Author: Armando Monteiro Neto

Source: Global 21 - RS - 29/07/2009

Armando Monteiro Neto *

We work in highly adverse conditions. The forecast by the National Confederation of Industry (CNI) is that the investment rate in Brazil will fall by 9% in 2009. The foreign market shrank and Brazilian exports dropped 23% from January to June this year, compared to the same period 2008. In the case of manufactured goods, the loss was even more significant and reached 31%.

The retraction of the economy and the intensification of competition require measures that will enable the industry to resume growth in the post-crisis. It is necessary to reactivate consumption, strengthen the competitiveness of companies and stimulate investment. As a result of dialogue with industry, the federal government has made progress in this direction by reducing taxes on important production chains and cutting financing costs. However, such initiatives must be complemented with the adaptation of the Productive Development Policy (PDP) to a more complex and challenging world.

The revision of the industrial policy requires the reinforcement of a structuring agenda, which guarantees incentives for the development of strategic segments to add value to the product and expand the insertion of Brazilian companies in the foreign market.

Launched in May 2008, when the country's economy was growing at a rate above 6% per year, PDP brought significant advances to boost development and innovation. It was the recognition of the importance of the industry as a promoter of growth and that the processes of transformation of the productive structure require the mobilization of a wide range of actions and instruments. It meant the articulation and convergence of initiatives in different areas of the federal government in an unprecedented way.

The implementation of the PDP, however, was marked by asymmetries. Some actions have advanced, especially those aimed at the operationalization of tax and credit instruments. The National Bank for Economic and Social Development (BNDES) responded quickly to improving credit conditions and expanding credit lines. Other actions have achieved less significant results in vital areas such as government procurement and regulation.

Despite the setbacks, the PDP was moving towards the objectives of expanding investments, exports and private spending on research and development. But the crisis ran over the process. The investment rate will hardly reach 21% of the Gross Domestic Product (GDP) or there will be a 10% growth in the number of micro and small exporting companies, as predicted by the PDP goals for 2010. It is also unlikely that entrepreneurs will increase to 0,65 % of GDP investments in research and development. The only feasible goal is the one that foresees an increase of 1,25% in the participation of Brazilian foreign sales, a viable data because world exports register a more intense drop than ours.

The change in the PDP needs to be accompanied by a tax system that prioritizes competitiveness. Tax reform is certainly one of the most relevant actions to create a favorable environment for the expansion of the industry. To speed up the process, it is possible to promote changes in the infraconstitutional legislation that solve distortions, such as the difficulties that companies face with the reimbursement of the credits of the Tax on Circulation of Goods and Services (ICMS) on exports.

Another important step is the adaptation of financial instruments to the context of credit scarcity, especially for micro and small companies. Among the necessary initiatives in this area are the reduction of interest rates, the improvement of the conditions of the BNDES lines, the implementation of the positive registration and the expansion of financing for working capital. The moment also requires a review of economic subsidies for research and development activities. In addition to expanding the number of sectors with access to the grant, it is necessary to simplify the content of the notices and increase the deadlines granted to interested companies.

The restructuring of the PDP is decisive for the country to take advantage of the possibilities opened up by innovation and technological advancement. It is time to remove barriers to investment and exports to ensure the effectiveness of the measures announced so far and prepare Brazil for a new phase of growth.

* Armando Monteiro Neto, businessman, is president of CNI

Source: The State of São Paulo (29/7/2009)