Transcript Slide 1

Case Studies of Successful and
Unsuccessful Industrial Policies:
The Case of Brazil
David Kupfer
Federal University of Rio de Janeiro - UFRJ
and
Brazilian National Bank of Development - BNDES
New Thinking on Industrial Policy
International Economic Association (IEA) – World Bank Roundtable
May 22-23, 2012
World Bank Headquarters - Washington, DC
Case Studies of Successful and Unsuccessful Industrial Policies: The Case of Brazil
David Kupfer (UFRJ and BNDES) – IEA-WB – Washington DC - may, 2012
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Brazilian Industrial Policy (BIP)
Outline
 Introductory Remarks
 1st BIP - PITCE
 2nd BIP - PDP
 3rd BIP - PBM
 Looking Ahead
Case Studies of Successful and Unsuccessful Industrial Policies: The Case of Brazil
David Kupfer (UFRJ and BNDES) – IEA-WB – Washington DC - may, 2012
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Introductory Remarks:
The Golden Age of Brazilian Industrial Policy (BIP)
• Up to the 1970s Brazil had a very active, strong IP aimed to promote import
substitution
• Why STRONG? Because it was able to join the crucial three conditions for an
IP
– First: co-existence with a favorable macroeconomic framework
– Second: intense use of classical instruments (tariff protection, financial incentives
via BNDES, and fiscal incentives to sectors prioritized in 1st and 2nd National
Development Plans)
– Third (and fundamental): the use of State-Owned Companies (some of them have
existed since the 50s, some of them just created in the 70s) as the way to solve
the typical coordination problems of the catching up process
• Results: These STRONG IP was successful to industrialize the country BUT
– good in structuring = new sectors (e.g, Petrochemical);
– successes and failures in innovating = new technologies (e.g.good to aircraft
industry, bad to computer industry); and
– bad in regulating = existing sectors (e.g., Textile, Automobile)
Case Studies of Successful and Unsuccessful Industrial Policies: The Case of Brazil
David Kupfer (UFRJ and BNDES) – IEA-WB – Washington DC - may, 2012
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Introductory Remarks:
The Golden Age of Brazilian Industrial Policy (BIP)
• After this, IP was relaxed and progressively
abandoned first due to macro difficulties in the
80s and then due to the ideological difficulties in
the 90s,
– First, the deterioration of the macro framework
– Second, the stabilization model based in fiscal
contraction
– Third, the privatization process
• Only in years 2000s did the IP return,
– with increasing proeminence but
– still without adequate macro framework, fiscal space and
effective coordination solution
Case Studies of Successful and Unsuccessful Industrial Policies: The Case of Brazil
David Kupfer (UFRJ and BNDES) – IEA-WB – Washington DC - may, 2012
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Timeline of Recent BIP
Greater Brazil Plan
Innovate to compete. compete to grow
PBM I - II
Productive Development Policy
Innovate and invest to sustain growth
PDP
Industrial, Technological and
Trade Policy
PITCE
Lula I
Lula II
Case Studies of Successful and Unsuccessful Industrial Policies: The Case of Brazil
David Kupfer (UFRJ and BNDES) – IEA-WB – Washington DC - may, 2012
Dilma
5
Industrial, Technological and Trade Policy - PITCE
2004-2007
Rationale
• macroeconomic dimension: external constraints
– vulnerability of balance of payment, very high country sovereign risk, and
volatility in the exchange rate
• industrial dimension: lack of industrial competitiveness
– outdated technology in critical sectors such as semiconductors, software and
capital goods
• innovative dimension: windows of opportunity for affordable
development in the scientific and technological systems
