Temer’s Austerity Policy and the Future of the Brazilian Innovation System

In this Policy Brief, we identify some of the main effects of the current austerity policy of the Brazilian federal government on the country’s national system of innovation (NSI). Such austerity policy includes a proposal to amend the Constitution which has been popularly called the “Expense Ceiling” Constitution Amendment Proposal (PEC do Teto de Gastos). Drawing on the work of the economist Mariana Mazzucato, we first present the relations between innovation and economic growth, highlighting the central role played historically by the State in economies based on innovation. Next, we analyze some of the impacts of the current austerity measures on four Brazilian SNI subsystems: (i) Financing; (ii) Education & Research; (iii) Production & Innovation; and (iv) Policy & Regulation. We conclude that, if approved, PEC do Teto de Gastos will jeopardize the future development of the Brazilian NSI. As a result, it tends to deepen the current economic crisis, moving the country away from an “intelligent” growth model – that is, from an innovation-based, inclusive and sustainable growth model. Finally, we recommend the rejection of the PEC do Teto de Gastos proposal by the Federal Senate, and argue that Brazilian socioeconomic development depends on the recomposition of public spending in ST&I, as well as on institutional reforms consistent with both the adoption of a national mission-oriented innovation policy and the respect for the social rights of the Brazilian population, as guaranteed by the Federal Constitution of 1988.