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Volume 59 / Social Sciences

ECONOMICS: BRAZIL


MELISSA H. BIRCH, School of Business, University of Kansas
RUSSELL E. SMITH, School of Business, Washburn University


THE INCREASED OPENNESS OF THE BRAZILIAN ECONOMY prompted by the 1990 Collor de Mello economic reforms—following the enhanced export experience of the preceding decades—was a dominant theme of the Brazilian economic experience in the1990s (item #bi 00000889#). Evidence of Brazil's growing exposure to global economic fluctuations after 1990 can be found in greater import than export growth (item #bi 00006564#) and in increased foreign investment (items #bi2001000681#, #bi 00003979#, and #bi 00003991#). The new openness can also be seen in the renewed interest in exports (item #bi 00006280#), government policies promoting economic competitiveness (items #bi 00002434# and #bi 00002870#), and barriers to exporting to the US (item #bi 00007577#). Greater market deregulation, however, may not lead to an "institutionally homogeneous world" and countries still may be able to follow independent national development strategies (item #bi2001000892#).

Economic integration is an important subtheme in the economic literature of Brazil, particularly subregional integration with Brazil's partners in Mercosul (the Common Market of the South): Argentina, Paraguay, and Uruguay. Examination of trade practices between Brazil and Argentina from 1991 to 1994 found that trade diversion dominated trade creation (item #bi 00003987#). Nevertheless, in agricultural trade between Brazil and its Mercosul partners, trade creation dominated (item #bi 00003286#). Both Mercosul and the 1999 devaluation of the real impacted trade and investment in the automobile industry (item #bi 00007557#). The production structure of the Mercosul economies, the structure of final demand, and opportunities for each partner are considered in the literature reviewed this biennium (items #bi 00005534# and #bi2001000591#), as are the social costs associated with pollution of the Parana River basin (item #bi 00001957#). The economic and political power of Argentine and Brazilian business also is discussed (item #bi 00003228#). Central to the stability and future of Mercosul are the exchange-rate regimes (fixed vs. flexible) among the partners and with nonmembers, and the possible formation of a monetary union (items #bi 00007589#, #bi 00002274#, and #bi 00002863#).

The literature on macroeconomic stability and policy—always important in Brazil—was dominated by discussions of the then largely successful Real Plan of July 1994, which pegged the Brazilian currency against the dollar, ended inflation, and through limited mini-devaluations avoided a shock-producing devaluation until January 1999. The Real Plan can be seen in the context of the larger recent experience of exchange-rate regimes and also in terms of the role of the state in price stabilization and political economy (items #bi 00005531# and #bi 00005913#). While successful in meeting short-term anti-inflation goals, long-run growth may be in doubt and social problems may have worsened under the Real Plan (item #bi 00002613#). In fact, future crises may be inevitable due to systemic characteristics (item #bi 00005882#). However, as the most successful of the major anti-inflation programs beginning with the Cruzado Plan of 1986, the Real Plan has had a favorable impact on poverty (item #bi 00000890#), food consumption (item #bi 00005701#), and the buying power of lower-income groups (item #bi2001000282#). According to some, the January 1999 devaluation of the real had limited impact on exports and was followed by a slow recovery (item #bi 00007593#), although other observers predict stronger economic performance in the future (item #bi 00002869#).

Despite attempts to implement neoliberal reforms during the 1990s, economic policy tools continue to be an important theme in a Brazil whose rapid growth and development are the creation of economic policy. Internationally, the privatization of Brazilian state-owned firms and the regulation of markets were highly visible, as they were in the recent Brazilian economic literature (items #bi 00006319#, #bi2001000397#, and #bi 00001567#). A shift was noted in investment activities, away from industries linked to consumption and toward those providing infrastructure (item #bi 00007104#). Industries prominent in the privatization program and the new regulatory model include electrical energy (items #bi 00005731#, #bi 00002871#, and #bi 00007103#), petrochemicals (items #bi 99009958#, #bi 00007554#, and #bi 00007555#), and telecommunications (item #bi 00005535#). Other policies and instruments considered include antitrust laws (item #bi 00002029#), infrastructure development (items #bi 00007102#, #bi 00002872#, and #bi 00001040#), taxation (items #bi 00007100# and #bi 00002501#), fiscal incentives (items #bi 00003377#, #bi 00001581#, and #bi 00004999#), and fiscal federalism (items #bi 00002739#, #bi2001000687#, and #bi 00003988#).

Most prominent among the industries studied is the automobile industry, which is examined both in terms of its origins during national development efforts in the 1950s (item #bi2001000319#) and in terms of its experiences in the 1990s with globalization, new quality control standards, and relations with suppliers (item #bi 00006566#), including comparisons with India (item #bi2001000214#). Of particular interest regarding the national development efforts of the 1950s is a case study of Willys and its labor relations in the ABC region of São Paulo (item #bi 00002178#). The increase in automobile imports immediately after the Real Plan is attributed to increased consumption rather than to import substitution for domestic production (item #bi 00007574#).

In writings on the agricultural industry, several themes are developed, including the impact of technological change (item #bi 99010156#), the role of minimum price policy, the relationship of agricultural policy to macroeconomic policy in the mid-1990s (item #bi 00003685#), and strategies for increasing agribusiness exports (item #bi 00002838#). Other industry studies are present in the literature, including works on natural resource intensive industries in general (item #bi 00006288#), banking (item #bi 00001956#), textiles and clothing (item #bi2001000230#), services (item #bi 00006285#), the capital goods industry (item #bi 00003754#), and ceramics (item #bi 00005533#).

In spite of Brazil's strong base of economic activity and vigorous economic policy, poverty and inequality continue to be serious concerns. A number of works reviewed for HLAS 59 reflect this concern, studying income distribution from various perspectives. It is argued that income distribution is still highly unequal, even after the end of inflation and the inflation tax (item #bi 00002685#), that poverty and inequality will be permanent features unless the government undertakes new programs (item #bi 00002925#), and that social expenditure has a positive impact on the distribution of income (item #bi 99009226#). Measures of poverty and social well-being also are discussed (item #bi 00006333#). A study of income in metropolitan areas in the early 1990s associates a reduction in earnings inequality with a return to education (item #bi2001000777#), while earnings differentials can vary by sector (item #bi 00003993#). Also of interest is the role of hypothetical increases in assets owned by the poor in increasing social welfare (item #bi 00002624#). In terms of employment, regional disparities are found to be procyclical (item #bi 00001577#), while the trend toward regional decentralization of economic activities seems to have reversed around 1985, suggesting that regional inequalities will continue (item #bi 99009169#).

The very able research assistance of Nicolas Prieto is gratefully acknowledged.


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