– oil and gas, agriculture, pharmaceuticals
Case Studies of Successful and Unsuccessful Industrial Policies: The Case of Brazil
David Kupfer (UFRJ and BNDES) – IEA-WB – Washington DC - may, 2012
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Objectives
• to increase the technological content of domestic production
• to promote exports of value-added products
• to make Brazilian companies more pro-active in international
markets
Case Studies of Successful and Unsuccessful Industrial Policies: The Case of Brazil
David Kupfer (UFRJ and BNDES) – IEA-WB – Washington DC - may, 2012
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Policy Action Points
• Horizontal Measures
– Support to Innovation Activities
– External Trade:
– Modernization
– Improvement in the Institutional Environment
• Strategic Choices
indicate four explicit sectors to focus on
– Semiconductors
– Software
– Capital Goods
– Pharmaceuticals and Medicines
• Innovation Carriers
– Biotechnology
– Nanotechnology
– Biomass /Renewable Energies
Case Studies of Successful and Unsuccessful Industrial Policies: The Case of Brazil
David Kupfer (UFRJ and BNDES) – IEA-WB – Washington DC - may, 2012
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Policy Action Points
• A new legal framework for fostering innovation , comprising
the Innovation Act, “Lei do Bem”, the Biosecurity Act and the
Biotechnology Development Policy
• The creation of the National Council for Industrial
Development (CNDI) and the Brazilian Agency of Industrial
Development (ABDI) to coordinate the proposed actions and
to promote dialogue between the public and private sectors
• The improvements regarding intellectual property rights ,
supported by the restructurating of the National Institute of
Intellectual Property (INPI)
• The creation, by the Brazilian Development Bank (BNDES) , of
specific financing programs, such as the Profarma
(pharmaceuticals) and the Prosoft (software)
Case Studies of Successful and Unsuccessful Industrial Policies: The Case of Brazil
David Kupfer (UFRJ and BNDES) – IEA-WB – Washington DC - may, 2012
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Policy Action Points – Main Results
Sectoral Funds for Technology: From Intention to Reality
Budget
Expenditure
Case Studies of Successful and Unsuccessful Industrial Policies: The Case of Brazil
David Kupfer (UFRJ and BNDES) – IEA-WB – Washington DC - may, 2012
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Terms of Trade
PITCE
Case Studies of Successful and Unsuccessful Industrial Policies: The Case of Brazil
David Kupfer (UFRJ and BNDES) – IEA-WB – Washington DC - may, 2012
PITCE
11
External Debt and International Reserves
PITCE
53,8
60
6,8
Total external debt/GDP (LHS)
50
International Reserves/debt service (RHS)
40
5,5
38,8
38,4
8
7
6
5
25,9
30
20
24,8
26,3
4
3
13,2
1,4
0,4
10
0,8
12,52
0,8
1
Case Studies of Successful and Unsuccessful Industrial Policies: The Case of Brazil
David Kupfer (UFRJ and BNDES) – IEA-WB – Washington DC - may, 2012
2° Trim.2011
2° Trim.2010
2° Trim.2009
2° Trim.2008
2° Trim.2007
2° Trim.2006
2° Trim.2005
2° Trim.2004
2° Trim.2003
2° Trim.2002
2° Trim.2001
4° Trim.1998
4° Trim.1994
4° Trim.1990
4° Trim.1986
4° Trim.1982
4° Trim.1978
4° Trim.1974
0
4° Trim.1970
0
12
Exchange Rates: Brazil, China, Japan and Eurozone
PITCE
Nominal Exchange Rate $/USD:
1995/1 - 2010/10
4,5
4,0
3,5
3,0
2,5
2,0
1,5
1,0
0,5
Source: FRED (Federal Reserve Economic Data)
BRZ
CHN/10
JPN/100
2010-07
2010-01
2009-07
2009-01
2008-07
2008-01
2007-07
2007-01
2006-07
2006-01
2005-07
2005-01
2004-07
2004-01
2003-07
2003-01
2002-07
2002-01
2001-07
2001-01
2000-07
2000-01
1999-07
1999-01
1998-07
1998-01
1997-07
1997-01
1996-07
1996-01
1995-07
1995-01
0,0
EUR
Case Studies of Successful and Unsuccessful Industrial Policies: The Case of Brazil
