Brazil

In response to the Great Recession of 2008, many national governments implemented fiscal stimuli packages in 2009 and 2010 to prevent further declines in aggregate demand... Show More + and to jump start their economic recovery. Where subnational governments responded with fiscal contraction, as in the United States, the impact was muted; where states/provinces also expanded expenditures, as in China and India, the impact was magnified. Increases in recurrent expenditure, which were made in Brazil and India, acted as short-term stimulants; additional public investment, as in China, appears to have had a more lasting impact on growth. Large developing countries typically exhibit high interregional inequality in levels of development and global integration, resulting in differential magnitude and timing of the crisis impact. For example, coastal states in India were affected more severely and quickly than landlocked states; revenue moved in opposite directions in the two types of state in 2009. Where fiscal stress varies widely across subnational entities, central transfers alone cannot prevent pro-cyclicality of subnational fiscal response to a recession. There is need for flexibility in subnational borrowing within a sustainable fiscal framework. Many Indian states were able to maintain or accelerate their spending thanks to the additional borrowing permitted in 2009 and 2010. In comparison, limited borrowing capacity and lack of flexibility in federal grants restricted the contribution of Brazilian states to fiscal stimulus. Legal prohibition of subnational borrowing induced China's provinces to finance additional investments through extra-budgetary borrowing by nongovernment entities, with significant fiscal risks on account of contingent liabilities. Show Less -

This note examines in detail Brazil’s export performance over the past 15 years, focusing not only on growth and composition, but also on different performance dimensions,... Show More + including diversification, sophistication, and firm dynamics. The analysis uses international comparisons to better situate the Brazilian performance, and explores different databases, including firm-level data recently published by the World Bank. The note uses a recent diagnostic toolkit developed by the World Bank in order to suggest some hypotheses about the factors that have been inhibiting exports and industrial production expansion. Among the latter, it is noted how service sectors, as the largest beneficiaries from favorable terms of trade, accommodated larger wage increases and "exported" cost pressures to other sectors of the economy. Furthermore, although a stronger currency can be appointed as one of the elements behind the lower competitiveness in Brazilian exports, sluggish productivity performance and a real wage uptrend explain a significant part of the overall loss of competitiveness. This diagnostic reinforces the importance of resuming the agenda of microeconomic reforms, increasing the investment-to-gross domestic product ratio, and advancing toward better-skilled human capital. Show Less -

This paper measures intangible investment in Brazil. It estimates that during 2000-2008, annual business spending on intangible assets or knowledge-based capital in... Show More + Brazil averaged about 4 percent of gross domestic product. While this is significantly lower than comparable rates for the United States, Japan and the United Kingdom, which hover around 11 percent, it is not too far below estimates for other developed countries such as Italy and Spain. Of the total expenditure on intangible assets in 2006, about 23 percent was spent on computer software and databases, 43 percent on innovative property (predominantly research and development and new product development in financial services), and 34 percent on economic competencies (which comprises branding, employee training and organization improvement). Brazil's share of spending on economic competencies is markedly lower than that observed in the United States and the United Kingdom, and the analysis finds it to be the slowest growing of the major intangible categories. Finally, having extended the intangible investment estimation methodology to produce more disaggregated (industry-level) estimates, the authors show that intangible investment is positively correlated with recent export growth and total factor productivity estimates across manufacturing industries. This suggests that intangible or knowledge-based capital, as measured here, can account for part of the hitherto unexplained component of productivity growth. Show Less -

This report provides a comprehensive description of the full process for supporting the new supervisory authority for closed pension funds in Brazil, The National Superintendence... Show More + for Pension Funds, supervisor of the closed pension fund system in Brazil, or PREVIC, in particular through the development of a revised approach to the risk-based supervision of closed pension funds. This report documents the first-funded World Bank project which, in conjunction with PREVIC, the supervisor of the closed pension fund system in Brazil (established in January 2010), has sought to provide guidance to implement a risk based supervision (RBS) appropriate to Brazilian environment, drawing on international experience. The project ran from January 2010 to March 2012. The key outputs of the project were specified as: i) an assessment of the strengths and weaknesses of the current supervisory benchmarking against best practices in RBS around the world; ii) a roadmap for the implementation of RBS under the circumstances prevailing in the industry; iii) proposals for regulations on selected critical elements for the implementation of RBS framework; and iv) training to supervisors and senior executives of closed pension funds about the main challenges of introducing RBS. Show Less -

Executive Directors approved the Expanding Opportunities, Enhancing Equity in the State of Pernambuco Development Policy Loan Project with the guarantee of the Federative... Show More + Republic of Brazil in the amount of US$ 500 million on the payment terms and conditions set out in the President's Memorandum. Directors expressed support for this operation, citing its consistency with the priority of the Brazil country partnership strategy for 2012-2015 to increase support to the poorer states of the Northeast region of Brazil. The Directors noted the importance of promoting equity and social inclusion, as well as welcoming the strong focus on gender issues into the State's development strategy. Directors encouraged continued attention by Staff to policy implementation and strengthening of the State's institutional capacity with a view to further enhancing the loan's development impact. Show Less -

