Is there a Brazilian model of development?

Is there a Brazilian modelof development?

www.Brazil4Africa.org#brazil4africa

Why is Brazil of interest to African countries?

Why is Brazil of interest to African countries?• Brazil and Africa have a

longstanding relationship, born out of the slave trade.

• The relationship was enthusiastically reinvigorated by President Lula in the 2000s.

• In addition to expanding diplomatic and economic links, Brazil has become more involved in development, through providing South-South cooperation.

• These are often based on innovative policies and institutions that have worked in Brazil.

A three year, £2.2m, DFID funded research programme

Addresses two main research questions: Phase 1: September 2013 – December 2014

Is there a new Brazilian development model? Phase 2: January 2015 – December 2016

What lessons might Brazil’s success have for the economies of sub-Saharan Africa? How could they be adapted?

What is the International Research Initiative on Brazil & Africa (IRIBA)?

www.Brazil4Africa.org

1) The economics of the Brazilian model of agricultural development2) What explains the intensification and diversification of Brazil’s agricultural production and exports from 1990 to 2012?3) Technological catch-up and indigenous institutional infrastructures: The role of EMBRAPA 4) Antipoverty transfers and inclusive growth in Brazil5) The Impact of SENAI's vocational training program on employment, wages, and mobility in Brazil6) Restructuring Brazil’s national financial system7) Institutions for macro stability: Inflation targets and fiscal responsibility8) Brazilian anti-corruption legislation and its enforcement: Potential lessons for institutional design 9) Infrastructure and its role in Brazil’s development process10) Tax, redistribution and the social contract in Brazil11) Explaining the decline in earnings inequality from 1995-201212) Synthesis paper: Is there a new Brazilian Development Model?

All available, with accompanying briefings at: www.Brazil4Africa.org/publications

Research Conducted in Phase 1:

Finding 1: The Brazilian ‘model’ is a blend of consensus and conjuncture

• Brazil’s transition to democracy and the 1988 constitution forged a strong social contract.

• This was necessary to push through and sustain difficult and potentially socially disruptive reform programmes such the Real Plan.

• A desire to address the ‘social debt’ created during military rule was also key. The resulting social policies have reinforced political support.

• The model wasn’t the result of an overarching strategy or plan, but a mutually reinforcing set of policies and institutions, implemented with a medium-term focus and remarkable continuity by different coalition administrations.

Social contract / consensus

Intuitions of economic management

Innovative social policies

Finding 1: The Brazilian ‘model’ is a blend of consensus and conjuncture

I

RIBA yellow tint (background): Red=2248, Green=244, Blue=219 (#f8f4db)

Finding 2: Brazil’s development ‘model’ is based on inclusive growth

0.2

.4.6

.8

0 .19 .38 .57 .76 .95Percentiles (p)

Confidence interval (95 %) Estimated difference

( Ref. period = initial | Order : s=1 | Dif. = ( Q_2(p) - Q_1(p) ) / Q_1(p) )

Brazil Growth Incidence curve 2001-2012

Finding 3: Macro stability has underpinned progress

The Real Plan - implemented in the mid 1990’s - ended hyperinflation.

There’s been a sustainable expansion of credit to households & businesses.

The national developmentbank (BDNS) has played an active role – particularly Following the Global Financial Crisis

Finding 4: Fiscal capacity and responsibility has been vital

Institutional responsibility was established in the battle against hyperinflation.

Brazil has benefited from taxreform and capacity built from the 1960s.

Finding 5: Agriculture has been transformed

Since 2000, Brazilian agricultural production and exports have increased enormously.

The production of crops rose by over 150%, while exports multiplied eightfold from 1990 to 2012

Not the result of an overarching plan – but the product of various institutions mutually reinforcing each other.

Finding 6: Brazil shows the ‘resource curse’ is not inevitable

High-valued wood products

Phytotherapics andphytocosmetics components

Biotechnology

Leading firms re-organize and re-focus their

research activities to face the new economicand institutional conditions of the 1990s

Electricity and steam

VCP-J

Suzano

Klabin

Leading firms strengthen their internal R&D

after the end of the IPEF/ESALQ external

Aracruz’s breakthrough innovation inforestry with worldwide recognition(Marcus Wallenberg Prize)

Suzano completes a six-year research projectand becomes world’sfirst paper maker fromeucalyptus pulp

Leading firms draw on their forestry

innovative capabilities to explore newtechnological and market opportunities

Leading firms re-organize their forestry researchactivities after the Genolypus project

Leading firms engage in the Genolyptus project

Aracruz structures its forestry R&D centre to tackleeucalyptus diseases

1950s-1960s 1970s-1980s 1990s 2000s

Brazil is the 4th largest producer of forestry-based pulp and the 9th largest producer of paper

Finding 7: Social policy has focused on inclusion & productivism

Innovative antipoverty transfers have:

1) Explicitly targeting human development, rather than simply acting as a more traditional safety net for the sick and old. 2) A productivist element, concerned with economic inclusion.3) A focus on citizenship- and rules-based transfers, avoiding clientelism.

Finding 8: Rising tax revenues have been redistributed

The tax system prioritises revenue raising over efficiency - which has funded the expansion of antipoverty transfers and other social policies.

0.53 0.54 0.55 0.56 0.57 0.58 0.59 0.6 0.61 0.627

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Gini Coefficient

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Finding 9: Human capital accumulation improved average wages, while labour market intuitions reduced earnings inequality

Brazil has invested significantly in formal education – but also ensures that effective vocational training is provided, particularly through SENAI.

Rises to the minimum wage have helped to reduce inequality since 2005.

The biggest factors behind the decline of earningsinequality were reduced gender, racial and geographical differentials.

Finding 10: There are limitations to the ‘model’

Slowdown in growth since the Global Financial Crisis.

Lack of investment in infrastructure & instability in regulation is stifling development.

Institutional bottlenecks prevent the effective prosecution of corruption.

Increasing strain on the social contract.

Implications for African counties?

Brazil is a product of unique set of social, political and economic circumstances – so a ‘cookie cutter’ approach to adapting lessons won’t work.

A strong social contract and inclusive growth has underpinning development.

How to manage the natural resource dividend?

South-South cooperation on particular issues may be useful.

The next phase of the IRIBA project will grapple with these question in much more detail - working alongside African researchers.

www.Brazil4Africa.org