 Good afternoon everyone. I think we will start. We are few, but very good. Let me kindly thank you all of you for coming today. We have a very interesting seminar by Professor Andres Lopez. Also let me apologize, the chief economist is not available today and I'm going to try to replace him as far as I can. Professor Lopez is a researcher and a professor of the University of Buenos Aires. He specializes in the economics of innovation as well as intellectual property. And he has a very interesting presentation today about the impact of trips in Latin American countries, which I believe is an understudied issue. I think we're going to have an interesting debate issuing from this presentation. We're going to agree and in disagreeing, but more importantly, at least for me, I don't know if he remembers, but he was my supervisor of my final work in my undergraduate studies in the same University of Buenos Aires, and at the time I was starting to be specialized in innovation economics and he was at that time already specialized in innovation economics. He did his dissertation, his PhD dissertation on the topic. Yes, exactly. The whole point of this is establishing that correctly and on record. The second point of this I think is a good symptom for the region, because at that time nobody was talking about intellectual property in Latin America, mostly about innovation. And we can see that I have started to be specialized in intellectual property, but also Professor Lopez and many others, which means that regardless which position we might take in favor or against or any other possible position in terms of IP, it's interesting that we have more and more knowledge and more more facts to discuss this. I think that's encouraging for the debate and I understand that WIPO seminars is also in disrespect an interesting forum. So with that saying, I will give the floor to Andres Lopez. Okay. Thank you for the invitation. It's a pleasure to be here. I don't know if you will regret having invited me after my presentation, but anyway, let's find out later. As Julio said, I've been working on these issues for many years and it is an understudied issue because it's an understudied issue for policy making also in Latin America, not only from the academic point of view, but also in the everyday discussions, intellectual property do not rank high except perhaps in some countries like Brazil or in certain specific topics, let's say, drugs. But in general, people do not put intellectual property issues in the rank of development issues broadly in our countries. So although this is beginning to change, there are less studies than we should wish in order to learn more about the impacts and the situation of intellectual property in general in Latin America. In fact, for instance, there are many countries which have innovation surveys in Latin America nowadays. Very few ask anything more than patents in terms of what kind of use do firms use of intellectual property mechanisms. In fact, only in Brazil they ask about trademarks and other intellectual property mechanisms, but in most cases they only ask about patents and they do not ask either about other appropriability mechanisms like first camera or other things. So we have a lack of data also. Not only the studies are few, but data is less than perfect. Well, the motivation of the study which I jointly wrote with my colleague Valeria Arsa, who also is an acquaintance of Julio, was to learn about what happened after trips in a region. Trips, well, as you very well know, the trips generated a strong debate among many Latin American countries. For instance, in Argentina, I'm Argentinian, the debate was really strong and in the Crogmas there were a lot of discussions, people who were favoring or against trips, and there were a lot of arguments. We will review them very briefly later. But anyway, there have been more than 10 years have passed since trips were signed in all Latin American countries and the fact is that we wanted to learn what happened with patenting in our countries after trips was, after the patent laws in most Latin American countries were reformed in order to adapt to the trips requirements. So we found almost no studies on that subject. Perhaps some of you may mention some studies which I do not know, but anyway, by searching in Google and other more specialized websites on innovation studies, we found very few studies. So we wanted to contribute to this debate and in fact, we had two questions. First, did trips driven modification in patent laws in Latin America have an impact on the level of patenting in our countries? So after trips, did we see an increasing patent counts in our countries? And the second one, which is, I think, more interesting is whether the impact was different according to the nationality of the patent applicants and holders. And later, I will show you some statistics showing that back in our guess that non-residents had increased the patent applications and the patent grants after trips and residents in Latin American countries did not increase the patent propensity and our econometrics exercises show that. So I am telling you the end of the story. You know that first, before going to the study, there is a strong debate about whether patents are a good indicator of innovation. So this is an old debate because patents, well, you know, you are counting patents and patents have very different economic importance, so you cannot simply count patents and assuming that all have the same value in terms of the innovation outputs and firms have patents that they do not use and many very important innovations in the world's history have never been patented. So there are a lot of old issues, but there are a lot of new issues that increase the doubts about whether patenting outputs are a good innovation indicator. And since the pioneer study of Cohen, Walsh, Nelson, et al., we know that firms patent for a number of reasons which do not have to do with the decision to protect the innovations, but also they patent because of strategic reasons like blocking innovations by others or litigations, et cetera. So patents are an imperfect innovation indicator. On the other hand, as all who work on innovation issues very well know, innovation is very hard to measure. There