Fernando Sarti

COSTS AND PARADOXES OF MARKET CREATION: EVIDENCE AND ARGUMENT FROM BRAZIL

In the early 1990s, the Brazilian car industry gradually began to be regarded, in both Brazil and abroad, as a “promising emerging market”. Heavy cross subsidy and subvention were involved in the attempt to realise what was perceived as a “market opportunity” for the Brazilian car industry. Massive income transfers occurred among consumers, producers, workers and government in Brazil, as well as between local actors and companies and, rentiers abroad. In short, the process of market creation involved heavy social costs. This paper maps several dimensions of the process of market creation as well as the social costs and the paradoxes involved. It raises issues of policy design for market creation, particularly in developing countries, and underlines the need to include market creation mechanisms in the research agenda of the automobile industry.

MERCOSUR: Interaction between Governments and Producers and the Sustainability of the Regional Automobile Industry

In the years following the Second World War, South American governments implemented development policies aimed at fostering a process of rapid industrialization. During the 1950s, countries like Argentina and Brazil, which had relatively large urban middle-income classes, targeted the automobile industry to lead the process of import substitution of durable goods. It was expected that high tariff and non-tariff barriers together with a set of fiscal incentives would result in the local production of parts and components for locally assembled vehicles.

Brazilian Industry: Recent Performance and Future Challenges

The Brazilian industry has shown signs of recovery in terms of generation of employment and added value at the beginning of the twenty-first century, in sharp contrast with the stagnation observed in the last two decades of the twentieth century. But after the global crisis of 2007/2008, it has experienced difficulties in maintaining its momentum faced with at the international level. This chapter seeks to present the recent performance of Brazilian manufacturing industry, emphasizing the difficulties encountered in the post-crisis period, given the fierce competition at the international scenario, which resulted in rapid growth of imports in the internal market and difficulty to expand exports. An overview of the evolution of Brazilian industry is presented in terms of production, investments, international trade, and innovation. This chapter also seeks to highlight the main challenges ahead for the Brazilian manufacturing industry to recover its dynamism and contribution to Brazil’s economic development.