APL (Ajiken Power Lunch)

APL (Ajiken Power Lunch) is a lunchtime workshop open to public, including IDE staffs, visiting research fellows, IDEAS students, outside researchers and graduate students. This workshop provides a platform for presentation of any work in progress where we can discuss in either English or Japanese.

Those who would attend a seminar are asked to announce yourself to receptionists on your arrival at the IDE and to obtain APL Organizers' signature on your admission card after the seminar.

February 27, 2017. (Monday) 10：00-11：30

Institute of Developing Economies, Japan External Trade Organization C21 Meeting Room 　

Boostrapping growth in Latin America: O&G local content policy and the emergence of a new corporate production system

Over the last couple of decades Latin America productivity stagnated, deindustrialization quickened and competitiveness declined. Brazil's paradigmatic industrial policy revival efforts seemingly failed to reverse these trends. New institutions and forums were created to increase coordination between government and business sectors, while traditional developmental institutions experienced a considerable increase in their budgets to fund modernization, internationalization and R&D activities of companies. In parallel to these, the government adopted protectionist measures in different sectors. Local content requirements (LCR) in the oil and gas sector in 1998 evolved from voluntary offers by oil companies to detailed lists that cover a broad array of equipment and services based on a rationale of securing demand and creating new opportunities for firms operating in Brazil. Despite controversial implementation and boom and bust results in promoting specific sector such as the shipbuilding industry, we argue that LCR effectively contributed to the consolidation and strengthening of links between oil companies and the different tiers of suppliers operating in the O&G sector into an emergent corporate production system (CPS). The incentives created by LCR seem to have established new collaborative partnerships overcoming historical hierarchical patterns between domestic supplier and foreign firms. By grasping the opportunity created by LCR in becoming suppliers of the O&G sector, Brazilian firms and foreign first-tier suppliers have been cooperating to deliver equipment and services to global oil companies operating in Brazil.

More specifically, we argue that LCR in combination with the high technical standards and technology-intensive characteristics of the offshore oil sector in Brazil allowed for this new CPS which spurred an upgrading dynamic by manufacturing suppliers in different tiers of the supply-chain. Critically, however, this more collaborative CPS and upgrading dynamic has not translated clearly yet in an increased innovative capacity of manufacturing Brazilian-owned firms. Empirically, our paper combines survey data collected from 564 suppliers of the Brazilian O&G sector with case studies of companies in different tiers of the supply chain – two large foreign providers of subsea equipment and some of their suppliers and a cluster of small size companies, originally suppliers for the steel industry, that became suppliers for the shipbuilding industry.

Our results suggest a debate about the effectiveness of recent efforts of Brazilian industrial policy and the scope conditions of policies aimed to stimulate upgrade and innovation of domestic firms joining complex and sophisticated supply chains. In practical terms, Brazilian efforts on the O&G sector seem to have achieved some positive results – such as upgrading – despite emphasis on goals such as job creation. They also indicate that LCR can be a useful policy for developing countries to help domestic firms upgrade and enter sophisticated global supply chains, and that some specific sectoral dynamics are more prone to favor such process.

Professor Antonio José Junqueira Botelho (Visiting Professor of Sophia University and Professor of Rio de Janeiro University Research Institut)

Tomohiro MACHIKITA

English