Industry: It’s Necessary to React

Data from the latest Annual Industrial Survey (PIA) conducted by the Brazilian Institute of Geography and Statistics (IBGE), lacking more recent numbers, show that the industrial sector lost 28,600 jobs from 2013 to 2019. Obviously, this study did not take into account the impacts caused by the coronavirus pandemic, which means that job cuts in industries may have reached even more dramatic numbers.

According to that survey, Brazil had 334,900 industries in 2013, the highest level in the historical series with data since 2007. However, starting in 2014, still during the government of Dilma Rousseff, the economy began to show signs of fragility, with successive declines, reaching 306,300 in 2019 due to the recession that affected the economy, which worsened with the shutdown of many factories from 2020 due to the pandemic.

According to IBGE data, the industrial sector, which employed 7.6 million people in 2019, was 15.6% smaller compared to 2003, which means that since then, 1.4 million jobs have been lost. The clothing and accessories manufacturing sector was the one that closed the most factories between 2013 and 2019: the number of companies in the segment shrank from 54,600 to 37,400. The second-largest decrease occurred in the segment of metal products (except machinery and equipment), a sector that saw a reduction of 5,600 companies, falling from 40,400 to 34,800. Another sector that recorded a negative variation was the manufacture of motor vehicles, trailers, and bodies, with a decrease from 12.3% to 9.2% between 2010 and 2019.

As it is known, these are sectors that had the foreign market as their main focus but had to pull back because, in addition to the scarcity of domestic inputs, companies began to face difficulties in obtaining imported raw materials, regardless of paying more for the products. Before the global crisis, Brazil managed to gain a significant share in the market for medium-tech products, which, however, was lost. Today, the main products exported are iron, sugar, beef, and soy.

In view of this, in order not to return to being just a supplier of raw materials, Brazil urgently needs its government to take concrete measures to try to reverse this trend, which means accelerating growth to alleviate the economic and social effects generated by the pandemic. This, obviously, involves comprehensive tax reform, involving federal, state, and municipal taxes.

As advocated by the National Confederation of Industry (CNI), this system, as seen in more developed countries, envisages the creation of a federal Value Added Tax (VAT), with a Contribution on Goods and Services (CBS), replacing the Social Integration Program (PIS) and the Contribution to Social Security Financing (Cofins), and another subnational VAT, with the unification of the Tax on Circulation of Goods and Services (ICMS) and the Tax on Services (ISS), which are extremely detrimental to competitiveness and economic growth.

But in addition to tax reform, Congress needs to advance the income tax agenda, seeking to align Brazil with international practices, avoiding measures that could discourage productive investments. In other words, the reform needs to focus not only on increasing revenue but also on promoting productive investments and economic growth, which involves the recovery of the industrial park, the fastest way to increase employment and improve the quality of life for the population.

---

Liana Lourenço Martinelli, lawyer, postgraduate in Business Management and International Trade, is the manager of institutional relations for the Fiorde Group, composed of Fiorde International Logistics, FTA Transport and Warehouses, and Barter International Trade. Email: fiorde@fiorde.com.br. Website: www.fiorde.com.br

Return to Blog