Industrial Policy, Sectoral Maturation, and Postwar Economic Growth in Brazil: The Resource Curse Thesis

Abstract

Resource-rich countries like Brazil have tended to favor autarkic (self-sufficient) development, in contrast to the export-oriented East Asian development model. Autarkic policy prematurely triggers a rapid expansion of heavy and chemical industry (HCI), which matures too slowly. The primary sector must therefore meet the foreign exchange and revenue transfer needs of the economy. But because the primary sector shrinks in relative size as per capita incomes rise, autarkic development proves unsustainable. Yet reform is then blocked by the vested interests that benefit from the rents which autarkic policies confer. Economic growth becomes erratic and slow. In this way a favorable natural resource endowment becomes a curse rather than a blessing, and resource-rich countries underperform, with interesting consequences for regional policy and the role of frontier regions like the Amazon.