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domestic market. Economists stress the need for government action to offset this with an income policy that will bring wages up to optimal levels.51
International Embeddedness and the Need to Spur Competitiveness A third structural feature affecting the emergence of NSA was Lula’s decision to liberalize the economy and maintain openness. Although export promotion had been a development target since the 1960s, domestic industrialization dominated the governmental agenda until the 1990s. This situation changed with globalization and liberalization. In the 1990s, Brazil opened itself to international competition and began to actively pursue export markets, forcing the state to pay more attention to competitiveness. When Lula’s government took office, one of its first moves was to emphasize the need for state action to encourage the solutions needed to maintain competitiveness. This decision, brought about by the commitment to open economy policies, explains both the revival of industrial policy and the government emphasis on innovation. From PITCE through Brasil Maior, policies have focused on boosting the international competitiveness of Brazilian companies, including BNDES’s support for the internationalization of Brazil’s most competitive industries and various mechanisms to subsidize exports. Although the government has recognized the importance of competiveness and that maintaining openness to foreign goods is necessary to preserve competiveness, it has also taken measures to provide protection for domestic industries.
Structural Elements: Conditioning Factors The stage was set for the government, led by the Brazilian Workers Party, to increase the role of the state in the economy. But why did Brazil’s role as a development state take the shape that it did? Why did Brazil opt for an innovation-focused and collaborative public-private form of industrial policy rather than, say, renationalization as did Venezuela, Argentina, Ecuador, and Bolivia? Why was Brazil supportive of foreign investment in most sectors? This section discusses factors that influenced the choices Brazil has made in its search to help the economy regain dynamism and promote inclusive growth. Among these factors, four are especially important: • Constitutional considerations
• The strength and scope of the private sector • International economic law and policy • Global financial markets
51 Bresser-Pereira, supra note 4 at 193.