which aimed to decrease dependency from Western developed economies and increase local production. However, these policies missed the fact that only selected industries should be protected. In addition, these policies produced disincentives to innovation, decreased rates of productivity and lead technological inefficiency. Innovation policy highlighst for this period were establishment of Aeronautic Technological Institute (ITA) in 1950, the National Research Council (CNPq) in 1951, the Brazilian Development Bank (BNDE) in 1953, the Agency for Financing studies and Projects (FINEP) in 1965, and the Brazilian Agricultural Research Corporation (Embrapa) in 1973. Apparently, these instruments did not get much attention among policy makers from strategic innovation perspective, and science and research remained marginal and isolated. One of the reasons for this was the misleading assumption made in Latin American World model in 1970s. It assumed that most important modern world challenges were not scientific but social and political. This lead to state that

“it was necessary to reduce the rate of technological development since advances in technology had already outstripped existing consumer needs.”

During this period, Brazil emerged as supplier of raw materials and crops and increased its capacity in manufacturing industry. Still in short, Brazil and other Latin American countries missed the one of the highest technological development phases in human history. Efforts to decrease the dependency to Western economies actually laid a ground for technological dependency for coming decades when global scale economic liberalization took place.

This lead to the Brazilian lost decades in 1980 – 2000. During this period Brazil as other Latin American countries’ economic development stagnated, poverty increased and income distribution gap increased. Recovery policies failed and increased the foreign dept. All this lead to super inflation and drew Brazil to economic and social turmoil.

In 1985 the Brazilian Ministry of Science and Technology (MCT) was formed to implement national innovation policies. However, investments to science and research does not realize overnight and didn’t help much Brazilian innovation performance during the economic and social difficulties. While Finland and South Korea as well as many other historically underdeveloped countries entered to global liberalization in 1990s with high technological capacity, Brazil and other Latin American countries were forced to rely even more heavily on foreign technologies to catch-up modern development. The Real Plan, Foreign Trade Policy (PICE) and the National Privatization Program (PND) meant Brazilian companies needed to enter global competition in 1990s. One only need look situation in sales of 50 biggest companies in Brazil in 2000 to figure out what happened. 19 out of 50 biggest companies in 2000 in Brazil were foreign owned and especially if we look high-tech industries as automobiles (9/10), telecommunications (5/10), petro chemistry (4/10), Information and communication technologies (8/10), pharmaceutics (8/10), and electronics (9/10) were foreign owned.

Stefan Zweig wrote already in 1941 “Brazil: Land of the Future”. In following decades this already became a joke arguing that “Brazil is the country of tomorrow – and always will be!” However, when coming to new millennium Brazil is finally starting to fulfil its promises.

Macroeconomic stability gained in late 1990s, President Lula’s social and international policies etc. as stated in earlier post – Brazil as natural future economy – have increased the arguments that Brazil is finally becoming a serious country not only famous of football, carnival and bikinis.

In 2005 almost century later of Santos Dumont first flight, Brazilian company Empresa Brasileira de Aeronáutica (EMBRAER) made again historical mark for aviation history. They unveiled the Ipanema, the first commercially produced aircraft to run solely on biofuels. This was not cause of blind change! One policy act still not mentioned in this post is the PróAlcool bioethanol policy implemented in 1975 to response the 1973 oil crises. Historical and long term evolutionary understanding of global development matters!

The Story of Brazilian Science is much more fascinating that one might think. This blog post shows that Brazilian innovation culture has deeper historical roots than many can image and lack of policy understanding for innovation have kept this part of the Brazil hidden for decades. Now it is time for Brazil to show its real face on race to tackle global societal challenges such as climate change and poverty reduction. All this culminates to Innovation Law established in 2004 which my next blog post will tackle.

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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 6th 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!

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