The Governm Ent Is Betting on an Agressive Protectionist Industrial Policy to M Ake Brazilian Industry M Ore Com Petitive, but O
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THE BRAZILIAN ECONOMY Economy, politics and policy issues • APRIL 2012 • vol. 4 • nº 4 FGV A publication of the Getulio Vargas Foundation Interview Ozires Silva – former CEO of Embraer Politics and infrastructure minister, "The quest Not (yet) a political crisis. for global competitiveness" Roundtable Rethinking the future of agriculture Viewpoint The persistent apathy of industry Economy IBRE April economic outlook The government is policy to make betting on an agressive protectionistBrazilian industrial industry how thateffective will be. more competitive, but opinion is divided on F O U N D A T I O N The Getulio Vargas Foundation is a private, nonpartisan, nonpro- Economy, politics, and policy issues fit institution established in 1944, and is devoted to research and A publication of the Brazilian Institute of teaching of social sciences as well as to environmental protection and sustainable development. Economics. The views expressed in the articles are those of the authors and do not necessarily represent those of the IBRE. Reproduction of the Executive Board content is permitted with editors’ authorization. President: Carlos Ivan Simonsen Leal Letters, manuscripts and subscriptions: Send to Vice-Presidents: Francisco Oswaldo Neves Dornelles, Marcos [email protected]. Cintra Cavalcanti de Albuquerque, and Sergio Franklin Quintella. Chief Editor Vagner Laerte Ardeo IBRE – Brazilian Institute of Economics The institute was established in 1951 and works as the “Think Managing Editor Tank” of the Getulio Vargas Foundation. It is responsible for Claudio Roberto Gomes Conceição calculation of the most used price indices and business and consumer surveys of the Brazilian economy. Senior Editor Director: Luiz Guilherme Schymura de Oliveira Anne Grant Vice-Director: Vagner Laerte Ardeo Assistant to the Editor Louise Ronci Directorate of Institutional Clients: Rodrigo de Moura Teixeira Editors Directorate of Public Goods: Bertholdo de Castro Vagner Laerte Ardeo Claudio Accioli Solange Monteiro Directorate of Economic Studies: Márcio Lago Couto Art Editors Directorate of Planning and Management: Ana Elisa Galvão Vasco Medina Coeli Marcelo Utrine Sonia Goulart Comptroller: Célia Reis de Oliveira Contributing Editors Kalinka Iaquinto – Economy Address João Augusto de Castro Neves – Politics and Foreign Policy Rua Barão de Itambi, 60 – 5º andar Thais Thimoteo – Economy Botafogo – CEP 22231-000 Rio de Janeiro – RJ – Brazil IBRE Economic Outlook Tel.: 55 (21) 3799-6799 Coordinators: Regis Bonelli and Silvia Matos Email: [email protected] Web site: http://portalibre.fgv.br/ Team: Aloísio Campelo André Braz Armando Castelar Pinheiro Carlos Pereira Gabriel Barros Lia Valls Pereira Monica de Bolle Rodrigo Leandro de Moura Salomão Quadros IN THIS ISSUE 3 THE BRAZILIAN ECONOMY 5 10 26 20 NEWS BRIEFS competitive, but opinion is divided units of the Getulio Vargas Foundation 4 Unemployment, wages, and manu- on how effective that will be. Claudio presented the first Roundtable on the facturing output are up … external Accioli interviews experts and reviews Agribusiness Scenario, and experts trade surplus sets record … President some of the history of industrial policy; there identified problems Brazil’s agri- shuffles government leaders in Con- that history is not promising, the risks culture sector must deal with to ensure gress … Aircraft maker Embraer is are high, and although the experts that it retains its current global promi- doing business in Africa … financing may disagree about how effective nence. Thais Timotheo reports on impli- agreed on for machinery exports to protectionism will be, they generally cations for Latin America as a whole Peru … Mexico comes round on auto agree that what is really needed is to and analyses a case of new agricultural exports … BRICS insist on more say improve the business environment. technology from Monsanto. in the IMF … tax on foreign borrow- ing extended … stimulus package IN TERVIEW VIEW P OI N T announced for industry. 20 The quest for global 37 The persistent apathy of competitiveness industry POLITICS Ozires Silva, former Minister of Infra- “When the economic situation is 8 Not (yet) a political crisis structure, former president of Embraer satisfactory but industry is not going Is President Rousseff facing a gov- and Petrobras, and now dean of so well, what should we do?” Luiz ernability crisis with her coalition Monte Serrat University, has seen Guilherme Schymura asks. The answer, allies? Probably not, at least not yet, where Brazilian business fits into the he says, is that “Since industry is apa- says João Augusto de Castro Neves. world economy from every possible thetic, the world economy is uncer- Though the Senate rejected one of her angle. He explains to Claudio Accioli tain, and bringing about devaluation is nominations and a very small political how Brazil can engage effectively in difficult, we should therefore move to party pulled out of the coalition, the the tough