I just returned from a two week visit to Brazil, where I used to live in the 1990s and worked on M&A deals, mostly for U.S. investors. While the FT article above accurately highlights some key challenges the country faces (skilled labor shortages, difficulties in integration into a fragmented global supply chain, etc), my personal view is that Brazil became a "BRIC" economy on its own terms, and I applaud them for that. Other emerging economies, especially in newly emerging Africa, where I now work, should take some lessons from Brazil's strategy of a self-reliant development path, in particular, as they develop their manufacturing industries. Let's not forget that Embraer, the Brazilian jet manufacturer is one of the most innovative companies in the world and Brazil is amongst the world's top ten automobile manufacturers. Also, the fact that Brazil still retains its unique vibrant culture in a globalized world where countres are expected to be "bland franchises" is also a major Brazilian achievement. Zemedeneh Negatu, Managing Partner, EY Ethiopia and Head of Transaction Advisory. Twiter: @Zemedeneh
@Zemedeneh Negatu you raise some interesting points. Indeed Brazil did do well for a while (2004- 2010) as a closed economy. In my view this was mostly due to a specific set of circumstances (commodity boom, credit deepening, virtuous cycle of consumption and job creation). On Embraer, it's interesting to note that the aerospace sector (which is mostly Embraer and suppliers) is the only manufacturing sub-sector in Brazil that has been doing well in recent years. Of course it is also the only sector which is heavily linked into global supply chains and vigorously competes in third markets. The automotive industry has been in decline ever since car sales in its shielded Mercosur market (mostly Brazil and Argentina) have been falling. Unlike the Mexican one, the Brazilian car industry cannot compete in unprotected markets.
"Brazil is amongst the world's top ten automobile manufacturers" - true but do you know of any relevant Brazilian brands? All cars manufactured in Brazil are made with foreign (US-American, German, French, Italian) know-how. The reason so many cars produced in Brazil is the size of the market, the high import tariffs as well as supportive Brazilian policies
We had some engineers fixing a plant in Brazil, last year, for a local company in our sector: it sells our products in Brazil at about 2x the price we can get in Italy. We were shocked: must be Garden of Eden, we all thought.
Crystal clear. If only the Brazilian policy makers would 'get it'. I can't understand why Brazilian consumers are willing to pay 3 times as much for a domestically produced car compared to its European or North American equivalent. Most products are more expensive and of inferior quality. Don't they see that they're paying a premium to please the unions? Why don't consumer activists make more noise and ask how come they should pay such a large premium?