The International Handbook of Telecommunications Economics, Volume III
Edited by Gary Madden
Chapter 18: Brazilian telecommunications: experience and future perspectives
Marcelo Resende INTRODUCTION State intervention in Brazil is historically associated with market failure. The emergence of the state as the principal supplier of infrastructure reﬂects the scarcity of investment funds and an insuﬃcient return (Suzigan, 1976; Trebat, 1983). Recently, the privatization process in Brazil reached a critical point in terms of deﬁning an appropriate role for the state in the economy. Arguments refer to the inadequate productive eﬃciency of state-owned enterprises and decreasing investment by those ﬁrms (Abreu and Werneck, 1993; Pinheiro and Giambiagi, 1994). The possible impact of privatization and the development of a competitive environment in the telecommunications sector are discussed by Ros (1999) in relation to developing economies. Ros (1999) indicates that network expansion, as measured by main lines per 100 inhabitants, is highest in countries with high private ownership, although this relationship does not hold for countries whose GDP per capita is less than 10000 United States dollars (USD). Moreover, Jayakar (1999) obtains econometric evidence on the US for the period 1876 to 1982 indicating that competition positively aﬀects telephone penetration, even in early stages of network development. This result is encouraging for a developing country where competition is being introduced, like Brazil. In Brazil the privatization of telecommunications has attracted intense media coverage because of the dynamic character and pervasiveness of the sector and because of the monetary magnitudes involved (Dores, 1999; Novaes, 1999; Pires, 1999). In July of 1998 the Telebrás system was privatized and its sale realized...
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