Brazilian exports of goods and serviceshave grown sharply in recent years, with sales nearly threetimes higher in 2010 than in 2000. However, Brazil facesconsiderable competitiveness challenges: its exportperformance depends mostly on favorable geographical andsector composition effects. Such challenges increased afterthe recent global economic crisis. A recent slowdown inindustrial exports, production, and investments seemsrelated to supply-side difficulties stemming from a widerange of inefficiencies and rising costs, rather thaninsufficient demand. Although a stronger currency is one ofthe factors behind the lower competitiveness ofBrazil's manufacturing exports, sluggish productivityperformance, lack of dynamism at the firm level, and a realwage uptrend seem to explain a significant part of theoverall loss of competitiveness. This diagnostic reinforcesthe urgency of resuming the agenda of microeconomic reforms,increasing the investment-to-Gross Domestic Product (GDP)ratio, and advancing toward better-skilled human capital.
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