how india and brazil have managed economic openness

8/8/2019 How India and Brazil Have Managed Economic Openness

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How India and Brazil

have managed economic

openness since the early1990s

by

Jrgen Dige Pedersen

DIIS, May 8, 2006


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Introduction: What are

the challenges?

Globalization = epochal change?

Threat of marginalization ofdeveloping 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


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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


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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)


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Trade policies:

Many agendas: WTO,

Mercosur, FTAA, EU

WTO: alliance with Indiabefore 1990, renewed after

1995

Stronger domestic links in

making trade policies industryand academia

Commercial defense

mechanisms

Still: Itamaraty dominance


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gure 4-1. Brazil. Annual growth of GDP, 1970-2004.

-6

-4

-2

0

2

4

6

8

10

12

14

16

1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004

8.6%

1.6%

2.6%

Results:


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able 4-3. Distribution of net sales of non-financial companies in Brazil.

1983 1989 2000

% % %

ivate national companies 53.4 (7547) 59.1

(6674) 50.2 (6441)

ate-owned companies 26.4 (407) 23.

8

(306) 15.2 (340)

oreign companies 20.2 (526) 17.

1

(500) 34.6 (756)

Figures in parenthesis indicate number of companies included in the surveys.

e: "Quem e quem na economia brasileira", Viso, agosto 1986 & agosto 1990; "Balano 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


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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


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India since 1991

reversal of license, permit, quotaRaj (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


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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


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Results

4

6

8

10

12

nt

Figure 5-1. India. Annual growth of Gross Domestic

Product, 1970-71 to 2000-01.


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Maintaining local control:

otal corporate sector 100.0 100.0 100.0

ndian private sector 46.0 86.2 57.2 88.4 64.3 88.6

op 50 Indian business houses 26.2 49.1 30.5 47.2 33.8 46.7

er cent share 1991 1994 1997

Government sector 46.6 35.3 27.5

Private sector 53.4 100.0 64.7 100.0 72.5 100.0

oreign private sector 7.3 13.8 7.5 11.6 8.3 11.4

able 5-3. Distribution by ownership of corporate sector

ssets.

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
http://www.cmie.com/http://www.cmie.com/http://www.cmie.com/


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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


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India-Brazil

India advancing, Brazil

maintaining position India based on national capital,

Brazil foreign dominated

Both have avoidedmarginalization

Both are trying to advance

technologically (ICT, biotechetc.) both have done too little

Both have successes:


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10,000

12,000

14,000

16,000

18,000

$million

Figure 6-1. High technology exports, 1993-2004.

Source: Reserve Bank of India (net export of software); Banco Central do Brasil (gross export sales)


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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..


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To illustrate:Brazil

0

1 0 0 0 0

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3 0 0 0 0

4 0 0 0 0

5 0 0 0 0

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7 0 0 0 0

1970

1971

1972

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1980

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1983

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1992

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1996

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1998

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Mio.U

S

S h o rt t e rm d e b tIn te rn a ti o n a l re


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India

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

1970

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1984

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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?

how india and brazil have managed economic openness

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