This book came in a good hour. It says about the many problems Brazil has to overcome to reach a better and sustainable development. I think all candidates and even the general public should read it, in order to know what must be done to Brazil tackling its persistent problems. As an example I would like to highlight the fact that for the last two decades Brazil's interest rates has remained among the highest of the world, undermining investment and comsumption. The book talks about the many reforms Brazil need to implement and it reinforces the need to keep or implement without delay, the reforms that has already been done, such as the high school reform. Of course that many people can not agree with everything in this book, like myself, but the debate is part of the democracy, what can not be done is nothing, including one sector that Brazil urgently need more productivity is its politics. Our politicians, their direct staff, their municipal and state secretaries, etc need to work more efficiently to make smarter and effective use of tax money. For this reason, please pay attention in who you will vote this year, vote in candidates that has shown good will, courage, tireless activism and knowledge to work for our people and country. This post is a summary of the book with the title above, published in 2018 at https://openknowledge.worldbank.org/bitstream/handle/10986/29808/9781464813207.pdf?sequence=2&isAllowed=y
Brazil enters the election year with an economy that is gradually recovering from the deepest recession. However, for many, the recovery has not yet translated into new and better jobs, or rising incomes. This book is motivated by the need to understand the possible drivers of future income and employment growth. Brazil needs to improve its performance in terms of productivity to generate lasting gains in incomes and provide better jobs for its citizens. This is all more important, because Brazil is aging rapidly and the boost the country has enjoyed thanks to its growing labor force will disappear in just a few years' time. productivity is a measure of how efficiently a firm, an industry, or a country uses its existing assets. Brazil has abundant natural resources, an increasingly more educated labor force, and some world-class companies in sectors ranging from agribusiness and aeronautics to textiles and oil drilling. In aggregate, however, the country uses its assets poorly. As documented in the book, if Brazil were to use its assets as productively as the U.S., Brazil's income per capita would increase by 2.7 times. Making all Brazilian industries work as efficiently as their counterparts in the U.S. would boost productivity more than four times. This book analyses some of the factors that may be behind such low productivity. Among the most important: 1) a lack of competition both internally and externally. 2) government policies that have concentrated on subsidizing existing firms, and distorting capital and labor markets, rather than fostering competition and innovation; and 3) fragmented government institutions for business support that have allowed policies to persist without much regard for whether or not they had shown to be effective. Brazilians have a legitimate aspiration to raise their standards of living to the level of high income countries. However, their country has been stuck in middle-income status for several decades. Brazil has experienced many of the structural changes associated with rapid growth and convergence to high income economies, including the transformation of its agriculture, the continued urbanization of the country, investments in education with some improvements in the human capital, and the demographic bonus, as Brazil's baby boomers of the 1970s and 1980s entered the labor force. The lack of convergence in living standards is associated with a poor record in productivity growth. An average worker in Brazil today is only around 17% more productivity than 20 years ago, compared to a 34% increase for an average worker in high income countries. Productivity growth is a critical driver of development in all countries. High commodity prices and loose fiscal policies fueled a consumption based growth model during the 2000s, but during the past five years, however, these factors have gone into reverse plunging Brazil into the deepest recession in over a century. Neither commodity prices nor government spending can be sustainable sources of growth over the long-term. Finally, investment-led growth will remain constrained by low domestic savings. Brazil's low productivity may be the source of past disappointments, but it also pffers a big promise for the country's future. At the heart of Brazil's low and stagnant productivity is an economic system that discourages competition and innovation and induces misallocation of resources and inefficiency. Brazilian companies operate in an environment of high costs. These high costs result from inefficient financial markets and high interest rates, an extraordinarily complex and burdensome tax system, the inadequate state of the country's infrastructure, an extensive set of administrative rules, and the peculiar challenges of operating with a myriad of different and changing regulations. Addressing these costs through cross-cutting financial, tax and administrative reforms and boosting infrastructure investments has proved difficult. Instead, government has compensated for these high costs through a variety of interventions in the functioning of markets that have arguably further reduced competition. These have done little to spur productivity, instead, they have distorted the playing field, discouraging new entrants, and creating incentives for incumbent firms to lobby for state support. As a result, Brazil's resources are poorly allocated, empoyment and income growth are weakened, and consumers pay high prices. Brazil suffers from higher transport and logistics costs than most comparator countries, severely limiting domestic and international integration. Brazil's infrastructure quality is poor, including railroad, airport and especially roads and ports. High costs of information and communication technologies also affect connectivity and may reduce the rate at which new tech are adopted. Improving the quality of transport, logistic and ICT infrastructure requires an improved investment framework. A key reason for persistent