The World Bank In Brazil

Brazil experienced a strong rebound in 2021-2022 after negative growth in 2014-2019 and the drastic impact of COVID-19. Its GDP grew on average by 3.3 percent per year in real terms in 2001-14, propelled by the international commodities boom and the domestic expansion of social programs, among others. Falling commodity prices, political turmoil, and unaddressed structural challenges led to an economic recession, with real GDP growth falling to an average of -0.3 percent between 2014 and 2019 and -3.3 percent in 2020 due to the COVID-19 pandemic. Growth rebounded to 5.0 percent in 2021 and 2.9 percent in 2022, propelled by a strong fiscal stimulus, a successful vaccination campaign, a favorable commodity market, and demand for services.

Growth remains solid in 2023, expected to reach 2.6 percent, driven by agriculture, and boosted by households and government consumption. CPI-inflation slowed to 4.6 percent in August 2023 – within the target range - after a peak of 12.1 percent in April 2022. This enabled the Brazilian Central Bank to lower the policy interest rate to 12.75 percent in September (from a high of 13.75), with further decreases expected. The current account deficit stood at 2.5 percent of GDP in the 12 months to July 2023, financed mainly by net FDI inflows at 2.4 percent of GDP. International reserves stood at 17.1 percent of GDP (US$ 345.5 bn) in July 2023. After improvements in 2022, fiscal balances showed some signs of deterioration in 2023 as revenues moderated and social transfers increased. As of July 2023, the 12-month primary deficit of the non-financial public sector reached 0.8 percent of GDP, from a surplus of 1.3 percent of GDP in 2022. Public debt increased to 74.1 percent of GDP as of July 2023. In the medium term, the budgetary outlook is expected to be anchored by the new fiscal framework, which sets out to maintain a primary surplus from 2024 and stabilize debt by 2026.

Yet several structural challenges persist, and Brazil’s growth trajectory is far below its peers. Productivity remained stagnant in manufacturing and many services sectors, where over 90 percent of the workforce is employed, even though large-scale agriculture growth helped promote food security and poverty reduction among parts of the rural population. Recurrent and rigid public spending still crowds out critical investments across sectors.  Brazil’s growth is expected to hover between 1.3 and 2.4 percent in the next four years, well below China, India, and Turkey.

Poverty rates remained stagnant between 2014 and 2022. Poverty was cut in half (with 27 million of Brazilians lifted out of poverty) from 2001 to 2012 thanks to economic growth, increased labor formalization and the expansion of social policies, but the crisis that started in 2014 led to stagnant income growth among the poorest and little progress in poverty reduction. Brazil implemented a bold set of emergency measures during the COVID-19 pandemic to help protect the most vulnerable populations, in large part through the expansion of the Bolsa Família (BF) program, and increased job opportunities arose as part of the economic recovery. Overall, poverty is projected at 24.3 percent in 2022, on par with 2014 levels, after peaking at 28.4 percent in 2021.

The 2023 poverty outlook looks promising, but faster job creation and stronger investments in human capital are needed to reduce striking inequalities. A real increase in minimum wages, a major overhaul of the Bolsa Família, and the planned introduction of additional benefits for families with children are expected to drive poverty further down in 2023. Yet Brazil remains one of the most unequal countries in the world, with a Gini coefficient of 0.53 in 2021 and the wealthiest one percent owning almost half of the country's household wealth. Inequalities are striking across regions, particularly between the poorer northern and the richer southern regions, but also within cities and between rural and urban areas. Female-headed households, Afro-Brazilians, and indigenous populations are overrepresented among the poor, as they face worse labor market outcomes and enduring wage gaps (even within comparable sectors and levels of skills). Today, nearly half of Brazil’s children, the country’s future workforce, are growing up in poor households.

The Brazil 2023 Systematic Country Diagnostic (SCD) update identified four development challenges:

The first is to create opportunities for all Brazilians through a focus on productivity-led growth and a competitive economy. Currently, Brazil's productivity levels in manufacturing and services are still below several Latin American countries, and economic growth has been tepid, decoupling from country peers. Brazil’s growth model continues to rely on factor accumulation, i.e., the expansion of labor, capital, and land. This model delivers only limited growth as demographic tailwinds are fading, low domestic savings constrain capital formation, and land accumulation manifests in deforestation. Brazil needs higher savings and investment rates. But as an upper middle-income country, it particularly needs to boost its growth in total factor productivity (TFP): TFP has been falling by 0.8 percent between 2014 and 2022, especially in the non-commodities sectors.

The second development challenge is to develop a people-centric strategy that increases the income-generating capacity of the poor. With a fifth of the population in chronic poverty before the pandemic, the COVID-19 crisis further exposed the vulnerability of Brazilian households to shocks. The gains of earlier years in households’ income-generating capacity have not been reproduced. In 2019, one-fifth of Brazilians were classified as chronically poor due to their lack of basic assets to leverage their income. While access to education improved, quality remains a concern, as the average student has low performance in both national and international assessments. The pandemic further worsened learning outcomes and inequality due to school closures and higher dropout rates, which will have long-lasting consequences on the future productivity of children.

The SCD update estimated that it may take up to 13 years to recover the losses caused by the pandemic in human capital. Access to relevant skills for the job market, especially in science, engineering, and technology fields, is limited, and there are gender gaps in these areas. Higher education enrollment is highly dependent on family income, reinforcing inequality. There are still gaps in basic access to health services and sanitation. Land tenure is unequally distributed, with high insecurity affecting low-income individuals. While financial inclusion has improved, certain groups still struggle to access financial assets.

