Class 6

Question 1

For Michael Porter, what is important to analyze about business environment and economic development?

Answer 1

Macroeconomic reform + Microeconomic fundamentals (nature of company and institutional strategies, resource and guidelines) –> companies’ competitiveness

Question 2

Why does Brazil have few important companies? (2)

Answer 2

Because we are stuck in the middle income trap which is a consequence mostly of our low productivity

Question 3

Where are the large companies? (2)

Answer 3

• Almost always performing in sectors that were important in the 19th century but became irrelevant in the 21th century
• Having global player in sectors such as drinks, cement, mining, agriculture , fish or steel is not bad but it is not enough

Question 4

How to get out of the middle-income trap? (5)

Answer 4

• Ending Dutch disease
• Maintaining an exchange rate that makes it difficult to import goods that could be produced here, and that encourages the export of manufactured goods (devalue)
• Increasing productivity mainly by improving infrastructure and the business environment: Facilitating the modernization of factories and investing in education to train workers.

Question 5

What are some causes of low productivity in Brazil? (7)

Answer 5

• High Taxes
• Lack of credit and high interest rates
• Bureaucracy
• Lack of infra-structure
• Low technology usage and weak labor capacity
• Inadequate legislation (ex: associations are prohibited)
• Lack of long-term plans which result in poor investments (few public policies)