Interview: Gonzalo Villarán
How significant are investments in innovation, and how can the public sector play a part?
GONZALO VILLARÁN: Evidence from countries around the world reveal that investing in innovation translates into higher productivity and competitiveness in companies. In the initial stages of developing innovation, the public sector must lead the way. It is not only their role to regulate the market, but also to create new markets. It is the government’s role to incubate a culture of innovation through public investments. Although currently public investments in innovation are almost eight times higher than private investments, this will change as the ecosystem grows, and the private sector understands that. Despite the risk of investing in innovation, it can also be fruitful when there is a long-term plan and vision in place. It should also be considered that innovation can take years to show results. This is relevant for Peru, especially considering that the great majority of small and medium-sized enterprises (SMEs) have deficiencies in productivity. To overcome this challenge, the public sector, through the Ministry of Production and Innóvate Peru, is investing in SMEs. In fact, 75% of the investments made by Innóvate Peru are directed to SMEs. It also provides significant support to large companies, universities, professional schools and other actors within the Peruvian innovation ecosystem.
Additionally, the $100m Inter-American Development Bank (BID) loaned to Innóvate for investing over the next four years will allow innovation to increase considerably. This is the third loan that this regional financial institution has lent to Innóvate since the agency was created in 2007. Between 2007 and 2016 public investment in innovation has increased by eight times. Some PEN452m ($133.97m) has been invested, with more expected in the coming years. According to the Innovation Fund for Science and Technology (FINCyT), for every sol lent from the BID that Innóvate invests through the FINCyT, a recovery of seven soles through taxes is projected. Investing in innovation in this way allows Innóvate to monitor whether or not potential projects become a reality. It also allows companies that have received investments from the BID through Innóvate to then turn to private investors with their success as their guarantee.
How important are clusters for the enhancement of innovation in Peru?
VILLARÁN: The Ministry of Production created the Cluster Support Programme as a tool oriented towards strengthening interrelations between companies of a particular geographical area or value chain – particularly micro and small enterprises – with the goal of enhancing their competitiveness and productivity, ultimately contributing to Peru’s sustainable development. Through this programme, the Ministry of Production is investing up to PEN2m ($592,800) per cluster, with a budget to cover up to 12 clusters. This allows clusters to create a common legal framework and agenda. Furthermore, through Innóvate, these clusters have access to different tools available to help them implement those agendas.
To what extent can innovation strengthen the competitiveness of agro-industry?
VILLARÁN: Around 25% of the country’s workforce works in the agro-industrial sector, yet it only contributes 6% to the country’s GDP. Furthermore, there are 7.6m ha with agro potential in Peru, 4m of which is undeveloped. This shows that there is much room for growth, and innovation can play a key role in increasing the sector’s competitiveness. There are a number of irrigation projects throughout the country that will help Peru reach this goal. Furthermore, agriculture has become one of the top recipients of public investment in innovation. Cutting-edge tools such as robots, big data and biosensors will allow agriculture to become further industrialised, increasing finished product production, and thus overall productivity in the sector.
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