Trajectory and Politics in Trajectory and Politics in Brazilian Economic Brazilian Economic

DevelopmentDevelopment

Renato Boschi

Política Consultoria

www.politicaconsultoria.com.br

Summary of presentation Summary of presentation

1. Continuities in the long run perspective

2. From State Developmentalism to a New Productive

Regime: social inclusion, crisis, and recovery

3. Conclusions: a continuous and upward process of

development

1.Continuities in the long run 1.Continuities in the long run perspectiveperspective

Pervasiveness of state institutions

Strong Executive: late modernization of state structure, but increasing intervention capacities

Business and state intermediations

1930’s and the layout of an institutional basis 1930’s and the layout of an institutional basis for industrial development :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

1950’s and the creation of infrastructure1950’s and the creation of infrastructure

- 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

1970’s Deepening ISI under military regime1970’s Deepening ISI under military 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

From State Developmentalism to From State Developmentalism to Productive reconfigurationProductive reconfiguration

Corporatism and Industrial Development:1930-1990 State/Society relations ordered from above

State developmental period: maleability and centrality of corporative structure as regulation

Economic reforms and productive regime in the 1990’s: new modes of economic coordination, more autonomy in interest representation,associations and market complementary activities

Adaptation, diversification and fragmentation of interest representation structure

Corporatism, Crisis and Reforms, New Modes of Regulation

T1 T2

•State corporatism•Closed economy•State protectionism•Industrial policies•Business

participation•in decisions

Fragmentation of interest repr.structure voluntary frame of actionChanges in state intervention Productive reconfigurationMarket regulationRegulatory agenciesStrong executive: access thru Legislative

Liberalizationof marketsReforms

1990’s Double transition of economic 1990’s Double transition of economic reforms and democratizationreforms and democratization

Diversity of institutional formats Quick adaptation of business organized interests to

new market conditions Congress as target of business organized action

(lobbies) Tension between market coordination and centralized

regulation

1990’s 1990’s

Real Plan:Stabilization and fiscal adjustment New regulatory matrix (independent agencies) Reform of the banking system (Proer) State reform 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

Rise of labor-based parties and organizations

2.From State Developmentalism to a New 2.From State Developmentalism to a New Productive Regime: social inclusion, crisis, Productive Regime: social inclusion, crisis,

and recoveryand recovery

State intervention and development: State intervention and development: exploring institutional possibilitiesexploring institutional possibilities 1. CDES (Social and Economic Development

Council): concerting a development project2. BNDES: industrial, technological and

external trade policy (PITCE)3. Networking thru new councils

Council for Economic and Social Council for Economic and Social Development (CDES)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

CNDI (National Council for CNDI (National Council for Industrial Development)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)

BNDES: strategic agency for industrial BNDES: strategic agency for industrial policy implementationpolicy 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)

Productive regime: towards Productive regime: towards structural change?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)

Change in state/society relations: Change in state/society relations:

Incorporation of labor sectors into the state administration

Reactivation of National Conferences of Public Policies

Pension funds: trade unions as partners of a model of development centered on the role of financial markets

Policies of social inclusion and citizenship opening a new avenue for na inward-based alternative of growth

Rise of a new middle class

Impact of income transfer programs and Impact of income transfer programs and countercyclical measurescountercyclical measures

Reducing inequality

Creating job positions

Reducing informality

Targeted forms of social protection

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

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

Level of Occupation 2001-2007 (In Thousands)Level of Occupation 2001-2007 (In Thousands)

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

Level of

Unemployment RatesUnemployment Rates

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

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

Degree of InformalityDegree of Informality

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

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

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

to June/2009)to June/2009)

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

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

TOTAL & PER CAPITA GDP(US$ BILLIONS)

FONTE: UNCTAD HANDBOOK OF STATISTICS AVAILABLE IN: http://stats.unctad.org/handbook/ReportFolders/ReportFolders.aspx

YEARYEAR

COUNTRYCOUNTRY

19981998 20062006

TotalTotal Per capitaPer capita TotalTotal Per CapitaPer Capita

GERMANYGERMANY

2.184.474,59

26.586,54

2.900.828,60

35.101,63

BRAZILBRAZIL

787.742,24

4.658,81

1.099.336,61

5.806,67

SOUTH KOREASOUTH KOREA

345.433,38

7.485,63

872.788,68

18.164,01

UNITED STATESUNITED STATES

8.752.441,00

30.955,35

13.166.784,98

42.915,13

MEXICOMEXICO

421.008,37

4.346,12

836.995,38

7.945,50

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

DEGREE OF OPENESS YEARYEAR

COUNTRYCOUNTRY

19981998 20062006

TOTALTOTAL EXPORT.EXPORT. IMPORT.IMPORT. TOTAL.TOTAL. EXPORT.EXPORT. IMPORT.IMPORT.

