The Oxford Handbook of the Brazilian Economy

738 Pages·2018·11.385 MB·English

by  Edmund Amann (Editor), Carlos Azzoni (Editor), Werner Baer (Editor)

The Oxford Handbook of the Brazilian Economy
Edmund Amann (ed.) et al.
https://doi.org/10.1093/oxfordhb/9780190499983.001.0001
Published: 2018 Online ISBN: 9780190600013 Print ISBN: 9780190499983
FRONT MATTER
Copyright Page
https://doi.org/10.1093/oxfordhb/9780190499983.002.0003 Page iv
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Oxford University Press is a department of the University of Oxford. It furthers o
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Library of Congress Cataloging-in-Publication Data
Names: Amann, Edmund, editor. | Azzoni, Carlos, editor. | Baer, Werner, 1931–2016, editor.
Title: The Oxford handbook of the Brazilian economy / edited by Edmund Amann,
Carlos Azzoni, and Werner Baer.
Description: New York, NY : Oxford University Press, [2018] |
Includes bibliographical references and index.
Identi�ers: LCCN 2017057398 | ISBN 9780190499983 (hardcover : alk. paper) |
ISBN 9780190600006 (epub)
Subjects: LCSH: Economic development—Brazil. | Brazil—Economic conditions. |
Brazil—Economic policy.
Classi�cation: LCC HC187 .O975 2018 | DDC 330.981—dc23
LC record available at https://lccn.loc.gov/2017057398
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Printed by Sheridan Books, Inc., United States of America
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The Oxford Handbook of the Brazilian Economy
Edmund Amann (ed.) et al.
https://doi.org/10.1093/oxfordhb/9780190499983.001.0001
Published: 2018 Online ISBN: 9780190600013 Print ISBN: 9780190499983
FRONT MATTER
Acknowledgments
Published: August 2018
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IN March 2016, during the early stages of this volume’s preparation, one of its editors, Professor Werner ca
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Baer, sadly passed away. For generations of scholars working on the political economy of Latin American m
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and Brazilian development, Werner was a truly inspiring �gure. From his early work on industrialization .o
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through to his contemporary research on socially inclusive growth, Werner not only kept pace with, but also .c
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set the agenda for research into an exciting, but surprisingly little understood, region. His work appeared in /e
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scores of highly cited journal articles, as well as several notable volumes including The Brazilian Economy, ite
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which eventually ran to six editions. Besides his published output, Werner, during his career at Vanderbilt -v
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University and then at the University of Illinois, mentored and encouraged dozens of younger colleagues m
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and students, instilling in them an enthusiasm and knowledge that was to prove the foundation for /2
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numerous successful careers. Werner’s PhD students include a former governor of the Brazilian Central 57
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Bank, a former president of Ecuador, and several leading academics in Brazil and throughout the region. ha
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Werner was tremendously enthusiastic about this Handbook, and it proudly features some of his last te
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published work. It was certainly a privilege for us to see this volume through to conclusion. 11
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In developing the chapters for this volume, the editors in July 2016 organized a workshop in São Paulo. This 2
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drew on the participation of contributors from Brazil, the United States, and Europe. We are grateful to the by
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UK Department for International Development (DFID), the University of Manchester, and the University of n
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São Paulo for the funding and administrative support that made this valuable event possible. Finally, we are rs
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extremely grateful to Christopher Lyon, from the University of Manchester’s Global Development Institute, t i O
for his assistance in copyediting and formatting the chapters. s
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p. x Edmund Amann and Carlos Azzoni, July 2017 er o
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The Oxford Handbook of the Brazilian Economy
Edmund Amann (ed.) et al.
