Knowledge and Innovation
for Competitiveness in Brazil
Alberto Rodriguez with
Carl Dahiman and Jamil Salmi
Trang 2Knowledge and
Innovation for
Competitiveness
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Trang 6
Contents
Foreword
Acknowledgments Abbreviations
Executive Summary Where Growth Comes rom
Methodology nd Organon ofthe Report
1L_ Bazil Growth and Performance ina Global Contest lh Growth inCompuate Penpectve esl Competivenes nan increasing Kronledge Oven ‘Global envionment “The Sir ofthe Economy and the ture of Exports ——
3 Behind Brnillow Gronth: Coneeprusiang Growth ad Detinga Rese Model Irnration nd Eeanone Growth
The elsionsip of Pryscaland Hera Catal with Economie Goth AGionthDeconpaston ers
Invezment Cate—The Ebling Eonar foe Growth Tad Onertation the per Sector and Growth
Doss the Pie Sector Castano atsijee Growth? Conciuon Getting the Farce Rpt War Necesiary but iin 3, Defining Innovation What ilnnston?|
Trang 7Diserating and sag knowledge
Sis Nason nmoation HưnanCaphlte: ter ets, tutions nd 4, Assessing Innovation at the National Level Compaatie Aueumant of RD—Inpus nd Outpats
ew Bi and Russa Face nos ane Performance Chlenges ^csuudionoferegtKhondedge
“The Denton and Us of Knowle
‘The lator! stem of Imran at Conemed by Government cenduien 5 Firm-Level novation Inman Bi Fave Perpectine
Falatorp among norton Pretty and Growth
‘oasis of routs and Ours Red to movationty Human inital craton and Prodactoty Key Varables Conchons and Pocy mplcsions
{6 Human Capital for imoration Changing Demand fre Bas ob Maret Huran Cpa Th Msg nk between nowaten andProdutity and Growth The Fornton of Hursn Capt Porpetveta sd is Compton als Edveaton stem ands Readiness Peduce Hunan
Captor Growth
Condusons Schooling and Beyond
17 How Brail Can Forter Innovation ` CrsengsndComrtercsizngKnzelelpandTe-romgr ‘que Foreign Krovi
Leveagng ust Tebolopes Improve Bsc Educa na Sis
t¬pandTeruzyEdeatonand AdafcedlSkf Tang 18 From Analysis Whe Nes oe ote? to Action
Nest Step-—fasng reese
‘Aophing the Fenevork in Suenationsl Es ‘Appendix A: Findings from the PINTEC Database
‘Appendix 8: Econometric Analysis of the Relationship among RED, Innovation, and Productivity Using ICS Data for Frm-Level Analysis [Appendix C: Assessing Partial Effects of Firm Size Associated with Pari Effects Explanatory Variables
Trang 8‘Appendix D: The Primary and Secondary Education Systems Appendix: The Tertary Education System and Advanced (utof School Training
Appendit The Demographle Window of Opportunity Notes References Index Borer ton Figures — Figue ts2 Fieve ewe? Figures Figue 4 Fauets ewe 21 Figue22 Figure 23 gue 3) Figure 320 Figue 32 F33 ewes ` `
‘The statute of Meenas Enbrapa and smal Emeriss The Sector Func Progam
‘The novation Lin
that edt Goverment Acton
gen Proceting Zenes nd Tn Referin Cina Arai Per Capa income tthe OFCD Aran 9) ‘A coneeptal Model forthe Componsnts Infason Rte 0-3007 of Growth
onal GOP Gronth Percent a0 Year Moving Avge, 1964-2005 eal Pr Capita Income Relative t the OECD Aes PA) Bess Ralngron the Glosl ompetvees nde, 006 Konladge as Factor inincome Oferencesbetween land the Repl of Keres 956-50
‘A Concept Model forthe Component of Growth
‘Gonth and TFP—Latn America Compared with Other Regons ` AD Effort for al and Compactors
Scientific aT our Arties er 109000 Irsabtants [Other Cours)
*detfcand Tech ural Arties pe 10000 nha Lin Americ ar he Caren)
Trang 9eves eves eves Fewest — ge s3 gue 4 ewes — Fewest ewe ewe? Fie gue os ewe Ds — ewes gue e2 gues gue 4 gue tt Fewer gue Tables valent lel? Tale valet sales ‘ales
teal adhe Russ Federation bnowaton Aes in Compare Penipectve Total ipors versus pots of Capa Goodin LAC aed Select Counties, 2004
tel Nona Imation Sytem
Innovation nput RAD, Lens ne Vente, 180) by Fr Se Innovation Outputs [ing mpoved Une ace Pedy rm Sze
Ireoation np R80, Leng Jone Vertes and) Sct
Irrovation Output [Fang Improve ine and New Produc by Sector Ireoation put BD, ers ae Vertes, 150) Regon
Innovation Outputs ralang, Improved une sae Puc) by Region
Changin) ak sl Demands the United State, 160-98 ‘rege Year of Schooling for rasan ad Older
InComprsonwthOther Selected Counties 960 and 2000 Net Eeliment ate for Prerany Eaton, 190 and 2002 Net Eelinent at le Secondey Edseation, 1990 and 2002 Terry Enlmens for bal OECD Compactor: NER 91-003 Comparative Publ Spending on Eduction asa
PeeetngeefGDP.990 and 2002
(Quay fEduaten in Tems of Leaning Outcomes fem P92 1003 Percentage of Student a Ech Level af Profieney nts Reding Sale 203,
sa Math/Spae an shape Sale, 2003 Detration of Suen by income Grp
Proportion of Stents Erelein Since ad rgewrng roy in Selected Latin Areca Counties
Proportion of Gadus StuentinSlcted.sta Amare Counties, 2003
Unt Conn Selec Latin American Coues
Dependent Populton andthe Labor Force in Ba 180-2005 option Tend by Age Grovpin Ba 18-2005, Population andLaber Supply nen 91-2005
A¿ea an laity of GOP Gromth ates, 1964-2005 eral esl GOP Gronth ate ora and Select Counsiee
Trang 10“Tel vale Tede32 THe33 ‘hale T35 ales TAe4) ‘hale? voles Tae wales ales ‘bles THles2 Tes3 Teale sales ales sable 57 pales sales ‘pale 50 voles sale _— vale pales shale sales? sole voles THeAI TrHeÐl ‘ale? select vate alec anh Reveled Compute Advantage RA 195 2.2005 ——DDỒ
“Goath of GDP capt stock and Employment 64-2005 “Conuibgiento GDP em 64-2008 felnve TF of Bland atin Amencan Compare “Doing usiness a Campane Respectie “he Nora novaton System of races,
Inston and Human Capbines
aD Ependiuresandficenyin Bal and eect Counties, 203, AD inputs nd ups for the BICKM County Gr
