Dispatches from the Road: Buzios, Brazil

I’m convinced more than ever in the importance of good economic development policy and efforts.  Brazil is one huge test market for such things and some have been successful and some have failed spectacularly.

The fundamentals are the fundamentals.  Education matters.  Transportation and communications infrastructure matters.  The rule of law and good government matters. 

Beyond that, there are basically only two ways that places like New Brunswick can be economically successful (defined as moderate population growth and that generate enough own source tax revenue to pay for government services).  Either you hit oil or some other high royalty natural resource and you milk that (i.e. Alberta, Saskatchewan and Newfoundland) or you create through good economic development policy and efforts the means by which it is attractive for other non-location specific industries to grow and thrive.  This is the Ontario way.  That province generates very little from natural resources relative to its overall budget.  It generates massive tax revenue and wealth from non-location specific industries such as auto manufacturing, aerospace, ICT, pharma/biotech, film/animation, head offices, etc.  None of these industries have any natural reason to be in Ontario.  They are there because over time it became a great place to be.

That must be New Brunswick’s path.  I have chatted with folks involved in the early stages of a number of Ontario’s growth industries and I continue to be amazed at how much government was involved.  Through direct grants and tax incentives through to R&D funding onto targeted industry specific workforce development efforts, Ontario has been a model for government-supported economic development.  Going back to C.D. Howe and before.

But now we are told by the experts that New Brunswick should cut taxes, cut regulation and cross our fingers.

I don’t agree.  That is not how Alabama built its auto mobile manufacturing sector from nothing to over 100,000 direct and indirect jobs in 20 years.  That is not how British Columbia built one of the most successful film/animation clusters in North America and it will not be a recipe for economic development success in New Brunswick.

10,000 kms away from New Brunswick but never far from thinking about economic development.

2 thoughts on “Dispatches from the Road: Buzios, Brazil

  1. You’re right David, Oil is an important resource commodity and the royalties collected from it can be earth shattering, but having it can become moot if the government or the policies surrounding it are inept. Remember FIRA and the NEP?

    Even after their abolition in 1984 — after Carney signed the Western Accord — many new economic Nationalist (a vain that seems to enter this comment section frequently) still criticized the eventual free trade agreement as being detrimental to Canada’s oil industry, in that, it would not be the enormous boon as promised out of the west (i.e. investment, employment, profits, along with increased revenues to government as well as increased expansion in exploration and development). Well, other than a temporary slowdown in the recession of the early 90s where drilling activity dropped to a 16 year low, natural resource revenues were massive for the province of Alberta (a province which sent a majority of its profits east via generous equalization payments).

    So there’s no question that Oil is important, but policy matters as well.

  2. An idea for a future post, perhaps you could talk about the areas in which NB has a comparative advantage. Also it would be nice to hear your thoughts on how we can develop those areas to grow our advantage.

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