Brazilian Private Sector’s Perspective on How to Improve Competitiveness
Despite Brazil’s role as a leading economy and strong international actor, the growth of its Gross Domestic Product has been in decline, bringing much needed attention to the country’s competitiveness deficit. A 2011 World Bank Global Competitiveness Report ranked Brazil 134th of 142 countries. Policy makers, academics and business leaders alike believe it is crucial to improve productivity in order to renew the Brazilian economy. To this end, an emphasis on international competitiveness is fundamental, requiring that the high costs of doing business in Brazil be reduced.
On June 6, 2013 the Brazil Institute in partnership with the Brazil-U.S. Business Council convened a workshop examining the causes of low competitiveness at the state and private levels as well as strategies for improvement. The discussion was moderated by Monique Fridell, Executive Director of the Brazil-U.S. Business Council (BUSBC). Erik Camarano, CEO of the Brazilian Competitiveness Movement (MBC) presented his organizations views and initiatives aimed at improving management skills at the federal level. Kellie Meiman, managing director at McLarty associated offered a business sector perspective on Brazil’s competitiveness challenges in the high technology sector, and José Guilherme Reis, lead trade economist at the World Bank provided an overarching view on industrial policy, the role of the private sector, and the need for a restructuring of the country’s competitiveness agenda.
Erik Camarano started the debate by providing an outlook of Brazil’s economic performance. Despite relative macroeconomic stability and a high volume of foreign reserves, growth is slow. Some reasons for this are inflationary pressures, an overheated job market and other structural problems such as an outdated competitiveness agenda and a low savings to investment ratio. Mr. Camarano highlighted the importance of a comprehensive agenda that incorporates education, infrastructure, and public pension system reform while also identifying bureaucracy as one of the main causes for low competitiveness and low FDI rates in tradable manufactured products and high value added production chains. To mitigate the bottlenecks caused by bureaucracy, Camarano suggested a method based on a simple first step: ask what the objectives of regulations are, oversee weather processes are being measured in ways useful to the end goal, and if not, suggest ways of improving them or eliminating them. An example of such was the abolishment of customs forms that were traditionally used in Brazilian airports, adding an extra 45 minutes to transit time. When officials were inquired about the objectives of this regulation, and whether it was efficient in achieving the objectives, they concluded it was an unnecessary burden. The Brazilian Competitiveness Movement established a Public Management Modernization Program, implementing corporate management skills in the public sector. Key to this program is the belief that competitiveness is not hindered by a lack of funds, but by a lack of managerial capacity. The success of the program is illustrated in the various public management programs developed by the Government, such as the Chamber for Management, Performance and Competitiveness Policies.
Kellie Meiman presented the private sector’s perspective on competiveness, focusing primarily on high-tech investments. Fundamental aspects of this competitiveness challenge are the rigid local content requirements, which lead to investments in high tech being significantly lower in contrast to other industries. In Brazil, the high value supply chain hinders those in the industry from finding domestic suppliers. Most companies require frequent upgrades in order to reach high-tech capacity, yet they have little incentive to invest in innovation. Due to the inflexibility in production policies and an educational gap creating a lack of skilled workers in the field; production and investment in high-tech are not attractive, resulting in diminished international competitiveness. Current policy does not meeting high-tech capacity, supply chain, and competitiveness needs. Ms. Meiman emphasized the need for constructive dialogue between the private sector and the government in order to create a more comprehensive framework for industrial policy.
José Guilherme Reis drew conclusions and comparisons from both presentations, focusing on industrial policy, the competitiveness agenda and the role of the private sector. According to Reis, another worrisome factor in the Brazilian economy is low productivity rates, an immediate reflection of a lack of competitiveness. The economic scene in Brazil has undergone a structural transformation. What was initially an economy run by agricultural, then developed into one driven by manufacturing, and now, services. The issue at hand is that productivity in the services industry is disappointingly low, indicating that attention has to be shifted from manufacturing to services. Complementing Erik Camarano’s presentation, Mr. Reis explained that the private sector also has a great responsibility in terms of addressing firm-specific limitations. Management practices lag far behind other developing countries such as Mexico. Mr. Reis concluded by stating that industrial policy has to be drastically transformed, starting with the establishment of clear goals and objectives.
Compiled by Carolina Cardenas, Brazil Institute Intern