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Brazil has demonstrated relatively good resilience during the crisis, like many major emerging-market economies. However, the more recent growth slowdown has highlighted the need to address long-standing structural weaknesses, such as infrastructure shortfalls and uneven access to quality education, as well as to achieve a better balance in social protection in order to foster job creation and employment in the formal sector.
Previous Going for Growth recommendations include:
- Enhance outcomes and equity in education by improving teacher pay, training and performance incentives as well as expanding vocational and training programs.
- Raise the currently low formal sector participation levels by improving incentives for formal labour force participation, especially among seniors.
- Reduce distortions in the tax system, for instance by reducing fragmentation and complexity.
- Increase private investment in infrastructure and remove remaining barriers to competition.
- Improve the efficiency of financial markets to allow for more efficient capital allocation.
Actions taken: Notable reforms in these areas over the past two years include:
- The authorities have increased concessions and simplified procedures for public works. Also, the 2007 Growth Acceleration Plan is under implementation. Nevertheless, several large projects are suffering from significant delays and more needs to be done to speed up investment in infrastructure.
- An expansion of a vocational education scheme (PRONATEC). This is aimed at enlarging federal network of technical schools and provision of free training places for young people from poor backgrounds.
The report also discusses the possible impact of structural reforms on other policy objectives (fiscal consolidation, rebalancing the current account and reducing income inequality). In the case of Brazil, reforms in the area of education will contribute to reducing inequalities, while those aimed at improving investment into infrastructure may increase the current account deficit in the short-run.