Policies to Improve Industrial Competitiveness in Brazil - 1995-2000

Abstract

The paper analyses industrial competitiveness policies adopted in Brazil from 1995 to 2000 and compares them to previous economic measures and instruments related to the theme. A number of changes over previous policies were identified, such as: a) the agenda of competitiveness policies is presently more complex and diversified than in the first half of the 1990s; b) both fast productivity growth and exchange rate devaluation contributed to counterbalance the anti-export bias which characterized particular time periods in the 1990s. Although increased competitiveness can be partially attributed to trade liberalization and exchange rate valorization up to early 1999, new instruments to enhance industrial competitiveness were responsible for increasing competitiveness in the second half of the 1990s; c) local (state) initiatives to increase competitiveness remained nearly the same, as compared with the first half of the 1990s; the reliance on the concession of tax exemptions and tax credits so as to attract new enterprises to their territories continued to be the norm; d) although many measures and instruments have had as their focus the industrial segment of micro, small and medium firms, their effectiveness is questionable; e) trade defense and related measures continued at the same pace as before, as no new instruments or institutions were created in the last years of the decade; f) measures to reduce overall competitive inefficiencies (custo Brasil) continued to be adopted, albeit on a less focused level; g) the most conspicuous sector policy instrument - the Automotive Agreement - survived the wave of difficulties associated with the widening competitiveness gap between Brazil and Argentina after the Brazilian exchange rate devaluation of early 1999. But its future is uncertain; h) the National Development Bank (BNDES) began in the mid-1990s to implement restructuring measures aimed at strengthening domestic firms and groups so as to enhance their competitive position both at home and abroad.