The economy of Brazil’s wealthiest state São Paulo grows 0.4% in 2020

RIO DE JANEIRO, BRAZIL – The São Paulo State Gross Domestic Product (GDP) grew by 0.4% in 2020, said governor João Doria, based on calculations from the State Data Analysis System Foundation (SEADE).

The governor’s announcement at a press conference called for this purpose comes a day after the Brazilian Institute of Geography and Statistics (IBGE) reported that the country’s GDP shrank by 4.1% in 2020.

Doria said that the state’s growth, in a context of retraction in the country’ activity and in most countries, proves the strength of São Paulo. He points out that São Paulo’s privatization program, started in January 2019 and ongoing, has contributed to this result, with the state having already gone to the B3 four times for concession auctions in this period.

Similarly, the São Paulo State Secretary of Finance and Planning Henrique Meirelles said that São Paulo’s GDP growth last year is the result of a number of initiatives in the infrastructure and investment areas. According to him, efforts in this direction began in 2019 and were continued after the start of the pandemic, through online meetings.

São Paulo’s GDP was driven by services and technology, which represent 77% of the economy and grew 1.8% per year, with financial activities, construction, and other technology and information services standing out. Agriculture and livestock dropped 1.7% and industry fell 2.9%.

The secretary pointed out that the GDP recovered in the second half of the year, in quarterly terms. After 0.7% and 6.3% drops in the first and second quarter, respectively, GDP grew 9.8% and 2.5% in the last two quarters of the year.

V-shaped recovery

Meirelles mentioned a “V-shaped” recovery of São Paulo’s economy in 2020 when detailing the GDP growth. According to him, the state’s economy began 2020 with strength, with “the engines running at full steam” and despite the impact of the pandemic mainly in the second quarter, it recovered faster than the country and the world’s economy. “São Paulo starts 2021 prepared to grow.”

According to Meirelles, São Paulo’s GDP recovered quickly last year. Since April, for eight consecutive months, there was growth in the economy. He pointed out that in December, growth reached a level 5.6% higher than before the crisis, considering the same month in 2019 as a baseline.

He says GDP growth in 2020 was driven by the service and technology sector, which accounts for 77% of the economy and grew 1.8% year-on-year. The services sector is big in the São Paulo economy, the secretary pointed out, and has become even bigger with the whole digital economy process over the course of the pandemic. The boost in this sector was crucial, he said, offsetting the 1.7% and 2.9% drops in agriculture and livestock and industry, respectively.

Meirelles advocated vaccination as crucial to the rebound of the Brazilian economy. In reference to fiscal issues, he said that “fortunately” Congress “apparently” decided to keep spending caps, which is an economic anchor. “The worst thing would be to emerge from a health crisis and enter a fiscal crisis. Fiscal soundness is important, so that investments and economic growth may occur.”

Opening companies

São Paulo’s Secretary of Economic Development, Science and Technology, Patricia Ellen, said that in 2020 the state posted its best net balance of company openings since 2013, with a record number of 224.153 firms opened by the Board of Trade.

This figure includes Individual Microentrepreneurs (MEIs), she said. She also recalled that the state closed last year with a net balance close to zero in the creation of formal jobs – a loss of 1.159 jobs, according to data from the General Register of Employed and Unemployed (CAGED), of the Ministry of Economy, released earlier.

According to her, the increase in job openings in the second half of the year offset the losses of the worst moment of the pandemic.

The secretary highlighted the impact of the ‘Empreenda Rápida’ (Fast Start-Up) state program, which trains entrepreneurs together with micro-credit concession. According to her, in 2020, Banco do Povo had the largest contribution in microcredit in its history, with a total value of R$210 million.

These initiatives, she says, join other programs to be launched to foster female entrepreneurship and to increase the share of women in the technology area.

Patricia also recalled that, of the total R$32.2 billion in investments announced with the support of the São Paulo government since 2019, R$31.5 billion occurred in the 14 economic development poles monitored on a weekly basis. According to her, two new poles, in the areas of logistics and hygiene and cleaning, will be launched in the coming weeks.

The economy of Brazil’s  São Paulo state alone is larger than Argentina, Uruguay, Paraguay, and Bolivia combined. A major industrial complex, the state has 21.9% of the Brazilian population and is responsible for 33.9% of Brazil’s GDP. The city of São Paulo, the homonymous state capital, is ranked as the world’s 12th largest city and its metropolitan area, with 20 million inhabitants, is the 9th largest in the world and first in the Americas.

Source: Valor/Globo