Accelerating Brazil's Economic Growth: The Power of Industrializing Comparative Advantages
- Carlos Honorato Teixeira
- Sep 13
- 3 min read
As we navigate the complexities of the global economy in 2025, Brazil stands at a pivotal crossroads. After decades of sluggish growth, with per capita GDP rising by just 1.5% annually from 1980 to 2023, it's time to rethink our strategy. In our latest report from the Imagine Brasil initiative at Fundação Dom Cabral, co-authored with Professor Jorge Arbache, we explore how Brazil can break free from the middle-income trap and scale its economy through the industrialization of comparative advantages.
This isn't just theory—it's a practical roadmap leveraging Brazil's unique strengths in natural resources, renewable energy, and geography. If you're interested in economic development, sustainability, or emerging markets, read on.
The Challenge: Brazil's Stagnant Growth and the Middle-Income Trap
Brazil's economy has slowed dramatically since the 1980s, plagued by volatility, low productivity, and structural issues. Key culprits include:
Low savings and investment rates
A closed economy with limited global trade integration
Fiscal imbalances and high exposure to commodity price shocks
Economic "primarization" (over-reliance on raw exports)
Bureaucracy, legal uncertainty, and infrastructure deficits
These factors inflate the "Brazil Cost," stifling competitiveness. Labor productivity grew at a mere 0.16% annually from 1980 to 2021, compared to China's 8.09% or India's 6.67%. As shown in Chart 1 from the report:
Chart 1: Labor Productivity per Employed Person (1952–2021, in 2020 USD PPP) (Note: Brazil starts strong but falls behind emerging peers like China and India post-1980.)
Year Range | Brazil | China | India | South Korea |
1952–2021 | 1.80% | 6.44% | 3.48% | 4.56% |
1952–1980 | 4.22% | 4.03% | 1.72% | 5.30% |
1980–2021 | 0.16% | 8.09% | 6.67% | 4.09% |
Source: Conference Board.
Without change, doubling Brazil's per capita income could take 47 years—far too slow in a world racing toward decarbonization and digital transformation.
The Opportunity: Industrializing Comparative Advantages
Brazil's path forward lies in transforming its natural endowments into higher-value products and services. We're not just talking about exporting commodities—we're advocating for powershoring: relocating energy-intensive industries to Brazil, where clean, abundant energy (90% renewable) provides a competitive edge.
Key comparative advantages:
Renewable Energy Leadership: Vast solar, wind, biomass, and hydropower potential.
Natural Resources: Critical minerals (lithium, niobium), biodiversity, arable land, and oil reserves.
Geography: Distant from geopolitical hotspots, close to North America/Europe, with food and energy security.
Sustainability Focus: Low-carbon fuels (e.g., SAF, biodiesel) and green technologies.
By industrializing these—think steel, fertilizers, chemicals, and pulp/paper powered by renewables—Brazil can attract foreign investment, boost productivity, and integrate into global value chains. Projects are already underway in ports and industrial zones.
As illustrated in Figure 1: Brazil in Search of a Shortcut (Industrial Density vs. Industry Share in GDP), we need policies to jump from low-density/low-share (Point A) to high-density/high-value (Point B), bypassing traditional paths taken by China or the US.
Why Now? Global Shifts Favor Brazil
Climate change, geopolitics, and supply chain disruptions are reshaping investments. Traditional cost factors (wages, subsidies) matter less than resilience, green energy, and proximity. Brazil's "powershoring" appeal positions it as a hub for "hard-to-abate" sectors, helping the world decarbonize while fostering inclusive growth.
This strategy addresses Brazil's unique challenges:
Rapid demographic aging (upward pressure on labor costs).
High urbanization (87% urban population, with infrastructure gaps).
Poverty and inequality reduction through value-added jobs.
Moving Forward: Policy and Private Sector Action
Success requires a blend of macro and micro reforms:
Public Policy: Tackle "Brazil Cost" via tax reform, regulatory stability, and innovation incentives. Promote partnerships for tech and green investments.
Private Sector: Internationalize operations, invest in R&D, and embrace sustainable business models.
Joint Efforts: Scale ongoing projects in low-carbon fuels, batteries, and critical minerals.
In future works, we'll dive deeper into these agendas.
Final Thoughts
Brazil has the assets to be ambitious: geography and resources that align with global needs for sustainability, food security, and energy transition. By industrializing comparative advantages, we can achieve resilient, inclusive prosperity. The journey won't be easy, but the rewards—faster growth, better jobs, and global leadership—are immense.
What are your thoughts? How can Brazil leverage its strengths in the green economy? Share in the comments—I'd love to discuss. Download the full report here: dom cabral.pdf.
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