Brazil Has Learned It Can’t Survive Without R&D

To guarantee high revenues in the sector – US$ 26 billion in 2005, the Brazilian companies that produce machinery and equipment must constantly invest in modernization and technological innovation.

This means both the purchase of new machinery and investment in research and development (R&D) centers. Many large companies, national or multinational, have their own centers. Small companies, in turn, tend to establish partnerships with institutions or universities through programs subsidized by the government.

Of the US$ 2.9 billion invested in the machinery sector in 2005, 36.9% was for technological modernization. In the three previous years, investment totaled US$ 1.4 billion.

Figures supplied by the Institute of Applied Economic Research (Ipea) show that innovating and spending more in R&D increases by 16% a company’s chances of entering the foreign market as an exporter, and it also expands the volume of innovative company foreign sales.

Considering the social impact, contrary to the concept that innovation causes unemployment, there is evidence that companies that bet on this tendency hired more than the average number of employees hired throughout the Brazilian industry.

According to the president at the Brazilian Machinery Manufacturers Association (Abimaq), Newton de Mello, the technological development is continuous at companies that produce capital goods.

"The leap registered in 2005 is a direct result of good sales in previous years. Investment was made basically to increase the productive capacity of companies," he said. That is, the more the company sells, the more money it has to invest in technology. With more technology, the company sells more. It is a cycle.

In the sector of tooling machinery, for example, which is among the most advanced, a large share of producers turn 5% or more of their revenues to R&D. "It is a sector that renews complete lines in little time.

New products – from conception, design, prototype to conclusion – are released in months," stated André Romi, president at the Sector Chamber of Tooling Machinery at the Abimaq. Despite the investment, Romi believes that a great technological transformation is yet to come.

"A new rupture with paradigms may be the advance of nanotechnology in the field of tooling machinery," he said. However, research in this sector is still at its initial phase at few international institutions.

Example

Romi industries, makers of tooling and plastic injection machinery, in which André is the institutional relations manager, are an example of a national organization that invests heavily in innovation. In 2005, investment in the R&D department was over US$ 10 million. The result is 62 patents recognized in Brazil and abroad and another 24 requests under analysis.

The company has a Technology Center for tooling machinery alone and another for plastic injection machinery. Among engineers, technicians and designers, 137 people currently work at the company R&D centers.

Apart from their own centers, the organization also has contracts for technological collaboration with foreign companies like the German Emag Maschinenfabrik GmbH and the Japanese Kira Corporation. (Read more about Romi tomorrow, in the third article in the series).

Last Generation Harvesters

Giant multinationals also invest in laboratories at their Brazilian subsidiaries. Massey Ferguson, the Brazilian subsidiary of the American AGCO group, has invested US$ 4 million in its Technology Center in the city of Canoas, in Rio Grande do Sul.

There the company has over 30 high precision testing workstations – among them a cold chamber that permits testing the performance of the machinery in special climate conditions, where products to be exported to cold countries are tested.

"All the equipment designed and supplied is evaluated at the center, which reproduces operations in the country, to obtain faster results and more precise information," stated Luiz Ghiggi, product engineering and management director at Massey Ferguson.

According to him, the Technology Center currently counts on a team of 15 highly qualified professionals. The company, which exports to over 80 countries, invests heavily in innovation. In 2006, investment should reach US$ 12 million and the forecast for 2007 is US$ 18 million.

In the agricultural sector, many companies have modernized and grown due to the great variety of kinds of soil and climate that Brazil possesses. The Brazilian industry had to develop different kinds of machinery and can now export to any country.

The Brazilian company Marchesan S/A, headquartered in the city of Matão, in the interior of the southeastern Brazilian state of São Paulo, is an example of this variety. The company, established in 1946 to produce vehicles and animal traction implements, became one of the largest producers in the agricultural machinery area in the country and exports to around 50 countries. The maker invests between 3% and 4% of its capital in product technology and 4% in production equipment technology,

Marchesan has a technology center for development and testing of its products, where 40 people work. "Apart from the tests executed at the technology center, our technicians and engineers develop studies and graphs of the work and analysis of the wear of the equipment. This is done with farmers in various regions of the country and on different soil," explained Francisco Matturro, the commercial manager at Marchesan.

