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Production in the interior of the state, management in the state capital

Study suggests that moving companies to the interior leads to a “deconcentration” of companies in the State, but decision-taking remains in the capital

São Paulo is the center of management of capital, while the state interior is increasingly seen as a manufacturing center. This is what the geographer Sandra Lencioni observes in Employment and Social Exclusion in the Urban Manufacturing Restructuring of the State of São Paulo, a project financed by FAPESP.

“Nobody can deny the central focus of city of São Paulo. The manufacturing plant has changed addresses, but the management center has not been switched to the interior”, explains the researcher, for whom the much heralded move of manufacturing to the interior and the fading away of the metropolitan factory, begun at the end of the 70s, needs to be examined as a dynamic of “deconcentration” rather than “industrial decentralization”. “There is an apparent industrial decentralization, but a closer look shows that companies’ strategy of splitting operations, while keeping business management in the metropolis is intensifying more intensively the role of management of  capital that São Paulo plays”.

Sandra located around 900 manufacturing companies in the 645 municipalities in São Paulo, which had split companies’ operations between the main management of the company and the manufacturing part of the business. In other words, these are companies where the main management center is located in a town (most in São Paulo), while the factory is located elsewhere. “It seems a small number, but we have to remember that, in general, these are large companies with the weight of a General Motors”, points out the researcher. Thus, she put together the tangle of relationships between the places, from the point of view of industrial restructuring. The geographer decided to demystify the recent switch to the interior of the State by manufacturing industry, which has always been present in the interior. At the end of the 20s, around 30% of industrial production in São Paulo was in the interior, particularly in the Sorocaba and Campinas regions, which employed 21.2% of the industrial  workers in the State of São Paulo. “The new element does not lie in industry being in the interior, but the industrial importance that the interior has taken on since the 80s, making it the second largest industrial area in the country, only exceeded  by the metropolitan region of São Paulo itself”, explains the professor.

“The new poor”
The system, as well as destroying the myth of industrial decentralization, helped identify the precarious nature of work both in the interior and the formation of the “new poor” as a result of this process of urban and industrial restructuring in the State.

As the survey shows, if nine out of ten business people wishing to expand their businesses prefer the interior, it must be emphasized that this choice is connected more with the dynamics of new manufacturing plants in the interior regardless of the process of migration of companies from the state capital. There are many reasons for the attraction felt by business people for other towns outside the state capital. These range from matters of policy (strategies to relieve the congestion in the metropolitan region) to economic questions (tax incentives, freehold land tenure, cheaper semi-skilled labor). “In the state capital, there are restrictive policies, such as environmental constraints, which are tougher than in the interior. Another questionable, but relative, aspect is the political organization of workers, which is stronger in the metropolitan region”.

The march of coffee to the western part of the State is being repeated in the recent switch of manufacturing to the interior and in the transformation of the towns. Small towns, and more particularly, medium sized ones, have created leisure and nightlife choices similar to those of the metropolis. “The state is becoming more homogeneous and the old distinction between capital and interior no longer applies”, says Sandra. Currently, 95% of the population of the State of São Paulo lives in towns. Faced with this new territorial logic, there needs to be a theoretical base to take account of the recent changes. Sandra saw that the classic theories of the location of industry and the dynamics of land use needed to be revised.

São Paulo California
Pierre Veltz was one of her theoretical bases: in the opinion of this geographer, we have to think in terms of the territorial network, that is to say, the network made up of decentralized activities connected through a business network, a concept that adapts perfectly to the case of São Paulo. “Industry in São Paulo has significant spatial mobility and there are significant cases of companies being territorially divided”, says Sandra. “The top address for management is Avenida Paulista or Avenida Luiz Carlos Berrini.(Business avenues in São Paulo). These offices are associated with Paris, London, New York, etc. A financial center and high-level service are needed and these are not to be found in interior towns, where the products and merchandise are manufactured”, explains the researcher.

