FORUM DE RIO - POLITICAS PARA O DESENVOLVIMENTO

Brazil: Policies for Productive Development
• Fernando Dantas Alves Filho • Sérgio de Oliveira Cabral• Ricardo Hausmann • Aloizio Mercadante • Mark Spelman Moderated by • Felipe Larraín Bascuñán
Thursday 16 April09.00-10.45
Felipe Larraín Bascuñán, Professor of Economics, Catholic University of Chile, Chile, asked panellists to focus on the reforms needed to unleash the region’s potential over the long term.
Aloizio Mercadante, Federal Senator of Brazil, noted that Brazil has shown substantial economic growth and significant poverty reduction, and has increased its middle class. The recession is hurting the country, yet Brazil seems to be in relatively good shape to resist the international storm. Brazil has the most diversified export platform of Latin America. Among the challenges Mercadante cited was the tax burden, suggesting that tax reform is crucial, including tax exemption for a number of sectors to encourage innovation and growth. He stressed the importance of maintaining a healthy ratio between GDP and public debt and asserted that responsible management of public funds is imperative. “Tax exemption must be instituted considering the reduction of public debt that has been in progress over the past fiver years,” Mercadante said. He highlighted the top five impediments to growth in Brazil: excessive tax regulations, inadequate infrastructure, restrictive labour regulations and inefficient government bureaucracy.
Mark Spelman, Global Head, Strategy, Accenture, United Kingdom, highlighted the importance of looking at long-term strategies for the competitiveness of Brazil. He said that a focus is needed on interconnectedness with other parts of the world, systematic innovation and long-term goals with “intermediate stepping stones.” Among Brazil’s advantages he cited a natural spirit of entrepreneurship and asked how it could be fostered and accelerated. Spelman also said that the country’s strength lies in clean energy and food production, and agriculture will be important in the future.
Sérgio de Oliveira Cabral, Governor of Rio de Janeiro, Brazil, was asked whether the tax structure in Brazil is an obstacle to development. Cabral admitted that the tax rate in Brazil is very high and that reform is needed. “We have a huge sector of informal workers due to the cost of formal jobs,” he said. Cabral stressed that Brazil’s strong commitment to democracy – the strongest among the BRIC countries – is an excellent basis for stability and sustainable growth. “Democracy has a real interface with business and the economy,” he added. Cabral also suggested that increased public-private partnerships are key for development.
Ricardo Hausmann, Director, Center for International Development, John F. Kennedy School of Government, Harvard University, USA, and Co-Chair, Global Agenda Council on Financial Empowerment, pointed out that Brazil has high tax and interest rates, low public investment, a complicated tax structure, poor education indicators, weak infrastructure and poor regulatory indicators compared with the rest of the developing world. Yet, he said, “the appetite for investment indicates that in spite of the poor environment, prospects are good.” Hausmann reassured: “A lot of what it takes to be a successful country is already in place.” Among the country’s strong points are good business models and innovation in technology and agriculture.
Fernando Dantas Alves Filho, Territory Senior Partner, Brazil, PricewaterhouseCoopers, Brazil, noted a number of obstacles to development in the business sector in Brazil but mentioned that, “despite its problems, Brazil has competitive advantages over other BRIC countries, like a consolidated democracy, lack of natural disasters and border conflicts, and a commitment to sustainability.” Brazil has the capacity to double the area already used for agriculture.
Key outcomes
• Despite problems with its tax structure, excessive regulation and high interest rates, Brazil attracts a good deal of foreign investment• Tax reform is necessary for productive development to be viable• Brazil is in a healthy financial position to weather the global economic crisis• The agriculture, technology and energy sectors represent potentials for further development in the country