Edited by Paul Cook, Raul Fabella and Cassey Lee
Chapter 7: Competition Policy and the Legal System in Brazil
Germano Mendes de Paula INTRODUCTION Brazil used to be a very closed economy regarding international trade. Like many other developing countries, Brazil adopted an import substitution industrialization (ISI) strategy. In this context, competition policy was misplaced, for several reasons. A substantial proportion of large companies were state-owned and therefore the government did not need to control pricing practices through the use of antitrust policy. Moreover, the most important state-owned enterprises (SOEs) were set up in order to mitigate the weaknesses of the domestic private sector rather than put limits on cartelization or mergers and acquisitions (M&As). The government fostered market domination by a few large SOEs. However, Brazil, as many other Latin American nations, experienced a very important shift in terms of economic policy in the 1990s. Indeed, the country engaged in intense trade liberalization and also deregulated and privatized companies. In this new environment, a massive wave of mergers and acquisitions occurred in which multinationals were in the acquiring corner for around two-thirds of all transactions (Amann, de Paula and Ferraz, 2002). As a consequence, the share of the foreign companies in the top 100 non-ﬁnancial ﬁrms in Brazil increased from 26 per cent to 40 per cent in the period 1990–98. The 1990s was a turning point for the Brazilian economy, after which the government and the corporate sector have faced a very diﬀerent economic environment. Instead of restricting competition, the government began to encourage it, mainly via trade liberalization and to a lesser...
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