Letter IEDI n. 1177—A guide to industrial recovery in Brazil
Today's Letter IEDI deals once again with the theme of a Brazilian industrial strategy. On this occasion, it addresses the study published by professors Antônio Carlos Diegues, José Roselino, Marcos Ferreira and Renato Garcia (2021), from UFSCAR and Unicamp, under the title “The resumption of the debate on Industrial Policy.”
The issue is dear to the IEDI which, since its foundation, focuses on actions and policies that can promote the development of Brazilian industry, not as an end in itself, but because the accumulation of skills and productive capabilities in the industry works as an important axis of the socioeconomic development of countries, as many publications of the Institute have already emphasized.
Currently, it is worth highlighting even more axes and criteria for a Brazilian industrial strategy, given the multiplication of industrial development initiatives in the world, as discussed in Letters IEDI n. 881 “Industrial strategy is the rule and not the exception around the world,” n. 860 “National Strategies for Industry 4.0” and n. 1159 “OECD Recommendations for Industrial Strategies,” among many others. This is the objective of our latest publications: “Criteria and Missions for a Brazilian Industrial Strategy,” Letter IEDI n. 1174 of Dec 02 2022, and “Actions for the industrial revitalization of Brazil,” Letter IEDI n. 1175 of Dec 06 2022.
In the article “The resumption of the debate on Industrial Policy,” the authors propose a guide for industrial development policies taking as a starting point the current characteristics of the sector and the knowledge accumulated through the study of successful international experiences. They thus seek to reduce discretion, unreasonable ambitions and risks of capture by specific sectors/companies.
The work also avoids the old approach of horizontal and vertical industrial policies, employing the contemporary idea of “pervasive industrial policies,” which combine horizontal actions with vertical programs—or else “targeted," as the OECD prefers—in order to be able to adapt to the heterogeneities of the national productive fabric.
As discussed in Letter IEDI n. 1159, the OECD employs the concept of “targeted policies”, which include those that emphasize strategic sectors and activities, but also mission-oriented policies, technology-focused policies and place-based policies, with objectives of inclusion and equality.
Pervasive industrial policies would contribute, according to UFSCAR and Unicamp researchers, to building a new consensus on the objectives and designs of a contemporary industrial strategy for Brazil and to creating a coalition of political forces that would support this strategy, not without adjustments and adaptations, for a period long enough for the actions to take effect.
In the view of the authors, this consensus should be around the need to foster Brazilian industry's productivity and competitiveness, notably through innovations, in a responsible way from a socio-environmental perspective.
Three criteria are used:
• the level of technological, productive and organizational competences of local agents in relation to the international frontier;
• the ability of industrial policies to influence markets effectively, in order to foster increased competitiveness of local actors;
• the degree of transversality/of impact of the activities to be fostered on other economic activities.
The authors point out four policy axes. The first occurs when the level of productive, technological and organizational competences of local agents is high and when there is international evidence that the capacity of industrial policies to influence markets effectively is high.
In this case, the necessary preconditions for public programes to be ambitious would be in place. The authors suggest, then, policies specifically oriented to local technological development, especially in activities of great transversality.
At the opposite extreme, when the capabilities of local agents are insufficient and there are indications that industrial policies are effective, the authors suggest that the most appropriate strategy to be pursued is based on the incorporation and diffusion of technologies already developed and of knowledge-intensive services in order to foster the increase in productivity of the productive structure.
The third axis of action occurs when the level of productive, technological and organizational training of local agents is high, but due to several factors the capacity of public programs to have meaningful effects is low. In these cases, the study indicates actions aimed at fostering systemic competitiveness and improving financing conditions.
In the fourth axis, when international experience indicates effective industrial policies, but internally the level of productive and technological training is reduced, the UFSCAR and Unicamp professors (authors of the study) suggest initiatives to promote industrial and service activities of medium value added.