• We need to talk about engineering

    DATE: 11/10/2022

    Published by: OEC

    by Claudio Medeiros*

    The export of engineering services is a strategic activity for the world’s largest economies, generating jobs, income, and investments along the chain of suppliers that make up the sector’s ecosystem, balances the national balance of payments, and serves as an instrument of foreign trade policy. Due to the complexity of the projects executed and the high competitiveness, the market is dominated by only 15 countries and 300 companies, with a recognized history of technical capacity and assiduous presence in exports. Brazil is one of them and witnesses the gains in internal knowledge production from investments in technological innovation and technical increment in undertakings executed both in the international and domestic markets.

    The role of the State as a promoter of internationalization is agreed upon, above all by the generation of value for the local economy, as it occurs in the United States, Japan, Germany, China, and the United Kingdom in their production chains. Brazil, on the other hand, in the last decade has lost positions in the ranking of engineering exporting countries to watch the advance of foreign contractors in our country and Latin America.

    In spite of the deep crisis faced by the national segment almost a decade ago, the technical capacity was preserved, with evidence of resilience. The national brands maintain large service contracts abroad, with Brazilians executing projects of high complexity and conditions to make ports, airports, hydroelectric and thermoelectric plants, among other projects of high technical demand feasible.

    The main bottleneck for exporting engineering goods and services is, therefore, the long-term financing or insurance guarantee, in order to allow Brazilian companies to compete with their international competitors.

    From 1989 to 2015, When disbursements to this segment were suspended, the volume of financing directed by the BNDES to encourage engineering exports totaled US$ 10.5 billion. In contrast, the bank received $12.8 billion in payments from borrowing countries, with $1 billion of outstanding debt.

    Considering the impact with tax collection and the generation of jobs nationwide throughout the chain, the surplus for the state is even greater. Brazil has reached a world share of 3.2% in 2015, when this market totaled $500 billion. In comparison, Turkey, an economy about half the size of ours and with less industrial diversification, has 4.4% of this market today, which shows that it is fully possible for Brazil to regain a position compatible with the size of the national economy.

    Spanish companies have realized the saturation of the domestic market and have bet on internationalization: OHLA, Sacyr, Acciona, FCC, Ferrovial, and ACS, the largest construction companies in the country, closed the first half of 2022 with a portfolio of 205 billion euros, with works in Colombia, Mexico, Chile, Peru, and Brazil.

    Around here, we continue to lose relevance and opportunities since the export of services has been the target of unfounded attacks that they lend themselves to draining national resources. Between 2003 and 2018, the activity represented only 1.3% of the total disbursed by the BNDES, while investments in national infrastructure, in the same period, accounted for 36%.

    A survey produced by the Brazilian Union of the Heavy Construction Industry (Sinicon) shows that for every R$1 million invested in infrastructure, there is a direct increase in the country’s GDP of R$1.4 million, and many other indirect opportunities that impact the productive chains of 32 sectors of our economy.

    The use of these mechanisms should be back on the agenda of public managers, opening a debate, this time more qualified and allowing the revision and resumption of the official instruments. There is no great country without strong companies committed to the national growth. The voluntarism of the past has yielded lessons that cannot be forgotten, much less relived.

    *Claudio Medeiros is president of the Brazilian Union of the Heavy Infrastructure Construction Industry (Sinicon), vice-president of the Brazilian Foreign Trade Association (AEB) and Director of Institutional Relations of Novonor.

    Article originally published by Folha de São Paulo newspaper on November 1st. Access here. Click here

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