Abstract

Among the most environmentally 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 became prominent just after the year 2000, and it has been exclusively driven by market forces. This chapter presents a comparative analysis of the environmental issues related to FDI in these two sectors in Brazil and extensively focuses on the importance of the international context in fostering 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? First, the stringency of the domestic environmental regulations has pushed for higher environmental standards in both sectors; second, and specifically in the case of the pulp-and-paper sector, international market environmental requirements also contributed 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 enter 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.