Evidence continues to mount that the uncompetitiveness of Brazil's economy exposed by its steadily strengthening currency is having far-reaching effects on industry. As the real heads inexorably, it seems, towards R$1.80 to the dollar, poor infrastructure, rigid labour laws, stifling bureaucracy and a bewildering tax regime are making it harder and harder for manufacturers to compete both at home and abroad. Many are importing inputs they previously made themselves; others are shipping their factories overseas.

Three Brazilian companies will sign a letter of intent with the governor of Catamarca, Argentina, this week, on investments of $60m in footwear, clothing and coachwork factories expected to provide jobs for 6,000 people. The province's generous tax breaks will have helped make up their minds. But if Brazil's government wants to stop the flow of jobs, taxes and development overseas, it should think again about its unwillingness to tackle the politically difficult reforms it has chosen to ignore.

Jonathan Wheatley