1.Is Brazilian Manufacturing Losing its Drive? Jorge Arbache1 AbstractBrazil has built over the decades, with great effort and sacrifice, a dynamic, integratedmanufacturing sector that has helped the country grow and become one of the worlds largesteconomies. Recently, though, basic indicators, such as the performance of output andemployment, have suggested that manufacturing is growing slower than other sectors and itsshare in total output is on the wane. The problem with this type of analysis is that it may lead tomisleading conclusions due to the substantial transformations which industrial activity hasundergone, such as the vertical specialization that decentralizes and fragments production withgains in efficiency and innovation, and the more than proportional increase in consumption ofservices in economies that have urbanized and modernized. For this reason, a carefulexamination of the evolution of the drive of the Brazilian manufacturing sector requires broader,comparative analyses, combined with the usual analysis of performance indicators at thedomestic level. This article employs the industry-space method (Arbache 2012), a simple butuseful tool for comparative analysis of industrial development, to assess the case of Brazil. Wefind evidence that the Brazilian manufacturing sector is indeed losing its drive both at nationaland international levels. The article discusses the origins of the slowdown, and the newchallenges faced by Brazilian industry. The article argues that, although challenges areextensive and complex, several business and investment opportunities emerging in Brazil cangive a new boost to the manufacturing sector and take it to a new level of development,provided that the public and private sectors undertake the reforms and actions needed forindustry to benefit fully from such opportunities. The article closes by discussing policystrategies that can boost the industrial sector. October 2012Keywords: Manufacturing sector, competitiveness, productivity, internationaltrade, innovation, industrial policies, BrazilJEL Codes: F14, L60, O14, 0251Professor of Economics at the University of Brasilia and Advisor to the President of theBrazilian Development Bank (BNDES). This article does not necessarily represent the opinionsand views of the BNDES and its Board of Directors. I would like to thank Andrea Goldstein,Ernesto Lozardo, Philip Schellekens, Victor Burns, Gianna Sagazio, and Fabiano Bastos fortheir useful comments and suggestions on an earlier version of this article. Contact:Jarbache@gmail.com. 1

2. 1. IntroductionWith great effort and sacrifice, Brazil has built a dynamic, integratedmanufacturing that has helped the country grow and become one of the worldslargest economies.2 Recently, though, basic indicators, such as theperformance of output and employment, have suggested that the manufacturingsector is growing slower than other sectors and its share of the economy is onthe wane. These transformations, which are not particular to Brazil, but rather toemerging economies that integrate the world economy, have led many to claiman across-the-board reduction in manufacturings share in GDP.The problem with this type of analysis is that it may lead to misleadingconclusions. This is because of (i) the substantial transformations whichindustrial activity has undergone, such as the vertical specialization thatdecentralizes and fragments production with gains in efficiency and innovation;3(ii) the more than proportional increase in consumption of services in economiesthat have been urbanized and modernized (Rowthorn and Ramaswamy 1997);and (iii) the methodological difficulties in calculating the sectorial share ofmanufacturing in GDP associated with the increasingly complex relationshipbetween this and the service sector. Besides these factors, there are othersspecifically related to Brazil, such as the overindustrialization in the 1970sassociated with the import substitution industrialization era (Bonelli and Pessoa2010), problems with relative prices and deflators of output and investment(Ferreira et al 2008), changes in national statistics, among others.For these reasons, an examination of the drive in Brazilian manufacturingrequires broader and comparative analyses, combined with the usual analysisof performance indicators at the domestic level. In order to do so, this articleemploys the industry-space method (Arbache 2012), a simple but useful tool forcomparative analysis of industrial development over time. We find evidence thatBrazilian industry is indeed losing its drive at the international level. This resultconfirms and strengthens previous findings using domestic level data.This article is organized as follows. Section 2 examines basic industryperformance indicators at the domestic level. Section 3 undertakes acomparative analysis of industrial development at the international level.Section 4 discusses the origins of the slowdown in the drive of the Brazilianmanufacturing, highlighting issues such as low labor productivity and low2There is a rich empirical literature suggesting that economic development and long termgrowth are associated with a modern, diversified and integrated industrial sector (e.g. UnitedNations 2007).3Cross-border investment, offshore trade, outsourcing and value chains brought substantialchanges to trade pattern and industrial production. The existing international trade statistics arestill based on traditional trade, which is difficult to accurately reflect the entire process of globalproduction chain and unable to consider changes in international trade and production. 2 3. investment in infrastructure and innovation. Section 5 discusses the newchallenges faced by Brazilian industry, such as the rapid demographictransformation, the new geography of production and innovation, and the rise ofState capitalism. Section 6 argues that, although industrys challenges areextensive and complex, the several business and investment opportunitiesemerging in Brazil can give it a new boost and take it to a new level ofdevelopment, provided that the public and private sectors take on the reformsand investments needed for the sector to benefit fully from such opportunities.Finally, the last section concludes with suggestions for policy strategies to boostindustry.2. The recent performance of Brazilian manufacturing sectorChart 1 shows the sectorial output performance from 2000 to early 2012.4Manufacturing was, arguably, the sector with the slower pace and also the mostaffected by the financial crises of 2008/09. Output has stagnated since then.Chart 1: Sectoral output (1995=100) Quarterly output, moving average 12 monthsSource: IBGE200180160140120100 80 60 Q 0 Q 0 Q 2 Q 3 Q 5 Q 5 Q 6 Q 7 Q 8 Q 8 Q 0 Q 1 Q 1 Q 1 Q 1 Q 2 Q 3 Q 4 Q 4 Q 6 Q 7 Q 9 Q 9 Q 023 2001 001 2003 2003 0 01 2003 001 0 03 2001 2001 0 13 2011 013 001 003 001 003 001 001 003 003 001 003 01 01.2.2.2.2.2.2.2.2.2.2.2.2.2.2.2.2.2.2 . . . . ... Q1 Agriculture Mining Manufacturing ServiceChart 2 shows the sectorial job performance. Growth in manufacturingemployment was on par with other sectors until the onset of the financial crisis.Since then, it has grown at a much slower pace than the service and mineralsectors. Job performance in the agriculture sector is also slow, but the mainreason is the substantial improvement in labor productivity.4Due to availability and quality of data, and to mitigate problems arising from changes in thestatistics series of the IBGE, the article focuses on the period starting in 2000. 