Industrial companies anything but champions of the world – Productivity trap Brazil

June 12, 2014 | Global news

While World Cup euphoria is likely to drown international criticism of Brazil in the weeks to come, industrial companies in the country itself are not given any respite. Subsidiaries of Western parent companies also feel the pressure: the domestic economy, isolated by politics, is limping, investments in machine parks are delayed, personnel costs are going through the roof. As a consequence, companies’ productivity is on a sharp decline. Time is threatening to run out for the Brazilian industry – that is the result of a market observation by the Staufen AG business consultancy. “Profits of industrial companies are dwindling in view of the persistent drop in productivity,” explains Wilhelm Goschy, Executive Board member of Staufen AG. No other national economy in the world has seen such a dramatic rise in unit labour costs between 2004 and 2011 as Brazil (+6 percent). In 2012, unit labour costs even increased by 7.2 percent, as assessed by the German Trade and Invest (GTAI) experts for the export trade. In addition: Asian competitors from China or South Korea have done their homework and improved their productivity. Staufen Executive Board member Goschy is convinced: “The Brazilian industry has to reach a higher level in terms of organisation and productivity. Any company not improving its productivity and investing in greater staff quality and leaner processes will not be able to keep its hold in the Brazilian market.” Even if the Brazilian industry as a whole rather seems to just sit back and wait because of the elections due this autumn, many other – particularly foreign – companies realise that there is no time to lose. For that reason, Staufen AG will significantly increase its employee base in its São Paulo branch this year already in order to meet the increase in demand. The extent to which Brazil will be able to recover from its dip in growth – 2012 saw a rise in GDP by only 1 percent – remains to be seen. According to GTAI, economic growth in the last year was 2.3 percent, but current forecasts predict a fall back to 1.8 percent for 2014. A further complication is that the Brazilian labour market continues to be difficult. Labour costs not only increase as the result of wage increases, but also as the result of continuing high fluctuations within the workforce. Against this backdrop, investment into employee qualification not only increases productivity, but also helps their retention within the company. This was shown by the current Staufen study entitled “War for Talents 2014”, for which 1000 young Brazilians aged between 18 and 34 years were interviewed. More than half of them (51 percent) regard in-house seminars and training courses as very important in their choice of employer. In answer to the question as to a possible improvement of education in their country, 53 percent of the young Brazilians suggested a better dovetailing of theory and practice. “Because Brazil has no dual vocational and educational system as in Germany, it is up to the companies themselves to become active,” declares Staufen Executive Board member Goschy. “In our projects and trainings in Brazil, we observe time and again the great importance attached to training and qualification in a company’s ability to compete.” Staufen AG Executive Board member Wilhelm Goschy is happy to be available to journalists for interviews and background discussions on the topic of Brazil.

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