Connecting Brazil to the World: A Path to Inclusive Growth
Adopting a new growth agenda is vital to the economic empowerment of Brazil’s citizens
May 2014 | by James Grant
As Brazil steps into the international spotlight as host of the 2014 World Cup and the 2016 Olympics, it is also celebrating a quarter century of democracy and political stability. The nation’s official poverty rate has been cut by half since 2003. Its rich resource endowments ensure that Brazil will remain one of the world’s leading exporters of commodities for years to come. But after a decade of rapid growth and falling poverty rates, the economy has been losing momentum. Millions who are striving to attain a real middle-class life remain frustrated by weak income growth and the high price of consumer goods. To raise their living standards, Brazil needs to find a new formula for accelerating growth.
Building deeper connections with the rest of the global economy could provide the opening to do just that. This will involve shifting the focus from protecting local industries to strengthening their competitiveness in global markets—a shift that will challenge Brazilian companies to evolve. The imperative to become more connected is not solely a question of trade and finance, however. Brazil also needs to tap into advanced skills, knowledge, technology, talent, and best practices from around the world. Focusing on innovation could allow Brazil to develop new strengths in higher-value-added products and services, eventually becoming a more diversified and resilient economy.
How Brazil can Connect, Compete, and Thrive
Even as it has grown to become one of the world’s largest economies, Brazil maintains relatively limited ties to the rest of the world beyond its resource exports. As new trade routes form, firms are racing to claim market share. Brazil, which needs a new catalyst for growth, cannot afford to be left behind.
To meet its goals for sustainable and inclusive growth, Brazil needs to continue looking for external opportunities. It has already benefited from rising resource demand, but there are other ways to ride the wave of global demand growth. In addition to entering new markets, Brazil can benefit from embracing the performance pressures that come with international competition. These effectively challenge local firms to evolve and become more efficient by, for example, implementing lean processes, investing in research and development, or integrating the latest technology. Global exposure also makes cheaper and more modern inputs available, and it enables companies to absorb more of the world’s rapidly expanding flows of innovation, technology, research, and ideas.
The global economy is increasingly characterized by an intricate web of connections that go far beyond the trade of goods. Flows of finance and services such as IT and business process outsourcing are expanding. Increasing numbers of tourists, students, and workers are crossing borders and exchanging ideas—and in the realm of digital communications, the concept of borders has all but disappeared. These evolving networks are redrawing the global economic landscape.