3 4. Chart 3 shows that, except for 2004, growth in manufacturing employment hasalways been smaller than that of the economy as a whole and the gap haswidened since 2008. As a consequence, manufacturings share in job creationwent from 20.6% of the total in 2002-2007 to 11.8% in 2008-2011.5 Chart 2: Sectoral formal job - Moving average 12 monthsSource: Ministry of Labor130120110100 90 80 70 60000 01 102 2 03 3 04 4 05 5 06 6 07 7 08 8 09 9 10 0 11 1 12 l/0l/0 l/0 l/0 l/0 l/0 l/0 l/0 l/0 l/0 l/1 l/1n/ n/n/n/n/n/n/n/n/n/n/n/n/ juju ju ju ju ju ju ju ju ju ju juja jajajajajajajajajajajaja Mining ManufacturingServiceAgricultureChart 3: Job creation (%)Source: Ministry of Labor12 9,610 7,77,9 87,5 6,9 6,66,2 5,8 5,7 65,4 4,7 4,54,43,6 3,8 43,5 2,8 2,82,7 20,7 0 2002200320042005 20062007 2008 2009 2010 2011Brazil ManufacturingSectorial labor productivity in manufacturing has also lost pace compared toother sectors. Ambrozio and Souza (2012) show that while labor productivity inmanufacturing grew -0.2% per year between 1995-2008, agriculture and mining5Despite the modest job creation in manufacturing, Arbache and Amorim (2012) found that theinter-industry wage premium paid in this sector remained at around 12% throughout the 2000safter controlling for human capital, demographic, geographic, sectorial traits, among othervariables. This result seems to be related to factors such as market structure, technologicalintensity and market regulation. 4 5. grew 6.7% and 4.4%, respectively. Using a different set of data, IPEA (2012)finds that labor productivity in manufacturing grew -0.9% per year between2000-2009, while it grew 4.3%, 1.8% and 0.5% in the agriculture, mining andservice sectors, respectively.Chart 4 shows that manufacturing goods represented 54.7% of total exports inthe beginning of the decade, but by 2011 their participation fell to 36%. Primaryproducts, in their turn, increased from 28% to 47.8%, becoming the definingsector for the insertion of the Brazilian economy in the global trade arena.6There were also significant changes in export coefficients and importpenetration, as shown in chart 5. Import penetration increased rapidly in severalsectors, including those which were traditionally occupied by domesticcompanies, such as consumer goods. In the beginning of 2012, some 23.7% ofapparent consumption in the textile sector was being imported against 8.1% in2000; clothes, 10.6% against 1.2%; leather artifacts, 46.1% against 6.6%;chemicals, 25.7% against 15.3%; and rubber, 25.6% from 11.1%. Puga andNascimento (2010) show that import penetration increased more rapidly in thelabor and scale-intensive sectors.Manufacturing trade, which was in surplus for several years, fell rapidly from2006 and became a deficit by end of the decade in 2011 the trade balance ofmanufactured products was minus US$ 43.2 billion. If we exclude for a momentthe surplus in the low technological products group, which includes foodstuff,lumber and pulp sectors, the manufacturing trade deficit would jump to US$86.1 billion, almost three times the total trade surplus in that year. The Braziliantrade balance is still in surplus thanks to primary products. Sarquis (2011)identified a falling trend in the Brazilian intra-industry trade, while Baumann(2012) found that Brazilian industrial exports are increasingly out of synch withtrends in the worldwide demand for manufactured products. Such evidence is astrong sign that Brazilian industry is being left by the wayside in relation toglobal manufacturing.6Part of this fall is related to the high prices of primary products in the 2000s.5 6. Chart 4: Exports by sector - % of totalSource: Ministry of Trade and Development 65 60 55 50 45 40 35 30 25 20 15 105020002001 20022003 2004 2005 2006 20072008 20092010 20112012 Jan-Apr Basic products Semi-basic productsManufacturingChart 5: Export coefficient and import penetration (%) Source: Confederation of National Industry 25 20,719,118,7 18,5 2018,0 17,317,3 16,815,715,4 15,3 15,015,0 14,613,5 13,4 15 12,311,8 11,9 11,611,411,110,5 10,3 10502000 2001 20022003 2004 2005 2006 2007 200820092010 2011 Export coefficientImport penetrationChart 6 shows a falling trend in the manufacturing share in GDP. In 2011, themanufacturing share was 14.6%, less than half of the figures recorded in theearly 1980s. The falling trend in manufacturing together with previousindicators, suggest that the Brazilian manufacturing sector is losing its drive atthe domestic level. 6 7. Chart 6: Manufacturing share on GDP (%) Source: WDI - World Bank 20 19,2 19 1818,018,1 17,217,1 1716,9 16,616,7 16,416,2 16 15,4 15 14,6 142000200120022003200420052006200720082009201020113. International comparisonTo further analyze whether Brazilian industry is truly losing its drive, it isnecessary to go beyond the usual analysis of performance indicators, aspreviously discussed, and assess it from the international perspective. To do so,we make use of the industry-space analysis (Arbache 2012). Industry-space isthe locus where two simple, but revealing variables for analyzing industrialdevelopment over time meet. The first variable is the manufacturing share inGDP. The second is industrial density, which is manufacturings value addedper-capita. Industrial density captures the capacity, and perhaps the willingness,of a society to build infrastructure, invest in physical and human capital and inR&D, and to reform institutions and manage such resources so as to fosterindustrial development (Arbache 2012). As this variable is strongly affected bythe size of the population and the demographic development, the focus ofanalysis of this variable should go to the rate of growth rather than to its levelonly.As put forward by Arbache (2012), the relationship between the manufacturingshare in GDP and industrial density is complex and in fact it is difficult to predictwhether it will be positive or negative. The positive relationship is more likely tooccur in emerging economies that are still building and developing industrialinfrastructure. The weak or negative relationship is more likely to occur inadvanced economies whose industries are already mature and havespecialized in high-end manufactured products with lots of technologicalservices embodied, such as the iPad. Arbache (2012) finds empirical evidenceof a positive relationship up to a point; afterwards the manufacturing sharestagnates or even retreats, while industrial density keeps rising.Brazilian industrial development from the international perspective7 8. Charts 7 and 8 present the averages of the manufacturing share in Brazilsoutput and industrial density and in a sample of countries from 2000 to 2011.7The average share of Brazilian manufacturing was 16.9%, comparable to that indeveloped countries such as the United States, Canada, France and theNetherlands, but quite below that in East Asian countries, such as South Korea,China, Thailand, and Malaysia. Chart 7 shows that Brazils industrial density,with an average of US$ 590, was closer to that in emerging economies such asChina, South Africa and Latin American countries, but substantially smaller thanthat in developed economies. Therefore, comparing the share of manufacturingin GDP in countries at very different stages of industrial development may bemisleading. Chart 7: Manufacturing share on GDP (%) average 2000-2011 Source: WDI - World Bank34,540 32,03528,6 27,526,1 24,23022,520,9 20,9 19,819,625 18,618,2 17,717,2 16,916,6 15,815,4 15,1 14,014,12013,5 10,015 9,810 5 0 nd Un Fr y Th ina aco ada un n e sng yG tin aia No ia cee r ut h la co cane zilM rea ey es ile er s M s Ar r ies ic o siaSi an a In orpadind tee ou esabe rwVe a ite a nlarkCht rif ri t ri In ChAm So zuNe St a apexay Ko Br m Ca n Jamla n tS on aiAr ica Aun Tu un ge er ald th coi dthud e eSa mco co in in gh e tindlHi id La M7All the data pertaining to the industry-space analysis is from the World DevelopmentIndicators, World Bank. Industry value added is in constant dollars of 2000. The sample ofcountries is highly diversified in terms of geography, income per capita and economiccharacteristics.8 9. Chart 8: Industrial density (constant US$) - average 2000-2011 82499000800067617000 540649986000 4478382650003719 3731 3431312540003000 14541336 1026100320009669548298437295905585623692591000 88 0 ne d Ca a yaco Ind dia co th da co esiaFr aen No sSt ya M ia th nceun la co rea iA y G iesileTh