Class 7

Question 1

What are the infrastructure characteristics that best explain the low productivity of the industry (key parts of business environment)? (8)

Answer 1

• Highways
• Ports
• Airports
• Railways (Terrible mistake: reducing railways → cost of transportation is one of the highest in the world)
• Urban Public Transport
• Water and Sanitation
• Electrical Energy
• Telecommunications

Question 2

Why does Brazil have poor management in local companies, and, consequently, low productivity? (9)

Answer 2

• Historical: colonization in Latin America for exploitation –> oligarchic and aristocratic formation + patriarchal society (that’s why is so family driven)
• Agriculture had been the only activity for many years: relation to the feudal system and was rooted in our culture –> authoritarian manner and always on the defensive
• Overreliance on the basic factors.
• Poor cooperation between companies.
• Lack of integration with the rest of the value chain
• Weak financial system to support capital requirements
• Little entrepreneurship culture –> lack of innovation
• Lack of brands with an international reputation
• Lack of managerial competence to operate in markets outside their own countries

Question 3

What needs to change
within the Brazilian companies? (4)

Answer 3

• Develop innovative culture
• More investments in R&D
• Increase the production scale
• Introduce modern management techniques.

Question 4

Who destroyed Brazilian industry? ((5+6)+2)

Answer 4

1. Washington Consensus (Americans)

• 1956: developmental policies implemented during the government of Juscelino Kubitschek created greater entry of foreign companies, mainly multinationals, with emphasis on automobile manufacturers
• 1960’s and 70’s: tax incentives for new industries + creating the necessary infrastructure –> road network growth
• After the 70’s: industry became stronger, with a wide variety of factories that produced everything from non-durable consumer goods to capital goods
• 1980’s: Brazil was one of the few countries in the world that produced almost everything
• 1990’s: adoption of neoliberal measures in Washington Consensus –> free market facilitated the entry of international capital and intensified internal competition with strong foreign companies
• Washington Consensus = Full liberalization of imports, Minimum presence of state with privatization of all state enterprises, Focus in Austerity, End of public subsidies, Keep high interest rates, High exchange rates which gave more capacity to local currency import products from developed countries

2. Dutch Disease
3. Lack of government investments –> very poor business environment