Brazil: The more the government “gives”, the more industrial production falls

The chart shows the behavior of industrial production in the world as a whole, in emerging markets and in Brazil.

Brazil_IP

Although far below the performance of industrial production in emerging markets (note that the data begins when China began the “big pull”), at least it evolved according to the world average.

For the past six years, however, it “dismounted from the world horse”. Curiously and more important, instructively, that coincides with the moment the government thought it had to adopt an authoritarian industrial policy:

  • Increase in subsidies from state banks
  • Reduction of industrial costs (lower payroll taxes and lower energy prices)
  • Local preference in government purchases
  • Local content policy in the oil and gas sector
  • National champions policy spearheaded by the national development bank (BNDES)
  • Rise in import barriers

The “gun”, however, backfired!

One thought on “Brazil: The more the government “gives”, the more industrial production falls

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