iesng e ses M icoAr ysiaco z i an inor pa Ve lanndud r keinelricbrwn Braou na Ch tr i atInChra tr zuntapex tr Ko m Ja laNe aAf m on ai aS a Tuunun geer eral hdut SiiteSoee UnSmica erininAm gh edltinHiid La MCharts 9 and 10 present the industry-space in 2000 and 2011. It is worth notingthe significant increase in industrial density in Korea, Singapore and China, aswell as the drop in the manufacturing share in total output in France, Argentinaand Chile. Brazils manufacturing share also fell, as discussed before, whileindustrial density increased slightly in the period. The gap between Brazilsmanufacturing share and the samples average remained almost the same in2000 and in 2011, at around 17% below the samples average. The samepersistence applied to industrial density, which remained at around 76% belowthe samples average. More important than this persistence is the deteriorationof Brazils relative position compared to industrial competitors such as China,Korea and Singapore, and even in relation to rising industrial powerhouses suchas Malaysia and Thailand.The industry-space analysis suggests that Brazilian manufacturing is losing itsdrive at the international level as well, while the economy is increasingly relyingon primary products. Among the expected implications of this impoverishedinsertion of Brazil internationally are the exposure to sudden changes in termsof trade, reduced capacity for technological and innovation development, andlower and more volatile long-term economic growth. Indeed, stylized facts showthat commodity prices are extremely volatile, and the experience in the lastdecades indicates that such prices are highly subjected to public and evenprivate interventions. Empirical evidence also reveals that countries that dependon commodity exports present economic growth that is slower than that incountries with a more diverse export portfolio, which is related to its higherexposure to shocks and to the negative impacts of volatility in investmentdecisions, fiscal revenue, export revenue and productivity (Loayza, Servn andVentura 2007). Lederman and Maloney (2007, 2008) show that this is not dueto the export of primary goods per se, but rather to the low diversification ofexports associated to low growth. Cavalcanti, Mohaddes and Raissi (2011) 9 10. present empirical evidence that rising commodity prices might bring somebenefits, but they also reveal that these benefits tend to be dominated by thedownside of commodity price volatility, which would explain the long-term lowgrowth tendency in countries that depend more on primary goods. Arbache andPage (2007) show that countries that depend more on commodity exports growlittle, not because of a lack of the capacity to grow, but because they experiencestronger growth accelerations and stronger growth collapses, which makeaverage growth low in the long term. The authors also show that shocks in theterms of trade are among the main causes of growth accelerations andcollapses in these countries. Cardoso and Teles (2010) show that fluctuations inBrazilian output around the potential output between 1900 and 2008 arestrongly associated with shocks in the terms of trade. Chart 9: Industry-space 200010000 9000 8000 JPN 7000 Industrial density (US$) 6000 SGP USA 5000 GERHICCAN 4000 NRW NTLFRC 3000 KOR 2000ARG MEX MAL 1000SAUVNZLAC CHL TUR BRATHA INDSAR MICCHN IDN00 5 101520 25 30 35 40Man. share on GDP (% ) 10 11. Chart 10: Industry-space 2011 100009000 JPNCIN80007000Industrial density (US$)6000 USA5000 GERKOR HIC4000 NRWNTLCAN3000FRC2000ARG MEX MALSAU TUR1000CHL VNZ PLA CHNTHABRA MICIDN IND SAR 0 0 5 1015 2025 30 35 40 Man. share on GDP (% )Table 1 shows the industry-space for 2011 divided into four quadrants createdaccording to the samples averages. Countries were mapped out accordingly.As expected, countries with strong industry and that focused on exports of highvalue added industrial products fell into the first quadrant (Q1). This is the casefor Germany, Japan, South Korea and Singapore, or the countries whosemanufacturing could be called Champions. Countries with mature industry andwith a modern and sophisticated service sector, such as the United States,France, Canada, the Netherlands and Norway, fell into the second quadrant(Q2). Their manufacturing could be called Mature. Medium income countriesand those that foster policies to develop and strengthen their industries fell intothe fourth quadrant (Q4). These are the cases for China, Malaysia andThailand, or those countries whose manufacturing could be called Tigers.Finally, the third quadrant (Q3) presents countries whose manufacturing sectorslack drive, that are losing their drive, or those whose primary sectors are eithereffectively, or are becoming dominant in the economy. This group includesVenezuela, Saudi Arabia and Mexico, which depend heavily on oil; Chile, whichprioritized the development of the mining, agricultural and fishing sectors; SouthAfrica, which focuses heavily on mining, agriculture and services and whoseindustry has faced severe hardships related to the apartheid;8 India, the secondworlds most populous country, the one with the largest poor population, and8For more details, see Draper and Alves (2009).11 12. with a large agriculture and service sectors; and Latin American countries,whose economies generally rely on commodities and have a significant informalsector. These are the countries whose manufacturing could be calledLaggards. Brazil is in this last group.9Table 1: Mapping out countries -- 2011CanadaQ2Germany Q1production) below average / above averageFranceJapanHigh Income Countries SingaporeIndustrial density (per capita industrialNorwaySouth KoreaThe NetherlandsUnited StatesArgentina Q3China Q4BrazilMiddle Income CountriesChile MalaysiaIndia ThailandIndonesiaLatin American CountriesMexicoSaudi ArabiaSouth AfricaTurkeyVenezuelaShare of manufacturing on GDP (%) below average / above averageTo advance the examination of Brazilian industrys drive further, we compareBrazil to select countries. The comparison of the Brazilian experience withChinas (Chart 11) shows large discrepancies in participation rates and inindustrial density. The participation of Chinese industry in the economy is nearlytwice that of Brazil. Chinese industrial density, however, started at a much lowerlevel than Brazils, at US$ 304 against US$ 551 in Brazil in 2000. However, as itincreased rapidly, among others, due to policies introduced to foster industrialdevelopment, including R&D, credit and export promotion, by 2007 Chinasindustrial density overtook Brazils, reaching US$ 904 in 2011, while Brazilianindustrial density was practically stagnant. Our simulations suggest that, withthe lasting and increasing rhythm of industrial density seen in the last decade,Chinas industry will fall into Q1 before the end of this decade. The comparisonbetween the two countries highlights the fact that the industrial density growthrate is just as, or is even more important than its level. It also emphasizes theimportance of public policies aimed at fostering and supporting industrialdevelopment.9 The industry-space method is strongly affected by the size and composition of the sample ofcountries. The inclusion of several African countries in the sample would significantly alter theaverages and, therefore, the classification of the countries in the quadrants of Table 1.12 13. Chart 11: Brazil vs. China 351000900 30 Industrial density (constant US$)800 Man. share on GDP (%) 25 700 20 600Brazil500 Brazil 15 China China400 10 30020051000 02000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011The comparison with South Korea shows that the participation rate of Koreanindustry, which was already substantially higher than Brazils at the beginning ofthe decade, continued on an upward path and, by the end of the period, it wasalmost twice Brazils participation (Chart 12). Industrial density, in its turn, whichwas almost five times that in Brazil at the beginning of the decade, grew rapidlyand, in 2010, was eight times larger. The Korean case also draws attention tothe relevance of public policies, such as educational, technological and exportpromotion, for industrial development.Chart 12: Brazil vs. Korea 356000 30 Industrial density (constant US$) 5000 Man. share on GDP (%) 25 4000 20BrazilBrazil 3000 15 Korea Korea 2000 10510000 02000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20102000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010The comparison between Brazil and Thailand reveals a similar path to theBrazil-Korea analysis. The difference is that industrial densities in Brazil andThailand were similar in 2000, but differed throughout the decade due to thefast growth in Thailands density (Chart 13). The Thai case also highlights therole of public policies in industrial development. Chart 13: Brazil vs. Thailand 13 14. 