The economic fragilities of the State of Bahia are reflected in the fall in GDP growth, accompanied by the decline in Brazil's GDP growth, the lack of internal savings for investment that makes Bahia strongly dependent on foreign capital, in the risk of Bahia's economic depression with the worsening of the Brazilian crisis and the progressive fall in the GDP of Bahia. These fragilities are the result of problems in Brazil and also of the existing structural problems in Bahia, as well as the crisis of management of the Bahia government, which translates into: 1) Planning crisis; and, 2) Crisis of the development strategy.

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THE ECONOMIC FRAGILITIES OF BAHIA AND THEIR CAUSES
Fernando Alcoforado *
The recession faced by Brazil in the last two years caused the reduction of 8.9% in the
Gross Domestic Product (GDP) of Bahia. The data is from a study by Tendências
Consultoria Integrada, which identified a drop in all Brazilian states. With this, the
Brazil's economy returned to the level of 2010. In other words, Brazil's GDP is lower
than it was in 2010. In the ranking of the Brazilian states, Bahia is the seventh state with
the greater drop, with 8.9 %, surpassing the national average, which fell by 7.2% in two
years.
In 2016, the losses in the State of Bahia economy were higher than in 2015. The
economic situation was aggravated by the fall of the agricultural harvest. The fall in
national GDP in 2016 was 3.5% and in Bahia, 6.4%. In 2015, the economy of Bahia
declined 2.7% and the national economy, 3.5%. The result of Brazil GDP is
fundamentally linked to the gigantic economic recession in Brazil due to the bankruptcy
of the neoliberal model and a prolonged economic mismanagement of the government
that is leading the Brazilian economy to collapse. In Bahia, the main reason for the
decline in GDP was the fall in the agricultural harvest in 2016, which marked a fall of
15.2% of agricultural GDP due to the severe drought faced in Bahia.
The production of Bahia's industry fell by 4.3% in January 2017 compared to December
2016 and fell by 15.5% in comparison with January of last year, according to IBGE
data. In the comparison of January 2017 / January 2016, the industrial sector of Bahia
recorded a decrease in eight of the twelve activities surveyed. The most important
negative influences came from the sectors of coke, petroleum products and biofuels (-
21.9%), motor vehicles, trailers and bodyworks (-38.0%) and metallurgy (-32.4%). The
year 2016 as a whole was bad for Bahia. The fall in GDP reached - 4,9%, a higher rate,
therefore, than the fall registered in the Brazilian GDP (-3.6%).
The much larger decline in the State of Bahia economy when compared to the Brazilian
economy is explained by the large contraction in the agricultural sector, which was
much higher in Bahia (-20.6%) than in Brazil (-6.6%). This was a reflection of the
severe drought in the Northeast. In services, which account for 71% of the economy in
Bahia, the contraction was - 2.5%, with the largest falls occurring in the commerce (-
8.1%) and transportation (-7.3%) segments. In industry, the negative variation was of
7.7%, especially the large reduction in mineral extraction, which was 18.5%. This is due
to the closure of activities in some oil wells that generated a reduction in the production
of oil and gas.
Another industrial segment that experienced a significant fall was the sector of
production and distribution of electric energy (7.4%). Here, the Brazilian economic
recession impacted negatively and also weighed the reduction in the flow of Sobradinho
lake as a consequence of the drought. On the other hand, the civil construction segment
(-8.7%) and the manufacturing industry (-1.7%), where production of vehicles and
metallurgy took place, had negative performances due to the Brazilian crisis. That is, the
decline of the State of Bahia industrial activity in most of the segments surveyed has
been a constant throughout 2016 and continues in the first month of 2017, being
affected by national and local factors.

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Bahia is de-industrializing. This is also in Brazil. According to IBGE, the share of
services in the Brazilian GDP reached 73.3% in 2016, almost 10 percentage points more
than the 64.7% in 2004. This increase was largely due to the processing industry, whose
the same period fell from 17.8% to 11.7%. In the current Brazilian crisis, the
manufacturing industry, as a reflection of the loss of competitiveness, has suffered more
than services. Industrial production fell by 4.7% in 2014, 10.4% in 2015 and 5.25% in
2016, while services grew by 1% in 2014 and had negative variations of 2.7% in 2015
and 2016.
The industrial sector has been losing share in GDP formation in almost all Brazilian
states, but Bahia led the fall and its industry suffered a fall of 27.1% of total GDP in
2010 to just over 20% in 2016 And there is an exponential reduction in the Civil
Construction sector, with new unit launches varying between 10 and 14 thousand at the
beginning of the decade and are currently around 3 thousand per year. As if it were not
enough, that during all these years has been leading the GDP growth, suffers now with
the biggest drought of the last 100 years.
While Brazilian industry is subject to international competition due to the opening of
the Brazilian economy, many segments of the service sector do not suffer from
competition from imported ones. Thus, in the face of the competitive advancement of
international competitors and the known competitive weaknesses that afflict the
domestic industry (high interest rates, valued exchange rates, poor education, precarious
infrastructure, chaotic tax system, etc.), deindustrialization has been strongly advanced.
In the specific case of Bahia, the difficulties that are undergoing the petrochemical
industry, the main segment of the state's transformation industry, reinforce this
situation.
The GDP of Bahia, which was the sixth largest in the country, lost its share in the
national ranking, being surpassed by Santa Catarina, falling to 7th place. The State of
Bahia exports, which represented 4.6% of total Brazilian exports in 2012, represented
only 3.6% of the total in 2016 and Bahia, which ranked 8th in the ranking of the largest
exporting states, was surpassed by Santa Catarina. Bahia also lost its position in
tourism, one of the main activities of the state productive base. Salvador lost the lead in
business tourism in the Northeast to Fortaleza and there was a reduction in the number
of national and international landings at the Salvador airport in a much larger proportion
than in other places such as Recife or Fortaleza and there was a reduction in the average
occupancy rate of hotels of 70 % to about 50%. Agribusiness, which has been leading
GDP growth in all these years, now suffers the greatest drought in the last hundred
years. It can be seen that the problem is not cyclical but structural, characterizing a
strong tendency of loss of competitiveness of Bahia's economy as a whole.
It can be seen from the foregoing that the economic weaknesses of the State of Bahia
are reflected in the fall in GDP growth, accompanied by the decline in Brazil's GDP
growth, the insufficiency of the domestic saving for investment that makes Bahia
strongly dependent on external capital, in the risk of economic depression in Bahia with
the worsening of the Brazilian crisis and the progressive fall in the GDP of Bahia. These
fragilities are the result of problems in Brazil and also of the existing structural
problems in Bahia, as well as the crisis of management of the Bahia government, which
translates into: 1) Planning crisis; and, 2) Crisis of the development strategy. The
planning crisis in the State of Bahia is characterized by the inexistence of a systemic
and strategic regional development plan that covers all Bahia and by the lack of