The third challenge is to unlock the country’s potential as a green economy. Brazil faces significant, recurring, and increasing losses from climate-related events: in 2019, reported losses were over BRL 22 billion, almost twice the long-term average of BRL 13.3 billion. Droughts are the costliest hazard, followed by flash floods, riverine floods and wildfires. These events impact agribusiness (the agriculture sector loses on average the equivalent of 1percent of agricultural GDP annually as the consequence of extreme climate events), the energy sector (substantially relying on hydro energy), and rural areas, but also disproportionately affect the rural poor who have few options to protect themselves from natural hazards and the urban poor, particularly those living in informal settlements.

Brazil's greenhouse gas emissions profile differs from other countries, with land use change / deforestation (52 percent) and agriculture (24 percent) being the primary contributors. The third-largest emissions source, and the primary one when focusing on urban areas, is the energy sector, with transportation responsible for 45% of emissions within this sector. This is predominantly a result of the substantial dependence on road transportation and vehicles running on fossil fuels. Decarbonizing the transportation sector is important to reduce demand on fossil fuels in the country.

Brazil made progress in reducing deforestation in 2004-2012, but deforestation rates have been steadily increasing since 2014 reaching 11,568 km² in 2022. In 2023, public policies in support of the environmental protection agenda have been reinstated and have already shown positive results. The Amazon rainforest alone, about 60 percent of which lies in Brazil, delivers ecosystem services valued at a minimum of USD317 billion a year to Brazil and the world. Deforestation puts these services at risk, especially if a tipping point is triggered and results in the permanent dieback of the Amazon. Modernization of land registration practices and incentives for more sustainable land use are crucial to address the country’s environmental needs.

The fourth key development challenge is to finance the country’s inclusive growth through a sustainable framework that relies on more efficient spending, better taxes, and a sound fiscal framework. Structural fiscal reforms, including addressing persistent structural spending issues and improving the tax system, will be critical for the country to find ways of creating space to support a new inclusive growth model. Factors such as public sector pay and pensions, and increased demand for social protection spending, continue to strain public finances. Managing the public service wage and pension bill is crucial, with the federal government wage premium and state pension deficits being sources of concern. Human resources challenges include wage disparities, fragmented and rigid structures, and inadequate performance management. The country's tax system, highly reliant on consumption of goods and services, offers opportunities for more progressive taxation and increased efficiency. The intergovernmental transfer system needs revamping to address horizontal gaps between states. Several state and municipal governments are facing a fiscal crisis, yet states and municipalities are responsible for the front-end provision of basic services to the population, such as education and health. Comprehensive administrative reform is needed, focusing on fiscal aspects, governance, and the quality of public service delivery.

Last Updated: Oct 09, 2023

The World Bank Group’s goals of reducing poverty and promoting shared prosperity are as relevant as ever in the current Brazilian context.

Brazil is a large middle-income country that aspires to become a strong leader of the global South, albeit in a challenging context. After governing in 2003-11, President Lula started a third mandate in January 2023 and explicitly stated his intention to “bring Brazil back” on the  global stage. Brazil will preside the G20 starting in December 2023 and will host the 30^th UN Conference on Climate Change (COP-30) in Belém, in the Amazon, in November 2025. Brazil also plays a leadership role in the context of South-South exchanges. President Lula has reasserted a strong government focus on reducing hunger and protecting the environment, but today’s context is challenging. Growth has been low, high inequalities are structurally persistent, poverty rates stagnated since 2014, and productivity growth in manufacturing and services is below MIC peers. Large-scale agriculture registered a more positive growth trajectory, but often with extension methods that can threaten important biomes and biodiversity.

Brazil remains systemically important for the world’s economy and natural assets, including the Amazon (60 percent of which is in Brazil). The country contributes to global public goods, and serves as a policy innovation lab with relevant lessons for other countries, as demonstrated by its experience with Bolsa Família (BF), the social registry (Cadastro Único, CadU) used to target 33 federal programs and dozens of subnational programs and services, the Food Purchase Program (Programa de Aquisição de Alimentos—PAA), and Crop Bonds (Cédula de Produto Rural—CPR), among others.

The World Bank Group has been working with the Brazilian government to address capacity, institutional, and regulatory gaps in the way of Brazil’s sustainable recovery and accelerated inclusive growth—at both the federal and subnational levels. In addition to addressing the immediate impacts of COVID-19, a green, inclusive, and sustainable recovery from the pandemic calls for reforms that support fiscal sustainability, poverty reduction, and productivity.

The Country Partnership Framework (CPF) for Brazil covering fiscal year (FY) 2018–2023 was built around three focus areas:

1.       Fiscal sustainability and improved service delivery. This pillar focuses on fiscal adjustment support at the federal, state and municipal) levels, including pension and social protection systems. It also addresses greater efficiency in public service delivery, especially education and health.

2.       Productivity growth and private sector investment. Goals under this pillar relate to efforts to reduce the regulatory barriers that undermine competitiveness, as well as to correct distortions in the credit market and mobilize investment in infrastructure.

3.       Inclusive and sustainable development. The goal here is to support Brazil’s ambitious nationally determined contribution (NDC) under the Paris Agreement by promoting global partnerships.

