Published on August 30, 2007
How India and Brazil have managed economic openness since the early 1990s: How India and Brazil have managed economic openness since the early 1990s by Jørgen Dige Pedersen DIIS, May 8, 2006 Introduction: What are the challenges?: Introduction: What are the challenges? Globalization = epochal change? Threat of marginalization of developing countries Threat of eroding the basis for state-directed developmental efforts Focus on ’capable’ developing states (India, Brazil): may provide clues to what options other developing states have Both ’opened up’ in 1990/1991 The specific challenges: The specific challenges The emergence of a new society wide techno-economic paradigm: knowledge-based, post-Fordist, ICT focused etc. The increasingly important and volatile financial flows The establishment of new international rules of the game for international economic exchange/a new regulatory framework Today: only focus on first and third challenge Brazil since 1990: Brazil since 1990 Dramatic liberalization: reduction of import tariffs Privatization of state enterprises Liberal rules for FDI, end of informatics policy Focus on ’competitiveness’ Technological support programmes (modest) Trade policies:: Trade policies: Many agendas: WTO, Mercosur, FTAA, EU WTO: alliance with India before 1990, renewed after 1995 Stronger domestic links in making trade policies – industry and academia ’Commercial defense’ mechanisms Still: Itamaraty dominance Results:: Figure 4-1. Brazil. Annual growth of GDP, 1970-2004. Results: De-nationalization: Table 4-3. Distribution of net sales of non-financial companies in Brazil. Note: Figures in parenthesis indicate number of companies included in the surveys. Source: 'Quem e quem na economia brasileira', Visão, agosto 1986 andamp; agosto 1990; 'Balanço Anual', Gazeta Mercantil, julho 2001. foreign take-over of privatized state companies computer sector again foreign dominated autoindustry + auto parts foreign dominated export sector foreign dominated De-nationalization Global position:: Global position: maintaining the position in global trade (= 1990 position, less than 1980 position) stronger regional ties (but declining recently) movement towards primary products/semi-manufactured products a few ’success-stories, cf. later India since 1991: India since 1991 reversal of ’license, permit, quota Raj’ (BoP crisis) liberal investment regime gradual opening for FDI, less so for short-term flows reductions in tariffs withdrawal of state reserved areas technological support system (timid!) Import of technology But: gradual implementation, not privatization, no labour reforms, strong state directions Trade policies:: Trade policies: Very little regional integration (SAARC). WTO only significant agenda Alliance with Brazil during Uruguay Round. Again from 1995- Strengthened local capacity for trade negotiations (esp. after 1998) Strong links to domestic industry etc Academic networks used Trade defensive mechanisms used increasingly Results: Results Figure 5-1. India. Annual growth of Gross Domestic Product, 1970-71 to 2000-01. Maintaining local control:: Maintaining local control: Table 5-3. Distribution by ownership of corporate sector assets. Source: Centre for Monitoring the Indian Economy, Corporate Sector, April 1998 (www.cmie.com, accessed 12/5 1999). Own calculation. The sample comprises more than 7000 companies. No increase in foreign control Decrease of state, increase of private sector Global position:: Global position: Increase in global trade (but still small) increase in outward orientation mostly manufactured exports outstanding success in software etc. companies investing strongly abroad India-Brazil: India-Brazil India advancing, Brazil maintaining position India based on national capital, Brazil foreign dominated Both have avoided marginalization Both are trying to advance technologically (ICT, biotech etc.) – both have done too little Both have ’successes’: Slide15: Figure 6-1. High technology exports, 1993-2004. Source: Reserve Bank of India (net export of software); Banco Central do Brasil (gross export sales) Explaining the outcomes: Explaining the outcomes Structural constraints (esp. debt crisis and vulnerability) ’gradualism’(India) vs. ’shock therapy (Brazil) Strong state (India) vs. weakened state (Brazil) ’developmental state capacity’/embedded autonomy argument …….and probably many more.. To illustrate:: To illustrate: Brazil India: India The embedded autonomy argument:: The embedded autonomy argument: Both countries have see a restructuring of state-business relations during 1990s: New organizations and new outlook among domestic industrialists: a new industry association in India (CII), new ’rebel’ organizations in Brazil + new roles to traditional organizations (CNI, FIESP renewal) Closer links to bureaucrats an policy-makers: parliamentary channels and bureaucratic channels Bureaucrats seek advice from industrialists in trade and other matters (even Itamarati in Brazil) + a new element (compatible with new paradigm thinking): Closer links to experts and academic research institutions: a new form of (post-Fordist) developmental state?