Is Brazilian Manufacturing Losing its Drive?
29 Pages Posted: 23 Sep 2012 Last revised: 14 Nov 2012
Date Written: October 13, 2012
Brazil has built over the decades, with great effort and sacrifice, a dynamic, integrated manufacturing sector that has helped the country grow and become one of the world’s largest economies. Recently, though, basic indicators, such as the performance of output and employment, have suggested that manufacturing is growing slower than other sectors and its share in total output is on the wane. The problem with this type of analysis is that it may lead to misleading conclusions due to the substantial transformations which industrial activity has undergone, such as the vertical specialization that decentralizes and fragments production with gains in efficiency and innovation, and the more than proportional increase in consumption of services in economies that have urbanized and modernized. For this reason, a careful examination of the evolution of the drive of the Brazilian manufacturing sector requires broader, comparative analyses, combined with the usual analysis of performance indicators at the domestic level. This article employs the industry-space method (Arbache 2012), a simple but useful tool for comparative analysis of industrial development, to assess the case of Brazil. We find evidence that the Brazilian manufacturing sector is indeed losing its drive both at national and international levels. The article discusses the origins of the slowdown, and the new challenges faced by Brazilian industry. The article argues that, although challenges are extensive and complex, several business and investment opportunities emerging in Brazil can give a new boost to the manufacturing sector and take it to a new level of development, provided that the public and private sectors undertake the reforms and actions needed for industry to benefit fully from such opportunities. The article closes by discussing policy strategies that can boost the industrial sector.
REVISED VERSION -- OCT 2012
Keywords: Manufacturing sector, competitiveness, productivity, international trade, innovation, industrial policies, Brazil
JEL Classification: F14, L60, O14, 025
Suggested Citation: Suggested Citation