Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 5153-BR

STAFF APPRAISAL REPORT

BRAZIL

PR OJECT FOR SCIENCE AND TECHNOLOGY

January 8, 1985

Project DepartmentLatin America and the Caribbean Regional Office

This document has a restricted distribution and may be used by recipients only in the performance oftheir official dutiesm Its contents may not otherwise be disclosed without World Bank authorization.

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BRAZIL

PROJECT FOR SCIENCE AND TECHNOLOGY

Table of Conte,ntsPage

BASIC DATA. ... ....... vi

GLOSSARY...* ....................... viii

LOAN AND PROJECT SUMMARY............................. xi

I. OVERVIEW AND PLAN OF REPORT ........... l1

II. SCIENCE, TECHNOLOGY, AND BRAZILIAN DEVELOPMENT ............ 1

A. Science, Technology and Change ..... ....... 1B. Scientific Underpinnings of Brazilian Growth ... .......... 2C. Bank Experience in the Sector..............o...... 3D. Sector Management ............ nagement 4E. Major Issues. .......... *....e-..0*****. .... *......* ... 5

Resource Base ................ ..... ....... ...... 5Educational System y....... 0e...... . ............. 5Composition of Effort ................................ o 6Institutional Arrangements ........ .............. .. ... 6

F. The Program for Science and Technology Development (PADCT). 7

III. CONTENT OF PADCT AND OF THE PROJECT......o.......JT 8

A. Ove vie.e .... .. 0-.. i.. e ..... 06.00 8B. Subproject Typese........ .... ..............p.0.y.. 9

Human Resource Subprojects...b .r oe ct... Y ....... ..... . 9Research and Development Subprojectsb.......... 0...-j.0.0c 9Service Subprojectsb p r o j e c t ........ ..... 0-0.0-00 10

C. Subproject Appraisal Guidelines..oi........... 0...-.-.. ..... 10

This report is based upon the findings of major appraisal missions that visitedBrazil in February and July of 1983 and 1984. Mission members includedRalph W. Harbison (Senior Education Economist, mission leader), Suzana Augusto(Disbursement Officer), Roberto Cucullo (Senior Counsel) and 10 technicalconsultants supported very substantially through a Bank administered UNDPproject. Additional details on the unusual appraisal process are available inAnnex 11.

This docant has a restricted distnbution and may be used by recpients only in the performanc oftheir officia duties. Its contents may not otherwise be dbscld without World Bank authorikaio

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D. Subprogram Areas ............................... **....... 11Disciplinary Subprograms ...... ................ ......... 12National Services Subprograms.* ............... ..... .... ... 12(a) The Subprogram for Basic Technological Infrastructure

for Science and Industry .............. ........ ........ 13(b) The Subprogram for Science Information Service ......... 15(c) The Subprogram for Reagents and Other Research

Consumables ............. *.......................... .................. 16(d) The Subprogram for Maintenance and Repair of Scientific

Equipment ............................................................ 16E. Summary of PADCT Content ....... 0....... ............... 17F. The Bank Project ....... ...................................... 19

IV. MANAGEMENT AND IMPLEMENTATION ....... ........... .......... .0...... 19

(Diagram of Management Structure and Functions) ............ 20A. General Management .............................. . . . 21

The Comissao Transitoria do PADCT ...... .................... 21The Secretaria Executiva do PADCT .......................... 21The Grupo Especial de Acompanhamento ....................... 22

B. Program Management - Grupos Tecaicos de Assessoramento..o..... 22C. Project Management .......... ................ ................. 23

Subproject Executing Agencies .. .... ........................ 23Funding Intermediaries ....... ............... ......... ....... 24(a) Allocation of Subproject Responsibility to Funding

Intermediaries ......................... .... ..... .. *. ............... 24(b) Subproject Appraisal and Final Approval .............. O.. 24(c) Subproject Supervision ................................ - . 25(d) Subproject Evaluation. .i................ .. .......... 26Xe) Special Provisions for National Services Subprograms... 26

D. Specially Assigned Implementation Responsibilities........... 27FINEP-Financial Agent.................... .......... 27CNPq--Import Aget...................... 27

E. Bank Role in PADCT Management ag... ............................ 28Program/Subprogram Supervision and Evaluation.............. 29Midterm Review .................. . ..... ... 29Subproject Supervision and Evaluation...... 30

F. Readiness for Implementation................................. 31

V. INVESTMENT PLAN AND FINANCIAL MANAGEMENT.... ................ 32

A. Investment Plan. ...... ... ..... 32Total PADCT Cost........... 32Sources of Funds for PAADC ... . . . .. ... 33Uses of Fundsu... ........... 34(a) Basis for Calculationslc ulation................. .... ... 34(b) Expenditures by Subprogram . ................... 34(c) Expenditures by Categorya.teg.o ry.......ee.... ee...e 35(d) Commitments by Year. . ................ 36(e) Costs of Program Administration . . ........ 36(f) The Bank Loan.......... ......... 37

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Page

B. Financial Management Procedures............-.-.............. 37Flow of Funds and Annual Operational Plan ................... 37Disbursement of the Bank Loan ....... ................... ..... 38(a) Disbursement Percentages ................................ 38(b) Disbursement Procedures%............... ............ .... 38(c) Retroactive Financing..-. ..... o... ........ ...... ...... .. 39(d) Disbursement Profile ............................... ...*. 40

C. Procurement ..................... ..... a....... * ............ 40Civil Works ............ ........ **.. ............... 41Consulting Services ... ................ .................. 41Equipment ........................ .................. ,.... 41

D. Accounts and Auditing ... .................. .. . 43Accounts Development .f.r Suta.d.rdutviy ..n......... 43Auditing Gaps.in.the.Policy...a...or....................... 43

VI. BENEFITS AND RISKS ................................... 43

A. Benefits ...................................... 43Relevance in.Ad .nistatio. ............... .... ... .... ..... 44EffectSveness ....... E.... N.......................... 44Efficiency ........... ,*. ..... ,..... . .... 44Systems Development for Sustained Productivity Gains ................................ 44

B. Risks ........... ,... ... ,........... .. 45Remaining Gaps in the Policy Framework ............. . ............... 45change in Administration.,., .............................. ........ ,,, ., 46

VJII. AGREEMENTS REACHED AND RECOMMENDATIONS ............................... 46

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Page

ANNEXES:

1. INTERNATIONAL ASSISTANCE FOR SCIENCE AND TECHNOLOGY IN BRAZIL .... .* 48

A. Inter-American Development Bank (IDB) ............................ 48University Development..6..6..6 .... **....*.* 666666666 .6666666 48Technology Development........................ ,.......0-... 49

B. The World Bank .................................................. 49Agricultural Research--EMBRAPA Loans........................... 49Alcohol and Biomass Energy.............. ................... 50Ecological Research in the Northwest Development Program...... 50

2. BRAZILIAN SCIENCE AND TECHNOLOGY AS A DEVELOPNENT SECTOR.. ........6 51

A. Summary Indicators of Scope of Brazil's Science and TechnologySecto r ,,51

B. National System for Scientific and Technological Development.... 52Conselho Nacional de Desenvolvimento Cientifico e Tecnologico. 52Financiadora de Estudos e Projetos ............................ 53Coordenacao de Aperfeicoamento de Pessoal de Nivel Superior ... 53Secretaria de Tecnologia Industrial........................... 54

C. National Planning for Science and Technology .................... 54D. Economic Consequences of Brazilian Scientific Research ......... 55

(Diagram of SNDCT Agency Structure) ........................... 58

36 POLICY FRAMEWORK AND OBJECTIVES., ........................666666, 6 6 , 59

A. Rationalization of Responsibilities ............................. 59B. Increased Productivity..................................... 60C. Improved Financial Base.. , ......6666666666666666666666.6 60D. Better Distribution of National Effort.,. ...................... 60

4. EXAMPLES OF PADCT SUBPROJECTS BY TYPE ................. ......... 62

A. Human Resource Subprojects .............666666666 666666666666.6..6 62B. Research and Development Subprojects ............................ 62C. Service Subprojects............................................. 63

5. SUMMARY OF PADCT SUBPROGRAMS AND SPECIAL COVENANTS ................. 64

A. The Biotechnology Subprogram..................................... 64B. The Chemistry and Chemical Engineering Subprogram............... 65C. The Geosciences and Mineral Technology Subprogram...69960-...... 66D. The Instrumentation Subprogram ...... 666...66.6...666 ...6666666666 67

E. The Science Education Subprogram ................................ 68F. The Subprogram for Science Policy Planning and Management ....... 69G. Special Subprogram Covenants ...........6666666666666666666666666 70

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6. KEY AGENDA ITEMS FOR THE MIDTERM REVIEW .......... ................. 74

