Remarks by Angel Gurría, OECD Secretary-General, 22 October 2013, Brasília, Brazil

(As prepared for delivery)
 

Minister, Ladies and Gentlemen,

 

It is a great pleasure to be back in Brasília. As you all know, Brazil is not a member of the OECD, but you are like a member of the family!

 

Our partnership goes back a long way. We are launching today our sixth Economic Survey of Brazil, and we have also worked together on many other areas, like regulation, integrity in the public service, education, agriculture and regional policies. Only today, in conjunction with Minister Manoel Dias, I launched a study on labour market inclusion for young people – Investing in Youth. Yesterday, Minister Mercadante and I signed documents to mark Brazil’s accession as an Associate member on the Governing Board of PISA – our Programme for International Student Assessment. Brazil is the first non-OECD member country to participate as an Associate on the Board of PISA. This is a very important conquest!

 

I hope this ever richer collaboration and deeper engagement has been as valuable in advancing Brazil’s reform agenda as it has been for us. Through this interchange, we have shared with Brazil our assessments and the experience of our member countries and partners, and have reflected in our work the perceptions, priorities and specific circumstances of Brazil. This journey has truly been one of mutual learning and benefit.

 

Brazil’s achievements have been impressive

 

Today Brazil has one of the world’s largest economies. Its economic growth has been reasonable, even though the global economy is still facing the problems created by the financial crisis and its recovery has been hesitant and uneven. Domestic demand in Brazil continues to be strong on the back of a gradual expansion of household consumption. Investment is gathering momentum again, boding well for accelerated growth in the near future.

 

Perhaps even more importantly, the benefits of economic growth are being shared more equally. The poverty rate has fallen and income inequalities have lessened. More people than ever before are at work – nearly 7 in 10 working-age Brazilians – and more jobs are being created. At 5.3%, the unemployment rate is at a historically low level, and more than half the population now have a formal job, with a signed work card and access to credit. Over 40 million people joined Brazil’s middle class in the last decade. This is almost one in five Brazilians!

 

This inclusive growth hasn’t happened by accident. It is the result of effective policies, implemented to ensure a stronger and fairer growth. Efforts to facilitate public access to education are delivering sustained increases in schooling and educational attainment, allowing workers to obtain better paid jobs. Income support programmes are also being strengthened: as we all know, Bolsa Família is a prime example, a targeted income support programme that links social transfers to school attendance and participation in preventive health care.

 

One of the OECD’s mottos in recent years has been to “Go Institutional”, and Brazil has also done much in this area. The reforms that started in the mid-1990s laid the foundations for the macro-economic consolidation that Brazil has experienced since. Based on a budget rule that has delivered sustained primary surpluses, fiscal policy has put liquid government debt on a downward track. And the monetary regime, combining inflation targeting and a flexible exchange rate, has tamed inflation and allowed real interest rates to come down over the years.

 

These are all impressive achievements, but they are not cause for complacency. Like other countries in Latin America, Brazil is still facing a series of important challenges.

 

Challenging problems persist

 

Despite the remarkable progress in reducing poverty, much remains to be done. The levels of poverty in Brazil are still higher than in other Latin American countries. A significant proportion of the population which has escaped from poverty is still in a vulnerable situation. As our Survey reports, one quarter of Brazilians still live in dwellings with no access to a sewage network or septic tanks, while 7% of dwellings have no access to piped water or wells.

 

Reducing inequalities among regions and households is one of the greatest challenges in Brazil. In spite of recent progress, Brazil still has one of the highest inequality levels in the world and it would take at least 20 years at the current pace to reach the inequality levels of a country like the United States, which is one of the most unequal OECD economies.

 

Furthermore, the global crisis has brought shortcomings in productivity and cost competitivity to the fore. Supply-side constraints, which impede growth, include infrastructure bottlenecks and an onerous and fragmented tax system. In addition, there are other, longer-term challenges as the Brazilian population will start to age faster a decade from now, while pension expenditures are already increasing.

 

Brazil’s external sector also faces important challenges. Brazil’s participation in international trade and its integration into global production chains is less than what might be expected, particularly for such a large and sophisticated economy. Obstacles continue to prevent Brazilian consumers from benefiting from foreign goods at lower prices. Furthermore, the participation of Brazilian small and medium-sized enterprises (SMEs) in global value chains is comparatively low: only 7% of small and 19.9% of medium-sized Brazilian companies engage in export activities.

 

Keeping up the reform momentum

 

In order to face these and other challenges, and to continue making progress, Brazil needs to step up its structural reforms. For example, it is essential to ensure that macroeconomic management continues to be targeted at reducing government indebtedness, and at keeping inflation well anchored around the central target of 4.5%.

 

It is also essential to increase the productivity of the Brazilian economy. For that, investment in education, training of workers, entrepreneurship, infrastructure and innovation will be the vital ingredients of success. Our PISA Programme for International Student Assessment puts Brazil among the countries that have made the fastest progress in improving their education system. It is also one of the few countries which have increased their PISA scores in every category – reading, mathematics and science – between 2000 and 2009.

 

However, there is still much that needs to be done in this area. Scaling up early childhood education; continuing the expansion of in-service teacher training; and building more schools, where needed, to ensure full-day schooling nationwide, are some of the areas we have identified as having a huge potential impact.

 

Infrastructure is another crucial area. More and better roads, railroads, ports and airports will make Brazil more efficient and attractive to investors and Brazilian firms more competitive, so as to thrive in the global value chains. It is therefore important for the government to work with the States and towns towards improving their managerial and technical capacities for executing infrastructure projects without unnecessary delays; and for implementing the planned modernisation of the port sector through regular concession tenders without automatic renewal.

 

A simpler, less burdensome tax system is also needed. This could simultaneously raise revenue and ease the burden on the majority of Brazilian companies and citizens. Reforms like these would improve the business environment and would help to enhance the productivity of the economy.

 

Ladies and gentlemen:

 

Brazil is tackling its economic and social challenges in a remarkable manner. The aim now is to maintain this momentum and to avoid the temptation of complacency. There is still so much to do. Brazil is adopting best practices in several areas but the best of Brazil is yet to come.

 

Latin America still has a huge debt towards millions of its citizens . The quality of our policies, of our reforms, is making a difference. We are turning the tide. Brazil is proof of this.

 

Let’s keep strengthening our collaboration, our Brazil-OECD partnership, to deliver better policies to provide better lives for our citizens.

 

Thank you very much.