In 2022, Brazil’s Performance and Learning Review (PLR) zoomed in on the: (i) inclusive growth, (ii) green recovery and climate, and (iii) fiscal sustainability. At the end of the FY18-FY23 period, the forthcoming Completion and Learning Review (CLR) suggests that a concerted effort of World Bank and client counterparts ensured significant progress across all CPF focus areas in an evolving context.

Substantial developments occurred in strengthening fiscal management; providing social protection and essential services to the poor; mobilizing the private sector for development; improving environmental management capacity at subnational levels; and promoting the inclusion of vulnerable groups. The World Bank delivered a robust lending program (although below anticipated levels), advisory services, analytics, and knowledge products that enabled the Government and counterparts to implement activities that supported the CPF outcomes and countered negative effects of COVID.

Preparation of the new CPF that will cover FY2024-2028 period is well underway, rooted in the diagnosis and recommendations provided by the recent SCD Update, the Opportunities for All Policy Notes and the CCDR. The overarching objective of the new CPF will be to help Brazil build a productive, inclusive, and green economy while also strengthening its institutional foundations. The FY24-28 CPF will focus on the World Bank support to: (i) greater productivity and employment opportunities; (ii) greater inclusion of poor and underserved people; and (iii) reduced greenhouse gas emissions and climate vulnerability.

Last Updated: Oct 09, 2023

Brazil’s project portfolio spans across all key sectors of the country’s economy and has had significant positive impacts on people’s lives—including, in particular, the most vulnerable. As of September 2023, IBRD portfolio consists of 25 projects at federal, state, and municipal levels with $3.79B in commitments, and another three projects financed by Recipient-Executed Trust Funds with a net total commitment of US$125 million.

The next section presents some highlights of the World Bank’s operations in Brazil.

Fiscal Sustainability and Improved Service Delivery

Education

In the 15 years prior to the pandemic, the quality of education in Brazil had been improving gradually. However, despite moderate progress, learning levels lagged behind comparable peers. This challenge is illustrated by the fact that, in 2019, 4 out of 10 Brazilian youths had not finished secondary school by the age of 19. Furthermore, a significant share of children under the age of 3 still lack access to early childhood education. Altogether, these facts impose a number of obstacles to economic and social development, which will be exacerbated as a result of the pandemic.

In this context, the Bank has consistently engaged with Brazil through investment projects that, in addition to providing financial support, also help to strengthen local capacity by sharing global expertise and knowledge.

The Support to Upper Secondary Reform in Brazil Operation advocates for an ambitious reform in the upper secondary school curriculum across the country. Along with financial support to expand the full-time school network and implement a competence-base curriculum, this US$250 million project addresses some of the new challenges brought about by the pandemic, including: (i) introduction of a hybrid model that is compatible with the new curriculum; (ii) lack of connectivity at schools; and (iii) digital infrastructure to facilitate distance learning.

The US$250 million Recovering Learning Losses from COVID-19 Pandemic in Brazil project promotes learning acceleration strategies concentrated in the most vulnerable states in Brazil’s North and Northeast. This Program for Results (PforR) will support the Brazilian strategy to promote learning recovery and address the increase in school dropout rates resulting from the health emergency crisis.

Another five multisectoral projects where the education component plays a key role (in multiple states and one municipality) are also part of our institutional support.

Among subnational projects, the Salvador Social Multisector Service Delivery Project, and its Phase II, which supports pandemic recovery, aims at improving the efficiency of social service delivery in the municipality of Salvador, one of the largest yet poorest urban areas of Brazil. The project supports innovation to consolidate and accelerate the acquisition of foundational skills and prevent school dropouts in primary and lower secondary education.

Most generally, this program also includes a rich set of analytical activities (including impact evaluations and assessments), a Brazil Human Capital Review, and technical support.

Health

Portfolio

The Paraná Public Sector Modernization and Innovation for Service Delivery Operation will support the expansion of hospital capacity to deliver COVID-19-related treatment, restructuring public health service delivery, and introducing new technologies to rationalize the Paraná state hospital network and strengthen coordination across different levels of care. It will also invest in environmental and disaster risk management information systems to improve service delivery and public sector management interventions.

The current portfolio also includes subnational operations focusing on (i) maternal and child health care, (ii) chronic diseases, (iii) strengthening of primary health care, and (iv) strengthening of health management systems.

For example, in its Phase I, the Salvador Social Multisector Service Delivery Project improved the delivery of public health services through the expansion of primary health care (PHC) coverage, reaching 56.95 percent of the population in May 2023, from a baseline of 46 percent, and the consolidation of secondary and tertiary care under municipal governance. Notable results have also been achieved in the use of technology to improve health care management, as evidenced by some of the project indicators. As of June 2023, the number of municipal health care facilities with an operational electronic medical record system had increased from a baseline of 0 to 175 units (surpassing the original target of 126); the number of municipal health care units providing health services under the municipal regulation system (Sistema Vida+) had increased from 22 to 175 (surpassing their target of 136); and the number of municipal primary care units with a management system in place had increased from 30 to 175.

Phase II of the project, in effect since October 2021, continued to support progress in these areas, in addition to facilitating the emergency response to the COVID-19 pandemic. For example, in April 2023, the number of hospital admissions for conditions which could be treated with primary health care interventions decreased from 27 percent to 22.7 percent; home visits by multidisciplinary health care teams increased from 1,046 to 8,329; and the percentage of municipal health facility patients with electronic medical records increased from 60 percent to 98.4 percent.

