Without sufficient investment to speed up the economy and make it more competitive, Brazil is lagging behind its international competitors. From 1980 to 2019, the country invested 49 times the volume of 1979. During the same period, the multiplier compared to other emerging markets in India was 249; 202 in South Korea; and 66 in South Africa. In the US it was 81.
The results partly explain Brazil’s weak economic performance, low productivity and lower competitiveness in recent years. Worse still, it is unlikely that this situation will change in the short or medium term.
A survey by the Brazilian Association of Infrastructure and Basic Industries (Abdib) shows that in 1979, in updated figures, Brazil invested R$930 billion. Between 1980 and 2019, the volume totaled BRL 45 trillion.
For example, if the country had followed the path of India, the investment during that period would have exceeded R$200 trillion.
Compared to South Korea, the value would reach almost R$190 trillion almost 20 times the gross domestic product (GDP) of Brazil in 2021. And in relation to South Africa, twice the national GDP.
“We were left behind. Brazil has stopped investing trillions of reais in recent years, which has distanced the country from other nations,” says Abdib’s Director of Planning and Economics, Roberto Guimarães. If the same model is applied in relation to industrial production, the result will be similar.
Brazilian industrial production would have had an additional BRL 6.5 trillion if it had grown like South Korea between 2010 and 2021. Regarding Mexico BRL 5.1 trillion or 2.9 times. Regarding South Africa, we would have doubled the production.
“We hit the key that investment needs to be increased, but what we have seen is that public investment has collapsed over the last decade.” One of the main problems, Guimarães says, is that governments are not in the able to cut current spending and then cut back on investment. “The budget forecast for this year is a quarter of what it was 15 years ago.”
vicious circle
Low investments have been a chronic problem since the 1980s. The Brazilian state grew too quickly, the state apparatus was bloated and with globalization the country began to lose competitiveness compared to its competitors. “Brazil has some problems to solve, like balancing public accounts and defining what it wants to be alongside agribusiness and mining,” says Insper Professor Ricardo Rocha.
The difficulty of the investment creates a vicious circle in the economy. GDP is not growing because investments are not picking up and companies are not making new investments due to low growth expectations.
“A country that grows little is a country that demands little, and that determines the investments,” says the president of the consulting firm Inter.B, Claudio Frischtak.
In his opinion, in a closed economy with little competition, the motivator for investment is growth.
Today Brazil has a fiscal adjustment policy and not a growth policy, experts say. Much of what the current government promised has not materialized, such as the privatization of key companies and fundamental reforms to put the country on a growth path, says FGV researcher Ibre Cláudio Considera. “A country with high unemployment, lack of expected demand and uncertainty does not attract investment.”