International economic integration is the outcome of an international trade process by which national resources become more and more internationally mobile while national economies become increasingly interdependent through the mutually beneficial voluntary exchange of goods and services undertaken by national and multinational enterprises.
The intensity of mutually beneficial voluntary trade depends on an open and market-based export and investment regime in the countries to which national and multinational enterprises bring their business. Liberal foreign trade government policies along with bilateral and multilateral trade agreements are crucial for the success of multinationals and the creation of national benefits from international trade.
There is more than politics and policies, though, to be understood in the process and in the outcome of international economic integration of a national economy. This is what you will find in abundance in this book. The authors use Brazil as a case study and explain both the process and the outcome of its international economic integration by analyzing in each chapter a different contributing factor to the benefits and costs from international economic integration. This makes the reading of this book extremely valuable.
Another important feature that makes this book unique is the fact that its authors are native Brazilian academic scholars. They possess both the professional training and the personal familiarity of the issues they investigate in their chapters. This book is a collection of pioneering and innovative set of studies that brings together a remarkable group of Brazilian scholars to explain how and why the Brazilian economy moves through international trade to take its right place in the world economy. In this book you will find a compelling account of international economic integration elaborated intensively for the Brazilian case with valuable lessons for other emerging and advanced economies around the world.
The process of international economic integration and its outcome, also referred to as globalization, is of great interest to both scholars and students in academia and to practitioners in business and politics. Scholars in economics, finance, marketing, management, politics, sociology, economic history, and journalism are interested in scholarly publications by researchers in academia who address the international economic integration issues of those countries with rigor and credibility, as was also mentioned in the introduction of the first volume of this book project on the Brazilian economy.1 International policy decision-makers as well as multinational enterprises and financial portfolio-managing companies interested in investing in those emerging markets would also be interested in scholarly publications that address the economic development issues of those markets with rigor and credibility. This is the need that this book, International Integration of the Brazilian Economy, will satisfy.
Most of what is published outside of Brazil on the international integration of the Brazilian economy is authored by non-native outsiders, by non-economists/non-specialists, or by authors with only undergraduate degrees. As a result, those publications are contaminated by the subjectivity error bias of their casual analysis and by the ephemeral value of their journalistic type of standpoint.
This book on the international integration of the Brazilian economy is different from anything that already exists in the market. It is authored by native economics scholars and will give the reader the local perspectives on the international integration of the Brazilian economy. The editor of this book, Dr. Grivoyannis, with the assistance of the young Brazilian scholar, Dr. Marcos Reis, selected the authors of each chapter from the established (old) and the emerging (new) scholars and faculty members of the top academic institutions in Brazil. Each chapter is written by a high-profile economist focusing on a key area of the Brazilian economy as perceived and understood by a native scholar.
This book also adds a dimension of historic value to the literature. Future historians will be able to find in this book how native scholars understood the economic globalization issues of Brazil at the beginning of the twenty-first century and will learn their main concerns. Many of these native scholars (authors of this book) are already influencing the policymakers of Brazil and the managers of Brazilian foreign trade and multinational enterprises directly or indirectly through their teaching and research. Their ex-college students currently manage and regulate the Brazilian economy and will continue to do so in the future.
1.1 Chapter 2
The second chapter of this book analyzes the fundamental relationship between domestic effective demand and foreign trade for the Brazilian economy and establishes a conceptual foundation for understanding Brazilâs international economic integration.
The degree of Brazilâs international economic integration is determined by Brazilâs trade with the rest of the world. Trade includes both, exports and imports. The composition of exports and imports, along with their monetary value, is determined by domestic effective demand.2 Domestic demand creates and sustains domestic supply.3 Domestic supply becomes international exports when other countries have an effective demand for the domestic supply and can sustain their demand for it. Domestic demand determines also the composition and the magnitude of imports from other countries. Domestic demand, therefore, determines Brazilâs exports and imports and, ultimately, the degree of its international trade and economic integration.
During the Import Substitution Industrialization (ISI) policy of the 1950â1970s, for example, the Brazilian economy grew rapidly as a result of massive investments and increasing production of durable goods, intermediate goods, and capital goods. The increasing demand for investment goods during this period of ISI had a different impact on the composition of Brazilâs international trade and on the structure of its international integration than in subsequent periods. The 1980s were characterized by stagflations and economic policy prescriptions summarized in the âWashington Consensus.â4 By early 1990s, tariff barriers were decreased, financial markets were deregulated, more capital inflows were allowed, public expenditures were controlled, and companies were privatized in Brazil. As a result, Brazilâs domestic demand and international trade changed from what they were in previous decades. The Brazilian economy experienced a price stabilization in 1994 and an economic growth acceleration from the mid-2000s to the beginning of the international economic crisis in 2008. The high growth during the 2000s was a result of a strong expansion of domestic effective demand and had a different impact on Brazilâs trade and international integration than the domestic demand during earlier periods.
Professors Borghi and Sarti from the University of Campinas (UNICAMP), Brazil, have identified in the second chapter of this book the main driving forces of economic growth and the underlying dynamics between demand, supply, and trade, which determine Brazilâs rate of international economic integration.
1.2 Chapter 3
Manufactured commodities are an important component in international trade and an influential determinant in the international economic integration of national economies. The penetration of the international markets by the manufactured commodities of any national economy depends on their market competitiveness. Market competitiveness of any product depends on its quality and on its cost of production, which constrains the downward movement of its price. The higher the quality and the lower the price, the more competitive is the product and the higher is the role this commodity plays in a countryâs international trade and economic integration.
Professor Castilho and Professor Freitas from the Federal University of Rio de Janeiro (UFRJ), and Professor Torracca from the Federal Rural University of Rio de Janeiro (UFRRJ), Brazil, analyze âThe Competitiveness of Brazilian Manufacturing in both Domestic and International Marketsâ in Chap. 3 of this book and shed light on the importance of manufacturing in Brazilâs international economic integration.
They first examine the international insertion of Brazilian manufacturing given the evolution of international prices and its consequences on the structure of Brazilian and global trade and the development of global trade and production networks. Secondly, they analyze the penetration of foreign goods and the import content of domestic demand in order to understand the evolution of Brazilian manufactured goods competitiveness in its domestic market. In Sect. 3.â2 of their chapter, they present a review of the literature on production fragmentation and examine the competitiveness of Brazilian manufacturing from the perspective of productive fragmentation. Holding that perspective allows for a different view of competitiveness that prioritizes the activities, tasks, and all the value created in this process over the transactions of final goods, which is the focus of traditional trade statistics usually treated in conventional literature. For countries like Br...