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. . . . . .2 Rio Grande do Sul and Pólo In mid-March 1999, Keith Maxwell, senior vice president for worldwide operations, Dell Computer Corporation, looked out the window of his office in Dell’s headquarters in Round Rock, Texas, and pondered the frustrating situation he faced in Brazil, which Dell had chosen as the site of its first manufacturing plant in Latin America. Just over a year earlier, Maxwell had led the site selection team in visits to five states in Brazil to determine where Dell should locate its plant.1 In June 1998, after the team confirmed its initial findings and concluded its negotiations, Maxwell made the final recommendation to Michael Dell: the plant should be built in Brazil’s southernmost state, Rio Grande do Sul. By mid-March 1999, Dell had signed an agreement with the state government on the terms of the investment, the process of hiring local personnel to manage the plant had begun, and construction on the plant itself was scheduled to start soon. Suddenly, however, the political climate in Rio Grande do Sul changed. A new governor, Olivio Dutra of the Partido dos Trabalhadores (pt, or Workers’ Party),2 had taken office on January 1, 1999, and he now appeared likely to rescind the agreement. This was a setback, and Maxwell would have to decide on which course of action to recommend: (1) leave Brazil entirely, (2) move the plant to another state, or (3) try to renegotiate with Governor Dutra. 1. The principal members of the initial team, in addition to Maxwell, included Daryl Robertson, vice president, Dell Latin America; Tom Armstrong, vice president, Tax and Administration; Kip Thompson, vice president, Worldwide Facilities Management and Corporate Real Estate; and Charlene Coor, director of International Tax. 2. Brazil’s Partido dos Trabalhadores (pt), the Workers’ Party, is a leftist political party with a socialist ideology. 88  HARNESSING GLOBALIZATION Dell’s decision to locate its manufacturing plant in Rio Grande do Sul, and the situation it found itself in now, had much to do with the state government’s relationship with a private, Rio Grande do Sul–based investment promotion agency called Pólo-RS, Agência de Desenvolvimento, known more commonly as Pólo. Pólo was similar in many ways to cinde in Costa Rica. Both cinde and Pólo were private, well-funded nonprofit agencies staffed by people with extensive private sector and international experience. Both had high levels of technocratic independence and transnational learning capacity. As with the Costa Rican government’s partnership with cinde, the collaboration between the state government of Rio Grande do Sul and Pólo increased the government’s technocratic independence and transnational learning capacity in the area of investment promotion. These ‘‘grafted on’’ characteristics greatly enhanced the government ’s ability to develop an effective strategy to promote nontraditional fdi, including Dell. But the two cases differed: unlike the situation in Costa Rica,3 the level of political security in Rio Grande do Sul changed significantly over time. Because Governor Dutra was less politically secure than the previous governor , Antônio Britto, he was unwilling to continue to collaborate with Pólo. Without Pólo’s collaboration, the effectiveness of the government’s investment promotion efforts declined. This contributed to the inability of the Dutra government to attract more nontraditional investment. Dell ultimately succeeded in renegotiating with Governor Dutra. Having faced protests when Ford left the state because of his stance, Dutra changed his position and allowed Dell to retain all the incentives. Dutra altered his approach to such an extent that he even sought to attract other companies like Dell to invest in Rio Grande do Sul. While the government’s relationship with Dell improved, its relationship with Pólo did not. Dutra’s unwillingness to continue the collaboration with Pólo had a serious impact on the government’s ability to attract additional nontraditional fdi. Background Leaders of Rio Grande do Sul’s two main business associations, the Federação das Associações Comerciais e de Serviços do Rio Grande do Sul 3. I am referring to Costa Rica from 1949 to 2002. As I explained in Chapter 1, after 2002 Costa Rica’s stable two-party system became somewhat more fragmented and polarized , thus reducing the level of political security in the Costa Rican political environment. Nevertheless, the level of political security Costa Rica’s political system provided remained higher than that of Rio Grande do Sul...

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