7. SUMNARY OF PADCT TEST ROUND ....................................... 77

8. PADCT SOURCES OF FUNDS ............................................ 80

9. PADCT USES OF FUNDS BY EXPENDITURE CATEGORY AND SUBPROGRAM ....... 81

10. BRAZILIAN PROCUREMENT REGULATIONS ....... ........... o.......... .. 83

11. APPRAISAL PROCESS FOR PADCT ............. .. ............ .. 84

12. CONTENTS OF THE PROJECT FILE ................. ......... s.e....... 86

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BASIC DATA

Social and Economic1970 1980

Population 91.1 million 119.0 million

Literacy Rate 61.5% 68.7%

Net Enrollment RatioPrimary Schools 67.2Z 67.7%Secondary Schools 15.0%

Undergraduate Enrollments 425.5 thousand 1225.5 thousand

Undergraduate Completions 64 thousamd 188 thousand

Gross National Product US$45.3 billion US$255.0 billion

GNP Per Capita US$489 US$1,959

Science and Technology1975 1982

National Expenditure on US$1.86 billionScience and Technology

Number of Researchers 18,200 32,500

Distribution of Researchers by:

DisciplineExact Sciences 14.4%Ergineerirg 18.7%Agriculture 17.7%Health 24.2%Social Sciences and Humanities 25.0%

Geographic RegionSoutheast 67.2%South 14.0%Northeast 15.1%North 2.5%Centerwest 1.2%

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1975 1981

Number of Graduate CoursesMaster's Degree 505 736Doctoral Degree 176 285

Graduate EnrollmentsMaster's Programs 20,500 35,400Doctoral Programs 1,700 4,800

Graduate Degrees AwardedMaster's Degrees 2,170 4,570

.Doctoral Degrees 138 508

Distribution of Financial Resources by:

SourcesFederal Treasury 66.1%State Treasuries 11.6%Public Sector Enterprises 13.6%Private Sector Enterprises 6.8%Other Financing Entities 1.9%

User ImstitutionsGovernment 32.0ZEducation 16.0%Productive Sectors 52.0Z

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GLOSSARY

ABNT - Brazilian Association of Technical Norms.

AP - Programmed Action (Acao Programada Para Ciencia eTecnologia)-the operational breakdown into programsand projects of the PBDCT, consisting of some 25 actionplans (acoes programadas) for specific priority fieldsof science and technology.

CAs - Appraisal Committees (Comites Assessores)--the groupsof scientific and professional peers which willappraise PADCT subproject proposals for thelntermediary agencies.

CACEX - Foreign Trade Bureau (Carteira de ComercioExterior)-the unit of the Baik of Brazil responsiblefor administerirg import quotas set by SEPLAN.

CCT - Science and Technology Council (Conselho Cientifico eTecnologico)-the policymaking body of CNPq.

CAPES - Coordinating Agency for Advanced Trainirg of High LevelPersonnel (Coordenacao de Aperfeicoamento de Pessoal deNivel Superior)-the dependency of the Ministry ofEducation and Culture which oversees all graduateprograms in Brazil.

CNPq - National Council for Scientific and TechnologicalDevelopment (Conselho Nacional de DesenvolvimentoCientifico e Tecnologico)-the dependency of SEPLAN,which through its assigned role in SNDCT, functiors asthe prime coordinating agency for science and technologyin Brazil.

CT - Temporary Commission for the Support Program forDevelopment of Science and Technology (ConissaoTransitoria para o Programa de Apoio ao DesenvolvimentoCientifico e Tecnologico)-the committee of the CCTestablished to oversee the Project.

EMBRAPA - Corporation for Agricultural Research (EmpresaBrasileira de Pesquisas Agropecuarias).

FINEP m Agency for Financirg Studies and Projects (Financiadorade Estudos e Projetos)-the dependency of SEPLAN throughwhich most resources for scientific research andgraduate education are channeled.

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FNDCT - National Fund for Scientific and TechnologicalDevelopment (Fundo Nacional de DesenvolvimentoCientifico e Tecnologico)-the government's major sourceof grant funding for scientific and technologicalresearch, administered by FINEP.

GTs - Technical Advisory Groups (Grupos Tecnicos deAssessoramento)-the task forces comprising scientistsand agency representatives established by the CT toplan, monitor, and evaluate the PADCT.

GEA - Review and Advisory Group (Grupo Especial deAcompanhamento)--the 15 member internationalexpert body which critically assesses PADCT progresstwice yearly.

IBICT - Brazilian Institute for Scientific and TechnicalInformation (Instituto Brasileiro de Informacao emCiencia e Tecuologia).

ICB - International competitive bidding.

IDB - Inter-American Development Bank.

INMETRO - National Institute for Metrology, Technical Standards,and Industrial Quality (Instituto Nacional deMetrologia, Normalizacao e Qualidade Industrial).

INPI . National Institute for Industrial Property (InstitutoNacional de Propriedade Industrial).

Intermediary - The four agencies of the government (CNPq, FINEP,Agencies CAPES, and STI) which will manage PADCT subprojects.

IPT - Institute for Technical Research (Instituto de PesquisaTecnologica).

PADCT - Support Program for Development of Science andTechnology (Programa de Apoio ao Desenvolvimento daCiencia e Tecnologia)-the government's new programinitiative in the science and technology sector whichthe Project cofinances.

PAS - Public Access System.

PBDCT - Basic Plan for Scientific and Technological Development(Plano Basico para o Desenvolvimento Cientifico eTecnologico)-the government's overall plan forscientific and technological development for the period1980-84.

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Project - The three year time slice of PADCT commitments expectedto total US$215.4 million (equivalent to 60Z of expectedPADCT Basic Plan total costs of US$359 million) to becofinanced with the Bank loan.

SE - Executive Secretariat (Secretaria Executiva doPADCT)-the PADCT administration unit established forpurposes of coordination among the four governmentfunding agencies and between them and the CT, and GTsfor PADCT.

SEI - Special Secretariat for Informatics (SecretariaEspecial de Informatica)-the dependency of thenewly established National Council on Informatics,responsible for administering Brazilian policies withrespect to development and protection of industriesbased on microelectronics (especially computers).

SEPLAN - Presidential Planning Secretariat (Secretaria dePlanejamento da Presidencia da Republica)--Brazil'snational planning ministry.

SERPRO - Federal Service for Data Processing (Servico Federal deProcessamento de Dados).

SNDCT - National System for Scientific and TechnologicalDevelopment (Sistema Nacional de DesenvolvimentoCientifico e Tecnologico)--the array of Brazilianinstitutions using federal monies for science andtechnology whose overall coordination is theresponsibility of CCT/CNPq.

STI - Secretariat for Industrial Technology (Secretaria deTecnologia Industrial)-a unit of the Ministry ofIndustry and Commerce, charged with oversight of basicservices for industrial development.

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BRAZIL

SCIENCE AND TECHNOLOGY PROJECT

Loan and ProJect Summary

Borrower: Federative Republic of Brazil.

ProjectExecutingAgencies: Executive Secretariat for PADCT with assistance of National

Council for Scientific and Technological Development (CNPq),Agency for Financing Studies and Projects (FINEP),Coordinating Agency for Advanced Training of High LevelPersonnel (CAPES), and Secretariat of Industrial Technology(STI).

Amount: US$72 million including a capitalized front-end fee ofabout US$0.2 million.

Terms: Repayment in 15 years, including 3 years ofgrace, with interest at the Bank's standardvariable rate.

Beneficiaries: Final beneficiaries would be Brazilian universities andschools, research institutes, industrial serviceorganizations, and industrial enterprises which competesuccessfully for subproject funding from the four federalgovernment agencies listed above.

ProjectDescription: The proposed Project would finance the foreign exchange

costs of commitments during 1984-86 for Brazil's Program forSupport of Science and Technology Development (PADCT).PADCT provides for research and human resources developmentin six fields: Chemistry and Chemical Engineering,Biotechnology, Geosciences and Mineral Technology,Instrumentation, Science Education, and Science Planning andManagement. PADCT also includes four National ServicesPrograms to address sector-wide service deficiencies: BasicIndustrial Tecbnology, Science Information, ChemicalReagents anl Research Consumables, and Spare Parts andMaintenance. These combined efforts are expected to resultin better quality and efficiency in research and humanresource development projects, multiyear finance for suchprojects, and more cost effective services for the scienceand technology sector.

Risks: The main risk for the project is that its activities couldbe slowed due to the likely change in implementing agencymanagers as a result of the upcoming change in federalgovernment. This risk has been minimized by ensuring,during the preparation process, that the PADCT project

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evaluation mechanisms are decentralized and do not dependexclusively on the executing agencies. A second risk isthat implementation of some areas of activity may go forwardin a manner inconsistent with the PADCT guidelines, sincefour intermediary agencies are involved, as well as hundredsof beneficiaries, and it will not be possible to supervisein detail each activity. This has been addressed byinclusion of a midterm review of the program in 1986 and byproviding for semiannual reviews of progress by a Reviewand Advisory Group (GEA).