401200 35 Industrial density (constant US$) Man. share on GDP (%) 1000 30800 25 20 Brazil600BrazilThailand Thailand 15400 1020050 02000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20102000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010The Turkish participation rate follows a falling trend much like Brazils. However,it stabilized in 2009 and has grown since then (Chart 14). Turkish density, in itsturn, presented a growing trend, increasing from US$ 840 in 2000 to US$ 1176in 2011, up 40%. Chart 14: Brazil vs. Turkey 25Industrial density (constant US$) 1400 1200 20 Man. share on GDP (%) 1000 15800BrazilBrazil 10 Turkey600 Turkey40052000 02000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2000 2001 2002 20032004 2005 2006 20072008 2009 2010 2011The path of Mexicos participation rate is similar to Brazils, but has presented atrend of slight increase since 2009 (Chart 15). Industrial density, which wasapproximately twice Brazils in the early 2000s, has shown a positive trendsince 2003, despite the break in 2008/09 due to the financial crisis.Chart 15: Brazil vs. Mexico 251200 Industrial density (constant US$) 201000 Man. share on GDP (%)800 15BrazilBrazil600 10 MexicoMexico40052000 02000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2000 2001 2002 2003 2004 20052006 2007 2008 2009 2010 2011The comparison with the United States shows some similarities in the level andin the path of industrys participation rate in the economy, but the American ratecontracted more than the Brazilian rate (Chart 16). However, when it comes toindustrial density, there is a substantial difference, since American industrialdensity tended to increase in general after 2003, stopping in 2008/09, but14 15. resuming the pattern in 2010. This exercise reinforces the view that comparingthe participation rates in countries with such different industrial densities mightbe inappropriate and could lead to misleading conclusions.10Chart 16: Brazil vs. the US 25 7000Industrial density (constant US$)6000 20 Man. share on GDP (%)5000 154000 Brazil Brazil 10USA3000USA200051000002000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010The highest level of industrial density ever recorded in Brazil was US$ 623 in2011. A similar level was recorded for the first time in Korea in 1982-1983.Based on these simple figures, one could argue that Brazilian industry is about29 years behind Koreas. A similar exercise suggests that Brazilian industry wasalso behind other countries industries, including Thailand (15 years behind),Malaysia and Turkey (10 years behind).Although Brazil has a manufacturing participation rate comparable to Q2countries, it is also well behind them. This is because in the year they firstreached the same participation rate as Brazils current rate -- between 14% and15% -- their industrial densities were substantially higher than Brazils, asfollows: Norways was US$ 3,522; the US was US$ 4,905; Frances was US$3,319; and Canadas was US$ 3,953. This exercise suggests that Brazilianmanufacturing contracted prematurely and well before reaching a higher level ofdevelopment.Tidal-wave effect?To examine whether the fall in Brazilian manufacturing resulted from an across-the-board shrinking of industrial activity rather than from a movement particularto Brazil, we calculate the growth rate of the manufacturing share in GDP andthe growth rate of industrial density. If there was indeed a tidal-wave effect,then we should find an across-the-board pattern in these growth rates. Charts17 and 18 suggest that there is no common pattern, even among commodityproducers and among developed countries. Countries have actually followedquite different patterns overtime and therefore there are no stylized facts.10Besides the experiences reported here, many others deserve a word, such as Indias density,which increased 85% from 2000 to 2011, even though it is still at quite a low level, as well asthe Argentine case, which shows a sharp fall in the manufacturing share in output since theearly 1990s. 15 16. Germany experienced a drop in manufacturing share, but an increase inindustrial density, whereas France experienced a drop in both indicators.Indonesia saw a substantial drop in manufacturing share, but a significant risein industrial density, whereas Thailand advanced in manufacturing share and inindustrial density. Venezuela and Saudi Arabia, major oil producers, alsoexperienced quite distinct patterns. While both manufacturing share andindustrial density dropped in Venezuela, these indicators improved in SaudiArabia. This simple exercise suggests that there is no such tidal-wave effect.Therefore, it is unlikely to have been the main explanation for the loss of drive ofBrazilian manufacturing. Chart 17: Growth rate of manufacturing on GDP (%) - 2000-201120100d un yiA a Fr a Un Tu e co Ge dia n ou s ou ysiaTh n aM s e Ar abia s ut ela ng a e r th e zil a St y s Ca leM te s sia ico -10 Co wae C an ud h in drie orpa ut lan C nd Ve a nc ite r kerie reSi fric ia tr ina Ch i neIn So ezunt ap ay exaKoNe BrrmJaica rla ntr ntr Sa C So aiAm Noge doalh n hd In -20eemco AmIn -30In ghetin dlHiidLaM -40 -50 -60 -70 Chart 18: Growth rate of industrial density (%) - 2000-201125020015010050 0dyaFr aC panAr ore ou iaer y un s ng aT h in aN s ne easaa ica J a l a M iesI n keyTu e G es i A ia ozi anewain d rieut anCo ndV e a nc Si esibiell rericdite xichi ys-50 ra tr ina atInrraCh zuntapKo m la ntSo ail r CSo o rAfnt nB Un MeSa ala St Cage doer ou h hdc o th udutC I n Ne e e m mercoAm In gh e tindlHi idLaM 4. Explaining the low drive in Brazilian industryThe integration of the Brazilian economy in the world economy led to increasingcompetition from foreign goods, especially Asian, in the domestic market, and 16 17. showed the lack of competitiveness in several segments of Brazilianmanufacturing. This section aims to briefly discuss the origins of suchcompetitiveness challenges.The so-called Brazil Cost (Custo Brasil) refers to systemic shortcomings in theBrazilian economy. Although companies in general suffer from domesticweaknesses, including inadequate planning and poor management,11 theenvironment in which they operate also influences their performance. As 71.5%of the gross value of the output of industrial companies refers to inputs andtaxes (Arbache and Burns 2012), it is reasonable to suppose that thecompetitiveness of industrial companies depends largely on conditions outsidethe "factory floor".12 Particularly significant external obstacles includeshortcomings in infrastructure and logistics, which are identified by industrialcompanies as some of the major constraints to their operations andcompetitiveness (World Bank 2012). In fact, the more a company depends onvalue chains and logistics to receive inputs and ship their products tocustomers, the more it is exposed to the high costs associated with the lowsystemic efficiency of Brazilian logistics.Excessive red tape and taxes are also cited as major obstacles to industrialcompetitiveness (World Bank 2012). Compounding taxes that