Regional Deconcentration of Manufacturing Industry Output
The major share of manufacturing industry output,
representing approximately 23% of GDP in recent
years, is concentrated in the southeast region.
According to IBGE’s Annual Industrial Survey (PIA),
analysis of manufacturing industry value1 shows
that the southeast accounted for 69.3% of total 1996
production, dropping to 61.6% in 2004, while output
in the northeast region moved from fourth to the third
position in the country (Figure 1). Application of the
Herfindahl-Hirschman Index (HHI)2, calculated on
the basis of the participation of the different states in
the overall value of manufacturing industry output,
showed a trend toward deconcentration of industrial
production, dropping from 0.286 in 1996 to 0.223
in 2004.
Analysis of available industrial indicators shows
that the decline in the participation of the southeast
Figure 1 – Regional participation in the industrial production
2004
1996
4.3% 1.1%
3.3%
10.1%
7.4%
4.0%
Southeast
18.0%
South
North
Northeast
69.3%
21.0%
61.6%
Center-West
Source: IBGE/PIA
1/ In each state, the sum total of activities classified as manufacturing industries plus the category “Others” is used as proxy of manufacturing industry
value. Based on current legislation, the rules on disidentification as applied in IBGE’s PIA require that information on products with just one or two
informants in each state be omitted from the aggregate information that forms the category in question.
2/ The HHI varies from zero, no concentration whatsoever, to one, maximum concentration. Maximum concentration would mean that total Brazilian
industrial output occurs in just one state. Based on the participation of the different regions in total output, the IHH indicated a reduction in concentration
from 0.5080 to 0.4504 during the period.
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September 2006
Table 1 – Growth rate of
industrial manufacturing, by geographic region
%
Year
Southeast South Bortheast
North
Center-west
Total
1997
5.4
7.0
-2.7
-6.4
15.2
4.7
1998
-0.6
0.7
4.5
-7.6
22.4
0.0
1999
-10.3
0.9
1.1
-3.8
-18.4
-7.3
2000
7.2
5.3
19.5
25.8
77.9
9.4
2001
1.0
7.8
2.0
8.1
-32.0
2.0
-13.7 -10.9
2002
-10.3
-8.6
0.2
-12.4
2003
12.1
13.9
12.4
9.9
52.8
13.0
2004
-2.2
-5.0
-2.8
7.1
3.7
-2.3
Source: IBGE
1/ Deflated by IPA – Industrial production (FGV).
Table 2 – Industrial production – % change
1996-2004
%
Regions
Units
Occupied
Real value of
industrial manuf.
1/
people
Southeast
15.5
-3.7
10.0
South
52.4
18.9
44.1
North
61.7
21.9
64.4
Northeast
49.5
22.8
42.8
Center-West
69.6
120.9
80.0
region resulted from less accentuated manufacturing
growth in that region compared to the other regions
of the country. Closer analysis shows that growth
in the real value of industrial manufacturing in the
southeast region closed above the national level only
in 1997 and 2004 (Table 1).
The intensity of the output deconcentration process
is clearly perceived in the evolution of the number
of industrial units, the real value of manufacturing
output and personnel employed. In all of these
variables, the lowest growth rates between 1997
and 2004 occurred in the southeast region. As a
result, the region registered negative real industrial
manufacturing expansion in the period (Table 2).
The information in Table 3 makes it possible to
identify the activities that registered positive and
negative growth in terms of the participation of the
various regions of the country. Based on a sampling
of 21 activities – accounting for 97.6% of industrial
manufacturing value – with minimum participation
of 1%, the southeast region lost 5.3 percentage
points to the other regions of the country, mainly
Source: IBGE
1/ Deflated by IPA – Industrial production (FGV).