The Rio Grande do Norte Regional Development and Governance Project has enhanced the offer of health care services targeting women and children by increasing the number of maternity wards and functional beds for newborns – the new Women Hospital started offering health services in December 2022. The project also aims to increase the number of emergency health care units in the state, and has strengthened their capacity to treat cancer and to diagnose various diseases in two new laboratories. The project has allocated about US$5 million to respond to the COVID-19 pandemic through the acquisition of medical and personal protective equipment.

The World Bank is also supporting analytical work in a range of areas. This includes technical assistance related to strengthen health care systems, including on topics related to funding, efficiency, equity, and quality of care.

Social Protection

The support provided by the Bank to the COVID-19 social protection response was anchored in a large federal operation (US$1 billion) to help mitigate the negative economic effects associated with COVID-19 on income, and the risks affecting the human capital of poor families. The project was approved in October 2020, and ended in December 2022. It financed the expansion of the Bolsa Família  Auxílio Brasil conditional cash transfer program to newly and previously uncovered affected groups.

On the analytical front, the Bank is focused on informing a medium-term reform of the social protection system to respond to the challenges arising from global megatrends and to new emerging priorities resulting from overlapping shocks. This will be done by delivering a robust set of advisory and analytical services focused on:

• Social Protection System for Brazil of the Future: This policy note explores the gains to be reaped from coordinated multisectoral policy reforms to reduce poverty and increase shared prosperity in a fiscally sustainable manner, taking into account the new challenges posed by global megatrends. With an outlook to 2040, it offers 10 medium-term policy reform proposals that could enable Brazil to take advantage of changes in the world of work, technology, and delivery systems, and to “build back better”.
• Human capital: The goal is to support the redesign of Criança Feliz (now called Primera Infância no SUAS), the world largest early childhood development (ECD) program, and implement impact evaluations on the use of technology among Crianca Feliz beneficiaries and on Bolsa Família  in terms of coverage, targeting, and fiscal cost.
• Social assistance: The note New Bolsa Família: challenges and opportunities for 2023 discusses the circumstances faced by the Ministry of Development, Social Assistance, Family, and Hunger Alleviation (in Portuguese, Ministério do Desenvolvimento e Assistência Social, Família e Combate à Fome, MDS) at the outset of the new administration in reshaping and implementing the new Bolsa Família Program. It also discusses the measures adopted during the first 100 days, how they responded to those challenges, and what still needs to addressed in the coming months of 2023.
• Economic inclusion of Bolsa Família beneficiaries: Strategies for labor market inclusion of Bolsa Família beneficiaries, review of its graduation rule, and exploration of the factors that explain why and how long beneficiaries stay in the program.
• Delivery systems: Policy note on the challenges related to Auxílio Brasil, and how a return to Bolsa Família might affect poverty and inequality rates.
• Social insurance rightsizing: Study on regulatory activities to achieve better fiscal sustainability for pension schemes at the subnational level, and suggestions for reform of the unemployment insurance system in Brazil. 
• Migration: Ongoing work to assess the barriers faced by Venezuelan migrants when trying to enter the labor market, as well as opportunities  to improve the labor intermediation services (SINE) and social assistance (CRAS) protocols to better serve this growing population.

The following studies are now available:

• Human Capital Review: This study looks at the evolution of the human capital index (HCI) in Brazilian states and municipalities in 2007–19, analyzes existing population gaps and its drivers, and assesses the impact of the COVID-19 pandemic on human capital.
• Brazil Poverty Assessment: This study aims at providing relevant evidence on the drivers of poverty and inequality in Brazil, with a strong focus on understanding the welfare of Brazilians during and after the COVID-19 pandemic.

Productivity Growth and Private Sector Investment

Agriculture

The World Bank's agriculture and rural development programs support states in strengthening productive activities and increasing access to markets both institutional and private - that help increase the quality of life and income of family farmers while strengthening their resilience to climate shocks and mitigating GHG emissions stemming from agricultural production. The majority of the WB support to the agriculture sector is concentrated in the poor regions in the Northeast, to foster inclusion, increase income of poor family farmers and strengthen their resilience to climate change (mostly droughts). In the other regions of Brazil, WB support is oriented towards fostering the development of a sustainable agriculture, increasing resilience, while supporting climate-smart agricultural practices that help mitigate GHG emissions. Innovative approaches that are tested with success in one State are also leverage and applied in other States. For example, the successful support to young people to develop their own agricultural activities that was tested in Santa Catarina with the Rural Competitiveness Project (P118540) was adapted and replicated in the ongoing Ceará Rural Sustainable Development and Competitiveness project – Phase II – P167455).

In addition, WB projects invest in public goods and complementary infrastructure to support agricultural activities, such as agrologistics, alternative energy sources, reduction of agroclimatic vulnerabilities, and water supply and sanitation. One such example, the Bahia Sustainable Rural Development Project—Bahia Produtiva, which ended in December 2022, supported strategic investments in several value chains, as well as in the formation of market alliances between producers and private companies to enable the necessary investments to meet market requirements in terms of both quality and quantity. The project also supported the recovery of different biomes through the adoption of agroforestry practices and systems and several other climate-smart practices that increase production and strengthen climate resilience.

Other initiatives, such as the Paraíba Sustainable Rural Development Project, focus on fostering agricultural production by family farmers and producers organizations, including by providing water access for household consumption and agricultural production. This project enables vulnerable farming communities to increase their food and water security in Brazil's driest region by reducing/eliminating the time spent by families fetching fresh water, diversifying food production, increasing access to markets, which leads overall to improving family farmers’ income.

