Abstract
There is an extensive literature that discusses two related processes of structural change that would characterize the Brazilian economy since the 1990s, the deindustrialization and regressive specialization processes. We argue that most of the latter literature based their investigation on indicators that, though traditional, are not sufficient to support their conclusions on the continuity and intensity of the two structural change processes under analysis. Indeed, the traditional indicators of deindustrialization involving the manufacturing industry share of total value added and employment are limited for various reasons. First, because we believe that a deindustrialization analysis should focus its attention on the subset of manufacturing activities that are responsible for the main technological flows within the economy. Second, because these indicators are directly related to the investment to output ratio and the latter is positively related to the trend rate of growth of output. Thus, a decrease in the trend rate of growth of the economy can lead to the misleading conclusion that a deindustrialization process is going on. On the other hand, the traditional indicator for the analysis of regressive specialization, the manufacturing industry share of total exports, can also lead to misleading inferences if not complemented by the use of other indicators. This is particularly true in the case of the Brazilian economy, which has a strong presence and competitiveness in the three major primary commodity groups (agricultural, mineral, and oil), all of them positively affected by the fast expansion of the Chinese economy in the period under analysis. In order to overcome the limitations of these traditional indicators, we focused our analysis on the performance of the innovative industry group (II)—which comprises those manufacturing industries most related to the process of technological innovation and diffusion in the economy—used indicators of the II competitiveness in external (the Brazilian share in world exports) and internal (the domestic production share on total intermediate and final demand) markets, and analyzed the evolution of the density of the II interindustry relations (its backward and forward linkage indicators) over the period. Our analysis shows that the deindustrialization and regressive specialization processes in the Brazilian economy have not been as continuous and intense as suggested by the existing literature. In particular, we show that such processes are concentrated in the period from 2010 to 2014, due to the innovative industry group (II) competitiveness loss in domestic and external markets.
Carlos Aguiar de Medeiros thanks CNPQ for the financial support. Patieene Alves Passoni thanks CAPES for the financial support.
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Notes
- 1.
Private investment, the main source of technical change in most economies, will grow according to the increase in final demand composed of domestic demand for consumer goods, exports, and technological innovation. Private investment follows the autonomous components of demand where government spending, credit finance consumption, and exports constitute the major sources. Most Keynesian and Structuralist analyses that seek to articulate demand factors with industrial transformations highlight other mechanisms like the importance of key macroeconomic prices such as the interest rate, the profit rate, and the real exchange rate over the investment expenditures (see Chang and Andreoni 2016, and new developmentalist Latin-American economists).
- 2.
- 3.
- 4.
In what concerns the connection between capital accumulation and structural change, see the important contribution by Cornwall (1977).
- 5.
As Chang and Andreoni (2016) have argued, with the pervasive expansion of intermediary trade in global value chains, industrial classification by sector becomes increasingly fuzzy and does not necessarily express the technological linkages. “Technological linkages among different manufacturing processes may be used to define ‘capability domains’, that is, domains of techniques, productive knowledge, and production technologies/equipment that show high degree of similarity and complementarity. Beyond standard sectoral boundaries, a manufacturing process could be re-conceptualised according to the underpinning capability domain. Different manufacturing processes could be then clustered based on their reliance on particular capability domains. This procedure would allow for a transition from a product-based taxonomy to a production technology-based taxonomy” (Chang and Andreoni 2016, 36).
- 6.
According to Sarti and Hiratuka (2017), the intense flows of foreign investment registered in the period accentuated the denationalization of the productive base, transferring abroad the control of strategic decisions on production, marketing, and investment. The result was the deepening of the regressive specialization through an increase in the imported content and coefficient, without a proportional increase in the exports coefficients.
- 7.
Although this classification is better suited to capture the structural characteristics of the Brazilian economy, it still presents some of the problems identified in the traditional OECD classification. In Brazil, the oil sector is one of the most technologically sophisticated and the main hub of a productive chain articulated with suppliers of machinery and equipment and, therefore, should be classified within the innovative industries. However, as all the innovation is limited to the process of production and there is no innovation in product, we prefer to maintain this separation in order to provide a classification more compatible with other studies on the productive structure of the Brazilian economy.
- 8.
For a more detailed description of the methodology, see Passoni and Freitas (2017).
- 9.
In the next section, the agricultural and services industries are included again in the analysis in order to capture their interrelations with the manufacturing and extractive industries.
- 10.
The connections and evidence from the investment rate and production of capital goods in Brazilian economy were also discussed in Magacho (2016).
- 11.
Note, however, that both industry groups show a slight declining tendency in the end of the period, although the reduction of indicator was not sufficient to bring its value to a level similar to beginning of the new millennium.
- 12.
Besides the contrast in terms of the evolution of the external market indicator along the period investigated, we may point out that levels of export penetration in external markets are significantly different. The traditional and innovative have an external market share of exports below 1%, while the other two industry groups present external market shares above 1%.
- 13.
Note, however, that these indicators have an important deficiency. Since they are based on the input-output matrices, they cannot deal with interindustry flows involving fixed capital.
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Appendix: Correspondence Tablea
Appendix: Correspondence Tablea
11 Sectors | 42 Sectors |
|---|---|
Agriculture, fishing, and related | Agriculture, forestry, livestock, and fisheries |
Industrial commodities group | Extraction of oil and gas, including support activities |
Extraction of iron ore, including processing and agglomeration | |
Other mining and quarrying | |
Oil refining and coking plants | |
Manufacture of biofuels | |
Manufacture of other organic and inorganic chemicals, resins, and elastomers | |
Cement and other nonmetallic mineral products | |
Manufacture of steel and its derivatives | |
Metallurgy of nonferrous metals | |
Metal products—exclusive machinery and equipment | |
Processed agricultural commodities group | Manufacture of tobacco products |
Manufacture of wood products | |
Manufacture of pulp, paper, and paper products | |
Traditional industry group | Food and drinks |
Manufacture of textiles | |
Manufacture of wearing apparel and accessories | |
Manufacture of footwear and leather goods | |
Printing and reproduction of recordings | |
Perfumery, hygiene, and cleaning | |
Manufacture of pesticides, disinfectants, paints, and various chemicals | |
Rubber and plastics | |
Furniture and products of various industries & Machinery and equipmentb | |
Innovative industry group | Pharmaceutical products |
Furniture and products of various industries & Machinery and equipmentb | |
Household appliances and electronic material | |
Automobiles, trucks, and buses | |
Parts and accessories for motor vehicles | |
Other transportation equipment | |
Public utility | Electricity generation and distribution, gas, water, sewage, and urban cleaning |
Construction | Construction |
Trade, accommodation, and food | Trade |
Accommodation and food services | |
Transport, storage, and communication | Transporting, warehousing, and mail |
Information services | |
Financial intermediation, insurance, and real estate services | Financial intermediation, insurance, and supplementary pension and related services |
Real estate activities and rentals | |
Community, social, and personal services | Business and family services and maintenance services |
Public administration, defense, and social security | |
Public education | |
Private education | |
Public health | |
Private health |
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de Medeiros, C.A., Freitas, F.N.P., Passoni, P.A. (2019). Structural Change and the Manufacturing Sector in the Brazilian Economy: 2000–2014. In: Santarcángelo, J. (eds) The Manufacturing Sector in Argentina, Brazil, and Mexico. Palgrave Studies in Latin American Heterodox Economics. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-04705-4_3
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