Brazil economy

Topics: International trade, Economics, Macroeconomics Pages: 4 (1341 words) Published: September 15, 2014
2014/8/17
Global Perspective
Day 4 Report
Atsushi Ito, G587159

Brazil: Embracing Globalization?

Analyze and evaluate Brazil’s development strategy and economic performance.

The success of the import substitution strategy and its pain.

Originally, the Brazilian economy was deeply depended on primary commodities exports which had followed the industrial structure in the colonial era, until hitting the crisis of sluggish exports due to the Great Depression in 1930. E.g. in 1920s, coffee accounted for 70% of exports, 10% of the GDP.

As post-WWⅡ, in 1950s, defeated countries or developing countries who did not have social capital fundamentals and infrastructures took a policy of protectionist for the purpose of enhancement of domestic industries, modernization.

Similarly, for the purpose of their economic growth and “Industrialization”, Brazil also took the import substitution strategy.

In the post-war world situation at the time, It can be said that this is a natural choice. It was the very essential matter for Brazil to establish a modernized and industrialized state in the next generation to move away from predicament where Brazil had stood. It was really important to do as well as to give additional values to many types of goods in the primary industry.

Since Brazil’s social capital accumulation was so vulnerable at that time, it was indispensable to utilize FDI. So they sought to attract foreign capitals to invest more by applying a variety of incentives. As a result, the FDI increased in 1950s.  

In order to ensure the import substitution strategy, Brazil took a series of measures such as tariff, non-tariff barriers, exchange controls, import licensing system, credit control through the BNDE, various incentives. Particularly important one was the "Plano de Metas" in 1956, to create a state-owned enterprise policy applied for the key industries in order to try to make them strong and sound.

While it was set to a high level,...
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