The Brazilian industry, in 2023, managed to avoid a new setback, but it was close. Its output was only 0.2% up in relation to the previous year and this was only possible due to the extractive sector, which registered a considerable expansion (+7%). Thus, for two years, the country's industrial trajectory has oscillated around zero, without the start of a new phase of expansion.

Strictly speaking, the last period of industrial growth ended in 2008. This was 15 years ago, it is worth stressing. Since then, the ups are circumstantial, only occur to compensate for some previous downturn, and usually do not completely offset the losses. It was so in 2010, in 2013, in 2017–2018, after the deep crisis of 2014–2016, and also in 2021, after the shock of the COVID-19 pandemic.

In manufacturing, the most diversified part of the industry and which establishes more links with other activities, the situation is more complicated. It ended 2023 with a decrease of 1.0%, driven by the strong contraction in capital goods (-11%). Its other macro-sectors, although in the black, did not recover the losses of 2022 in most cases.

A survey carried out by the IEDI based on IBGE PIM-PF data, with 91 manufacturing segments, shows that 59.3% of them did not grow in 2023. Among the sharpest falls were trucks and buses (-28.3%), electric motors, generators and transformers (-29.2%), electronic components (-34.6%) and resins and elastomers and artificial and synthetic fibers (-42%)

It is important to note that manufacturing comprises branches with longer chains which, therefore, are more subject to the distortions of our economic environment. It also includes: branches in which exports are marginal and, thus, more dependent on the domestic market; and branches that produce durable goods, whether for consumption or investment, whose markets, as a consequence, are harmed by the high levels of interest rates still present in the country and by few sources of long-term financing.

For 2024, the prospect of lower interest rates for final borrowers, of inflation under control and of low unemployment creates conditions for higher industrial dynamism. Balanced inventories at the end of 2023 also count favorably, with 60% of manufacturing branches reporting lower-than-planned levels in December.

Added to this are the potential effects of recently announced public policies, such as income transfer programs and the PAC, with the capacity to generate demand for the industrial sector, but also to improve its production conditions through gains in scale, occupation of installed capacity, resumption of investment and reduction of bottlenecks in infrastructure.

Although essential, the cyclical dynamism of the Brazilian industry is not enough to inaugurate a new period of sustained expansion. Improving the business environment and a consistent modernization process are the key drivers. 

In this direction, there is at least two good news. First, the approval of the tax reform, which in the coming years will progressively establish a value added tax in Brazil, bringing our system of taxation of goods and services in line with the rest of the world. With adequate regulation, the tax reform will make an important contribution to reducing the Brazil Cost — which, however, has other components to be tackled.

Secondly, the launch of the Nova Indústria Brasil program, which, if well implemented, could promote the modernization of the sector and an increase in value added, enhancing its contribution to addressing contemporary social challenges: greater sustainability of production processes, reduction of greenhouse gas emissions, generation of quality jobs, including through the diversification of services related to industrial activities of greater technological intensity, resilience of essential chains to national security, among other topics present in the main industrial strategies being adopted in the world.

Industrial revitalization, in light of the international experiences of the present and the past, is not an easy task, as we all know, but it is not impossible. If successful, it is capable of giving great impetus to the socioeconomic development of the country. This requires commitment to the objectives, but with persistent improvement of actions, derived from periodic evaluations, with transparency and openness to debate.

The full text is available in Portuguese.