Geoff's blog

A visit to Brazil

Geoff Mulgan - 20.03.2013

I recently made my first proper visit to Brazil, visiting Rio de Janeiro, São Paulo and Brasilia, and meeting a wide range of people, from banks and innovation agencies, to universities, accelerators, startups, civil society groups, arts collectives and government ministries.

Everyone now knows that Brazil is on a roll, with strong growth. It's becoming associated with dynamic technology and industries as well as soccer and samba, and with the imminent 2014 World Cup and 2016 Olympics it's certain to become even more visible in the years ahead. For us at Nesta it's particularly interesting to see the new ways in which the country is innovating.

The big picture is that Brazil's position is also complex: Latin America has had many false starts over the past century and many economists warn that growth could be cut short by a variant of Dutch disease (the mix of problems often afflicting countries with strong commodity and raw materials exports: these tend to corrode productivity, and push exchange rates too high). Socially Brazil remains very unequal, despite the great progress made by the current government in reducing poverty. In international affairs Brazil - along with the other BRICS (Russia, India, China and South Africa) - has shown its power to block, but has yet to show so clearly how it can lead.

The innovation agencies and funders

BNDES (Vice President Ferraz) and FINEP - are striking for their scale and their ambition.  BNDES has run a big programme of support for software and pharma for a decade, improving standards, trying to get industry to shift from copying to origination, and now encouraging acquisitions abroad to take advantage of relatively cheap prices. FINEP, the innovation agency, under the leadership of its President Glauco Arbix has been pushing the frontiers on energy technology as well as investing heavily in health, for example with a big neuroscience programme. But both struggle with the relatively low investment in innovation by Brazilian companies (and a possible 10-25% fall since the financial crisis) despite generous incentives. 

Universities

A good deal of their attention focuses on universities - we visited both the University of São Paulo (USP) and the Federal University of Rio de Janeiro's (UFRJ) graduate engineering school, COPPE - which are rapidly becoming better at spinouts and technology transfer. Brazil's science system has major strengths - particularly in fields like biofuels - documented by my colleague Kirsten Bound, who was also on the visit, in a previous report Brazil: the Natural Knowledge Economy, part of The Atlas of Ideas.  

Many multinationals are relocating research labs there, including British Gas and Peugeot Citroen, which is opening a 10 year research centre on biofuel-powered combustion engines. But universities were forbidden to deal with the private sector as recently as the early 2000s, and although there are very dynamic innovation hubs (like USP which benefits from their extraordinary funding base, a guaranteed share of state tax revenues via the state research funding agency, FAPESP) innovation isn't yet in the bloodstream in much of higher education.   



USP's Innovation Agency showed what is possible: The Centre's coordinator, Professor Vanderlei Bagnato (shown above, left) is a great example of the academic as innovator and entrepreneur, encouraging students to be alert to the innovative potential of their work. Recent successes include a student of medical forensics who realised that the fluorescent light he was using to judge time of death could be used to control beer fermentation, resulting in a practical tool that could accelerate the fermentation process by 20% with lucrative implications.

There are others:  the use of rubber in textiles, photodynamic therapies for skin cancer, and with Boeing and Embraer, there is even an airplane comfort lab that uses simulators to explore good sleep for passengers rather than only training pilots. In relation to ageing, cosmetic surgery was the top concern: Brazilian women still want to go dancing at 80 and look their best, and infrared treatment during exercise helps muscle strength by amplifying the metabolism.

Startups

Beyond the universities there is great interest in new ways of starting businesses, particularly in technology. There are nearly 500 incubators in Brazil and many people are setting up new kinds of accelerator, such as Daniel Pereira of b2b startup accelerator Papaya Ventures, redesigning models from the US and Europe (for example, having 'demo days' earlier in the process). The government has also adapted a variant of Start-Up Chile's remarkable programme.

Rio's big story is 'pacification' in favelas: this involves government driving out the drug dealers and promising proper policing, along with formal provision of utilities to replace the informal arrangements often in use now.  Generally this seems to be popular, and is part of a broader programme to bring order to the city, exemplified by Rio's futuristic control centre (pictured below), a modern day panopticon tracking traffic, incidents, weather and landslides, with a crisis command centre for the Mayor. 



