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Trajectory and Politics in Brazilian Economic Development

Trajectory and Politics in Brazilian Economic Development. Renato Boschi Política Consultoria www.politicaconsultoria.com.br. Summary of presentation. Continuities in the long run perspective From State Developmentalism to a New Productive Regime: social inclusion, crisis, and recovery

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Trajectory and Politics in Brazilian Economic Development

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  1. TrajectoryandPolitics in Brazilian EconomicDevelopment Renato Boschi Política Consultoria www.politicaconsultoria.com.br

  2. Summary of presentation • Continuities in the long run perspective • From State Developmentalism to a New Productive Regime: social inclusion, crisis, and recovery • Conclusions: a continuous and upward process of development

  3. 1.Continuities in thelongrun perspective Pervasivenessofstateinstitutions StrongExecutive: late modernizationofstatestructure, butincreasinginterventioncapacities Business andstateintermediations

  4. 1930’s andthe layout ofaninstitutionalbasis for industrial development : -structuring of business labor relations through corporative interest organizations - business: official structure, parallel associations, participation in council and consultative functions - labor legislation and trade-unions: monopoly of representation, limited forms of social protection geared towards formal labor market - trade-union tax and incentive for maintenance of structure of business/labor organizations

  5. 1950’s andthecreationofinfrastructure • State productive sector : steel and oil • BNDES (National Bank for Economic Development) as an agency for the financing and support of development • Strong autonomous Executive power and bureaucracies

  6. 1970’s Deepening ISI undermilitary regime -Expansion of state’s productive activities - Increasing extractive capacities and taxation -Modernization of the state (administrative reform) and first reform of the banking system -Centralization of decision-making and reaction of business - Steady rates of growth with income concentration

  7. FromStateDevelopmentalism to Productivereconfiguration • Corporatismand Industrial Development:1930-1990 State/Societyrelationsorderedfromabove • Statedevelopmentalperiod: maleabilityandcentralityofcorporativestructure as regulation • Economicreformsandproductive regime in the 1990’s: newmodesofeconomiccoordination, more autonomy in interestrepresentation,associationsandmarketcomplementaryactivities

  8. Liberalization of markets Reforms • Adaptation, diversification and fragmentation of interest representation structure • Corporatism, Crisis and Reforms, New Modes of Regulation T2 T1 Fragmentation of interest repr.structure voluntary frame of action Changes in state intervention Productive reconfiguration Market regulation Regulatory agencies Strong executive: access thru Legislative • State corporatism • Closed economy • State protectionism • Industrial policies • Business participation • in decisions

  9. 1990’s Double transitionofeconomicreformsanddemocratization • Diversityofinstitutionalformats • Quickadaptationof business organizedinterests to newmarketconditions • Congress as targetof business organizedaction (lobbies) • Tensionbetweenmarketcoordinationandcentralizedregulation

  10. 1990’s • Real Plan:Stabilizationand fiscal adjustment • Newregulatorymatrix (independent agencies) • Reformofthe banking system (Proer) • Statereform • Redefinition of state interventionism: less maneuvering abilities (external financial vulnerability) but still strong coordination capacity (taxation, centralization of economic policy-making) in spite of low rates of growth • Riseoflabor-basedpartiesandorganizations

  11. 2.FromStateDevelopmentalism to a NewProductive Regime: social inclusion, crisis, andrecovery

  12. State intervention and development: exploring institutional possibilities • CDES (Social and Economic Development Council): concerting a development project • BNDES: industrial, technological and external trade policy (PITCE) • Networking thru new councils

  13. Council for Economic and Social Development (CDES) • Created 2003 as a consulting board to the Presidency to discuss development related issues • 103 members: 90 of civil society, 13 ministers and President • Despite lacking representativeness in the old corporatist sense, Council has been effective in establishing consensus and guidelines on new development strategies • Repercussion within government

  14. CNDI (National Council for Industrial Development) • in charge of implementing major points of Development Agenda • plan for investment and systemic innovation in durable consumption industries • establishing links between governmental agencies and universities/ research institutions for partnerships and funds for science and technology (sectoral funds) • 2005: creation of executive agency (ABDI)

  15. BNDES: strategic agency for industrial policy implementation • Credit for long term investments at lower annual interest rates (9.7%) • Increasing allocations starting in 2001 but steeping as of 2003 with special emphasis on credit to SME’s; expanding microcredit • From 2003 to 2008 disbursements increased 175% • Adoption of countercyclical measures to stave off effect of crises • 2009: credit equivalent to 18% of GDP (together with other public banks)

  16. Productive regime: towards structural change? • New economic environment did not lead to regressive specialization: Brazilian industrial restructuring may increase country’s potential in world economy • Firms that innovate and differentiate products show better performance when compared with those specializing in standard products and those that do not differentiate • Financing and expanding large national enterprises in competitive sectors (meat processing, civil construction,etc)

  17. Change in state/societyrelations: • Incorporationof labor sectorsintothestateadministration • ReactivationofNationalConferencesofPublic Policies • Pensionfunds: trade unions as partnersof a modelofdevelopmentcenteredonthe role of financial markets • Policies of social inclusionandcitizenshipopening a newavenue for na inward-basedalternativeofgrowth • Riseof a newmiddleclass

  18. Impactofincometransferprogramsandcountercyclicalmeasures • Reducinginequality • Creatingjobpositions • Reducinginformality • Targetedformsof social protection

  19. Family Income Inequality Rates Per Capita: Gini Coefficient (1977-2007) Family Income Inequality Rates Per Capita: Gini Coefficient (1977-2007)

  20. Level of Level of Occupation 2001-2007 (In Thousands) Source: AppliedEconomicResearchInstitute (IPEA)Mercado de Trabalho, Trabalho Infantil e Previdência, Primeiras Análises,IPEA 2008.