Estimated Project Costs:

Local Foreign TotalUS$ million

Oriented ProgramsBiotechnology 17.7 13.5 31.2Chemistry/Chemical Engineering 25.5 17.7 43.2Geosciences/Mineral Technology 18.9 12.3 31.2Instrumentation 19.4 4.6 24.0Science Education 15.0 1.8 16.8Science Planning/Management 4.0 1.4 5.4

Subtotal 100.5 51.3 151.8

National Services ProgramsBasic Industrial Technology 26.6 11.5 38.1Science Information 2.4 1.0 3.4Reagents/Research Consumables 0.6 4.4 5.2Repair/Maintenance 7.5 4.1 11.6

Subtotal 37.1 21.0 58.3

Program Administration 4.6 0.7 5.3

Total Baseline Costs 142.2 73.0 215.4

Front-End Fee on Loan - 0.2 -

TOTAL FINANCING REQUIRED 142.2 73.2 215.4

Financing Plan:Local Foreign Total X

US$ million

Government 142.2 1.2 143.4 66.6IBRD - 72.0 72.0 33.4TOTAL 4.2 215. T1

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Estimated Disbursements:

1985 a/ 1986 1987 1988 1989 1990Bank Fiscal Year - US$ mlllon-

Annual 15 a/ 20 15 10 7 5Cumulative 15 35 50 60 67 72

Rate of Return: n.a.

a/ Including initial deposits into Special Accounts.

BRAZIL

PROJECT FOR SCIENCE AND TECHNOLOGY

I. OVERVIEW AND PLAN OF REPORT

1.01 In Brazil, the worldts ninth largest economy, the character and paceof technological change-and ultimately the rates of future economicgrowth-have been compromised by sharp reductions in investment for science andtechnology in a time of economic crisis as well as by weaknesses in the policyframework and in the institutional, human, and physical infrastructure forscientific and technological research.

1.02 In recommending a Bank loan of US$72 million as the first phase ofBank suipport for the requisite infrastructural improvements of science andtechnology in Brazil, this report addresses several questions:

- What role do science and technology play in Braziliandevelopment? Which characteristics of the Brazilian science andtechnology sector most inhibit its contribution to growth? What isthe Brazilian government's strategy to respond to those problems(Chapter II)?

- What comprises the investment program-called Programa de Apoio aoDesenvolvimento Cientifico e Tecnologico (PADCT)--proposed by thegovernment as the vehicle to put the strategy into practice(Chapter III)?

- How will PADCT be managed (Chapter IV)?

- How will PADCT be financed (Chapter V)?

- What are the potential benefits and foreseeable risks associated withPADCT (Chapter VI)?

- What covenants and special conditions would be attached to Bankcofinancing of PADCT through the proposed loan of US$72 million(Chapter VII)?

II. SCIENCE, TECHNOLOGY AND BRAZILIAN DEVELOPMENT

A. Science, Technology and Change

2.01 Wihatever else it may entail, economic development always involvesemploying resources in new and more efficient ways. This technologicaldevelopment is the engine of growth in agriculture, industry, and services.

2.02 The scope and pace of a nation's technological development depend uponits collective ability (i) to assess the adequacy of existing technologies inthe context of constantly changing product markets and factor endowments;(ii) to screen proven foreign technologies, and adapt those selected to localneeds and conditions; (iii) to generate new technologies when necessary; and(iv) to incorporate technological advance, whatever its source, into productiveprocesses to achieve optimum use of available resources. In each of theseareas, the depth and breadth of a nation's infrastructure for scientific andtechnological research is a crucial determinant of success. Rich and poorcountries differ in their relative reliance upon assimilation and in'igenousgeneration of technology.

2.03 Large and rapidly industrializing countries like Brazil haveparticularly strong motivation for indigenous development of technology and itsunderlying base of scient'fic research. Heavy reliance upon imported technologyinvolves a major drain on scarce foreign exchange and would in any case bedifficult to assimilate in such a heterogeneous environment. Importedtechnologies are often ill suited to the variety of local conditions and factorendowments. Heavy dependence upon foreign technology may also be politicallyunpalatable.

B. Scientific Underpinnings of Brazilian Growth

2.04 The vitality of science and technology is an increasingly importantfactor in the success of Brazil's evolving growth strategy.

2.05 Following four years of unprecedented negative real growth, Brazil'simmediate objective is to make the transition from a harsh short termstabilization program to sustained development later in the 1980s. Resumptionof growth requires a strategy quite different from that which produced the'Brazilian miracle" in the 15 years prior to 1979. Brazil must generate more ofits own resources for development and rely less on foreign borrowing; moreattention will have to be given to employment generation, and to the quality aswell as the availability of basic social services such as health care andeducation. An enhanced ability to compete successfully for a wider range ofindustrial and agricultural products in international markets over theintermediate and long term is a fundamental objective of Brazilian economicpolicy. So is the drive (i) to increase domestic sources of energy to alleviatethe drain on foreign exchange of importing oil, (ii) to improve public sectormanagement so that more limited governmental resources are used with greatereffect and (iii) to develop numerous diverse Brazilian owned, small and mediumsize private enterprises, and reduce reliance on the large state enterprises andmultinational corporations. Brazilian science and technology will play animportant part in moving to and keeping on this new growth path.

2.06 Agricultural output-for home consumption of a growing population, forexport, and as an alternative energy source-will depend increasingly uponsophisticated biotechnology to alter the genetic makeup of crops. This canresult in higher nutrient content, enhanced disease resistance, better control

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of pests, and improved viability under adverse conditions of drought, and pooror toxic soils. Biotechnology also has important applications in human andanimal health, especially in improving diagnostic procedures and facilitatinglow cost production of vaccines. Exploitation of Brazil's considerable mineralresources requires state-of-the-art capacity in geosciences and mineraltechnology to find, assay, mine, beneficiate and incorporate minerals intoindustrial processes. Reduced dependence upon imported oil not only meansfinding more oil and gas, where again expertise in geosciences is a limitingfactor, it also presupposes an advanced national capacity for basic research andengineering in chemistry to develop alternatives for sugarcane as a feedstockfor alcohol, to determine the viability of vegetable oils as a substitute fordiesei, and to make effective use of Brazil's substantial coal and forestresources. Subdisciplines of chemistry also constitute the essential scientificunderpinnings of the food processing, pharmaceutical, and plastics industries.

2.07 Significant increases in manufactured exports, including foodproducts, require incorporation of up-to-date technology in the productionprocesses of a much broader range of enterprises. This presupposessensitization of managers and entrepreneurs to the potential gains from moreefficient use of technical resources. Wider dissemination of practicalinformation on available technologies must be accompanied by higher levels ofquality control and component standardization. This requires improvement in theunderlying metrological, standardization, and patent services, and wider use ofmodern process control instrumentation. A national capability to produceappropriate instruments-and to maintain and repair a growing inventory ofequipment for various uses-is also an essential input to improvement of medicalcare, and for support of science and engineering research and education at alllevels. As higher levels of technology are applied throughout the economy, awidely diffused understanding of the physical environment, acquired in partthrough science education in the schools, becomes a more important ingredientboth of overall labor productivity and of the costs of training workers.Finally, an ability to monitor the performance of the science and technologysector and to adjust the policy framework and specific plans on the basis offact rather than conjecture is an important determinant of public sectorefficiency.

2.08 In these and other zreas of science and technology, much basicknowledge and technology is already available in Brazil, and much more can beacquired from abroad. But in an age of rapidly increasing technologicalsophistication, a highly developed base in the underlying sciences, engineering,and technological support services is essential to screen and select amongavailable technologies, to adapt them where possible, and to develop entirelynew approaches when necessary.

C. Bank Experience in the Sector

2.09 The Bank has supported research in Brazil in previous loans.Assistance for applied research on farming systems and crop-specific productiontechnology was provided through Loans 1249-BR and 2016-BR to the Corporation of

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Agricultural Research (Empresa Brasileira de Pesquisas Agropercuarias -EMBRAPA). Both have been effective in producing and disseminating researchresults and helping to improve EMBRAPA's capacity to manage research. Loan1989-BR, for the government's Alcohol and Biomass Energy Program, provided fundsfor research on various aspects of alcohol production systems and has alreadyproduced important results. Additional information is available in Annex 1.These efforts, and others in fields such as hydroelectric power and seweragetechnology, were made through intermediaries whose mandate is limited tospecific applied activities. The Bank loan recommended in this report wouldaddress broader critical issues which are holding back overall productivity ofBrazilian research and development, and thus would enhance ongoing and futurearea and problem specific support by the Bank.

D. Sector Management

2.10 In 1972, Brazil established the National System for Scientific andTechnological Development (SNDCT), which encompasses all organizations usingpublic resources for purposes of planning, coordinating, executing andevaluating research, and disseminating research results. Under the SNDCT,responsibility for sector coordination lies with the Presidential PlanningSecretariat (SEPLAN), which, in turn, acts through the National Council forScientific and Technological Development (CNPq). The Scientific andTechnological Council (CCT, formally a part of CNPq; CNPq's staff acts as itsexecutive secretariat) formulates broad science and technology priorities, andseeks to assure adequate coordination of the nation's efforts in science andtechnology. CNPq also administers seven separate research institutes and otheractivities for support of basic research. In addition to CNPq, there are threeother key intermediary agencies through which public funds for nonmilitary,scientific research and technology development and related training programs arechanneled. The Agency for Financing Studies and Projects (FINEP) wasestablished to finance preinvestment studies and technology development and tosupport technology transfer to Brazil. FINEP also administers the National Fundfor Scientific and Technology Development (FNDCT), the principal governmentsource of grant funding for science and technology. The Agency for Training ofHigh Level Personnel (CAPES) of the Ministry of Education and Culture is thecoordinating agency for second and third degree higher education. Finally, theSecretariat for Industrial Technology (STI), under the Ministry of Industry andCommerce, is responsible for metrology, standards and quality control, patents,and applied technology development, all of which are carried out through variousinstitutes. All four agencies have long and successful experience in projectfunding. Annex 2 contains additional background on the sector and its majorinstitutions, and provides a few examples of Brazilian scientific research whichhave made a significant contribution to growth.

