In recent months, the Brazilian industry’s results have been mediocre. Nearly stagnant, the industrial sector suffers from high costs of production, be it from competition of imported products or from the low productivity of its workers.
Believe it or not, over the past 30 years, worker productivity in the Brazilian manufacturing industry fell 15%. This indicator is calculated based on worked hours and the number of employees in the industry. In the same period, according to IPEA (Institute of Applied Economic Research), productivity in China has increased by a whopping 808%.
China is a major world power and it is not surprising that its workers productivity is higher. But Brazil’s performance has lagged behind even its neighbors such as Chile, which showed an increase of 82%, and Argentina, which had productivity gains of about 17% in the last 30 years.
So, what’s wrong with Brazil?
Increasing productivity is a precondition for sustained growth. Among the factors that contributed to the meager productivity performance in Brazil are deficiencies in education and infrastructure, writes Chrystiane Silva.
Increasingly, industries use sophisticated technology and require a well educated labor, but only 20% of the workers in the industry has a university degree. Besides, Brazil still has low integration standards with the global economy. The indicator to measure the economy’s openness is calculated by using the ratio of foreign trade to GDP… the higher the ratio the better for the economy. Over the past three years, Brazil’s ratio stayed at 11% on average, while in Argentina the same indicator was 20%.
Despite all the technological advances, Brazil still has a low technology and innovation absorption, not to mention the bureaucratic hurdles to open businesses.
“The country would need to grow 4% per year to accommodate salary increases and compete with imported products. Brazil is giving the luxury of having the highest production costs in the world, which simply kills the industry,” says economist Julio Gomes de Almeida.
Kicking the can down the road…
For a country that needs to grow, low productivity is a concern. “It’s an obstacle that creates barriers to international competitiveness. It is a must to create strategies to enhance industrial development,” says IPEA economist Gabriel Coelho Squeff.
In the short term, the international economic instability makes it even more necessary to strengthen the relationship between industry and workers in order to reactivate growth, but there is no evidence that the current industry trends can be reversed in the short term.
If it wants to grow in a sustained way, Brazil will need to follow the example of successful nations that have strongly invested in education, like China and South Korea.