President Lula’s government launched on Monday (22/01) a plan with goals for the country’s industrialization, called “Nova Indústria Brasil”. Lines of credit, government subsidies, and the requirement for local content in industrial production are planned to encourage national companies.
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With goals for the next ten years, the new policy is specifically aimed at six areas: agroindustry; bioeconomy; health industrial complex; infrastructure, sanitation, housing, and mobility; digital transformation; and defense technology.
Neo-industrialization
Authorities who worked on drafting the policy point out that there was a concern to include public authorities in a central position in what they call neo-industrialization. Following this logic, national companies will be provided with two initiatives, lines of credit with favorable conditions, so that they can take on services and works under the New Growth Acceleration Program (PAC), and also contracts with government purchases.
Goals for 2033:
- Increase the share of the agro-industrial sector in the agricultural Gross Domestic Product (GDP) to 50%
- Achieve 70% mechanization in family farming establishments
- Produce internally 70% of all internal demand for medicines, vaccines, equipment, and other inputs and technologies
- Reduce travel time from home to work by 20% (in terms of housing and mobility)
- Digitally transform 90% of Brazilian industrial companies, prioritizing new technologies, such as advanced robotics
- Reduce carbon dioxide emissions in industry by 30% and increase the share of biofuels in the transport energy matrix by 50%
- Obtain autonomy in the production of 50% of critical technologies for defense (in the part on national defense)
Financial Market Reaction
The financial market did not react well to the Lula government’s plan to boost the country’s industry over the next ten years. After the government announced the package, the dollar accelerated its rise against the real, and closed with gains of 1.20%, at R$4.9866. This year, the exchange rate accumulated an increase of 2.77%.
The Brazilian Real (BRL) was the currency that depreciated the most against the dollar globally, in a session in which the American currency had a slight gain of 0.05% against the main currencies, according to data from Bloomberg.
Analysis:
The announcement of Brazil’s New Industry program marked the initiation of a new chapter in the extensive history of Brazilian industrial policies. This ambitious initiative involves the provision of approximately R$300 billion in financing by 2026, with a significant portion sourced from BNDES. The global landscape has witnessed a resurgence of government interventions aimed at revitalizing industries.
The quest to fortify the industrial sector has long been an aspiration of government officials. In the context of emerging economies, industrialization has consistently been perceived as a catalyst for development. In Brazil’s case, the process of deindustrialization occurred before the nation achieved prosperity, influenced by a combination of internal factors and global circumstances.
The government’s plan, outlined with various objectives, departs from the simplistic notion of mere industrial revitalization. Instead, it emphasizes directing incentives toward research, development, and innovation. Notably, the decision to channel resources into agroindustry is commendable, recognizing Brazil’s distinct comparative advantage in this sector.
However, a note of caution arises from the historical tendency of governments to use industrial policies to favor politically strategic sectors and pursue particular developmental priorities. Additionally, the persistent absence of effective evaluation and course correction mechanisms poses a challenge. Too often, what begins as provisional measures becomes entrenched, exemplified by instances like the Manaus Free Trade Zone and the proliferation of special tax regimes.
Source: O Globo; Folha de São Paulo.
