Policy-Entrepreneurship or Policy-Opportunism? the Diffusion of Local Content Requirements in Brazilian Industrial Policy

Thursday, 2 July 2015: 8:30 AM-10:00 AM
CLM.B.05 (Clement House)
Yuri Kasahara, Norwegian Institute for Urban and Regional Research, Oslo, Norway
Antonio Botelho, Iuperj / UCAM, Rio de Janeiro, Brazil
In spite of the 1990s liberalization wave and the continuing focus on competitive export-oriented measures, local content requirements (LCR) have remained a critical mechanism of Brazil’s industrial policy regime. Such measures can be found both in in government procurement practices in the health and renewable energy sectors and in criteria to obtain subsidized loans from the National Development Bank (BNDES). In particular, since the late 1990s, LCR have also been a cornerstone of the Brazilian industrial policy for the oil and gas (O&G) sector. Here, the innovation lies in the fact that the policy is aimed systematically toward upstream activities in order to stimulate the supply industry of equipment and services – especially the ones related to offshore activities. Recently policy-makers have sought to devise a similar policy of LCR for the supply industry in the mining sector, characterizing a process of inter-sectoral policy diffusion at the federal level. However, in contrast with the oil and gas, the mining sector in Brazil has presented several challenges that limit their diffusion efforts. Furthermore, what it is more striking is the lack of voices arguing for or opposing it, in contrast with the heated debates the issue has raised in the O&G sector.

In this paper, we analyze how the LCR policy model developed for the O&G sector has been pushed into the mining sector by bureaucrats that act as “policy-opportunists” as in contrast with the ideal-type of “policy-entrepreneurs”. Our study focus on three levels of analysis: 1) the process of “policy transfer” of the model to the mining sector promoted by policy-makers at the Ministry of Mines and Energy (MME) and the Brazilian Agency of Industrial Development (ABDI); 2) differences in the organization of interests in both industries; and 3) the contrasting industrial structure and organization between the sectors, particularly the level of technological sophistication and internationalization of the respective supply chains.

Our analysis shows that a top-down approach from the government in implementing LCR, the lack of systematic evidence about the success of LCR in the O&G sector, and the lack of knowledge about the organization of the mining industry itself and its suppliers characterizes this diffusion process as the result of policy opportunism of bureaucrats. Rather than acting as policy entrepreneurs that aims to advance a well-structured and elaborated agenda based on specialized knowledge, the bureaucrats seem to have acted as “policy opportunists” who used the proposal of a new mining code as window of opportunity to launch LCR in the sector. The opportunism of their actions lies in the fact that the promotion of LCR is in line with the “developmentalist” idea-set dominating the current government industrial policy regime. However, the historical trajectory of institutional arrangements and greater fragmentation of interests in the mining sector makes coordination within government and between companies more difficult and thus less likely that LCR can succeed there in comparison with the O&G sector.