Abstract
The present article aims to analyze the recent behavior of real exchange rate in Brazil and its effects over investment per worker in Brazilian manufacturing and extractive industry. Preliminary estimates presented in the article shows an over-valuation of 48% of real exchange rate in Brazil. The reaction between the level (and volatility) of real exchange rate and investment (per worker) in Brazil is analyzed by means of a panel data econometric model for 30 sectors of Brazilian manufacturing and extractive industry. The empirical results show that the level and volatility of real exchange rate has a strong effect over investment per worker in Brazilian industry. Finally, we conclude the article presenting a proposal for a new macroeconomic regime that aims to produce an acceleration of economic growth of Brazilian economy and, by that, a catching-up process with developed countries.
Highlights
The general issue formulated for the tenth edition of the Economic Forum of São Paulo concern the strategy required for Brazil double its per capita income in
Considering that the Brazilian population is currently growing around 0.6% p.a. for Brazil to double its per capita income in 15 years, GDP would have to grow at rate of 5.26% p.a. during this period
Given that in the last 20 years (1992-2012) the average growth of the Brazilian economy was 2.96% p.a., according IPEADATA, to double Brazil’s per capita income, in such a short space of time, would be necessary to increase the rate of GDP growth by almost 100%
Summary
This simple exercise points to the fact that the recent depreciation of the nominal exchange rate is much lower than that required to restore the competitiveness of the manufacturing industry, a sine qua non condition for obtaining more robust growth rates for real GDP. It follows that while the government does not operate a profound change in macroeconomic matrix, which allows obtaining a more competitive exchange rate in the same time that keeping inflation in low and stable levels, the Brazilian economy will be doomed to get mediocre growth rates. We replaced the volatility of the real exchange rate by the volatility of nominal exchange in order to verify the robustness of the empirical results
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