Lessons of Brazil’s Economic Transformation for Indonesia
Brazil, as one of the economic powerhouses in Latin America, has undergone significant economic transformation in recent decades. One of the most striking changes is the rapid deindustrialisation process, triggered by declining productivity and structural changes in the economy.
This phenomenon has had a profound impact on Brazil’s industrial structure and overall economic well-being. In the 1980s, Brazil’s manufacturing industry reached its peak, accounting for around 34% of the country’s Gross Domestic Product (GDP).
Back then, the industrial sector played a crucial role in the economy, contributing significantly to economic growth and creating jobs. However, since 1990, there has been a drastic decline in the manufacturing sector’s contribution to GDP, falling to just 11% in 2020.
This decline reflects the phenomenon of rapid deindustrialisation, where the country is experiencing a sharp decline in industrial activity. This phenomenon not only reflects a relative decline in industrial production but also indicates a structural shift in Brazil’s economy.
One of the main factors behind this deindustrialisation is the failure of the Brazilian economy to increase productivity after 1990.
The Brazilian government at that time focused on boosting domestic demand rather than efforts aimed at increasing industrial productivity. Policies that prioritised domestic consumption often ignored the need to improve industrial efficiency and competitiveness.
As a result, Brazil’s industrial sector was unable to adapt to global changes and rapid technological advances. Lack of innovation and investment in technology leads to productivity stagnation, which hinders the industrial sector’s ability to compete in the global market.
In addition, limitations in industrial policy and inadequate support for research and development exacerbate this problem.
Brazil’s deindustrialisation phenomenon offers valuable lessons for Indonesia in formulating its economic development strategy. Just like Brazil, Indonesia also faces challenges in maintaining industrial competitiveness amidst global changes and rapid technological advancements.
To avoid the trap of deindustrialisation, it is important for Indonesia to not only focus on domestic demand, but also actively increase industrial productivity through innovation and investment in research and development.
Source: Bappenas
