Economic Premise
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The Economic Premise series summarizes good practices and key policy findings on topics related to economic policy. They are produced by the Poverty Reduction and Economic Management (PREM) Network Vice-Presidency of the World Bank.
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The Brazilian Competitiveness Cliff
(World Bank, Washington, DC, 2013-02)Brazilian exports of goods and services have grown sharply in recent years, with sales nearly three times higher in 2010 than in 2000. However, Brazil faces considerable competitiveness challenges: its export performance depends mostly on favorable geographical and sector composition effects. Such challenges increased after the recent global economic crisis. A recent slowdown in industrial exports, production, and investments seems related to supply-side difficulties stemming from a wide range of inefficiencies and rising costs, rather than insufficient demand. Although a stronger currency is one of the factors behind the lower competitiveness of Brazil's manufacturing exports, sluggish productivity performance, lack of dynamism at the firm level, and a real wage uptrend seem to explain a significant part of the overall loss of competitiveness. This diagnostic reinforces the urgency of resuming the agenda of microeconomic reforms, increasing the investment-to-Gross Domestic Product (GDP) ratio, and advancing toward better-skilled human capital.