19/03/2013 - Brazil’s economic growth has been supported in recent years by important government investment and social programmes that mobilise resources across the country. These programmes could help Brazil to meet its goals of sustaining economic growth and fostering social development, while reducing regional disparities. A new OECD report, the Territorial Review of Brazil, argues that, for these efforts to achieve their full potential, better coordination is needed among government agencies at the federal, state and local levels.

 

“Brazil’s efforts to fight poverty, reduce income inequality and strengthen social cohesion are bearing fruit and providing valuable policy insights for other countries”, noted OECD Secretary-General Angel Gurría. “Good governance will be critical to Brazil’s ability to build on its previous achievements and reach its development goals. I encourage the government to bring key ministries and sub-national authorities together to ensure that this opportunity is not lost.”

 

Brazil’s regional disparities remain high by OECD standards (Figure 1), although they have been falling over the last 15 years thanks to faster GDP per capita growth in some of the poorer states. Average GDP per capita varies widely across Brazil, from just 46% of the national average in the Northeast region, to 34% above the average in the Southeast.

 

Figure 1. Gini index of GDP per capita among sub-national (TL2) regions, 2010 or latest year available

 

Note: TL2 regions in the OECD correspond to the first administrative tier of sub-national government. For Brazil these are equivalent to States.

 

Though Brazil’s economy has grown faster than most OECD countries, its urban regions are not doing as well as the OECD average (Table 1). Since the 1980s, economic activity in Brazil has become less concentrated in the country’s large urban centres. This reflects the importance of the primary sector in fuelling growth in the country’s hinterland. Brazil’s cities now face the challenge to increase productivity and growth in services, which account for the lion’s share of their economy.

 

Table 1. GDP per capita growth among types of Urban (TL3) regions, 1995-2007

 

Note: TL3 regions typically correspond to second-tier sub-national administrative units, such as Län in Sweden and Départements in France. In Brazil they are the Mesorregiões.

The review, which draws on data and comparative perspectives from OECD countries, highlights challenges that Brazil will need to tackle, including those related to fiscal arrangements among the sub-national governments, building administrative capacity at the local level, and fostering cross-sectoral co-ordination in federal programming:

 

• Brazil’s states and municipalities enjoy considerable budgetary autonomy on both the tax and spending sides. Efforts to streamline the state tax on goods and services and increase financing from other sources should be pursued.
• Many municipalities lack the capacity to carry out their roles effectively. This is considered one of the important bottlenecks for the implementation of policies in lagging regions. Some progress has been made in identifying the municipalities with the greatest capacity problems. Programmes for capacity building at state and municipal level should therefore be enhanced.
• The institutional culture of Brazil’s administration remains one of “silo”-type ministries, creating co-ordination problems which are compounded by Brazil’s federal structure. The instruments of regional development policy could be useful tools for co-ordinating these different sectoral policies across the territory, to make the most of potential synergies among them and to achieve greater growth and social inclusion in all regions.

 

For example, the impact of the successful Bolsa Família Programme could be enhanced by targeted policies for employment and infrastructure in lagging regions. This would provide complementary services in poor rural and urban regions so that beneficiaries exiting from the programme could benefit from more jobs and other opportunities.

 

To obtain a copy of OECD’s Territorial Review of Brazil, journalists should e-mail [email protected].

 

For further information about this and other governance reports, please contact Enrique Garcilazo in the OECD Governance directorate by telephone + 331 45 24 86 18.