A study indicates that, with better legislation, Argentina could be a pole of innovation
Argentina is the country with the worst protection of intellectual property rights among the G20 countries and ranks 46 out of 50 countries in the Intellectual Property Index, which is an obstacle to the arrival of investments and the development of the knowledge industry, according to a study conducted by Geneva Network and the Libertad y Progreso Foundation presented this week.
This is not a minor detail because of the enormous potential for attracting investments and creating employment for knowledge-based industries, which depend intimately on intellectual property rights. According to the work of Libertad y Progreso and Geneva Network, the knowledge-based services are the fastest growing exports in Argentina, growing from 151 million dollars in 1996 to 6,500 million in 2015. In that year, these exports were the second most important export sector after soybeans, reaching 9.1% of total exports. These activities already employ 1.3 million people in high-quality, well-paid and formal employees.
“The richest and most developed countries obtain ratings above 30 points in this Intellectual Property Index and even some others that are admired here for their innovation policies more than double the Argentine rating, such as Israel and Taiwan. And among the G20 nations, Argentina is the worst positioned. The government has expressed its ambition to turn Argentina into a regional center of innovation, to boost economic growth and create jobs with high added value. To achieve this goal, it should reform and improve the framework of intellectual property rights (IPR) in order to reach the countries that perform best in this area, “said Martin Krause and Jorge Otamendi, collaborators of the Fundación Libertad and Progreso, and Philip Stevens, Director of the Geneva Network.
According to the authors, the knowledge industry is the economy for the future. “Knowledge-intensive sectors such as biopharmaceuticals, information technology, and entertainment are the engine of growth and employment in most OECD countries. In recent decades, some countries have advanced along this path: Singapore, Japan, Taiwan. Economists agree that sustained economic growth depends on diversifying production beyond commodities and a basic industry and focusing on services, industry and agricultural production with high added value, with much R & D. The knowledge economy has enormous potential to boost the growth of Argentina given the local and global economic context, increasing productivity and job creation of the entire economy, “explained Krause” In this context, a strong legal framework of intellectual property rights (IPR) is vital to secure investments in knowledge-based industries. Making reforms in this sense will pay off, he explained .
Having a solid framework of intellectual property rights, especially the patent system, according to the authors, entails benefits such as boosting economic growth, improving the integration of countries in global value chains, promoting the diffusion of new technologies, promoting direct foreign investment and promote startups .
According to the study, only since 2015 has Argentina begun a change of direction, improving its institutional quality and its insertion in the world, it still has many challenges to address.
The Achilles heels of Argentina
The specific problems facing the country in this area relate to issues such as delays in managing patents, criteria restricted patentability, implementation and monitoring of standards, protection data, protection of copyright, protection of commercial secrecy, among others.
For example, in terms of patents, this is considered the most vulnerable sector in the local context, more specifically, in pharmaceutical inventions and biotechnology inventions. For the knowledge economy to flourish, the patent system must be transparent, predictable and efficient. Obtaining a patent can take a long time; so much that it becomes useless for many purposes. This makes applicants leave the processes or do not submit them. Delays affect decisions about which industries receive investments. Many countries have improved the process of patent examination through reforms such as digitization of patent offices. Fortunately, in Argentina some changes have begun to occur. For example, the patent office, INPI, has recently created more agile procedures to apply for patents already obtained in other countries and in March 2017, the INPI and the North American similar agency, USPTO, started the Patent Prosecution Highway (PPH) that could speed up future times.
In addition, Argentina is one of the few countries in the world that has not signed the PCT.
Another weakness of the country lies in the patentability criteria, with the development of secondary patents or the possibility of editing genomes, modifying the genetic code of a species. But because of the importance of this kind of innovation, Argentine patent law makes it very difficult for local companies to have protection from any development in this area. In fact, in 2016 the INPI approved less than 5% of patents. Additionally, another major problem related to patents is the weakness of the standards protection and control system.
Finally, a classic problem linked to intellectual property is the protection of copyright. Although the existing legislation is good, the problem is in the application and control of the rules. The estimated sales losses due to piracy exceeded 300 million dollars in 2007, of which 215 million corresponded to software for companies and 82 million for musical recordings (Rozanski, 2007). According to BSA, The Software Allliance, 70% of the software used in Argentina is pirated. Argentina has a lot of jurisprudence on copyright protection, but it does not have specific courts for intellectual property rights. The lack of technical knowledge prevents prosecutors from prosecuting cases and judges making judgments, leaving many cases in limbo.
An ocean of opportunities
According to the work of Libertad y Progreso and Geneva Network, the knowledge-based services are the fastest growing exports in Argentina, growing from 151 million dollars in 1996 to 6,500 million in 2015. In that year, these exports were the second most important export sector after soybeans, reaching 9.1% of total exports. These activities already employ 1.3 million people in high-quality, well-paid and formal employees.
In addition to knowledge-based services, such as accounting, legal and engineering, Argentina has an increasing capacity in R&D. Exports of R&D have grown steadily over the past 20 years, reaching 505 million in 2015. In complex activities there are several Argentine companies that export services R&D abroad as Tenaris, INVAP and Satellogic [1]. There are also Argentine companies that export R&D incorporated to products in very knowledge-intensive areas, such as biotechnology (for example, Bioceres, or Don Mario).
This is a good starting point, but there is a huge potential to achieve much more. The potential reward is enormous: for years, China has been integrating more into global R&D networks and now captures more foreign direct investment in R&D than the United States. The pharmaceutical sector leads the way with investments of 1,600 million dollars between 2010 and 2015 according to fDi Markets .
Another case is that of medical R&D, where Argentina could obtain significant economic benefits if it increases its participation, particularly in the provision of clinical trial services. According to the Israeli economic consultant Pugatch Consilium, Argentina would have the potential to obtain 850 million dollars in investments aimed at clinical trials, if the institutional and regulatory framework improves (Pugatch Consilium, 2017).
In the United States, for example, agriculture and industry predominated forty years ago, but since then a great structural change has taken place and today 85% of the value of companies in the S&P 500 index comes from “intangible assets”: ideas , concepts, brands and innovative products. Innovation is also crucial for economic growth; explains two-thirds of the US since 1945.
[1] López, A., & Ramos, D. (2016). Technological and sectoral prospective analyzes: Business services. Buenos Aires: MINCYT: http://www.mincyt.gob.ar/adjuntos/archivos/000/047/0000047552.pdf
