Industrial Development and Industrial Finance in Brazil and South Africa: Comparative assessment

Brazil and South Africa share similar development challenges. Both have very unequal income distributions, both have a strong resource orientation underpinning their industrial development trajectory, and both have undergone a sharp liberalisation and opening up of their economies in the past decade. At the same time, both countries are attempting to chart a progressive domestic economic path, while being important role players in the global economy. The most obvious difference is that of apartheid in South Africa. However, military regimes in Brazil pursued heavily state-influenced industrial development strategies which had similar objectives of self sufficiency and import substitution as did those of the apartheid regime in South Africa.

The Banco Nacional de Desenvolvimento Economico e Social (BNDES) is the government industrial development bank in Brazil and has been heavily involved in the development of minerals and resource-based industry in Brazil. In recent years it has diversified its activities and increased lending to services and infrastructure-related industries. It has also been successful, as part of governments industrial policy, in supporting dynamic industries such as aerospace. Its lending increased rapidly in the 1990s from US$3bn at the beginning of the decade to almost US$10bn by the end of the decade. In addition to its activities as a development bank, BNDES also plays an important role in formulating Brazilian development policies and identifying solutions to structural problems in the Brazilian economy.

The paper assesses the Brazilian experience and contrasts it with that of South Africa, in light of the restructuring of the Brazilian and South African economies and the development challenges they face.