Despite recent positive numbers, Brazilian industry still ailing

Brazilian industry has been sending some mixed signals. Output has increased for three months in a row, the PMI index — a closely watched gauge of the health of manufacturers — has been up over the past four months, confidence levels in the economy are creeping up, and the sector added 122,400 jobs in the first quarter. 

Still, the sector remains below pre-pandemic levels, and a solid comeback doesn’t appear to be on the horizon.

While Covid has made things tougher for factories, the virus isn’t the only factor; Industry has been losing relevance in the Brazilian economy for at least three decades. 

According to research by the Brazilian Institute of Economics (FGV-Ibre) at Fundação Getulio Vargas, a think tank, the share of the manufacturing industry of the GDP dropped from 18 percent in 1990 to 12 percent in 2019. Data from the National Confederation of Industry shows that the sector accounted for just 11.3 percent of the GDP last year.

This decline is widespread with 12 of the 14 segments analyzed by the think tank having a reduced share in the Brazilian economy since the 1990s. The food and beverage segment, for example, shrunk from representing 2.9 percent of GDP in the 1990s to 2.2 percent in the 2010s. The textile industry fell from 1 to just 0.3 percent in the same period. 

The only segment that expanded, albeit not significantly, was the automotive sector, which rose to 1.2 percent from 1.1 of GDP. For the footwear segment, participation remained stable.

Claudio Considera, one of the authors of the research, explains that the loss of relevance is a natural...