For years, the narrative around Brazil’s economic decline has pointed to a single culprit: deindustrialization. The story often sounds straightforward, the industrial sector shrank, and that’s it. But recent data tells a far more complex and revealing story, one that challenges long-held assumptions about what really happened to Brazilian industry.
Brazil’s deindustrialization is portrayed as a deep and long-term process that has weakened key sectors such as agribusiness and the automotive industry, leading to widespread job losses. This decline is linked not only to recent political events like the Lava Jato operation, which dismantled major value chains connected to Petrobras and large construction firms like Odebrecht — who led the construction sector in Africa, for example —, but also to earlier policies dating back to the late 1980s and 1990s. Market liberalization under the Collor Plan and the FHC administration opened the Brazilian economy without protecting national industries, accelerating the dismantling of sectors such as electronics, defense, and automotive.
To face this process it is necessary emphasizes the central role of the state in reversing deindustrialization, contrasting Brazil’s limited intervention with the strong state-driven strategies of the United States and China. In the U.S., government investment through institutions like DARPA and massive military-industrial funding has historically created the foundation for technologies later commercialized by private companies — illustrated by examples such as the internet, GPS, and Elon Musk’s reliance on public contracts for SpaceX. This dynamic reinforces the classic “center and periphery” structure described by Celso Furtado, where developed nations concentrate high value-added production and extract wealth from developing economies, maintaining their dominance through economic pressure and strategic intervention.
Infortnately to Brazil, it joined the neoliberal policies of the Washington Consensus further weakened its industrial capacity, limiting monetary autonomy and suppressing domestic industry through high interest rates and a floating exchange rate. Meanwhile, China achieved rapid growth by rejecting this policy model and adopting long-term state-led industrial planning. Reindustrializing Brazil requires a 50-year national project centered on strong state action, strategic investment, and rule changes that enable industrial development.
If you look at the data, a little more than 20 years ago, industry represented 22% of Brazil’s GDP. Today it’s around 11–12%.
Today, in Brazil, people say: “Why should I open a company? I’d have to hire workers, face risks, and families aren’t buying much. And if I need a loan, I’ll end up drowning in debt. Why bother, if I can simply buy government bonds?” And this, in my view, it simply kills any industrialization processis practically criminal. The fact that Brazil have one of the highest interest rates (the Selic rate) in the world.
Look at Japan, just for comparison. There’s been an uproar there because they doubled their interest rate on public debt. It went from 0.25% per year to 0.50% per year, and the Japanese were shocked. In Brazil, the Selic it’s already above 15%.
A Dramatic National Decline, but Not the Whole Story
At first glance, the data paints a bleak picture. But a deeper look reveals that this national average hides a far more uneven and surprising reality.
The Regional Puzzle: Deindustrialization Has an Address
One of the most striking findings is that the decline was not evenly distributed across Brazil. In fact, it was overwhelmingly concentrated in a handful of states.
More than 90% of all industrial job losses between 1985 and 2022 came from only three states:
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São Paulo
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Rio de Janeiro
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Rio Grande do Sul
This means Brazil is not facing a nationwide industrial collapse, but rather a localized crisis in former industrial powerhouses. While traditional hubs were losing strength, other states moved in the opposite direction.
Mato Grosso, for example, saw its industrial employment increase eightfold during the same period.
Brazil today is, in practice, two very different industrial countries: one declining, one expanding.
Sector-by-Sector: What Brazil Actually Lost
The sectoral breakdown is equally revealing. In São Paulo, the epicenter of industrial decline, the process did not happen all at once. It came in waves:
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1990s: textiles and metallurgy were hit hardest.
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2000s: automotive and electronics sectors suffered major setbacks.
Each decade claimed different victims, showing that the structural shift was not uniform but fragmented and progressive.
This distinction matters because not all industrial jobs are equal. Losing low-tech sectors is one thing; losing the industries that drive innovation is another.
And that is exactly what happened.
High-Tech Industries Were the Most Affected
Studies divide manufacturing into two groups:
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High-technology industries: electronics, chemicals, automotive, machinery
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Low-technology industries: food, textiles, clothing, footwear
The data shows a troubling pattern: the sharpest declines occurred in the high-tech group.
The Human Impact: A “Malignant Structural Shift”
Beyond maps and charts, the consequences fall on workers. The study uses a term that sounds technical, “malignant structural change”, but its meaning is simple and alarming.
In practice:
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The labor market deteriorated.
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Household incomes fell.
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The shift from industry to services translated into lower living standards for millions of workers.
The Verdict: Deindustrialization Has Three Faces in Brazil
After analyzing geography, sectors, wages, and long-term data, researchers describe Brazil’s deindustrialization as having three defining characteristics:
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It is highly concentrated: not a nationwide phenomenon, but one rooted in a few key states;
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It is heterogeneous: each region and each industry tells a different story;
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It is malignant: the country is losing high-tech sectors while pushing workers into lower-quality jobs.
The answer may shape the future of Brazil’s economy, and determine whether the country can rebuild a modern, competitive industrial base or remain trapped in a cycle of premature decline.
The central argument is that Brazil must focus on producing goods and services that the world wants to buy, regardless of the price, following the model of companies like Apple, which sells an identity and an experience (the iPhone), and not just a product.
A developed country reaches a point where industrialization gives way to the production of sophisticated, high value-added services, such as Engineering, Finance, Robotics, Insurance, and smart home technologies.
There is a concrete opportunity to reverse Brazilian deindustrialization by focusing on the Health Industrial Complex:
The Federal Government alone annually imports US$ 18 billion in health products from India, China, and Europe.
It is estimated that 80% of these imports are for products with expired patents.
By adding the spending of states, municipalities, and the private sector, the total imports reach about US$ 40 billion (approximately R$ 200 billion).
All of this government spending would be able to could be used to generate a national industrial park through mechanisms such as:
- Copying and pasting technologies from expired patents;
- Business incubators;
- Government purchases protected by WTO rules, guaranteeing a market for local production.