https://doi.org/10.1093/oxfordhb/9780190499983.001.0001
Published: 2018 Online ISBN: 9780190600013 Print ISBN: 9780190499983
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Contributors  a
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Eliseu Alves, former President and current Presidential Advisor, Embrapa, Brazilian Ministry of /e
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Agriculture ite
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Edmund Amann, Professor of Brazilian Studies, Institute of History, Leiden University lu
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Jorge Arbache, Secretary for International A�airs, Brazilian Ministry of Planning and Professor of 79
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Economics, Department of Economics, University of Brasília /c
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Carlos R. Azzoni, Professor of Economics, Faculty of Economics and Administration, University of São te
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Paulo 11
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Carlos José Caetano Bacha, Professor of Economics, University of São Paulo at Piracicaba-Esalq 3
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Werner Baer, Professor of Economics, Department of Economics, University of Illinois at Urbana- U
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Champaign e
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Armando Barrientos, Professor of Poverty and Social Justice, Global Development Institute, University of t i O
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Manchester lo
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Alexandre Rands Barros, President, Datamétrica, Recife r o
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Luiz Carlos Bresser-Perreira, former Brazilian Minister of Finance and Professor of Economics, D
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Fundação Getúlio Vargas–São Paulo e
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Antonio Carlos Coehlo Campino, Professor of Economics, Faculty of Economics and Administration, r 2
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University of São Paulo 2
Lindsey Carson, Adjunct Lecturer in International Development, SAIS, Johns Hopkins University
Claudio de Moura Castro, former Professor of Economics, Catholic University of Rio de Janeiro
Luiz Ricardo Cavalcante, Economist, Brazilian Senate
Ariaster B. Chimeli, Professor of Economics, Faculty of Economics and Administration, University of São
Paulo
Donald V. Coes, former Professor of Economics, Department of Economics, University of New Mexico
p. xii Gustavo S. Cortes, PhD Candidate, Department of Economics, University of Illinois at Urbana-
Champaign
Maria Dolores Montoya Diaz, Professor of Economics, Faculty of Economics and Administration,
University of São Paulo
Philippe Faucher, Associate Professor, Department of Political Science, University of Montreal
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José Goldemberg, Professor, Institute of Physics, University of São Paulo ow
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Eduardo A. Haddad, Professor of Economics, Faculty of Economics and Administration, University of São d
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Paulo fro
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Anthony Hall, Professor of Social Policy, London School of Economics ttp
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Rodolfo Ho�mann, Professor of Economics, Faculty of Economics and Administration, University of São c
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Paulo, Esalq; and University of Campinas em
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Fernando de Holanda Barbosa, Professor Brazilian School of Economics and Finance (EPGE) Fundação up
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Getúlio Vargas, Rio de Janeiro o
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Celia Lessa Kerstenetzky, Professor of Economics, Department of Economics, Fluminense Federal ite
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University -vo
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Joseph L. Love, Professor Emeritus of History, Department of History, University of Illinois /2
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Danielle Carusi Machado, Adjunct Professor of Economics, Department of Economics, Fluminense /c
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Renato L. Marcondes, Associate Professor of Economics, Faculty of Economics and Administration, 11
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Geraldo B. Martha Jr., Researcher, Secretariat of International Relations, Embrapa, Brazilian Ministry of by
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Paulo César Morceiro, Researcher, NEREUS, University of São Paulo ite
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Charles C. Mueller, Professor Emeritus, Department of Economics, University of Brasilia lo
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Armando Castelar Pinheiro, Coordinator of Applied Economics, IBRE-FGV, Rio de Janeiro and Professor r o
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Camila Pires-Alves, Federal University of Rio de Janeiro e
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Luis Carlos D. Prado, Federal University of Rio de Janeiro r 2
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Mariana Mota Prado, Associate Dean Graduate Studies, Faculty of Law, University of Toronto
p. xiii Eduardo Pontual Ribeiro, Professor of Economics, Institute of Economics, Federal University of Rio de
Janeiro
Sarquis J. B. Sarquis, Minister Counsellor, Embassy of Brazil, Paris, and Associate Researcher, London
School of Economics
Flavia Mori Sarti, Assistant Professor, School of Arts, Sciences and Humanities, University of São Paulo
Simão Davi Silber, Professor of Economics, Faculty of Economics and Administration, University of São
Paulo
Peri Silva, Associate Professor, Department of Economics, Kansas State University
Breno Augusto da Silva e Silva, Professor, Department of Economics, Fluminense Federal University
Thomas Trebat, Director, Columbia University Rio Global Center
Flávio Rabelo Versiani, Professor of Economics, Department of Economics, University of Brasília
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André Villela, Researcher, Fundação Getulio Vargas–EPGE, Rio de Janeiro d
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The Oxford Handbook of the Brazilian Economy
Edmund Amann (ed.) et al.
