6. International Trade in Goods by Technological Intensity: The Brazilian Case, 1996–2010

This is due to the very nature of the import substitution industrialization (ISI) process. The internal development process originates from external constraints that manifest primarily through the expansion and diversification of industrial production capacity (Tavares 1981). According to Tavares (1981, p. 41), “the dynamics of the development process by import substitution route can be attributed, in short, to a series of responses to successive challenges posed by strangulation of the external sector, through which the economy is becoming quantitatively less dependent from abroad and changing qualitatively the nature of this dependence.” The ISI model implies the creation of isolated branches that have undergone consistent changes in scale and technology, in the presence of highly protected markets and heavily regulated international transactions. The current policy generally induces passive relationships among these branches (with their supply sources of capital goods, inputs, and technologies), with little coordination with the domestic business sector (Vera-Vassallo 1996).

Because “innovation system” is a diffuse and fluid concept, one can find several definitions for it. One characterizes it as an institutional arrangement that involves various constituent elements that interact and are linked to each other. These include (1) firms with research and development (R&D) laboratories and which comprise cooperation and interaction networks, (2) universities and research institutes, (3) educational institutions, (4) a finance system that can support the innovation investment, (5) legal systems, (6) market mechanisms and non-market selection, (7) governments, and (8) coordination mechanisms and institutions (Freeman 1995; Lundvall 1988, 1992; Nelson 1993). With these factors in mind, one can apply them from two different approaches (but in a complementary fashion) to help understand a country’s innovation and dynamic development. A more restricted definition equates innovation with science and technology (S&T) and suggests that the use of expertise and performance indicators relates to innovation (i.e., efforts in R&D and S&T). The main indicators proposed in this approach are R&D spending and S&T spending in higher education, the allocation of human resources to R&D and S&T, patents, and scientific publications, inter alia; these are tangible outcomes of the production of knowledge and learning. However, some elements and relationships inherent in an innovation system and which directly affect learning ability are informal and difficult to measure; this is why the innovation system approach used, from this viewpoint, is broad and includes social institutions, communication infrastructure, education, the types of relationships among agents, and the like (Lundvall et al. 2009).

Albuquerque (1999) suggests a typology that differentiates national innovation systems (NISs) according to their level of development: a “mature” NIS is found in developed countries; an “immature” NIS in countries at an intermediate level of development, such as Latin American countries, South Africa, and India; and a “non-existent or rudimentary” NIS in less developed countries. A peculiarity of immature-NIS countries like Brazil is the existence of “partial connections” between scientific infrastructure and technological activities (Albuquerque 1999, 2003).

The trend of adopting consumption patterns from core countries in peripheral economies has already been pointed out, for example, by Sunkel (1971), Erber (1972), Fajnzylber (1989), and Furtado (1991, 1998), each of which seeks to show how the gap between the production structure and consumption structure can explain underdevelopment. Thus, consumption patterns in Brazil, which mimic those of more developed countries, involve the importation of foreign technology—technology that is designed for countries where the relative cost of labor is higher—and this prevents the development of technologies that are appropriate to national conditions (Prado 2011).

Unlike gross domestic product (GDP), trade flow is measured on a gross rather than an aggregate basis. This analytical method can hide important foreign trade characteristics and a country’s true state of international insertion. For example, high-tech products can be said to be exported by developing countries, when those countries may in fact be participating only in their assembly (maquillas)—which requires relatively low levels of capability—while using high-tech parts and components imported from more developed countries. Thus, imported parts and components are recorded between exports, where the assembly of the product took place (e.g., in developing countries). Therefore, the analysis of gross figures would suggest that such a country was a “major player” in the global market for dynamic, technology-intensive products, when in fact it is only a mere assembler (Akyuz 2005).

Luiz Inácio Lula da Silva from the Workers’ Party was the democratically elected president of Brazil for two consecutive terms, from 2003 to 2010. Lula is considered one of the most popular politicians in Brazilian history, and his mandates were famous primarily because of their social programs. Before Lula, Fernando Henrique Cardoso served for two terms as president of Brazil from 1995 to 2002. Important features of Cardoso’s administration were the stabilization of monetary policies and the deepening of privatization. Cardoso is identified with neoliberalism and right-wing politics. Lula supported the candidacy of Dilma Rousseff, who was inaugurated in 2011 as the first female president of Brazil and was reelected for 2015–2018.

According to World Bank data, the real interest rate in the 2000–2010 period was, on average, 41.17% per annum. Data are available at http://​data.​worldbank.​org/​indicator/​FR.​INR.​RINR?​cid=​DEC_​SS_​WBGDataEmail_​EXT

Official exchange rate data are available at http://​data.​worldbank.​org/​indicator/​PA.​NUS.​FCRF?​cid=​DEC_​SS_​WBGDataEmail_​EXT

The sharp and steady decline of the manufacturing industry’s share of GDP marks what is known as “de-industrialization.” According to data from Brazilian Institute of Geography and Statistics (Instituto Brasileiro de Geografia e Estatística [IBGE]) (compiled by IPEADATA), in 1990, the manufacturing industry accounted for 26.54% of Brazil’s GDP (year 2000 prices), while in 2000 and 2010 it accounted for 17.22% and 16.23%, respectively. In the 1970–1980 period, the manufacturing industry represented, on average, 32.29% of GDP. There is an extensive debate concerning the causes and consequences of this process, but there is consensus that this process wrought profound impacts, especially from the viewpoint of dismantling and demobilizing important links in some national production chains. This was the result of, or resulted in, increased imports of parts and components among Brazilian industries. According to Cano (2012), de-industrialization in Brazil is occurring as a result of: (1) exchange rate policy that stemmed from the Real Plan, (2) unregulated opening up of the economy in 1989, (3) high interest rates, and (4) increased flows of foreign direct investment. Hiratuka and Sarti (2015) hold a different view in this debate on de-industrialization in Brazil and show that a consideration of a set of competitive, productive, technological, and financial changes in the global economy helps one understand the de-industrialization process there.

The Industrial Export Quality Index, developed by United Nations Industrial Development Organization (UNIDO), is the simple arithmetic average of the share of exports of manufactured goods in total exports and the share of medium- and high-tech goods in total exported manufactured goods. There are caveats to be made: in addition to problems related to the classification of products by technological level, there is the problem of the extent of local value added in export activities. (An exporter that simply gathers high-tech products is captured as being as “sophisticated” as one that designs and produces similar products with local components; indeed, both kinds of companies report the same export figures.) (UNIDO 2007). The intrinsic logic of this index lies in the fact that the share of manufactured goods in total exports captures the role of production in export activities and, more indirectly, technological complexity (i.e., a company’s ability to make the most advanced products and move into more dynamic areas of export growth). The share of medium- and high-tech goods in total exported manufactured goods gives a positive weight to relatively complex activities, given that they are desirable for competitive performance: a more complex structure denotes industrial maturity, flexibility, and the ability to move to the fastest-growing activities (UNIDO 2007).

By sector, this is not true. There are sectors in which Brazil finds itself at the technological frontier, such as civil aviation; this is represented by the good international performance of Embraer, for example. For that matter, we must once again point out that the innovative process is unique in each sector and each particular firm. Thus, the international transfer of technology is also unique for each sector and each firm.