1. Ferraz 2003 Economic liberalisation and development in Latin America: Achievements, constraints and perspectives for the Brazilian Industry João Carlos Ferraz Economic Comission for Latin America and the Caribbean, United Nations David Kupfer and Mariana Iootty Instituto de Economia, Universidade Federal do Rio de Janeiro, Brasil

2. Ferraz 2003 Guide of presentation Development and competition Historical context and framework conditions Economic liberalisation Industrial performance Competitiveness in four industrial groups 10 years of economic liberalisation Made in Brazil … and after???

3. Ferraz 2003 Development and competition

4. Ferraz 2003 Development Development: growth, structural change, income distribution and learning State: pro-active participant in processes of transformation Development: innovation, competition and entrepreneurs Successful corporations: networking and increasing competences to explore expanding markets

5. Ferraz 2003 Process of competition Competition is a systemic, interactive process, involving firms, industrial structure and framework conditions Confrontation among firms - primary source of economic dynamism Competitive firm: imposes the rules of competition

6. Ferraz 2003 Competitiveness and patterns of competition Competitiveness: Capacity of a firm to formulate and implement strategies to maintain or expand a sustainable market position Competitive firm: Strategies, capabilities and performance coherent with sectoral pattern of competition Pattern of competition: Collection of competitive drivers -key factors for success in a specific market Competition is a systemic, interactive process, involving firms, industrial structure factors and framework conditions Two important remarks Patterns of competition are sector/market specific In time, patterns of competition may change due to innovation or changes in systemic factors

7. Ferraz 2003

9. Historical context and framework conditions

10. Ferraz 2003 Historical context 1930/82: –High growth –Low contribution of technical progress Last 20 years: –Instability –Low rythm of structural change The 1990s/2000s –External vulnerability (trade deficit) –Product and services updating but assymetric modernisation

11. Ferraz 2003 Structure and framework conditions Natural resources and wide markets, strong inequalities Infrastructure: insufficient and concentrated Propensity for the generation of low skilled jobs Low investment and dependence on foreign resources

12. Ferraz 2003 Private structure and competences Willingness to do business –Propensity for the generation of low skilled jobs Companies good in routines; weak in search activities: –Low local technological effort –Extensive use of external technologies National x transnational: occupying different spaces

13. Ferraz 2003 Economic liberalisation

14. Ferraz 2003 Economic liberalisation and price stabilisation (i)economic deregulation (ii)privatisation of manufacturing industries and utilities services (iii)liberalisation of the external sector (iv)appreciated exchange rate, high interest rates and foreign capital inflows Macro implications: foreign capital inflows financing trade deficits; increasing external vulnerability, not compatible with long-term stability; volatile & insufficient growth in the 1990s

15. Ferraz 2003 Industrial performance

16. Ferraz 2003 Output in different industries (1991=100) 199419961997199819992000 Industrial Commodities 109,5115,9122,8126,8130,3138,2 Agriculture Commodities 94,4100,6104,0101,2105,498,9 Traditional industry except Food/beverages 105,3103,6104,1101,3100,0104,3 Food/beverages 107,2127,0127,3128,9 130,5 Innovation Carriers 123,3107,8105,2105,698,3108,2 Durable Goods 133,0153,4165,8133,9123,1148,6 Manufacturing Industry 111,4115,4119,9117,4116,7124,2 Source: IBGE - Industrial Monthly Survey (Special Tabulation)

17. Ferraz 2003 Industrial output & employment 1985-1999 Source: IBGE – Monthly Industrial Survey and Monthly Employment Survey

18. Ferraz 2003 Foreign trade 1980-2002 - US$ million Source: Alice Database

19. Ferraz 2003 Foreign trade in industrial groups 1999-2002 Source: GIC-IE data bank

20. Ferraz 2003 Fixed capital formation 1990=100 Source: IBGE/DECNA

21. Ferraz 2003 Private M&A & Privatisation, 1990-99

22. Ferraz 2003 Ownership change Ownership change Share in sales revenue of 300 largest companies (%) SectorYearEMN Commodities 199142,421,236,5 199925,833,141,1 Durables and Innovation Carriers 19910,860,338,8 19990,086,913,1 Traditional 19910,036,563,5 19990,048,551,5 Total 199120,536,043,5 199912,553,534,0 Ownership: S – State owned; M –Multinational; N – National Source: GIC-IE data bank

23. Ferraz 2003 Expenditure in innovative activities, 2000 Number of Firms Net Revenue (R$ 10 6 ) Expenditure in Innovative Activities Total Machinery acquisition Internal R&D Number of Firms Value (R$ 10 6 ) Number of Firms Value (R$ 10 6 ) Number of Firms Value (R$ 10 6 ) 72,005582,40619.16522,34315,54011,6677,4123,741 Source: IBGE, Industrial Survey on Technological Innovation, 2000

24. Ferraz 2003 Industrial Commodities

25. Ferraz 2003

27. Output and employment in the steel industry, 1988-2001

28. Ferraz 2003 Durables goods

29. Ferraz 2003

31. Employment and productivity in car asssembly 199019921994199619982001 Employment117,396105,664107,134101,85783,04985,257 Labour productivity* 7.810.214.817.719.121.3 * units per worker in a given year Source: Sarti (2002)

32. Ferraz 2003 Traditional industries

33. Ferraz 2003

36. Innovation carriers

37. Ferraz 2003

40. 10 years of economic liberalisation Made in Brazil And after?

41. Ferraz 2003 Competitive regularities Industrial commodities –Low unit value in exports, differentiation for the local market Durables goods –Inward internationalisation and cacthing up in middle income segments Traditional industries –Competitive constraints defined by unequal income levels Innovation carriers – Moving ahead, lagging behind... competitiveness still very weak

42. Ferraz 2003 General features No structural transformation – new or abandoned activities Foreign trade expansion, from US$ 50 to US$ 100 billion but unchanged trade pattern Expansion investments in few sectors Inward internationalisation Modernisation but unchanged relative position of firms

43. Ferraz 2003 Development paradox Local capital and innovation capabilities are regularities of successful countries X Ownership internationalisation and incipient innovation capabilities in Brazil

44. Ferraz 2003 Open questions How to attract dense FDI? How to evolve from modernisation (rationalisation) to innovation? How to achieve double moving target (national best practice to international average and average national to national best practice)? Employment???????