SÃO PAULO, January 30, 2013—Brazil’s productivity growth has stagnated, and if productivity does not improve, it will weigh on the country’s economy, according to a new report by The Boston Consulting Group (BCG). The report, Brazil: Confronting the Productivity Challenge, is being released today.
The report states that from 2004 through 2011, Brazil’s most liquid publicly traded companies produced an average annual total shareholder return of 19 percent. That impressive growth came mostly from gains in revenues due to a growing Brazilian middle class and global demand for Brazilian commodities.
However, according to the report, slower credit expansion and a sluggish global economy will weaken demand, so companies operating in Brazil will have to look for value creation avenues that are less dependent on pure growth. In this context, productivity emerges as the key challenge for individual companies and for Brazil’s economy as a whole.
During the past decade, Brazil’s economy grew largely by adding more people to its employed population rather than by increasing the output of each worker. This approach is not sustainable, and the country will need to improve productivity significantly to meet its aspiration of growing GDP by more than 4 percent per year. The report identifies several ways in which both companies and government can address key obstacles to accelerating productivity growth.
“In order to continue its development trajectory, Brazil needs to shift focus from the demand to the supply side, in particular enhancing productivity levels. That will require improving both hard and soft infrastructure and increasing levels of investment,” said Masao Ukon, a BCG partner and coauthor of the report.
The next decade in Brazil will impose new challenges but will also offer high rewards. What worked in the past may not be a recipe for the future. However, companies able to meet these challenges—particularly by boosting their productivity—will be better positioned to serve the sizable domestic market, take advantage of Brazil’s advantaged position in natural resources, and continue to create value.
A copy of the report can be downloaded at www.bcgperspectives.com.
To arrange an interview with one of the authors, please contact Eric Gregoire at +1 617 850 3783 or email@example.com.