In Competitiveness Brazil Gets an F

Brazil is 39th in international competitiveness, according to the Competitiveness Indicator (IC) calculated by the Federation of Industries of the State of São Paulo (Fiesp).

The study, which considers 83 variables in 43 countries, is designed to identify the major obstacles to increasing Brazil’s competitiveness, as well as to evaluate what has already been done and what needs to be done to enhance and sustain the country’s competitive capacity in relation to other countries.


According to the report that was presented, the chief factor behind the country’s competitive backwardness is the high cost of obtaining bank credit.


The Fiesp study shows that Brazil ranked 37th in 1997, advanced to 36th in 1998, then slipped to 40th in 2001.


The report points out that, during the period under analysis, the country was submitted to a tough internal and external adjustment with measures that obstructed economic activity, constraining the country’s growth and, consequently, hampering competitiveness.


According to the Fiesp Manager of Competitiveness and Technology Projects, Renato Corona Fernandes, the measures that had the biggest negative impact on Brazil’s competitive capacity were the devaluation and fluctuation of the currency, the pursuit of a surplus to honor foreign obligations, the increase in real interest rates, fiscal adjustment, spending cuts, and, most of all, tax increases.


Fernandes explained that Brazil has specific limitations that keep it from becoming more competitive.


“In order of importance, they are capital, technology, and the domestic economy,” he said.


According to Fernandes, in terms of capital, the current bank spread in Brazil is 37.94%. In 2002 this index stood at 43.5%.


“Decreasing at this pace, it will take Brazil 31 years to reach the average rate among countries, which is 5.5% per year.”


The study shows that annualized interest rates amounted to 63% in 2002, dropping to 54% in 2004, as against an average of 8.3% in the other countries that were examined.


Loans to the private sector corresponded to 27% of the GDP (Gross Domestic Product) in 2002. In July, 2004, they represented 25% of the GDP.


“To attain, in 20 years, the average (85.6%) among the countries that were analyzed, this rate should grow 6.9% per year.”


The tax burden in 2002 was equivalent to 34.4% of the GDP. In the first half of 2004, it got as high as 38.11%.


“Brazil has a tax burden similar to that of developed countries, but the quality and scope of the services that are provided are inferior,” Fernandes argued.


In countries whose per capita income is similar to Brazil’s, on the other hand, the tax burden amounts to around 20% of the GDP.


Agência Brasil
Translator: David Silberstein

Tags:

You May Also Like

World’s Largest Floating Tree Up in Rio for 14th Year

Once again the traditional inauguration of the largest floating Christmas tree in the world ...

Brazilian Indians Hold Three Hostages to Have Their Truck Fixed

The 13 chiefs of Brazil’s Apinajé people held hostage the regional manager of the ...

Brazilian Beef Gets Quality Seal

Like French champagne, camembert cheese and other famous products, farmers from the southwestern region ...

Brazilian Migrants on Way to the US Among Killed in Mexico’s Drug Gang Massacre

The Ministry of Foreign Relations of Brazil has received word from the Mexican government ...

Brazil Favors Syrian Troop Withdrawal from Lebanon

Brazil’s Ministry of Foreign Relations released a note in which the Brazilian government considers the ...

Outlook for Brazilian Economy Remains Upbeat

Latin American markets were mixed to lower, as investors took some profits following yesterday’s ...

Brazil Free to Plant All Tobacco It Wants Despite Signing Tobacco Control Pact

Last year Brazil signed the Framework Convention on Tobacco Control and the government has ...

Brazil’s Rice Growers Overproduce and Now Fear Serious Price Break

Brazil’s rice growers achieved a record-breaking crop this year, around 13.3 millions tons, according ...

No Reason to Fear Brazil’s Growth, Says Rice

U.S. Secretary of State Condoleezza Rice began a four-country tour of Latin America April ...

Brazil's depachante de aduana

Meet the Despachante, Your New Brazilian Best Friend

In the previous articles in our series about doing business in Brazil we’ve discussed ...