Paulo César Morceiro
Production and employment in the Brazilian manufacturing industry grew significantly in the decade from 2004 to 2013, but the technological intensity of production activities declined. Growth was driven by domestic demand, which performed well due to the significant job creation, real minimum wage increases, and the credit boom. However, Brazilian manufacturing lost competitiveness, presented a negative labor productivity growth, and registered trade deficits in most sectors, including those traditionally associated with surpluses. The chapter also shows that the manufacturing sector is integrated into the global value chains by imports, but not by exports—which is a case of introverted fragmentation.
Martin Andersson and Magnus Henrekson
This chapter assesses the role local institutional framework conditions play in fostering local entrepreneurship. The basic premise is that entrepreneurship is a central driver of economic renewal and change, and that institutions affect both the supply and direction of entrepreneurship. While local institutions always develop and operate against the backdrop of national institutional frameworks, in particular in nonfederal states, there is plenty of room for local initiatives and policies to influence job creation and the local entrepreneurial climate. This pertains to both formal (e.g., taxes, regulations. and stringency of enforcement) and informal (e.g., attitudes and social legitimacy) institutions. The local institutional environment is essential in any local policy aimed to foster productive (high-impact) entrepreneurship. Favorable local institutions increase not only the odds that a region develops or manages to attract entrepreneurial incumbents, but also the odds that a region reaps the full potential of its business climate by hosting entrepreneurial and knowledge-intensive activities.
This chapter examines a little explored and yet important aspect of the poor productivity in Brazil: the performance of the service sector. It shows evidence that the meager long-term performance of the services sector is a key factor in explaining the poor aggregate productivity and manufacturing competitiveness in Brazil. The reasons for that are twofold. First, Brazil is experiencing a profound structural transformation in favor of the services sector, mainly at the expense of the manufacturing sector, to the point that the shares of services in output and in employment have become unusually high by emerging market standards. Second, manufacturing firms in Brazil are increasingly outsourcing all types of services to the point where the share of services in total costs have become comparable to that of advanced economies.