2.11 Brazil's current policy for science and technology is described in its1980-85 Basic National Plan for Scientific and Technology Development (PBDCT).The two main objectives of the plan are (i) to further develop the nation'sscientific capacity through quality improvement and expansion of research anddevelopment activities and (ii) to support improvements in capacity to selectand generate more adequate technologies for Brazil's economic and social growth.

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E. Major Issues

2.12 Important issues regarding human resource development, institutionalcoordination, and finance were identified during Bank sector work, and agreementwas reached with the government on how they should be addressed in order toachieve the objectives of PBDCT. The central concerns are inadequacy andfragmentation of the resource base, inefficiencies of the education system,imbalances in the composition of the national effort, and ineffectiveness ofinstitutional arrangements. Greater detail is contained in "Brazil: Issues inScience and Technology Development" (Report No. 4819(a)-BR, January 27, 1984).

Resource Base

2.13 Since about 1979, Brazil has failed to sustain, let alone generate,critical mass efforts in its science and technology sector. Too few resourceshave been spread too thinly across too many discrete activities. The majorgovernment funding agencies have usually approved support for one or at most twoyears at a time, a period too short for meaningful results to be attained frommost scientific and technological development activities. In order to piecetogether the many inputs typically required for a project, institutions engagedin high level research and/or graduate education have had to approach severalgovernment funding agencies simultaneously, each of which supplied only one ortwo of the required inputs under policies, procedures, and schedulesunsynchronized or even incompatible with the others. Delays between approval ofsupport and actual delivery of the funds in a period of rapid inflation erodedthe real value of grants so much that achievement of originally envisionedresults was precluded. As the competition for funds increased in the late 1970swith return of manv Brazilians from graduate training abroad, the average sizeof awards became so small that significant results could not realistically beexpected. Each of these trends was exacerbated by the shortfall of publicsector resources for investment occasioned by Brazil's current economic crisis.Tightly restricted access to foreign exchange had particularly severerepercussions in a sector which depends on imports of equipment and technicalexpertise. These deficiencies in the resource base have resulted indeterioration of installed capacity in relatively advanced fields and in failureto generate new capacity in relatively underdeveloped areas important forgrowth.

Educational System

2.14 Brazil's educational system is not yet producing at any levelgraduates with the qualities needed to sustain economic development. Whenscience is taught in primary and secondary schools, it typically is limited tomemorization of outdated facts usually of questionable pertinence to thestudents' physical environment. Rarely employed is the experimentally based"discovery mode" of teaching which would prepare students for a world ofaccelerating technological change. The general population does not acquire theminimum understanding of science and technology which is the foundation fordevelopment of modern agriculture, industry and services. Explosive expansionof first degree higher education in the 1970s (enrollments multiplied nearlythree times in the 12 years ending in 1982) was achieved only by sacrificing thequality of academic programs, especially in the capital intensive fields of

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science and engineering. Too often graduate (second and third degree higher)education today is remedial in content and orientation. While in certain fields(for example some areas of engineering), overproduction of dubious qualitypersonnel is already evident, in other fields (especially in the sciences)the numbers of highly trained professionals needed for improving the quality ofhigher education, for intensifying research and development in priority areas,or for immediate employment in the productive sectors have not materialized.

Composition of Effort

2.15 Brazil's science and technology sector suffers from importantimbalances in the composition of national effort. Capacity for research anddevelopment in several disciplines critical for economic growth has laggedbehind, in part because of inadequate production of high level personnel inthese areas (notably chemistry and related engineering fields, biotechnology,geosciences and mineral technology, and the engineering subareas essential todevelopment of modern instrumentation for science and Industry). Eighty fivepercent of Brazilian infrastructure both for production of high level personneland for research and development is concentrated in the south of the country.The result is a mismatch between availability and orientation of scientific andtechnological expertise, and the unexploited natural resource base and acutedevelopment challenges in the northeast, centerwest and north of Brazil.

2.16 Host important, the unavailability of crucial support services forscience and technology imposes significant constraints on the productivity ofthe sector as a whole. Science cannot be efficient without access to a widevariety of information sources, without facilities for equipment maintenance andrepair, without reliable supplies of research reagents and consumables.The transfer of scientific results to the productive sectors and the diffusionof proven technology depends on such elements of technological infrastructure asmetrological services, access to information on patents and standards, andmechanisms for quality control. In all these areas Brazil is severelydeficient.

Institutional Arrangements

2.17 Brazil's mechanisms for setting and enforcing priorities forscientific and technological development are not effective. Under the law,CNPq, operating through its CCT, is supposed to take the lead in formulatingsector policies and in coordinating their implementation by the many constituentunits of the SNDCT, most especially by the four key government science andtechnology funding agencies. The CCT is a large top-heavy body withouteffective mechanisms to oversee the intermediary agencies. CNPq's supposedservice in this area is compromised by its being a major funder of scientificdevelopment activities itself. The conflict of interest inherent in beingsimultaneously an arbitor of the activities of other agencies and a key actorhas undermined the confidence of the user communities, especially as resourceshave shrunk and choices among competing uses have become much more difficult.CNPq's potential effectiveness is further undermined by its lack of control oversector resources. While the legal mandate to oversee sectoral development restswith the CCT and the technical staff of CNPq serving as its secretariat, power

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over the purse really resides in FINEP, as executive secretariat of the FNDCT,and in the Budget and State Enterprise Control Secretariats of the SEPLAN. Thisseparation of oversight and funding responsibilities means (i) that decisions onsubstance taken by the competent sectoral bodies are not always enforceable and(ii) that decisions on flows of resources can be taken without due considerationof their likely impact by the appropriate sectoral authorities.

2.18 Ambiguity in defining roles and responsibilities of the severalgovernmental science and technology funding agencies, and conflicting policiesand regulations of government agencies outside the sector further compromise theeffectiveness of institutional arrangements. Resources from several agenciesmay be destined for the same ends (for example, graduate training abroad ofresearchers), while other needs of the sector (for example, equipmentmaintenance and repair facilities) are left unattended. The restrictions onmicroelectronic components imposed by the Special Secretariat for Informatics(Secretaria Especial de Informatica - SEI) have deprived researchers andgraduate students of state-of-the-art instrumentation, and have idled asignificant fraction of Brazil's most costly and sophisticated scientificequipment for lack of replacement parts. Rationing of foreign exchange by theForeign Trade Bureau (Carteira de Comercio Exterior - CACEX) has drasticallycurtailed such fundamental inputs to scientific research and technologicaldevelopment as subscriptions to foreign journals, chemical and biologicalreagents, nonelectronic equipment and spare parts/consumables, and foreignpatents and standards.

2.19 Decision making in the sector is also faulty. Decisions on researchand development program objectives, content, and implementation have often beentaken without adequate involvement of Brazil's expert community of scientistsand engineers. At the project level too, systematic peer review and evaluationof individual applications to the funding agencies are incipient or poorlyoperated. Inadequate decision mechanisms have led to misdirected programs,wasteful misallocation of resources, and poor quality research and developmenteffort--all of which have contributed to a resurgence of mutual dissatisfactionand distrust between the government funding agencies and the scientificcommunity.

F. The Program for Science and and Technology Development (PADCT)

2.20 In response to the aforementioned issues which constrain thedevelopment of the sector, the government prepared the Program for Support ofScience and Technology Development (PADCT) over a two year period. In the firstphase of a larger, longer term effort, PADCT has been launched as an investmentprogram for science and technology with total commitments over the first fiveyears of about $360 million. During the first three years (1984-86), PADCTcommitments are expected to total about US$215 million. This initial time sliceof commitments is the basis for the proposed Bank loan.

2.21 The main objectives of the PADCT are (i) to provide funding forlonger term and targeted research and human resources development projects insix areas of science, (ii) to consolidate and improve the functioning of science

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service systems through national programs for equipment maintenance and repairs,supply of research consumables, science information services, and basicindustrial technology, and (iii) to introduce an evolutionary approach toinstitutional improvement for the sector.

2.22 An detailed later in this report, this approach to improvement ofsector management utilizes existing institutions and provides them with themeans to work better separately and together. Responsibilities allocated to theinstitutions would be those which have constituted the core of their work formany years. Where necessary, the processes by which they arrive at and executedecisions would be reformulated or otherwise strengthened; new bodies would beestablished only to assure that the legal mandates of each agency, andespecially of the CCT to coordinate policy formulation and programimplementation, can be effectively carried out.

