Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Can we say that there is sustainable growth in Brazil? 2011 PEGNet Conference 8th September 2011 Hamburg - Germany Fabio Veras Soares – IPC-IG (UNDP/SAE/IPEA) 0 Three key factors in the current pattern of equity and economic development: Economic Stability Expansion of Social Protection Programmes and Social Services Institutional reforms that guaranteed economic stability and the expansion of social protection and social service 1 Economic Stability o 1980’s and 1990’s: low and volatile growth rates combined, o o o o o o o successive failure of stabilization plans and hyperinflation – widespread indexation of contracts. 1994: Plan Real – monetary reform (monetary anchor and overvalued exchange rate) Institutional reform. 1999: inflation targeting and fiscal surplus targets 2000: Law of fiscal responsibility. Continuity between Cardoso (1995-2002) and Lula’s terms (20032010) Response to the 2008-9 crisis – fiscal stimulus package (minimum wages, credit expansion and Bolsa Família expansion. Recent fiscal consolidation. 2 Social Protection and Inclusive Growth Expansion of Social Protection Programmes o Social Protection as social insurance: dual welfare system: formal/urban versus informal/rural sector workers o Incipient SP for informal workers (authoritarian regime to 1988 Constitution: rural pension and non-contributory pension (from Funrural to universal rural pensions) and disability grant (from RMV to BPC) o Universal Health System o Universalization of Primary education (school meals) o Expansion of the CCTs programmes and consolidation of them under Bolsa Família (coverage: 25% of the population) o Social assistance expenditure increases from 0.7% (0.08%) of the total social expenditure of the federal government (GDP) in 1995 to 6.8% (1.09%) in 2009. o Social security (including rural pensions) increased from 5% of the GDP to 7.28% in the same period. o Tax burden: 26% of the GDP to 35% (1998-2008). 3 Features of the recent growth process in Brazil o Growth Rates: bottom of the table of the BRICS: 4.4% between 2004-2010. Higher than the 2% observed between (1981-2002) but well below of the one observed during ISI years: 7.5% (1947-1980) o In Brazil, the poorest households have experienced a much faster increase in their income than the richest; the increase in the real income of the poor was higher than the GDP growth rates for India. Bringing both poverty and inequality down. Household income growing 2 p.p more than GDP rates according to household survey. o The internal consumption fueled by the emergence of a large lower middle class and the expansion of (expensive) consumption credit jointly with the anti-cyclical measures adopted in 2008-9 explains why the crisis was relatively mild in Brazil (-0.8% in 2008) and why growth bounced back so vigorously in the following year (7.5% in 2009). 4 Challenges of this growth process Constraints: a) Highest interest rate in the world; b) overvalued exchange rate and its impact on the manufacturing sector; c) lack of private funds to finance long-term investment (increasing the fiscal burden for government); d) lack of domestic savings in an a credit-based mass consumption economy. New policies: a) Reduction of interest rates to ease private investment (specially in long term); b) reduce leakages – consumption credit without hindering redistributive policies; c) active industrial policy (innovation) to avoid specialization in the commodity sector; d) emphasis on less fiscal sensitive redistributive mechanisms like more progressive taxation and improving quality and distribution of social expenditure. 5 Many Thanks 6