[LINK] "Brazilian Economy Booming, but Sliding Backwards"

[rfmcdonald]

Inter Press Service's Mario Osava makes the important point that although Brazil's economy is doing fine as a whole, and doesn't seem likely to succumb to the foreign debt and bad government issues that have harmed its past growth prospects, it still faces significant problems not least of which is apparently a fair amount of deindustrializaiton.

The economy has grown by more than seven percent this year, and exports for the January to November period were up by 30.7 percent over the same period last year.

But imports have grown at the considerably faster rate of 43.9 percent so far this year, as part of a trend that has held steady since 2007. In 2006, Brazil had a 46.1 billion dollar surplus of exports over imports, which has decreased every year since; as of November this year the balance in Brazil's favour was only 14.9 billion dollars.

Furthermore, the trade surplus is based on exports of agricultural and mineral commodities. The manufacturing trade balance is negative, to the tune of some 35 billion dollars this year, a figure that could grow five-fold in two years' time, Rogerio Souza, chief economist at the Institute of Studies for Industrial Development (IEDI), told IPS.

The industrial sector in Brazil was hit hardest by the global financial crisis in 2009, when its output fell by seven percent. After rallying early this year, production dropped again in the second quarter and remained stagnant in subsequent months, alarming manufacturers.

Industrial production has stagnated in the context of a fast-growing economy, which accentuates the fall of its share of GDP, already six percentage points lower than in 1970, when Brazilian industrialisation was in its infancy and the country’s main export was coffee, Souza said.

[. . .]

Paulo Francini, head of research at the Federation of Industries of the State of São Paulo (FIESP), said on Nov. 30 that the extremely undervalued Chinese yuan, together with a Brazilian real that is overvalued by an estimated 42 percent against the dollar, make it impossible to compete, since no one can halve their production costs.

That day, Francini presented a study which describes the increasing replacement of national inputs and products by imported ones in factories in Brazil’s industrial heartland.

The government must do everything in its power to combat overvaluation of the real, including restrictions on inflows of speculative capital attracted by Brazil's high interest rates, said Souza.

The textile industry provides another illustration of the problem. Five or six years ago, exports exceeded imports by 400 to 500 million dollars a year.

This year, however, a deficit of 3.5 billion dollars is projected, with imports worth some five billion dollars, said Fernando Pimentel, supervising director of the Brazilian Textile Industry Association (ABIT).

The sector has fought back with hefty investments in new technology and equipment, but there are too many factors against it, like high taxes and interest rates, poor infrastructure and little technological innovation, said Pimentel. "Change makes everything more difficult; if we hadn't been creative, we wouldn't have survived," he said.