(MENAFN- The Rio Times) Brazil's factories are signalling an economy that is slowing, not collapsing. In October, industrial production was virtually flat, rising just 0.1% from September and falling 0.5% versus a year earlier.

After growing 3.1% last year, most banks now expect industry to expand by no more than 1% in 2025. The loss of momentum began in late 2024, when the central bank restarted interest-rate hikes and pushed the Selic to 15% to force inflation back toward its 3% target.

High borrowing costs hit the real economy first through factories. Industry is capital-intensive and depends on medium and long-term credit, which becomes scarcer and pricier when monetary policy stays tight.

Executives complain that it is easier to make money in government bonds than in machines, while investment plans are postponed or scaled back.

Business groups argue that a lighter tax and regulatory burden would help firms cope better than another round of subsidised, state-directed credit. Beneath the headline number, the picture is uneven.



Extractive industries such as oil and mining grew 3.6% in the month. Vehicles rose about 2%, food production 0.9%, and durable consumer goods 2.7%, helped by a rebound in electronics and cars.

Semi- and non-durables advanced 1%, driven by a fourth straight rise in food, up 5.5% in the period. But capital goods, the heart of future investment, are still nearly 3% below last year despite a second monthly gain of 1%.
Brazil's industry stalls as tariffs and weak demand bite
Intermediate goods, which make up roughly 60% of the index, fell 0.8% and remain under pressure from lower output of petroleum derivatives. External conditions are not helping.

Export-oriented segments report weaker orders after the latest round of U.S. tariff increases, which spared some primary goods but left many manufactured products exposed.

That hits the part of the economy that creates formal jobs and higher productivity, and it undercuts the government's rhetoric about“reindustrialisation” through subsidies and state programmes. Economists from major banks now see Brazilian GDP growing 2% in 2025 and slowing further in 2026.

For investors and foreign observers, the message is simple: a productive, private-sector-driven Brazil is struggling to move beyond commodities, and choices on interest rates, taxes and trade will decide whether industry gets a new growth cycle or stays stuck in first gear.

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