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Labor productivity growth in Brazil, after showing positive annual rates between 1950 and 1979, became stagnant after 1980. We decompose, calculate and analyze statistical evidence on the Brazilian labor productivity growth in the period 1950–2011, according to “structural change” and “within” components as proposed by McMillan and Rodrik's (2011) methodology. Since it is almost a consensus that the stagnation in the subperiod 1980–1994 is explained by the external debt crisis and chronic inflation rates, we regressed labor productivity growth as well as its two components on several microeconomic and macroeconomic variables in Brazil for the period 1995–2011. The results show that the stagnation of the Brazilian economy in the recent decades is explained by the overvaluation of the Brazilian currency, the reprimarization of the export basket, the low degree of Brazil's trade openness and the high real interest rates prevailing in the period.

Even though the New Macroeconomic Consensus (NMC) guidelines have been under review by mainstream economists from developed countries since the 2008 global financial crisis, Brazilian policy-makers are still following these old recommendations. The NMC was adapted in Brazil in 1999 as a policy arrangement known as the macroeconomic tripod: a combination of inflation targeting, floating exchange rates and targets for the primary fiscal surplus. The theoretical basis of this policy arrangement is thus closely aligned to that of the NMC: a reduced (if any) role for fiscal policy and an exclusive focus on price stability for monetary policy. Particularly with respect to the experience of inflation targeting in Brazil, by implementing a vector autoregression model for the period 2000–17, we show that (i) inflation dynamics are mostly cost-push rather than demand-pull; (ii) inflation rates show low sensitivity to changes in interest rates; and (iii) the main variables negatively affected by an increase in the Brazilian policy rate are the nominal exchange rate (i.e. the Brazilian real tends to appreciate) and output growth. It follows that the macroeconomic tripod is unsuitable to the Brazilian economy, especially considering that, as it is also shown in this article, such arrangement has contributed to perpetuating trends of high real interest rates, domestic currency overvaluation and low economic growth in Brazil in the last two decades. The article ends calling for a new macroeconomic arrangement to reverse these adverse long-term trends.

Globalisation is the extent and intensity with which a country’s production, trade and capital flows are integrated into the world economy. Our focus is on globalisation through international trade. We analyse the main theoretical predictions about the effects of global trade integration on trade patterns between countries of different levels of income and technology and compare this analysis to our investigation of Brazil’s trade integration between 1990 and 2016. Particularly, we investigate whether Brazil’s recent trajectory has been directed to a pattern of regressive specialisation. By regressive specialisation, we refer to that in which both production and export structures are strongly oriented to goods of low technological sophistication and low income elasticity of demand. The recent theoretical literature on technological gaps suggests that when a country enters a rapid pattern of regressive specialisation, a falling-behind trajectory is observed. Our main findings are as follows (i) the technological gap significantly widened for all groups of manufactured goods classified by factor content and technological sophistication; (ii) the income elasticity of demand for Brazilian imports is greater than that for Brazilian exports, implying a falling-behind trajectory of the economy in the past few decades and that growth has been constrained by long-term balance-of-payments equilibrium (Thirlwall’s law); and (iii) there has been a very marked trend of high concentration of Brazilian exports in primary goods, but imports composed of high technologically sophisticated manufactured goods, reinforcing the regressive specialisation of Brazil’s trade pattern in the last decades.

The “optimum” long-run real exchange rate is the rate that will efficiently channel production resources into industries that generate and diffuse productivity gains in the economy as a whole and that will thus tend to speed up and sustain the economic development process. Rather than employing conventional models, a structuralist-Keynesian model is used to demonstrate, both theoretically and empirically, that the factors influencing the path of the long-run real exchange rate and the divergence of the observed real exchange rate from the “optimum” real exchange rate in terms of economic development are accounted for by both structural and short-term macroeconomic policy variables. Econometric estimates for 1999-2015 indicate that, following a prolonged period, beginning in late 2005, during which the Brazilian currency appreciated quite steeply, the real exchange rate in Brazil reached its “optimum” level in mid-January 2016.

