One of the main shortcomings of Brazilian industry is the low pace of productivity evolution in recent years, as emphasized in the IEDI document "Industry and Brazil of the future" (in Portuguese). This factor, coupled with serious impediments to the sector's competitiveness, has contributed to the shrinking of our industry both in the country's production structure and in the global industrial system.

Since productivity is the result of a complex process of economic and social interactions, it is almost impossible to identify only one cause for its poor trajectory in Brazil. It is not difficult to verify the presence of factors such as the low quality of education, the partial and incomplete international integration of the national economy, the level of domestic investment far below the recommended, and some activities' little exposure to competition.

Despite this, two other causes also stand out. The first, as shown in Letter IEDI no. 864, is that the sectors with the highest productivity growth in recent years lost share in our industrial system. It was the case of the industry intensive in engineering and R&D, whose productivity in 2010-2015 rose 5% p.a. versus the 0.7% p.a. of manufacturing in general. This is because Brazil has neglected to create the necessary conditions for the industrial activities that are more complex and have greater technological content to flourish.

Alongside this issue of the composition of our industrial system, the second cause to be highlighted is the strong heterogeneity existing among companies in the country. That is, in a same sector, there are companies of excellence and others of very low productivity. In this sense, the most disadvantaged are usually smaller firms, whose access to credit, technical consultancies and a more qualified workforce is very restricted. Also, they often operate in isolated markets because of our insufficient and poor infrastructure.

In view of this situation, the Brazil More Productive Program (B+P) sought to, between 2016 and 2018, increase intra-firm productivity through the adoption of lean manufacturing techniques, with especial focus on small and medium-sized firms. Today's Letter IEDI presents an evaluation of the program carried out by ECLAC and IPEA together at the end of 2018, identifying the successes achieved and the limitations to which the initiative was subject.

With a very small fiscal impact (R$ 50 million), B+P was coordinated by the then MDIC (Ministry of industry, foreign trade and services) and counted with the participation of the ABDI, SENAI, ApexBrasil, Sebrae and the BNDES. In its first stage, the program assisted 3,000 companies in branches like food and beverages, metal-mechanic, furniture, apparel and footwear, primarily located in local productive arrangements (LPAs) distributed throughout the country.

The results achieved were very positive: an average increase in production lines' productivity of 52.11%, much higher than the previously established target (20%); a 60.60%  average reduction in the time of labor movement and a 64.82% fall in reworking. The companies also reported that they expect to obtain an annual return more than 11 times the amount invested in the consultancy (R$ 18,000 per firm).

In spite of these results, which can be considered a success, the fact that B+P has a very small scale and scope makes it incapable of promoting an increase in the systemic productivity of the Brazilian industry. Thus, the program makes sense if seen as an initial experiment to be later scaled up to match the size of the challenge we have to face. Judging by the results, this could be a way forward.

With the intensification of international competition and the various initiatives of the world's leading industrial powers towards industry 4.0, the long-needed increases in Brazilian industry’s productivity and competitiveness are becoming more urgent and essential. Unless Brazil decides to stay on the global sidelines.

The full text is available in Portuguese.