Brazil's manufacturing growth puzzle

06/26/2013

Fernando Sedano, Ph.D., economic consultant
While manufacturing activity has historically mimicked the path of the overall economy in Brazil, it seems that the 2008 crisis created a structural break, leading these two variables on divergent paths. After manufacturing production stopped growing in March 2010, Brazil's economy kept expanding. In a highly protected environment, a lack of qualified labor is limiting manufacturing growth in Brazil. It seems that absent a major influx of qualified workers -- unlikely in an inward-looking society -- growth can be achieved only through the opening of the economy; the prevailing ideology in Brasilia goes against that, however. Amid the industrial complex's standstill and the government's initiatives to foster local manufacturing -- protectionist policies, tax reductions, lower energy costs, etc. -- tensions are rising between public officials and the country's captains of industry. Issues in Brief

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