Brazil’s laws

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Biotechnology development in Brazil is moving, but slowly, due to the lack of (1) investments from the private sector and (2) a clear and consistent exercise of the Brazilian patent law (9279/96). In this commentary we will deal with the first issue and in the next with the patent context.

Science in Brazil has progressed considerably in the last couple of decades. Science output in Brazil was multiplied by five since 1980 and Brazil contributes close to 3% to the world scientific output.

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Figure 1 – Brazilian scientific output with respect to the world (indexed by Thomson/ISI), and to Latin America from 1981-2008. In green: Brazilian output with respect to the world. In blue: Brazilian output with respect to Latin America.

When we compare the public investment made in Brazil to the same public investments made by developed countries the numbers are similar. However private investments are far from what one can see in the same developed countries. For this reason, combined Brazil invests slightly above 1.0% of its GNP in science and technology.

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Figure 2 – Public and private investments in science and technology by country as % of the GDP. Public (yellow) Private (blue)

Brazil established recently two laws to stimulate private investments. The Innovation Law, December 2, 2004, and the Good Law, November 21, 2005. The last one was complemented by a Decree, on June 7, 2006, which in chapter III Articles 17 to 26 states that those entrepreneurs active in technological research and innovation can automatically deduct this investment from the income tax. In summary the government renounces to receive the tax as long as the money is invested in technological development and innovation. Both laws are recent and the results, although moving up, are still modest. In 2006 private companies invested 0.09% of the GNP.

In 2008 these investments climbed to 0.3 % of the GNP. The number of private companies in 2006 was 131 and the fiscal incentive US$1.4 billion. In 2009, 635 companies deducted from their fiscal taxes US$5 billion.

There are flaws: entrepreneurs complain that calculations are complicated (services are now available to help) and they fear that when they submit their deduction proposal the financial system will contest what they presented as technological development or innovation. Another flaw is that the laws do not benefit nascent and small companies – in other words, companies typical of the biotech sector. For this reason few biotech companies (particularly in the area of health) are benefited. Risk capital to move up small companies is still a problem in the biotech sector. Brazil has supported these small companies through another mechanism (I’ll discuss it later). The system helps these companies but they hardly are funded to scale up their business.

Luiz Antonio Barreto de Castro

Luiz Antonio Barreto de Castro

CEO, ABCP Agriculture Biotechnology Consultorias e Projetos