Capabilities and Compatibilities: An Industry-Level Comparison of Trajectories of Developmental Learning Under Pressure in Mexico and Brazil

2016 has not shaped up to be a good year for Brazil. The confluence of a global commodities bust, a paralyzing national political scandal and a virus epidemic are testing the country’s institutions at a level possibly not witnessed since the transition to electoral democracy. In many respects the current economic and political troubles are a high-stakes game of developmental problem-solving. Many believe that the high-capacity, strong-state approach adhered to by the country has endowed it with the resources and know-how to triumph in the long run (eg Rodrik 2015). Yet the pathway toward such eventual outcomes is still incipient and poorly understood. 

Meanwhile, Mexico stands as another economic giant of Latin America that is beset by many parallel political and economic problems, yet it employs an entirely different approach to the role of the state in the economy as well as what are its key models and sources of economic learning. Supporters of laissez-faire economics believe that Mexico’s model will outcompete Brazil’s in the long-run, and take the country’s resilience – with even some significant economic bright spots in sectors such as automobile manufacturing – in the current global slump as an indicator of such.

This paper aims to compare the problem-solving processes of Mexican and Brazilian industries under conditions that are testing both countries’ economic and political models. In particular, it compares their divergent models of innovation systems in order to glean lessons about how these different models – with different roles and organizational forms for public as well as domestic and foreign private actors – affect problem-solving pathways amidst similar global economic pressures. We do so with three matched industry comparisons (petroleum, automobile manufacturing, and aerospace manufacturing), each with its own industry-level competitive pressures, as well as distinct legacies of state involvement. We hypothesize that variation in industry learning sequences will adhere much more closely to the articulation between a) the conditions of vulnerability in the form of threats to market viability and b) the types of assistance to learning offered by the state than they do to c) measurable capacities of either public agencies or private firms. By following the pathways of these industries from the time of the global financial crisis to the present, we aim to deepen the literature’s understanding of the mechanisms driving learning processes forward iteratively in varying innovation systems, and how these institutional designs’ impacts are mediated by exogenous shocks whose forms vary by industry. By clarifying the relationships between institutional capacities, policy models, and industry-level competitive structures, this research contributes to theories of public-private partnerships and organizational learning in developing countries.