2.23 The principal new bodies which have been established are TechnicalAdvisory Groups (GTs) to set priorities in each area, to elaborate operationalguidelines, to monitor implementation of programs, and to recommend adjustmentsto ongoing programs on the basis of accumulating experience. The GTs haveexercised a high degree of selectivity with respect to specific activities to besupported, thereby assuring that limited resources are sufficiently concentratedto have impact.

2.24 Peer review mechanisms for decision making on project funding wouldalso be rationalized and strengthened. Through participation in AppraisalCommittees (CAs), the communities of scientists, engineers, and technologistswould be involved in a deliberative fashion in selection of projects for fundingand in evaluation of results obtained.

2.25 Finally, under a new management unit (Executive Secretariat - SE)created to ensure coordination, the four government intermediaries (CNPq, FINEP,CAPES, STI) have been brought to a clear and public agreement on theirrespective roles so that, as a function of specific characteristics of theirprojects, applicants for government funding will know unambiguously which agencyshould consider the application and will be able to acquire from that singleagency all the inputs needed to undertake the project. This one-stop shoppingapproach would replace the current piecemeal system which compels an applicantto package the required inputs supplied by a variety of agencies on differentconditions and schedules. Multiyear financing, in monetary units of reasonablyconstant value, would replace the current one to two year allocations.

2.26 Annex 3 contains more information on the policy framework andobjectives of PADCT.

III. CONTENT OF PADCT AND OF THE PROJECT

A. Overview

3.01 In physical terms, PADCT comprises increased and carefully coordinatedinvestments in two kinds of subprogram. The first provides for investments inlagging fields of science and technology which are crucial to economic growth.The second involves investments in the support services which are essential

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underpinnings for scientific and technological productivity in every field.Whether in discipline or service oriented subprograms, investments will be inthe form of discrete subprojects of three general types, implemented overperiods of two to five years. The government's four major science andtechnology funding agencies (CNPq, FINEP, CAPES, and STI) will (i) disseminateinformation on program priorities, content guidelines, and available funding asdelineated by the Technical Advisory Groups; (ii) solicit subprojectapplications; (iii) appraise those subproject proposals with the help ofcommittees of scientific peers; (iv) provide financial support for approvedsubprojects; (v) monitor subproject execution; and (vi) evaluate subprojectresults. Each intermediary will assume exclusive responsibility for appraisingcertain types of subprojects according to the published guidelines specific toeach subprogram, but using common mechanisms and procedures. Those proposalswhich are approved will be implemented by the applicant institution under asingle contract for funding with the intermediary whiich originally appraised theproposal and which will assume responsibility for supervision. Some subprojectswill be executed directly by the four government intermediary institutions or byagencies which fall under their immediate supervision. The central features ofthe PADCT investment program are discussed below.

B. Subproject Types

3.02 PADCT investment subprojects, for which commitments totallingUS$350 million are expected to be made during 1984-88, will be of three majortypes, according to their fundamental purpose. Concrete examples of each arepresented in Annex 4 for illustrative purposes only, without intent to exhaustall possibilities.

Human Resource Subprojects-US$93 million

3.03 The overriding objective of the first type of subproject is toconsolidate and, where still necessary as in the northeast, north, andcenterwest regions, to extend the human resource base for science andtechnology. Most subprojects of this type will strengthen, or occasionallycreate, master's and doctoral programs in Irazil's universities. A lessernumber will support nondegree training, including training for specializedtechnicians. Research institutes and high technology enterprises (especiallythe large parastatals) will host some of this training.

3.04 The expected output of these human resource subprojects is more andbetter trained personnel for the sector. Many should be capable of leading orparticipating in major research and development projects, and of infusing higherquality into lower levels of the educational system. Others will have acquiredparticularly sound training for application in the productive sectors. Traineeswill usually be drawn from and reintegrated into employment within the sector.

Research and Development Subprojects-US$148 million

3.05 The fundamental purpose of the second type of PADCT subproject is toshed light on a defined scientific or technological problem, through systematic

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research or developmental activity. Frequently these subprojects will bedirectly related to a specific problem within significant development sectorssuch as agriculture, energy, industry. However, these subprojects may alsosupport basic research where no direct or immediate application is envisioned.

3.06 The expected output of research and development subprojects is areport on a completed research project or ongoing line of research, a series ofpapers published in scientifically and industrially oriented professionaljournals, a prototype item reacy for commercialization, or a proven processready for application.

Service Subprojects--US$109 million

3.07 This third type of PADCT subproject will improve or establish someinfrastructural service to enhance the productivity of science and technology inmany disciplines.

3.08 The expected result of such subprojects is a broad range of inputs forscientific and technological activity that are of higher quality, and thatare both more widely and more rapidly available. As noted later, abouttwo thirds of these service subprojects will be concentrated in four articulatedsubprograms whose broad purpose is to increase the overall productivity ofscience and technology; the remaining third of the service subprojects will bespecific to targeted disciplines.

C. Subproject Appraisal Guidelines

3.09 For each subprogram, the Project file contains an extensive BrazilianSubprogram Proposal setting forth the rationale, overall goals, strategy to befollowed, technical detail of subproject content with the associated resourceallocations and model budgets, and special criteria, procedures, and mechanismsfor subproject management. This material has been recapitulated in brieferpublic announcements for PADCT and separately for each subprogram. Theseannouncements, also contained in the Project file, are the government's requestsfor subproject proposals. Widely disseminated in Brazil in April 1984, theseprogram announcements contain a listing of appraisal guidelines. While varyingin detail across subprograms, the appraisal guidelines fall into four generalcategories involving (i) scientific/technological content orientation withrespect to priority themes for research, sought directions for graduate or othertraining program development, and infrastructural service specifications;(ii) regional targets for resource allocation; (iii) institutional eligibilitycriteria; and (iv) economic or financial parameters for subproject size, unitcosts for common inputs, required counterpart contribution of the applicantagency, and, where appropriate, efficiency indicators such as ratio of doctoralto predoctoral level staff, number of graduate student enrollees per course orsenior professor, etc. Regional targets for resource allocation generally applyto infrastructural services and human resource development activities,especially when the creation of a new training program is particularly requestedfor the development of a less privileged region of the country. Regional

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targets do not typically apply for research activities where resource allocationis determined essentially by the technical merit of the subproject itself.

3.10 These Subprogram Proposals and announcements were exhaustivelyexamined by the Bank's appraisal consultants at various points in theiriterative development by Brazilian working groups of scientists and agencystaff.IJ As set out in the proposals and announcements, the subprogramguidelines provide reasonable security that subprojects will be concentrated inpriority areas, will be effective in attaining stated objectives, and will uselimited resources efficiently. At negotiations, assurances were obtained fromthe government that the _ontent of PADCT and the standards for subprojects wouldnot be materially altered from what is set forth in the Subprogram Proposals,the overall PADCT announcements, and the individual subprogram announcementswithout prior review by the Bank. The ten Subprogram Proposals in their finalrevisions, reflecting in form and substance acceptable to the Bank themodifications agreed upon during post appraisal on the basis of first roundsubproject appraisals in July 1984, were received in the Bank prior to Boardpresentation.

D. Subprogram Areas

3.11 Given the extent of the sector and its uneven development, it is notfeasible or desirable for PADCT to encompass more than a small portion of it.Eligibility criteria for subprojects are necessary to limit PADCT's scope.Drawing heavily upon (i) the Third Basic Plan for Scientific and TechnologicalDevelopment (Plano Basico para o Desenvolvimento Cientifico e Tecnologico -PBDCT), (ii) the Acao Programada (Programmed Action - AP), the breakdown of thePBDCT into programs) and its constituent action plans, and (iii) the progressassessments contained in Avaliacoes e Perspectivas (see Annex 2, paras. 15-17),the CCT identified 10 substantive areas for special attention under PADCT.

3.12 In relation to the sector as a whole, these 10 PADCT subprogramsconstitute a sharply constrained effort. In financial terms, all activities ofthe 4 governmental funding intermediaries broadly construed as falling withinthe 10 subprogram areas accounted for just under one quarter of the expendituresof those agencies for 1981 and 1982, equivalent to about 4% of Brazil's overallscience and technology effort. Because not all such activities are coveredwithin the PADCT investment program, a maximum of 15% of the fourintermediaries' total projected regular budgetary resources for the five yearperiod 1984-88 would be destined for PADCT subprojects. PADCT will thus accountfor roughly 3% of Brazil's overall science and technology effort.

3.13 In making its selection of subprogram areas, the CCT applied threemain criteria. The areas are of central importance to Brazil's long termdevelopment strategy (paras. 2.04-2.08). They are also highly interdependentand mutually supportive; progress in any one of them enhances the chances for

1/ The Project file contains working papers prepared by the appraisalconsultants on the basis of the Subprogram Proposals. See Annexes 11and 12.