asic Comparions between Bran and Rusa
Compare Dat n Agung Foreign kronledge(@ACKM Product Diperion within raat nual sectors ela RAD Tax cet, 2000-2006
“Typed Rate of imoraton mong Đnyisnficm 1996-20003nd 200-05 Ace Charteris of rn Fis eouped by “Cempetttesuaepy
“Typeof noun by CompettveSategy of rooetng ms Innovation Source fox rl Fes, 1998-2003 m1
ThpefConpette sraepr —
reage Coelicients Ser- Estee ar Slcted investment ‘Cate Varables Este fom TF? Aepresons arp fects of Edveation on nnoustion puts and Oupus Bal er a vege Wages Schoclg an Werke Terre nanan ere by Competent rp Type 2009
"hobtMModdlof hobebl fadte fr Absorbing Technology by rasan
Sales Schoclg.and True Bain nds ems oeage Monthy Slay by Eduction tamer
“The trina School yite Resins ‘The secondary schoo stem Readies fo nator sot fer na.aten Led Growth Festus Rte to School Perfomance and Governance
Teaches and Teaching nthe Pima ad Secondary Shots ‘Advanced sls Tang Outs the Schooling 5st “ensyEeucttonsndfesdee rrlmorston1edGshi Who Needs Do ht Ingato novation rrr on Maufactung Fim Pdactity inBranl Measured by Log of PVA per Woe 2001
naman orRAD,Imowtion unm sn4?uebiey Escmstions for REO novaten fees and Prodoctty Marga ecso nsoraten puts argc on Insraton pts nd Ouputn Ba nd Ouputsin Bal
arg fectson oration puts nd Ouputsin Bl
segees
usoates
„
Trang 11sable sale sale Thaps Thleb7 Tale 08 ‘pales ‘ble 2 valet valet valet Tran t€ ‘ble? voieca
struct of Bazi Bsc auction Sytem Cove, Access, and fine 190-2003
Compaate per Sten Spercng by Eduction Level Eeeldownof Buc and Secondary Edveston Speningby transd Four Comparators epetiton Rates Bal and Comparator Couns
veniewaf PA erfomancein rl and Four Other Counts School Rescues PSA 2008 2003
Teaching and euing Enron PISA 203, bral Terary ction Syste, 208
“Terry Easton Coverage inst Americ, 1980-2004 Share of Labor ore wth ety Eduction, 2004 Seiosconari Charteris of Undergaduate Student UNICAMP Compared the Sate an Raton
Word UnverstyRakrgsby the Times Higher ction Supplement, 2008 .7— .1 Anka rainy eure Derifcaton Maier Puc Teri Eaton
Inston by Category and souee of meome
Trang 12Foreword
Trang 13regime, (3) an efficient innovation system, and (4) a dynamic information {nfrusructute Good performance in all areas i generally required fora coun try to take advantage of new opportunities Ín the analysis of Brazil that followed, theee main issues emerged Fist, Brasil rails its counterparts, particularly in Asia, in providing a quality edu cation to all citizens, Second, Brazil has consistensly aimed for the kind of lite, capitaliatensive innovation that produces world-class technological breakthroughs while overlooking the kindof day-to-day innovations in pro duction processes that tend to deliver the greatest economic returns Thied, Brazil has eed too heavily on government leadership to foster innovation, while overlooking the more costeffective approach of using incentives to encourage private sector innovation, which tends to spread sore quickly through the broader economy: In addition, trade harriers have not heen climinated fast enough to open the private sector to the kind of global ‘competition that is necessary to foster innovation “This study was developed in close consultation with Brazilian government and civil society leaders who ace deeply engaged with the question of how to foster innovation and greater economic competitiveness Indeed, the breadth cof the support for ths study i 4 testament to Brazil’ pragmatism and pet severance in pursuing more rabust growth Is alo a welcome reflection of its continually evolving relationship with the World Bank Today, Brazil has cemenged a leader of efforts to build South-South cooperation-fa this role, it can set an important example for other middle-income nations and act as «bridge between the northern and southern hemispheres Developing a policy framework to foster innovation is na cay tak, but ‘experience shows that countries sch as South Korea and Ireland have made ‘rent leaps forward in just a decade The most succesful innovation pro trams are based on a wellarticulated vision, societal agreement around the program, and efforts to address all four pillars of the knowledge economy theough 3 combination af bottom-up initiatives and top-down seforms We hope that this volume will contibuteto Brazil efforts to analyze ts strengths and weakness and chare an effective way forward, for tself and for other ‘midalesincame nations In taking on this challenge, Brazil leads the way for many countries thet might also benefit from a close examination oftheir capacity to innovate and compete
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‘Acknowledgments
‘This study isthe result ofthe colluborstie efforts fa team of World Banka? and constkaats inside and outside Bazi Alberto Rodriguez, Lead Education Spevalis in the Haman Development Department for the Latin America and the Caribbean Region (LAC), was the lead author and manager ofthe ‘wotk, Co-authors Carl Dablman of Georgetown University and aril Salmi ofthe World Bank's Human Development Network provided mujor contribu tons without which this study would not have been possible
‘The authors wish to thank the many World Bank stall members who contributed thei expertise and dedication to this project, Core team mem- bers included José Guilherme Ress, Senior Pavate Developmeat Specialist, Anuja Utz, Senior Operations Officer, World Bank Institute; Julio Revilla, ‘Senior Economist; and Junior Profesional Assaiates Mariam Dayoub and
