If you meet a Baiano (the name for someone from Brazil’s state of Bahia), you are likely to hear that in terms of territory Bahia is the size of France, and that it is abundantly endowed with natural resources. Indeed, the state, Brazil’s 7th largest, grew robustly between 2003 and 2014, expanding at an average rate of 3.4% (with private consumption averaging growth of 4.1%), thanks largely to expansion in key industries such as the oil and gas sector, the construction sector, together with an emerging automotive sector.
However, since the Brazilian economy entered a downturn toward the end of 2014, Bahia (population 15.2 million), struggled along with the rest of the country, with retail sales in volume terms contracting by 19.2% (against a country average of 10.1%) and industrial output contracting by 11.9% (against a country average of 14.5%).
Indeed, with much of Bahia’s industrial output focused in the construction sector (40.3%), and a large part also concentrated in the oil and gas sector (13.8%), Bahia’s ability to withstand the negative shock incurred by both sectors during the crisis was limited. However, the economic recession in Brazil has pushed local actors to seek diversification, including greater development of alternative energy production and greater investment in the agriculture sector, among other initiatives.
With this context in mind, and considering the importance of Brazil’s northeast for long-term economic growth, FSG will be producing a mini-series of blog posts over the coming weeks, in which we will share lessons learned from a recent research trip to the state’s capital (Salvador). In these posts, we will look to provide insights into the obscured opportunities that currently exist in this country-sized Brazilian state, in addition to providing a vision regarding near and medium-term economic growth.
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