El tipo de cambio real “optimo” a largo plazo es aquel que, al redirigir eficientemente los recursos productivos hacia los sectores generadores y difusores de incrementos de productividad para la economia en general, tiende a acelerar y sostener el desarrollo economico. A diferencia de los modelos convencionales, se utiliza un modelo estructuralista-keynesiano para demostrar, teorica y empiricamente, que los factores que influyen en la trayectoria del tipo de cambio real a largo plazo y el distanciamiento del tipo de cambio real observado con respecto al tipo de cambio real “optimo” para el desarrollo economico se explican, simultaneamente, por variables estructurales y variables influenciadas por la politica macroeconomica a corto plazo. Las estimaciones econometricas relativas al periodo 1999-2015 muestran que, tras una prolongada tendencia de considerable apreciacion real desde fines de 2005, el tipo de cambio real en el Brasil alcanzo su nivel “optimo” a mediados de enero de 2016.

The majority of economic literature tends to discuss economic development issues by analysing the industrial policy and other long-term development policies separate from short-term macroeconomic policy. However, development strategies require a close coordination of the macroeconomic regime with the industrial policy. In addition to Brazil, our analytical discussion and normative implications can be addressed to other developing countries also facing premature deindustrialisation. We propose an analytical discussion of the phenomena of industrialisation, deindustrialisation and reindustrialisation, including a discussion on the connection between the macroeconomic regime and industrial policy, both oriented to reindustrialisation and catching up. The main point is that both policy regimes must be closely coordinated with each other. Concerning the macroeconomic regime, we argue that consistent monetary, fiscal, wage and exchange rate policies are those which are able to not only keep price stabilisation, but also provide average real interest rates below the average real return rates on capital, a competitive real exchange rate and real wage rates increasing in accordance with labour productivity growth. As for industrial policy, theoretical and empirical evidence suggest strategies aimed at the diversification of production, processes and products, especially within the manufacturing sector and within tradable segments of the service sector.

The aim of this paper is to shed some light on the issue of why some BRICS countries are doing much better than others after the international financial crisis. Although these economies sha...

We present a Kaldor-Thirlwall theoretical and empirical framework on the basic driving forces of the behaviour of productivity and economic development in the long-run. By calculating the so- called Thirlwall equation, the main contribution of our research is to examine whether Brazil has been catching up or falling behind. We show some empirical evidence based on both descriptive statistics and econometric regressions for Brazil between 1970 and 2010. Some important indicators of descriptive statistics reveal that Brazil has entered into a process of early de-industrialization. In addition, since our econometric estimates also show that there was a dramatic increase in the income elasticity of demand for imports between 1980–1998 and 1999–2010 (from 1.97 to 3.36) and a small decrease in the income elasticity for exports during the same periods (from 1.36 to 1.33), we conclude that Brazil not only has already embarked on a trajectory of falling-behind relative to the world economy and the international economic frontier, but also that it might show, in the absence of appropriate policies, lower growth rates in the long run. However, if the opposite occurs, it would face major long-term external constraints to growth.

The main goal of our paper is to provide analytical arguments to explain why Brazil has not been able to restore its long-term capacity for economic growth, especially compared with its economy in the 1950-1979 period (7.3 per cent per year on average) or even with a number of emerging economies in the 1980-2010 period (6.7 per cent per year on average, against 2.3 per cent per year on average in Brazil in the same period). We build our idea of convention to growth based on the Keynesian concept of convention. For our purposes, this concept could be briefly summarized as the way in which the set of public and private economic decisions related to different objectives, such as how much to produce and invest, how much to charge for products and services, how to finance public and private debt, how to finance research and development, and so on, are indefinitely – or at least until there is no change – carried out by the political, economic and social institutions. This analytical reference can be connected to the Neo-Schumpeterian National Innovation System (NIS) concept, which emphasizes not only institutions associated with science and technology per se, but also the complex interaction among them and other institutions. In this paper we identify two conventions to long-term growth in the last three decades in Brazil: the liberal and the neo-developmental. We show that the poor performance in the Brazilian economy in terms of real GDP growth from the 1980s on can be explained by a weak coordination between short-term macroeconomic policies and long-term industrial and technological policies. This weak coordination, in turn, can be associated with the prevalence of the liberal convention from the 1990s on, which has emphasized price stabilization to the detriment of a neo-developmental strategy whose primary goal is to sustain higher rates of growth and full employment in Brazil. JEL Classification: 01; 02; 05.

