Abstract
Market liberalization has a profound impact on the structure of economies as well as changes the roles of the public and private sectors and affects innovative capacity of countries. This paper explores the Brazilian experience with wheat market liberalization and the impact on the seed sector. The analysis presented in this paper is based on interviews with 12 experts intimately involved in wheat research and breeding in Brazil. The analysis reveals liberalization boosted private investment in wheat R&D, which translated into increased research output. However, Brazil faced many challenges in establishing wheat innovation system and important lessons can be drawn from its experience.
Highlights
Wheat is the most commonly grown crop in the world1 occupying approximately 25 % of the world’s arable land and providing 20 % of the daily protein and food calories for around 4.5 billion people (EMBRAPA 2014)
Conclusions and policy options There are no doubts that liberalization had a profound impact on the wheat sector in general and wheat R&D sector in particular
The opening of the economy was perceived by the interviewees as very sudden, which undermined wheat production and willingness of farmers to invest in wheat R&D
Summary
Wheat is the most commonly grown crop in the world occupying approximately 25 % of the world’s arable land and providing 20 % of the daily protein and food calories for around 4.5 billion people (EMBRAPA 2014). This study will analyze the impact of market liberalization and subsequent privatization of research and breeding on the innovative capacity of the Brazil’s wheat seed sector. The move to democratic institutions was accompanied by an increase in civil and economic liberties, resulting in the emergence of freer markets and strongly reshaping the landscape of the Brazilian economy These changes allowed some industries to thrive, while others failed and in the following we discuss the impact on the wheat market and innovative capacity of the seed sector. The results from the existing empirical and theoretical literature suggest that opening of an economy to foreign competition and trade creates incentives for private firms to engage more in R&D and thereby increases innovative capacity. Based on the insights from the related literature, the following hypotheses can be formulated for the seed industry: liberalization increases innovative capacity of the domestic seed industry through better access to foreign seed/technologies; liberalization increases private R&D investment through enhanced competition; and, liberalization enhances private R&D due to firms growing bigger and better exploiting economies of scale
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