Fernando Alcoforado*
This article aims to demonstrate how the Lula government will be able to reverse the process of deindustrialization in Brazil that has taken place since the 1980s of the twentieth century. The analysis of Figure 1 shows the decline in the participation of industry in the formation of Brazil’s GDP from 1987 to 2019, which fell from 27.3% in 1987 to 11% in 2019, unlike what happened in the period 1947/1987, whose participation of industry in the formation of the GDP of Brazil evolved from 16.5% in 1947 to 27.3% in 1987.
Figure 1- Participation of industry in the formation of Brazil’s GDP (% GDP)
Source: https://valoradicionado.wordpress.com/tag/pib/
Upon assuming the Ministry of Industry, Commerce and Services, Vice-President Geraldo Alckmin correctly stated in his inaugural speech that “reindustrialization is essential so that sustainable development can be resumed and that this recovery takes place under the only prism that legitimizes it, that of social justice”. He also correctly stated that “it is urgent to reverse the early de-industrialization that occurred in Brazil, which calls for a clear policy of contemporary industrial competitiveness”, that “Brazil cannot do without industry if it has ambitions to leverage economic growth and develop socially” , and that “either the country resumes the industrial development agenda or it will not recover the path of sustainable development, job generator and income distributor”.
Minister Alckmin lamented the fact that “the manufacturing industry has lost its share of the country’s GDP, which harms economic growth and imposes an unwanted and expensive stagnation on us”. He also stated that “industry led Brazilian economic growth during a good part of the 20th century and until the 1980s, when its share was around 20% of GDP”. “Except for a few and brief periods of President Lula’s government, what has been seen in recent years has been its shrinkage, reaching 11.3% of GDP in 2021”. In summary, Minister Alckmin considers reindustrialization as a process of reconfiguration of the productive model based on cutting-edge technologies capable of supporting a “contemporary industrial competitiveness policy”. At the end of his speech, Minister Alckmin stated that the starting point of any industrial policy is sustainability and socio-biodiversity.
However, Minister Alckmin’s speech lacked a concrete analysis of the causes of the deindustrialization that Brazil has faced from the 1980s to the present moment in order to outline a strategy and policies for industrial development capable of promoting the reindustrialization of Brazil. Minister Alckmin failed to inform that the deindustrialization of Brazil occurred thanks to the economic opening adopted by the various governments of the country since 1990, which caused the Brazilian market to suffer the invasion of imported inputs and products at very low prices, mainly from China, which took many Brazilian industries bankrupt due to predatory competition from imported inputs and products.
Minister Alckmin failed to state that, in order to reindustrialize Brazil, the first measure would consist in the Lula government abandoning the neoliberal economic model adopted in Brazil since 1990, which promoted the unpatriotic opening of the Brazilian market to imported products. Minister Alckmin failed to state that the reindustrialization of Brazil will only happen if Brazil abandons the neoliberal economic model still in progress with its replacement by the developmentalist national economic model that was responsible for the greatest economic growth in the country’s history based on the substitutive industrialization process of imports that took place from 1930 to 1980, when the Brazilian State acted as an inducer of economic and social development, which is the condition to halt the deindustrialization of the country.
Reindustrializing Brazil means not only adopting an import substitution policy, but also contributing to the elimination or reduction of the country’s dependence on foreign capital and technology. The analysis of the article Capital Estrangeiro no Brasil: poder e controle sobre a riqueza in Capital estrangeiro no Brasil (Foreign Capital in Brazil: power and control over wealth in Foreign Capital in Brazil) by Regina Camargos et alli [1] shows that Brazil is enormously dependent on foreign capital, which has a large share in the Brazilian economy, whether in sectors industrial, commerce and services. Minister Alckmin of Industry, Commerce and Services has the duty to eliminate or reduce the dependency of these sectors on the outside world.
Based on data from 2016 of the 200 largest economic groups, involving more than 5,000 companies, it is possible to have a basis for the presence of transnational foreign capital in Brazil. The 200 groups add up to R$ 3.9 trillion in revenue, equivalent to 64% of GDP, of which 27% come from foreign groups. When not considered Petrobras, Bradesco, Itaú and Banco do Brasil, the participation of foreigners reaches 37%. Without the financial sector, considering only the trade, industry and services sectors, the participation of transnational groups is 36%. The Brazilian economy is transnationalized and is part of the productive circuit of large transnational capital.
In the industrial sector, transnational companies account for 28% of revenue (37% without Petrobras) and are in dynamic segments with the highest technological standards: transport material (vehicles and parts), metallurgy, electronics, chemicals, food, and beverages. They are at the heart of the value chain in each segment. In the service sector, the participation of foreign capital companies that acquired companies in the telecommunications and energy sectors has been growing. These corporations are responsible for 44% of the sector’s revenue (48% without Telebras). In the trade sector, transnationals focus on the commodities and large retailer segments, central links of control in these chains. Within the groups, transnationals account for 47% of revenues.