David Kupfer (UFRJ and BNDES) – IEA-WB – Washington DC - may, 2012
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13
Productive Development Policy – PDP
2008-2010
Rationale
• Virtuous circle of inclusive growth: from external trade to
consumption in domestic market to fixed investment (the multiplieraccelerator dynamic) – how to maintain it
• Virtuous circle of labor market restructuration: from income transfer
programs to minimum wage increase politic to formalization of jobs
– how to extend it
• Vicious circle of industrial weakening: regressive specialization, loss
of industrial chain density, slowdown of productivity, increase in
technological gap – how to revert it
Case Studies of Successful and Unsuccessful Industrial Policies: The Case of Brazil
David Kupfer (UFRJ and BNDES) – IEA-WB – Washington DC - may, 2012
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14
Investment Rate (% GDP)
PDP
Souce: SCN/IBGE
Case Studies of Successful and Unsuccessful Industrial Policies: The Case of Brazil
David Kupfer (UFRJ and BNDES) – IEA-WB – Washington DC - may, 2012
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A structural change in the labor market: the
formalization of jobs…
Net Creation of Formal Jobs
As part of the process of
economic inclusion, the Brazilian
labor market is going through a
significant expansion of
formalization of jobs, without
changes in labor laws
300.000
250.000
200.000
150.000
100.000
50.000
0
-50.000
-100.000
Unemployment Rate (%)
11.0
7.0
6.0
5.0
8.0
7.2
6.1
5.5
4.0
jan
2006
Source: IBGE.
fev
mar
2007
abr
mai
2008
jun
2009
jul
ago
2010
set
out
2011
nov
dez
PDP
2012
Case Studies of Successful and Unsuccessful Industrial Policies: The Case of Brazil
David Kupfer (UFRJ and BNDES) – IEA-WB – Washington DC - may, 2012
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jan/12
jan/11
jan/10
jan/09
jan/08
8.2
jan/07
8.0
9.3
jan/06
9.0
-150.000
-200.000
jan/05
10.0
Productive Development Policy – PDP - 2008-2011
Case Studies of Successful and Unsuccessful Industrial Policies: The Case of Brazil
David Kupfer (UFRJ and BNDES) – IEA-WB – Washington DC - may, 2012
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PDP – The Sectoral Dimension
Case Studies of Successful and Unsuccessful Industrial Policies: The Case of Brazil
David Kupfer (UFRJ and BNDES) – IEA-WB – Washington DC - may, 2012
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PDP Targets
Case Studies of Successful and Unsuccessful Industrial Policies: The Case of Brazil
David Kupfer (UFRJ and BNDES) – IEA-WB – Washington DC - may, 2012
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Structural Patterns of Brazilian External Trade:
1989 a 2010
US$ mil
140,0
120,0
100,0
80,0
60,0
40,0
20,0
-20,0
CI
Mineral
commodities
Exportação
-60,0
IN
More Innovative
industries
Importação
Corrente
2010
2008
2006
2004
2002
2000
1998
1996
1993
1989
2010
2008
2006
2004
2002
2000
1998
1996
1993
1989
2010
2008
2006
2004
2002
2000
1998
1996
1993
1989
2010
CA
Agrocommodities
-40,0
2008
2006
2004
2002
2000
1998
1996
1993
1989
0,0
IT
Traditional
industries
Saldo
Fonte: SECEX,
GIC-IE/UFRJ
Source:
SECEX, GIC-IE/UFRJ
Case Studies of Successful and Unsuccessful Industrial Policies: The Case of Brazil
David Kupfer (UFRJ and BNDES) – IEA-WB – Washington DC - may, 2012
2020
Greater Brazil Plan – PBM
2011 - 2014
• 1st stage launched in August 2011
• Almost 40 measures including financial and fiscal
incentives and new regulations
• New institutions are being created to favour its
implementation
Case Studies of Successful and Unsuccessful Industrial Policies: The Case of Brazil
David Kupfer (UFRJ and BNDES) – IEA-WB – Washington DC - may, 2012
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Rationale
Opportunities
Challenges