This report summarizes the findings of research conducted in Brazil on the business case for shifting Bolsa Família payments to a bank account-based (financially inclusive)... Show More + payment scheme, from the standpoint of the payer bank, the recipients, and the program itself. The report concludes that in the Brazilian case the answer to research question is yes, as Ministry of Development (MDS) has proved that it is cheaper to use a financially inclusive account than the limited-purpose instrument. Today, MDS saves 5.83 percent of the cost of payments by having 15.02 percent of banked recipients. If all payments shifted to Caixa Facil accounts and the terms of the contract with Caixa remained the same, MDS would save 31.47 percent compared to a situation where all recipients received their grants through the Social Card. However, MDS has decided not to impose accounts on recipients. The report concludes that in the Brazilian case the answer to research question is yes, as MDS has proved that it is cheaper to use a financially inclusive account than the limited-purpose instrument. Today, MDS saves 5.83 percent of the cost of payments by having 15.02 percent of banked recipients. If all payments shifted to Caixa Facil accounts and the terms of the contract with Caixa remained the same, MDS would save 31.47 percent compared to a situation where all recipients received their grants through the Social Card. However, MDS has decided not to impose accounts on recipients. The study also noted weaknesses in and awareness of Caixa's recourse mechanisms, making it difficult for recipients to resolve problems with their bank accounts. Moreover, the research suggests that recipients perceive savings as something outside their reach. With substantial safety nets and access to credit for asset purchases, they find little incentive to save a portion of their small Bolsa grants or low incomes. A standard current account appears to be ineffective tools for helping this segment accumulate financial assets; one better aligned with existing habits may have more success at increasing savings and even changing transactional patterns. Show Less -

At the request of the Secretariat of Economic Policy (SPE) at the Brazilian Ministry of Finance (Fazenda), the World Bank carried out a second phase of the Non-Lending... Show More + Technical Assistance (NLTA) aimed at supporting the Government's ongoing housing sector reform efforts. Work provided under Phase II of the NLTA focused on two interrelated issues : Proposing the introduction of new instruments which will allow lenders to raise long-term funds from the capital markets; and Identifying options to ensure a better alignment of the Sistema Financeiro de Habitação (SFH), with its two pillars SBPE and FGTS, with the introduction of new capital market instruments. Show Less -

This paper analyzes the macroeconomic implications of population aging in Brazil. Three alternative yet complementary methodologies are adopted, and depending on policy... Show More + responses to the fiscal implications of aging, there are two main findings: First, saving rates could increase and not necessarily fall as a consequence of aging in Brazil -- thus contradicting conventional views. Second, lifetime wealth across generations could increase -- as capital deepening generates a second demographic dividend. Two policy responses to aging are emphasized: First, a structural policy response of linking mandatory retirement (or entitlement) ages to increasing life expectancy would boost labor supply and reduce the fiscal costs of aging. Second, in terms of preferable parametric policy responses, the second demographic dividend will be promoted to the highest extent by keeping taxes and debt unchanged while allowing public pensions to adjust downward. Such a policy response would keep pensions from further crowding out private saving -- thus balancing capital accumulation with intergenerational income distribution. In conclusion, Brazil will not necessarily experience a fall in saving and growth, but if government policies are appropriately, adequately, and timely formulated, population aging is likely to lead to substantial capital deepening and increases in lifetime income, wealth, and welfare. Show Less -

This Brazil quarterly knowledge report newsletter includes some of the following headings: Brazil's ,missing middle by Makhtar Diop; becoming old in an older brazil... Show More + by Michele Gragnolati; Brazil's hour by Mauro Azeredo; multidimensional poverty in Brazil by Guilherme Lichand; when south meets south by Ana Francisca Ramirez, and Mauro Azeredo; rural credit and agricultural production and productivity by Abdoulaye Sy, and Barbara Farinelli; improving opportunities in Brazil; Rousseff's political and economic challenges by Denise Marinho; and in the loop: some of the quarter's noteworthy events. Show Less -

This Brazil quarterly knowledge report newsletter includes some of the following headings: social assistance and shocks: the food crisis and CCT's by Fruttero, Anna;... Show More + a critical juncture by Diop, Makhtar; Bolsa familia and entrepreneurship by Lichand, Guilherme; savings, poverty and lifecycle in Brazil by Rocha, Romero; the Brazilian economy and the advent of pre-sal by Firmo, Marcio Gold; a Greenfield moment for investment in Brazil by Marinho, Denise; Ximenes, Jivago; and Firmo, Marcio; a path to efficient public investment management by Velloso, Tarsila; building a public management policy community by Levy, Evelyn; green growth in Brazil by Azeredo, Mauro; summer (or winter): it's time travel by Ximenes, Jivago; and Cordella, Tito; and in the loop: some of the quarter's noteworthy events. Show Less -