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congrats Several reviewers offered invaluable feedback and advice throughout the ‘conceptuslizition and wring stages These included Kathy Linder, Chie topher Thomas Allred Watkins, Robin Her, and William Maloney Sheldon ‘Aanis contributed hs editorial expertise to the project, andthe World Bask (Ollce ofthe Publisher produce the English-language book: Bri’ National Confederation of Industry, the CNI, translated the volume and produced the Portaguese-language version for dstabution ia Braz Finally the authors wish to thank ll the Braiian authorities at the Federal and state levels who supported this study as well asthe many private soctos, ‘vil society, and education sector representatives who contributed ideas, information and feedback throughout the research and writing process
Trang 16Abbreviations ADBI ANPEL BNDES BRIC BRICKM CAPES cer cer ccn cE cer CEPEC cate CNA ẢNG CNDI cur ND EEA EIA
Brazilian Agency of Indastial Development
Assaciagio Nacional de PDRE das Empresas Inovadoras (National Astocstion of Research, Development, and Engi- neering in Innovative Firms}
National Bank for Economic and Socal Development Bra, Rusia, India, and China
Brazil Russia, Inia, China, Korea (Rep, of, and Mexico ‘Coordenagio deAperfelgoamentode {Coordination for the Improvement of Higher Education Pessoal de Nivel Superior Seat)
Centro Braseiro de Pesquiss Fisices (Bazdlian Center for Research om Physics) National Council on Scence and Technology
conditional enh transfers
‘Censo do Capital Estrangero no Brai (Cental Bank's Foreign Capital Census (Caixa Eeonomica Federal (Federal Savings Bonk)
Genter for Research in Education Culture and Community ‘Action
(Center for Management and Strategic Studies Confederation of Agriculture and Livestock National Confederation of Business
National Council of Industrial Development National Confederation of Industry
Consetho Nacional de Desenvolvimento Ciemifico e Tec: aolégico (National Counc for Scientific and Tachaclogica Development) Education for All
Trang 17Embraps ENADE ENCEJA ENEM Eu FAPESP For IFS FLESP FINEP TNDCT FPR FUNDER, FUNDEF ct GDP GNI IBGE Ic Ics ICT IDB ur TMPA INEP Inmewo INPI Bea, ier BR er so Kẹp, KAM LẠC Lop
Empresa Brasileirs de Pesquisa Agropecuiria (Broziian ‘Agricultural Reseach Corporation) Exame Nacional de Desempenko de Estudantes
Exame Nacional de Cetiicaci de lovens e Adultes Exame Nacional da Ensino Medio
European Union|
Fundagio de Amparo & Pesquisa do Estado de Sto Paulo (Sto Paulo State Rescarch Foundation)
Forcign direct investment
Fundo de Financismento ao Estadante do Ensino Superior Federation of Industries ofthe State of Si Paulo
Financiadora de Estudos e Projtos (Financier of Studies and Projects)
Fundo Nacional de Desenvolvimento Cienifico ¢ Teenols- ico [National Fund for Seientfc and Technological Dever opment) Rural Professional Training
Fan for the Development of Basic Edveation
Fund for the Development of Fundamental Education & Valorization of Teachers abo knowa as EVM
Global Competitiveness Index ‘ross domestic product
{1098 national income Brazilian Institute of Geography and Statistics investment climate Tawestment Climate Survey
information and communications technology IngcesAmerican Development Bank Indian Institutes of Technology
Instituto Nacional de Matematicn Pura ¢ Aplicads (National Institute of Basic and Applied Mathematics)
National lasttute for Education Research and Study
Instituto Nacional de Metrologia (National Institute for Mesrology)
Instituto Nacional de Propriedade Intelectusl (National Institute of Intlleetsal Property)
Institute of Applied Economie Research Irmposto sobre Produtos Induetilizalos
intellectual propery hts Instituto de Pesquisas Tecnokigicas do Estado de Sio Pasko {Sao Poulo State Institute for Technological Research)
International Standards Organization Knowledge for Development
Knovsledge Assesment Methodology (World Bank) Litin America and the Caribbean tegion
Trang 18McT MDIC MEC MIT MLE MSE MSTQ NGO NRL OECD PACTI PADCT PAM PRQP PDDE PDE, PDTUPDTA, ĐĨA PINTEC Pisa PME PNAD ĐNG pep ppv PROEP' PROME Prolai RAIS REA SÁT
Ministry of Science nd Technology Ministry of Development, Industry and Trade Brazilian Ministry of Education and Sports Massachusetts Institute of Technology ‘medium and lage enterprise
‘micro- and small enterprise metrology, standards testing, and quality control nongovernmental organieation
Network Readiness Index
‘Organisation foe Economie Co-operation and Development Programa de Apoio a Capacitagio Tecnoldgica da Indstria {Support Program for Technological ladustril Training) Programa de Apoto ao Desenvolvimento Cienifico Tecnolo- ico [Support Program for Scientific and Technological Deve- opment)
‘Mobile Activities Program Programa Beaslico da Qualidade e Produtividade (Nationa Program for Quality and Productivity)
Projeto Dinheiro Direito na Escola
Plano de Desenvolvimento da Educasio (Plan for Educational Development
Programas de Desenvolvimento Tecnoligica Indust e ‘Agropecusria (Programs for the Development of Industrial and Agricultural Technology}
Pesquisa Indastil Anual IBGE’ Annual Industrial Survey) Pesquisa Industrisl-Inovasio Tecnologica (IBGE's Industrial Surve}~Technological Innovation)
(OECD Programme for international Student Assessment ‘Monthly Employment Survey
Pesquisa Nacional por Amostra de Domicios (National Household Survey) National Curiculum Parameters
purchasing power party Standard-of Living Survey
