July industrial numbers show that only a bold bet on railroads can activate a national development project. The IBGE today published the data on Brazilian industrial production in July. The numbers are not good, but not disastrous and, above all, perfectly explained by three extremely strong pressure points on national manufacturing activity.
Production fell by 0.2% compared to June, marking the fourth consecutive month without growth, but still maintains a 1.9% increase in 12 months, and 1.1% in the year to date until July. The first point of pressure is the high interest rates of the Central Bank, which cannot be evaluated only by the 15% Selic rate, but must be understood together with the very high bank spreads.
This makes citizens, consumers, businesspeople, and the government have an extremely high cost of financing and debt. This issue is directly linked to infrastructure. Infrastructure is a sector that needs long-term financing and cheap credit, which, in turn, is linked to railroads.
Brazil needs modern railroads, for passengers and goods, because without them, a development project or a sustainable reactivation of the national productive park will not be possible. The second point of pressure is the American tariff hike. The United States, the main buyer of Brazilian manufactured goods, already imposes barriers that affect our industrial exports.
Although some sectors have managed to get an exemption, such as aviation, others face growing difficulties in the American market. The third point comes from the increase in imports. With a favorable exchange rate and dammed-up Asian products seeking new markets, the manufacturing sector faces fierce competition from imports offered with aggressive discounts.
High interest rates and a tariff hike leave no other way out for the national industry: railroads Despite the pressures, there are signs of resistance. Durable consumer goods grew by 9.6% in the last 12 months, food products advanced by 2.2% also in the last 12 months, and pharmaceuticals by an impressive 12%. Vehicle production maintains a positive trajectory, as do machinery and equipment with 5.2% growth and textile products with a 9.9% increase in the last 12 months.
Extractive industries also stand out with 6.3% growth in the last 12 months, driven by increased production of crude oil and natural gas. The pulp, paper, and paper products sector registered a 3.8% increase in the last 12 months, while equipment maintenance and repair grew by 8.7% in the same period. China’s lesson is crystal clear: massive investment in high-speed railroads, integrated with energy systems and digital connectivity, created the basis for manufacturing growth.
Brazil needs the same boldness. Without trains connecting Rio-São Paulo, São Paulo-Brasília, Rio-Brasília, Recife-Brasília, Porto Alegre-São Paulo, and other economic centers, there will be no sustainable reindustrialization.
