Although the economic picture is not yet normalized, since the COVID-19 outbreak has still not been extinguished, our industry is ready for a new stage of dynamism, as in the last few months it has managed to go back to output levels registered prior to the negative shock of Mar–Apr/20, when the pandemic hit the country.

As the bases of comparison have already been restored, the high growth rates that marked the months of May to July gave rise to a more modest but still positive performance. In Nov/20, as the most recent IBGE data show, industrial production increased 1.2%, in line with the result of Oct/20. In this way, the deceleration that it had been presenting stopped.

In addition to being positive as a whole, the seasonally adjusted result of Nov/20 also signaled expansion for most industrial sectors. Of the 26 monitored by the IBGE, 17 were in the black, that is, 65.4% of the total. Among the macro-sectors, all avoided losses. Capital goods grew the most, with 7.4%, followed by consumer durables, with 6.2%.

At the end of the year, the evolution has been satisfactory even in relation to 2019. Compared to the same period of the previous year, there have been three consecutive months of growth (2.8% in Nov/20). Much of this, however, is due to depressed comparison bases, as at the end of 2019 the Argentine economic crisis and trade tensions between the US and China hurt the results. Still, there will be no escape from an overall loss in 2020 (-5.5% in Jan–Nov).

With these signs of recovery, the confidence of the sector's business people has registered an improvement, by both the CNI and FGV indicators. Moreover, optimism about the present situation has advanced more than expectations about the near future, which helps to validate the projections of better days ahead.

Despite this, there are aspects that leave something to be desired and certain obstacles still need to be overcome at this beginning of 2021. In the data for Nov/20, it is noteworthy the fact that intermediate goods, which form the core of the industrial system, have been practically stagnant for two months. They registered a mere +0.1% compared to Oct/20, with seasonal adjustment, despite the scarcity of many inputs produced by this macro-sector.

In addition, it should be noted that the low inventory levels in the vast majority of industrial sectors (92.6% of the total according to the CNI) expose industrial growth to risks of disruption in supply chains, which can restrict dynamism and cause cost pressures.

Another fact that expresses the limitations of the current phase is that the level of industrial production is 14% below the peak registered before the crisis of 2014–2016 and about 1/3 of the industrial sectors remain below the pre-pandemic level (Feb/20).

This is important information for clearly showing the magnitude of the challenge to turn the page of these last years, when the sector suffered two periods of severe adversity (2014–2016 and now in 2020). So much so that the industry utilization of installed capacity is 4% below that of Q1/2014, despite recent advances.

In relation to the coming months, as the IEDI has been insisting for some time, the end of emergency measures to combat the economic effects of the pandemic, the evolution of unemployment and doubts about the speed of vaccination against COVID-19 are factors that can lead to an important deceleration in the dynamism of the industry and of GDP in general. Avoiding this will require coordination and some difficult choices by the responsible authorities.

Another point is the urgent need to rescue the agenda of structural reform, notably a tax revamp, which has been widely discussed in recent years, without which the competitiveness and long-term growth conditions of the industry are at risk. With a better tax system, we will be giving the industry, in 2021, the beginning of a new horizon.

The full text is available in Portuguese.