Program for the Reform and Enhancement of Profesional
Education
Program for the Enhancement and Education Programa Universidade para Todos Social Promotion
potential vale added research and development
Rela Anual de InformagSes Socais (Ministy of Labor and [Employment's Annual Listing of Soca Information)
revealed comparative advantage science and technology
Trang 19SAER SE SEBRAE, Secex SENAC SENAT SES SESCOOP SESI SEST SESU, SINAES SMEs stt me THES TIMSS TVET ver UNDIM UNDP UNESCO UNESP ĐNICAMP UP WDI WEF WIPO National System for Basic Education Evaluation smal enterprise
Servigo Brasileiro de Apoio as Micro ¢ Pequenas Empresas (Brazilian Service for Assistance to Small Business) Secretaria de Coméscio Exteior (Intemational Trade Secretariat) National Service for Commercial Apprenticeship
Servigo Nacional de Aprendzagem Industrial (National Ser: vice for Industral Apprenticeship) National Service for Axriulture Apprenticeship
National Transport Apprenticeship Service
Social Service for Commence National Apprenticeship Service in Cooperative Activities Social Service for Industry
Socal Service for Transport Industries Ministry of Education's Secretary for Higher Education Sistema Nacional de Avaiagio da Educagio Superior small and medium enterprises
Scientic and technological institutions
total factor productivity Times Higher Education Supplement (United Kingdoon) “Teonds in Intemational Mathematics and Science Sty technical and vocational education and taining
vocational education and taining
National Associaton of Municipal Education United Nations Development Progeamas
United Nations Educational, Seientf, and Culoml Organization
Universidade Fstadual Palisa Jali de Mesguita Filho Universidade Universidade Estoial de Campinas de Séo Palo
World Development Indicators World Economic Forum
‘World Intellectual Property Organization (Currency Equivalents (Exchange Rate Elective: lane 19, 2007)
Trang 20Executive Summary
Brazil has made considerable progress toward macroeconomic stability since ‘efor measures began to take holdin the early 1980, and its economy has produced stronger growth as a result—an average of 25 percent annually ‘over the past decade, Neverthces, rom an iatemational perspective, Brazil's level of economic growth é stil a matter of significant concern Compared ‘with Organisation for Economic Co-operation and Development (OECD) ‘countries or with competitors such as Chias or Indi, Brazil not only is grow~ ing slowly, i is falling farther behind Indeed, as shown in figure ESA, the income gap between Brazil and OECD counties has substantially widened In 1980, Brail’s per capita purchasing power parity was about 42 percent of that of OECD countries Twenty-live years ltr, it had fallen to under 28 percent of OECD counties
‘Where Growth Comes From
Trang 21Keondcde sdtmeeionfer Congeii-rcsinErrg
Figure E51 Brazil's Per Capita Income Relative tothe OECD Area in PPP)
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Figure E52 A Conceptual Model forthe Components of Growth
accelerating grovth, Fist, Brazil needs to build upon its stable macro ‘econaaic environment to extend reforms that will improve the investaent imate, Second, higher productivity wil require a focused effort to expand TTP theough inaovation-based growth Third, a sees of “micro” cforms ae needed, of which ta ze urgent—strengthening incentives fr firms t inno: vate, and upgrading the education system to improve the skills of workers centering the labor force, We presenta staf specific recommendations that stem from this analysis We also discuss possible roles for Brazilian agencies in implementing these recommendations as well us the need to ease aware- nessa the urgency of this agends ‘The min messages of this report cover four topice—consolidating the macroeconomic eaviroameat, boosting innovation, dasprving skills acsoss the Ishor force, and mowing fom analysis to ation,
‘consolidating the Macroeconomic Environment
Trang 23Keondcde sdtmeeionfer Congeii-rcsinErrg ‘The Brazilian economy has remained stable asa result of prudent macro economic management—including fiscal and monetary policy as well as debt management, Improved! mactoccanomie fundamentals have reinforced the benefit of favorable extemal demand for Brazil’ primary commodities, ae ing international eserves to unprecedented levels Fiscal restraint, which has included a cap on public investment, has translated into yearly primary sur pluses and macroeconomic stability: However, the couatry’s infrastructure row needs upgrading in order to increase productivity and avoid jeopat: izing growth,
‘The challenge facing Brazil to continue reducing public debt and {improving the quality ofthe fiscal adjustment (that is ensuring adequate re- sources for key public investments and poverty alleviation programs) while ko improving the elfciency of pubic expenditures to create the sca space necessary for progroseth investments The ability of the government tw adjust the composition of public expenditures i constrained, however, by its current high Tevel of spending (most notably on pensions) and by an ‘ongoing debt butdea that uliately lets the governmveat’s borrowing and spending eapacty In addition, the continous growth in the size of governs ment during the past decade—financed through increased taxcs—has con strained domestic savings High interest ates have acted asa isinceative to private sector investment {a shor, «stable macroeconomic environment has helped to reverse the bitter declines of the so-called “lst decade” of criss and stagnation in the 180s, and his has led to moderate growth in the pas few years However, stable macro eavironment has aot been sulicint to spark fast growth, Mose ‘over, given inadequate public investment in infrastructure and the sluggish ross of reforms to fucliate che investment climate, prospect for significantly higher growth remain slim, While productivity improved during the past decade, as showin by historical evidence in this report, iis nonetheless ower than in previous periods when investment grew faster
