CNI's 2012 Growth Assessment / by Mark Langevin

Brazil’s National Confederation of Industry (CNI) issued its Economia Brasileira 2012 on an optimistic, but sober assessment of the past year and immediate future.

According to the CNI, the economic environment is fertile for continued expansion founded upon more favorable exchange and interest rates as well as the government’s recent efforts to reduce production costs through lowered payroll deductions and energy rates for Brazilian industry.  Brazil will grow more in 2013 than in 2012.

CNI estimates that 2012 economic growth will come in at a disappointing 0.9%, only a third of the projected rate forecasted at the beginning of the year.  Industrial output was even more frustrating as it contracted by 0.6% as a proportion of the overall Gross National Product and grew only 2.0% from last year’s output.  Brazil’s industrial stagnation was not only a consequence of the global downturn, but also a result of lower than average investment rates.  At the root of the problem is the low level of investment coupled with comparably low productivity levels in sharp contrast with many of Brazil’s competitors.  Also cumbersome regulation and questionable quality of education have teamed up to drive down Brazil’s relative competitiveness.

Accordingly, CNI suggests that the government needs to double up efforts to improve infrastructure, reduce systematic costs (the Brazil cost), and further promote investment in plant and production.  Industry needs to invest in more innovative production processes and raise productivity to spur on industrial competitiveness and output.

If Brazil makes such changes, then national economic growth could achieve levels of 3-4% during the coming years.