International Integration of the Brazilian Economy

International economic integration is the outcome of an international trade process by which national resources become more and more internationally mobile while national economies become increasingly interdependent through the mutually beneficial voluntary exchange of goods and services undertaken by national and multinational enterprises.

This chapter analyzes Brazil’s economic growth in the 1990s and 2000s, pointing to interactions between demand and supply. The Brazilian growth pattern over this period has been mainly based on consumption and low investment levels. Important changes have been observed, however, toward a reduction of external vulnerability and a growing reliance on domestic market as a source of demand. Domestic industry, in turn, has not followed this movement and a growing mismatch between domestic demand and supply challenges a sustained growth recovery, particularly in the face of the international crisis.

This chapter aims to analyze the competitiveness of Brazilian manufacturing both in the international and the domestic markets. In fact, the performance of Brazilian manufacturing in the period 2000–2013 has been comprehensively analyzed, especially in what concerns the composition of exports and their capacity to promote job creation and income increase. But a thorough analysis of trade and production data reveals that the competitiveness of Brazilian manufacturing in the domestic market is significantly different from that in the international market. In the international arena, it is worth mentioning the tendency toward primary goods exports and the weak insertion of Brazilian manufacturing into global value chains. Concerning the domestic market, primary goods are of less importance in total production, and their composition is considerably different from exports. The methodology for analyzing the competitiveness in the international market included estimates of structural indicators and indicators related to the country’s insertion into global value chains, based on data extracted from the World Input-Output Database (WIOD). The declining trend of manufacturing goods in global trade and the evolution of relative international prices are considered in our analysis. The methodology for analyzing the competitiveness in the domestic market includes the estimation of import penetration ratio and the share of import content in the intermediate and final production, based on data extracted from the Brazilian Input-Output Table. The study concludes that the participation of Brazil in global value chains is comparable, for manufacturing exports, to those of China and Mexico. Concerning the domestic market, imports penetration rose significantly in recent years and the country’s dependence on imported goods increased.

This chapter suggests that low innovation performance of Brazilian firms is one of the main reasons for productivity stagnation and technological regression of the country’s export basket in recent years. Although the last decade was undoubtedly prosperous for Brazil in terms of income and exports growth, that process was strongly determined by the 2000’s commodities boom. When compared to OECD and more dynamic developing countries, Brazil presented inferior performance in innovation inputs and outputs indicators, such as business expenditures in R&D, patents, and introduction of new products in the market. We assert that there are important government initiatives in place to face this issue and support private firms’ innovation activities. However, that effort is still insufficient and threatened by the institutional weakness of the national innovation system. The recent reduction in subsidized credit and grants for business expenditures in R&D exemplifies the problem.

We show that from 1996 to 2010, Brazil had negative trade balances in its high-tech goods industries (i.e., Brazil was a debtor with regard to goods that feature high levels of technological intensity). On the other hand, the country presented positive trade balances in low-tech goods. Thus, although the country has increased its economic openness, Brazil’s exportation of industrial goods that feature high levels of technological content has been scarce and fragile. Moreover, Brazil relies on a remarkable specialization in exports of low and medium–low-tech goods. In international markets, both importing technological goods and developing domestic technological capabilities are fundamental to the creation of dynamic competitive advantages; through the use of exploratory data, we show that Brazil is lagging behind, since it has maintained certain export dynamics in terms of commodities; however, it has moved backward in terms of being an exporter of manufactured goods—especially of high-tech ones.

This chapter analyzes Latin American performance in 2003–2013, to evaluate two ideas: whether the first decade of the 2000s constituted “Golden Years” and whether the 2010s were likely to be a “Latin American Decade.” We compare the region’s 2003–2013 performance with that in the 1980s and 1990s, evaluate how it performed in the sub-periods 2003–2007 and 2008–2013, and compare the region’s 2003–2013 indicators with those of other developing regions during the same period. The chapter concludes that the period 2003–2013 was a golden decade only when compared with the region’s own performance during the previous two decades but not when compared to other developing regions. Furthermore, the “Golden Years” were 2003–2007, half a decade. Therefore, it is concluded that there is no indication of a “Latin American Decade” in the past or in the forthcoming periods.

This chapter aims to analyze the boosting economic relationship between Brazil and China at the beginning of the twenty-first century and identify the prospects for the near future based on the ongoing structural economic and social changes that are currently happening in China. For that, it discusses the changes that the Chinese economy passed in the recent decades and also its most recent trends, characterized by a new era of slower growth, the so-called Chinese “new normal”. The main conclusions are the following: (1) the rapid growth of China in the last few decades profoundly changed the relationship between this nation and Brazil, (2) the new economic perspectives for China can represent a watershed in this relationship, and (3) it is necessary that Brazil prepares itself for this new phase to strengthen the partnership with the Asian country.

This chapter seeks to verify empirically whether the Brazilian growth over the last three decades is balance-of-payments constrained or not. In order to accomplish such a task, we shall base our theoretical analysis on the Balance-of-Payments Constrained Growth Model (BPC) first developed by Thirlwall in 1979. Thirlwall’s Law claims that the home country growth compatible with the current account balance is essentially determined by its exports growth rate and its income elasticity of demand for imports ratio. Provided a constant elasticities ratio over time, in the end what we really want to evaluate is if there is any long-term relation between the Brazilian growth rate and its exports growth rate during the given period. Wherefore, we will test the cointegration hypothesis, that is, the long-run relation aforementioned, through both Johansen and Engle-Granger techniques.

More than half of global trade consists of trade in intermediate goods and services that are incorporated at various stages in the production process of products and services for final consumption. These processes, which can be formed by sequential chains or complex networks, are referred to as Global Value Chains (GVCs). Despite its increasing global importance, Brazil still has a very low participation in the GVCs. This chapter discusses the external insertion of the Brazilian economy to understand the determinants of its currently small involvement in that system. For that, the chapter discusses the external insertion of the Brazilian economy in historical perspective, examine the participation of Brazil—compared to other emerging and developed economies—in the GVCs, and analyzes what prevents Brazil to participate more actively in GVCs. The chapter concludes that by falling behind during the times in which the first GVCs were being formed, Brazil now finds it more difficult to enter the global markets. The country should seek to coordinate supply chains in Latin America to be able to be competitive and participate more actively—and in more high-value-added parts—in the GVCs.

This chapter aims to discuss the role played by Southern Common Market (Mercosur) in the Southern Cone, especially in terms of the Brazilian economy. In order to do this, its quantitative failure and its qualitative success are analyzed. While the bloc has experienced a contraction of its trade flows, it has remained as a forum of exchange of goods with considerable added value, leading to the conclusion that Mercosur’s great potential is underexploited because of the lack of political will that avoids the coordination of economic policies between members.

International economic integration of national economies establishes value supply chains that create exploitable economic dependencies. National economies can benefit from their exploitation of benefits from their supply of exports and their demand for imports. Descriptive statistics are used to present the standing of Brazil, in terms of its international economic integration, compared to that of emerging and advanced economies. The views of unrestricted trade with liberal exploitable economic dependencies and restricted trade in an economic interdependence with reciprocity and justice are discussed. Implications for Brazil and the global economy from Brazil’s international integration are derived.