A BrazilWorks Briefing Paper
By Etienne Michaud
BrazilWorks is pleased to publish this BrazilWorks Briefing Paper, “Driving up the Local Content of Brazilian Cars: The Inovar-Auto Program and Supply Chain Strategy," written by Etienne Michaud. Mr. Michaud’s work on Brazilian industrial policy makes an important contribution to understanding development and industrial policy experiences, outcomes and evolving alternatives during the first half of the twenty-first century. This briefing follows up on his BrazilWorks Briefing Paper published earlier this year, “Assembling the World’s Most Expensive iPhone: Global Value Chains, Industrial Policy and Electronics in Brazil”. In this briefing, Michaud describes Brazil’s Inovar-Auto local content policy for automobile manufacturing within the context of Trade-Related Investment Measures (TRIMs) and the 1994 TRIMs agreement of the World Trade Organization (WTO), analyzes its role in the supply chain strategy of major global automobile manufacturing firms, and summarizes the findings of his application of a partial equilibrium model to the pricing of the Brazilian car market. His report reveals the responses of the major global automobile firms to the Brazilian Inovar-Auto industrial policy and its most important outcome, namely the relocation of manufacturing facilities to Brazil. Michaud makes a notable contribution to a scholarly understanding of developing country industrial policy and the global automotive industry, but more importantly, he provides a policy analysis that should inform the Brazilian debate precisely as the government contends with the European Union and Japan’s challenges to this local content requirement policy at the WTO. Moreover, Michaud’s analysis assists policymakers and business leaders to better understand alternatives for advancing Brazil’s economic development for decades to come. Read more.