Boosting Innovation
Trang 24Until the 19905, the productive sectorsin Brazil operated within a relatively protected economy: The government provided few incentives for private Sector investment in innovation; yet that mattered less because protection from competition made private sector investment in sngovation slaively less necessary We argue in this report tha two factors—a bias toward overly theoretical” research in publicly funded universities and significant underin vestmenty «shielded private sector thats spared the aeed to compete atthe heart of Braails current relative underperformance in innovation ‘The private sector needs to invest more in RED Receat initiatives to ‘encourage firms to invest in innovation-—for example, the Innovation Law and the Sector Punds—are weleome steps However, ab argued throughout this repor, the government now aceds to take these measures further by seating a broader enabling environment in sshich private firms are will ing to invest in innovation, take riss, and expand their productive activi is into news, Tessafe" areas In addition to ineeeasng is overall investment ‘ite, Brill needs to Further liberalize the economs, in pat, to force firms to Iecome more competitive
Public investment in R&D needs to be made more effective, not just by producing more knovsledge and technology but also by providing the infs- structure to commercialize and disseminate new knowledge (for example, technology parks, technology transfer offices busines incubators, andl venture capital operations) Span provides a notable example of how such efforts can ‘work Moreover as we argue belo, Brazil alo mst invest more in human capital through quality basic education and advanced skills traning Chins, Ireland, the Republic of Kara, and Singapore ae just few of many examples where this has been done massively and suecesfdly ‘This report peopotes road new definition of innovation As used here the term refers not just to new products and processes but also to new business processes and new ways of carrying out productive activites We emphasize that innovation to improve TFP should nat be understood simply as invention or the fist use globally of a new technology but also asthe first aplication ‘oF a productor proces in specific setting, Because developing counties are bbchind the technological curve in most sector, they need to think less about invention and more about doing things differently with avaiable knowledge and technology that they can acquire The epor proposes a threestranded ‘ypology of innovation: (a} creation and commercalization of new knowledge and technology, (b) acquisition of knovledge and technology from abroad for local use and adaptation and (6) the daseminaton and elective application of knowledge and technology (whether domestically created or acquired from broad) thất sleady available in-country though not broadly utilized The significance ofthese distinctions discussed below,
Trang 25Keondcde sdtmeeionfer Congeii-rcsinErrg the public sector has excelled in the production of conceptual knowledge— for example, Brazil accounts for nearly 2 perceat of articles published in intemationally recognized research journals (roughly on par with Brazil's 2 erent of world gross domestic product [GDP]).On the other hand, substan tial public expendituce has been far ss suceestl at energizing technological innovation—for example, patents that can be commercialized According to the World Intellectual Property Organization (WIPO), Beal accounted for about 0.18 percent of patents in 2000 This compares with 3.4 percent of patents attabutable to Sweden—that i, nearly 19 tes more patents thin Brazil despite 4 much smaller popslation Similany; Korea accounted for 1L7 percent of patents, more than nine times the rate for Broil Ironically az invested in RED infeastructae fr earlier than most other veloping countries Yet this report finds that an intellect and practical disconnect has now emerged in Brazil that isnot always found elsewhere ‘The publi universities and labs where most govenment-fusded research is «conducted primarily pursue “pure” conceptual knowledge Links between the private sector and these universities and labs are not well developed, wale in ‘other countries where entrepreneurial scientists and engincers typically have 1 foot in both worlds Moreover, the private sector's own research capacity thas boon diminished by underiavestment from companies protected by trade barriers fom foreign competition The net result is that Brazl neds to pay far greater attention to what is produced through publi investment, what happens to neve knowledge once itis eeated, and how the private sector can bbe mobilized as an active partner Strengthening the institutions and norms that protect intellectual property and supporting business incubators would hp tmmediicly, ‘A nation’s capacity to create sew knowledge and technology & closely associated with advanced technical skills and tertiary education system thats particularly strong in science, engineering, and technology application Brazil has emphasized the humanities and socal sciences at the expense of science and engineering, Despite slow but steady growth in the later di ciplines Brazil's tertiary education system stll has far too litle capacity to train advanced innovators who can work atthe frontier of glohal knowledge creation In Ching, the govesnment has tapped and supported both public and ‘rivate universes to increase enrollment capidly and to leverage respective ‘comparative advantage As Brazil serstles with the coverage relevance, and esoutce nceds ofits higher education system, the Chinese examples could be instruct
