Brazil fell six positions from 2015 to 2016 and recorded its lowest mark in the competitiveness ranking of the World Economic Forum – which in Brazil is developed in partnership with Fundação Dom Cabral (FDC). The country is now at 81st place in the current edition, among the 138 surveyed, the worst performance since the change in methodology, which took effect in 1998.

According to FDC, Brazil’s drop in ranking reflects clear signs of strong economic crisis and decline in productivity experienced by the country, resulting in lower business sophistication and low levels of innovation. “Brazil moves away significantly from the other group of countries BRIC and G-20 and lost international space,” says the organization in a statement.

According to the report, the main factors behind this Brazilian competitiveness loss trend are those linked to the current political situation, but also data relating to the structural and systemic issues. “Factors of this situation, as the economic and political crisis that has been deteriorating since 2014 are associated with structural and systemic factors, such as regulatory system and inadequate tax, disabled and low productivity infrastructure, resulting in a weakened and unable economy to promote progress in the domestic and international competitiveness without greater integration in the world market “, says the text.

Of the 12 pillars studied, Brazil fell in six of them. The biggest drop was in “financial market development”, leaving the 58th place in 2015 to 93rd in 2016. There was also worsening in “business sophistication” (from 56 to 63), “Innovation” (from 84 to 100) “economic Environment” (from 117th to 126th), “technological readiness” (from 54 to 59) and “market size” (from 7 to 8).

Already the largest increase was in “Higher Education and Training” (from 93rd place in 2015 to 84th position in 2016); followed by “Efficiency of the labor market” (from 122nd to 117th), “Health and primary education” (from 103 to 99), “Infrastructure” (from 74 to 72) and “institutions” (from 121st to 120th).

In the item “Efficiency of goods market,” the country was stable in the 128th place, the last of the global ranking.

For FDC, the fall in the evaluation of the “economic environment” in Brazil was already planned. “With a public debt of R$ 4 trillion, downfall perspective in general revenue, inflation with weak response to stimuli and rising interest rates, key losses were expected in this pillar.” Since the gains in “Infrastructure” are seen as a reflection of the investments made for the World Cup 2014 and the 2016 Olympics.

In the case of “Development of the financial market”, which dropped 35 positions, the document points out that weighed the credit crunch, rising interest rates and increase in delinquency, among other factors that denote greater state interference in the banking system. “The recession, in fact, reduces the demand for money and therefore the banking service. The unfavorable scenario exacerbates the expectation of profits for the financial sector.”

The 12 pillars are grouped into three sub-indices: basic requirements, innovation and sophistication and efficiency enhancers. As a country of average development in the case of Brazil the last subindex receive greater weight in the calculation final.Para 2016, the World Economic Forum projects a global economic growth of less than 2.5%. In the case of Brazil the forecast is down 4.5%. According to Professor FDC Carlos Arruda, the data related to the forecast for the Brazilian activity is outdated, but that does not impact on the overall position of the country in the ranking, since GDP is more consequence than the cause of competitiveness.

As part of the survey conducted annually by the competitiveness ranking, respondents were asked which are the most problematic factors for doing business in the country. In 2016, the tax remains the largest Brazilian challenge, followed by corruption, restrictive labor laws and inefficiency of the bureaucracy state-owned.

Arruda explains that one third of the indicators that make up the overall rankings come from interviews with entrepreneurs who are always carried out from March to May. Thus, in the Brazilian case, search did not catch the improved optimism that resulted from the impeachment of President Dilma Rousseff, effective on August 31. “The indicators related to that suffered because they captured this transformation. Our forecast is that next year there is a reflection of this, with an improvement in the perception of the business community,” he explains.

According to FDC, reforms are needed in the tax and social security in order to put an end to the competitiveness downward trend, aimed at actually resolving unsustainable issues in the long run. “The largest share of world trade emanates as solution for Brazil to invest more in export sectors, seeking products with higher added value and higher marginal returns,” the report said.

Professor FDC believes that 2016 marked the bottom of the well for productivity in Brazil, which should start to rise in the coming years. One reason for this is precisely the expected reforms. “Competitiveness is a race, and if you do not move the others will pass you. Now the government began to stir, announced changes in Education this week, and perhaps they will work out the labor reform. Brazil has very bad positions on various items , which means that any gain can help move up the rankings, “he explains.

Arruda do not see a big jump positions in Brazil already in 2017, but says the country must climb some steps, and among three or four years, it can recover much of the ground lost since the peak of 2012, when it recorded its best placement in the ranking – the 48th position. “A good position for Brazil today would be somewhere between the 45th and the 55th place”, exposes.

For the eighth consecutive year, Switzerland topped the list of most competitive countries of the world, this time followed by Singapore, the United States, the Netherlands and Germany. On the other hand, eight of the ten least competitive countries in the survey are in Africa (Congo, Liberia, Sierra Leone, Mozambique, Malawi, Burundi, Chad and Mauritania), with the exception of Yemen, last place, and Venezuela, immersed in a social , institutional and economic crisis.

“The fall in the price of commodities and the end of the commodity supercycle had generally a strong impact in these countries,” the report says.

Carlos Monteiro is a Brazilian citizen, graduated in Business Administration by the Catholic University of São Paulo. He lives in Odense, Denmark with his Danish Wife, Cathrine, and their half Danish /Brazilian daughter Ines Marie. You are very welcome to be in contact him at any time.
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