The Bank is also supporting the adoption of climate-smart, resilient, and inclusive policies for the agricultural sector, through several projects and analytics.

For example, the State of Goiás Sustainable Recovery Development Policy Financing (DPF), approved in May 2022, helps steer the state’s agricultural sector toward climate-smart practices, including the adoption of a state climate mitigation and adaptation plan. This DPF supports measures that reduce greenhouse gas emissions and increase carbon storage in the soil, and aims at a 10-percent annual increase in the use of nonchemical fertilizers and phytosanitary products. It strengthens the climate focus of the state environmental licensing framework by reducing compensation fees for GHG emission-neutral enterprises. Finally, the DPF will support land tenure regularization for smallholders through regulations that are environmentally sound, inclusive, and gender-balanced.

Furthermore, the Bank is contributing to integrating agricultural (including livestock) and environmental policies through a partnership with the Ministry of Agriculture and Livestock, and the Ministry of the Environment aimed at the implementation of Global Environmental Facility Grants such as the Vertentes GEF FOLUR. In this project, sustainable agricultural practices are disseminated in large tracts of Cerrado landscapes through technical assistance provided to farmers.

Finally, the WB is undertaking several analytical studies to support the development of a green, resilient and inclusive agricultural sector:

• Estimates of public support to agriculture at the State and federal level and options for repurposing towards a green, resilient and inclusive development.
• Increasing productivity without deforesting: policies options for optimizing the use of degraded pastures.
• Designing Productive alliances projects to foster the adoption of Climate-Smart Agriculture practices, with the support from the Korean TF (KGGTF).
• Scaling up innovations for Climate-Smart Agriculture, with the support from the Korean TF (KGGTF).

Inclusive, Resilient, and Sustainable Cities

The World Bank recognizes the importance of Brazilian cities. Brazil is a highly urbanized country, hence what happens in cities can be a great platform for change in promoting low-carbon, inclusive, and resilient development. While Brazil’s growth rate is in decline, the country’s urbanization rate is still high, with approximately 87 percent of the population living in urban areas (IBGE estimates, 2019). Cities are also drivers of economic growth and development. The 25 largest urban areas in Brazil generate 63% of the country’s GDP.

However, urban development in Brazil has resulted in an unbalanced system of cities. Overall, there are few largely populated capital cities and metropolitan regions (many of which are along the eastern coastal areas of the country), many small-sized cities spread throughout the country, and very few medium-sized cities (mostly concentrated in the Southeastern and Southern regions). But there is a change underway. In the past two decades, urban population growth has been greatest not in major hubs, but in smaller cities, which tend to have more limited capacity to manage urbanization and deliver urban services (CUT 2021). In fact, cities like Rio de Janeiro, Belo Horizonte, Recife and Salvador have lost population over the last twelve years, posting negative growth rates of 2, 3, 3 and 10 percent, respectively. On the other hand, medium-sized cities, like Boa Vista and Goiânia, are growing at a very fast pace, at 45 and 10 percent rates, respectively (IBGE, 2022). This data brings about important considerations, on a potential productive decentralization underway, which is pushing development (and in turn its related urbanization challenges) to cities in the North and Center-West regions of the country.

Cities in Brazil contribute a large and growing proportion of the country’s greenhouse gas emissions. They also suffer from a high concentration of poverty, as well as dramatic sociospatial inequalities, all exacerbated by the rising frequency and intensity of extreme climate events, which affect the poor and vulnerable in a disproportionate manner.

The World Bank's support for promoting inclusive, resilient, and sustainable cities comes in different ways, including policy dialogue with the Federal Government, innovative one-on-one engagements with larger municipalities, and initiatives at scale to reach the smaller. These efforts aim to address their specific multidimensional challenges related to sector policy formulation and capacity building; enabling systems around urban planning, management and finance; the provision and maintenance of infrastructure and services at the local level, especially for the poor and disadvantaged; the management of urban pollution; and overall access to opportunities and social equity.

The Fortaleza Sustainable Urban Development Project, for example, benefits more than 300,000 people through a set of urban and environmental improvements, which are expected to drive the transformation of the entire western (underprivileged) portion of the city. This project comprises the implementation of a 10-km-long linear urban park; the reduction of point-source pollution along the coastline; and an increase in the municipality’s own-source revenue capacity.

In addition, the World Bank has been investing in innovative ways of providing municipalities with finance to support integrated urban resilience projects. This is being promoted, for instance, through Sul Resiliente credit line, an operation between the World Bank and the Brazil’s Southern Regional Development Bank (Banco Regional de Desenvolvimento do Extremo Sul—BRDE). BRDE  will be able to act as a financial intermediary to on-lend to small and medium-sized municipalities in southern Brazil interested in promoting the resilience agenda. This project comprises a specific credit line to finance disaster risk management and mitigation projects for events such as floods, landslides, and coastal erosion.

Finally, a recently approved municipal operation – Promoting Green, Resilient and Inclusive Regeneration of the Central Area of Porto Alegre (Centro+4D) – is seen as a critical anchor contributing to unlock the transformation of Porto Alegre’s urban core in the direction of the city’s proposed long term development vision. The project is supposed to implement integrated investments to improve accessibility, livability, and promote other positive externalities in the city. A series of flood risk reduction investments and climate-informed upgrades to public spaces will be made to increase green areas, reduce car use, and attract local economic development to the urban core.