require complexmanagement and that are high for world standards contribute to significantlyraising the final price of products and thus harming competitiveness. The ICMStax subsystem, an extremely complex, costly and fragmented VAT governed byeach federative state, constitutes an important barrier to efficiency. Besidesbeing high -- it can be as high as 25% -- the ICMS state laws are inconsistentand foster fiscal wars. Of particular note in this area is the conclusion of a studyconducted by the Brazilian National Confederation of Industry (CNI), which hasidentified that the tax burden on manufacturing is disproportionately high,reaching up to 57.3% of the output of certain industries, while in agriculture itreaches up to 3.7% and in services up to 21.1%.Markets with few competitors, as well as regulatory and legal issues, alsocompromise the competitiveness of industry. The case of energy is illustrative.Although the price of energy in Brazil is always associated with high taxes, animportant part of the final price is due to a legal framework that leads to a lownumber of competitors and discourages investment. Energy costs are among11 Bloom et al (2011) show that manufacturing firms in Brazil tend to be poorly managed jointwith India, Brazil actually ranks among the worst in a cross-country analysis. They also showthat there is a wide spread of management practices and a large tail of very badly managedfirms in the country.12 Data are from the IBGE Annual Survey of Industry (PIA). According to the PIA classification,inputs are the gross value of industrial production minus the industrial value added. Inputsinclude workforce, financial services, industrial services, logistics, energy, among other items.17 18. the highest in the world, despite Brazil having one of the largest renewableenergy matrix globally.The increasing dependence of industrial enterprises on service providers andoutsourced services also impacts the competitiveness of the manufacturingsector. This happens because, as shown by Arbache and Burns (2012),services are expensive and of poor quality, affecting the cost and thecompetitiveness of industry.13 Despite the poor quality and cost, expenses withservice inputs continue to grow they went from 20.5% in 2007 to 24.5% in2009.14One of the most striking characteristics of the Brazilian economy vis--viscomparable countries is poor labor productivity.15 However, as seen above, thedevelopment of labor productivity in manufacturing has been particularly low,which is a result of several factors, including, but not limited to, poor humancapital. Although Brazil has made significant progress in education over the lastdecade average schooling increased by 17% in the period many emergingcountries have also made similar or even better improvement in education.16Despite manufacturing workers having higher average education than theaverage of the population, the sectors indicators fall short. In fact, amongformal workers in manufacturing, some 52.8% has not finished high school and26% has not finished elementary school. The rate of functional illiteracy amongmanufacturing workers from 15 to 64 years of age is 26%, only slightly belowthe country as a whole, which is 28.2%.17Due to educational shortcomings as well as cognitive learning and knowledgegaps, training and professional education have become increasingly importantto equip employees with labor skills. Such skills are required so that modernindustry can operate within the framework of the new forms of production thatentail more creativity, adaptability and innovation. According to the PNAD-IBGE(National Household Survey), in 2007 only 34% of industrial workers hadattended a training course, and this shortcoming is partly due to the shortage inopportunities for training, as well as technical and vocational education.13 According to the IBGE, inflation in services has been higher than that for industrial products.14 Latest year available.15 See, for example, productivity data from the Groningen Growth Development Centre or theInternational Labor Organization. Productivity has grown modestly in relation to emergingcountries between 2000 and 2009, productivity (measured by total factor productivity) grewapproximately 0.4% per year in Brazil, while in China and India it grew 5.2% and 2.8%,respectively (Wilson 2011).16 See Barro and Lee (2010) database.17 According to a study conducted by CNI, some 85% of companies indicate that poor quality ofelementary education is the main obstacle for skills development (A Falta de Qualificao dosTrabalhadores da Indstria, CNI, April 2011). 18 19. At the same time that manufacturing requires more human capital, the supply ofskilled workers has not kept up with demand, increasing the workforce deficit. Infact, the lack of skilled workers is identified as an issue for 69% of industrialcompanies, pushing wages up thus harming mainly smaller companies. Forindustry, which is directly exposed to international competition, the combinationof slow growth in labor productivity and rising labor costs compromisescompetitiveness, especially in labor-intensive sectors.Three simultaneous factors help explain the significant increase in the realwage in the private sector from 2005 to 2011. The first factor is the heating upof the economy. The second is the limited supply of skilled workers. The thirdfactor, and perhaps the most important, is the slowdown in the growth rate ofthe working-age population resulting from a profound demographic change inBrazil (Arbache 2011).In fact, the cost in dollars of the labor-hour in Brazils manufacturing sectorincreased from US$ 5.02 in 2005 to US$ 10.08 in 2010, a substantial rise forinternational standards (see Chart 19).18 In 2010, labor costs in themanufacturing sector were already higher than those in Poland and Taiwan (twocountries whose average years of education and whose workers skills are wellabove those in Brazil), and were much higher than those in China and Mexico,countries with which Brazilian industry competes directly for markets.Considering the recent developments in labor productivity and wages in Brazil,it is reasonable to assume that there has been a significant increase in unitlabor cost (ULC). In fact, Bonelli and Pinheiro (2012) show that between 2005and 2008, the ULC increased approximately 19% per year and, from 2009 to2011, rose 11.5%. According to these authors, this increase resulted from threefactors: the rise of real labor costs in Brazilian reais, the appreciation of theexchange rate, and the stagnation of labor productivity. Along the same lines,Arbache and Burns (2012) show that there was a significant increase in theparticipation of labor costs in total costs for industrial companies, especially inlabor-intensive industries, such as apparel and clothing, leather and footwear,wood products and miscellaneous goods.18 2010 is the latest year available.19 20. Chart 19: Hourly manufacturing labor cost (US$ - include wages and payroll taxes) and growht (%) Source: US Labor Bureau 133,3 25140 12019,1101,1 2016,6 100 15,113,2 15 8011,7 200510,1 2010 9,4 60 46,4 44,2 108,4 Growth rate 8,07,96,2 5,6 40 5,5 24,75,0 5 11,0 209,9 1,45,4 0,6 0 0Taiwan Korea Mexico Portugal Singapore Poland Brazil ChinaThe heating up of the labor market in recent years and the lack of skilled laboralso contributed not only to increasing the labor turnover, but also to revealingthe labor law obstacles to manufacturing competitiveness. On the one hand,legislation encourages workers to look for immediate extra earnings when theychange jobs. On the other hand, strict legislation regarding the adjustment ofworking hours and shifts when the economic cycle dwindles encouragesdismissals (Gonzaga 1997). The problem is that the labor turnover is not neutralin terms of productivity and costs, as it discourages company investment intraining and, for workers, it discourages commitment to the company andcareer. According to the Ministry of