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concomitant advance in most of the others.2/ Finally, each is laggingsignificantly behind more advanced areas because systematic and effectiveattention from public authorities has been lacking.

Disciplinary Subprograms

3.14 Six subprograms with expected investments of US$253 million (70% ofthe total program) involve interventions in fields or disciplines of scientificendeavor of particular importance to long run economic growth(paras. 2.07-2.08). These Disciplinary Subprograms are (i) biotechnology,(ii) chemistry and chemical engineering, (iii) geosciences and mineraltechnology, (iv) instrumentation, (v) science education, and (vi) science policyplanning and management. (PADCT does not address needs in 17 other disciplinesidentified in the PBDCT planning process as worthy of special effort.) TheseDisciplinary Programs seek to expand the human resource base for advancedresearch and graduate training and to focus critical mass research anddevelopment efforts on problems of high priority to economic growth. Additionaldetail on the rationale and content, and on the special covenants and conditionsassociated with each of the Disciplinary Subprograms is available in Annex 5.At ne tiati ns, assurances were obtained from the government concerning thesespecial subprogram covenants (Annex 5, para. 22).

National Services Subprograms

3.15 The productivity of the considerable infusion of investment resourcesin these six subprograms (and in many other fields of scientific andtechnological endeavor as well) is to be assured by strengthening (or creatingfrom scratch) four key science and technology services. With expectedinvestments of US$97 million (28% of the total), these National ServicesSubprograms are (i) basic technological services for science and industry,(ii) science information services, (iii) supply of reagents and other researchconsumables, and (iv) maintenance and repair of scientific equipment. Inaddition to the Subprogram Proposal, the Project file contains extensive workingpapers by the appraisal consultant describing these subprograms. Thesesubprograms are expected to serve a broader clientele than the disciplinary onesand to remain as permanent services available to the sector. The specialcovenants and conditions associated with these National Services Subprograms arealso found at the end of Annex 5. At negotiations, assurances were obtainedfrom the government on these special covenants.

2/ For example, significant advances in biotechnology and in mineraltechnology are more likely if there is a strong research base in chemistry;progress towards local production of scientific instruments depends uponexistence of good facilities for equipment maintenance and repair;production and maintenance of sophisticated instrumentation and modernindustrial processes presuppose a national capacity to make and disseminateextremely accurate physical measurements; application of research findingsin all fields requires access to and diffusion of practical technologicalinformation.

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(a) The Subprogrram for Basic Technological Infrastructure for Science andIndustry-US$63.5 million 3W.

3.16 Penetration of a wider range of international markets, protection ofthe health and safety of the Brazilian consn mer, and wider acceptance of localgoods and services within the Brazilian market all depend upon Braziliancapability to embody technological innovation in production and to produce goodsand services to exacting standards of quality in terms of physicalcharacteristics, technical performance, and reliability. These requirements forinnovation and quality assurance become more difficult to meet as the number ofproduction units and their geographical dispersion increase, and as theiraverage size decreases-i.e., as greater reliance is placed on diversedevelopment of small and medium size private enterprises, a central theme ofBrazil's growth strategy.

3.17 Technological change and quality assurance presuppose (i) widespreadunderstanding of the need to produce to high quality standards, and of the costsof not doing so; (ii) readily available practical information on productiontechnologies and on quality standards; and (iii) the means of producing to tightspecifications, including most fundamentally a capability for physicalmeasurements and calibrations of sufficient accuracy to ensure uniformity ofoutput and compatibility among products of local and foreign origin. Theconduct of much research in the basic sciences also depends upon measurement andcalibration facilities of great accuracy. Each of these is lacking in Brazil.To provide them is the objective of the Basic Industrial TechnologicalSubprogram whose activities are further disaggregated in four areas:

Ci) Metrology-US$35.3 million. Brazil's metrological capabilities willbe upgraded to international levels. Staff development will involverecruitment of approximately 150 new professionals and technicians (ofwhom about 20 will be at the PhD level), graduate training for about50 members of the current staff, foreign consultants for on-the-jobtraining, and support for research aimed at increasing understandingof fundamental physical processes of potential importance tomeasurement technology. Construction of the primary metrologicalfacilities at Xerem will be completed. Equipment will be provided atthe laboratories for mechanics, electricity, temperature, acoustics,optics, and time and frequency (at the National Observatory) as wellas for the mechanical and electronics repair shops; reasonableprogress towards completion of physical facilities and recruitment ofsenior staff will precede purchase of equipment. Included in thesefigures are modest outreach activities to the secondary laboratories,which serve as the link to industry. The National Institute forMetrology, Technical Standards and Industrial Quality (InstitutoNacional de Metrologia, Normalizacao e Qualidade Industrial - INMETRO)will be the implementing agency.

(ii) Technical Information Services-US$8.8 million. An integratednetwork of 22 information nuclei dedicated to specific clienteleoriented tasks will be established. Basic nuclei (2) will provideeasy access to industrial standards and to patents, both local and

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foreign. Sectoral nuclei (15) will generate, collect, and package-information on industry specific technological developments fordissemination primarily to micro and snall enterprises in such fieldsas food processing, leather goods, furniture. Regional nuclei (5)will retail the products of the basic and sectoral nuclei in ageographic region and will supply diagnostic and problem solvingtechnological extension services appropriate for micro and smallfirms. The standards nucleus will be established throughcollaborative action of INMETRO, the Institute for Technical Research(Instituto de Pesquisa Tecnologica - IPT), and the BrazilianAssociation of Technical Norms (ABNT) to update the nationalcollection and to convert it to computer readable media. The patentnucleus involves similar action by National Institute for IndustrialProperty (Instituto Nacional de Propriedad Industrial - INPI).Sectoral and regional nuclei will be placed within existing researchand development centers which already have experience and someinfrastructure for information services. STI will manageimplementation.

(iii) Sector Related Training&-US$15 million. Quantitative andqualitative deficiencies in the supply and utilization of humanresources are severe constraints in the basic industrial technologyareas of metrology, standardization, quality control, and technologytransfer. Notwithstanding federal legislation mandating inclusion ofcourses on these subjects in university engineering curricula, thelack of professors with both the appropriate academic qualificationsand sufficient industrial experience, and to a lesser extent the lackof necessary equipment, have limited progress. Subprofessionaltechnician training institutions experience simi'lar problems. Inindustry, entrepreneurs and managers, especially in micro and smallenterprises, are generally unaware of the benefits which can accruefrom the higher quality products produced through more efficienttechnology. Technical assistance is still limited in these areas.

Four kinds of training activities will be conducted under the generalmanagement of a special unit to be established within STI.Approximately 4,400 studentmonths of training in courses of more thanone month but less than one year will be provided to upgrade thecompetencies of engineers and technicians already employed in industryin both technical and managerial aspects of metrology, standarization,quality control, new manufacturing technology, and technologytransfer. Short course modules (including teaching materials) will beproduced to sensitize industrial managers and workers to the conceptsof quality assurance, productivity improvement throughstandardization, and transfer and management of technology. Thecourses will be offered widely in industrial enterprises and via themedia for which 2 half hour films will be produced. About 6,000middle level supervisors and technicians from industry and basictechnology services agencies will participate in roughly 300industry-specific courses of less than one month duration targeted onspecialized needs in statistical methods of quality control, new

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technology acquisition, standardization and related areas. Three tofive universities offering training in basic industrial technologywould receive funds for doctoral education abroad of about 20 currentmembers of their professorial staffs, so that these institutions maydevelop into centers of excellence for research and local graduateprograms in basic industrial technology.

(iv) Policy Studies -US$4.4 million. The competitiveness of Brazilianindustry during its rapid expansion in the 1970s was more a result offiscal and customs barriers than of achieving increasing levels ofquality and productivity through more efficient and purposeful use oftechnology. Brazilian economists have produced an impressive array ofstudies on macroeconomic issues. But policy oriented studies, whichrelate that macroeconomic policy regime to the behaviour andperformance of enterprises which could most profit from using publiclysupplied technical services, are scarce. Therefore, an integratedseries of 13 policy oriented analyses will be conducted on the broadthemes of the impact of macroeconomic policies on technologydevelopment and the role of basic technological services, with a viewto informing future decision makers in these areas. The STI planningunit will oversee implementation of the studies by a variety ofinstitutions selected on the basis of competitive proposals.

(b) The Subprogram for Science Information Services-USS5.7 million.

3.18 Access to and diffusion of information is such a fundamentalrequirement of scientific and technological development that some aspect of itis dealt with in every PADCT subprogram. The need for specialized technicalinformation is addressed in the Subprogram for Basic Industrial Technology. Thebibliographic needs of the basic science disciplines are addressed within thecontext of the Biotechnology, Chemistry, Geosciences, Instrumentation, andScience Education Subprograms. The Science Policy Planning and ManagementSubprogram deals with information on the sector itself.

3.19 This Subprogram addresses the infrastructural requirements of Brazil'snational system for scientific and technical information, and more particularlythe components of it which come under the jurisdiction of the BrazilianInstitute for Scientific and Technical Information (Instituto Brasileiro deInformacao em Ciencia e Tecnologia - IBICT).

