Brazil has faced, in the past three years, the most
serious economic crisis of its measured history. GDP fell by
7.3% from its 2014 level in only two years – a rate
which exceeds those of the recessions of 1929-1933 (-5.3%),
1980-1983 (-6.3%) and 1989-1992 (-3.4%).
However, since mid-2016, Brazil's road to economic recovery has
been paved with far-reaching reforms. Much has been already
carried out to resume economic growth, create jobs, increase
productivity and competitiveness, and guarantee fiscal
Congress has approved a constitutional amendment limiting
increases in federal government primary spending to no more
than the previous year's inflation rate in the next 10 years.
In the subsequent 10 years, each president may propose to
Congress a new rule to limit primary spending for the following
four years. To respect the spending ceiling without
across-the-board cuts, structural reforms are needed. Thus, a
constitutional amendment has been presented to the National
Congress to reform the pension system, which is set to post
growing deficits as Brazil lives through a drastic demographic
change. The government has sanctioned a new law providing
relief for debt-ridden states without compromising the federal
debt dynamics. To raise productivity growth, Congress has
already passed laws making Brazilian labour relations and
immigration rules more flexible. We are also lifting crushing
regulations, reducing the complexity of the Brazilian tax
system, implementing a public-private partnership program for
infrastructure investment, and working to better integrate the
Brazilian economy into international trade and investment
Moreover, we are leaving a lighter footprint on capital
markets, which opens up space for more private sector activity.
The Brazilian Development Bank (BNDES) has played a fundamental
role in stimulating the expansion of industry and
infrastructure since 1952. But, in recent years, long-term
financing in Brazil has been heavily reliant on BNDES'
subsidised credit line. In 2018, the interest rate on BNDES'
loans will be replaced by the New Market-Based Rate (TLP, in
Portuguese). The TLP will be set on a monthly basis by the
Central Bank and will vary according to the consumer price
index and the pre-fixed rate of five-year inflation-linked
bonds, thus reducing the subsidy financed by the Treasury.
The combination of a responsible and predictable
macroeconomic framework and a structural reform agenda will
underpin higher economic growth with low inflation for Brazil.
Those reforms are also strategic for repositioning Brazil in
the world. We could be, for instance, the first country to be
simultaneously part of the BRICS and the OECD.
In confronting Brazil's worst economic recession, we have
restored the old adage that the best social-welfare program is
economic growth. Nevertheless, we understand that many
Brazilians need a stronger social safety net. By restoring
fiscal sustainability, the reforms will allow diverting more
resources to socially relevant areas, such as pre-school and
elementary education, means-tested income transfer programs and
Brazil has gone through turbulent economic and political
times, but its institutions have shown resilience. The economic
reforms are the cornerstone of a more just and prosperous
Brazil. This is not the agenda of a particular government. This
is an agenda for the ages.