We can no longer repeat the mistakes of the past, nor ignore the future. Brazil cannot avoid facing the obstacles and divergences in relation to the rest of the world that, for a long time, have been distancing us from a process of socio-economic development. 

The IEDI defends an agenda of actions to improve the country's business environment and bring us closer to standards and practices common to countries with higher socio-economic performance. The main axes of this agenda will be summarized in this Letter, but they can be found in detail in the document “Industry and Strategy for Socioeconomic Development in Brazil,” available on the Institute's website (in Portuguese).

Thus, the IEDI seeks to contribute to the process of building the country's future, identifying the main obstacles that we must overcome in order to re-establish a trajectory of sustained growth and promote the improvement of the population's living conditions. The task is complex and will only be successful with political coordination and a democratic and qualified debate of ideas among social agents. 

Idiosyncrasies and anachronisms, in contrast, will charge an even higher price at a time when the global economy is likely to (at a speedy pace) go through a set of profound transformations—which are already underway, it is worth emphasizing—towards greater environmental and social sustainability, higher digitization of production processes and an increasing search for resilience in value chains.

The main global economies have already woken up to what is at stake in the coming decades and rushed to design socio-economic development policies that link the cyclical dimension of job creation and greater economic growth in the wake of the pandemic to the structural dimension of modernization of their structures productive, aiming to become more sustainable, advanced and efficient.

The industry is among the most powerful levers of the ongoing transformations. This is because, increasingly associated with sophisticated services and other activities (including primary ones), the industry establishes around itself an ecosystem with the capacity to introduce innovations that can revolutionize production processes, but also the consumption patterns and lifestyles of populations.

It is not by chance that the strengthening of industrial and technological competences has been considered a key issue by developed countries. And this is not a recent trend. The flourishing of broad industrial strategies around the world has been going on for almost a decade. Between 2008 and 2016, UNCTAD mapped 114 strategies across a hundred countries that together account for 90% of global GDP, 74% of which were adopted after 2013.

It is not about state control, nor about having a bigger or smaller state. These are outdated views. What is important is that the public sector and the private sector work together in a virtuous way to build a path of sustainable economic growth and improvement in the living conditions of citizens.

In Brazil, the recurrent need to stress the importance of the industry for research, development and innovation, for the acceleration of GDP growth, for the generation of quality jobs and for tax collection (among other fundamental attributes for socio-economic development) signals the country's backwardness in this debate. 

In recent decades, we became used to seeing the shrinking of Brazilian industry as a share of the country's GDP and of total exports, but also the persistent loss of Brazil's participation in the value added of world industry and in global manufacturing trade. We are giving up one of the main gears of socio-economic development that countries have at their disposal.

This loss results from an accumulation of factors of different natures—macro and microeconomic, geopolitical, systemic and specific—which distorted our economic environment. It is necessary to change this trajectory to foster greater socio-economic development of our country. 

Even starting from an unfavorable scenario, given the heterogeneity of the Brazilian industry, Brazil has modern and competitive companies, which follow global trends towards digitization and sustainability. 

These companies, often leaders in their production chains and better integrated into the global economy, can function as a hub for the dissemination of new technologies and new practices for the entire industrial system in the country, through their networks of employees, suppliers and customers. What we need is to create conditions for these cases to multiply.

For this, it is unavoidable that we respect some preconditions, all of crucial importance. The first one concerns the maintenance of institutional tranquility in our country, without which the State becomes a great destabilizing force. 

The second refers to obtaining a favorable trajectory of public accounts capable of putting us on a medium and long-term trend towards fiscal balance. Only in this way can we ensure that important variables, such as inflation and interest rates, behave adequately. It is worth emphasizing the interaction between these first two conditions, since the fiscal balance tends to be put at risk when there is a weakening of institutions.

The third condition comprises the reduction of our social inequalities. A country with low social mobility is condemned to be less competitive and less innovative. An equitable and high-quality educational system is the basis for ensuring social mobility not only materially, but also politically and intellectually. Educating Brazilians more and better is a key part in the engine of socio-economic development. 

Finally, the fourth condition refers to the commitment to environmental sustainability, due to its connection with the other preconditions and the legacy to future generations.

With these conditions in place, we will be able to move more assertively on the issue of competitiveness and productivity, an essential pillar of the socio-economic development agenda.

It is past time to remove the "elephant in the room" represented by the so-called “Brazil Cost” (Custo Brasil), starting with our unfair, complex and onerous tax system, which places national companies, whatever the sector, on an unequal footing with their international competitors. 

The sources of Custo Brasil are numerous and go far beyond taxation, representing, according to the Ministry of Economy, a burden equivalent to no less than 22% of our national GDP. This is a weight that our companies carry on their shoulders and that leaves them behind in the competitive race, whether in the foreign market or in the domestic market. 

Thus, the IEDI also judges as very pertinent and urgent far-reaching initiatives such as: the continuation of the Labor Reform, the development of the capital market and the new role of the BNDES, the decrease in the cost of credit, adjustments in economic regulation and reduction in legal uncertainty, and encouraging investments in infrastructure, including that needed for digital transformation and sustainability. 

In this same direction, it is necessary to deepen the competitive insertion of the Brazilian economy in the world, preferably through the greatest number of possible fronts of negotiation of trade agreements, with an emphasis on three principles: gradualism, horizontality and transparency. Furthermore, we must take the initiative to reduce our internal barriers to trade flows. 

It is important to emphasize that, in accordance with the principles of gradualism, horizontality and transparency, the commitment to opening up our economy, regardless of its form, must be unconditional, that is, not linked to the prior achievement of success in other aspects of the development agenda.

Brazil cannot be isolated and it is mainly up to the industry to strengthen ties with the outside world. This is because it is industrial chains (longer and more complex that others) that create the bridges and, when well inserted in the world economy, import to export not only goods but also services related to their production. 

By creating conditions for more robust advances in the competitiveness and productivity of our companies and by taking advantage of our participation in global value chains, Brazil's greater integration into the world economy will open the way for the expansion of our exports of more sophisticated and technology-intensive goods and services.

For 32 years since its foundation, the IEDI aims to accelerate the socio-economic development of our country from the perspective of the industry. In this sense, the Institute has always sought to establish principles and to suggest actions for the constant reinvention of our industrial competences. The objective is to systematically make the industry move forward and not perpetuate past patterns.

For this, the IEDI defends, in addition to the conditions highlighted above, a forward-looking industrial strategy, with an emphasis on the generation and diffusion of technological changes, with positive effects on productivity and competitiveness and with important implications for the organizational forms of companies and for the entire Brazilian productive structure.

The full text is available in Portuguese.