ABSTRACT
It has been the major aim of this study to assess the attractiveness of Brazil as a location for automobile and steel production in the future. For this purpose, the export performance of Brazil’s motor-vehicle and steel industries in different markets has been evaluated, and major determinants of the country’s current position in world markets have been identified. In the longer run, the involvement of foreign and domestic investors in the two industries is likely to depend on whether automobile and steel production fits into the pattern of industrial specialization which is in line with the country’s endowment with physical and human capital as well as (unskilled) labour. Export expansion is hardly sustainable in the long run if mainly based on policy interventions that artificially create a competitive edge in world markets. Therefore, the following hypotheses figured prominently in explaining the past export performance:
Export success might have been due to an industrialization strategy that concentrated on areas which made intensive use of Brazil’s relatively abundant productive factors.
Alternatively, policy interventions might have been responsible for the export performance in the 1970s and early 1980s.
The empirical tests of these hypotheses provided the basis for evaluating the future prospects of automobile and steel production in Brazil. The results confirm the need for a fairly disaggregated analysis in order to identify the major determinants of Brazil’s export performance, and especially of the rising share of capital-intensive products in manufactured exports. The Brazilian government heavily discriminated between industries and even between different branches and types of enterprises within industries, as concerns economic incentives granted to domestic and export sales. Even for priority sectors such as the automobile industry and the steel industry, the relative importance of the various factors determining world-market performance differed in some important respects.