A large and dynamic domestic market able
to sustain growth even in the context of
economic crisis in developed countries


To strengthen the technological
upgrading of the Brazilian
manufacturing industry
Favorable conditions in commodity
markets that enable to sustain trade
surplus


Existence of a group of innovative
companies capable of leading a
manufacturing modernization process
To deal with the effects of both the
currency appreciation and the
uncertainties of the international
environment

Accumulation of scientific competencies
with potential to develop products and
services with high technological content
To face growing international
competition in the domestic and
international markets

To accelerate investment in physical
infrastructure

To improve basic education and to
promote professional qualification
at technical and university levels,
particularly in engineering-related
areas


Abundance of natural resources,
technological mastery, and
entrepreneurial capacity in renewable
energies and in the oil and gas chains

Use of public procurement and large
sporting events to leverage new
businesses and technologies
Case Studies of Successful and Unsuccessful Industrial Policies: The Case of Brazil
David Kupfer (UFRJ and BNDES) – IEA-WB – Washington DC - may, 2012
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Objectives
To build and strengthen critical competencies in the national
economy
To enhance productivity and technology density within value
chains
To expand the domestic and external markets of Brazilian
companies
To ensure socially inclusive and environmentally sustainable
growth
Case Studies of Successful and Unsuccessful Industrial Policies: The Case of Brazil
David Kupfer (UFRJ and BNDES) – IEA-WB – Washington DC - may, 2012
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PBM: Strategic Objectives
Sustainable
Development
Expand
Markets
Innovate and invest to increase competitiveness, support growth
and improve the quality of life
Diversify exports and
promote the
internationalization of
Brazilian companies
Provide technology,
goods and services
markets for energies
Improve the quality of
goods and services
Aggregate value
Enhance Value
Chains
Strengthen
critical
competences
Increase share of
knowledge intensive
sectors in GDP
Strengthen micro,
small and mediumsized companies
Foster clean
production
Increase fixed
investment
Expand corporate R&D
Strengthen skills
Case Studies of Successful and Unsuccessful Industrial Policies: The Case of Brazil
David Kupfer (UFRJ and BNDES) – IEA-WB – Washington DC - may, 2012
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Management System
National Industrial
Development Council
Higher advisory
level
Management Committee
PR/Cabinet Affairs, MDIC, MF,
MCTI, MP
Coordination: MDIC
Management and
decision-making
level
Executive Group
Executive
Committees
Sectoral
Competitiveness
Councils
Systemic Coordination Units
Sectoral Coordination Units
Coordination: MDIC
Foreign Trade
Investment
Innovation
Professional Education
and Qualification
Sustainable Production
Competitiveness of
Small Businesses
Articulation and
formulation level
Regional Industrial
Development
Consumer Welfare
Labor relations and
Case Studies of Successful and Unsuccessful Industrial Policies:
The Case
of Brazil
working
conditions
David Kupfer (UFRJ and BNDES) – IEA-WB – Washington DC - may, 2012
25
Executive Committees and Sectoral Competitiveness
Councils
Case Studies of Successful and Unsuccessful Industrial Policies: The Case of Brazil
David Kupfer (UFRJ and BNDES) – IEA-WB – Washington DC - may, 2012
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Main Actions



Incentive for Investment and Innovation



Tax Relief
Financing for Investment and Innovation
Legal Framework of Innovation
Foreign Trade




Tax Relief on Exports
Trade Remedies
Financing and Guarantee for Exports
Trade Promotion
Industry and Domestic Market Defense




