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Volume 65 / Social Sciences

ECONOMICS: BRAZIL


MELISSA H. BIRCH, Associate Professor and Director, Center for International Business Education and Research, University of Kansas
RUSSELL E. SMITH, Professor and Associate Dean, School of Business, Washburn University

THE LITERATURE REVIEWED FOR THIS VOLUME reflects the concerns of a Brazil that has moved past the crises and challenges that marked the 1980s and 1990s. These included the debt crisis, endemic inflation, the process of redemocratization, and the challenges of international trade and increased competition. Even the successful Real Plan and the 1999 devaluation are almost outside of the concerns of the present period. The neoliberal reforms of the state and privatizations of the 1990s, including the opening of the economy and the politics of Mercosul, now seem part of the background, or are of technical or historical interest. Instead of analyses of crisis, one finds heightened interest in the dynamics of a working market economy that has become open to the world, that allocates activities across Brazil in accord with market forces and local rather than national policies, and that is far enough removed from its recent past that numerous retrospective efforts are in order.

Brazil's openness to the world is reflected in works that consider trade and investment across borders and the rules, mechanisms, and policies that guide these activities. The sudden success of Brazilian exports, including ethanol (item #bi2008002319#) and soy (item #bi2007003976#), has attracted considerable attention, leading authors to examine more closely the entire supply chain in an effort to understand the phenomena and make appropriate policy recommendations (items #bi2007000542# and #bi2008001888#). The research seeks to explain the origin and destination of exports (items #bi2007000346# and #bi2007000236#), the finance and logistics required to support them, and the importance of the origin of capital (item #bi2006003778#) and the size of the firm (item #bi2008001847#; also see item #bi2008004493#) in the determination of export success. Also considered are the developmental safeguards that are part of trade law (item #bi2008004501#) and the new role of civil society groups in the formulation of trade policy (item #bi2008001887#). It is these mechanisms that allow Brazil to respond to globalization and the open economy and ultimately to influence the allocation of activities geographically now that protective barriers are down.

The literature reviewed includes a large number of items about the economic experience of specific regions, states, and more local units, reflecting perhaps both the dispersion of economic activity as well as the increased dispersion of the researchers. While recent economic performance has been shaped by liberalizing reforms of the 1990s, it also has been influenced by the previous pattern of economic activity, investment, and development, including the general historical pattern of economic development starting in the coastal cities, and also the movement of actors, by choice and by policy, to extend the region of economic development to the west and to the north. The cases in the literature reviewed here reflect both the historical pattern of development and also the allocation of economic activities in response to the more open economy.

Consistent with both a development trajectory and the newly opened economy, the literature exhibits a clear concern with the idea of a service economy, both as a post-industrial next step and as part of the idea of a global city based on high-value, knowledge-intensive service in a global system of such cities. In a set of papers linked by the theme of innovation and services in the context of the knowledge-based economy, the role of innovation, technology, and services for the future of the Brazilian economy is explored (items #bi2008004497# and #bi2006002307#). A mostly theoretical discussion of the service (tertiary) sector in industrial and postindustrial economies finds that with industrial restructuring, Brazil's increasing service activities are predominantly low-skill rather than the technology rich, sophisticated services characteristic of the developed economies (item #bi2008004522#). In the concrete case of São Paulo, the service economy discussion interacts with the migration of manufacturing activities since the 1970s from the city to the metropolitan region and to other areas of the state and country in search of lower costs. It is argued that the new prominence of service industries reflects outsourcing of services by manufacturing as well as the migration of manufacturing, but not that São Paulo is becoming a global city disconnected from manufacturing (item #bi2008002331#).

Viewing São Paulo from a regional perspective and starting from an apparent "reversal of polarization" that shifts manufacturing activity from the São Paulo Metropolitan Region to Porto Alegre, Curitiba, and Belo Horizonte, researchers ask whether the forces of disagglomeration leading to dispersion of manufacturing dominate the forces of agglomeration retaining centralization in São Paulo. They conclude that what was seen as a dispersion of manufacturing to low-cost areas outside the city, or even outside of the state, is now seen as the expansion of a system of manufacturing which retains the control, innovation, and knowledge-based functions within São Paulo. The new, lower-cost locations of manufacturing are not seen as having the research and intellectual capital base to be autonomous centers. On the service side, a portion of the service activity in São Paulo is seen as a result of outsourcing and not associated with an emerging center in the world city or world system framework (item #bi2008001470#). Global city or not, the restoration of the central region of the city of São Paulo since 2000 is explored thoroughly elsewhere in the literature (item #bi2008004504#).

