Opinion: Irene Simanavicius, Toronto:

Invite Brazil
to Tea

Three decades ago, for example, the Brazilian government gave aircraft manufacturer Embraer lucrative contracts and various subsidies, recognizing that it could potentially find a niche in producing smaller, regional aircraft. Private investors were dubious of Embraer’s chances. Had it relied solely on private investment, the company probably would have failed; instead, it flourished, becoming the world’s biggest maker of regional jets.

My question is... What is Lithuania going to do to get top tier corporations to take Lithuania seriously? Lithuania needs to get on board especially now with the slow economic temperature in Europe, we need investors that will TRUST Lithuania. We need Lithuania to trust Lithuania. We need to be investing in the country, providing jobs for Lithuanians, introduce some level of security for Lithuania.

Lithuania NEEDS a strong economy!

Combining government support with a mandate for profitability and independent management has yielded successful businesses in other countries like Brazil for instance Brazil is perhaps the best current example of how a country can build innovative industries. Successive Brazilian governments have intervened—with incentives, loans, and subsidies—to promote industries that otherwise would have needed long-term private investment to make them competitive with U.S. and European rivals. At the same time, Brazil preserved strong, independent management of state-backed firms, ensuring they did not become political boondoggles.

Three decades ago, for example, the Brazilian government gave aircraft manufacturer Embraer lucrative contracts and various subsidies, recognizing that it could potentially find a niche in producing smaller, regional aircraft. Private investors were dubious of Embraer’s chances. Had it relied solely on private investment, the company probably would have failed; instead, it flourished, becoming the world’s biggest maker of regional jets.

Similarly, by investing in deep-sea drilling technology, Petrobras, a state oil company with an independent management board, has made itself competitive with multinational giants such as Chevron, Shell, and BP.

Three decades ago, for example, the Brazilian government gave aircraft manufacturer Embraer lucrative contracts and various subsidies, recognizing that it could potentially find a niche in producing smaller, regional aircraft. Private investors were dubious of Embraer’s chances. Had it relied solely on private investment, the company probably would have failed; instead, it flourished, becoming the world’s biggest maker of regional jets. Similarly, by investing in deep-sea drilling technology, Petrobras, a state oil company with an independent management board, has made itself competitive with multinational giants such as Chevron, Shell, and BP.

By picking industries it could dominate and supporting them even when private capital was scarce, Brazil has created internationally competitive companies in a range of industries, from aerospace to clean energy. Today the government often backs companies as a minority shareholder or through indirect vehicles, allowing for corporate independence while still helping companies make important investments in research and skills. Many of Brazil’s state-backed companies have survived the global slump far better than multinationals because they can rely on government assistance to see them through

Singapore has used government incentives to push companies to move into industries such as solar and other clean energies, which, although not necessarily profitable now, will be the emerging technologies of this century.

Some smaller countries may respond by either curbing their government access to their markets or by intervening heavily in their own economies. Neither of these solutions is really viable. As the biggest companies expand their global operations, their technology, connections, and capital will be almost impossible to keep out. And aging, heavily indebted nations face huge challenges reforming their entitlement programs: They’re in no position to pour the amount of resources into companies that Brazil, India, or China can.

Singapore offers one model of how the state can intervene in the economy without stifling entrepreneurship. The government there identifies industries that are critical to innovation and future technology, helps provide initial angel investments in small companies, tries to woo talented men and women from other countries who work in these industries, and uses state resources to ensure that universities focus on basic science research that will yield dividends in the future.

The government there identifies industries that are critical to innovation and future technology, helps provide initial angel investments in small companies, tries to woo talented men and women from other countries who work in these industries, and uses state resources to ensure that universities focus on basic science research that will yield dividends in the future.
Instead of trying to prevent—or worse, dismiss this altogether— U.S. and European companies and governments would do better to learn from them.

All these strategies require only modest state investment, and nothing on the scope of China’s or Brazil’s large-scale lending to state companies.

Perhaps we should invite the Brazilians for tea!