Industrial Policy in Brazil: a Framework

We presume that the objectives of industrial policy in Brazil are determined in the current context by the general philosophy of the Plano Real.1 That is, the creation of an efficient and progressive economy, based on free markets and an economy open to international trade. Such a vision for the economy might be adopted solely for ideological reasons, but might also be thought to be the best way to achieve long term growth and social objectives. Alternative objectives might be the growth of the economy in itself without concern for efficiency, as in the economic plans of the Geisel era, or a desire to protect and create employment. The latter objective is certainly of continuing importance for policy, especially where rapid adjustment of a sector in response to trade or technology shocks generates major losses of employment which are regionally or sectorally concentrated. The question of sectoral adjustment will be discussed below. The general question of employment does not fall within the ambit of industrial policy within the vision of the Plano Real, though it can be argued that the best way to create employment is to ensure that the economy is efficient and can compete internationally. Rather, the key to employment lies in labour market policies, and policies for training, education and health. These areas are not generally recognized as part of industrial policy and will not be considered in this paper, though they are clearly very important. Similarly, questions of infrastructure will not be considered here, though their importance in Brazil is well known