47 2015 Industry trends By José Antonio Fernandes Martins, president of Sindicato Interestadual da Indústria de Materiais e Equipamentos Ferroviários e Rodoviários (Simefre) Due to significant uncertainties surrounding the economy, which, by the way, also affects the industry performance — although making quantitative predictions is almost impractical — one can say with certainty that if industry is faring badly, the economy goes the same way too, and vice-versa. The country’s economy is deteriorating, as reflected in their extremely worrying data from 2014, which pointed out a fiscal deficit never seen before. The balance of trade – once traditionally positive – has been deteriorating at an alarming rate: 2011, US$ 29.8 bi; 2012, US$ 19.4 bi; 2013, US$ 2.4 bi; 2014, US$ -4.0 bi (considering that one dollar is now worth BRL 3.25). In 2014, the deficit itself in the processing industry, including export/import, reached US$ 111 billion. The balance on current account, which was on average US$ 55 billion negative, rose in 2014 to US$ 90.9 billion, accounting for 4.12% of GDP, when the upper limit, according to the Maastricht Treaty on European Union, is no more than 3%. SELIC rate ended the year at 11.75%, and should, now, reach 13%, still pointing to an uptrend. Although the exchange rate has been partially recovered, it is still far from the level (BRL 3.50) needed for us to recover the balance of trade with exports. The GDP ended the year at 0.1%. Only the Foreign Direct Investments (FDI) continues at the level of US$ 62.5 billion, helping to cover the huge deficit in current accounts, but the forecast of banks for 2015 is that there will be a decrease in the order of US$ 55 billion. Fortunately, the country still holds net foreign-exchange reserves amounting to US$ 375 billion, which cover the foreign debt. These poor results have devastated the GDP. And, consequently, a low GDP reflects the hopeless situation of the country’s industry. The table below shows a decrease in the general industry and breaks it down in segments. Industrial Production Fluctuations – December, 2014 (%) In the month (seasonally adjusted) Dec. 2013 In the year 12 months General Industry -2,8 -2,7 -3,2 -3,2 Capital Goods -23,0 -11,9 -9,6 -9,6 Intermediate Goods -0,8 -1,5 -2,7 -2,7 Consumer goods -2,0 -3,2 -2,5 -2,5 Consumer durables -2,2 -9,7 -9,2 -9,2 Semi-durables and non-durables -1,7 -1,3 -0,3 -0,3 Mineral extraction 0,5 9,0 5,7 5,7 Transformation -3,5 -4,4 -4,3 -4,3 Source: IBGE The decrease in capital goods reveals the total distrust of companies when it comes to investing. The Processing Industry participation on the GDB has been decreasing year by year. When encountering such alarming figures, it is no wonder why we ask ourselves: how have we come to this point, when we ended 2010 GDP at 7.5%, shortly after the 2008 crisis? There are many reasons and we pointed them out below: • Federal Government’s countercyclical measures, focusing on consumption rather than investment. • Indeterminations in rebuilding infrastructure, particularly in the consolidation of concessions for airports, highways, railways, ports, sanitation and energy - unsatisfactory internal rate of return (IRR) and uncertainties as to regulatory benchmarks.
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