3.20 Established in 1976 as an institute of CNPq, IBICT is formallyresponsible for overall coordination of Brazil's decentralized informationresources and services. To this end, IBICT has begun to develop a number ofservices. Activities to be supported include: online access to computerizedforeign data bases, development of several computerized national data bases,production of the nation's union list of serials, management of the interlibrarylending system (jointly with CAPES), and systems development for standardizationof bibliographic record formats for data bases. IBICT also provides, orarranges for others to conduct, a wide range of personnel training programs forinformation specialists. These activities include encouragement of pertinentprofessional associations and of other forms of interchange among Brazilian and

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international specialists, in-service short courses on topical subjects, andsupport for undergraduate and graduate degree courses (with CAPES). Theseuniversity based programs in library science degree courses have not yet beenadjusted in structure or curricular content to the demands of a moderninformation environment. All of these services require major strengthening andwill be addressed under this subprogram. Many components of this subprogramwill be executed in-house by IBICT.

(c) The Subprogram for Reagents and Other Research Consumables--US$8.6 million.

3.21 In most fields of teaching and research in science, the most highlytrained personnel and most sophisticated equipment cannot be productive withoutsecure and rapid access to a wide range of chemicals and other researchconsumables. Such access is lacking in Brazil today because of the virtualabsence of a fine chemical and consumables industry, and of mechanisms whichensure procurement of these items from foreign sources within a time framecompatible with productive research and advanced teaching.

3.22 Thus, the two central objectives of the Subprogram for Reagents andResearch Consumables are creation of a system for rapid supply of chemicals fromlocal and foreign sources, and development of the Brazilian fine chemical andconsumables manufacturing base, initially for local use and eventually forexport, especially to Latin America and Africa.

3.23 To assure rapid access to imported chemicals and supplies, thissubprogram will include: establishment of a series of Brazilian supply centers(a central node and about six regional satellites) at which the most frequentlyrequested foreign items will be stocked and distributed upon demand of users;and development in CNPq of a clearing house for expediting rapid importationrequests for chemicals and consumables. Emphasis in 1985 will be on theclearing house and the central node supply center. To stimulate nationalproduction of research chemicals and consumables, and eventually their export,the subprogram will include: development and regular updating of catalogs fornationally produced items; studies to ascertain Brazilian needs and potentialproduction capacity; contracted batch production of items identified in thestudies (occasionally these will be produced by university students as part oftheir training); and establishment of quality control laboratories to assureusers of domestic (and foreign) research reagents and consumables that theirtechnical characteristics (e.g., purity and concentration) fully meet tequiredspecifications. Work on the first edition of the catalogs and on the studieswill be undertaken in 1985. FINEP will assume lead responsibility forimplementation, in conjunction with CNPq which will be the site of the clearinghouse.

(d) The Subprogram for Maintenance and Repair of Scientific Equipment-US$19.3 million.

3.24 Lack of repair and maintenance for equipment has become a majorimpediment to scientific and technological productivity in Brazil. Withinenterprises, equipment maintenance and repair needs tend to be reasonablystraightforward, and are usually well attended to, if often at very high cost,

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by manufacturers of the equipment under service agreements, by specializedfirms, or by in-house technicians. Within the universities, research institutesand hospitals, however, the situation is different. The rapid expansion ofhigher education, the increased importance given to research, and themicroelectronic revolution in instrumentation occasioned huge growth in the sizeand sophistication of the Brazilian equipment park. It has ceased to betechnically or economically feasible to rely upon original manufacturers fromabroad for maintenance and repair. Effective local mechanisms must still bedeveloped. This is the goal of the Subprogram for Equipment Maintenance andRepair, which will function in especially close collaboration with theSubprograms for Instrumentation and for Reagents and Research Consumables.

3.25 The subprogram will thus involve phased establishment of a network ofequipment maintenance and repair centers within existing institutions of highereducation and research, each with the necessary specialized personnel,diagnostic facilities, and stock of parts to deal with given classes ofinstruments. Envisioned are (i) approximately 100 small units with capacity forpreventative maintenance and minor repairs (such as fuse replacements andexchange of other simple components not requiring specialized technicians);'ii) about 25 centers with capacity to do such things as identify and replace adefective circuit board, conduct optical alignments, and clean sensitivecomponents; and (iii) perhaps 15 centers fully equipped and staffed to diagnoseand resolve complex problems such as circuit board repair, fabrication of glassparts, and calibration of sensitive measuring devices. Equipment and stafftraining appropriate for the mandate of each center will be provided. Eachcenter would undertake training of technicians from research and teachinglaboratories in proper maintenance ard rudimentary repair procedures. Thesubprogram would also involve production of manuals for maintenance and repairin Portuguese for some of the most widely available instruments; technicalassistance to universities and research institutes on repair and maintenanceconsiderations in equipment procurement; development of catalogs of availableparts; and promotion of local production of replacement parts for widely useditems. Activity in 1985 will involve further diagnostic surveys of maintenanceneeds and current capabilities, design of the master inventory control systemwhereby all centers will know what parts are available throughout the system,and funding for pilot centers of each class whose numbers and location willemerge from the surveys. FINEP will assume lead responsibility for most aspectsof these services.

E. Summary of PADCT Content

3.26 The expected breakdown of subprograms by type of subproject for1984-88 is summarized in the following table.

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Table 3.1: EXPECTED DISTRIBUTION OF SUBPROGRAMS BY SUBPROJECT TYPE(Amounts in US$ million)

Subproject Type

Total Human Resource Research ServiceAllocation Approx.Overall Approx.Overall Approx.Overall

Subprogram (US$ million) Number Amount Number Amount Number Amount

DisciplinarySubprograms

Biotechnology 52.0 50 12.0 80 27.2 40 12.8Chemistry, Chemical 72.0 200 - 18.0 650 50.9 25 3.1Engineering

Geosciences, Mineral 52.0 100 22.4 200 21.3 50 8.3Technology

Instrumentation 40.0 -0- -0- 120 29.9 20 10.1Science Education 28.0 70 23.0 25 4.0 5 1.0Science Planning andManagement 9.0 20 3.6 20 3.3 5 2.1

Subtotal-Disciplinary 253.0 440 79.0 1,095 136.6 145 37.4

National ServicesSubprograms

Basic IndustrialTechnology

- Metrology 35.3 10 0.8 15 1.6 27 32.9- Technical Information 8.8 -0- -0- -0- -0- 22 8.8- Sector Related

Training 15.0 25 11.3 2 3.7 -0- -0-- Policy Studies 4.4 -0- - 13 4.0 1 0.4

Subtotal 63.5 35 12.1 30 -§ . 50 4.IScience Information 5.7 35 1.9 10 0.9 10 2.9Reagents, Research 8.6 -0- -0- 30 1.1 190 7.5Consumables

Equipment Maintenance 19.3 -0- -0- 10 0.4 225 18.9and Repair - - _ _

Subtotal-Services 97.1 70 14.0 80 11.7 475 71.4

TOTAL 350.1 510 93.0 1,175 148.3 620 108.8

Projected Average Size 152 182 126 175(US$ thousand)

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F. The Bank Project

3.27 A PADCT investment program, totalling US$350 million for commitmentduring the five year period 1984-88, was proposed by the government andappraised by the Bank. With the addition of about US$9 million in incrementaladministrative costs, the content of such a program was found to constitute asuitable basis for a Bank loan of about US$120 million. However, rather thansubject a loan of that magnitude to formal tranching arrangements proposed bythe Bank, the government requested and the Bank approved a reduction in the loanto the proposed amount of the first unrestricted tranche (which had been set at60% of expected overall commitments for investment expenditures) to be coupledwith a clear statement of willingness by the Bank, contingent upon smoothfunctioning of PADCT during 1985 and 1986, to consider a supplementary loanrequest should the government decide to prepare one. 4/ Assuming that at leastUS$48 million of additional foreign exchange, complemented by counterpartfinancing equivalent to approximately US$96 million, will be provided to PADCTfor commitments to be made in 1987 and 1988, the proposed content of PADCT for1984-86 remains a reasonable basis for a Bank loan. Under a more stringentassumption, the proposed scope of PADCT even in 1984-86 would be questionable.In this context, the Project recommended for Bank support would comprise allPADCT subprojects and concommitant incremental administrative expenses approvedduring 1984-86 up to a total of US$215.4 million provided however that twogroups of PADCT subprojects would not be eligible for disbursements from theBank loan: (i) those subprojects financed by FINEP through its onlendingfacility to profit making enterprises, and (ii) those subprojects with militarypurposes or for which a military institution is the executing entity. In total,these exclusions of PADCT activities from eligibility for financing under theBank loan are expected to amount to less than 15% of overall PADCT investments.At negotiations, assurances were obtained from the government that these twogroups of PADCT subproject would not be eligible for Bank finance.

