With too much spending, too little planning, and too little budget discipline, all three forces disrupt financial life, disrupt prices, and make it difficult to do business.
The largest in the emerging world, industry Brazil produced 0.1% more in October than in September, and achieved an increase of 0.9% in 12 months. In December, it should complete another year of modest growth. In seven of the 14 years between 2011 and 2024, the balance of industrial production was negative. The overall result for the period clearly shows the irregularity of performance. In the third quarter of last year, production volume was 14.8% lower than what was achieved in May 2011, the peak of the series. Brazilian Institute of Geography and Statistics (IBGE).
Modest growth is easily linked to lower investment in productive capacity. The latest data from the capital goods industry, i.e. machinery and equipment, indicates a 29% decline in production compared to September 2013, the highest point in historical development. Not only did the industrial sector invest modestly. Other sectors of the economy, including the public sector, also failed to invest productively. Regarding this point, the industry clearly reflects the overall image of the country. Expensive credit is part of the explanation. But it is necessary to take into account insecurity when constructing medium- and long-term scenarios.
The policies designed and implemented in Brasilia are important drivers of insecurity. With too much spending, too little planning, and too little budget discipline, all three forces disrupt financial life, disrupt prices, and make it difficult to do business. Bureaucratic complexities, despite some reform efforts, hinder productive activity and reduce the overall productivity of the economy.
High inflation has been for many years one of the most visible – and most damaging – consequences of public sector financial mistakes and official policy insecurity. Despite some recent cooling, price appreciation continues to reach the target ceiling and is far from the central target of 3% for 12-month periods.
The Central Bank stated its readiness to maintain key interest rates at 15% until the end of the year. Any relaxation of this policy should only take place from next year and in a very cautious manner, according to the entity’s managers. If it depends on low interest rates, the dynamism of the economy will have to occur slowly. Clear and credible signs of more cautious management of federal finances could facilitate an easing of monetary policy by B.C. Industry dynamism will be one of the most beneficial effects.