Brazil and the Future: BRICs or RICs

1
Brazil and the Future BRICs or RICs?

• Albert Fishlow
• June 2006

2
Introduction

• Brazil is still the country of the future after
  two decades of slow growth beginning in the
  1980s
  
• In the 1990s, a veritable economic revolution
  occurred
  
• Privatization
• The end of inflation
• Expansion of international trade
• Why has economic performance failed to show
  dramatic improvement?
  

3
Some Reasons Inadequate Commitment to Education

• Expansion in primary education has occurred in
  last decade, but quality has been lacking
  
• Repetition rates of something like 20
• Literacy after 4 years of schooling only 50
• Bolsa Familia has grown but with greater
  attention to present rather than future
  
• Brazil spends something like 5 of GDP but much
  goes to public universities
  
• Brazil has to catch up and in other areas
  affecting human capital health, sanitation,
  etc.
  
• Inequality will only diminish with full
  educational access
  

4
Some Reasons Savings and Investment Rates

• Brazils rate of investment remains only about
  20 -too low to achieve an annual rate of growth
  beyond 3.5 - 4.0
  
• Infrastructure, housing construction and other
  capital intensive areas are lagging behind
  
• PPPs have hardly begun to take effect
• High real interest rates are not the whole
  problem
  
• Model has to change state as saver, private
  sector as investor

5
Some Reasons Institutional Certainty

• Judicial reform, regulatory continuity and
  political restructuring remain necessary
  
• Personal security is seen to be a major problem
  by the Brazilian population itself
  
• Social security reforms will be necessary,
  breaking the linkage with minimum wage increases
  

6
Conclusion

• China has grown very rapidly through high rates
  of investment and industrial exports
  
• India has expanded by virtue of its
  internationally competitive service sector and
  higher gains
  
• Russia has gained through its petroleum exports
  and dramatically rising prices
  
• Brazil needs to catch up
• Agriculture is a continuing source of comparative
  advantage
  
• Manufactures have diversified and shown
  productivity gains
  
• Service sector has areas of strength
• Higher rates of expansion and diminished poverty
  are realistic goals