Brazilian president Luiz Inácio Lula da Silva is introducing two new pieces of legislation that will make it easier for biotech innovation to materialize. Credit: EVARISTO SA/Agence France Presse/Getty Images

Two new complementary laws designed to break down the rigid separation between public and private sectors are coming into force in Brazil. They are expected to help foster the development of innovation in fields such as biotech. With the new law, public funds can now be spent on industrial projects. The success of the government's policy will depend on whether industry is willing to contribute to the growth of the sector.

Brazil is due to implement a new fiscal incentive law in April that will provide the mechanisms for allocation of tax breaks and grants to stimulate innovative companies. That tax law complements another piece of legislation: a new Brazilian innovation law signed by President Luiz Inácio Lula da Silva on December 2, 2004.

Many institutional impediments preventing public-private collaboration are removed by the new innovation law. “This law has been formulated to promote the transfer of technology and dissemination of knowledge generated within public[ly] funded research institutions to the [industrial] sector,” declares Francelino Grando, technological policy and innovation secretary, at the Brazilian science and technology ministry, in Brasilia. And intellectual property held by these institutions may now be licensed out by tender, allowing the commercial utilization of publicly sponsored inventions by private companies. Universities will also be able to grant their own researchers 3-year renewable licenses to establish businesses to develop promising innovations.

But the main task identified by the government's innovation strategy is the need to overcome the public sector's entrepreneurial naivete and industry's poor R&D spending record, by creating joint ventures. From now on, both national and local government, and public research bodies will be permitted to undertake joint R&D projects with public and private institutions. “Now we can give entrepreneurs government grants for their research,” explains Renato Marques, Project Analyst at the Brazilian Innovation Agency, Science and Technology Ministry, in Rio de Janeiro.

Besides, the innovation law also contains clear provisions allowing joint projects to flow towards joint ownership of patents. Crucially, academic institutions will be allowed to share laboratory space, facilities and equipment to incubate both joint ventures and private companies. Tiago Campos Pereira, Professor in the Medical Genetics Department at Campinas State University, expects that “the number of patents will probably increase in the near future and they will come to be seen as a basic element of market competitiveness.”

Out of the existing 300 incubators in Brazil, only 5% are in the biotechnology sector whereas 35% focus on information technology, according to the Panorama 2004 report of the National Association of Entities for Innovative Enterprises—ANPROTEC. Although agreeing that the new innovation law will make it easier to start biotech ventures, Antonio Paes de Carvalho, president of the Brazilian Association of Biotechnology Companies, based in São Paulo, cautions that financial support will be critical: “Ever fewer scientists get good funding…and high interest rates and high collateral demands on small enterprises make obtaining credit difficult.” That's where, Marques believes, the new fiscal law will provide a real advantage to biotech startups that inevitably rely heavily on seed money. “We are still planning what actions to take, but investments on high tech startups with nonrefundable money will be a priority,” promises Marques.

For now, the main winners are scientists themselves. Now public employees can be seconded to other institutes or private firms without losing tenure or benefits. “This puts an end to previous legislation which prohibited the participation of civil employees in boards and executive posts in industries of any size. This is important in a country where around 80% of scientists are civil employees in federal and state universities and isolated research institutes,” notes Carvalho.