Thus, the presence of large transnational corporations in the Brazilian economy is evident. They occupy segments that are at the heart of value chains, allowing them strategic control of production and marketing (back and forth) in each sector. This fact guarantees them the appropriation of the value created in different links in the chain. In the transport material segment, for example, automakers are in the control center of the chain. They have the power to determine their suppliers’ prices and, therefore, appropriate part of their profits through oligopsony power. It holds power over the forward chain, the marketing and services of its dealers, also appropriating the value that would be added there. Another example is the commodity chain. On one side are the large corporations that control seeds and inputs; on the other, the big traders. The agricultural producer has his profit margin squeezed between two foreign giants that appropriate the value created by him.
Brazil’s dependence on foreign countries in the financial sector is demonstrated in the article A participação do capital estrangeiro no setor financeiro brasileiro in Capital estrangeiro no Brasil (The participation of foreign capital in the Brazilian financial sector in Foreign capital in Brazil) by Regina Camargos et alli [2]. According to recent data from the Central Bank, foreign banks account for 14% of total assets and 31% of the balance of credit operations in the country’s financial sector. In terms of participation in credit, the current situation is a little better than in 2005 and even so because, since then, there has been a vigorous expansion in the volume of credit operations in the country for all financial institutions . In the years when the Brazilian economy grew the most – 2010 and 2011 –, the participation of foreign banks in total credit offered to society reached the level of 40%, almost equal to that of public banks.
The activities and investments of large multinational companies are concentrated in research units in their countries of origin, or in other developed countries, for business reasons, among them to achieve economies of scale in research, to have access to a greater supply of labor- highly qualified workforce and to be located in larger markets. The scarcity of investments in research in peripheral areas of capitalism, such as Brazil, is evidenced by the small number of patents registered, as a result of research carried out here. However, even when research is carried out in Brazil, in the case of a foreign company, the patent will be registered in the name of the company and its use in Brazil, or in any country, will generate payments and remittances to the headquarters of the company, which owns the patent. On the other hand, the subsidiary of the foreign company in the periphery remits resources to its headquarters in the form of payments for providing technical assistance and for the use of trademarks and patents.
It has been proven that the presence of a foreign company dampens and discourages the technological development effort in the economic system of peripheral countries because it discourages the formation of a national capital goods industry, which is essential to autonomous technological progress, the only one capable of making the company permanently competitive in the international market. In addition, foreign companies tend to reserve management positions in their branches abroad to foreign executives and employees, including as a way of preserving industrial secrets and preventing technology from leaking, that is, actually being transferred and used by competing local or foreign companies.
There is a myth that foreign capital transfers technology, reflecting a naive view of the role of foreign capital in peripheral countries. This myth contributes to hampering Brazil’s scientific and technological development effort, keeping the country at a permanently lower technological level and, therefore, contributing to a constant flow of payments abroad and a permanent deficit in the technology item in the balance of transactions chains. It is this situation of economic and technological dependence on the outside that explains Brazil’s inability to promote its economic and social development throughout history and the ongoing deindustrialization of the Brazilian economy.
The reindustrialization of Brazil must be accompanied by actions that also contribute to the modernization of Brazilian industry with its insertion in Industry 4.0. The 4th Industrial Revolution or Industry 4.0 is characterized by the integration of so-called cyber-physical production systems, in which intelligent sensors inform machines how they should operate in their production processes. Industry 4.0 is an industry concept that encompasses the main technological innovations in the areas of automation, control and information technologies applied to manufacturing processes. The implementation of the Industry 4.0 concept requires planning with the study of the main problems that the Brazilian company faces, the investigation of the different technologies that can be adopted and making a long-term plan to gradually modernize the entire national industry [3].
While Industry 4.0 is under development, especially in the most advanced capitalist countries, unfortunately, Brazil is faced with the double challenge of, on the one hand, reversing the process of deindustrialization that it has suffered from 1990 to the present moment from the introduction of the neoliberal economic model that devastated the Brazilian economy that is currently being bankrupted and, on the other hand, to promote the development of Industry 4.0 in the country. The consensus among experts is that the national industry is lagging behind and is still largely in the transition from what would be Industry 2.0 of the 2nd Industrial Revolution, characterized by the use of assembly lines and electricity, to Industry 3.0 of the 3rd Industrial Revolution that applies automation through electronics, robotics and programming.
To have an idea of Brazil’s lag, it would be necessary to install around 165,000 industrial robots to approach the current robotic density in Germany. At the current pace, with around 1,500 robots installed per year in the country, Brazil will take more than 100 years to reach the level of Germany. We will need, more than ever, for the Lula government to be able to plan the development of Brazil, for strong and articulating leaders in the industry, and in the country’s academic and research institutions to develop Industry 4.0. We will also need relevant levels of investment and intensive training of managers, engineers, systems analysts and technicians in these new technologies, in addition to partnerships and strategic alliances with entities from other countries that are more advanced in industry 4.0. Brazil therefore still has a long way to go in various sectors of the economy in a gradual and disruptive way. One of the necessary measures for Brazil’s inclusion in the 4th Industrial Revolution consists of massive investments in the education system to qualify people with a focus on technology.
From the above, it was evident that the Lula government needs to consider that Brazil will only reverse the deindustrialization process if it adopts the strategies described below:
1) Abandon the neoliberal economic model with its replacement by the national development model with the Brazilian State acting in the planning of the national economy and as an inducer of the process of economic and social development.