In addition, special investments will be targeted to the social and economic inclusion of selected disadvantaged and vulnerable groups and individuals that are present in the intervention area, such as waste pickers and street vendors. The Project will also yield institutional and capacity-building benefits, as it will enhance the municipality’s capacity to promote urban resilience and adopt green, resilient, and inclusive practices in urban planning and management, urban mobility, and social inclusion.

Over the medium to long terms, this operation will help unlock opportunities for economic development and mobilization of private investments in Porto Alegre. Centro+4D will be jointly co-financed between the World Bank and the Agence Française de Développement (AFD).

Inclusive and Sustainable Development

Environment

Few countries have ecosystems as rich, diverse, and critical to the well-being of their population as Brazil. Brazil holds one third of the world’s tropical rainforests, 20 percent of the world’s freshwater supply, and the Cerrado biome—a tropical savanna with the world’s highest rate of biodiversity. A significant part of the Brazilian economy relies on the use of natural resources. Brazilian forests are also huge carbon sinks and an important asset for maintaining the global climate balance.

In recent years, Brazil has enhanced its environmental legislation and implemented several initiatives to combat climate change, with significant emission reductions and the World Bank has supported the implementation of those programs through a variety of initiatives

The Brazil Amazon Sustainable Landscape Project (ASL) has been a long term support to the Amazon Protected Areas System which aims at:

(a) Improving integrated governance and management at landscape level;

(b) Expanding the uptake of sustainable practices and participation in production chains linked to timber/nontimber and fisheries, as well as identifying and fostering opportunities for new sustainable uses of native biodiversity;

(c) Expanding ongoing efforts and exploring new approaches to strengthen the implementation of key legal instruments for forest recovery; and

(d) Improving Brazilian stakeholders’ implementation and collaboration capacity.

The Amazon Region Protected Areas Program (ARPA), which is a component of the ASL, started in 2002 and currently supports the consolidation of 119 protected areas. Ongoing technical studies aim at the creation of 19 new federal and state-level units, with an estimated total area of 4.96 million hectares. In addition, activities under implementation include:

• Training new Voluntary Environmental Agents in the state of Amazonas;
• Signing nine additional fishing agreements in the state of Amazonas, and supplying equipment for community-based tourism, seedling nurseries, signage, and so on;
• Assessing proposals for four protected area management plans;
• Creating a fish-landing monitoring system at two ports;
• Developing restoration proposals for three areas;
• Analyzing and validating 16,445 Rural Environmental Cadaster (CAR) records.

In the Amazon region, the Bank is supporting the implementation of environmental legislation and incentives to combine forest protection and sustainable development. For example, the Amazonas Fiscal and Environmental Sustainability Programmatic DPF (approved by the Board in December 2020 and ended in December 2022) sought to address regulatory loopholes and institutional gaps, as well as support the provision of incentives for climate-friendly investors and poor communities to sustainably use state forest resources, .

With World Bank support, the state of Amazonas strengthened its state environmental, regulatory, and institutional framework by (i) adopting a state deforestation action plan, which provides clarity on institutional “command and control” roles; (ii) adopting state legislation for the sustainable management of forest concessions, based on sound international environmental and social standards; (iii) adopting state regulations that streamline the environmental regularization process and clarify the requirements to address conservation deficits; and (iv) strengthening the state’s fiscal and financing framework for a pioneer payment for environmental services (PES) program to benefit poor communities, thus paving the way for the creation of local carbon credit markets.

In Brazil, the World Bank is supporting the government in better managing and conserving the Cerrado, the second largest biome in South America, which is being deforested twice as fast as the Amazon as a result of increased land clearing for agriculture and cattle ranching.

The Cerrado is a driver of economic growth and is essential for food security, biodiversity conservation, water regulation, and carbon sequestration. Investments under way are tackling deforestation drivers by making agricultural production more sustainable, providing monitoring and information, and building capacity to detect, prevent, and fight forest fires.

So far, the Cerrado biome projects have achieved positive results in terms of management and use of anthropogenic areas; better governance and integrated land management system; and production and management of information. Below is a list of some of the highlights:

• 20,025 farmers were trained in low carbon farming, with a 93,844-hectare increase in the area under low carbon agricultural practices.
• 190,072 landholdings, and 32 traditional community territories (totaling about 35.5 million hectares) were formally included in the National Rural Environmental Cadaster System (SICAR)
• 36 Indigenous communities, 12 quilombola communities, and 12 traditional communities received assistance to maintain and improve their livelihood and sustainable development; and 20 representatives of Indigenous peoples and traditional communities from the Cerrado biome were supported in conservation and other REDD+-related processes at regional, national, and global level.
• 11 states (Tocantins, Bahia, Piauí, São Paulo, Paraná, Mato Grosso, Mato Grosso do Sul, Distrito Federal, Goiás, Minas Gerais, and Maranhão), the Brazilian Forest Service, and the Ministry of Agriculture, Livestock, and Food Supply were supported with improved environmental and land planning management systems.
• Cerrado deforestation rates were made public. The data is available at: http://cerrado.obt.inpe.br/ or http://terrabrasilis.dpi.inpe.br/app/dashboard/deforestation/biomes/cerrado/increments.

In addition, the recently approved Brazil Climate Finance Project will support the expansion of sustainability-linked finance and strengthen capacity to access carbon credit markets. In collaboration with Banco do Brasil, one of the largest financial institutions in Latin America, the project will adopt, for the first time ever, a sustainability-linked lending approach to help Brazil meet its climate goals.

