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Why Did Brazil Deindustrialize So Much? Testing The Dutch Disease And Premature Deindustrialization Hypotheses

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  • Bacha, Edmar
  • Terziani, Victor
  • Considera, Claudio
  • Guimarães, Eduardo

Abstract

Between 1995 and 2022, Brazil’s manufacturing share of GDP at constant prices declined from 15.7% to 9.8% — a 38% drop. This paper tests two leading explanations for this marked deindustrialization: Dutch disease and premature deindustrialization. While both hypotheses find statistical support in our econometric analysis, neither accounts for the actual decline. Exchange rate changes (Dutch disease) would have led to reindustrialization, and the evolution of GDP per capita (premature deindustrialization) would have raised, not reduced, the manufacturing share. A residual time trend explains nearly all of the fall, suggesting that other factors—such as declining industrial competitiveness—are at play.

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  • Bacha, Edmar & Terziani, Victor & Considera, Claudio & Guimarães, Eduardo, 2025. "Why Did Brazil Deindustrialize So Much? Testing The Dutch Disease And Premature Deindustrialization Hypotheses," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 79(2), September.
    • Handle: RePEc:fgv:epgrbe:v:79:y:2025:i:2:a:93504
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