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Brazil - Industry
Industry
After 1987 problems that had confronted industry earlier in the
decade intensified, adverse macroeconomic conditions persisted,
and political troubles affected expectations adversely. Until the
end of the 1980s, industry relied heavily on government protection
and favors, but it also faced pervasive regulations and extensive
governmental interference. These factors had a deleterious effect
on industrial investment and on the productivity of several industrial
subsectors, increasingly blunting the competitive edge they had
struggled to achieve in the world market. Moreover, as a result
of the fiscal crisis, the government was hard-pressed to continue
to provide support and subsidies for industry and to maintain and
expand the country's infrastructure.
The Collor
de Mello administration, inaugurated in 1990, introduced significant
changes in Brazil's economic strategy. Regarding industry, the government
implemented measures to eliminate regulations, to liberalize trade,
and to markedly reduce governmental favors and subsidies. It also
announced a series of actions aimed at increasing industry's competitiveness.
Despite these efforts, political and macroeconomic difficulties
prevented the effective implementation of the new strategy, and
the mounting fiscal crisis dampened efforts to rebuild and improve
the badly deteriorated infrastructure. Therefore, an important part
of the industrial sector failed to recover and to modernize. With
stagnation, the domestic market could not give industry a dynamic
push. Moreover, the reduction in investment, coupled with the deteriorating
infrastructure, led to declines in competitiveness. These developments,
together with fewer import barriers, caused industry's balance of
trade to decline, from a peak of US$16.3 billion in 1988 to US$11.1
billion in 1991. In the early 1990s, despite sectoral weaknesses,
the industrial sector became a major contributor to the country's
exports and trade surplus.
Data as of April 1997
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