Labor, the turnover rate, which is alreadyone of the highest in the world, has increased 30% since 2006, while thepercentage of professionals in the same job for more than five years has beendecreasing.Another obstacle to manufacturing competitiveness is the poor numbers in theadoption of new technologies and investment in innovation. Indicators ofPINTEC-IBGE show that Brazilian companies not only invest little in innovation,but most of those who do in fact invest, do so by acquiring machinery andequipment. As a result, companies tend to operate in more competitive and"commoditized" markets, in which little or no extra compensation at all isreceived.19There is also evidence that new equipment does not always work at its optimumspeed nor with the best output due to factors ranging from inadequate trainingof workers to variations in electrical current. Among the main consequences of19 Economic literature emphasizes that technology and innovation policies should be the mainelement of public policies to foster diversification and strengthening of industrial activity,especially in countries that aim to reduce the technological discrepancy in an era in whichcatching-up becomes harder due to the constant and swift evolution of the technologicalparadigm (e.g. Dahlman 2012). 20 21. low investment in innovation is the large and growing trade deficit formanufactured goods of high and mid-high technology, as previously discussed,and the drop in exports of high-technology products, which went from 9.3% oftotal exports in 2005 to a mere 6.2% in 2011.Finally, the lack of access to financing, high interest rates and an appreciatedexchange rate complement those other obstacles to industrial competitiveness.Although interest rates have fallen significantly since the beginning of 2012,they are still high compared to world standards, compromising investments andthe financial health of companies, especially small and medium-sizedenterprises. In fact, PIA data show that financial services are one of industrysmost important cost items (Arbache and Burns 2012). The appreciation of theexchange rate of more than 46% since 2003, on the other hand, significantlyaltered relative prices in favor of imported products, affecting internationalcompetitiveness and the profitability of industrial investment. 5. The new challenges faced by the Brazilian industryBrazilian industry has at least six emerging challenges that are likely toinfluence its destiny. The first challenge is related to demographic changes.Brazil is undergoing one of the most rapid demographic changes of the post-war period, and its effects are already being felt in the declining growth rate ofthe working-age population. Estimates from the IBGE indicate that growth in thePIA will be very low or even zero from mid-2020. This demographic change isalready affecting the general competitiveness of the economy and especiallythat of industry, notably through the pressure it places on the labor market in acontext of low growth of labor productivity (Arbache 2011).The second challenge is related to the entry of Asian countries, such as India,Vietnam and Indonesia, and African countries in the mass manufacturing sectorencouraged not only by growth in domestic markets, but also by the increase inlabor costs in China, and by multinationals seeking geographical diversificationof production.20 China, in its turn, will increasingly invest in these regions tomass produce while it is undergoing a technological upgrade.The third challenge is associated to this technological upgrade in China.21 Chinahas made remarkable achievements in areas as diverse as space technology,20 India is developing an ambitious industrial policy, the National Manufacturing Policy, whichaims high at the international level in several sectors. African countries, even with all theirproblems, have increasingly participated in manufacturing in a more active way. An example ofthat is the growing shoe industry in Ethiopia.21Science and technology became fundamental chapters in the 11th and 12th NationalDevelopment Plans (FYP) and gained more focus with the Medium and Long-Term Plan for21 22. supercomputers, nanotechnology, mechanical industry and medicine. Withtechnological advancement, Chinas exports are moving up in the value chainand competing with developed countries exports of capital goods mightsurpass Germany in 2012, having already left Japanese exports in the dust.22The fourth challenge is associated with new technologies and increasedinvestments in manufacturing in developed countries. After decades of lackinginterest, the US began paying attention to industry again, and the sector isalready one of the main contributors to growth in product and employment in thecountry (Helper et al 2012).23 Backed by heterodox monetary and industrialpolicies, as well as new manufacturing technologies, new shale gastechnologies, and rising labor costs in China, US industrial investments andexports are increasing and this is already having an effect even in Brazil thebilateral trade balance of manufactured goods moved from historically positivein favor of Brazil to strongly negative. Although labor costs in the US are muchhigher than in developing countries, it seems that the use of sophisticatedtechnologies, such as 3D printing and robotics, coupled with high laborproductivity, has offset the cost differential and is helping to put the countryback on the industry map.24The fifth challenge is protectionism. Employing State capitalism policies isbecoming popular worldwide as the economic crisis and uncertainties worsen.Chinas State capitalism coupled with the failure of ultra-liberal economicpolicies, like those adopted by the US even before the financial crisis, haveencouraged policymakers to reconsider the use of protectionist measures andmarket intervention to favor domestic companies. While it is understandablethat State capitalism is politically attractive in a context of economic crisis, itsmultiplication on a global scale will have harmful implications on trade andeconomic growth, worsening the already strongly asymmetric competitionNational Science and Technology Development (2006-2020). China has vast ambitions andintends to lead technologies in several areas over the next few decades.22 China is now the worlds leader in manufacturing output, with 19.8% of total production in2011, having surpassed the US, which is now home of 18% of total output (Marsh 2012).According with Freire (2011), China is the country that has experienced the largestimprovement in productive capacity in the last 25 years. Productive capacity is the set ofcapabilities available in a country to produce and market its output of goods and services.These capabilities include resource endowments (i.e. labor, physical capital, human capital,land), total factor productivity, mechanisms for the allocation of these endowments to specificuses, and any other factor that contributes to maximizing the output of the economy, includingtrade and transport integration, institutions, policies and regulations (Freire 2011).23 Over the last few years the US government has introduced several policies and instrumentsto offer support to recover and strengthen industry, such as 2010s National ManufacturingStrategy, as well as fiscal stimulus policies to bring back American companies set up abroad.24Because of these technological advances, product customization, rising expenses ofmanufacturing in emerging economies and other problems, Marsh (2012) argues of a NewIndustrial Revolution, in which the opportunities for emerging economies to participate in and tocatch up with manufacturing output in developed countries are beginning to level out. 22 23. conditions. Boosting the manufacturing sector in such an environment will beharder.The sixth challenge is the rising commodities revenues and their potentialimpacts on exchange rate appreciation, an issue that will probably becomemore noticeable when the