Kieler Studien Institut Fiir Weltwirtschaft an Der Universitat Kiel
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Kieler Studien Institut fiir Weltwirtschaft an der Universitat Kiel Herausgegeben von Herbert Giersch 221 Bernhard Fischer • Peter Nunnenkamp et al. (^Capital-Intensive Industries in Newly Industrializing Countries The Case of the Brazilian Automobile and Steel Industries Authors: Bernhard Fischer, Juan-Carlos Herken-Krauer, Matthias Lucke, Peter Nunnenkamp ARTIBUS INl J.C.B. MOHR(PAUL SIEBECK) TUBINGEN ISSN 0340-6989 CIP-Titelaufnahme der Deutschen Bibliothek Capital-intensive industries in newly industrializing countries the case of the Brazilian automobile and steel industries / Bernhard Fischer ... - Tubingen : Mohr, 1988 (Kieler Studien ; 221) ISBN 3-16-345444-5 kart. ISBN 3-16-345445-3 Gewebe NE: Fischer, Bernhard [Mitverf.]; GT Schriftleitung: Hubertus Miiller-Groel ing Institut fur Weltwirtschaft an der Universitat Kiel J. C. B. Mohr (Paul Siebeck) Tubingen 1988 Alle Rechte vorbehalten Ohne ausdruckliche Genehmigung des Verlages ist es auch nicht gestattet, den Band oder Teile daraus auf photomechanischem Wege (Photokopie, Mikrokopie) zu vervielfaltigen Printed in Germany ISSN 0340-6989 Ill Contents List of Tables VI List of Figures XII Abbreviations and Acronyms XIII Preface XV A. Introduction 1 B. The Competitive Edge of the Brazilian Automobile Industry 9 I. Introduction 9 II. Economic Performance of the Brazilian Automobile Industry 13 1. The Role of Brazil in International Automobile Production 15 2. Export Performance of Brazilian Automobile Producers .. 25 a. Destination of Exports 25 b. Product Structure of World-Market Sales 28 c. Differences in Firm-Strategies 36 III. Brazil's Position in World-Automotive Markets and Relative Production Costs 37 1. Quantitative Assessment of Brazil's Revealed Comparative Advantages in World-Automotive Markets 37 a. Export-Performance Ratios for Major Export Markets 38 b. Price Competitiveness in Europe and the United States 44 2. Production Costs in the Brazilian Automobile Industry: Major Cost Elements in International Perspective 53 a. Overview on International Cost Comparisons 54 b. International Comparison of Unit-Labour Costs in Motor-Vehicle Production 63 c. Scale Efficiency of Automobile Production in Brazil .. 72 d. On the Efficiency of Supplying Industries: Inter- national Cost Comparisons for Selected Input Items .. 79 IV. Major Determinants of the Export Performance of the Brazilian Automobile Industry 88 1. Factor Intensities in Automobile Production 90 a. Standardization in International Production of Transport Equipment? 90 IV b. Factor Intensities in Sub-Branches of the Brazilian Motor-Vehicle Industry 95 2. The Role of Government Interventions in Brazil 109 a. Automobile Exports and Exchange-Rate Policies 110 b. Export Incentives for Automotive Exports 116 c. Relative Incentives to Domestic and Export Sales of Automobiles: A Comparison of Nominal Incentive Rates 124 d. Effective Incentives Granted to Automotive Industries 127 V. Prospects of Automobile Production in Brazil 133 1. Domestic Demand Prospects for Automobiles in Brazil . 134 2. The International Environment for Brazilian Automobile Firms in the Future 139 a. Prospects of World Demand for Automobiles 139 b. Technological Change, Firm Strategies and Motor- Vehicle Production in Brazil 147 3. Policy-Induced Bottlenecks to Future Growth of Auto- mobile Production in Brazil 156 C. The Competitive Edge of the Brazilian Steel Industry 164 I. Introduction 164 II. Economic Performance of the Brazilian Steel Industry 166 1. Output, Trade, and Current Structure 166 a. Origin and Development of Steel Production 166 b. Firm-Specific Characteristics of the Brazilian Steel Industry 172 c. Brazil's Position in the World Steel Market 173 2. Major Trends in Brazil's Steel Exports 178 a. Export Performance and Export Propensity 178 b. Destination of Exports 182 c. Export Performance at the Firm Level 184 III. An Assessment of Brazil's Position in World Steel Markets and an International Comparison of Production Costs 185 1. Quantitative Assessment of Brazil's Revealed Com- parative Advantage in World Steel Markets 185 a. RCA values for Iron and Steel 185 b. Price Competitiveness 188 2. Level and Structure of Production Costs: An Inter- national Comparison 190 V a. Overview of International Cost Comparisons 191 b. Major Cost Elements in International Perspective 194 c. Transport Costs, Embarkation Costs and Sea Freights 204 3. Summary 206 IV. Major Determinants of Production Costs in the Brazilian Steel Industry 207 1. Factor Intensities of Steel Production 207 a. International Standardization in Steel Production .... 