In 2022, the physical production of Brazil's general industry returned to negative ground. Although closer to stability, it registered -0.7%, in good measure due to the performance in the second half of the year, which in relation to the same period of the previous year had the help of low bases of comparison. In Q4'22, it expanded 0.5%.

The manufacturing industry—that is, excluding the extractive branches— followed this same movement, but with slightly better results. In the year, it showed a decline of 0.4% and in Q4'22 it grew 0.7%. This Letter IEDI employs the OECD methodology to analyze the evolution of this part of Brazilian industry according to the technology intensity of its branches.

There are four groups of technology intensity in which these industrial branches are distributed: high, medium-high, medium and medium-low. Manufacturing does not have activities classified as low technology, a group that consists of agriculture, livestock, forestry, fishing and aquaculture, production and distribution of electricity, gas, water and urban cleaning, construction and a wide range of services.

In the 2022 aggregate, it can be considered that three of the four categories of technology intensity failed to grow. Only the medium-low technology industry increased its output, by +0.9% versus 2021, after two consecutive years of decline.

The expansion of the medium-low range was thanks to two of its branches: food and beverages and petroleum products, favored by the increase in commodity prices and the rise in their exports, as discussed in Letter IEDI n. 1186. All other branches were in the red, with intense falls in metal products (-9.5%) and textiles, clothing and footwear (-7.0%).

In Q4'22, the medium-low category also registered 0.9% against Q4'21, implying a significant slowdown compared to previous results. This was due to the loss of dynamism in the branch of petroleum derivatives and the continuation of important drops in metals, textiles, clothing and footwear and also in paper and cellulose.

At the opposite extreme, the group with the worst result in 2022 as a whole was the medium technology intensity range, with a loss of 5.4%, caused by all of its five branches. In three of them, the result of 2022 managed to be worse than that of 2020, when the COVID-19 crisis hit Brazil. This was the case of rubber and plastic, non-metallic minerals and "manufacturing of other goods."

Like the medium-low range, the medium-tech industry also had no significant improvement in Q4'22. It was the only group to remain in the red, registering -4.1% compared to Q4'21, and all of its branches lost production.

The high-tech industry, on the other hand, avoided the negative ground, but was also unable to expand. It was flat in 2022, with a variation of 0%. Thus, this part of the industry has not grown for four years in a row, which puts Brazil in the opposite direction of the world, whose industry of higher technology intensity has been growing above the global manufacturing industry, as discussed in Letters IEDI n. 1167 and 1180.

Among the high-tech branches, the only one to expand in 2022 was computing and office machinery (+3.3%), but not enough to make electronics as a whole to be in the black (-0.3%). The pharmaceutical industry, in turn, fell 1.1%.

In the second half of 2022, however, low bases of comparison helped the high-tech industry register positive variations, reaching 6.8% compared to Q4'21. But this was only due to the important growth of pharmaceuticals (+13.0%), since electronics fell again (-1.3%).

Finally, the medium-high technology intensity industry registered +0.3% in 2022, that is, almost nothing, especially when compared to the 2021 result (+13.4%). So it was left in a situation of virtual stagnation, just like high technology. Of its five branches, three grew and two fell in 2022. 

The medium-high losses were concentrated in the branches associated with capital goods and, consequently, with investment: electrical machines and appliances fell 10.7% and machinery and equipment dropped 2.3%. In both cases, the end of the year did not help: -7.1% and -4.6% in Q4'22, respectively. 

This contributed to the still low growth of medium-high technology in the last quarter of the year (+1.9%), as well as the declines of the chemical industry (-0.3%) and the manufacture of medical, optical and precision instruments and materials (-10%). In Q4'22 the only branch of this group to grow was the automotive industry (+10.2%).

The full text is available in Portuguese.