competition imposed by address the ‘Brazil cost.’” problems are more symbolic than real. emerging Asia, especially China and South Korea. With approval ratings and economic ECO N OMY indicators on her side, President Rous- 39 IBRE April economic outlook seff is retaining political capital. But for ROU N DTA B LE The Brazilian economy is recover- how long? 26 Rethinking the future of ing, but more slowly than expected. agriculture Low inflation, high employment, and COVER STORY The OECD says world food supply will income growth are promoting recov- 10 Made in Brazil need to increase 20% in 10 years to ery, but lack of dynamism in industry The government is betting on an meet demand, and expects that Brazil- and an expected slowing down of aggressive protectionist industrial ian agriculture will have to contribute purchases of durable goods will act as policy to make Brazilian industry more about two-fifths of that. In March, two a brake. April 2012 The Brazilian Economy 4 BRAZIL NEWS BRIEFS ECONOMY POLITICS Unemployment and wages up in 2011 and the best result for the month President shuffles government February since 2007, according to the Ministry leaders Brazil’s unemployment rate rose to 5.7% of Development, Industry and Foreign President Dilma Rousseff ousted her from 5.5% in January, the government Trade. Both exports, at US$21 billion, floor leaders in both houses of Congress statistics agency IBGE announced. and imports, at US$19 billion, set new in a move seen as an effort to quell signs However, February’s jobless number records. (April 2) of unrest within the governing coalition. was the lowest for the month since Sen. Romero Juca of the Democratic Manufacturing output up in 2002, indicating that the Brazilian labor February Movement Party (PMDB) and Rep. market was largely unaffected by the Industrial production grew 1.3% in Candido Vaccarezza of the Workers’ Party country’s economic slowdown in the February, after falling 1.5% in January, (PT) stepped down so that the president second half of 2011. Wages adjusted for according to seasonally adjusted IBGE could introduce rotation of the posts, inflation rose 1.2 percent from January data. Compared with February 2011, which are the administration’s main to R$1,699 (US$931)—4.4% more than a however, production fell by 3.9%, the points of contact with each chamber. year earlier. (March 22) sixth consecutive decline. So far in 2012 The PMDB’s Sen. Eduardo Braga replaces External trade surplus highest the industrial sector is down by 3.4%. Juca and the PT’s Rep. Arlindo Chinaglia replaces Vaccarezza. According to Rep. since March 2007 (April 3) Exports exceeded imports by US$2 Jeronimo Goergen (government-allied Inflation lower in March billion in March, up 30% over March Progressive Party), “It’s no use changing Brazil’s official consumer price index the leaders or ministers … because they rose 0.21% in March, slowing from a TRADE will always require authorization from 0.45% rise in February mainly because President Rousseff for everything they BNDES and Interbank finance inflation was lower for all items but food do. This is a general complaint among machinery exports to Peru and transportation. (April 5) members of the coalition.” (March 15) On March 12 the National Bank for Economic and Social Development (BNDES) and the Banco Internacional Del DEFENSE Perú S.A.A. (Interbank) signed a contract Embraer supplies aircraft to turboprops: Burkina Faso, Angola, to finance Brazilian exports of machinery African nations and Mauritania. Total value of the and equipment to Peru. A line of credit Embraer Defense and Security has contracts—which include an extensive up to US$50 million was established. signed contracts with three African logistical, training, and replacement The partnership between the BNDES nations to acquire its A-29 Super Tucano parts package—is more than US$180 and Interbank will promote trade light attack and advanced training million. (March 28) between Brazil and Peru and present new opportunities for their financial cooperation. (March 13) Mexico bows to Brazilian pressure on auto exports Photo: Embraer Mexico has agreed to reduce its auto exports to Brazil to an average of about US$1.6 billion over the next three years, bowing to Brazilian concerns about its ailing industrial sector. Mexican car exports to Brazil jumped by around 70 percent in 2011, aggravating a glut of cheaper imported autos in Brazil. The quota is the latest in Brazilian government efforts to protect the industry. Free trade between the two nations will resume after three years. However, the accord fell far short of what Mexico said it would fight for, and prompted harsh words from Mexican free trade advocates. (March 15) A-29 Super Tucano light attack and advanced training turboprop. April 2012 The Brazilian Economy BRAZIL NEWS BRIEFS 5 FOREIGN POLICY BRICS demand better representation at the IMF Leaders of the world’s most powerful emerging economies have threatened to withhold financing that the International Monetary Fund has requested to fight the European sovereign debt crisis unless they gain more voting power at Photo: Roberto Stuckert/ABr.