Table 3 – Growth in regional participation in the value of industrial manufacturing
Itemization
Manufacturing industry
Food products and beverages
Chemicals
Metallurgy
Coke, oil refining, nuclear fuels and alcohol
Manufacturing and assembling of automotive vehicles, trailers and truck bodies
Machines and equipment
Plastics and rubber goods
Cellulose, paper and paper products
Metal products – Excluding machines and equipment
Non-metallic mineral products
Edition, printing and reproduction od recorded media
Electronic fittings, communication equipment and apparatuses
Other transportation equipments
Leather prep, manufact. leather products, travel goods and footwear
Textiles
Electric machines, appliances and electric fittings
Wood products
Furniture
Clothing and cloth goods
Tobacco
Hospital and medical, precision and optical equipment and instruments,
chronometers and clocks
Office machines and computer equipment
Recycling
% Participation in the Differences in percentage points
value manufacturing between 1996 and 2004
industry in 2004
North Northeast Center-west Southeast South
13.0
12.4
11.5
11.4
8.1
5.3
4.5
4.1
3.7
3.7
3.5
2.7
2.6
2.5
2.3
2.0
1.8
1.4
1.1
1.0
0.7
0.6
0.1
1.4
-5.1
0.5
-1.3
0.8
-0.9
-0.9
2.2
3.9
13.4
-11.2
1.0
-0.1
2.8
0.0
0.2
0.2
0.9
1.2
-0.3
0.7
-0.9
0.3
3.2
-0.5
1.2
1.7
4.5
0.8
-0.5
0.9
-0.3
13.1
1.1
-1.1
-0.7
1.9
1.7
-5.7
1.4
7.8
1.1
0.3
-3.1
0.6
0.1
0.1
0.7
1.2
0.0
0.6
0.0
-0.2
1.3
0.7
0.3
-1.5
0.8
0.7
0.0
-5.7
-8.9
-9.0
-1.1
3.2
-15.2
-5.7
-8.5
-5.3
-9.9
-3.6
-6.5
-10.3
11.5
-0.3
-5.8
-8.4
-5.3
-13.4
-8.3
-32.1
2.3
0.7
7.1
0.4
4.6
11.0
7.4
6.3
3.9
5.2
0.5
2.5
-4.0
0.2
-15.1
4.2
6.5
7.5
10.6
5.7
36.8
0.9
0.6
0.1
-5.3
-5.7
4.7
0.4
8.0
9.5
0.2
-0.8
1.1
2.9
-9.7
-23.6
1.8
8.3
8.3
Source: IBGE
September 2006
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to the south, which expanded its participation 2.5
p.p. The southeast region expanded its participation
in output of coke and oil refining, while the north,
south and central-west regions registered equivalent
declines, and in other transportation equipment, a
segment in which the north lost ground. At the same
time, reductions occurred in eight of 21 activities in
the southern region of the country, with the largest
falloff (16.4 p.p.) under leather, leather goods, travel
articles and footwear, offset by sharper growth in
these activities in the northeast region. The north and
northeast regions registered participation declines
in only six of these activities, while expanding their
participation in the others. Output of electronic
equipment and communications devices and
equipment in the northern region expanded 12.8
p.p., driven mainly by fiscal incentives granted to
that region of the country. At the same time, aside
from footwear industry growth in the northeast,
manufacturing value rose under metal goods, except
machines and equipment, offsetting the reduction
registered in the southeast.
Based on data available in the Annual Social
Information Listing (Rais), elaborated by the
Ministry of Labor and Employment (MTE), Table
4 shows the distribution of industrial facilities
according to size and region. In 2004, despite a loss of
7.3 p.p. in relation to the 1996 position, the southeast
accounted for 49.9% of industrial installations. In this
comparison, the southeast registered declines in all
of the various size categories, while the other regions
and principally the south registered across-the-board
growth. In the northeast, reductions occurred under
establishments with 500 or more employees.