The capital forms a “basin of intangible work” where ideas, interpretations, opinions, are produced, and there is great use of knowledge for practical purposes, as well as third sector activity. “It is intangible work that determines the relationship between production and consumption. It is in São Paulo, in the capital, that this relationship happens”. She says. “To draw an analogy with the construction industry: the works site is in the interior, but the architect is still based here”.

To understand the new diversity in the state, the researcher divided it into five regions: 1) the metropolitan (the capital, defined in administrative and economic terms)); 2) the expanded metropolis (including the area surrounding the metropolis, where the highest growth rates are to be seen and where highway connections are thick on the ground, with emphasis on Campinas, São José dos Campos and Sorocaba); 3) urbanized (areas of growing industrialization, farther from the capital); 4) non-urbanized (fragmented areas with regard to the industrialization process and with less capital); and 5) the coast (greater concentration of services connected with tourism).

The urbanized region, also called the São Paulo California, has heavy industrial development and infrastructure close to that of the capital. Ribeirão Preto is an example. “This is an urbanized area, although it is rather far from the metropolis and is not part of the region surrounding the metropolitan area”, explains Sandra Lencioni. Santos on the other hand, in terms of the regional division devised, appears as part of the expanded metropolis. “The mere fact that there is a mountain range, a natural obstacle, does not mean any separation from the city of São Paulo. Santos has a different history from the northern and southern coast, and it cannot be dissociated from that of São Paulo, forming a single unit. It is the port that that the capital does not have, in contrast to other capitals like Rio de Janeiro”.

In the 90s, what grew fastest in Brazil was unemployment and jobs in the informal economy. Adopting the free markets program coincided with the sharp fall in industrial employment, involving the destruction of more than 2 million formal, paid jobs. All this led to what the economist Paul Singer defines as “the precarious nature of labor”, that Sandra reiterates. “The problem of the deterioration of labor rights cries out. Even in the interior of the State, there are poor conditions with regard to labor rights”, she says. “Strictly speaking, this is not social exclusion, but a contrary inclusion, leading to new types of poverty and social needs”.

Poverty and social climbing
The unbalancing of the labor market, with high nominal rates of unemployment  (a fall in the ratio of the total number of wage-earners to people in jobs) and the creation of informal jobs, has changed the idea of poverty and social ascent. “The rise of middle class families particularly those of immigrants, took place through hard work and saving. This was allied to the search for good schooling for their children. Nowadays, projects are of much shorter term.”

In the interior too, they are going through the syndrome of under hiring or outsourcing. One company frequently hires another to divide the responsibilities or to pass them on. From a situation of a large estate producing and exporting primary products up until the 30s, Brazil had become the eighth biggest manufacturing country in the world by the end of the 70s. And São Paulo is the Brazilian state capital that has undergone most the effects of this change.

Countries that that make most progress in new technologies are not the same as those that reduce industrial employment. This was not what happened in Brazil. In 1999, only 11.5% of all workers were employed in manufacturing, similar to the situation seen before the president Juscelino Kubitschek’s Targets Plan, when our level of industrialization was much lower. Also in 1999, Brazil fell back to a figure of 3% of total world industrial employment, 29% less than it had been two decades earlier.

“We have copied so many American models that we forget these figures. It seems that Brazilian policy is breaking up in the search for an independent solution. We depend hugely on foreign financing. I hope that we never reach the stage that Argentina has reached”, emphasizes the researcher.

“The question being raised today is how to give urban spaces the characteristics of a metropolis, because many activities exclusive to the metropolis need to be reproduced outside of it so that capital reproduction in general can continue to expand”. We are faced with a new reality: the question is no longer how urbanize the spaces, but to make them a metropolis. The point is how to act in this process of creating a metropolis of these spaces and how to acquire sovereignty in development projects. “We are increasingly losing the independence of our destiny. Are we exhausting all our possibilities? Like in the interior of São Paulo today, the square is empty”, she laments.

The project
Employment and Social Exclusion in the Urban Manufacturing Restructuring of the State of São Paulo (nº 98/10376-6); Type Support for research project; Coordinator Sandra Lencioni – Geography Department of USP’s de Philosophy, Arts, and Humanities Faculty; Investment R$ 15,000