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portnersips; distance learning: and more Trade—specically, importing the latest versions of hardware, machinery, and software—is probably the most, dlrect and critical means of acquiring knowledge and technology Brazil is sill struggling to reconcile the relative comforts of peotectionisn with the inevitable need to compete in global makes In this respect, Braiian firms re just avakening tothe fll Benefits that acquired foreign technology can bring, Not surprisingly, the frm-level analysis of innovation wndertken for this report found large firms (and especially multinational rms) 4 be fat shead in innovation and productivity “The capacity of firms to pat acquired technologies to praduetive use points again to the challenges of human capital formation Technology stands litle chance of being adopted and adapted successfallyf workers lack basic eading nd math skis or ata higher level, the ability to reason conceptually think ‘outside the box, and apply the scientific method, Workers with these skills are no less rite than highetlevel managers wha ean quickly adjust to compat tization or imaginatively redesign a production strate, If firms cannot trust, Jn the adaptability of their employees, they nocessanily become risk averse, ‘opting forthe low rad to eeanomie survival-—that heavier exploitation of heap, unquslfed labor (es we found occuriag inthe northeast of Brea) In ‘essence both basic and advanced skills ate needed fra fem to maximize the rewards of acquired innovation
Trang 27Keondcde sdtmeeionfer Congeii-rcsinErrg to disseminate knowledge through channels such os industrial and service extension programs, techascal information centers and clusteased tech nology improvement programs Some innovation requires nevwer machinery and better physical inputs, s well as better management and organization Equipment is nota magic bullet, however What mater is what happens on the shop floor Can workers observe new practices first-hand, and is there an ‘eavizonment that eewards increased efficiency and productivity? Indeed, can ‘workers aecomplish the sime things through etter use ofthe equipment and Jnputs that they aleeady have? “The fact that job tenure in Brazil is generally ow—aal lower stil or les skilled workere—might be expected to increase the flow of good practices between firms ln realty, however, tis does not appear to be happening, We spt that the lack of basi skill among workers is probably the single mast ‘Significant obstacle tothe use of new technology and equipment ofthe fee Nw of innovative practices across rms Indeed, emetilel worker are ikely tobe risk averse and more comfortable withthe imple routine of procedures that do aot demand additional formal taining Moscover, high job turnover may discourage elective irm-level training Our study found that Brazilian firms do invest significant time and resources training their employees; however in most esses this tning focuses on basic sls defies that should Ihave been addressed by the formal education system, not on the introduction of innovation to improve productivity onthe shop fla (One notable exception i the prosiction chains that have heen developed by small and medium enterprises that act x suppliers to large innovative Brms such as Embrace, Petros, Gerda, Ford, ad others These seallee fms fe {quently ae able t enhance their productivity by using technologies adapted From the larger innovative companies Cases such as these tend to occu in speci geographic cluster, The local qualifications of human resources — both advanced and basic are crucial to these process, as the experience of Embraer demonstrates,
Improving Skills Across the Labor Force
Trang 28bby community colleges in the United States and postsecondary technica institutes in Europe,
‘Strengthening Tertiary Education Wis wll accepted that more and better education improves employability and earings However, aerage educa tional attainment for the Brazilian population age 15 and olde is stil only 43 years With only a quarter ofthe universiy-age population attending a tertiary insitation, Brazil ha the nextto-loseest gross enrollment rate among the lager Latin American countries, well below the continental average of 30.3 percent The low enrollment rte in universities s mirored by the very small proportion of the labor force with terary-level educational gualifca- ‘Hons: 8 percent Despite many top-quality endlaves at the tertiary level, the overall lack of consistent high quality (especially in the absence of performance standards) ‘scriical Bra isthe word!’ eighth-most-popalous county, yet no Bravlan ‘university to be found among the 100 top-ranked universities workwide Rescurch production is concentrated in avery small group of elite public or state universities, A second ter of public