RESUMO: Este artigo, de cunho eminentemente analítico, mostra que no âmbito da política macroeconômica é necessária consistência entre as políticas monetária, fiscal, cambial e salarial para viabilizar taxas de juros reais médias inferiores às taxas de retorno médias sobre o capital, taxas de câmbio reais competitivas (em torno da taxa de "equilíbrio industrial") e taxas de salários que evoluam de acordo com o crescimento da produtividade, condições para que se assegure o crescimento econômico sobre bases sustentáveis. Já com respeito à política industrial é preciso perseguir estratégias de diversificação produtiva, notadamente no setor manufatureiro e nos segmentos tradable do setor de serviços, mediante a identificação de prioridades estratégicas tanto nas cadeias produtivas, segmentos e setores próximos à base de vantagem comparativa preexistente, como naqueles mais próximos à fronteira tecnológica internacional. Embora os argumentos analíticos favoreçam a estratégia de diversificação produtiva, esta não deve ser confundida com semi-autarquia, o que significa que as cadeias e setores que não sejam foco da política industrial devem ter alíquotas de importação zero ou próximas de zero. ABSTRACT: This paper is predominantly analytical. Concerning the macroeconomic regime, we propose more consistency between monetary, fiscal, exchange rate and wage policies. Such consistency is to provide sustainable long-term economic growth with structural change. Also, it is to make it feasible to not only maintain average real interest rates below the average real return rates on capital, but also competitive real exchange rates (i.e., marginal undervalued real exchange rates) and real wages that increase in step with productivity growth. This will help guarantee sustainable economic growth. As for industrial policy, theoretical and empirical evidence suggests the need to pursue strategies that diversify production, especially within the manufacturing sector as well as within tradable segments of the service sector. Although theoretical arguments are favorable to strategies that diversify production in countries that did not manage to catch up with developed countries, such strategies should avoid semi-autarky policies, which means that production chains, segments and sectors that are not the focus of industrial policy should have zero import tariffs, or close to zero.

En este articulo se analizan los cambios en la estructura y competitividad de la industria de bienes de capital brasilena desde comienzos de los anos 1990 y se propone una clasificacion dentro de esta industria basada en los diversos segmentos industriales que demandan maquinas y equipos. Aunque esta industria sigue pesando bastante en el valor agregado del sector manufacturero, la eficiencia productiva y la competitividad internacional de los segmentos que la componen son bastante heterogeneas. El articulo destaca los segmentos con mayor potencial de desarrollo y sugiere para cada uno de ellos medidas que podrian complementar los instrumentos de politica industrial y tecnologica contenidos en la Politica de Desarrollo Productivo establecida oficialmente en mayo del 2008.

This article analyses changes in the structure and competitiveness ofthe Brazilian capital goods industry since the early 1990s and proposes aclassification within that industry based on the different industrial segmentsfrom which the demand for machinery and equipment derives. Althoughthis industry still accounts for a large share of manufacturing sector valueadded, the production efficiency and international competitiveness of thesegments it comprises are quite heterogeneous. The article singles out thesegments with the greatest development potential and suggests measuresthat could be taken in each of them to complement the industrial andtechnology policy instruments contained in the Production DevelopmentPolicy officially established in May 2008.

The main goal of this paper is to discuss Brazil’s economic situation in the recent period. Although the analysis is centred on the current Brazilian business conditions (known as the conjuntura econômica in the Portuguese language), the paper covers the period after 2014, during which the country’s economic problems have significantly worsened. The remainder of the paper is divided into the following sections. Section 2 seeks to analyze and discuss the main structural and short-term causes that explain the worsening of Brazil’s economic situation in 2014, as well as the deep recession that followed it. Section 3 critically analyzes the macroeconomic policy adopted by Temer’s government, assuming implicitly that there are both fiscal and monetary policy alternatives. Section 4 concludes and discusses economic policy alternatives for growth recovery of the Brazilian economy, other than those chosen and adopted by Temer’s economic team in 2016 and onwards.