2) Encourage the implementation of import-substituting industries for inputs and products with financing and the granting of tax incentives to ensure national self-sufficiency.
3) Promote the selective opening of the Brazilian economy to protect the national industry from predatory competition from imported inputs and products.
4) Promote the strengthening of the existing national industry in Brazil by offering financing and granting tax incentives.
5) Promote the development of the national capital goods industry to make it permanently competitive in the international market.
6) Put an end to the country’s economic and technological dependence on foreign countries by promoting autonomous scientific and technological progress, the only one capable of making national companies permanently competitive in the international market, with the strengthening of universities and research centers in Brazil .
7) Promote the modernization of Brazilian industry with its inclusion in industry 4.0, encouraging relevant investments and intensive training of managers, engineers, systems analysts and technicians in new technologies, in addition to partnerships and strategic alliances with entities from other countries and massive investments in education to qualify people with a focus on technology.
REFERENCES
[1]. CAMARGOS, Regina; BRESSER-PEREIRA; SAWAYA, Rubens; STUDART, Rogerio; CAMPOS, Pedro Henrique; FUSER, Igor; METRI, Paulo and FORUM POPULAR DO BUDGET. Capital Estrangeiro no Brasil: poder e controle sobre a riqueza. Available on the website <https://www.corecon-rj.org.br/anexos/E6C63BBDDAB6A3E26D95630A862E4FB0.pdf>.
[2]. CAMARGOS, Regina; BRESSER-PEREIRA; SAWAYA, Rubens; STUDART, Rogerio; CAMPOS, Pedro Henrique; FUSER, Igor; METRI, Paulo and FORUM POPULAR DO BUDGET. A participação do capital estrangeiro no setor financeiro brasileiro in Capital estrangeiro no Brasil. Available on the website <https://www.corecon-rj.org.br/anexos/E6C63BBDDAB6A3E26D95630A862E4FB0.pdf>.
[3] ALCOFORADO, Fernando. The future of the industry. Available on the website <https://www.academia.edu/45626607/THE_FUTURE_OF_THE_INDUSTRY>, 2021.
* Fernando Alcoforado, awarded the medal of Engineering Merit of the CONFEA / CREA System, member of the Bahia Academy of Education, of the SBPC- Brazilian Society for the Progress of Science and of IPB- Polytechnic Institute of Bahia, engineer and doctor in Territorial Planning and Regional Development from the University of Barcelona, university professor and consultant in the areas of strategic planning, business planning, regional planning, urban planning and energy systems, was Advisor to the Vice President of Engineering and Technology at LIGHT S.A. Electric power distribution company from Rio de Janeiro, Strategic Planning Coordinator of CEPED- Bahia Research and Development Center, Undersecretary of Energy of the State of Bahia, Secretary of Planning of Salvador, is the author of the books Globalização (Editora Nobel, São Paulo, 1997), De Collor a FHC- O Brasil e a Nova (Des)ordem Mundial (Editora Nobel, São Paulo, 1998), Um Projeto para o Brasil (Editora Nobel, São Paulo, 2000), Os condicionantes do desenvolvimento do Estado da Bahia (Tese de doutorado. Universidade de Barcelona,http://www.tesisenred.net/handle/10803/1944, 2003), Globalização e Desenvolvimento (Editora Nobel, São Paulo, 2006), Bahia- Desenvolvimento do Século XVI ao Século XX e Objetivos Estratégicos na Era Contemporânea (EGBA, Salvador, 2008), The Necessary Conditions of the Economic and Social Development- The Case of the State of Bahia (VDM Verlag Dr. Müller Aktiengesellschaft & Co. KG, Saarbrücken, Germany, 2010), Aquecimento Global e Catástrofe Planetária (Viena- Editora e Gráfica, Santa Cruz do Rio Pardo, São Paulo, 2010), Amazônia Sustentável- Para o progresso do Brasil e combate ao aquecimento global (Viena- Editora e Gráfica, Santa Cruz do Rio Pardo, São Paulo, 2011), Os Fatores Condicionantes do Desenvolvimento Econômico e Social (Editora CRV, Curitiba, 2012), Energia no Mundo e no Brasil- Energia e Mudança Climática Catastrófica no Século XXI (Editora CRV, Curitiba, 2015), As Grandes Revoluções Científicas, Econômicas e Sociais que Mudaram o Mundo (Editora CRV, Curitiba, 2016), A Invenção de um novo Brasil (Editora CRV, Curitiba, 2017), Esquerda x Direita e a sua convergência (Associação Baiana de Imprensa, Salvador, 2018), Como inventar o futuro para mudar o mundo (Editora CRV, Curitiba, 2019), A humanidade ameaçada e as estratégias para sua sobrevivência (Editora Dialética, São Paulo, 2021), A escalada da ciência e da tecnologia e sua contribuição ao progresso e à sobrevivência da humanidade (Editora CRV, Curitiba, 2022) and a chapter in the book Flood Handbook (CRC Press, Boca Raton, Florida, United States, 2022).
Site Title 