Brazil's deindustrialization widespread but reversible: expert

Brazil's deindustrialization widespread but reversible: expert

Brazil's deindustrialization might be gradually reversed due to the recent appreciation of the U.S. dollar, lower domestic interest rates and a better fiscal situation, an expert said here Friday.

Deindustrialization, or the reduction of the heavy industry's impact on the economy, was not a recent occurrence in the South American country, Jose Augusto Fernandes, executive director of the country's National Industry Confederation (CNI), said in an interview with Xinhua.

However, he said, reasons for deindustrialization were different now.

"In the past, the low output value that the industrial sector contributed to Brazil's GDP should be put down to the economic imbalance," he said.

But the current deindustrialization was, in a way, a result of the country's success.

The macroeconomic stability in Brazil was a favorable scenario, which attracted a large volume of dollars into the domestic commodity market and sent the Brazilian real higher, Fernandes said.

The real's appreciation was the main cause of the current industrial issues, as the country's exports became more expensive in the global market and imports became cheaper, he said.

As a result, the number of imported products considerably grew in all sectors of industry in Brazil, Fernandes said, adding that some businesses, especially those needing large amounts of labor, were facing great challenges.

But deindustrialization could be reduced or even reversed, and the recent appreciation of dollar, whose value rose 18 percent in September, was a crucial factor, the CNI director said.

"The dollar's appreciation is welcome in Brazil as it eases the intensity of the deindustrialization process. Combined with a more vigorous fiscal program and a great fall in the interest rate, the tendency could be reversed," he said.

Brazil's benchmark Selic rate was cut from 12.5 percent to 12 percent in August, but remains one of the highest in the world. The country's Monetary Policy Committee will decide in mid-October whether to cut the rate once again.

Fernandes also said the government's latest measures to boost industrial production and competitiveness were helpful but should be continued and further improved.

"The challenge is to launch a coherent and consistent fiscal program which preserves investment, adjusts costs, generates fiscal sustainability, and solves structural issues like social security regulations, in order to reduce the interest rate faster," he said.

Even the political problems in Brazil might have a positive influence on the industrial sector, Fernandes said, noting that due to corruption accusations in several ministries, some projects and contracts with private businesses have been temporarily suspended or postponed for reevaluation.

He said the sector was affected after the government decided to suspend contracts and reevaluate projects. However, if the official decision could bring about more professionalism and less corruption, it was a price worth paying, he added.

With an eye on the ongoing global economic recession, the director said that Brazil, though not immune to the turmoil, could face it thanks to the country's extensive oil reserves, infrastructure programs and close trade with China.

"Those suggest that, even if the financial situation worsens, Brazil would be able to maintain a certain growth path," he said.

Editor: Yamei Wang

English.news.cn   2011-10-01 14:47:24 FeedbackPrintRSS
RIO DE JANEIRO, Sept. 30 (Xinhua)