(MENAFN- The Rio Times) Brazil's factories are running out of steam. In September, industrial production shrank by 0.4%, wiping out much of August's fragile recovery and leaving the sector 14.8% below its 2011 peak.

The numbers tell a story of an economy caught between stubbornly high interest rates at home and punishing US tariffs abroad-a double blow that's squeezing businesses, stalling investments, and dimming hopes for a quick rebound.

At the heart of the problem is Brazil's central bank, which has kept its benchmark interest rate locked at 15%, one of the highest in the world.

The goal? To tame inflation, which still hovers above the official target. But the side effect is a credit crunch that's freezing factory floors and discouraging spending.

Meanwhile, since August, the US has slapped a 50% tariff on key Brazilian exports-everything from cars to wood-claiming protection for American jobs but also sending a political message after the legal troubles of Brazil's former president.



The result? Factories are cutting back, and the few bright spots, like a 1.9% jump in food production, aren't enough to offset the broader slowdown. The pain isn't spread evenly.
Brazil's Factories Struggle Under Tariff Pressure
Three industries-pharmaceuticals, mining, and carmaking-make up nearly a quarter of Brazil's industrial output, and all three are struggling. Twelve of the 25 sectors tracked by the government shrank in September, with car production alone dropping 3.5%.

The tariffs have hit especially hard, with some companies blaming them directly for lost orders. Diplomatic talks to ease the tensions have gone nowhere, leaving exporters in the lurch.

For outsiders, the crisis reveals a deeper tension. Brazil's government has prioritized fiscal discipline and inflation control, even as businesses plead for relief.

Critics argue that this rigid approach-combined with a reluctance to push for bolder economic reforms or smoother trade relations-is prolonging the pain.

The US tariffs, tied to political disputes, have only made things worse, turning economic policy into a high-stakes game with real-world consequences.

The stakes are clear: without a change in course, Brazil's industria l slump could drag on, costing jobs, scaring off investors, and leaving the country's economic potential untapped.

For now, the message to the world is simple-Brazil's factories need more than just time to recover. They need a break.

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