GERMANYGERMANY 46,43% 24,87% 21,56% 69,43% 38,18% 31,24%

BRAZILBRAZIL 14,25% 6,49% 7,76% 21,25% 12,54% 8,72%

SOUTH KOREASOUTH KOREA 65,31% 38,30% 27,00% 72,74% 37,29% 35,45%

UNITED STATESUNITED STATES 18,58% 7,79% 10,79% 22,46% 7,89% 14,58%

MÉXICOMÉXICO 59,00% 27,90% 31,10% 61,96% 29,92% 32,04%

% 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 TRANSPORTEFONTE: OECD STATISTICS PORTAL INSTITUTO NACIONAL DE ESTADISTÍCA E CENSO DE LA REPÚBLICA ARGENTINAINSTITUTO BRASILEIRO DE GEOGRAFIA E ESTATÍSTICA, PESQUISA INDUSTRIAL ANUALINSTITUTO NACIONAL DE ESTADÍSTICA Disponível em: http://stats.oecd.org/index.aspxhttp://www.indec.mecon.ar/http://www.sidra.ibge.gov.br/bda/pesquisas/pia/default.asp?o=16&i=Phttp://www.ine.es/

YEAR 1998 2001 2005

GERMANY 52,66% 54,05% 56,66%

BRAZIL 36,95% 38,77% 38,26%

SOUTH KOREA 50,46% 53,96% 55,74%

UNITED STATES 44,94% 42,42% 41,38%

MEXICO 37,73% 39,18% -

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, COMBUSTIBLESFONTE: UNCTAD HANDBOOK OF STATISTICS iAvailable inhttp://stats.unctad.org/handbook/ReportFolders/ReportFolders.aspx

YEAR YEAR

COUNTRYCOUNTRY

19981998 20062006

MANUFAT.MANUFAT. COMMOD.COMMOD. MANUFAT.MANUFAT. COMMODIT.COMMODIT.

GERMANYGERMANY 90,56%90,56% 9,44%9,44% 88,76%88,76% 11,24%11,24%

BRAZILBRAZIL 57,55%57,55% 42,45%42,45% 53,85%53,85% 46,15%46,15%

SOUTH KOREASOUTH KOREA 87,03%87,03% 12,97%12,97% 89,69%89,69% 10,31%10,31%

UNITED STATESUNITED STATES 84,80%84,80% 15,20%15,20% 82,09%82,09% 17,91%17,91%

MEXICOMEXICO 85,47%85,47% 14,53%14,53% 76,25%76,25% 23,75%23,75%

INNOVATION INVESTMENTS AS % OF GDP

FONTE: UNESCO INSTITUTE FOR STATISTICSDisponível em: http://stats.uis.unesco.org/unesco/TableViewer/document.aspx?ReportId=143&IF_Language=eng

COUNTRY COUNTRY YEARYEAR

20002000 20022002 20052005

GERMANYGERMANY 2,5%2,5% 2,5%2,5% 2,5%2,5%

BRAZILBRAZIL 0,9%0,9% 0,9%0,9% 0,8%0,8%

SOUTH KOREASOUTH KOREA 2,4%2,4% 2,5%2,5% 3,0%3,0%

UNITED STATESUNITED STATES 2,7%2,7% 2,7%2,7% 2,6%2,6%

MÉXICOMÉXICO 0,4%0,4% 0,4%0,4% 0,5%0,5%

3.Conclusions: 3.Conclusions: a continuous and a continuous and upward process of development upward process of development 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

Upward process: new trendsUpward process: new trends

Foreign investment boomTransnationalization of Brazilian firms

supported by BNDESDiversification of industry’s regional

distributionNet formation of fixed capital increased

7.4% from 2009 to 2010Exploration of pre-salt oil reserves

Overcoming obstacles aheadOvercoming obstacles ahead

- Developing infrastructural capacities: expanding road system, modernizing ports, expanding and improving sanitary conditions

- Structural reforms: fiscal and tax reform- Improving educational system and technical training- Reducing informality, expanding forms of social

protection- Increasing investments in technology and innovations