The project aims to deliver robust mitigation benefits. Up to 90 million tCO₂e in emission reductions are expected by 2030, the equivalent of about 4.5 percent of what Brazil needs to achieve in order to stay on track with its net-zero commitments. The project is also expected to mobilize up to US$1.4 billion in private capital through the scale-up of financing by Banco do Brasil and private investors. As a leader in the Brazilian agribusiness sector, with around 60 percent of all rural credit in financial markets, Banco do Brasil is committed to supporting customers, partners, and society in the transition to a low-carbon economy, with methodologies, lines of credit, and sustainable solutions.

Water

Water scarcity and floods are growing problems in Brazil, and are further exacerbated by climate change.

Key challenges in water resource management include the need of increasing its strategic priority in the national political agenda, while improving communication with society and decision makers about its results and benefits. 

Despite the progress achieved over the past few decades, Brazil still faces persistent deficits in access to water supply and sanitation (WSS) services, with important negative environmental, social, and economic impacts. 

The World Bank’s strategic partnership with Brazil in the water sector goes back several decades. It includes a broad scope and multi-instrumental programs: investment financing, technical assistance, analytical and advisory services, and sectoral dialogue implemented in close partnership with key sectoral institutions at the federal, state, and municipal levels.

Ongoing investment projects in the states of Ceará, Paraíba, and Espírito Santo, in the municipalities of Fortaleza and Porto Alegre, and with the SABESP utility in São Paulo aim to address many of the challenges above, including improving sustainable water resource management, promoting water and soil conservation, preventing and responding to extreme hydrological events, increasing access to sustainable water and sanitation services (in particular for vulnerable people), and improving quality of life. Attention is also given to rural areas, where WSS gaps are higher, through operations targeting rural populations in Ceará, Paraíba, and Rio Grande do Norte, as well as activities that benefit Indigenous communities in Acre.

In addition to lending operations, the World Bank: (i) promotes a rich water-sector policy dialogue with the government at all levels; (ii) uses trust funds and analytical and advisory services to build evidence, complementarity, and innovation in the water sector, including initiatives to build capacity against drought events and ensure the safety of dams, and to improve water utilities’ performance and efficiency (Utility of the Future), export innovative solutions (Citywide Inclusive Sanitation); and (iii) promotes capacity building, exemplified by the technical assistance provided to the National Water & Sanitation Agency (ANA) with a view to incorporating its new mandate and regulatory role under the new law.

Recent examples of analytical and advisory studies in the sector include a diagnostic assessment done in 2022 titled Policies, Institutions Regulations, and Expenditures in the Water and Sanitation Sector in Brazil, which aimed to produce evidence to inform the government’s proposed policy reform agenda and reorient investments in the sector, following the approval of the new water and sanitation law; and studies to support the government in the Post-Covid response, preparing against future financial shocks (Global Risk Financing Facility (GRiF) and supporting a green, resilient, inclusive, and water secure post-covid recovery (GRID).

Updated results for the period 2018–2023 include:

• 678,000 people with improved access to sanitation (urban)
• 777,000 people benefiting from more reliable water services (urban)
• 319,000 people with improved access to water (rural)
• 54,000 people with improved access to sanitation (rural)

Transport

Brazil is a highly urbanized country, with 85 percent of its population living in urban areas. One of its top priorities is to provide more inclusive and sustainable urban services, as well as to promote socioeconomic development to small rural producers and vulnerable groups. Brazil still suffers from poor logistics performance, with stagnant road infrastructure since the 1990s.

In addition to that, the transport sector is a large contributor to GHG emissions, with road transport accounting for 86 percent of all transport emissions. Furthermore, Brazil’s road death toll is among the highest in Latin America and the Caribbean (23 deaths/100,000 people per year), and road accidents cost around 4 percent of the country’s GDP.

The World Bank is promoting the development of inclusive, green, and high-tech BRT corridors in the cities of São Paulo and Belo Horizonte, and in the Itajaí River region. These projects aim to enhance urban mobility with a focus on reducing GHG emissions, improving road safety, and increasing job accessibility for the poor. Public transport, besides being the main mode of transport for the poor and for women in general, could help to significantly reduce air pollution.

At the federal level, the World Bank supported the technological transition to electric mobility by enhancing Brazilian cities’ structuring capacity through bus service PPPs, with business models that aim to improve competition and formalization in this sector. This initiative, together with additional technical assistance for electromobility extended to São Paulo, Belo Horizonte, Salvador, and Fortaleza, has paved the way for a project to co-finance 1600 electric buses in São Paulo, which is currently under preparation. Anticipated outcomes encompass not only enhanced public transportation and fleet decarbonization but also contribute to the growth of the national electric bus industry.

Additionally, the World Bank has provided support for various transport projects that facilitate public investments in three major passenger rail PPPs: Metro Lines 4 and 5, both in São Paulo; and SUPERVIA, Rio de Janeiro’s suburban rail system. The World Bank is also supporting the Municipality of Rio de Janeiro in strengthening fiscal management and accelerating the transition towards a low-carbon, resilient, and inclusive urban transport development.

These projects were pioneers in the field and allowed for strong private participation in sectors in which only the public sector used to invest. With these investments, high-quality transport services are being provided with private financing, improving people’s accessibility to jobs, health services, and leisure options; reducing travel times; and generating deep and direct benefits to more than 3 million people a day—most of whom are poor and were previously subject to “super commutes”.