is not a single indicator which can be used and also R&D intensities are an imperfect indicator. And the fact that innovation indicators are hard to find is even more important in Latin American countries because in Latin American countries most firms do not play the game of radical innovation or world-first innovations, but they play mostly the game of adaptive innovation and they rarely undertake formal art and the activities. So in Latin America, the issue of innovation indicators is even more pressing and we still do not have a very good set of indicators to learn about what's really happening in terms of innovation in Latin America. Having said this, the imperfect quantitative evidence and also imperfect qualitative evidence tells us that innovation in Latin America is still far from being strong and also only Brazil spends more than 1% of the GDP in terms of R&D. The other countries are far behind that level and more important perhaps the participation of the private sector in R&D expenditures in Latin America is very low. And in fact, the increases that we see in the last decade in many Latin American countries in terms of R&D intensities are directly related to a higher public expenditure which has been allowed by the better macroeconomic situation and the relaxation of some budget constraints. So the private sector in particular in our countries has spent very few in terms of R&D activities and the share of Latin America in terms of patents, for instance, in the European patent office, so the US patent office is very low, extremely low, ridiculously low. In fact, our region has been losing share and while Asian firms have obviously gained a lot of presence in that area. So I'm saying these things with two objectives. First, our study deals with the impacts of trips on patenting, not on innovation. As I said before, patenting is not necessarily a perfect indicator of innovation. So of course it is related but our results are about patenting, not necessarily about innovation. And the second objective is to tell you that in Latin America there are a number of factors that are blocking innovation and I will mention them later in the conclusions. And IPR, laws are only a part of the factors that are are, let's say, blocking innovation efforts in our region. So there are a number of other factors which are more important in our view for innovation and that must be dealt with specific policies and IPR is not perhaps at the present situation in our region, the most important. So I will review this very briefly because we are at Geneva, the YPOSO, everybody knows the positive and which are the arguments in favor of trips and the arguments against trips. And very briefly, trips supporters say that a reform in patent laws in developing countries could create more incentives for R&D activities in developed countries to take into account the needs of developing countries, especially for instance, developing drugs which are not available and that attack specific diseases of developing countries. Second, foster domestic R&D activities in developing countries by improving the probability conditions faced by domestic innovators and certainly stimulate technology transfer from developing countries via trade, FDI and licensing since multinational firms are more safe regarding their intellectual property rights. And on the other hand, you have a number of arguments posing possible negative impacts. First, well, there is a lot of literature that tries to show that many countries and many firms which are now world-class innovators began by imitating and by copying and by doing reverse engineering and lax intellectual property regimes favor this kind of behavior. So making IPR regimes more strong could block this road towards the development of innovation capabilities. This is, there is a large literature on this issue about Asian countries, Korea, Taiwan, etc. Second, the distribution of benefits from trips are very unique in terms of royalties and payments. So developing countries could suffer net losses in the short run. And third, stronger IPR protection may lead to higher prices of medicines and other inputs, another goods which are very important from the social point of view. So there are some studies trying to learn about whether IPR, stronger IPR regimes have positive or negative impacts in developing countries trying to deal with one or more of these arguments which I mentioned before. But these studies are not really conclusive in general. So there, for instance, there are some studies that show that the pharmaceutical industry developed some drugs which were relevant to tropical diseases in countries like India when India strengthened the intellectual property regime. But in general, the evidence shows that stronger IPR regimes in developing countries have not motivated increases in R&D in developed countries. So this, there is no evidence in favor of this argument. And second, what happens with IPR regimes in terms of local innovation in developing countries? There are a few studies which show claim positive effects. But these studies have some methodological drawbacks in terms of, for instance, they mixed developed and developing countries and IPR indexes could be solved. The problem is this. If you use an IPR index like the Genate Park Index, for instance, and then you try to learn whether they increase in the Genate Park Index. That meaning that the intellectual property regime has improved in that country. And you use only the Genate Park Index in an econometric study. This kind of study could, the Genate Park Index, the increase in the Genate Park Index could be related to other changes in the institutional setting of the country. So this kind of studies may confound the increase, the impact of the change in the IPR regime with other changes in those countries, which also have to do with the modification in the institutional environment. So we try to deal with this issue in our study separating developing countries and developing countries and trying to do some econometric exercises which could, we think, deal with this problem. And said the evidence is more strong in terms of that IPR regime's favorable technology transfer to developing countries. So if you review the third, the three arguments in favor