resource misallocation and limited competition arguably is the high regulatory and administrative barriers against doing business. In addition to the inadequate state of the country's infrastructure, include regulatory obstacles, high tax rates and an extraordinary complex tax system, high interest rates and a weak insolvency regime, and a cumbersome processes to operate a business, including time and cost to register property, obtain construction permits and bid under government contracts. Agriculture stands out as the only sector with high rates of productivity growth in Brazil. Indeed, unlike in manufacturing and in services, where Brazil lags the rest of middle and high-income countries, in agriculture Brazil is a leading innovator. Moving forward, the agriculture sector will need to adjust to sustain past success and reconcile Brazil's role as a global source of food with the need to protect its natural patrimony. Brazil has traditionally been a country with low savings rates and consequently low rates of investment. National savings have been consistently below 20% of GDP. Macroeconomic imbalances and a legacy of high public debts are reflected in high interest rates. Compounded by microeconomic and institutional inefficiencies, interest rates spreads remain exceptionally high. The banking sector maintained healthy incomes even during the recent crisis, reflecting both cautious lending and the ability to charge high margins. Despite a substantial expansion in access to education and hence in Brazil's human capital, the quality of the education and professional training system remains relatively low thereby reducing Brazil's productivity. Brazil has invested considerably in education but at the aggregate level is getting very little return. This is in part because labot is misallocated and hence human capital is not put to its best use. But it is also because the quality of education investment has been low: despite increases in investment per student, the quality of Brazil's education outcomes remains disappointingly low. An overloaded focus on memorization of academic subjects, reduced school hours, and a perceived lack of relevance of the Ensino Medio curriculum are some of the main shortcoming of the current basic education system. Moreover the current system may also contribute to persistent economic inequality: public school students find it difficult to progress to tertiary education, as they must compete with better prepared private school students. Reform to secondary education were recently introduced that target improvements in educational outcomes. in 2017, the Federal Government passed a reform of the secondary education system including the introduction of a competence-based curriculum and the extension of the full-time school model. The new ensino medio curriculum is a long overdue and promising reform to reduce dropouts while supporting learning among adolescents. Drawing from the experiences in Mexico and other OECD countries such as Portugal and Poland to add flexibility to a new competence-based curriculum can be an important step to increase student motivation and engagement. Technical and vocational education has also been inadequate, though recent initiatives seeking business input are promising. Technical education in the high school could play an increasingly important role in building the human capital that Brazil needs to raise its productivity. Labor market policies, both passive and active, are not sufficiently supportive of produtivity growth. Brazil spends about 1.1% of GDP (in 2015) on federal labor programs, but their effects on labor allocation are largely counterproductive. Compared to neighbors, peers and members of the OECD, Brazil is characterized by relatively high spending on passive labor market policies (83% of the total) and only limited investment in active policies, especially labor market internediation and job-search support. Accelerating productivity gains to allow inclusive economic growth requires significant changes in policies and institutions. This book has shown that there is little prospect of sustained income gains in Brazil without enhancing competition and tackling the vast policy-induced barriers to productivity growth. This requires a significant change in public policies across a range of areas, reorienting state intervention and creating greater space for Brazilians firms to compete in domestic and international markets. There are several short-term opportunities to reduce trade and thus facilitate the greater integration of Brazil into the global economy. As outlined in chapter 3, Brazil imposes several nontariff related costs on exporters because of cumbersome and poorly coordinated border control procedures. Brazil's trade policy reform needs to be coordinated within Mercosul, but even current rules provide some flexibility for unilateral reduction of tariffs. Brazil should take advantage of the shifting global trade policy landscape and consolidate and increase ongoing efforts for new trade agreements such as those between Mercosul and the E.U., Canada and India. In preparation for gaining greater market access, Brazil should strengthen its domestic quality assurance system (e.g. INPI & IINMETRO). The recent meat scandal and resulting temporary export bans for Brazilian meat highlight the importance of such measure to secure market access including in areas where Brazil already demonstrates a strong competitive advantage. Over the medium-term, Brazil may wish to consider some institutional innovations that helped other countries provide a focal point for a coherent productivity agenda. Among the experiences Brazil could consider are the establishment of a productivity commission, the creation of an institutionalized public-private sector dialogue mechanism to overcome coordination failures, or the creation of a policy lab that encourages experimentation in business support policies. The various institutional reform options reviewed here can help overcome coordination problems but they are no substitute for political leadership. What this report has tried to do is to show why Brazil's productivity agenda is both urgent and promising. It belongs to Brazil's political leaders to put this challenging reform agenda into practice. Brazil's future shared prosperity may well depend on it.
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