Economic surveys and country surveillance

Economic survey of Brazil 2006: Executive summary

 

Contents | How to obtain this publication | Additional information

The following is the Executive summary of the OECD assessment and recommendations, taken from the  Economic survey of Brazil 2006, published on 24 November 2006.

Contents                                                                                                                           

Considerable progress has been made in recent years in achieving macroeconomic stability and restructuring the economy. Productivity has risen since the macroeconomic stabilisation of the mid-1990s and the implementation of a series of structural reforms. But Brazil's GDP growth performance (about 2.5% per year on average since 1995) nevertheless needs to improve to close a widening income gap relative to the OECD area. Reaping the full benefits of stabilisation in terms of faster growth will require consolidating macroeconomic adjustment, boosting innovation in the business sector and stepping up formal labour utilisation.

Consolidating macroeconomic adjustment

Fiscal policy has been on track, and public debt management has been exemplary. Monetary policy is delivering sustained disinflation, anchoring expectations. Brazil’s overarching macroeconomic challenge is to continue to reduce the public debt overhang while improving the quality of fiscal adjustment, which has so far been underpinned by revenue hikes, rather than a retrenchment of expenditure commitments. To do so, measures will be needed to arrest the increase in current spending, especially on pensions, paving the way for subsequently reducing the tax burden, once the debt-to-GDP ratio has been reduced in a sustainable manner.

Boosting innovation in the business sector

Innovation performance is improving fast. Innovation policy is beginning to focus on the potential synergies among science and technology promotion, R&D support and trade competitiveness. But R&D intensity is comparatively low by OECD standards and carried out predominantly by the government and public universities. Despite academic excellence in many niche areas, output indicators suggest that there is much scope for improvement. The key policy challenge is to boost innovation in the business sector. To this end, policies will also need to bolster human capital accumulation and to encourage university-business ventures so as to convert knowledge into productivity gains at the enterprise level.

Improving formal labour utilisation

Brazil’s labour force participation is comparable to that of the OECD for prime-age males. It is somewhat lower for females and is trending down for youths partly as a result of rising school enrolment, which is welcome. Informality is nevertheless pervasive, especially for the less educated, because the labour market is placing an increasing premium on skills. The main policy challenge is to improve formal labour utilisation. This can be achieved by fostering human capital accumulation on and off the job and mitigating policy disincentives that reduce the opportunity cost of informality.

 

How to obtain this publication                                                                                      

The Policy Brief (pdf format) can be downloaded. It contains the OECD assessment and recommendations but not all of the charts included on the above pages.

The complete edition of the Economic survey of Brazil 2006 is available from:

Additional information                                                                                                  

 

For further information please contact the Brazil Desk at the OECD Economics Department at eco.survey@oecd.org. The OECD Secretariat's report was prepared by Luiz De Mello and Diego Moccero under the supervision of Peter Jarrett.

 

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Challenges to Fiscal Adjustment in Latin America: The Cases of Argentina, Brazil, Chile and Mexico

Economic Survey of Brazil 2005

 

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