Brazil’s industry struggles to weather Covid-19 crisis

With the first figures on the economic impacts of the pandemic coming to light, the toll that social isolation and lack of demand has taken on Brazilian industry is evident. While a steep fall in production and plummeting investments were already expected due to stay-at-home measures, the fact that this coincided with a pained recovery from the 2015-2016 recession sparks concerns about how well the sector will be able to regain its footing in the post coronavirus economy.

Data from the Institute for Applied Economic Research (Ipea) shows that investments in fixed-capital assets — such as machines, equipment, and real estate used to increase production — dropped by 27.5 percent between March and April, the first full month of stoppages due to Covid-19. 

In comparison to April 2019, production shrank by nearly one-third.

The data is consistent with the 18.8-percent plunge in industrial production measured by the national statistics bureau in April, the worst performance for the month since 2002. Furthermore, fixed capital assets are used to increase the country’s overall productivity, serving as a bellwether for future growth. As Ipea shows, the level of investment plunged during the recession and remained significantly below the peak reached in 2013 and 2014.

According to Renato da Fonseca,...