of trips, we could say that the empirical evidence is more favorable for the third argument. That is the argument that foreign firms feel safer to transfer technology to developing countries in which IPR regimes have been improved via trade or licensing or FDI. But the evidence is not so in favor of the other two arguments. First, that stronger IPR regimes improve, increase, add on the activities in developed countries aimed at dealing with problems specific of developing countries. And the other arguments saying that IPR regimes, stronger IPR regimes could foster innovation by residents, by local firms in developing countries. And regardless specifically trips, the studies are even less. So the studies are even non-existent about the impact of trips on developing countries in terms of the issues that we are dealing with. Perhaps there are other studies dealing with the prices of medicines, etc. But the studies trying to learn what happened with trips in terms of innovation are rare. And in fact, one of the only ones that we have found was one by Hamdan Liberamento, who is also an economist here at WIPO showing that trips was positive in terms of technology transfer. So in the same line that the studies I mentioned before, but it was negative for the actual application of new technologies because it increases the cost of using new technologies by entrepreneurs in developing countries. So trips favored technology transfer, but it increased the cost faced by developing countries and entrepreneurs to use new technologies. So the impact, in fact, is mixed. So our aim was trying to learn what happens in terms of trips in Latin America, separating, patenting by residents and no residents. So first, some statistical evidence. First, in Latin America, the Chinata Park Index, which increases when the IPR regimes are stronger in terms of not only of design, but also in terms of application, etc. enforcement, the increase is obvious. So you see that Latin American countries have been converging to the standards of IPR protection of developing countries. The increase has been almost three times between 1990 and 2005. And so that's clearly related to the modifications in the patent regimes in order to adapt them to the trips requirements. But what happened with patents? So in the left side, you see the statistics of developing countries. And in the right side, you see the statistics of Latin American countries. And you may see that comparing the 20 years before 2000, when all Latin American countries had signed the TRIPS agreement. And by 2001, by 2000, all Latin American countries signing TRIPS had adapted the patent regimes to the TRIPS requirements. You see that in developing countries, the patent statistics went up. So in the last 10 years, patenting was higher than in the previous 20 years, both by residents and non-residents in developing countries. But in Latin America, you may see that also an increase in the year after 2000, comparing with the previous 20 years. But the increase is only seen in the non-residents patenting. Residents' applications have almost no change. And the same happens with patent grants. You see increases in developed countries. You see increases in Latin American countries in terms of patent grants to non-residents. But patents granted to residents show no increase in after trips. So the statistical evidence, the simple statistical evidence suggests that modifications in patent laws in Latin America in order to adapt them to TRIPS requirements have mostly been ripped by non-residents and have had no impacts in terms of patent applications and grants to residents. Then we undertake two econometric studies to analyze whether this hypothesis was right. We built a data set of 28 developed countries and 13 Latin American countries comparing what happened after and before 2000. And we used WIPO data for granted patent applications by residents and non-residents. And we assume that WIPO data is very good. So we use it with confidence. And we employ the World Data Bank for a number of control variables, population, GDP per capita, trade openness, et cetera. And we use two different methodologies. First, we built a fixed-effect model to assess the impact of strengthening IPR regimes. And we use the Genata Park Index as representative of the strength of the IPR regimes. And then we use a semi-experimental design using what is called in different techniques to learn about the specific incidents of TRIPS compliance by Latin American countries. And I'm not an econometrician, so my colleague is the one who knows about econometrics. So all econometric questions, I may take them, but the answer will be by email. And so I show you the results. This is the fixed-effect model. You may see if I stand up, the microphone is still running. This is the relevant line. So here we have the impact of improving or strengthening IPR regimes using the Genata Park Index. As I told you before, Genata Park Index increased in all countries, but the increase was stronger in Latin American countries and they converged to the level of IPR protection in developed countries. So we try to learn whether stronger IPR regimes foster patenting by residents and non-residents. The first two columns show the general results. So here we are mixing all countries, developed and Latin American countries and we find that increasing the Genata Park Index had a negative impact in terms of patent grants and had no impact in terms of patent application. So it is considered intuitive because we find that the Genata Park Index increases and the level of patent grants decreases. So it goes against the rationale. But we find, we think that this result is confounding the effects of what's happening with stronger IPR regimes in developed countries, visa-based developed Latin American countries. So we separate the sample and then we have the results here for Latin American countries only in terms of non-residents and residents. And what we found is that when you separate the sample and when you only analyze what's happening in Latin American countries, an increase in the Genata Park Index, that is an improvement in the strength of the IPR regime, fosters an increase in terms of patent grants and applications by non-residents. Hence, when the Genata Park