Emerging Markets: Brazils quest for Comparative advantage
Why is Brazil’s agriculture so competitive? Why do its manufacturing industries lack competitiveness?
Brazil is one of the world’s leading countries in agriculture. It is a significant player in such products as beef, poultry, soybeans, sugar and coffee – in which the country is top producer, exporter or even both, according to the case. What is more, Brazil provides more than half of world-wide ethanol export.
The main reasons for such a high Brazil’s agriculture competitiveness are climate conditions: lots of sunshine, soil and water. What is more, Brazil possesses the biggest territory in the South America which provides prospects for further development.
Brazil’s manufacturing do has a lack of competitiveness. The main reasons for this are high operating costs comparing to most developed countries. This was caused by the so-called ‘Brazil cost’ followed by increase prices of energy, raw materials and decreased wages, according to the case.
Why have Brazil’s governments in both the 20th and 21st century been eager to develop world class manufacturing?
In the early 20th century most of Brazil’s export consisted of agriculture products like coffee or sugar. However after the crisis of in 1930s when the prices for such goods fell sharply, the Brazil’s economy had to be reorganized. The government placed its stake on manufacturing and industrialization. After World War II, the country introduced tax duties on imported goods and restrictions on their purchase. The aim was to protect local producers from foreign competition.
According to the Brazil Embassy in New Zealand (n.d.), “The industrialization process from the 1950's to the 1970's led to the expansion of important sectors of the economy such as the automobile industry, petrochemicals, and steel, as well as to the initiation and completion of large infrastructure projects.” Industry has developed more than ever before. State willing to help private owners, dared to open a small business and built itself steel mills and power plants, produces oil and iron ore.
The current government under the rule of Dilma Rousseff is still convinced that building strong manufacturing industry is the high-priority mission for Brazil’s economy development. As a result their main efforts are concentrated on this aim.
How can Brazil shift some of its resources from uncompetitive industries to competitive industries?
In order to shift resources from uncompetitive industries to competitive ones, first of all, Brazil should define them. For instance, those industries which are protected by foreign tariffs are obviously uncompetitive whereas agriculture sector, on the other hand, particularly producing ethanol is highly competitive. Thus, the government may shift resource from the former ones to the latter one. This will eventually lead to more efficient resources employment and will end up with uncompetitive manufactures and leaving only competitive ones.
ON ETHICS: While president Rousseff’s critics accuse her of ignoring Brazil’s lack of comparative advantage in manufacturing her supporters argue that her policies force Brazil to reduce its dependence on foreign made manufacturing goods. IF you were to participate in this debate which side would you be on?
The government is trying to develop manufacturing facing such problems as high operating costs, high prices for energy and raw materials. On the other hand the phenomenal success of Brazil’s agriculture products is one of the reasons of 38% real appreciation against dollar since 2009. This is a real fact of what sector brings real benefit to the Brazilian economy.
References
Emerging Markets: Brazils quest for Comparative advantage. (n.d.).
Brazilian Economy. (n.d.). Retrieved December 20, 2014, from http://www.brazil.org.nz/page/brazilian-economy.aspx
