Institutions and industrial policy in Brazil after two decades: have we built the needed institutions?

ABSTRACT

This paper aims to examine the design and implementation of industrial policy in Brazil based on their capacity to affect the prevailing institutions. We argue that the main reason for the failure of policies in Brazil, and in Latin America, is their inability to induce persistent changes in firms’ innovative behavior. Based on the analysis of national innovation indicators, and on previous empirical studies, we demonstrate that the Brazilian industrial policy was not able to change the prevailing conventions. The main problems related to this fragility are: institutional problems and related to industrial policy development conventions; serious coordination problems; maintaining a macroeconomic policy that is not convergent toward industrial policy efforts; policy instruments that were not able to change prevailing conventions, such as low R&D and innovative expenditures; a set of strategic choices that are inconsistent with innovation, technological catch-up and structural change.

KEYWORDS:

• Institutions
• industrial policy
• developing countries
• Brazil
• knowledge and innovation

Acknowledgements

The authors would like to thank Eduardo Albuquerque, Marcelo Pinho and Marcia Rapini, and other participants at the Belo Horizonte and Diamantina Workshops 2019; Gabriel Yoguel and Diana Suarez, editors of this special issue; and two anonymous referees; all of them provided useful comments on an early version of this manuscript. Usual disclaimers apply.

Disclosure statement

No potential conflict of interest was reported by the author(s).