Index increases, when the IPR regimes are stronger, non-residents patent more than before. But what's happening with residents, what's happening with local firms and local agents, patent grants and applications decrease. So an improvement in the strength of the IPR regime fosters, as expected, more patenting by non-residents, but it does not foster more patenting by non-residents, in fact fosters a decrease in patent applications and grants by residents. So this is a fixed effect model and it allows us to separate the impact of the increase in the IPR regime from the impacts of other changes which are not actually non-model which are unobservable by us, but that anyway could have an impact on the patent behavior by residents and non-residents. So this is a better methodological design vis-à-vis other models which do not use fixed effects. So in that case, the increase in the Genata Park, the impact of the Genata Park Index could include the impact of other changes which are not observed by the economist which is undertaking this kind of studies. So we undertake another study which uses a methodology called Difference in Difference, which is useful for learning about what happens when a group of countries or a group of anything has what we call a treatment. It's like trying to replicate what the drugs tests do because, well, you take a sample of individuals which have a disease and you apply some drug to a group of them and you do not apply the drug to the other group and you see which is the difference between the two groups after the treatment. One group was treated, the other group was not treated. Well, this kind of design tries to replicate to some extent this logic. So here we have a treatment which is the treatment, the application of trips. So the treatment is the countries have adapted their laws to their trips requirement. So with this methodology, we are able to learn what happens after the treatment. That is, after the treatment, the patenting behavior in those countries, change or not. So the first six lines are the more relevant, but in fact the two which are in great shape are the more important. First, here we have all countries and then you see the signs, the negative signs obviously shows that the patent behavior had a negative change and here we have these great ratios which shows the strength of the change. And first we find that after trips, countries in general, the patent counts in countries in general are lower. Well, that's surprising, but in fact that is again confusing the behavior of developed countries and Latin American countries. And we have a note fact for our study that is that in Europe patent counts have been decreasing in many countries because patent counts have increased a lot in European patent office. So this could be also reflecting that issue. What happens in Latin countries specifically? What happens in Latin American countries? Patent grants and applications decrease after the trips, the adaptation of the IPR retrieves to the trips law vis-a-vis what happens in developed countries. So after trips, patents in Latin American countries are lower than before trips in comparison with developed countries. And so the first result is that after trips, the patent in Latin American countries did not change. And this is shown in this line. This line shows that the quotations are not significant. So after trips driven modifications in IPR retrieves in Latin American countries, the result is that patenting has not changed in our region. But what happens when we try to learn whether this impact was different in terms of residents and non-residents? Well, here is the relevant line and here we are showing the interaction of the three changes. The signing of the trips agreement and separating Latin American countries from developed countries and separating residents and non-residents. So these coefficients show the joint effect of these three dimensions and we find that after trips patenting by residents in Latin American countries decreased. So confirming the results of our previous exercise. So before trips patenting by residents in Latin American countries is lower than before trips. And so the in fact we are able to estimate the magnitude of the impact and we find that residents patent systematically less than non-residents in Latin American countries after trips. In fact the magnitude is 81% for rapid patents and 72% for applications. So in general in general the patent in Latin American did not change in the after trips period. But when we separate residents and non-residents we find that non-residents patent systematically less than before trips vis-a-vis residents and non-residents in our region. And the effect is very strong 81% 72% of course I would not I would not bet my house for these for these percentages but anyway it's only to give a magnitude of the impact count. So summing up summing up trips had no overall effect in patenting activity in Latin American countries but it has favorable patents by non-residents while probably discouraging patents by residents. And because when only when Latin American countries are considered stronger IPR regimes only increase the patenting activities by non-residents and decrease that of residents and so which is the reading of this which is the interpretation of these results. Well the fact that IP a stronger IPR regimes do not motivate an increase in patenting in by residents in Latin America is no surprise for us because we have a number of other problems market failures stronger than in developed countries in terms of access to credit and information. Institutional macro instability and lack of human capital in terms not only of quantity but mostly about quality. We would call weak national systems of innovation meaning that interactions among the actors of the innovation systems are weak and there could be also a problem of facilitation patterns that is whether you you sell mining or you sell petroleum or you sell soybean and that those activities are not very prone to innovation and patenting etc. So I put this with a question mark because I'm not very sure about this argument but I'm pretty sure about this argument so if you if you change the IPR regimes and you do not tackle these issues so nothing will happen probably because