Rethinking Foreign Investment for Sustainable Development: Beyond Pollution Haloes: The Environmental Effects of FDI in The Pulp and Paper and Petrochemicals Sectors in Brazil

Among the most environmental sensitive sectors are pulp and paper and petrochemicals. In a historical perspective, FDI played an important role in the establishment of the petrochemicals industry in Brazil in the 1970’s when it was driven by strategic state policies to develop the domestic intermediate goods industry. In the pulp and paper sector, FDI has becoming prominent just after the year 2000 and it has been exclusively driven by market forces. Here is presented a comparative analysis of the environmental issues related to FDI in these two sectors in Brazil and extensively focusing on the importance of the international context to foster domestic environmental commitments. One conclusion is that, in general, domestic firms in these sectors are just as environmentally friendly as foreign firms. What would explain such convergence? Firstly, the stringency of the domestic environmental regulations has pushed for higher environmental standards in both sectors; secondly, and specifically in the case of the pulp and paper sector, international market environmental requirements also corroborated to this trend. Last but not least, the technological competencies accumulated by the domestic firms in both sectors, which are closely related to the strategic state industrial policies applied to them, strengthened their capability to entry into an environmental technological path. One policy lesson drawn from these case studies is that attracting FDI is not a guarantee of a higher level of sectoral environmental control, while an integrated policy approach to environmental, technological and industry capacity to enhance national environmental control at the industry level is highly recommended.