Mariano Francisco Laplane

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.

Stagnation, liberalization and foreign investment in Latin America

Trade and investment policies reform that deepened integration in the world markets implemented by most Latin American countries in the last two decades have failed to deliver high and sustained growth rates as expected. Multilateral institutions, which strongly supported such reforms, now suggest that further market friendly changes are needed to produce the expected results. Drawing on evidence from Brazil, this paper argues that the neoliberal model that impregnated policy reforms in Latin America neglected a crucial political dimension, that is, the role of State in the planning and fostering of development. By weakening national states, liberalization, not only increased vulnerability to external shocks but also stimulated conflict in societies with profound social divisions and fragile institutions. Development requires a dense network of both public and private institutions managing issues related to the asymmetries in access to markets, to capital and to technology. Building such institutions is the critical part of a new agenda for development.