We present a Structuralist-Keynesian theoretical approach on the determinants of the real exchange rate (RER) for open emerging economies. Instead of macroeconomic fundamentals, the long-term trend of the real exchange rate level is better determined not only by structural forces and long-term economic policies, but also by both short-term macroeconomic policies and their indirect effects on other short-term economic variables. In our theoretical model, the actual real exchange rate is broken down into long-term structural and short-term components, both of which may be responsible for deviations of that actual variable from its long-term trend level. We also propose an original concept of a long-term “optimal” real exchange rate for open emerging economies. The econometric models for the Brazilian economy in the 1999–2011 period show that, among the structural variables, the GDP per capita and the terms of trade had the largest estimated coefficients correlated with the long-term trend of the RER in Brazil. As to our variables influenced by the short-term economic policies, the short-term interest rate differential and the stock of international reserves reveal the largest estimated coefficients correlated with the long-term trend of our explained variable. The econometric results show two basic conclusions: first, the Brazilian currency was persistently overvalued throughout almost all of the period under analysis; and second, the long-term “optimal” real exchange rate was reached in 2004. According to our estimation, in April 2011, the real overvaluation of the Brazilian currency in relation to the long-term “optimal” level was around 80 per cent. These findings lead us to suggest in the conclusion that a mix of policy instruments should have been used in order to reverse the overvaluation trend of the Brazilian real exchange rate, including a target for reaching the “optimal” real exchange rate in the medium and the long-run.

We present a Structuralist-Keynesian theoretical approach on the determining factors of the real exchange rate for open emerging economies. Instead of macroeconomic fundamentals, the long-term trend of the real exchange rate level is better determined not only by structural forces and long-term economic policies, but also by both short-term macroeconomic policies and their indirect effects on other short-term economic variables. In our theoretical model, the actual real exchange rate is broken down into long-term structural and short-term components, and both of which may be responsible for deviations of that actual variable from its long-term trend level. The econometric model for the Brazilian economy in the 1999-2010 period shows that the terms of trade and the short-term interest rate differential are the most significant variables that explain the long-term trend of the real exchange rate overvaluation in Brazil. We also propose an index of overvaluation and an original definition of a long-term “optimal” real exchange rate for open emerging economies. The econometric results show two basic conclusions: first the Brazilian currency was persistently overvalued throughout almost all of the period under analysis; and second, the long-term “optimal” real exchange rate was reached in 2004. In January 2011, the average nominal exchange rate should be around 2.91 Brazilian reais per US dollar for reaching that “optimal” level, against an observed average nominal exchange rate of 1.67 Brazilian reais per US dollar. According to this estimation, in January 2011, the real overvaluation of the Brazilian currency in relation to the long-term ¨optimal¨ level was around 74 per cent. These findings lead us to suggest in the conclusion that a mix of policy instruments should be used in order to reverse the overvaluation trend of the Brazilian real exchange rate, including a target for reaching the “optimal” real exchange rate in the medium and the long-run.

Efforts towards economic development in Brazil and India share some common aspects. From the beginning of the 1950s to the end of the 1980s, both countries adopted import substitution policies including high tariffs and non-tariff barriers. Since the beginning of the 1990s, liberalizing economic reforms have been implemented by the respective Governments. If we compare the reach of the Brazilian reform to that of India, one could easily conclude that the former was more extensive and profound than the latter; and in conventional indicators of innovative effort such as research and development expenditures, education coverage, average years of education and literacy rate, Brazil’s results are a little bit better than those of India. However, since the beginning of the 1980s, India has been showing better general economic performance than Brazil. This paper argues and gives some empirical evidence to show that India’s performance is explained by its institutional capacity for coordinating conventional macroeconomic policies with other policies related to its National Innovation System.

RESUMO Este artigo analisa os principais efeitos da liberalização do comércio brasileiro sobre a eficiência técnica da indústria manufatureira e o padrão de comércio. Os principais resultados empíricos sugerem os seguintes resultados para a década de 1990: i) ganhos expressivos na produtividade do trabalho e redução dos custos reais médios para a maioria dos setores da indústria de transformação entre 1988 e 1998; ii) o padrão comercial foi impulsionado principalmente por mudanças nas importações; iii) em média, as indústrias que apresentaram os maiores ganhos em eficiência técnica não as traduziram em ganhos de competitividade nos mercados globais; e iv) em média, houve perdas dinâmicas de eficiência uma vez que, em primeira mão, os maiores ganhos em competitividade internacional foram localizados nos setores tradicionais e, por outro lado, as indústrias que fizeram os maiores investimentos em Pesquisa e Desenvolvimento (P & D) foram os mesmos que apresentaram déficits comerciais setoriais significativos ao longo dos anos 90.