Through a road transport project in Bahia, which ended in June 2022, the World Bank contributed to improving the efficiency and safety of the state’s transport and logistics operations, while enhancing the state capacity in environmental and disaster risk management. In the state of Tocantins, a World Bank project (closed in December 2021) helped to improve road safety. In addition, the project supported the Tocantins’ efforts to: (i) increase efficiency in selected public services; (ii) integrate development and social agendas; and (iii) address gender-based violence in project areas.

In the state of São Paulo, three World Bank projects (already completed) contributed to enhancing road resilience and improving rural accessibility. This was achieved by upgrading and rehabilitating roads used to transport commodities and agricultural exports from rural areas; strengthening road safety; providing connectivity to Indigenous communities and rural areas (in all seasons); and promoting a proactive gender agenda, whereby those projects were able to amplify their results by promoting gender empowerment and equipping communities to fight sexual exploitation and child prostitution.

Analytical work

The World Bank in Brazil released the following studies between July 2022 and June 2023:

• A Balancing Act for Brazil’s Amazonian States - An Economic Memorandum: This study will look into how to reconcile inclusive economic development in the Brazilian Legal Amazon with the conservation of its natural forests.
• Brazil Country Climate and Development Report (CCDR): This pioneering report is a new core diagnostic tool that aims to explore the interplay between climate change and development, and to support countries in identifying high-impact climate actions, while recognizing related trade-offs. The study explores how Brazil's development objectives are exposed to risks and opportunities arising from climate change, climate related natural disasters, and other environmental stressors, as well as global and domestic decarbonization trends. It assesses the economic implications of climate change on metrics such as growth, income distribution, and private sector competitiveness.
• Brazil Infrastructure Assessment: Enhancing the quality of Brazil’s infrastructure requires a more robust investment framework. Improved spending on infrastructure will raise productivity directly and make other investments more productive. Unfortunately, Brazil’s infrastructure stock has been depleting since 1990, when, for the first time ever, infrastructure spending fell below the level required to maintain it (about 3 percent). The causes are not hard to understand: budgetary constraints that favor earmarked spending over investment, limited government capacity for project planning, and poor procurement and contract/asset management practices. This report presents an analytical framework that seeks to understand the relationship between infrastructure and productivity, inclusion, and climate change in the Brazilian context. Key findings and core messages may be summarized as follows: (i) Brazil urgently needs to increase public investment in infrastructure to stop its deterioration, expand access, improve quality, and thereby increase the productivity and competitiveness of the economy; (ii) in order to maximize the impact of its infrastructure investments, Brazil needs to establish a set of strategic investment and policy priorities that will yield cost savings and enhance productivity and global competitiveness; and (iii) Brazil needs to increase technical capacity, particularly at subnational levels, to plan, deliver, and better manage infrastructure assets, while increasing private participation.

Energy

Brazil has one of the most decarbonized energy sectors in the world, with renewables accounting for over 45 percent of the Brazilian energy matrix and over 80 percent of its power matrix, compared to world averages of approximately 15 percent and 27 percent, respectively. In the energy matrix, hydropower and sugarcane products – such as biomass and ethanol – stand out, together accounting for over 30 percent of the national energy supply. With regards to the electricity matrix, hydropower is the main supply source, accounting for over 60 percent of the power matrix, followed by wind and biomass, with roughly 10 percent each. Electricity accounts for 18 percent of total energy consumption, and this share is expected to increase significantly in the coming decades as the economy electrifies, as is explained further below. The CCDR showed that the fundamentals of Brazil’s energy sector offer the country a unique opportunity to decarbonize the economy. Indeed, Brazil’s power system’s characteristics offer unique conditions to support decarbonization, and this can facilitate decarbonization of other sectors of the economy through electrification.

To enable the implementation of decarbonizing the economy in sectors that are difficult to abate, the World Bank will finance the shared infrastructure of the green hydrogen hub in the Industrial and Port Complex of Pecém (CIPP), in the state of Ceará. This operation, that was recently approved by the Cofiex, comprises a $90m lending operation from the Bank together with $35m from the Climate Investment Funds (CIF) and $10m of local contribution, for a total of $135m of investment. Besides the shared-infrastructure components, the project will also finance an innovation hub aimed to develop a pilot plant to produce sustainable aviation fuel (SAF).  

This operation will be the first green hydrogen hub financed by the Bank. Currently, the Bank’s energy team is articulating a second lending operation on green hydrogen shared infrastructure with the Port of Suape for $125m, in the state of Pernambuco, Northeast region. In a complementary way, the Bank's energy team is articulating with Banco do Nordeste a Green Hydrogen Facility to help mitigate the risks that the private sector faces when trying to implement projects at commercial scale.

Open Brazil website

In 2021, the World Bank Group and the Government of Brazil launched a “one-stop-shop” innovative, open, and interactive online platform: Brasil Aberto/Open Brazil. It offers real-time data on the performance of the WBG Program in the country. Open Brazil geolocates WBG spending and helps to visualize the WBG portfolio footprint against social, economic, and environmental indicators at the local level. It also automatically tracks CPF indicators by drawing on the government’s open data platforms. It leverages social media to track public sentiment on selected reform areas and features a Smart Supervision App, which showcases results on the ground.

Through this platform, the World Bank Group seeks to foster transparency and improve its relationship with its stakeholders, bringing benefits to various sectors of Brazilian society.

Since its launch, the Open Brazil platform has had more than 43 thousand views and has attracted 9 thousand users, or close to 400 users every month.

For more details, please visit Open Brazil.

Last Updated: Oct 09, 2023