Published 10 October 2014

Brazil in transition 

– opportunities for Sweden where Trade meets Innovation

The legacy of the previous import substitution policy is still evident in Brazil’s actions as an international trade and business partner. This means that the 'technology upgrading' in the first place is expected through the development of national/domestic value chains, serving a growing domestic market.

These technology up-grading ambitions affect Brazilian international relations through high import tariffs and demands for locally produced content. For international counterparts, it is sometimes therefore difficult to meet Brazilian requirements when extensive technology transfer is requested while the policy dialogue between the two countries revolves around innovation. Hence when Brazil brings a trade dimension into what other countries perceives as an innovation discussion.

This report identifies some of the causes which may point to misunderstandings in the policy dialogue between Sweden and Brazil. For Brazil’s public policy in the domain of innovation and trade policy, the goal is mainly about diversifying the industry structure to decrease the vulnerability of exposure to commodity exports. This in turn takes place in the light of: a lack of infrastructure; a generally low level of innovation; shortage of human capital and skilled labour; and heavy bureaucracy and administrative inefficiency.

In the Sweden-Brazil relationship one possible reason for these misunderstandings is significant differences in the Swedish and Brazilian approaches to innovation. The misunderstandings can be traced back to the significant differences in the two countries societal challenges.

The Brazilian innovation policy aims to: 1) gain core competences in future key technology areas; and 2) quickly create a large base for industrial production. In practice, unlike in Sweden, the way forward includes a large element of government involvement. Hence, public policy in Brazil is more hands-on in industry-related issues than in Sweden and other similar countries.

The result is that Brazil holds a different view of innovation than Sweden and Swedish counterparts. Somewhat simplified, one can argue that Brazil focuses primarily on trade issues including large scale innovation /technology transfer projects while Sweden speaks of international co-operation on research, innovation and education on a smaller scale, leading to smaller projects and in broader domains. However, indications are that the relationship between Sweden and Brazil right now is in a positive formative stage for future co-operation. The single biggest reason for this is undoubtedly the JAS Gripen deal, which not only increases the potential for greater cooperation in the defence field but also creates the conditions for increased innovation and industrial cooperation in other areas. In practice, therefore JAS Gripen is the catalyst and platform that connects the ongoing activities within the framework of: 1) the bilateral co-innovation; 2) already existing industrial; and 3) the various "autonomous" / standalone initiative.

Given the broad and historically strong contact area between Brazil and Sweden, there is a potential for synergies, considering a couple of factors. We need to internally discuss what this new relationship between Sweden and Brazil may contain, in order to set the stage for deeper collaboration. What new possibilities for cooperation, both institutionally and sectorally, will this new co-operation open? Furthermore, Swedish players must to a much larger extent than in the past make an effort to understand the Brazilian challenges and priorities. Only that way, Sweden can put together a national offer that is interesting for both parties.

The main point of this study is that the new relationship with Brazil can only be designed in conjunction with our Brazilian partners. Only through close dialogue and greater mutual understanding, Sweden will be able to take advantage of the opportunities that lie in the pot. The prospects are good, however with a number of initiatives at various levels that, if we manage to tie them together, can lead us “from an innovation-driven collaboration to industrial cooperation based on innovation”.

Title
Brazil in transition  – opportunities for Sweden where Trade meets Innovation

Serial number
Direct response 2014:22

Reference number
2014/248

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