Emblematic both of the thread of the westward movement of Brazil and also of globalization is the recent development of the state of Goias in the Center-West, an agricultural frontier region that grew consistently through recent decades, even as the manufacturing-driven cities of the coast stagnated. Illustrative is the case of Catalão in southeastern Goias, which benefited from the boom in modern agriculture by becoming a regional center for agricultural services and eventually, after several stages and with economies of agglomeration, a center for manufacturing often by outside firms. The conclusion is that small cities on the periphery can grow to connect the region to the wider world, even while remaining relatively small (item #bi2008004508#).

Emblematic in a different way is the restructuring and new growth in the state of Rio de Janeiro, which also experienced major deindustrialization in the Rio de Janeiro Metropolitan Region in the 1990s. Several works report of localized manufacturing growth in the interior of the state which is not connected to the capital city and its previous manufacturing activity. For example, one study reports on the success of "local productive arrangements" (APLs) for 13 industries rooted in regions across the state outside of the Rio de Janeiro Metropolitan Region (item #bi2008004488#). A similar study looked at "configurations of local production" (CPLs), which are groupings of small and medium firms and agencies and institutions of support in four small cities (item #bi2008004513#). Taking up the question of the city of Rio de Janeiro as an emerging center of high-value services, a third study finds that the city has experienced a substantial out-migration of the highly qualified workers needed for advanced services to cities in adjacent states and especially to São Paulo (item #bi2006002233#).

Studies of parts of Brazil outside of the larger states are very much in evidence in the literature reviewed, including studies from the agricultural economy, including from the southern states and from export agriculture generally (item #bi2008002319#). The growth of these regions, and the power of the agribusinesses that are so important to their transformation, is changing the way politics are "done" in Brazil (item #bi2008004519#). With the dispersion of activities in the textile industry in response to the opening of the economy, the Southeast is found to still be first in spinning, weaving, and clothing and the South is first in cotton production, while the Northeast leads in growth in all areas (item #bi2008002469#). Another case of South-Northeast links is the outsourcing of shoe and garment production from Rio Grande do Sul to Ceará in response to labor and fiscal incentives, resulting in excessively bad labor conditions (item #bi2007005131#). Labor conditions in large-scale projects are discussed for the construction of Brasilia in the late 1950s (item #bi2008002503#) and more recently in metal mining in Para state (item #bi2008003304#).

The sense of having moved into a new era is reinforced by the number of volumes in which the authors, looking backward, demonstrate with a combination of economic history and development studies, how far Brazil has come (items #bi2008004491# and #bi2008004515#). Other retrospective volumes include ones on the economic and social conditions of urban workers from 1930 to the present (item #bi2008004502#), and on capital markets over 50 years (item #bi2008004511#), and on the 30th anniversary of FUNCEX, the trade promotion agency (item #bi2008001885#). A less sanguine study might be the volume that focuses on the evolution of government policy on hydrocarbons (item #bi2008004521#).

Some studies, despite their retrospective focus, include a forward-looking, policy-oriented component (items #bi2006002563#, #bi2008004512#, and #bi2008004499#). These volumes tend to state explicitly that they will begin their analysis after the creation of the real or after the devaluation of 1999. In fact, these studies may be the beginnings of a new macroeconomic literature for Brazil: an examination of the economy in the context of relative stability and the under the policy priorities of Lula's government. Among those reviewed here are an analysis of the tax reform started by the Lula government (item #bi2008001464#), volumes that examine the public debt (item #bi2008004499#) and central bank autonomy (item #bi2008004514#), and studies of the present performance of privatized firms (item #bi2007000048#) and labor markets and institutions (item #bi2008004489#. Another branch of this literature examines the articulation of business groups and policy toward business (item #bi2008004506#) in the wake of globalization. The common thread of these studies is the focus on preserving monetary stability while promoting economic growth, distribution of wealth, and social inclusion. These are the issues for so many countries, developed and developing, suggesting that the outlook for the future contribution of Brazil's evolving economic literature is bright.


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