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initiative of the Bahia government and the productive sectors to articulate to reverse the
economic stagnation of Bahia. The crisis of the development strategy results from the
fact that the government of the State of Bahia does not have an effective development
strategy that ensures the development of each municipality, each region and the State of
Bahia as a whole and is ineffective and inefficient as an organization.
One fact is clear: the organizational structures of the Bahia government at all levels are
outdated. It is unacceptable that in Bahia the federal, state and municipal governments
overlap efforts, as is still the case today in many sectors, exhausting the meager
resources placed at their disposal and not proceeding to act on the basis of regional
structures in which are present all federal, state and municipal stakeholders interested in
its development. In order to solve this problem, it would be necessary to have the
federal and state governments take on global, regional and sectoral planning and
regulatory functions on an integrated basis, while municipal governments, regional
development bodies and public companies would also do the executive part in an
articulated way. This model of integrated management of the public sector in Brazil
would be contrary to what prevails today, in which the federal, state and municipal
governments are autonomous in their deliberations and actions, and politically reactive
to the idea of integration.
In order to make the governmental structures of Bahia operate in an integrated way, it is
necessary to establish the so-called Network State. The Network State presupposes the
implantation of a Network Structure, or a Network Organization, which is a type of
organizational macrostructure that would function according to a circular or star-shaped
organization chart, in the center of which is the main organization, that is, the federal
government at the national level and the state government at the state level. The
objectives and operational plans of the components of the network structure must be
established jointly by all its members. The operation of this type of organization would
be based on modern computer and telecommunications systems that would allow the
management and control of all processes. The network structure will make it possible to
reduce the state's operating costs and, consequently, to minimize the tax burden on
taxpayers.
* Fernando Alcoforado, 78, member of the Bahian Academy of Education and the Brazilian Academy of
Letters of Rotary - Bahia Section, engineer and doctor in Territorial Planning and Regional Development
by the University of Barcelona, university professor and consultant in the areas of strategic planning,
business planning, regional planning and planning of energy systems, is the author of the books
Globalização (Editora Nobel, São Paulo, 1997), De Collor a FHC (Editora Nobel, São Paulo, 1998), Um
Projeto para o Brasil (Editora Nobel, São Paulo, 2000), Os Condicionantes de Desenvolvimento do
Estado da Bahia (PhD Thesis, University of Barcelona, http: //www.tesisenred.net/handle/10803/1944,
2003), Globalização e Desenvolvimento (Editora Nobel, São Paulo, 2006), Bahia- Desenvolvimento da
Bahia do Século XVI ao Século XX e Objetivos Estratégicos na Era Contemporânea (EGBA, Salvador,
2008), The Necessary Conditions of the Economic and Social Development- The Case of the State of
Bahia (VDM Verlag Dr. Müller Aktiengesellschaft & Co. KG, Saarbrücken, Germany, 2010),
Aquecimento Global e Catástrofe Planetária (Viena- Editora e Gráfica, Santa Cruz do Rio Pardo, São
Paulo, 2010), Amazônia Sustentável- Para o progresso do Brasil e combate ao aquecimento global
(Viena- Editora e Gráfica, Santa Cruz do Rio Pardo, São Paulo, 2011), Os Fatores Condicionantes do
Desenvolvimento Econômico e Social (Editora CRV, Curitiba, 2012), Energia no Mundo e no Brasil-
Energia e Mudança Climática Catastrófica no Século XXI (Editora CRV, Curitiba, 2015), As Grandes
Revoluções Científicas, Econômicas e Sociais que Mudaram o Mundo (Editora CRV, Curitiba, 2016) e A
Invenção de um novo Brasil (Editora CRV, Curitiba, 2017). Possui blog na Internet
(http://fernando.alcoforado.zip.net). E-mail: falcoforado@uol.com.br.

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