In Matturro’s evaluation, investment in technology is of great importance, not only in products but also in equipment for production, like for example the automation of the assembly line of components. "The competitive market always requires technological investment, as this means gains in various sectors, in industry, in agricultural production and in end prices for consumers," he said.

Mills for Export

Another large Brazilian company that bets on technology is Dedini Indústrias de Base. In the last ten years, the maker of equipment for sugar and alcohol mills has been investing between 3% and 8% of revenues in innovation.

"Last year, of the R$ 19 million (US$ 8.8 million) invested in production, R$ 15.8 million (US$ 7.3 million) went into modernization of production equipment and R$ 3.2 million (US$ 1.5 million) went to development of new products, productivity and information technology," explained Fábio Malerba, the development analyst at Dedini.

The company has already exported 23 complete plants for production of alcohol. The products were shipped to Venezuela, Ecuador, Argentina and Mexico. "Among the most recent foreign sales we may point out the set of grinders that have the largest crushing capacity in the world, able to process 28,000 tons of cane a day, exported to U.S. Sugar Corporation, located in Clewiston, Florida," stated Malerba.

To have an idea of the size of the Brazilian company, around 60% of the infrastructure of sugar and alcohol mills in Brazil was built by Dedini, which also operates in other segments like brewing, mining, cement and fertilizers.

Support for Small and Medium Organizations

The term "technological innovation" has also already entered the jargon of small and medium companies. Without significant funds for investment, these companies – which represent 60% of the sector – end up buying technology, when they can. Many do not even manage to invest in more modern machinery and automatic systems.

To help small and medium associates to include technological innovation in their organizations, Abimaq established, in 2003, the Institute for Research and Technological Development of the Machinery and Equipment Industry (IPDmaq), whose objective is to guide businessmen in questions connected to the matter.

The institute helps producers to find partner institutions and universities for possible projects and still helps the producer find government subsidies, which may come both from the Ministry of Science and Technology and from the Brazilian Development Bank (BNDES), among others.

Apart from that, the organization also helps with information regarding patenting. Over 300 companies are participating in the events promoted by the IPDmaq this year. According to the executive secretary at the institute, Demétrio Prior Travessa, this figure shows that businessmen are starting to wake up to the matter.

Apart from Abimaq, other organizations, like the National Association for Research, Development and Engineering of Innovative Companies (ANPEI), also have programs to provide incentives to company technology. The Technological Leverage program, developed in partnership with the São Paulo state Brazilian Micro and Small Business Support Service (Sebrae), is turned to small and medium companies in all sectors.

According to Olí­vio ívila, the executive director at the ANPEI, the idea is to provide basic notions as to how to use technology at the service of the company. From the modification of a machine to the design of a product. Established five years ago, the project has already assisted over 1,000 companies. "The result is always positive: revenues double, companies start exporting, among other things," stated Olí­vio.

Technological production at companies in general should grow starting next year. This is because the government made use, between May and July, of the regulation of two laws that are fundamental for technological supply: the Innovation Law and the Good Law.

Starting now, companies that invest in their own research centers, employing professionals with master’s degrees and doctorates, and who seek patents, will have deductions of up to 100% in Income Tax.

Another benefit – which is doubly positive for the machinery sector – is a 50% reduction in the Industrialized Product Tax (IPI) over the purchase of machinery and equipment for use in research and development.

The idea is to make companies invest more and more in innovation, a powerhouse that may make Brazil more competitive – especially against technology monsters like Japan, Germany and the United States.

Anba – www.anba.com.br

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  • Dewolfe

    Maybe you can tell me something? I understand that alcohol develops the most work when it’s used in a long throw cylinder with a large radius crankshaft so that it creates torque and horsepower at lower rpm than gasoline engines. So why has all the emphasis been on createing dual fuel engines that aren’t very efficient when used with alcohol instead of some small engines suitable for agricultural machinery, pumps, marine engines and generators? Could you run that past your sources and let me know. Perhaps I’ve been misled about the basic properties of alcohol as an engine fuel? This seems to me to be a chance to create a product for national consumption that will sell for hard currency (which the Real has become). Romi Industries sounds like just the company for this if they are National and run by interests who don’t care if they can balance investment with getting money out of the country so long as it’s hard currency (Reais).

    Dewolfe

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