The Final Curtain? The impacts of COVID-19 on the creative economy in Brazil

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This article is part of a series in which OECD experts and thought leaders from around the world and all parts of society address the COVID-19 crisis, discussing and developing solutions now and for the future. Aiming to foster the fruitful exchange of expertise and perspectives across fields to help us rise to this critical challenge, opinions expressed do not necessarily represent the views of the OECD.

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The year 2020 started with positive perspectives for the Brazilian economy and, in particular, for the creative industries. However, in the first quarter, the sector suffered from a virtually complete halt in its activities due to the pandemic of a new type of coronavirus — COVID-19.

Actions to control the pandemic led to the need for social isolation, restricting business opportunities at the local and international levels. Activities considered non-essential were halted indefinitely, which has greatly affected the national economy, the maintenance of the level of per capita income and the employment throughout the nation.

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Economic activities that require spaces and physical contact to function are suffering more severely from the effects of the crisis. In such a situation, a good part of the activities of the so-called “creative economy”, such as theater plays, concerts, cultural presentations and gastronomy to name a few. However, other sectors saw opportunities to expand, as with software and games.

It is important to note that a considerable part of the activities of this sector are unable to adapt their business models to a completely digital context; in these cases, the closure of activities is the only option.

Read the OECD Policy Brief: Cities policy responses (also avaliable in Portuguese)

Image: Marcelo de Jesus/Eduardo Uzal/Fabio Cordeiro

How big is the creative economy in Brazil?

Although there are several ways to define creative economy activities, for the purpose of this work we used the classifications adopted by the Federation of Industries of Rio de Janeiro (FIRJAN) and presented in the Mapping of the Creative Industry in Brazil. It is adapted to Brazil’s productive sector, and contains data on the creative economy’s contribution to GDP and jobs generated in the economy, which are important in the calculation of economic impacts presented in this document.

Figure 1: Classification of the Creative Economy in Brazil

Source: Mapping of the Creative Industry in Brazil, FIRJAN

As can be seen from Figure 1, the diverse activities of the creative economy leads to different economic behaviours.

According to data from FIRJAN, in 2017 the creative economy was responsible for 2.6% of Brazil's GDP and generated a total of 837,206 formal jobs, equivalent to 1.8% of the entire national labour force.

What are the effects of the COVID-19 crisis on the creative economy?

The creative economy is suffering at different levels from the effects of the extended measures to restrict the circulation of people and the hours of operation of the establishments. On one hand, in some cases the restrictions compromise the development of the activity, such as the prohibition of concerts and events to prevent large gatherings. On the other hand, the crisis has led the sector to experiment with new formats of production and delivery of its products and content to the public, such as live shows broadcasted on social networks, online events and the proliferation of courses, lectures and events using video streaming platforms.

However, from an economic point of view the impact of the COVID-19 pandemic on the creative economy is profound, not to mention that this sector is considered one of the last candidates for reopening. Some activities may resume more quickly, such as those in the consumer, media and technology segments, but for the culture sector the path still seems to be longer.

Graph 1: Trends in variation of activities in the creative economy sector

Source: FGV

In addition to these main activities, the sector is also a strong influencer of support activities in the formation of a long productive chain that is now also impacted by the shocks to the creative economy.

It is important to note that, due to the heterogeneity of the segments of the creative economy, both the impact and the risk of recovery will be different for each area (Consumer, Media, Culture and Technology) and its segments. The possible responses given by the actions and policies aimed at these sectors and the dynamics of society's behaviour in the months to come will also influence the situation. While some were strongly affected by the need for social distance or by the economic crisis that reduces the consumption of their products, others were able to maintain or even increase their activity due to the use of digital resources for the production and commercialisation of their products and services.

Image: Shutterstock/Diego Grandi

The response of the cultural economy tends to be slow, and has been initially motivated by the increased consumption of technology, mainly purchases via internet, streaming operations and games (which, unlike other sectors, grew during the crisis). Next, the impulse will be to resume consumption in physical stores; and finally there will be a return to business with corporate and cultural events.

There has been a great reduction in the production volume of the activities due to the pandemic which, at the worst moment during confinement, dropped to an average of 43.9% below a “normal” month compared to 2019.

The economic losses compared to 2019 will be significant. Based on the estimated production volumes, the sector's GDP will be BRL 129.9 billion in 2020 (a 31.8% reduction compared to 2019) and BRL 181.9 billion in 2021 (close to returning to the level of 2019, but still 4.5% lower). Thus, the total loss of the Brazilian creative sector will be BRL 69.2 billion in the 2020-2021 biennium, which represents a loss of 18.2% in the total production for the period.

Analysing the total volume of the economic loss in the sector and the possibilities for recovery, it is clear that a short-term recovery of the losses generated will not be possible. We have a long way to go to recover the volume of production.

To learn more, visit our website at FGV Europe.

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Luiz Gustavo Medeiros Barbosa

Executive Manager, Fundação Getulio Vargas (FGV)

Luiz Gustavo Medeiros Barbosa holds a Ph.D. in Business from the University of Nottingham, United Kingdom. He is a Professor at Brazilian School for Public and Private Administration (FGV EBAPE) and Executive Manager at Fundação Getulio Vargas (FGV).

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