Global commodity chains have emerged as an organisational response to globalisation and have become one of the main spheres for the organisation of productive and innovative processes. How is the tobacco cluster in the Rio Pardo valley in Brazil influenced by the multinational companies that control the global tobacco chain?

Research by the Institute of Development Studies suggests that participation by local enterprises in the global tobacco chain is limited to raw material suppliers and service providers. Most of the innovations adopted at the growing stage are developed through knowledge systems in which producers and other local actors play only a minor role.

The need to compete with a growing range of producers in foreign markets has forced local producers in developing countries to integrate into global commodity chains. The basic idea behind the global commodity chain analysis is that these chains might offer a possibility for local producers to embark on a path of progressive upgrading through learning processes and new knowledge acquired from external buyers.

An analysis of the tobacco chain in the Rio Pardo Valley reveals a high diversity in the nature of the linkages, actors and institutions involved in the phases of tobacco growing, processing and retailing activities. The linkages between growers and processing firms in the tobacco cluster not only play a fundamental role in the dynamics of innovation at the stage of agricultural production, but also shape the core institutional designs in the cluster.

Key findings include:

• Local business associations in the cluster carry out an important role in supporting the control of the production system, but have a very limited role in engaging local actors in collective learning processes and in shaping innovation strategies.
• Local actors play only a marginal role in innovation processes. Key innovations in growing and processing activities are instead either introduced into the cluster by multinational corporations or through user-producer relations established with machinery suppliers and other external knowledge sources.
• At the technological level of processing plants, there is still a considerable difference with countries like the USA.
• Both the innovative paths associated with the development of plant varieties and with tobacco industrial processing activities are controlled by the subsidiaries of multinational corporations.
• There is a restricted level of interaction between firms and research institutions in the cluster region.

Policy implications include:

• Moving into new stages of the value chain cannot really be considered a feasible option for local producers.
• Upgrading strategies associated with the tobacco growing stage can be seen as an alternative for the cluster.

Source(s):
‘Forms of Governance, Learning Mechanisms and Upgrading Strategies in the Tobacco Cluster in Rio Pardo Valley – Brazil’, IDS Working Paper 125 by M. A. Vargas, 2001 Full document.

Funded by: CAPES

id21 Research Highlight: 27 January 2003

Further Information:
Marco Antonio Vargas
Federal University of Rio de Janeiro, Institute of Economics
Research Network on Local Productive and Innovative Systems
Av. Pasteur, 250 – URCA
Rio de Janeiro – RJ
Brazil 22290-240

Tel: +55 21 22571725
Fax: +55 21 22571725
Contact the contributor: mvargas@vetor.com.br

Contact the contributor: mvargas@ie.ufrj.br

Research Network on Local Productive and Innovative Systems

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