But Brazil's social position is in flux. Jesse de Sousa, one of the country's leading sociologists, argues that Brazil has a complex class structure, in which a large group - perhaps 40% of the population - is unable to engage in the formal economy. Instead, this group lives in informal, temporary and often one-to-one service roles, because of both structural conditions and their own cognitive and cultural upbringing. There's also a smaller more traditional working class; a growing middle class; and a small elite. One of the many challenges for social policy is how to go beyond income redistribution, and the big successes of programmes like Bolsa Familia, to address cultural capital in the family.

Civil society

A generation after the end of the military dictatorship civil society is ever more confident.  Portuguese is the second most widely used language on Facebook and Twitter, while social media are prominent tools in civic activity.  A good example of this is Rio's  of Purpose.Com, led by the impressive Alessandra Orofino, whose most visible project is Meu Rio - a platform for young people to mount campaigns to change policy. A recent campaign tried to stop a school being abolished using 24/7 web cams and clever mobilisation of traditional media.     Cidade Escola Aprendiz is another good example (led by Natacha Costa, pictured below). It links local web platforms to a broader mission to turn neighbourhoods into learning systems.  It prompted me to realise that we need to do much more to connect our hyperlocal media work to schools and children.



A session with several ministries hosted by CGEE looked at the state of the overall innovation system. The coordinating ministry (MDIC) has a comprehensive and ambitious plan underway, stretching from sector strategies (including for biomaterials) to encouragement for startups and accelerators. Between the 1970s and early 2000s industrial policy went out of fashion, but it's now very central to government strategy.  

Their main fear is that Brazil will be squeezed between countries adept at high quality and high technology, and others which can outcompete them on cost: hence the shift to raising performance along supply chains, and policies like a 25% premium for public procurement of more innovative products in ICT, defence and health. The ministry in charge of science and innovation is overseeing adoption of a network of Fraunhofer-type centres called EMBRAPI, while an interesting programme with Intel, FGV and US organisation, Endeavour is building up mentoring support from big business to early stage entrepreneurs. 

There was wide agreement on indicators - that they measure what's easy to measure (ie patents and narrowly defined R&D) not what's useful - and this leads to a harmful bias. Brazil is also pioneering the idea of innovation diplomacy - using diplomatic tools to improve its position in the international division of labour, mobilising consulates to act as innovation observatories.

Sao Paulo's agency FAPESP warned us that the costs of doing research are now higher in Brazil than in California because of implicit and explicit labour costs (taxes, risks of employment law etc).  Costs of capital have at times been very high because of interest rates, though they're much lower now, and policy can be contradictory. But overall the picture is of quite a strong science system evolving fast into a more effective innovation system, with a fuller ecology of funding sources, incubators, growing businesses and activist public policy.

Creative economy

The creative economy is the focus of a significant part of the culture ministry, led by Secretary of Creative Economy Cláudia Sousa Leitão, and is half way through a strategy - we discussed issues of intellectual property  (they're very conscious how rare it is that a new artistic idea has a single originator), how to strengthen indigenous production and how to help creative entrepreneurs become better at business.

Grupe Nos de Morro is an engaging arts project based on a favela on a hill - under the direction of Guti Fraga.  They're best known outside Brazil for having recruited and trained up the actors in 'City of God' - the film about favelas - and run variety evenings, Shakespearean plays and projects in schools.  They're now struggling both to fund themselves and to cope with creeping gentrification of the favela (not a problem in most, it should be said).

Social investment

We met ICE - a new initiative aiming to build a social investment field in Brazil. It's very well-connected and very much part of the wealthy elite (the WEF/Ashoka end of the social entrepreneurship movement, plugged into investment banking and global business schools). They have talented people and big resources so if they can make the most of those connections while also linking to grassroots innovators they could achieve a lot.  



Telefonica Foundation led by Françoise Traipenard, is another funder with big ambitions - in particular to grow and improve uses of technology in schools. One of their aims mirrors discussions we've been having about acting as a curator for new technologies, providing guidance on which ones actually work.

For Nesta, there are many follow ups - and great potential partners, full of ideas and energy.  Although Brazil's next few decades will be challenging, this is a part of the world that seems to assume that life will get better, and that optimism is infectious.