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OECD Reviews of Regulatory Reform: Brazil 2008

Strengthening Governance for Growth

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The debate on a market-based economy has now entered a new phase in Brazil, addressing the broader context of quality regulation and the reduction of regulatory risk. The improved macroeconomic situation and the progress made by the sectoral regulatory agencies have paid off, and there is also wider social participation in the improvement of the regulatory framework with a stronger consumer engagement. But Brazil still needs to further improve its capacities for regulatory quality and increase transparency and accountability in the system to reinforce regulatory performance.

This review analyses the challenges of strengthening regulatory governance in Brazil to improve economic growth, with appropriate regulatory frameworks for core infrastructure sectors. Improved institutional capacities would also enhance support for regulatory policy across various government areas. Setting up an appropriate architecture for sectoral regulatory agencies and balancing autonomy with accountability will contribute to improved governance. Challenges include consolidating the autonomy and status of Brazilian regulatory authorities, reinforcing the strategic organisation for planning and decision making, increasing social accountability mechanisms, and improving co-ordination with competition authorities. Regulatory reform will help Brazil boost growth opportunities, and improve the quality and value of core services provided to its citizens.

Brazil requested this broad review by the OECD of its regulatory practices and reforms. The review presents a general picture of the overall frameworks to assure high quality regulation with a special focus on four core infrastructure sectors: power, private health insurance, land transport and telecommunications.

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Conclusions and Recommendations

Brazil faces the challenge of establishing a regulatory framework that will facilitate and accelerate its long-term economic growth. The country has made progress towards addressing its broader economic and social imbalances. OECD work shows that there is a clear link between the long-term economic performance of a country, and the quality of its overall regulatory framework. In Brazil, much of the recent debate has focused on regulatory authorities, which have been analysed in this report. However, the economic and policy implications of the regulatory framework extend beyond these agencies. Improving the overall regulatory framework, paying attention to quality, impact assessment and simplification, will also contribute to long-term growth. Significant aspects of the regulatory framework were not addressed as part of the current report, at the state and municipal level. While improvements can be discussed at the federal level, they will need to be matched by similar attention at lower levels of government. The sectors analysed here show many positive signals and achievements, even if significant bottlenecks persist in some areas. A governance approach that takes into account the link between institutional structures and economic development can help achieve social and economic goals, while responding to policy priorities. Brazil is confronting the challenge of increasing social inclusion, and broader social participation may also help to address the challenges of reforming public services in such a large and diverse country.

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