New IDS research published today sets out the policies that developing country governments should implement to encourage export diversification, drawing lessons from Brazil.

The report's launch coincides with the BRICS Summit (Brazil, Russia, India, China and South Africa) which is taking place this week in New Delhi. Heads of state of the world's leading emerging economies are expected to discuss political, economic and social issues of mutual and international interest. The fourth meeting of its kind, the summit will focus on a ‘BRICS Partnership for Global Stability, Security and Prosperity’.

The global political and economic influence of Brazil, along with the other BRICS countries, is fast increasing. Brazil has seen rapid economic growth over recent years, with its economy now overtaking the UK to become the world’s sixth largest. Much of this growth has been fuelled by exporting. Achieving Export Diversification: Lessons from Brazil, published today, aims to draw lessons from the export diversification experience of Brazil for other developing countries.

IDS Research Fellow and co-author of the report, Xavier Cirera, explained the rationale of the project. ‘Brazil’s economy has grown rapidly by exporting, and although this has been very much based on agricultural commodity exports, diversification has occurred in other sectors. Much of this is down to strategies of individual firms that have diversified into new products and markets. We used evidence from Brazilian manufacturing firms which have successfully diversified their exports, to examine the firm-level characteristics and strategies that have led to this.

‘We identified clear government policies which will encourage export diversification, such as encouraging firms to innovate and link up with international markets. If developing country governments want to reap the benefits of export diversification, they need to take seriously the support they provide to firms.’

Why export diversification matters

Achieving export diversification has been a central objective of development policy for the last 50 years, as it is correlated with high rates of economic growth. By exporting an increasingly diverse range of products, vulnerability to external trade shocks is reduced, and new learning opportunities are created.

But despite the theoretical and empirical grounding on the benefits of export diversification, many developing countries struggle to achieve it. High commodity prices and increased global competition mean it is difficult to break into new markets, and so exports tend to focus on products that are highly concentrated in natural resources. Successful export diversification at an economy level requires individual firms to diversify exports. However, little is known about the firm-level processes and innovation efforts required for introducing new products to export.

Lessons for developing country governments

The research identifies four key policy lessons for developing country governments, which will help facilitate firm-level export diversification:

1. Incentivise innovation
2. Support firms to consolidate in the domestic market
3. Support export sustainability
4. Facilitate Foreign Direct Investment (FDI) and links with international markets.

Find out more

• Download the In Focus Policy Briefing - Achieving Export Diversification: Lessons from Brazil
• The IDS BRICS Initiative carries out research, learning and knowledge sharing on the role of the BRICS in international development