Why Does Brazil Have a Small Participation in the Global Value Chains? An Analysis of the External Insertion of the Brazilian Economy

Abstract

More than half of global trade consists of trade in intermediate goods and services that are incorporated at various stages in the production process of products and services for final consumption. These processes, which can be formed by sequential chains or complex networks, are referred to as Global Value Chains (GVCs). Despite its increasing global importance, Brazil still has a very low participation in the GVCs. This chapter discusses the external insertion of the Brazilian economy to understand the determinants of its currently small involvement in that system. For that, the chapter discusses the external insertion of the Brazilian economy in historical perspective, examine the participation of Brazil—compared to other emerging and developed economies—in the GVCs, and analyzes what prevents Brazil to participate more actively in GVCs. The chapter concludes that by falling behind during the times in which the first GVCs were being formed, Brazil now finds it more difficult to enter the global markets. The country should seek to coordinate supply chains in Latin America to be able to be competitive and participate more actively—and in more high-value-added parts—in the GVCs.