Brazil’s Growth Imperative

In 10-15 years, Brazil will be faced with a tremendous opportunity to capitalize on its demographic dividend. But, unless its government takes action now to boost GDP and productivity growth through industrial policies that emphasize investment in infrastructure and skills acquisition, it will miss its chance.

SÃO PAULO – Brazil has lost its swagger. Growth estimates for this year put Latin America’s largest economy above only Venezuela and El Salvador in the region, and the outlook for next year is not much better. Brazil’s currency, the real, has fallen to its lowest level against the US dollar in more than four years, compelling the government to pump billions of dollars into the foreign-exchange futures market and raise interest rates to deter capital outflows – just a few years after imposing a new tax to deter inflows. So what is really happening in Brazil, and what can be done to secure a prosperous future?

To be sure, Brazil has done remarkably well on some measures of economic performance over the past decade. For example, its extensive social programs, combined with past GDP growth, have improved the country’s income distribution markedly.

But, over the same period, annual GDP growth has averaged a modest 3.5%, and productivity growth has slipped into negative territory. Brazil’s labor productivity is one-fifth that of the United States and lower than that of Mexico and Chile. As a result, Brazil may not be as well positioned to take advantage of its demographic dividend (when a rising share of working-age people creates new opportunities for economic growth) as its leaders believe.

We hope you're enjoying Project Syndicate.

To continue reading, subscribe now.

Subscribe

Get unlimited access to PS premium content, including in-depth commentaries, book reviews, exclusive interviews, On Point, the Big Picture, the PS Archive, and our annual year-ahead magazine.

http://prosyn.org/1SYUR2F;

Cookies and Privacy

We use cookies to improve your experience on our website. To find out more, read our updated cookie policy and privacy policy.