IV. MANAGEMENT AND IMPLEMENTATION

4.01 A central feature of the Project is to address institutionalweaknesses of the Brazilian science and technology sector through specialarrangements for management and implementation of PADCT. Assuming experiencedemonstrates their worth, these may later be generalized throughout the sector.Operational simplicity and overall efficiency would be enhanced. Thesearrangements--for planning, decision making, implementation, andevaluation-involve fundamer.tally improved interaction among the four keyscience and technology funding agencies of the government, and between them andthe various communities of practicing scientists and technologists.

4.02 Appropriate arrangements have been made and tested for management ofPADCT at overall program/subprogram and subproject levels. The figure onpage 20 depicts graphically the PADCT management structure sketched in this andthe following section. This structure and allocation of responsibilities areexhaustively described in various documents contained in the Project file:

BRAZILPROJECT FOR SCIENCE AND TECHNOLOGY

Management Structure and Functions

FUNCTIONS/RESPONSIBIliY SIRUCTURE

POUCY FORMAJlIION & COORDINAIIONBODIES CoAhCitldC

E1091E S ~~~~~~~~~~~~~~~~~~~~~ConwIho C ,e,Fif8ttcou locnnkgco

A PrrotoV/SubprogiomPtonning & PRpoalon G.AMlotq & AdiusItmnI Cl G tAowqc IEvaluation Cottusxto linslor4tOo _d_ o Acofxwrpemiotlo

B Inietogency Coordinat on | 9CIOICWI E uncuIrv

Disciplinary National Services- Subp rgrams GRUPOS TECNICOCS Sub rograms

RAMG Mf rMD IE, , . I- -

A4OI1aI & Appovo.

Evaluation

EXECUIING ASENCIESSubprolct L UNNEISIIIES. RESARCH INSIIIIJTES. ENTERPMISES

PRep-ationImpWwenotaIbio

Wold 8t*

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(i) PADCT: Documento Basico", the government's overall description of PADCT;(ii) "PADCT: Manual Operativo-, the detailed operations manual for PADCT; and(iii) Informe PADCT", No. 01 April 1984 and No. 02 May 1984, the government'spublic announcements of PADCT. Annex 2 provides background information usefulfor placing the PADCT management improvements in their proper context. Atnegotiations, assurances were obtained from the government that PADCT would bemanaged by the organs and substantially in accord with the provisions specifiedin those documents, and that no material change in these arrangements would bemade without prior Bank approval.

A. General Management

4.03 Ultimate responsibility for PADCT rests with Brazil's CCT. The intentis to use the CCT's involvement in PADCT to enhance its ability to function asthe central organ for science policy and program coordination. The principalrequirement in this regard is to evolve practical means for achieving w,oreeffective (i) collaboration among the four principal government funding agenciesfor science and technology and (ii) participation of practicing scientists inall phases of program management. To achieve these objectives, the CCT willwork through a smaller subcommission, an executive program management unit, anda program review group. These provide the heretofore missing link between theCCT as the highest level science and technology policy organ, and the four majoroperating agencies for support of scientific and technological research andhuman resources development.

The Comissao Transitoria do PADCT

4.04 The CCT established a Temporary Commission (Comissao Transitoria -CT), with delegated responsibility fcr PADCT program development, supervision,and evaluation within the guidelines and periodic review by the CCT. The CTconsists of the chairmen of the relevant CCT Subcommissions for the Basic Plan,the heads of the government's four intermediary funding agencies, and four ofthe presidential appointees to the CCT drawn from and representing the interestsof the relevant communities of practicing scientists and technologists. It hasresponsibility for approving the objectives and content of each subprogram;recommending allocation of resources among subprograms, translating generalpolicies and principles into operational criteria, procedures, and mechanismsfor each subprogram; and monitoring and evaluating subprogram activities. Inthe course of preparing PADCT, the CT has met several times formally andinformally, and would be expected to meet at least twice annually during thelife of PADCT to consider progress reports and act on recommendations submittedto it.

The Secretaria Executiva do PADCT

4.05 Management responsibility for PADCT is vested in an ExecutiveSecretariat (Secretaria Executiva do PADCT - SE). Located physically withinCNPq in Brasilia, the SE consists of an Executive Secretary and Deputy appointed

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by the President of the CCT upon recommendation of the CT, one senior officialof each of the four intermediary agencies designated by their executive heads,and seven full time administrative personnel reassigned from the fourintermediaries. In conducting its activities, the SE will draw heavily upon thespecialized staff units of the four funding intermediaries. The SE will ensureoperational coordination and performance.

4.06 Specific functions of the SE, detailed in full in the Documento Basicoand Manual Operativo, include: control of the flow of SEPLAN resources to theintermediary agencies; logistical support for the meetings of the CT, GTs andreview group; elaboration of PADCT operational guidelines with the assistance ofand for approval by the GTs; preparation in draft and final review of all PADCTdocumentation including subprogram announcements and application forms;consolidation of PADCT program records from four intermediary agencies(consolidated financial records will be kept by a specialized unit within FINEPreporting to the SE); developoent of the annual operational plan in conjunctionwith the intermediary agencies; and preparation of twice yearly PADCT monitoringand evaluation reports on the basis of and following review of reports submittedby the intermediary agencies. The SE will also be the point of routine Bankcontact with PADCT.

The Grupo Especial de Acompanhamento

4.07 Given PADCT's scope and its potential ramifications for broaderaspects of science and technology development in Brazil, a mechanism is neededto obtain independent assessment of PADCT progress and disinterested advice onhow PADCT may be perfected. For these purposes, a 15 member internationalReview and Advisory Group (Grupo Especial de Acompanhamento - GEA) has beenestablished to examine and formulate recommendations on the significance andquality of scientific and technological activities in PADCT programs, theprogram and project management activities of the PADCT funding agencies andcoordinating structures, and the experience of project executing agencies.Consisting of a Brazilian chairman and distinguished Brazilian and foreignscientists and science managers appointed initially for three years, the GEA hasbeen constituted as an advisory body to the CT. The GEA would meet in Braziltwice yearly for approximately two weeks and render written reports to the CTand the Bank. Constitution of the GEA and the holding of its preparatorymeeting occurred on schedule in September 1984. At negotiations assuranceswere obtained from the government that the GEA would be maintained and wouldfunction under terms of reference agreeable to the Bank. The governmentinformed the Bank of GEA's membership and terms of reference as approved by theCT and satisfactory to the Bank prior to Board presentation.

B. Program Management - GruDos Tecnicos de Assessoramento

4.08 In order to function effectively as a deliberative body for subprogrammanagement, the CT required a mechanism for 'staffing" the issues it would haveto consider in a way which would blend the best available technical expertiseand judgment from pertinent communities of practicing scientists andtechnologists outside of government with the accumulated administrativeexperience of the four agency bureaucracies.

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4.09 The detailed planning, supervision, and evaluation of the PADCTsubprograms were thus delegated to 10 Technical Advisory Groups (Grupos Tecnicosde Assessoramento - GTs) created especially for this purpose by the CT andacting in an advisory capacity to it. Each GT consists of one member of thetechnical staff of each of the four funding intermediaries, plus a minimum ofeight practicing scientists, technologists, and businessmen from outside thescience funding bureaucracy. In the case of the GTs for the four NationalServices Subprograms, four or five of these eight nongovernme-nta1 members aretypically drawn from the GTs of the six Disciplinary Subprograms, thus assuringcoordination among them. GT chairmen are selected from among the nonagencymembers by the CT, usually after informal consultation among the members. GTmembers are appointed by the CT for once renewable, two year terms followingwide canvassing of professional, technical, and business organizations fornominations. Nonagency members are remunerated for their services. in thecourse of designing PADCT, the GTs have each met several times, and willcontinue to meet at least three times annually.

4.10 Since their establishment in 1983, the GTs have been directlyresponsible for elaboration of the Subprogram Proposals in each area, includingspecification of strategies, objectives, general content of subprojects, andsubproject processing criteria, procedures, and mechanisms specific to thesubprogram in question. The GTs will periodically assess all activities wichintheir respective subprograms, propose those adjustments to content and processas experience may suggest, review and approve annual operations plans, advise onresolution of disagreements in their respective subprograms among theintermediary agencies, and maintain close contact with the communities ofscientists, technologists, and businessmen who are the subprograms'constituents.

C. Project Management

4.11 Management of subprojects entails the familiar processes ofpreparation, appraisal, implementation, supervision, and evaluation for themultitude of individual subprojects within the PADCT subprograms. These tasksare shared between the many PADCT executing agencies and the government's fourfunding intermediaries in ways which assure that technically correct decisionswill be made under common policies and standards, and that implementation of alarge array of decentralized subprojects is efficient.

Subproject Executing Agencies

4.12 PADCT subprogram announcements have been disseminated widely withinall Brazilian higher education establishments and research institutions, andotherwise made known within the industrial agricultural and service sectors.Any institution which meets the eligibility criteria established for eachsubprogram is free to prepare and submit subproject epplications to theintermediaries in accordance with the guidelines and calendar provided in theannouncements and application forms. Subproject implementation is theresponsibility of the sponsoring institution, although assistance in suchmatters as procurement from foreign sources may be obtained from the fundingintermediary.

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Funding Interm