The extremely premature deindustrialization of Brazil’s most technologically intensive sectors, such as automobile manufacturers, metallurgical factories, and the chemical and petrochemical industry, has blocked the country’s development. And it will be very difficult to recover the time and space lost to other countries. This is the conclusion of a study published by Nereus, the USP Center for Regional and Urban Economy.
Less technologically intensive sectors, such as the food and beverage, textile and wood industries, on the other hand, entered the deindustrialization process at a later time than that indicated as “normal or natural” by international standards.
The study “Not all deindustrialization is the same: why does the sectoral composition of manufacturing matter?” », written by Paulo César Morceiro, Milene Simone Tessarin and André Nassif, carries out an unprecedented analysis of the phenomenon in Brazil, based on data on the loss of the industry’s share of total employment from 1985 to 2022. A previous work by the first two authors analyzed the sector as a whole, from the point of view of its weight in GDP (Gross Domestic Product).
The decline in industrial employment is a global phenomenon, but it has occurred prematurely in Brazil precisely in high-tech sectors since the mid-1980s.
Early deindustrialization occurs when employment in a certain sector peaks at a time when the country has a lower GDP per capita than would be the norm in international comparison. It is thus possible to determine what level of income and development was reached when jobs began to migrate more strongly towards the service sector.
In the automotive sector, for example, the peak occurred when Brazil had a GDP per capita of $13,000 (value adjusted by purchasing power parity), about half the average of $26,500 verified in a benchmark study covering 173 countries.
The relationship between the sectors is in fact highlighted in the study: premature deindustrialization leaves the country with an industry but also a less sophisticated service sector.
Among the most serious cases of prematurity are the machinery and equipment and electrical, electronic and communications equipment sectors, which reached their peak when national income was only 20% of what would be considered the norm for developed countries. In the most fundamental sectors, the process occurred later in Brazil, when GDP per capita already exceeded that observed in international comparison – leading to values above 100%, as shown in the graph on this page.
To illustrate the precocity of this process in the most advanced sectors, the study draws an analogy with motherhood. A delivery is considered normal when it occurs in the 9th month of pregnancy. If there is a termination after only 20 to 40% of this time, it means that the baby will not have developed enough to survive a premature birth.
According to researchers, high- and medium-high-tech industries are key vectors of research, development and innovation, in addition to generating better-paid jobs that are likely to disseminate technical progress.
“Our interpretation is that the extremely premature deindustrialization of the most technologically intensive sectors in Brazil has blocked the country’s development, either by weakening the SNI (National Innovation System), or by reducing the growth potential of overall demand, or by making the most sophisticated service segments, which depend on more advanced production, unviable,” the researchers say.
One of the authors, professor at the Department of Economics of the UFF (Universidade Federal Fluminense) André Nassif, believes that this process is not irreversible, but affirms that the country lacks a development strategy that could lead to a recovery of this sector, which would also have positive impacts on services and agriculture. For him, some form of government induction is necessary, which does not necessarily involve import substitution policies (such as high protective tariffs).
Nassif sees the energy transition as one of the opportunities for the country to have a more robust high-tech industry. “Reindustrialization is not about resurrecting sectors that have become obsolete or lost momentum over the last two or three decades.”
The Nova Indústria Brasil (NIB) program, launched by the Lula government last year, is cited as a program that prioritizes business credit with little sectoral focus.
Another author, researcher associated with Nereus Paulo César Morceiro, says that if Brazil wants to slow down the process of deindustrialization or promote slight reindustrialization, there are three things to do. Increase the weight of industry in global exports, the massive consumption of industrial products on the domestic market (which depends on the redistribution of income) and focus industrial policy on innovation and technology.
“This implies an industrial policy more focused on innovation. We are not even talking about national champions. We must have few global champions in key sectors.”
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