The dynamics of the Brazilian manufacturing industry from 2002 to 2024: empirical research in light of the New-Developmentalist Theory

de Paula, Gilson Nunes; Borghi, Roberto Alexandre Zanchetta

doi:10.1590/3086-44612026-3767

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FORUM - DUTCH DISEASE • Brazil. J. Polit. Econ. 46 (2) • 2026 • https://doi.org/10.1590/3086-44612026-3767 linkcopy

The dynamics of the Brazilian manufacturing industry from 2002 to 2024: empirical research in light of the New-Developmentalist Theory

Authorship SCIMAGO INSTITUTIONS RANKINGS

This study examines Brazil’s manufacturing industry (2002-2024) through New-Developmentalist Theory. Using a VECM, it shows that real exchange rate appreciation and import penetration are key drivers of manufacturing sector’s decline, amplified by commodity cycles (Dutch disease) and hysteresis. Three major structural breaks are identified: commodity-driven growth (2003-2008), post-2008 decline, and post-2017 stagnation. Findings indicate that exchange rate adjustments alone are insufficient: coordinated industrial, technological, and investment policies are required to restore manufacturing dynamism and strengthen Brazil’s role in the global market.

JEL Classification: F43, F63, O14, F41, L60

KEYWORDS:
New developmentalism; Brazilian manufacturing industry; real exchange rate; import penetration; Dutch disease

Category	Capital Goods Imports (FOB, US$ million)	Consumer Goods Imports (FOB, US$ million)	Intermediate Inputs Imports (FOB, US$ million)	Other Imports	Total	Capital Goods Exports (FOB, US$ million)	Consumer Goods Exports (FOB, US$ million)	Intermediate Products Exports (FOB, US$ million)	Other Exports	Total
Relative Share in Total (monthly average, 2024)	13%	15%	60%	13%	100%	5%	13%	65%	17%	100%
Relative Share in Total (monthly average, 1999)	20%	15%	55%	10%	100%	9%	20%	69%	2%	100%
% Change in Relative Share 2024-1999	-35%	-5%	9%	27%	–	-43%	-38%	-5%	750%	–

Series	Definition and Comments
Manufacturing Industry GDP – Physical Output.	Physical Output – Table 8888 – Index number – CNAE 2.0 – Source: IBGE – Monthly Industrial Survey.
Bilateral Real Exchange Rate – IPA-DI – Brazil/United States.	The bilateral real exchange rate is defined as the product of the nominal exchange rate (in R$/unit of foreign currency) and the Producer Price Index (PPI) of the respective country, divided by the Domestic Availability Producer Price Index (IPA-DI) for Brazil. An increase indicates depreciation, and a decrease indicates appreciation. Source: BCB.
Exports (FOB) – USD (millions) Basic Goods + Commodities.	Exports – (FOB) – USD (millions) Basic Goods + Commodities (basic/processed food and beverages + basic industrial goods + fuels) – SECEX12_XVTOT12. Source: IBGE-SECEX.
Terms of Trade for the Manufacturing Industry.	Export-import price ratio – FUNCEX12_MDPBCNDGCE12. Average Index. Source: FGV-FUNCEX.
Import Penetration Ratio (USD) in the Manufacturing Industry.	Import Penetration (Ratio in USD) of the Manufacturing Industry relative to Exports of the Manufacturing Industry – Prepared by the author using data from SECEX12_MCOBLUBGCE12. Source: IPEADATA-SECEX.

Hypothesis	Test Statistic	Critical Value (10%)	Critical Value (5%)	Critical Value (1%)
r ≤ 4	2.45	7.52	9.24	12.97
r ≤ 3	10.09	13.75	15.67	20.20
r ≤ 2	15.74	19.77	22.00	26.81
r ≤ 1	34.99	25.56	28.14	33.24
r = 0	190.90	31.66	34.40	39.79

GDP	Agro GDP	Manufacturing Industry GDP	Real State GDP	Services GDP	Total GDP	Global
	Brazil	Brazil	Brazil	Brazil	Brazil	GDP
2002 to 2008	4.7%	3.9%	2.7%	4.0%	4.0%	3.5%
2009 to 2016	1.8%	-1.9%	1.9%	1.6%	1.2%	2.6%
2017 to 2023	4.9%	0.1%	0.9%	1.7%	1.7%	2.6%

Test	Result	Interpretation
Stability Analysis	Stable (roots within the unit circle)	The VECM is stable and suitable for long-term analysis.
Model Residuals (ACF)	No significant autocorrelation	Residuals are random, and the model is well specified.
Portmanteau Test	p-value = 11.57% (fails to reject H0)	No autocorrelation in residuals, confirming model adequacy.
LM Test	p-value = 11.61% (fails to reject H0)	No significant serial autocorrelation, reinforcing adequacy.
Normality Test	p-value = 8.5% (Ttit is normal)	Only Ttit exhibits normality; others do not follow normal distribution.*
Heteroscedasticity Test	p-value = 1 (no heteroscedasticity)	Error variance is constant, suggesting no heteroscedasticity.

Variable	Share in Variance (%)
Manufacturing GDP	34
Real Exchange Rate	28
Import Penetration	26
Terms of Trade	9
Commodity Exports	3

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Centro de Economia Política Nove de Julho Avenue, 2029, CEP 01313-902 - São Paulo - SP - Brazil, Tel. (55 11) 3816-6053 - São Paulo - SP - Brazil
E-mail: bjpe@fgv.br

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[1] Source: Prepared by the authors using R Studio.

[tn1] ^*
The residuals of most equations are non-normally distributed, except for Ttit; however, this does not invalidate the VECM, as its core assumptions are satisfied. In addition, the large sample size mitigates potential effects of non-normality, and the main inference tools – impulse response functions and forecast error variance decomposition – do not rely on normality.