2018 OECD Economic Surveys: Brazil 2018

image of OECD Economic Surveys: Brazil 2018

Strong growth and remarkable social progress over the past two decades have made Brazil one of the world’s leading economies, despite the deep recession that the economy is now emerging from. However, inequality remains high and fiscal accounts have deteriorated substantially, calling for wide-ranging reforms to sustain progress on inclusive growth. A better focus of social expenditures towards the poor would reduce inequality and ensure sustainability of public debt at the same time. This will require difficult political choices, particularly in pensions and social transfers. Reducing economic transfers to the corporate sector, in conjunction with more systematic evaluations of public expenditure programmes, will strengthen growth, improve economic governance and limit the future scope for rent seeking and political kick-backs. Maintaining the growth potential of the economy requires stronger investment, which could also raise productivity and concomitantly, the scope for future wage increases. Simplifying taxes, reducing administrative burdens and streamlining licensing would raise investment returns, while stronger competition could generate new investment opportunities in thriving, high-performing enterprises. At the same time, trade barriers shield enterprises from global opportunities and foreign competition. Fostering a stronger integration into global trade would allow firms to become more competitive and generate new export opportunities.



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Fostering Brazil's integration into the world economy

Brazil is less integrated into the world economy than other emerging markets as trade barriers shield enterprises from global opportunities and foreign competition. Stronger integration would improve the ability of Brazilian firms to compete in foreign markets by greater access to intermediate inputs and technology at internationally competitive conditions. This would boost productivity and allow them to pay higher wages. Lowering barriers to trade would also reduce the cost of capital goods, spurring investment and growth and creating new jobs across the economy. Consumers would see their purchasing power increase, with particularly strong effects among low-income households. Ensuring that everyone can benefit from trade will require accompanying policies to help workers cope with the likely reallocation of jobs across firms and sectors. Such policies should focus on protecting workers, rather than jobs, by creating training and education opportunities that allow low-skill individuals to acquire new skills and get ready for new jobs, while protecting their incomes in the transition.

English Also available in: Portuguese


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