Nurturing domestic firms through public procurement: A comparison between Brazil and Japan

Abstract

Due to the significant amount of financial resources involved, public procurement can be used as a useful pull mechanism to stimulate private investment and to influence market dynamics, entrepreneurship, and R&D activities, in order to promote the growth of local industries. This study examines recent policies implemented by the Brazilian government aimed at using public procurement to foster the domestic industry. It also discusses how the Japanese government used public procurement as a tool to promote the growth of domestic firms before the country signed the World Trade Organization’s Government Procurement Agreement (GPA) in 1995, in order to present the advantages and drawbacks of each country’s approach. This study argues that, while the pre-GPA Japanese approach was efficient in creating more significant partnerships between the government and key domestic firms to achieve industrial policy objectives in strategic sectors, the Brazilian recently implemented policy has the advantage of being more accountable and transparent. This research argues for the possibility to harmonize transparency and accountability with initiatives to nurture domestic firms in public tenders and contends that an efficient strategy to use public procurement to promote the growth of the national industry should be a mixture of the Brazilian and Japanese approaches.

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