BRAZIL: EMBRACING GLOBALIZATION
It has always been a challenge for the developing countries to find effective and efficient strategy regarding cross-national cooperation, globalization, and economic growth. The developing countries have been struggling to find the appropriate mix between the imports and exports. On one hand, the developing countries are looking for strengthen the local industry by putting up different regulations and tariffs and on the other hand these countries are looking for opportunities to increase the overall exports to other international countries. This requires the formulation of effective and efficient economic and trade strategy. The developing countries are facing the challenge of improving the local industries and companies and at the same time increasing the integration with other economies and improving the exports and foreign reserves. Same is true for Brazil; the country has been trying to improve the foreign reserves and exports and at the same time decrease the inflation and enhance the economic growth. For this reason, the country has tried different strategies like import substitution and regional integration.
IMPORT SUBSTITUTION IN BRAZIL
Brazil has been struggling from the start for stabilizing its economy. The country in the start was dependent on the export of coffee and was among the largest exporters of the coffee. However, the great depression in 1930s resulted in leaving negative impacts on the economy of Brazil (Alfaro, 2002). This forced the country to look for other alternatives to make the economy strong. For this reason, the country opted for import substitution strategy and supported the local industry with the help of huge government investments. The import substitution strategy allowed Brazil to improve its economic growth. At the same time, the country was able to improve its local industries. However, the strategy of import substitution resulted in increasing foreign debt; however in the long run resulted in leaving negative impacts on the economy (Alarcon & McKinley, 1992).
It is important to acknowledge here that the import substitution strategy worked for the economy of Brazil in the initial years and helped them to reduce the inflation and enhance the economic growth. This strategy of import substitution also allowed the country to improve the local industries and companies and hence allowed them to come up with high quality products. However, in the long run it is not suitable for the country to only pursue the import substitution strategy. In today’s competitive world and marketplace the countries cannot live in isolation and have to integrate with other countries in order to look for a steady economic growth (Katz, 2000). Brazil should also find an effective and efficient mix between the open economy and protecting the domestic industries in order to achieve a stable status.
REGIONAL INTEGRATION (MERCOSUR) AND BRAZIL
Brazil has been able to increase the export of its goods and products by forming regional integration with other countries in the region under the name of MERCOSUR (Alfaro, 2002). This regional integration allowed the country to enhance the status of foreign exchange and at the same time reduce the inflation (Alfaro, 2002). However, the question is that will this regional integration will be sufficient enough for Brazil to grow in the international economy and market. It is important to acknowledge here that although this regional integration allowed Brazil to increase its export among the member countries within the region but have not positively influenced the trade of Brazil with other countries in the world (Siroën & Yucer, 2012; Yeats, 1998). Hence, Brazil cannot rely on regional integration only and will have to look for ways to improve the trade relations with other countries and economies, as well.
REGIONAL INTEGRATION FOR DEVELOPING COUNTRIES
The globalization has resulted in creating several challenges for the developing countries. For this reason, the developing countries have been looking for different ways for boosting up their economic growth in this highly unpredictable globalized economy. One of these methods is to form regional integration in order to improve the regional cooperation with the other countries in that particular region (Venables, 2003). This regional integration allows the developing countries to work on the development of domestic industries and at the same time remain connected with the other international countries. The regional integration also allows the developing countries to build a strong regional block to protect the economy against the big international forces. Hence, carefully build regional integrations can be helpful and beneficial for the developing countries (Schiff & Winters, 2003).
GLOBALIZATION FOR DEVELOPING COUNTRIES
Globalization is resulting in blurring the borders of the countries and is encouraging different economies to integrate with each other. Globalization has its own set of advantages and disadvantages for different international players. However, there have been an ongoing debate regarding the impact of globalization on the developing countries. The economists and analysts have been trying to find the answer to the question that is globalization beneficial for the developing countries. It is a difficult question to answer. On one hand globalization results in providing several economic advantages to the developing countries but on the other hand globalization also brings with it several challenges and issues (Rogoff, Wei, & Kose, 2003).
Globalization results in the creation of increasing and stable supply of money for the developing countries. As it creates more opportunities for the developing countries to reach different markets and consumers. This in turn increases the overall demand of the products exported by the developing countries. Globalization also allowed the developing countries to increase the process of knowledge sharing and thus improving the overall innovation process (Archibugi & Pietrobelli, 2003).
However, globalization also results in creating some issues and challenges for the developing countries. The open economy results in the increased competition from the developed countries for the domestic industry of the developing countries. At the same time globalization also increases the chances of the exploitation of the developing countries on the part of the developed countries (Rogoff, Wei, & Kose, 2003).
Hence, in order to avail all opportunities offered by globalization and avoiding the challenges associated with it, the developing countries should come up with effective and efficient strategies and policies. Only in this way the developing countries can reap benefits from the globalization.
Hence, it can be concluded that there is no right or wrong policy or strategy for the developing countries in today’s competitive and globalized economy. The developing countries have to work out for the best suited strategy and policy according to the prevalent situation and environment. For this reason, developing countries have come up with different methods and strategies like import substitution and regional integration. However, the most important factor in this regard is that the developing countries, like Brazil, cannot exist in isolation and will have to work on increasing the economic integration with other countries and at the same time will have to work for the development of the domestic industries and companies. Import substitution strategy and regional integration cannot benefit Brazil, or any other developing country, in isolation and should be paired up with other effective trade and integration strategies.
List of References
Alarcon, D., & McKinley, T. (1992). Beyond import substitution: the Restructuring projects of Brazil and Mexico. Latin American Perspectives, pp. 72-87.
Alfaro, L. (2002). Brazil: embracing globalization. Harvard Business School Case, pp. 701-104
Archibugi, D., & Pietrobelli, C. (2003). The globalisation of technology and its implications for developing countries: Windows of opportunity or further burden?. Technological Forecasting and Social Change, vol. 70, no. 9, pp. 861-883.
Katz, J. (2000). The dynamics of technological learning during the import-substitution period and recent structural changes in the industrial sector of Argentina, Brazil, and Mexico. Technology, learning and innovation: Experiences of newly industrializing economies, pp. 307-34.
Rogoff, K., Wei, S. J., & Kose, M. A. (2003). Effects of financial globalization on developing countries: some empirical evidence (Vol. 17). Washington, DC: International Monetary Fund.
Schiff, M. W., & Winters, L. A. (2003). Regional integration and development. World Bank Publications.
Siroën, J. M., & Yucer, A. (2012). The impact of MERCOSUR on trade of Brazilian states. Review of World Economics, vol. 148, no. 3, pp. 553-582.
Venables, A. J. (2003). Winners and losers from regional integration agreements*. The Economic Journal, vol. 113, no. 490, pp. 747-761.
Yeats, A. J. (1998). Does Mercosur's trade performance raise concerns about the effects of regional trade arrangements?. The World Bank Economic Review, vol. 12, no. 1, pp. 1-28.