and private universities has many pockets of excellence but beyond tht point on the spectrum—that iin the ‘ast majority of small underfunded private universities quality s worse than ‘uneven and serious rescarch is neither financed nor rewarded, At the federal universities #3 percent of instructors ate fulltime academic, in contest to bout a third of instructors in the municipal universities anda fifth in the private institutions In private universities, most instructors are part-time em ployees Basically, they earn an hourly wage and they’ ate paid according to the numberof classe that they teach The proportion of academies with « dactral degree rose from 15 percent fn 1994 10 21 percent in 2004 At the federal universities, the rate doubled from about 2 percent to 42 percent The vat majority of academics not only hhave not been tained in rseasch through doctoral training, they have vr ally no opportunity to participate in publicly funded basic R&D, That des ‘not meaa, however that they are more likely to engage in “practical” research for that they engage in outsde-the-aniversity research with private sector ‘ounterpart To the contrary the university and private sector realms remain consistently separate across the board Unlike the Silicon Valley or Route 128 models inthe United Stateswhere welltrined innovators may constantly shift from university to private sector and back throughout their carcers, ot ‘may simply maintain » permanent presence in both—their Briziian counter parts rematn remarkably segregated To an astonishing extent, the two workds do not intersect, much les croeeferile Sunfluh, only a selatively small ‘minority of Breilian faculty study abroad, In 2005, only 2,075 students were officially sponsored for graduate studies outside Brazil Only 1,246 foreign seadents attended Beaiian universities ‘Other postsecondary trining is offered by private providers and, in par ticulag, by the instittions that form the “S-sjstem.” These nine insti tions constitute the langest consolidated professional traning sjstem in Latin
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Keondcde sdtmeeionfer Congeii-rcsinErrg Amercs, created by the National Confederation of Industry (CND and the state federations of industry The system is financed through a compulsory 2.5 percent payroll tax, Present in about 60 percent of Brazilian municipalities, the S-aystem offers an estimated 2,300 courses per year and cardl sbout 154 million trainees annually While the ellectivenes ofits training (and the costelficiency ofthe sytem itself} has been hard to assess, the S-system plays crucial cae in providing specific taining for workers and could serve asthe somentone ra ion learning framework in Brazil Accesstotetlary education especialy atthe most prestigiousuniverstes— ‘sskewed heavily toward upperincome laniles, While approximately 69 per: ‘cent ofthe population iclassified alow income in Brazil about 90 percent of students at UNICAMP (geneally garded as one of the top two universities) ate not low income This unequal distribution at ƯNICAMP bay ique; itreflets a continuing patern of unequal opportunity across the system more broadly At the secondary level, for example, about 90 percent of cildeen from the highest income decile complete school, compared with only about 4 percent of children fom the lowest decile of fii
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45 millon students have not completed university training, and only sbout 20 perceat hold masters degrees or the most part, the raining of those who ate university-educated tends tobe very strong pedagogical theory but ery weak in the applied art of teaching (Over the past 20 year the number of paces in primary and secondary schools has increased dramatically, and access to primary education is now victally univers Ie is less certain, however, that the quay of education has increased This it telated less to absolute lack of financial resources (publi educational expenditure ose from 3.9 percent of GDP in 1995 t0 4.3 percent ‘of GDP in 2005) than to management factors For example, itis estimated that shout 60 percent of school princiuls obtained ther jabs based on politica criteria Computers in the schools (approximately 2 per 100 students com- pated with 28 per 100 in Korea) tend tobe used by teachers and adminis tors, not by students, which ial the more significant for future technological Jnnovation in country where the vast majority of families do not have a personal computer a home, The report also dacusses the pedagogical and curriculae factoos thất contribute to lowe quality in basic education Classroom teaching at the primary level (especialy in rural areas) stil conducted very much asi was 8 genoration ago That means students pasvely copy what the teacher writes ‘om the bourd and are expected to lean by rote memorization, an approach that & the diameticl opposite of the kind of active learning that ewards flexible thinking, eoeeptisl reasoning, and problem-solving skin other swords, the very traits that adult workers aced for competitiveness ina knowl edge economy Tn summary, the low evel and skewed distribution of elcation among Br zalans explains more than the oftstudied cyeleof poverty and inequality Here, swe argue that basic and advanced skills are crtcal input for the nation to
hharness innovation, increase productivity, enhance competitiveness, and acel- nite economic growth—and that these needs presently ate not being met
From Analysis to Action: Who Needs to Do What?
