Understanding Brazil’s Changing Role in the Global Economy
Review by Mark S. Langevin, Ph.D.
Lael Brainard and Leonardo Martinez-Diaz, editors. Brazil as an Economic Superpower? Understanding Brazil’s Changing Role in the Global Economy, Washington, D.C.: Brookings Institution Press, 2009, ISBN 978-0815702962 256pp., paperback, $24.95
“Why might Brazil succeed where others have failed? One possible answer is that the country is reaping the benefits from its legacy of policies that were intended to advance self-sufficiency and autonomy from international markets but are now paradoxically conferring important advantages for engaging with the world economy as its leadership seeks to seize opportunities in globalizing capital, product, and energy markets (5).”
Brazil as an Economic Superpower?: Understanding Brazil’s Changing Role in the Global Economy, edited by Lael Brainard and Leonardo Martinez-Diaz, asks all the right questions. Can Brazil finally reach the elusive grandeza that has eluded this resource-rich country for two centuries? Even more to the point, can Brazil, with the world’s ninth largest national economy, exercise international leadership while building “domestic support for outwardly oriented strategic policies?” These timely questions frame a set of analyses that promise to explain Brazil’s recent economic development and deepen an understanding of its emerging global leadership.
The book begins with three chapters devoted to Brazil’s very successful agriculture and energy sectors. In chapter two Ricardo Ubiraci Sennes and Thais Narciso explain how Brazil developed from a nation-state in search of transportation fuel self-sufficiency to an emerging energy superpower. In chapter three André Meloni Nassar reveals the essential overlap between this country’s increases in agricultural production and productivity and its successful transition to the sugarcane based ethanol and flex fuel passenger automobile model.
In chapter four Geraldo Barros reports the tremendous success of Brazilian agriculture and explains how this sector increased production and raised productivity as both government subsidies and farm prices fell in the past two decades. Taken alone, each analysis documents Brazil’s arrival as an agricultural powerhouse and emerging global leader in oil and ethanol. Yet, taken together these chapters fail to collectively detail the critical connections between the performance of agribusiness, the strategic exploration and development of Brazil’s oil reserves, the rise of the country’s multinational firms in agriculture and energy, and the consequent economic stability and growth these developments helped to produce during the past two decades.
Emphasis on Agriculture
As Barros points out, since the 1930s Brazil’s national development strategy has featured a prominent role for agriculture, both to guarantee food security and render up the foreign reserves necessary to finance industrialization. The agricultural sector’s remarkable productivity increases of late continue to anchor economic development by expanding international markets and earning critical foreign reserves.
These developments, coupled to the rising production of ethanol and petroleum, have not only achieved food and energy security, but set a lasting foundation for economic stability, technological innovation, and social welfare policies that may coalesce sufficient political support for Brazil’s deepening integration with the global economy.
Part two focuses on trade policy, but falls short of explaining the international obstacles and domestic interests that challenge Brazil’s economic development and impede further trade liberalization. In chapter five Pedro da Motta Veiga accurately summarizes and judiciously criticizes the Lula government’s steady political commitment to the Common Market of South America (MERCOSUR), the downgrading of preferential trade negotiations with the United States and the European Union, and the expansion of trade agreements with developing countries, including the India-Brazil-South Africa initiative.
Motta Viega and Mauricio Mesquita Moreira in chapter six argue that Brazil has made substantial progress in trade liberalization, but that policymakers continue to rely on an overly “defensive” trade policy that prevents the country from obtaining the potential welfare and growth benefits of expanded trade. Motta Viega explains,
The debate on Lula’s trade strategy makes it explicit that no consensus has been reached among Brazilian elites concerning the ‘ideal’ degree of international integration for the Brazilian economy. This lack of consensus appears clearly in the debate on the relevance of preferential agreements with developed countries and, more broadly, on the assessment of the costs and benefits of trade liberalization aiming to foster competition and productivity in the domestic market (128).
Unfortunately, neither author gives sufficient attention to explaining why the nation’s economic leaders and elected officials cannot agree to accelerate trade liberalization with developed countries even though both admit that much progress has been made in the past decade.
Part three provides for a better understanding of the complex interaction between the global economy and Brazilian politics and public policy making by framing the analysis around successful Brazilian multinational firms. In chapter seven, Ben Ross Schneider confirms Brazil’s immense comparative advantages in a range of industries, but focuses his analysis on the development of competitive advantages through a mixed bag of savvy investment, entrepreneurial acuity, technological innovation, and supportive public policies. Towards this end, he details the success of such firms as Gerdau in steel, Votorantim in cement, pulp and paper, and aluminum, JBS in meat, and Vale (formerly Companhia do Vale do Rio Doce-CVRD) in iron ore, Odebrecht, Camargo Corrêa, and Andrade Gutierrez in engineering and construction, and the largest Brazilian banks, Itaú, Bradesco, and Unibanco, among other Brazilian multinational firms.
In chapter eight Edmund Amann deepens this line of inquiry by focusing on the expansion of Brazilian foreign direct investment as a consequence of: of science and technology policies that encouraged innovation; the key role played by the government’s development bank (known as BNDES) in financing state owned enterprises and privately held firms; and the transformation of the São Paulo Stock Exchange (BOVESPA) as an efficient mechanism for rewarding the competitive advantages developed by a select group of Brazilian multinationals. To illustrate this mix of public support and private initiative, Amann presents critical case studies of Embraer (the regional jet manufacturer) in aviation, Petrobrás (the state owned petroleum company) in oil exploration, and Odebrecht in construction (hydroelectric). Collectively, Schneider and Amann reveal the different paths to success followed by Brazilian multinational firms. They point to how the success of these well known Brazilian companies may lead to greater domestic support for the country’s recently adopted outward oriented economic development strategy and leadership role on matters of international trade and development.
In the last chapter, Marcelo Neri delivers a cogent study of Brazil’s social welfare programs, including the well known bolsa familia conditional cash transfer to millions of poor families, but avoids an exploration of the questions posed by Brainard and Martinez-Diaz, namely how these social welfare policies overlap with the nation’s move toward deeper global economic integration. Neri’s detailed policy evaluation reveals which pro-poor growth policies and social welfare programs work and why, but not how they impact domestic support for further integration and the projection of international leadership.
Certainly the country’s favorable trade balance, boosted by high commodity prices, expanding industrial exports, and the success of Brazilian multinational firms, creates the fiscal conditions to finance a gamut of social welfare programs that effectively lessen poverty and inequality; but are these policies sustainable and can they effectively target those regions and families that lag behind Brazil’s journey toward grandeza and thereby undermine political support for economic globalization?
Mark S. Langevin, Ph.D. is Director of BrazilWorks (www.brazilworks.org), adjunct Associate Professor of Government and Politics at the University of Maryland-University College, and Associate Researcher at the Laboratório de Estudos Políticos da Universidade de Espirito Santo, Brasil. He can be reached at Mark.email@example.com