Argentina

The purpose of this paper is to review the status of industrial policies in Argentina and Brazil, draw lessons from the experience of the European Union (EU), and indicate... Show More + future policy issues which Mercosur partners will have to confront. The major conclusions are that while both countries employ some industrial policies by and large these are isolated and moderate in degrees. Whereas Argentina favors some export development policies, Brazil is more prone to selective industrial promotion. Both countries have distinct policies towards the automotive sector and favor regional development schemes. Nevertheless, first-order estimates of the fiscal costs of industrial policies appear to be at a moderate level. Whereas federal level policies will require some rationalization, greater difficulty will be encountered in future industrial incentives offered by sub-national governments in both countries, particularly in Brazil. Drawing on the experience of the EU, the recommendation is to deal with this potential problem sooner rather than later. Observations are also offered in how to deal with declining industries, inasmuch as this may occur more frequently in a context of rapid economic integration. Show Less -