Trang 31Keondcde sdtmeeionfer Congeii-rcsinErrg «capital; education; and so forth The final chapter recast the broad array of secommendations from the perspective of which actors need to take what actions The chapter addresses the many entities of government, the private sector and cv society that will have to implement eecommendations i ieas ate tobe translated fist into action and then into reality Not all ofthe recommendations are of equal weight and priority; and for techaical or political reasons, some will be far mote dificult to implement than others Some actions would require new Inws through Cangress Some would require significant changes in policies or the regulatory envionment, while others could be achieved by exerting a reasonable amount of political will.Some could be caried out with existing resources Others would require signiicant mobilization of public and private funds Some actions could be lone rapidly Others will require years of sustained efforts Some actions wll bre ficult because they affect the interests of groups who benefit rom the system the way itis (ur work does not go so far as to prioritize or suggest details For ä par ticular plan That i necesary—including all the hard choices and tradeoffs that canceete aston implies—thowgh itis beyond the scope of the present report, What is clear is that Brazil necds to undertake & broad, systemic or process in order to increase the competitiveness of ts economy and to accelerate growth There isa danger that the recently improved trade perfor: _mance—deven bythe cureent hoom cycle in commodity prices—will improve ‘economie performance enowgh ta temporarily justify complacency: Given the fundamental changes that are taking place loblly, that shore-sighted approach would be costly Neither the government nor Brazilian society as a whale appears to be Fully cognizant ofthe international twends or the opportnity costs of Faure to respond, Most governments and ctizens of Asia da nderstand these tends, and they are responding, and that fs an important reson why Asia ising ác the new base of econamic power For Baal the next step isto mobilize a smase ‘campaign to rse public awareness Brazil needs ta se ts performance inthe broader global context, to analyze the new global challenges that i faces, and to discuss in a transparent way shat mist be done The process of stocktaking and building stakeholder awareness inherently « domestic political process Teieeds tobe locally driven and locally owned eshoped that this report will provide useful input into launching sucha process
“This report wis cseried out by « multdisciplinary team of World Bank staf consultants, and Brazilan counterparts, The core team and contributors analyzed existing data, developed conceptual and econometric models and ‘consulted extensively with federal and subnational governments busines ead «sand academies The research was conducted primarily between November
Trang 34CHAPTER 1
Brazil’s Growth and Performance
in a Global Context
Brazil has achieved relative economic stability and a growth rate of about 25 percent over the past decade However, Bnail has not recovered the rapid srowth rates once achieved, nr the current rapid growth rates ofits main ‘slobal competitors ln fc, from a global perspective, Brazil aot only i uling to catch up its falling eelatvey father behind ‘This chapter aseses Brazil's recent growth compared with other countries ia Latin America and with several middle-income economis of approximately simile size Tt then considers Bravils ranking in a highly competitive global ‘avironnveat that is increasingly deven by knowledge and ingovation These international comparisons provide context for Iraming the sswes of cent ‘concern fortis report This chapter also examines the structure of the Brazian secoaomy and ts exports Chapter 2 presents 4 conceptual Framework within which to intenpy
Brazil's experience, placing this study within a growing body of work on inno- ‘ation, competitiveness and eeanome groveth, Chapter 3 looks more closely 3t the nature and origins of innovation, The remaining chapters Focus on the pectic innovation and human capt limitations that are constraining Brazil's surtent growth and competitiveness
Brazil's Growth in Comparative Perspective
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202202
PPE PEPELEPLER IEEE LE ES ESE EGE
Sarr anno Capa Sit wen ee
Trang 36ens Groth Pomc ne lb Content
1 Average and Volatility of GDP Growth Rates, 1964-2005
ene Sender eon na arto a v mm TA Tre ce ne bye wo Figure 12 Annual GDP Growth: Percent and 10-Year Moving Avera 1964-2005
Trang 37Keondcde sdtmeeionfer Congeii-rcsinErrg ‘Table 12 Annual Real GDP Growth Rate for Brasil and Select Countries
rere ap of o “ 2 “ “
"` „
ssaprisingly shorclved In 2005 and 2006, growth rose ta shout 3 percent, only slightly above the average forthe previous decade The weakness in growth becomes even more apparent when Brus performance fs compared with current fast-zroneth economies such as Chins, India, o Indonesia As shown in table 1.2, during the 1960s these economies grew auch more slowly than Brazil Yet while Brazil fell at during the 1980s, these economies managed to jump-start their growth, The Republic of Korea Malays, and Thailand not only have sustained high growth for longer periods than Brazil but also have experienced prolonged periods of rapid expansion {ollosing periods of lw growth “The relative consequences of this low growth ae lustrated in figure 1.3 {As shoven, Bris income gap relative to the Organisation for Economic Co-operation and Development (OECD) counties has steadily widened, Since the 19905, Brazil has not only fale to catch up, it has fallen farther Yehind-—om about 42 percent of OECD per capits income i 1980 to Tess than 29 percent in 2005
Brazits Competitiveness in an Increasingly Knowledge-Driven Global Environment
Trang 38ens Groth Pomc ne lb Content
Figure 13 Bras Per Capita Income Relative tothe OECD Area (in PPP)
:
Trang 39Keondcde sdtmeeionfer Congeii-rcsinErrg the share of knowledge-based industries in total value added rose fom S1 to 530 percent in Germany, from 45 to 81 percent ia the United Kingdom, and from 34 to 42 percent in Finland (OECD 200) ‘One way to see the increased importance of knowledge ito examine the hanging structure of global tade in even the short period betseeen 1985 and 2004 (table 1.3) The share of primary products decrease fom 23.2 per ‘ent in 1985 to 14.7 percent in 2004, while that of manufactured products increased from 76 Ñ percent to 85.3 percent This i largely because man factured products are more income-lastc than primary products, because fareater numberof new and increasingly dillerentisted products ane proce through advancesin knowledge, Moreover, the share of resource-based man
Trang 40Figure 14 Brasil Rankings on the Global Competitiveness In
and training, 85th on market efficiency, and Sst on technological readi- ness Beuzl ranks 36th on the innovation and sophistication factor sub- index {which characterizes innovation-driven economies); it ranks 33rd ‘on the business sophistication subcomponent and 39th on the innovation subcomponent “The GCI scores suggest that Bri wil face a tiple challenge if it wishes to make the transition from postive economic growth to rapid economic arowth Fist, s€ must improve upon the basic enabling conditions for
‘rowth—a sound macroeconomic environment, capable institutions, moders infastructute, and highenqualty basic education and health services Improv ing the basic enabling environment is probably the key priority because this the area where Brazilian performance is the worst, particularly with gard to the macroeconomy As shown in chapter 2, Bra faces considerable obstacles in this arca—Largly asa result of low ates of investment—vshich negatively llc its silty to grow: Second, Brazil must improve domestic competition
fand market efficiency, education and taining, and its ability to use existing techaology effectively: Improving eficieney i the second key priority assis the second-worst performance