Executive summary, also available in Portuguese: Sumário executivo
The OECD assessment and recommendations on the main economic challenges faced by Brazil are available by clicking on each chapter heading below.
Macroeconomic policies: paving the way for sustained growth
This chapter discusses Brazil’s macroeconomic performance, including an overview of the main policy challenges ahead. The economy is recovering in earnest and the foundations for sustained growth appear, by and large, to be in place. The maintenance of a prudent policy stance is essential and owes much to the strengthening of institutions, in particular the inflation targeting framework and the Fiscal Responsibility legislation. The continuing external adjustment is making the economy more resilient. A main policy challenge is to improve the quality of fiscal adjustment, which has been achieved primarily by hiking taxes and compressing public investment. This challenge can be met by placing emphasis on the rationalisation of current spending, including further social security reform, reconciling the need for fiscal consolidation with that of alleviating Brazil’s high tax burden.
Further developing financial markets
This chapter discusses the main weaknesses and strengths of Brazilian financial markets. Low credit ratios, high intermediation costs, and financial exclusion contrast with the expansion of the institutional investor base, including pension and mutual funds. On-going policy efforts, including the reform of bankruptcy legislation, improvements in credit information, and the expansion of micro-finance, are important steps forward. The challenge of improving the investment climate can be met by facilitating access to credit and reducing intermediation costs. Additional measures would include the paced phasing out of directed credits to agriculture and housing, the gradual alleviation of the tax burden on financial intermediation, and the continued strengthening of the credit information industry.
Enhancing the regulatory framework
This chapter assesses Brazil’s product market regulation and the regulatory framework for several network industries: electricity, oil and gas, and water and sanitation. Private investment can be encouraged by tackling regulatory uncertainty in many areas. To this end, recent initiatives include legislation on the role and structure of the regulatory agencies and the new model for the electricity sector. New legislation on public-private partnerships (PPPs) can encourage private investment, particularly in much-needed infrastructure, if carried out in a fiscally sound manner, adequately balancing risks between the government and its private-sector partners. These reforms are consistent with the government’s agenda for growth, focusing on meeting the challenge of improving the business environment.
Strengthening social policies and expenditure
This chapter reviews Brazil’s main social programmes and policies. Much has been done in the social area over the last decade or so, with unquestionable improvements in key social indicators, particularly in education. The government already spends a high proportion of GDP on social programmes. Public spending on pensions accounts for a higher share of GDP in Brazil than in the average OECD country, despite Brazil’s younger population, while spending on means-tested programmes, such as income transfers for the care of children, and elderly and disabled persons, is well below the OECD average. The challenge of improving the cost effectiveness of public social spending can be met by prioritising in a fiscally sound manner the social programmes that are deemed to be most pro-poor and conducive to the accumulation of human capital.
Introductory Remarks by Andrew Dean, Deputy Director, OECD Economics Department, at a seminar at the Getulio Vargas Foundation, Rio de Janeiro on 1 March 2005, marking the publication of the Economic Survey of Brazil 2005.
A printer-friendly Policy Brief (pdf format) can also be downloaded. It contains the OECD assessment and recommendations.
To access the full version of the OECD Economic Survey of Brazil: