Opinion – Pablo Acosta: In search of a future with opportunities for all

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After a period of economic stability, high growth rates and substantial poverty reduction in the 2000s, Brazil faced a challenging horizon in the following decade and at the beginning of this one, the effects of which still linger. The 2014-2016 crisis, the Covid-19 pandemic and the aftermath of the Ukraine War had a profound impact on the country, reducing growth, increasing unemployment and raising inflation. These crises were decisive at a time when little was gained in the fight against inequality. Existing disparities have widened due to the disproportionate impact on the most vulnerable. An incipient recovery is underway, but it is fragile and exposed to greater uncertainty given the gloomy global outlook and mounting climate risks.

In order to present its vision of the country’s main challenges and point out possible paths to follow to face them, the World Bank presented in December the document “Opportunities for All” (which will soon be available on the institution’s website), aimed at formulators of public policies and Brazilian society.

Looking forward under a new government, Brazil is faced with the task of ensuring recovery from past shocks and building a future with opportunities for the entire population. In this sense, the report presents a prioritized agenda around the four issues presented below, of fundamental relevance for Brazil’s recovery and future resilience.

1) Financing sustainable development

The first is the objective of promoting development in a sustainable manner, given the immediate challenge of situating the country’s enormous needs for growth, inclusion and climate action, while maintaining fiscal discipline to offer lasting opportunities. The country has made progress towards rebalancing the budget, liquidating much of the pandemic’s emergency spending package. But debt levels remain high, spending pressures are high, and a less favorable global and domestic growth outlook poses considerable risks. To reconcile fiscal discipline and development needs, the document offers policy recommendations to maintain a reliable fiscal anchor, make social transfers and taxation more efficient and progressive, and contain public sector remuneration.

2) Build opportunities through productivity

The main obstacle to increasing income in Brazil is the low productivity model of the economy, which has sustained the unsatisfactory economic performance over the last two decades. With the growing dependence of Brazilians on income transfer policies, it is essential to resume the vision of growth and employment as the most important vehicles for the dignity and mobility of the poor population. To this end, the document proposes policy options to: intensify integration and competition through trade; increase innovation and technological advancement; improve the investment environment; and modernize the infrastructure.

3) Increase the skills and economic inclusion of the poor

Despite the impressive gains of previous decades, poverty and disparities remain prominent in the lives of many Brazilians. Before the pandemic, the richest 10% of the population had an average per capita income greater than 50 times that of the poorest 10%. One in five was extremely poor, and the majority resided in households headed by someone without a complete elementary education or without a formal job. The pandemic has widened these discrepancies and today almost half of the future Brazilian workforce (children) are growing up in poor families. It is necessary to offer everyone a greater ability to capture the opportunities that arise with growth. In this sense, the document addresses a set of policies to rebuild capacities, putting learning and skills back on track and strengthening economic inclusion policies.

4) Realize Brazil’s potential as a green economy

The country faces significant impacts from climate change, which are exacerbated by deforestation and land degradation. Climate change is already altering temperature patterns and rainfall patterns in the country, resulting in reduced water availability and prolonged droughts. These problems are expected to get worse over time. Climate shocks could also push 800,000 to 3 million Brazilians into extreme poverty as early as 2030. Reversing these trends will be crucial for future growth and protecting the vulnerable. Halting illegal deforestation in the Amazon and Cerrado biomes is of particular urgency. In addition, the document proposes policies to: curb deforestation; advancing sectoral transitions to net zero emissions and increasing the role of carbon pricing and climate-smart social safety nets as key measures across the economy.

This column was written in collaboration with my colleague Shireen Mahdi, World Bank Lead Economist for Brazil.

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