https://doi.org/10.1093/oxfordhb/9780190499983.001.0001
Published: 2018 Online ISBN: 9780190600013 Print ISBN: 9780190499983
CHAPTER
1 Introduction 
Edmund Amann, Carlos R. Azzoni
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This chapter provides context and background for the Handbook. Brazil’s economic development ca
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process and challenges are discussed and analyzed in long-term perspective. Referring to subsequent m
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chapters, the introduction highlights the structural obstacles that will need to be overcome if Brazil is .o
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to embark on a path of sustainable and inclusive growth. These include, but are not limited to, issues .c
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surrounding productivity growth, regional inequality, investment in education and infrastructure, a /e
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commodities-centered export sector, and �scal constraints. Although these challenges are serious ite
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they should not obscure the fact that Brazil’s economy has made important strides forward in recent -v
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years. In particular, there have been real achievements relating to poverty alleviation and price m
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Keywords: Brazil, economic development, productivity, commodities, poverty, price stability, growth p
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Subject: Urban, Rural, and Regional Economics, Economics r/21
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BRAZIL’S rise to global prominence over the past 30 years comprises several dimensions. These include an rs
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increasingly activist posture on the world diplomatic stage, an in�uential sporting and artistic culture, and t i O
a pivotal role in the international struggle to preserve biodiversity and �ght climate change. However, at the slo
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core of Brazil’s emergence as a major global player lies its vast and diverse economy. According to World s
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Bank estimates, in 2016 Brazil possessed the seventh-largest economy on earth, the largest economy in r o
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Latin America, and the third-largest economy among the BRICS (Brazil, Russia, India, China, and South 1
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Africa) group of major emerging-market nations. Re�ecting on the sheer scale of the Brazilian economy ec
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alone cannot do full justice to its global signi�cance. This signi�cance arises as much from the policy
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lessons that Brazil can o�er to the rest of the world as to the country’s pivotal role in the international r 2
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economy. 22
In terms of Brazil’s direct role in the global economy, it is hard to overestimate the country’s importance. As
the process of globalization has unfolded over the past three decades, Brazil has become one of the major
destinations for inward foreign direct investment (IFDI). Brazil stands alongside Mexico as the most
important recipient of such �ows in Latin America. The surge in IFDI has partly resulted from an ambitious
privatization program that, during the 1990s, was the world’s largest. The same forces of economic
liberalization that have propelled IFDI have also encouraged Brazilian enterprises to internationalize. As a
result, Brazil’s stock of foreign corporate assets has increased by more than a factor of 10 since the early
1990s.
Important though investment �ows are, it is probably Brazil’s role in international production chains that
has attracted the most attention. Having long enjoyed a signi�cant comparative advantage in the
production of natural resource–based (NRB) products, Brazil has taken advantage of the global growth in
trade, in particular the rise of China, to propel its exports. As a result of this process, exports of such
products as soy, iron ore, and meat have rapidly accelerated to the point where Brazil is the world’s leading
p. 2 exporter of these and related product categories. The Brazilian export success story is not con�ned to
commodities; Brazil is now the world’s largest exporter of regional jet aircraft and is South America’s
largest automotive products exporter.
As Brazil’s economy expanded through the 1990s and the �rst decade of this millennium, so did the
country’s role in international cooperation and governance. Having played a central role in the creation of a
regional customs union, Mercosul, in the early 1990s, by the 2000s Brazil’s economic governance role had
become truly global. During this period it cofounded the BRIC group, jointly launched the Shanghai-based
New Development Bank, and was admitted to the G20 group of the World’s largest economies.
As indicated previously, the global in�uence of the Brazilian economy also stems from the policy lessons D
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that other countries have drawn. Up until the early 2010s, at least, Brazil became renowned for its socially n
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inclusive development model (Amann and Barrientos 2016). The latter ensured that the fruits of rapid ad
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export-fueled growth �ltered through to the poor, resulting in poverty alleviation and a more even fro
distribution of income. Such progress was achieved through a combination of conditional cash transfer m
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(CCT) programs (notably the Bolsa Familía), macroeconomic stabilization, and buoyant labor markets. ttp
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Learning from the Brazilian experience, a number of countries, notably in Sub-Saharan Africa, began ://a
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implementing CCT programs. The sense that Brazil serves as a laboratory for the testing of new economic d
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ideas has roots that stretch back a long way beyond the creation of CCT programs in the �rst decade of the ic
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2000s. In the 1950s and 1960s, Brazil was a pioneer in implementing the insights of the structuralist u
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development economists. This gave rise to the rapid industrialization of the economy and a turning away o
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from Brazil’s traditional focus on NRB product exports. Three decades later and facing hyperin�ation and /e
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stagnating output, Brazil once again proved willing to put new economic ideas to the test, from ited
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neostructuralism (as in the Bresser anti-in�ation plan) to elements of rational expectations theory (in the olu
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design of elements of the Real Plan). In this sense, and irrespective of its absolute size, Brazil has long e
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served as a focus of interest for economists from around the world. 79
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Although Brazil now clearly ranks among the world’s leading economies, it is equally obvious that it ha
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remains beset with serious di�culties, many of which, but by no means all, are of its own making. After te
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more than a decade of rapid expansion, Brazil entered a period of economic slowdown and recession in 2012, 11
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from which it only appeared to be gradually emerging �ve years later. As growth vanished and the economy 6
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contracted, unemployment rose, placing the progress made in alleviating poverty in severe jeopardy. At the 3
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same time, rising prices started eating away at living standards. Eventually, though, the authorities U
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managed to contain price pressures; certainly there was no return to the hyperin�ation typical of the 1980s. iv
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What factors resulted in this reversal of fortune? The chapters that follow this introduction will, of course, t i O
give a much more detailed account of the issues involved. However, in essence the di�culties stem from s
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unaddressed structural constraints, in particular low productivity growth, a failure to su�ciently diversify us
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p. 3 away from NRB production, and chronic underinvestment in infrastructure and education. Once global r o
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demand for commodities began to slacken (which occurred shortly after the global �nancial crisis of 2008– 01
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2009), the Brazilian economy was left badly exposed as a critical source of demand for its products fell e
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away. Had Brazil enjoyed a more diversi�ed economy and a more responsive supply side, it would have been m
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able to cope with the external commodities demand shock more adroitly. As it was, the economy proved r 2
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incapable of responding rapidly and positively to changing global circumstances. 2
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Adding to the di�culties and impeding recovery has been an unprecedented political crisis. This crisis,
centred on the so-called Lava Jato (Car Wash) scandal, has focused on the diversion of funds intended for
public sector contracts to political parties. In an illustration of institutional robustness, investigations have
been rigorously prosecuted by the federal judicial authorities, resulting in the imprisonment of leading
political and business �gures. A parallel scandal centring on the illegal manipulation of the public sector
accounts saw the impeachment of President Rouse� in mid-2016.
