A recently disclosed report by the Brazilian Institute of Geography and Statistics (IBGE) showed that Brazil is experiencing a lost decade of investment, with difficulties in increasing the economy’s capital stock, essential for starting a new cycle of development. The investment barely covers losses from depreciation, as the wear and tear on machines, equipment, and infrastructure are called throughout their use. The scenario appears in updated data from the IBGE’s National Accounts System consolidated in the Ipea Indicator (Institute of Applied Economic Research).
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Capital Stock
This type of capital is the set of resources necessary to boost the country’s productive capacity. It includes, for example, factory machinery, the sanitation network, retail warehouses, office buildings, the telecom system, and highways with their elevated roads and bridges.
Capital Stock Growth
Between 1995 and 2014, the physical capital stock in Brazil grew on average 2.5% per year. However, since 2015 it has been at zero and has fallen by 3.5% when residential construction is excluded — that is, at best, the economy’s total physical capital stock is sideways.
Per Capita
The per capita effect of these results, considering the population aged 18 to 65 – at working age –, including all sectors, there was a 7% drop in the per capita capital stock. Excluding the effect of residences, the retraction is 10%.
Infrastructure for Work
The calculations above show if the country is improving the physical structure for workers. The results reveal that this is not happening and that it will be difficult to increase labor productivity in the short term.
Drop in Investments
The recovery of investments and capital stock from the recession (2014-16) has been slow, in part because it was very deep and with new setbacks in the following years, such as the COVID-19 pandemic. It was such a sharp drop that, for the first time in history, net investments became negative. It was only in 2019 that Brazil returned to recording positive net investment, but the pandemic came, and it returned to negative territory in 2020.
Industry
The machinery and equipment segment remains the most struggling. In a particular crisis, closely associated with industry, investments continue to decline. In 2021, the capital stock shrank -0.68% after falling 1.62% in 2020 and remaining at zero in 2019.
Agribusiness and Oil and GasIn the so-called segment that includes agribusiness and the oil and gas sector, the capital stock had the most significant expansion: 4.47% in 2021.