Tax Exemption on Payroll
Special Automotive Regime
Government Procurement
Harmonization of Funding Policies
Case Studies of Successful and Unsuccessful Industrial Policies: The Case of Brazil
David Kupfer (UFRJ and BNDES) – IEA-WB – Washington DC - may, 2012
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Targets for 2014 and Indicators
1.
To increase fixed investment by % of GDP
•
2.
To increase corporate spending on R&D by % of GDP
•
3.
Target: 65% X 53.7% (2010)
To increase value added in manufacturing: increase the value
added/turnover ration (VIT/GVP)
•
5.
Target: 0.90% x 0.59% (2010)
To increase human resource qualification: % of industry workers
with at least secondary education
•
4.
Target: 22.4% x 18.4% (2010)
Target: 45.3% x 44.3% (2009)
To increase % of knowledge intensive manufacturing: value
added of high-tech manufacturing/total
•
Target : 31.5% x 30.1% (2009)
Case Studies of Successful and Unsuccessful Industrial Policies: The Case of Brazil
David Kupfer (UFRJ and BNDES) – IEA-WB – Washington DC - may, 2012
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Targets for 2014 and Indicators (cont.)
6. To strengthen small and medium-sized enterprises: number of
innovative SMEs
• Target : 58,000 x 37,100 (2008)
7. To promote clean production: reduce energy consumption per unit of
industrial GDP (toe per unit of industrial GDP)
• Target : 137.0 ton/ R$ million x 150.7 ton/ R$ million (2010)
8. To diversify Brazilian exports by increasing share in international
trade
• Target : 1.6% x 1.36% (2010)
9. To develop the national energy markets: increase the ratio of value
added/gross turnover of energy-goods manufacturing
• Target: 66.0% X 64.0% (2009)
10.To increase access to goods and services for improving quality of life:
increase the number of urban households with broad band
access (National Broad Band Plan)
• Target: 40 million households x 13.8 million (2010)
Case Studies of Successful and Unsuccessful Industrial Policies: The Case of Brazil
David Kupfer (UFRJ and BNDES) – IEA-WB – Washington DC - may, 2012
29
PBM 2nd Stage (april, 2012)
• PBM 2nd Stage was based in a new rationale
– The recognition of the worsening of the competitiveness
gap of Brazilian industry
– The need for a new conceptual target for the IP –
productive system instead of productive chain
– The search for new instruments to strengthen the effects
of the IP: eg, the Automotive Regime
– The urge for new institutions to favour public-private
collaboration
Case Studies of Successful and Unsuccessful Industrial Policies: The Case of Brazil
David Kupfer (UFRJ and BNDES) – IEA-WB – Washington DC - may, 2012
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Looking Ahead
• Exchange rate-interest rate trap: Dutch disease (cost) x
Brazilian disease (structural heterogeneity)
• Regulatory and financing bottlenecks in infrastructure
investment
• Macro and micro tax burden and the federation
impasse
• Institutional capacity building, industrial policy
practices and the big push to technological innovation
Case Studies of Successful and Unsuccessful Industrial Policies: The Case of Brazil
David Kupfer (UFRJ and BNDES) – IEA-WB – Washington DC - may, 2012
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Looking Ahead
• Brasil => Outward
– The China Effect - Brasil in the córner?
– Energy and Food: a new “primary export-led”
– Internationalization of Brazilian firms
– South-american integration and the development
of regional productive chains
– Opportunities and threats of sustainability agenda
Case Studies of Successful and Unsuccessful Industrial Policies: The Case of Brazil
David Kupfer (UFRJ and BNDES) – IEA-WB – Washington DC - may, 2012
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Looking Ahead
• Brazil => Inward
– Income distribution and the internal market
potential
– The triple role of infrastructure: demand, supply and
focus for the National System of Innovation
– The Knowledge Economy as strategic field for the
embedness of more innovative activities
– Changing from the Competitiveness Imperative to a
Competence Building economy
Case Studies of Successful and Unsuccessful Industrial Policies: The Case of Brazil
David Kupfer (UFRJ and BNDES) – IEA-WB – Washington DC - may, 2012
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Final Remarks
• About Conception:
– social inclusion /mass consumption – the drive for efficiency increases or
decreases the space for IP?
– more intangibles and less manufacturing shop floors – for whom the policy
should be addressed?
– vertical specialization / industrial fragmentation – where they are?
• About Policy-Making:
– Macro-policies and / or focused policies
– how to combine traditional catching-up with new redistributive objectives ?
– The consensus building about the future and the essential role of structuring
projects
• About Implementation:
– top-down x bottom-up? Don’t discuss this; do both!
Case Studies of Successful and Unsuccessful Industrial Policies: The Case of Brazil
David Kupfer (UFRJ and BNDES) – IEA-WB – Washington DC - may, 2012
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