The Regional Impact of National Policies

The Regional Impact of National Policies

The Case of Brazil

Edited by Werner Baer

Brazil is a country of continental proportions whose gross domestic product is unevenly distributed among its various regions. The impact of general domestic economic policies has often been perceived as not being regionally neutral, but as reinforcing the geographic concentration of economic activities. This detailed book examines the regional impact of such general policies as: industrialization, agricultural modernization, privatization, stabilization, science and technology, labor, and foreign direct investment.

Chapter 6: The Impact of Privatization on Brazil’s Regions

Edmund Amann and Werner Baer

Subjects: development studies, development economics, economics and finance, development economics, regional economics, urban and regional studies, regional economics


Edmund Amann and Werner Baer 6.1 INTRODUCTION The regional concentration of economic activities has been a constant in Brazil’s economic history. The first great export cycle was concentrated in the Northeast; this was followed by the gold export boom which moved major economic activities to the Center-South (especially Minas Gerais); and the coffee export cycle, which began in the nineteenth century, concentrated economic activities at first in Rio de Janeiro and surroundings, moving to the state of São Paulo in the middle of the nineteenth century, where the concentration remained, though spreading to some of the areas close to São Paulo.1 The regional concentration established during the coffee export cycle would remain as the country began a process of industrial growth based on immigrant labor demand. By the mid-twentieth century, as the country switched from an open to a closed economy, pursuing a policy of import substitution industrialization (ISI), the geographical concentration of economic activity centered still further on the South and Southeast where much of the Brazil’s productive capacity and wealth were located. In the twentieth century the dynamics of market forces tended to reinforce this regional concentration, as both domestic and foreign investors were interested in locating their activities in the region with the highest per capita income, the best infrastructure, the best human capital, and so on. Only special government actions through incentives, various types of transfer payments, and investments of state enterprises were able to bring about some reverse flow of investments.2 Until the...

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