Interview with Paulo Skaf, President of FIESP (Federação das Indústrias do Estado de São Paulo)

What is your assessment of industrial development in São Paulo/Brazil? How competitive is the industry, globally? How important is the industry for São Paulo/Brazil?

Industry is a great Brazilian and São Paulo heritage and its construction occurred over many decades, granting the economic development of the country.

Although its representativeness on the GDP is under 20%, the industry is the most dynamic sector in terms of qualitative job creation and impact in income generation in economy. It's noticeable that the Brazilian industry is very diversified in terms of sectors and that must be preserved and intensified, particularly in our state of São Paulo.

There are companies in the country that are strongly present in the international market, in sectors going from beverage to aeronautic, with Embraer – third largest civil aircraft producer in the world. These companies, besides being competitive, are also generating innovation.

5 years from now, how do you see the evolution of the industry in São Paulo/Brazil?

I believe that Brazil – with the state of São Paulo as a leader - will offer excellent opportunities for manufacturers in the years to come, between other reasons, because of its economic stability, the organization of big world sport events and the exploration of new oil fields.

So, it's important for the country – including the state of São Paulo - to offer manufacturers full capacity to produce here and to profit from the new opportunities. I'm specially referring to the years that follow the creation of a more competitive environment, with lower capital costs to entrepreneurs, a more efficient logistic and an exchange rate that doesn't discourage the productive park.

Another crucial element that has been more important for the industrial sector is the aptitude of the companies to innovate. They are aware of the competitive challenges in a globalized world and have been increasing investments in innovation and in the creation of technologic advantages.

What markets do you feel are the future drivers of São Paulo/Brazil industrial exports? Which bilateral or regional agreements have affected most the São Paulo/Brazil trade patterns and export flows?

In the last few years the Brazilian Government has been committed to conclude the Rodada de Doha and the opportunities of bilateral agreements were less relevant.

The most important countries for the export of the Brazilian goods are Latin-America, specially the Mercosul. In these markets, the great majority of Brazilian products are already a huge success, remaining the completion of a free trade space. In the traditional markets of the United States and of the European Union, the export of manufactured goods has been decreasing of importance over the years and only the sale of commodities have been raising.

It's a worrying situation, because Brazilian and São Paulo competitors have been making free trade deals, like the one that China signed with Peru and Chile or the one that the United States have signed with Colombia, Panama and South Korea.

This movement deepens the trade diversion in reaction to Brazilian exports, which has been occurring due to China's competition mainly because of the Yuan undervaluation.

What is the main challenge for São Paulo/Brazil's industry? What could hamper the Brazilian success story?

The main challenges continue to be those related to the competitive agenda. Brazil needs to create, in the next years, a more favorable business environment, especially in what concerns simplification and reduction of tax burden.

The Brazilian industry can leap forward if it takes advantage of the energetic wealth to be explored, but that needs an active and effective industrial policy. The growths of the Capital goods and equipment sector, or of the shipping industry to fulfill the Pre-Salt needs, are good examples of how to enlarge production in technologic niches and innovate in specific products, which can be good international players in the future.

An essential point is to deal with Oil exports. There are examples of countries that let the exchange rate appreciate without creating an internal dynamic, and that's not the way for Brazil.

What is the image of São Paulo/Brazil industry abroad?

The image of the industry is a reflex on the perception about Brazilian products, which is very positive. In general, Brazilian industries have important attributes, such as quality and delivery capacity.

In some goods, the country is known worldwide, like food and beverage, fashion related products, agricultural machinery and aircrafts. Those ones assure the good Brazilian and São Paulo image in the markets in which they are sold.

How would you describe your main strategy over the next 5 years?

The main strategy is to focus on innovation to diversify and promote competitive advantages for the industry, especially in the more dynamic small and medium size companies. In addition, we have to work together with the government for the construction of a more favorable environment to the entrepreneurial activity.

At present times, how easy is it to invest in São Paulo/Brazil?

It's undeniable that Brazil – and São Paulo - offers challenges for the business development. Meanwhile, the opportunities found also present exceptional advantages, like the dynamic growth and vast consumer's market. Moreover, the perspectives are very positive in several sectors and manufactures, regardless of the origin of the capital, can obtain positive results in their companies.

That doesn't make us forget about the existing obstacles to be overcome, many of which I already quoted previously. For all investors, mainly the foreign ones, there are difficulties regarding the tax system of the country or the worker's laws and those are the subjects that Brazil must work on over the next years.

Picture credit: Concrete Show