As regards the subject matter of this volume, Brazil’s economy, the corruption scandals have two important
rami�cations. First and most obviously, the political and regulatory uncertainty that they have brought
have created an adverse environment for public- and private-sector investment. They have also de�ected
policymakers from the pursuit of reforms. Taken together, these developments have done little to accelerate
the exit of Brazil’s economy from recession. Second, and perhaps more profoundly, the wave of scandals has
thrown a harsh light on the nature of state-business relations. As the investigations have unfolded since
2013, the enormous scale of the clientalism and graft surrounding the interaction of the state and Brazil’s
leading enterprises has become abundantly clear. This development, at the very least, calls into question the
continued sustainability of a critical component of Brazil’s development strategy over the years: the close
articulation between state and business. As will be argued in subsequent chapters, the latter was central to
the industrialization process and has remained �rmly embedded in Brazil’s political economy despite
economic liberalization and opening from the late 1980s onward (Alston et al. 2016, Chapter 2).
Summing up our initial discussion, Brazil, then, remains a globally vital but troubled economy. Against this
background, the purpose of this volume is to o�er real insight into the Brazilian economy’s development in
the contemporary context, understanding its most salient characteristics and analyzing its structural
features across various dimensions. At a more granular level, this volume will set out to accomplish the
following tasks. First, it will seek to provide an understanding of the economy’s evolution over time and the
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connection of its current characteristics to this evolution. Second, it will attempt to portray and explain o
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Brazil’s broader place in the global economy and consider the ways in which this role has changed and is lo
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likely to change over coming years. Third, and very much re�ecting contemporary concerns over its de
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performance, the volume aims to provide an understanding not only of how one of the world’s key fro
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economies has developed and transformed itself, but also of the ways in which this process has yet to be h
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completed. This will involve understanding the current challenges facing the Brazilian economy and the s
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kinds of issues that need to be tackled for these to be addressed successfully. c
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p. 4 To accomplish these objectives, the structure of the volume is composed of seven parts. Part I examines the ic
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evolution of the Brazilian economy over time, re�ecting on such relevant issues as the colonial era, u
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industrialization, and the emergence of a Brazilian tradition of economic thought. Part II then examines o
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Brazil’s macroeconomic policy and institutions, focusing in particular on the evolution of macroeconomic /e
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policy approaches and public and private banking institutions. Next, in Part III, the focus becomes more ited
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microeconomic, with the emphasis placed on the supply-side characteristics of the Brazilian economy. olu
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Thus, this section contains chapters analyzing the agricultural sector, industry, energy, and crucially, the e
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infrastructure and productivity gaps. 79
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Part IV recognizes that an important—though often overlooked—dimension of Brazil’s economy stems ha
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from the country’s vast territorial dimensions and regional diversity, whether in terms of sectoral focus, te
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income, or export orientation. Against this background, Part IV contains chapters on the regional 11
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distribution of economic activities and the Northeast, a region often characterized as Brazil’s poorest and 6
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least developed. Next, Part V examines the critical socioeconomic dimension. As previously indicated, Brazil 3
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has recently experienced a signi�cant period of rapid, pro-poor growth. Part V examines the background to U
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this achievement and its future sustainability. Chapters in this section focus on such critical issues as iv
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human capital formation, the role of conditional cash transfer programs, health, and environmental issues. ite
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Part VI then moves on to consider the role of Brazil in the global economy. It features chapters on trade, s
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foreign direct investment, and Brazil’s involvement in the BRICS group of major emerging economies. us
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Finally, Part VII considers the changing role of the state. The evolution of business government relations r o
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forms an important focal point of this section, with chapters on privatization, competition policy, and 01
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corruption. e
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To provide a broader context for the detailed analysis embedded in these sections, the remainder of this e
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introductory chapter considers the recent development of Brazil’s economy, focusing on what we argue to 0
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be its incomplete transition and associated challenges.