Aside from spatial deconcentration among the
various geographic regions, MTE data on formal
Table 4 – Regional distribution of industrial facilities by number of employees: growth between 1996 and 2004
Number of employees
% participation in the number of facilities in 2004
Percentage growth between 1996 and 2004
Southeast South Center-west
Southeast South Center-west
Northeast North Brazil
Northeast North
Up to 19 employees
49.0
30.0
6.5
11.7
2.7
100.0
-7.3
4.1
1.2
1.5
0.6
Between 20 and 99 employees
54.3
26.4
5.3
10.2
3.8
100.0
-6.7
2.9
1.2
1.7
1.0
Between 100 and 499 employees
54.5
27.4
4.1
9.7
4.2
100.0
-7.7
3.8
1.0
1.5
1.4
More than 500 employees
52.1
27.4
4.1
12.3
4.1
100.0
-7.3
5.1
2.0
-1.2
1.4
Total
49.9
29.5
6.2
11.5
2.9
100.0
-7.3
3.9
1.2
1.5
0.7
Source: MTE/Rais
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Table 5 – Industrial employment in the interior,
by geographical region
%
Year
Southeast South Northeast North
Center-west
1996
45.9
69.0
45.9
41.0
56.0
1997
46.7
69.7
45.1
45.3
53.5
1998
48.4
70.3
45.4
48.2
54.4
1999
49.9
71.1
45.4
52.1
56.0
2000
50.8
70.9
47.5
51.4
56.9
2001
51.8
71.3
48.5
50.4
59.1
2002
53.0
71.9
49.7
51.3
60.7
2003
53.9
72.7
51.0
49.9
61.7
2004
55.1
72.7
51.6
49.2
63.3
employment in the manufacturing sector indicate a
shift into the interior of the country during the period
under analysis. As a result, formal employment has
grown at a more accentuated pace in the interior,
compared to metropolitan regions or state capitals.
This process occurred in all of the different regions
and was particularly strong in the southeast.
Absorption of manpower in that region expanded 9.2
p.p., accounting for 55.1% of industrial employment
in the region as a whole. In the southern region, the
participation of industries located in the interior in
overall formal job opportunities increased from 69%
to 72.7% (Table 5).
Source: MTE/Rais
Table 6 – Employment growth in the interior by regions
and by product types in the manufacturing industry
between 1996 and 2004
In points of percentage
Sub-sectors
Southeast Southern Northeast Northern Center-western
Growth
Nonmetallic
minerals
5.8
4.7
8.5
9.9
3.0
Metallurgy
5.5
4.7
13.9
-8.1
11.6
Mechanics
13.0
7.5
1.4
-0.7
20.7
12.7
-0.7
14.0
-1.0
-6.9
13.3
-13.1
-10.7
-2.0
35.9
furniture
10.5
2.9
5.5
6.1
4.8
Editorial
7.3
2.2
5.5
-17.6
8.2
Electric and communications
equipment
Transportation
equipment
Wood and
Rubber, tobacco
and leather
6.6
2.4
8.2
15.2
12.3
Chemicals
9.1
10.7
9.9
24.7
9.4
10.7
3.2
7.5
-16.8
8.9
6.0
6.7
14.6
44.1
-7.3
and beverages
5.8
1.7
0.4
16.4
7.4
Total
9.1
3.7
5.6
8.1
7.3
Textiles
Footwear
Food products
Source: MTE/Rais
Table 6 shows the tendency toward a shift of formal
employment into the interior, in terms of both product
types and regions. Transfers of industrial activity to
the interior were more significant in the southeast,
where the participation of metropolitan regions
declined in all of the different categories. In the south
and northeast regions, the interior employed relatively
less workers in the transportation equipment sector,
due primarily to the opening of a General Motors
plant in the metropolitan region of Porto Alegre
(Gravataí) and a Ford plant in the metropolitan region
of Salvador (Camaçari).
In the northern region, several industrial subsectors
showed a marked preference for locating industrial
activities in the Manaus metropolitan area, a tendency
explained by the incentives offered to companies
operating in that area. Despite this, however,
employment in the interior of the northern region
increased 8.1 p.p. between 1996 and 2004.
All of the different indicators show a process of
spatial redistribution of manufacturing industry
output between 1996 and 2004, with a significant
loss of participation in the southeast region. It should
be noted that, with the exception of the decline in
the real value of manufacturing, the reduction was
not caused by a decline in activity, but rather by
less accentuated growth in the regional framework.
Parallel to this, all regions of the country registered
more accentuated industrial expansion in the interior
compared to state capitals. This conclusion is clearly
backed by the evolution of formal employment in the
manufacturing sector.
September 2006
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