Ford’s exit foretells Brazil’s troubles

When Ford Motor Company announced it was shuttering its operations in Brazil, the reaction was swift and shrill. Adversaries of President Jair Bolsonaro were quick to blame official neglect and ineptitude, to the delight of cartoonists and social media warriors. Bolsonaro faulted decades of dirigisme and accused Ford of plumping for subsidies, even as the Economy Ministry scolded the automaker on Twitter for snubbing the “strong recovery” ostensibly already under way.
Ford was one of South America’s pioneer multinationals, setting up its first assembly line for the Model T in Brazil in 1919 and full-scale manufacturing plants in 1953.
The brand, often feted by national leaders, has been synonymous with Brazil’s leap into the industrial age, a badge of progress for an awakening mass consumer society in a continental country.
So why walk away from the second biggest market in the Americas, with a 58-million strong car park and a nation bound by ribbons of road — never mind why forsake Brazil for historical rival and recidivist economic deadbeat Argentina?
The answer is complicated, with causes ranging from a global technological reset in the mobility industry to vexatious Brazilian taxation and production costs to the country’s decade-long economic torpor capped by the pandemic crash. Ford’s Brazil sales dropped 39% last year over 2019, more than for any other automaker.
Argentina’s production costs, gutted by a crashing peso, also beckoned. And although Brazil boasts an enviable domestic consumer base, in a competitive, cross-continental industry that depends on procuring parts and partners across multiple time zones, it has become a distant and costly platform from which to export to the rest of the world.
Yet for all the domestic political sniping over who lost Ford, Brazil would do better to ask what the shutdown of three factories and 5,000 jobs means for a nation struggling to rescue a prostrate market, secure a niche in the global economy and retool a cosseted industry nurtured on last century’s conceits.
Any such inquiry should begin with a hard look at made-in-Brazil roadblocks. “Ford’s decision is highly symbolic, and not just because of its centennial market presence,” said Sergio Lazzarini, a scholar of Brazilian business culture, who teaches at the Sao Paulo university Insper.
The move, he said, calls into question Brazil’s long established development model of lavishing subsidies and tax breaks on select “strategic” industries instead of improving Brazilian market competitiveness, raising productivity and reducing the country’s onerous cost of doing business.

—Bloomberg