20 INTERVIEW The quest for global competitiveness The Brazilian Economy—Brazil made Photo: Divulgação. it through the international crisis more comfortably than most countries, but last year economic growth was below expectations. What do you think are the prospects for the Brazilian economy? Ozires Silva—I’m not as optimistic as the government. Without a doubt, the GDP of Brazil is lower than the country deserves. … We have the false impres- Ozires Silva sion that the country is going well, but Former Minister of Infrastructure and former president of the numbers show that Brazil’s external Embraer and Petrobras current account has only been balanced Claudio Accioli, São Paulo by capital inflows, which is problem- atic. Covering the current account Forty years ago Ozires Silva envisioned that Brazil deficit that way generates a liability as would be a major player in international aviation. Twice president of the Brazilian Aeronautics the capital has to be paid back. We must Company (Embraer), the third largest manufacturer have a vision for the future and propose of commercial jets in the world, aeronautical strategies for development. We must give engineer Silva, now dean of Monte Serrat University, priority to education, which is absolutely explains how Brazil can prevail against the tough fundamental for Brazil today. … Brazil competition imposed by emerging Asia, especially cannot reach the necessary revenue China and South Korea. Having served as president of the state oil company, Petrobras, as Minister of potential and profit more because of Infrastructure, and as a reserve officer in the Brazilian constraints than because of lack of incen- Air Force, Silva has a uniquely broad perspective. tives. We cannot do anything without He thinks the main obstacles to Brazil’s competing requiring a government permit, which successfully in world markets are the excessive makes things difficult. The State is in presence of government in Brazilian life and the every corner of Brazilians’ activity . education deficit that undermines the quality of our workforce. But he also thinks that with the right I often joke that in Brazil money is not effort such problems can be overcome. at risk. What is at risk are the company, April 2012 The Brazilian Economy INTERVIEW 21 employment, the entrepreneur, and the and what is business; government and product. You must use money not just to business interests are working together generate more money but also to create to create a competitive direction for value. those countries. Brazil would benefit greatly if we could replicate that close Of all the sectors, industry is performing collaboration between the public and worst. Is there a risk of deindustrializa- private sectors. That is all that we need tion? to take action. The competition today is Deindustrialization is already a reality in between countries. This is not company Brazil. Recently Renner, one of the oldest A in Brazil trying to compete with and most traditional textile companies company B in China; it is company A, in Brazil, began to sell Chinese products. alone, having to compete with company What’s worse is that these products are B and its ally, the Chinese government. being paid for mainly by our export of commodities. In that context, what do you think of But more important than making a the Greater Brazil Plan, launched last correct diagnosis of the situation is to year to support domestic industry and know what to do. There are no magical recently expanded? measures, but something undoubtedly The plan itself is comprehensive and well needs to be done about the [appreci- defined, but I think the media have not ated] exchange rate, which has been addressed the issue properly. They have extremely harmful for the country . emphasized the amount of tax relief and Brazil’s competitiveness is far below that suggest that the federal government is of our competitors . [but] the picture not collecting taxes so it can help entre- can change dramatically if [the exchange preneurs. The correct view would be to rate] is changed. show how much is being invested and There is another aspect that has to what is the expected return, because if be taken into account. I spent much that money comes back, it is not a loss. time as a minister of state and real- What is worrisome is how the measures ized clearly that the government is far will be carried out. We have complex removed from society. As a result the laws to curb corruption, long, full of civil service distrusts the private entre- restrictions, but doing so is related preneur. Meanwhile, if we look at two powerful examples We must have a vision for the future of competing economies today, and propose strategies for development, China and South Korea, we one of which must be to give priority see that it is hard to distin- guish what is the government to education, which is absolutely fundamental for Brazil today. April 2012 The Brazilian Economy 22 INTERVIEW much more to educa- We must join the On the other hand, tion than to penalties. world community, it’s easy to list the incen- But the laws end up manufacturing and tives that we’re giving not being respected. I for foreign companies fought four years for exporting products to enter Brazil. High the Innovation Law in which we’re taxation, interest rates, and celebrated when competitive and labor and welfare laws, it was approved. The among others, all law is good, really buying when we’re directly subsidize our innovative—but then not. imports. the decree regulating it ruined it, so much so that we see no How do you assess the “Brazil cost”? results. We are lagging behind. There is no use adopting measures just to offset this cost, Are measures to protect Brazilian because they will create problems for us industry and encourage local content in the international market. Reducing regressive? production costs certainly would help. To some extent, imports of foreign Of course there is a problem that must components have helped to improve be faced: the government spends money the production of goods in Brazil. I it does not have, which has increased see nothing wrong with that. We live the tax burden. Infrastructure is some- in a globalized economy, in which old thing that you do not feel, but without concepts such as 100% national goods it you do not move. And Brazil is stuck don’t apply any more. Even products in this regard because the government made in developed countries have a lot has chosen to be. Until the new airport of imported components, systems, and concessions, for a long time there were equipment. The computer is a good no utility concessions granted to the example. Just open one, in any country, private sector, which has resources and and you will find parts from all over appetite to invest. The government lost the world. The outdated idea that all its managerial capacity, and that’s what components of products manufactured motivated me to fight for Embraer to be in Brazil must be essentially national privatized. It was impossible to manage returns us to the policy that prevailed Embraer because the government had from the 1970s into the early 1980s. become a poor shareholder. We must join the world community, The premiums paid for the airport manufacturing and exporting products concessions were very large, much in which we’re competitive and buying higher than expected, which shows the when we’re not. private sector is interested in investing April 2012 The Brazilian Economy INTERVIEW 23 in infrastructure . If we hand over that management is perhaps the magic to the private sector everything we can word for the future. That’s what the in terms of infrastructure, Brazil would president asked for from Jorge Gerdau change with extraordinary speed. — a management shock to eliminate the distrust between government bureaucrats You have headed up two major Brazilian and the national productive sector. companies. From the standpoint of management and governance, are we What would be the best strategy for competitive? Brazil to defend against the heavy No. But what the government does is competition from Asia? crucial in determining whether Brazilian Be a better competitor than they are. businesspeople manage efficiently. Much Is that difficult? Extremely. Last year of the efficiency is lost in the govern- Brazil graduated just under 40,000 ment’s huge bureaucracy. Jorge Gerdau engineers. China graduated 630,000. Johannpeter, [president of the Gerdau If we imagine that just 10% of Chinese Group], who is now in the govern- engineers are exceptionally talented, last ment, says that in the United States his year China graduated a larger number company has 3 employees to deal with of talented engineers than Brazil gradu- paying taxes; in Brazil it has 200. ated engineers of all talents. It’s a huge loss of competitiveness, but also a great How do you explain Embraer’s challenge, which can only be overcome success? by education. When I became CEO of Embraer on Several decades ago, General Park January 2, 1970, there was no structure, Chung Hee and Deng Xiaoping launched just one office at the Aerospace Tech- the biggest educational programs their nical Center for company headquarters. countries had seen. The Financial Times From the beginning, I was concerned defined the Korea program as ‘Bigotry for to create a competitive environment in Education’. A month ago, in Detroit, the the company . We would not seek cradle of the American auto industry, a subsidies or privileges. Korean car was voted We would win in the If we hand over to Car of the Year. competitive strategy of the private sector Back to the case placing planes in the everything we of Embraer, I am world market.