Number of Factory Closings in São Paulo is Highest in a Decade

SÃO PAULO, BRAZIL – The State of São Paulo, the country’s largest industrial hub, has registered the shutdown of 2,325 processing and extractive industries in the first five months of the year. The number of closings is the highest for the period in the last decade and is 12 percent greater than last year, according to the Trade Board.

The data indicates that the weal recovery of the Brazilian economy after the recession from 2014 to 2016 continues to lead to the shrinking of the productive sector, leaving a trail of deactivated factories.

Between 2014 and 2018, the Brazilian Gross Domestic Product (GDP) accumulated a drop of 4.2 percent, while that of the manufacturing industry throughout the country fell 14.4 percent. “It means that production fell a lot and had an impact on companies, with factory shutdowns and layoffs,” says economist José Roberto Mendonça de Barros, of MB Associados.

In parallel, 4,491 industries were opened from January to May in São Paulo. Traditionally, more factories are open than shut down, but this is not always a positive indicator. For Mendonça de Barros, regardless of the number of new industries, the drop in industrial GDP shows that there was a shrinkage in production and, probably, large and medium-sized companies were closed, while smaller units were opened.

Caetano Bianco Neto, president of the Jaú Footwear Industry Syndicate, states that, in the last years, several companies considered of significant size for the activity, with 300 to 400 employees, closed their operations. “When a big one closes, often another three or four micro and small manufacturers appear, some even opened by former employees, but with little labor,” says Bianco Neto.

The footwear pole of Jaú, a national leader in the production of women’s footwear, had once employed 12,000 workers in the mid-2000s. Today it has 5,000 employees, says Bianco Neto. Recently, Neto and leaders of the footwear industry of neighboring cities Franca and Birigui submitted a recovery plan to governor João Doria.

Among those that have closed their doors are domestic and multinational industries. Some have transferred branches to other units of the same company to cut costs and others have ended production, leaving a contingent of unemployed people, some of them without receiving wages and compensation.

The Indebrás auto parts industry, in the western zone of São Paulo, stopped operating in April and put 150 employees on the street. With unpaid salaries and no severance pay, workers were camped out in front of the factory for 48 days. After an agreement in the Labor Court, the company proposed to make payment in 18 monthly installments.

“The fear is that the company will pay the initial installments and then suspend payment, as already occurred in previous agreements closed by other companies,” says the director of the Metalworkers Union of São Paulo, Érlon Souza.

Difficult situation

The situation in São Paulo industry is repeated all over the country. In addition to the closure of the activities of small companies, large groups closed units considered less productive and concentrated production in other more modern ones, almost always without transferring the labor force.

Tire manufacturer Pirelli announced in May the closing of its plant in Gravataí (Rio Grande do Sul) and the dismissal of its 900 employees. The production of motorcycle tires will be unified with that of tires for cars in Campinas (São Paulo) where 300 jobs will be generated over three years. The company claims the need for restructuring, “given the difficult economic scenario in Brazil.”

Among the companies that closed plants this year are PepsiCo/Quaker (Rio Grande do Sul), PepsiCo/Mabel (Mato Grosso do Sul), Kimberly-Clark (Rio Grande do Sul), Nestlé (Rio Grande do Sul), Malwee (Santa Catarina), Britânia (Bahia) and Paquetá (Bahia).