first have stronger IPR regimes but they do not have access to credit or technical information they live in a country where institutional macro economic stability is pervasive they do not find good personnel there is a lack of human capital and they do not have strong interactions with universities, technical organizations etc. So this is not surprising and the the interpretation is first change deal with the structural issues and then and then IPR regimes could be important as it happened in Korea for instance well 50 years ago firms in Korea did not patent they began to innovate and then they began to afterwards they began to to be interested in patents. I was not interested in changing learning about changing diapers before my first child was born so first you are interested in something in patenting when you have something that to protect but the interesting question I think in terms of the academic agenda and also in terms of policy regimes is how we read the results about that the results that shows that trips motivated an increase in patenting by North residents so what's happening we have two alternative interpretations first foreigners feel safer to innovate and to develop and patent new technologies in Latin American countries we in fact do not know how many of those patents are due to local innovation activities my multinationals located in Latin American countries how many of those patents are subsequent filings of patents previously granted in other in other countries so this is this this anyway we do not know whether then reform in the patent system motivated multinational firms to spend more in R&D in our countries or it simply made them safer in order to transfer technology of our countries the obviously the two channels are very different in terms of their development implications but anyways this could be a positive interpretation of our results so be that firms feel safer to transfer technology be that firms feel that they are fostered to making more expenditures in R&D activities in the Latin American region but so but the interpretation is that multinational firms make these subsequent filings in order to block innovation by domestic firms so this could have a be that they want to block innovation by domestic firms or be that they they do not want to block innovation it is not part of their objectives but they block innovation anyway because this this this patents by multinational firms block this kind of a process which I mentioned before when you began first by making reverse engineering and copying et cetera and then you you become a world class innovator so if this were the case we could have a potentially damaging effect in terms of learning trajectories of latin american firms so of course that in fact the two interpretations are not alternative they could be complementary so it could be happening that multinational firms are transferring are transferring more technologies to our region it could be also that multinational firms feel safer to make more R&D expenditures in our region and it could also be that local firms find troubles in terms of doing reverse engineering and copying et cetera and so it could be damaging in terms of their learning trajectories so our paper cannot say nothing about which is the right then predation we don't have the data and so it is a development it is a an agenda to be to be followed by other by other people but in terms of policy lessons then if you want to foster innovation by residence the strengthening IPA regimes is like putting the cat before the horse so so perhaps it has no damage by itself but it won't solve the problems of the low levels of innovation in our countries so first we need to deal with the structural factors blocking innovation in the region our countries fortunately have in a number of latin american countries science and technology policies are stronger than before so then we have begun to tackle some of these problems but anyway we have a long way to uh to to to to go after uh until we we we become uh we like i don't know what we we won't be japan perhaps never but we could be spain let's say or uh now now no spain before 2008 wait where and uh i mean if you have a if there is a peruvian firm or a chilean firm who has a world-class innovation well you can go to the us pt office and or to european patent office and you find the protection you need because if you have a world-class innovation you want to patent in europe in european union and it stays not in peru because your market is the world not not your country and the fact that the problem is what's happening with uh the patenting by non-residents so uh uh our world of caution is well on one hand technology transfer is good uh we we do not know how much does ipr regimes are important for technology transfer vis a vis other factors we are showing that ipr regimes foster technology transfer but they for instance well i i i i i i i know very well the literature on fdi and there are many other factors uh in terms of fdi attraction and china is not a very good performer in terms of ipr regimes and it is the the country who who attracts more fdi in the developing world so of course it is not only ipr which uh foster technology transfer but anyway technology transfer is good so ipr regimes stronger ipr regimes foster technology transfer that's a good news but uh it it is not necessarily a good news if a strong stronger ipr regimes could be blocking uh this learning trajectories by domestic firms if they prevent these firms to uh to go through the way of uh reverse engineering copying imitation etc because uh which has been uh a road that allowed firms like samsung for instance to become a world-class innovation this firm began doing reverse engineering and if in korea the the ipr regime would would would have been as strong as today in in the 70s and in the 80s samsung would had not become a world-class innovator this is my guess obviously but anyway this the the fact is that they began doing reverse engineering so that i think that the there is a very rich agenda in terms of uh these these issues but there is a lack of people wanting to to make this kind of studies and we need more data and uh so wipe could be could could help uh in that in that regard in both sides and uh thank you