207 b. Factor Intensities in Sub-branches of Brazil's Steel Industry 210 2. The Technology-Adoption Hypothesis 213 3. The Role of Economies of Scale 218 4. The Impact of Government Interventions 224 a. Domestic Price Controls 225 b. Exchange Rate Policies and their Effects on Steel Exports 228 c. Nominal Incentives to Domestic Sales and Exports of Iron and Steel Products 232 V. Prospects for Steel Production in Brazil 237 1. Domestic Demand 237 a. Methodological Issues 237 b. Empirical Results 240 2. The International Environment 245 a. Trends in World Demand 245 b. Technological Changes and Steel Use 247 c. The Impact of Protection in Industrialized Countries on Brazil's Steel Exports 251 3. Domestic Supply Conditions 258 D. Summary and Conclusions 261 Appendices 273 1. Normal Pattern and Actual Automobile Production in Brazil and Other Major Producing Countries - Calculation Methods and Illustrations 273 2. Appendix Figures 280 3. Appendix Tables 281 4. Glossary of Technical Terms (Steel Industry) 306 References 309 VI List of Tables Table 1 - Growth of Brazilian Manufactured Exports and Auto- motive Exports to the World, Developed and Developing Countries, 1973-1983 14 Table 2 - Production of Passenger Cars by Regions and Selected Developing Countries, 1965-1985 16 Table 3 - The Relationship between Brazilian Automobile Production and Production in Major Industrialized Countries, 1970- 1985 - Regression Results 19 Table 4 - Destination of Brazilian Exports of Road-Motor Vehicles, 1972-1984 26 Table 5 - Automotive Exports and World-Market Shares by Region and Selected Developing Countries, 1971-1984 29 Table 6 - Share of Brazilian Automobile Production Devoted to Ex- ports, 1965-1985 33 Table 7 - Product Structure of Brazilian Automotive Exports, 1972-1985 35 Table 8 - Export Shares and the Structure of Exports of Major Brazilian Automobile Companies, 1986 37 Table 9 - Export-Performance Ratios for Brazilian Automotive Ex- ports to Major Markets, 1971-1984 40 Table 10 - Unit Values of EC-Imports of Motor Vehicles and Se- lected Automotive Parts from Brazil and Other Countries, 1982-1985 46 Table 11 - US-Imports of Selected Automotive Items: Unit Values, Transport Costs and Market Shares of Brazil, Mexico and Japan, 1980-1984 ' 48 Table 12 - Retail Prices of a Middle-Range Car in Brazil and Major Industrialized Countries, July 1985 58 Table 13 - Cost Comparison between a Japanese and a Brazilian Car, 1984 59 Table 14 - Labour-Cost Savings for US-Manufacturers from Out- sourcing of Various Autoparts and Components to Se- lected Countries, 1982 62 Table 15 - The Motor-Vehicle Industry in Selected Producing Coun- tries: Wages, Value Added and Output per Employee, Unit-Labour Costs and Vertical Integration, 1982 66 VII Table 16 - Indices of Unit-Labour Costs for the Motor-Vehicle Industry in Selected Producing Countries, 1975-1985 ... 70 Table 17 - The Scale of Production of Passenger Cars and Light Multiple-Usage Vehicles at the Firm and Model Level in Brazil, 1960-1985 75 Table 18 - The Scale of Production of Passenger Cars and Light Multiple-Usage Vehicles at the Firm and Model Level in Selected Countries, 1984 77 Table 19 - Wholesale Prices for Major Automotive Input Items in Selected Automobile Producing Countries, 1975-1985 82 Table 20 - Nominal and Real Lending Rates in Selected Automobile Producing Countries, 1975-1986 86 Table 21 - Relative Factor Intensities of Transport-Equipment Industries in Selected Automobile Producing Coun- tries, 1973-1984 91 Table 22 - Factor Intensities in Sub-Branches of the Brazilian Transport-Equipment Industry, 1975, 1979 and 1980 97 Table 23 - Factor Intensities in Sub-Branches of the Motor-Vehicle Industry of Brazil 1975, 1979 and 1980 - Rank-Corre- lation Results 102 Table 24 - Factor Intensities in Total Manufacturing and Transport- Equipment Industries of Brazil, by Size of Establish- ments, 1975, 1979 and 1981 105 Table 25 - The Structure of Employment and Average Wages in Transport Equipment and Total Manufacturing Indus- tries of Brazil, 1975 and 1980 107 Table 26 - The Impact of the Real Exchange Rate and the Degree of Capacity Utilization on Brazilian Exports of Road- Motor Vehicles, 1970-1985 - Regression Results 112 Table 27 - The Impact of Real Exchange Rates and the Degree of Capacity Utilization on Brazil's Market Share in Total Road-Motor-Vehicle Imports of Selected Regions, 1970- 1984 - Regression Results 113 Table 28 - Incentive Rates to Exports and Domestic Sales of Brazilian Manufacturing Industries, 1980 121 Table 29 - Legal and Implicit Tariffs and Implicit Protection of Automotive Products in Brazil, 1980/81 126 Table 30 - OECD-Estimates of Car Pare and Automobile Demand in Brazil, 1990-2000 136 VIII Table 31 - Alternative Projections of Passenger-Car Demand in Various Regions, 1985-2000 141 Table 32 - Production, Trade, and Apparent Consumption of Rolled Steel Products, Brazil, 1925-1985 168 Table 33 - Structure of the Brazilian Steel