New Export Activities in Brazil: Comparative Advantage, Policy or self-Discovery?

The study aims at analyzing the emergence of export discoveries in Brazil following a framework proposed by Hausmann and Rodrik (2003, p. 603-633). Three activities were selected to illustrate the approach applied to Brazil: aircrafts, cell phones and swine meat. These activities not only recorded double-digit growth rates in the value of exports, but also accounted for a substantial share of the rise in Brazilian exports over the last ten years: in 1996 they answered for 1.0% of Brazil?s exports, a proportion that climbed to 7.8% in 2000, before receding to 5.7% in 2005. The three cases we examined in detail tend to confirm the importance of efficiency gains and sunk costs in discovery processes, as well as the good performance of the world economy, as driving forces behind the continued expansion of exports despite the recent appreciation of the real. They also point to the conclusion that both economic policy and comparative advantage played important roles in the emergence of new export activities in Brazil. More specifically, we found that the role of government was very important in aircraft, moderate in mobiles, and nearly nil in swine meat production and exports. Overall, our case studies reinforce the view that market failures are common in activities that go through export discoveries. In the three cases, economies of scale were a crucial determinant of competitiveness and a wellknown brand was an important instrument to overcome information asymmetry and facilitate entry into export markets (less so with swine meat). The three activities also shared the fact that exporters were increasingly concentrated on design, marketing, R&D, and assembling, turning coordination with suppliers a very important element in their strategies. Vertical diffusion was another noteworthy feature of the cases examined.