  21. Unemployment Rates Source: AppliedEconomicResearchInstitute (IPEA)Mercado de Trabalho, Trabalho Infantil e Previdência, Primeiras Análises,IPEA 2008.

  22. Evolution of Formal Employment – Comparison between the June and January to June 2003-2010:

  23. Source: Applied Economic Research Institute (IPEA)Mercado de Trabalho, Trabalho Infantil e Previdência, Primeiras Análises,IPEA 2008. Degree of Informality

  24. The Evolution of the Formal Employment by sector of economic activity – a comparison between the months of June 2003 and 2010

  25. Industrial output (with seasonal variations controlled) 2002=100 PIM-IBGE – Brazil (June/2007 to June/2009)

  26. Variation of Brazilian GDP during the last quarters (in %)

  27. Variation of Brazilian GDP during the last quarters (in %)

  28. TOTAL & PER CAPITA GDP(US$ BILLIONS) FONTE: UNCTAD HANDBOOK OF STATISTICS AVAILABLE IN: http://stats.unctad.org/handbook/ReportFolders/ReportFolders.aspx

  29. DEGREE OF OPENESS FONTE: UNCTAD HANDBOOK OF STATISTICS Available in: http://stats.unctad.org/handbook/ReportFolders/ReportFolders.aspx

  30. % OF SECTORS OF HIGH MEDIUM TECHNOLOGY IN INDUSTRY’S OUTPUT *ALTA TECNOLOGIA: PRODUTOS QUÍMICOS, MÁQUINAS P/ ESCRITÓRIO E EQUIPAMENTOS DE INFORMÁTICA, RÁDIO, TELEVISÃO E EQUIPAMENTOS DE COMUNICAÇÃO, EQUIPAMENTOS DE INSTRUMENTAÇÃO MÉDICO-HOSPITALARES, INSTRUMENTOS DE PRECISÃO E ÓTICOS, EQUIPAMENTOS P/ AUTOMAÇÃO INDUSTRIAL, CRONÔMETROS E RELÓGIOS, MÁQUINAS E EQUIPAMENTOS, MÁQUINAS, APARELHOS E MATERIAIS ELÉTRICOS, MONTAGEM DE VEÍCULOS AUTOMOTORES E OUTROS EQUIPAMENTOS DE TRANSPORTE FONTE: OECD STATISTICS PORTAL INSTITUTO NACIONAL DE ESTADISTÍCA E CENSO DE LA REPÚBLICA ARGENTINA INSTITUTO BRASILEIRO DE GEOGRAFIA E ESTATÍSTICA, PESQUISA INDUSTRIAL ANUAL INSTITUTO NACIONAL DE ESTADÍSTICA Disponível em: http://stats.oecd.org/index.aspx http://www.indec.mecon.ar/ http://www.sidra.ibge.gov.br/bda/pesquisas/pia/default.asp?o=16&i=P http://www.ine.es/

  31. MANUFACTURED GOODS AND PRIMARY COMMODITIES IN OVERALL EXPORTS* • MANUFACTURED GOODS: CHEMICALS, MACHINES TRANSPORTATION EQUIPMENTS OTHER MANUFACTURES • PrRIMARY COMMODITIES: FOODS AND BEVERAAGES, AGRICULTURE GOODS,MINERALS AND METALS,GOLD, COMBUSTIBLES • FONTE: UNCTAD HANDBOOK OF STATISTICS • iAvailable inhttp://stats.unctad.org/handbook/ReportFolders/ReportFolders.aspx

  32. INNOVATION INVESTMENTS AS % OF GDP FONTE: UNESCO INSTITUTE FOR STATISTICS Disponível em: http://stats.uis.unesco.org/unesco/TableViewer/document.aspx?ReportId=143&IF_Language=eng

  33. 3.Conclusions: a continuousandupwardprocessofdevelopment • Recovery of a specific path dependent development trajectory in the post-reform democratic scenario: state institutions in a modality of coordinated market economy • Transition appears to be consolidating around a new flexible institutional arrangement of state/business relations • Emphasis on stability constrains but does not prevent state-coordinated development • Changes in reference frames of elites as to the importance of income distribution policies • Contours of a late social democratic brand of capitalist development

  34. Upwardprocess: newtrends • Foreign investment boom • Transnationalization of Brazilian firms supported by BNDES • Diversification of industry’s regional distribution • Net formation of fixed capital increased 7.4% from 2009 to 2010 • Exploration of pre-salt oil reserves

  35. Overcomingobstaclesahead - Developinginfrastructuralcapacities: expandingroad system, modernizingports, expandingandimprovingsanitaryconditions • Structuralreforms: fiscal andtaxreform • Improvingeducational system andtechnical training • Reducinginformality, expandingformsof social protection • Increasinginvestments in technologyandinnovations

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