pre-salt oil layer starts to flow into the market.The challenges associated with the new geography of production will redesignthe global economy and the consequences will be immense. Immediately, therewill be increasing competition. In the mid-term, there will be deep-seated andsignificant changes not only in global production sectors, but also in the globalnetworks for innovation, international trade, capital flows as well as job creationand income. This complex transformation process will increase the pressure onBrazilian industry and force the country to implement policies and actionsneeded to significantly lift competitiveness.Likely consequences arising from the first and second challenges for Brazilianindustry include an increase in production costs and heated competition inlabor-intensive industries. To mitigate the potential effects of these challenges,industry will have to invest heavily in the use of technologies that save labor andin innovations to foster a technological and market upgrade.Likely consequences arising from the third and fourth challenges include anincrease in competition in international markets in general, and in the mediumand high value added markets in particular. If, on one hand, China opens upspace for other economies to produce lower value-added manufacturedproducts, on the other hand, it will increase competition in markets for goods ofhigher value added, including aircraft, capital goods, chemicals, andtelecommunications, sectors that Brazil already holds market share and aims toexpand its presence. For the country to participate more intensively in thesemarkets, it will be necessary to substantially increase investments inproductivity, efficiency and innovation, and to prioritize investments in sectorsand niche markets.The probable outcome from the fifth challenge will be the harmful effects arisingfrom the fallacy of composition of State capitalist policies, egging on mercantilistwars and political tensions among countries. In this environment, industries incountries with greater political strength and power to affect markets andinfluence institutions, such as the United States, the European Union andChina, will tend to be favored.2525 The Brazilian industry will need to tackle the challenges associated with the risingcommodities revenues and their potential impacts on exchange rate. This issue will probablybecome more noticeable when the Pre-Salt oil starts to get in into the market. 23 24. Finally, the challenges associated with the rise of natural resources revenue willrequire Brazil to find ways to make this sector a boost rather than an obstaclefor industrial development. Brazil can and should develop natural resourcestechnologies and add value to commodities, especially in food, minerals andbiodiversity. Indeed, Petrobras and Embrapa, two well known championcompanies in the areas of oil and agriculture, suggest that Brazil should aimhigh in commodities and industrial development as it can produce state-of-the-art research and technology in the field. 6. Several opportunities to boost Brazilian industryAlthough industry challenges are extensive and complex, the many domesticmarket opportunities and investments arising in the coming years will probablybe decisive in boosting industry. The labor market continues strong despite theeconomic slowdown, which is contributing to the drive and strength of domesticconsumption. The heating up of the economy since the middle of the lastdecade, coupled with the real increase in minimum wage, the expansion ofsocial inclusion programs, reduced birth rates, and legislation aimed atencouraging enterprises and to formalize labor, helped create the rightenvironment for millions of Brazilians to ascend socially26 and enter the marketeager to consume goods and services. Economic class C already accounts for55% of the population and the tendency is for it to grow in the ensuing years,creating new business opportunities and investments in many industrial areas.With regards to credit, banking and easier access to bank loans for householdsare also changing the economic environment. The creation of new instrumentsfor financing investments, such as securitization, extension of loan terms forhome mortgages and, more recently, the fall in interest rates, should improvethe business climate and contribute to investment and production at large.Accelerated growth in the poorest areas of Brazils North and Northeast regions,at rates higher than those in the South and Southeast, as well as the growingdomestic economy, have created new and promising business opportunities forindustry, ranging from tractors to furniture and other capital and consumergoods. The expansion of the pharmaceutical industry in the countryside of thestate of Gois is just one of many other examples of success.The Growth Acceleration Program 2 (PAC 2) will foster investments of over US$1 trillion in the coming years with an emphasis on energy projects and thehousing program My House, My Life (Minha Casa, Minha Vida). The recentgovernment decision to increase the focus on investments as a means to26Income inequality was reduced substantially and the poverty rate fell from 25.4% of thepopulation, in 2004, to 12.9% in 2011.24 25. protecting the economy from external shocks will strengthen the foundations forsustainable growth. The emphasis on public-private partnerships in severalareas, as well as new instruments and modalities for financing investments,coupled with concessions in infrastructure projects supported by tax benefits,such as the concession programs for roads and railways recent announced, willimprove the conditions for investing in the industrial sector and reducing theBrazil Cost. Recently-approved legislation that created the public servantretirement fund (FUNPRESP), which will be one of the largest funds in the worldin the near future, will be an important source of additional savings, thusreducing capital costs.Moreover, the coming years will see other opportunities, such as sporting andlarge-scale events, as well as government purchases with a preference fordomestic industry, local minimum content rules for investment, improvements inthe conditions to finance foreign trade, new commercial defense measures,improvements in conditions and resources to finance production, and moreresources for investments in innovation and R&D through the so calledsectorial funds. All of these will also contribute to improving the investmentclimate and the competitiveness of industry.Finally, the domestic industry can and should aspire to actively participate in thenew geography of production. This is because the country has uniqueopportunities for technological and industrial development through both theknowledge economy and innovating natural resources. Areas such as oil andgas, agribusiness, biodiversity, green technology, health, among others, aregreat frontiers for development. Exploration of the pre-salt layer, for example, isa great opportunity for investment, technological advancement and value chainconsolidation, as well as an engine for growth. It is estimated that US$ 354billion will be invested in the sector between 2012 and 2015. To take part in thepre-salt layer, large multinationals are setting up state-of-the-art R&D labs in thecountry. Solutions to the scientific and technological challenges, logisticchallenges, as well as challenges with equipment and materials required by thevalue chain in the sector, are a great, and perhaps a unique, businessopportunity for domestic industry.27 If the knowledge and skills developed toexplore the pre-salt layer are absorbed by universities, research centers andnational industry, then deep-rooted effects may occur in several other industrialsectors, with substantial economic and social impacts.2827 The uniqueness of the pre-salt layer for industrial development relies not only on the size ofthe investments, but on the fact that the technology required for oil exploration and logistics arestill being developed.28For an interesting discussion on the externalities and implications of an industrial andtechnological upgrade in the economy, see Hidalgo et al (2007).25 26. 