Brazil EMBRACING GLOBALIZATION : case study HBR

Feb 3rd, 2012
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Brasil or Brazil case study published in Harvard business review focusing on import substitution. This is an analysis of the case study. its about 4 pages in length

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BRAZIL: EMBRACING GLOBALIZATIONImport substitution refers to a strategy where a country imposes restrictions on imports to allow local manufacturers and products to prosper. Secondly country would sometimes choose selective imports where it would allow favorable terms on imports of industrial goods while it places greater restrictions on import of consumer goods.Brazil chose this import substitution after the Great Depression. But it stayed with this strategy for decades allowing the local industries to prosper. Brazil chose the import substitution policy during the two oil shocks too along with devaluing its currency. Devaluation made local products cheaper in international markets while it also strengthened the economy by minimizing imports of consumer goods. However there were side effects of this strategy too. Due to this problem, inflation increased and normal competition couldn't prosper. The protectionism policy that became possible due to import substitution strategy worked for Brazil for some time. Between 1950 and 1980, Brazil saw a growth rate of 7% each year and its industrial sector became stronger. This substitution policy was marked by excessive investment by government where specific industries were targeted and high tariff rates were imposed against competition. However after 1980, disaster struck as Brazil saw hyper inflation, collapse of investment, external debt increased excessively and foreign investors disappeared due to economic conditions in Brazil

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