The year 2002 was tumultuous. Not so much because of the economy – despite the country's foreign vulnerability – but mostly because of presidential elections. In fact, throughout the presidential campaign, all odds pointed to the victory of the Partido dos Trabalhadores (Wokers Party) candidate – which indeed happened. In the eyes of the financial system, a grim outlook. The country risk soared, foreign investments vanished and foreign productive investments dwindled. The currency was strongly devaluated, pressuring inflation. The rise in the dollar exchange rate impacted domestic companies' foreign debt, affecting all industries relying on inputs purchased abroad, and exports suffered. Brazilian GDP growth barely reached 1.5%.
An additional blow hit the telecommunications industry: investments from POTS carriers, who achieved in 2001 the build-out goals set by the government, dried up. And for the first time in many years, the sector's income did not grow as much as the GNP. Net revenues of the 216 companies listed on the Anuário telecom 2003 totaled R$ 74.5 billion in 2002 – 1,3% more compared to the previous year, while the GDP grew by 1.5%. In dollars, net revenues were US$25.3 billion — in average, 20% less. The impact was harder on the industry as a whole than on service providers. Net revenues of equipment and systems providers went down by 31.6%, totaling R$ 13 billion (in dollars, US$ 4.4 billion — 46% less). Net revenues of service providers (including carriers) reached R$ 61.6 billion (a 12.6% growth), the equivalent of US$ 20.9 billion — 11% less.
Even so, a little over half of the Directory's top 100 companies (53%) ended 2002 with profits, although the net margin was negative for 50% of the companies. More than one third (38%) netted up to 9.9%. Returns on net equity and investments were negative for 47%. And net sales evolution was negative for 65% of the companies.
According to Abinee (Brazilian Association of Electrical and Electronic Industry) the 35% slump in the telecommunications industry in 2002 was decisive for the overall bad performance of the electronic sector. A truthful picture of the telecommunications industry situation is given by the all-time low level of production capacity usage: from 46% in December 2001 it went up to 52% in March 2002 – but down to 32% in December. Abinee's forecast was 42% in March 2003. Production was maintained thanks to mobile telephones, especially terminal exports. Notwithstanding the immobility of the Argentine market, foreign sales were good in other markets, namely the US.
Total exports of telecommunications goods reached US$ 1.3 billion, same as in 2001. Mobile phones accounted for most of the foreign sales, totaling US$ 1 billion (26% more than in 2001), while imports went down to US$ 707 million (70% less).
From January through May 2003, exports totaled US$ Challenges to improve the telecommunications model are innumerable and permanent. The fact that the current administration, the National Regulatory Agency and the Ministry of Communications do not see eye to eye on this issue only adds to the complexity of the situation.
The government also intends to go back to an industrial policy, included in the Multi-Annual Investment Plan to be sent to Congress in the third quarter. For the electronic industry in general, and the components sector in particular, this would greatly contribute to reduce their persistent commercial deficit. But economist Lidia Goldstein sees many obstacles in the way — the current macroeconomic model, operational difficulties and fuzzy regulatory issues, to name a few.
As far as the macroeconomic model goes, the government chose high interest rates and a 4.5% primary surplus, in 2003 and in the following years, as the route to achieve fiscal and inflation control. For the year to April 2003, surplus was 4.53% of the GNP. The result was a tight economy, which also affected the telecommunications industry.
According to Goldstein, implementation of an industrial policy relies on the recovery of sustainable growth, which in turn is the condition for that growth.
The Administration promised a "show" of growth in the second half of the year. But for the industry, it seemed to be too late — the year was already lost.