7. Conclusions and suggestionsThis article presents evidence that the Brazilian manufacturing sector is losingits drive at both national and international levels. Considering theunquestionable relevance of the manufacturing sector for economic and socialdevelopment, it is critical that, first of all, the weakening drive is not passivelyaccepted as a destiny, and second, that political and economic resources aregenerated to change this trend. This is justifiable not only because of therelevance of industry, but also because of the evidence that the success of acountrys industrial sector is due, at least in part, to public policies. So say theAsian countries!Which policies should be implemented to boost Brazilian industry? The firstalternative could be policies and efforts that increase the participation rate ofmanufacturing in the economy, or the horizontal migration of Brazil fromquadrant 3 (Q3) to quadrant 4 (Q4) in table 1. To do so, it would be necessaryfor the industrial output growth rate to increase more than the growth rate ofother sectors for several years. Even though it is a hard task due to factors suchas the trend for high growth in service and agriculture sectors, it is still possibleto achieve. This would require investments and institutional reforms needed toincrease industrys productivity and international competitiveness, and pavingthe way for it to benefit fully from the immense business and investmentopportunities that are emerging in Brazil, as discussed in the previous section.The second alternative are policies and efforts required to increase industrialdensity, or the vertical migration of Brazil from Q3 to Q2 in table 1. Thisalternative would require, along with higher productivity and competitiveness,the creation of national trademarks and marketing them internationally, intensemobilization of resources and policies to foster the consolidation of valuechains, policies that ease access, facilitate absorption of advancedtechnologies, and strengthen international cooperation, as well as the increasein investments in science and technology to equip industry with innovations thatwould enable it to add value and reach new levels of development.The third alternative are policies and efforts that raise the level of industrysparticipation in the economy and industrial density simultaneously, or thediagonal migration from Q3 to Q1 in table 1, as Korea and Singapore managedto do years ago and as China, Malaysia and Thailand are in the process ofdoing. This alternative would require a mammoth prioritization effort and thecoordination of public and private policies in favor of industrial development.Considering the challenges and risks discussed before, boosting Brazilianindustry might require identifying sectors with higher probability of success forthe purpose of benefiting from public support. Public support, in its turn, to besuccessful, should be enhanced with modern governance and accountability26 27. mechanisms as well as with continuous monitoring and evaluation processes.29Within this spirit, one immediate practical suggestion would be requiringcompanies that take public support to meet conditionalities in the form ofimproving productivity and efficiency indicators, and increasing investments ininnovation.ReferencesAmbrozio, A.M.H.P. and Souza, F.L. (2012), Decompondo a produtividadebrasileira entre 1995 e 2008, Viso do Desenvolvimento No. 101, BNDES.Arbache, J. (2011), Transformao demogrfica e competitividade internacionalda economia brasileira, Revista do BNDES, 36, 365-392.Arbache, J. (2012), Industry-space and industrial development, mimeo, BNDES.Arbache, J. and Amorim, P.R. (2012), Revisitando o diferencial de salriosinter-industriais no Brasil, mimeo, Departamento de Economia, Universidade deBraslia.Arbache, J. and Burns, V. (2012), O setor de servios e seu impacto nacompetitividade da economia brasileira, mimeo, BNDES.Arbache, J. and Page, J. (2007), More growth or fewer collapses? A new look atlong run growth in Sub-Saharan Africa, World Bank Policy Research WorkingPaper #4384.Banco Mundial (2012), Bancos de dados do Doing Business e do EnterpriseSurvey.Barro, R. and Lee, J.W,(2010), A new data set of educational attainment in theworld, 1950-2010, NBER Working Paper No. 15902.Baumann, R. (2012), A composio das exportaes brasileiras demanufaturados e as perspectivas do cenrio internacional, mimeo,Departamento de Economia, Universidade de Braslia.Bloom, N., Genakos, C., Sadun, R. and Van Reenen, J. (2011), Managementpractices across firms and countries, Harvard Business School, Working Paper12-052.Bonelli, R. and Pessoa, S. (2010), Desindustrializao no Brasil: um resumo daevidncia, Centro de Desenvolvimento Econmico, Ibre-FGV, TD 7.29 Dani Rodrik has made useful suggestions for this agenda.27 28. Bonelli, R. and Pinheiro, A.C. (2012), Competitividade e desempenho industrial:mais que s o cmbio, Estudos e Pesquisas No. 432, XXIV Frum Nacional,Instituto Nacional de Altos Estudos.Cardoso, E. and Teles, V.K. (2010), A brief history of Brazils growth, Textospara Discusso No. 241, EESP - Fundao Getlio Vargas.Cavalcanti, T., Mohaddes, K. and Haissi, M. (2011), Commodity prices volatilityand the sources of growth, Faculty of Economics, Cambridge University,mimeo.Dahlman, C.J. (2012), Industrial policy and innovation: Rethinking innovationpolicy in an increasingly interdependent world, mimeo, Georgetown University.Draper, P. e Alves, P. (2009), Trade reform in Southern Africa: Vision 2014?,Johannesburg: The South African Institute of International Affairs.Ferreira, P.C., Ellery Jr, and R. Gomes, V. (2008), Produtividade agregadabrasileira (1970-2000): declnio robusto e fraca recuperao, EstudosEconmicos, 38, 31-53.Freire, C. (2011), Productive capacities in Asia and the Pacific, United NationsEconomic and Social Commission for Asia and the Pacific, MPDD WorkingPapers WP/11/17.Gonzaga, G. (1998), Rotatividade e qualidade do emprego no Brasil, Revistade Economia Poltica, 18, 120-140.Helper, S., Krueger, T., and Wial, H. (2012), Why does manufacturing matter?Which manufacturing matters? A policy framework, Washington, DC: BrookingsInstitution.Hidalgo, C.A., Klinger, B., Barabsi, A-L. and Hausmann, R. (2007),The productspace conditions the development of nations, Science, 317, 482-487.IPEA (2012), Produtividade no Brasil nos anos 2000-2009: anlise das ContasNacionais, Comunicados IPEA No. 133.Lederman, D. and Maloney, W. (2007) (eds.), Natural resources: Neither cursenor destiny, Washington, DC: World Bank and Stanford University Press.Lederman, D. and Maloney, W. (2008), In search of the missing resource curse,Economia Journal of the Latin American and Caribbean EconomicAssociation, 9, 1-39.Loayza, N.V., Rancire, R., Servn, L. and Ventura, J. (2007), Macroeconomicvolatility and welfare in developing countries: An introduction, The World BankEconomic Review, 21, 343-357. 28 29. Marsh, P. (2012), The new industrial revolution - Consumers, globalization andthe end of mass production, Yale University Press.Puga, F. and Nascimento, M. (2010), O efeito China sobre as importaesbrasileiras, Vises do Desenvolvimento No. 89, BNDES.Rowthorn, R. and Ramaswamy, R. (1997), Deindustrialization: Causes andimplications, Working Paper 97/42, International Monetary Fund.Sarquis, S.J.B. (2011), Comrcio internacional e crescimento econmico noBrasil, Braslia: Fundao Alexandre Gusmo, Ministrio das RelaesExteriores.United Nations (2007), Industrial development for the 21st century: Sustainabledevelopment perspectives, New York: United Nations.Wilson, W.T. (2011), The productive prize Accounting for recent economicgrowth among the BRICs: Miracle or mirage? SIEMS Issue Report, SkolkovoInstitute for Emerging Market Studies e Ernst & Young.29