Despite efforts to liberalize trade, reform has been uneven. In the heavily protected automotive industry, high import tariffs have encouraged foreign automakers to establish factories in Brazil. But their productivity remains low; auto plants in Mexico, for example, produce twice as many vehicles per worker. And Brazil exports only a small share of the vehicles that it produces.
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This contrasts sharply with Brazil's success in developing innovative and globally competitive aerospace and agricultural sectors. One critical difference was the authorities' emphasis on boosting R&D in these sectors before reducing the government's direct role.
Brazil's trade in goods also suffers from the country's inadequate transportation and communications networks. The rail system is limited, and only 14% of roads are paved, which is not surprising, given that Brazil's investment in infrastructure averaged only 2.2% of GDP in 2000-2011 – well below the global average. Brazil can improve on this record by using profits from the offshore oil fields that it is currently developing.
As for trade in services – an area where performance has been lackluster, at best – Brazil would benefit considerably from increased foreign-language proficiency, which would enable more Brazilians to conduct business abroad. Tourism also offers significant growth potential, particularly if Brazil can build on the rare opportunity presented by hosting the World Cup and the Olympics.
Brazil's connectedness agenda should also include efforts to attract more foreign talent. Skilled migrants have been essential to the growth of some of the world's leading hubs of technology and innovation – from Silicon Valley to Ireland, India, and Taiwan. Today, only 0.5% of Brazil's workforce is foreign-born, compared to more than 5% in the early 1900s.
Brazil also lags in terms of data and communication flows, partly because a large share of the population lacks Internet access. With improved digital links, Brazil would gain new opportunities to improve productivity and innovation. What better place than Brazil, with its large and growing consumer market, to incubate the next Facebook? If that sounds farfetched, consider this: Instagram co-founder Mike Krieger is a Brazilian who left home to find his fortune in San Francisco.
This month, the World Cup is bringing the world to Brazil. It is up to Brazil to invite it to stay.
Commentary by Matt Slaughter, an NBER economist and professor at Dartmouth, and Jaana Remes, a partner at McKinsey Global Institute.
Copyright: Project Syndicate, 2014.