Volume 43, Number 171,
October-December 2012
Structural Limits on Economic Development:
Brazil (1950-2005)
Bibiana Medialdea
THE CHRONIC INSUFFICIENCY OF DEMAND
Weak Investment ( ...continuation )

On the one hand, the investment rate was still maintained at reduced percentages in the 1960s, 16.1% on average, and reached its maximum at the end of the following decade with an average percentage of 21.4% of gdp17 (Figure 2). As such, this ratio did not reach an important level even during the years of the most intense investment, and remained far from the levels of developed countries during their industrialization periods (25-30%), which were further maintained over many years.

Figure 2. Investment Rates: 1950-2005 (gfcf/gdp %)

To calculate the private investment rates, we subtract the “gfcf of State Enterprises” that the ibge notes in the section “gfcf of Companies and Families.” As a result, we include this item to calculate the public investment rate.
Source: Prepared by the author based on data from ibge (Sistema de Contas Nacionais), available at: http://seriesestatisticas.ibge.gov.br/lista_tema.aspx?op=0&no=12 and ipea.

On the other hand, the composition of investment tells us that the part destined for equipment (machinery and work tools) was maintained at very low levels. The investment rate in machinery and equipment stayed at an average of 5.6% of gdp during the 1950s and 1960s, and rose to 8.7% in the following decade (data from ipea). In other words, this investment does not manage to significantly surpass 0% of total investment18 even during the years when this investment had strongest growth, as seen in Figure 2. Once again, the contrast with experiences in developed countries is illustrative: following an “initial capitalization” phase that demands a high level of non-residential investment in structures, this investment takes on the protagonist role with levels of participation that surpass 55-60% of the total.

However, if investment was weak during the decades of greatest dynamism that we just enumerated, its evolution is even worse when economic expansion is interrupted at the beginning of the 1980s: its volume barely increases, the investment rate falls, and the same happens for productive equipment.

Between 1981 and 2005, investment growth is essentially insignificant. It starts to fall at an annual rate of 0.7% until 1992, and later grows at a low rate of 1.6% annually. If we look at the evolution of investment in machines and equipment, the results are not much more encouraging: some growth until 1992, at 1.4% annually, and annual growth of 3.4% throughout the following years. In summary, throughout these twenty-five years, the investment dynamic is disastrous: total investment grows at an annual average of 0.5%, while investment destined for equipment grew at 1.9%. This poor behavior means that during the 1990s and up to the present, Brazil is still in a period where the gdp is also growing slowly. The investment rate never reached a notable ratio, with an average of around 19%, and the investment rate in equipment has stayed at around 6.5%.19

To summarize, during the decades of the most growth and economic transformation, between 1950 and 1980, Brazil still did not manage to overcome the structural restrictions that limit its investment dynamics, and in the following quarter of a century, these restrictions would only sharpen. As such, it is evident that the Brazilian economy has a chronic deficiency in investment demand, which is even more pressing in the case of investment in machinery and other productive equipment.

17 It is useful to highlight that between 1950 and 1980, nearly one third of investment was public. The investment rates, as well as relative participation of the rest of the components of aggregate demand provided in this section, were calculated based on data from ibge(Sistema de Contas Nacionais), available at:
http://seriesestatisticas.ibge.gov.br/lista_tema. aspx?op=0&no=12 and the ipea portal (http://www.ipeadata.gov.br/).


18 It is paradigmatic that in this period the mechanical industry only accounts for 7.2% of the total investment destined towards the industry of transformation. Calculations for 1959-1980 based on ibge (1990).

19Real growth rates were obtained by calculating the average cumulative growth rate for the series that we refer to in footnote 17 at constant prices for 2005 (provided by the ipea).

Published in Mexico, 2012-2017 © D.R. Universidad Nacional Autónoma de México (UNAM).
PROBLEMAS DEL DESARROLLO. REVISTA LATINOAMERICANA DE ECONOMÍA, Volume 48, Number 191, October-December 2017 is a quarterly publication by the Universidad Nacional Autónoma de México, Ciudad Universitaria, Coyoacán, CP 04510, México, D.F. by Instituto de Investigaciones Económicas, Circuito Mario de la Cueva, Ciudad Universitaria, Coyoacán,
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