Edited by David Parker and David Saal
Chapter 11: The Privatization Experience of Brazil
Werner Baer Introduction To understand the process and impact of Brazil’s privatization in the 1990s, one must understand the reasons for the rapid growth of the state in the economy prior to that time. This chapter therefore begins with a brief review of the growth of state enterprises in Brazil, their contribution to the country’s development, and the circumstances that ultimately resulted in state ﬁrms being considered as obstacles to growth, leading to the privatization programmes of the 1990s. This is followed by a description of the privatization process and its impact on eﬃciency and equity. The growth of state enterprises in Brazil State enterprises were present in Brazil in colonial times.1 Their inﬂuence over the economy, however, was minor. This began to change considerably during the Great Depression of the 1930s. The institutional changes that led to a greater role of the state in the economy stemmed from the Brazilian government’s desire to protect the economy from the full impact of the world depression and to support and speed up the process of import substitution industrialization (ISI). The latter became the major development strategy after the Second World War. When it became clear that neither the domestic private sector nor foreign groups had an interest in building an integrated steel mill, which was deemed necessary as a requirement for a vertically integrated industrialization process, Brazil’s government became involved in that sector.2 State ﬁrms were started in the 1940s and 1950s with the intention of guaranteeing Brazilian control...
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