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Strategies needed to brazil facing current economic crisis

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  • 1. 1 STRATEGIES NEEDED TO BRAZIL FACING THE CURRENT ECONOMIC CRISIS Fernando Alcoforado * Strategy is defined as a methodology that leads to the achievement of the strategic goals set by public and private organizations. At the current juncture, the Brazilian government should pursue strategic objectives that contribute to reducing the current economic, social and environmental problems, to neutralize the existing and potential economic threats, reinforce the strengths of its economy and take advantage of economic opportunities and prospects. To achieve these goals in the coming years is urgent, therefore, the development of a strategic development plan for Brazil. To delete the current economic problems, the strategies of the Brazilian government should be directed to overcome: 1) regional inequalities in Brazil that focuses on Southeast Region 60% of the GDP of the country, 2) the decline in economic growth with a tendency to stagflation which Brazil's GDP will not grow more than 2.5% in 2013 and now there is a decrease in the levels of employment and average income of the employee for the first time in ten years in nine metropolitan regions, and 3) the very high tax burden that Brazil presents being among the 30 nations with the highest tax burdens in the world (35% of GDP), 4) the growing indebtedness of the public machine whose relation Public Debt / GDP reached 59% in January 2013 due to their inefficiency and the high rates of Selic interest rate (currently 8% per year); 5) the precariousness of transport infrastructure and logistics bottleneck that contribute to the increase in Brazil cost that makes the prices of products of the manufacturing industry in Brazil become 30% more expensive than those manufactured in other countries; 6) the inefficiency and ineffectiveness of government organizational structure that contribute to the generation of waste of public resources and, 7) the high level of corruption in Brazil whose annual cost is around R$ 41.5 and R$ 69 , 1 billion. Overcoming the current economic problems requires the adoption of the following strategies: 1) implement the policy of fiscal and financial incentives to decentralize the Brazilian economy by promoting investment in all regions of Brazil, especially in the North and Northeast, 2) encourage increased private savings for investment, reduce the costs of the state apparatus to generate surplus and consequent public savings for investment and renegotiate the debt to the government dispose of public resources for investment; 3) promote economic growth by adopting the policy of import substitution with emphasis on the expansion of the internal market; 4) dramatically reduce the tax burden by lowering the cost of government spending and government debt burden by reducing the Selic interest and conduct a thorough reform of the state and public administration in Brazil; 5) drastically reduce the national debt to a decrease in interest rates Selic; 6) eliminate the logistical bottleneck with incentives for public and private investment in energy infrastructure, transport and communications; 7) deploy networked organizational structure in the Brazilian state to raise levels efficiency and effectiveness of public administration in Brazil, and, 8) combat corruption with achieving political reform and a reform of the state and public administration through a Constituent Assembly exclusive. To delete the current social problems, the strategies of the Brazilian government should be focused on overcoming: 1) maldistribution of income shown in the fact that 20% of Brazil's richest be the holder of 67% of national income and 20% of poorest have only 2% of national income, 2) poor quality of public services in education, health, public
  • 2. 2 transport and housing in which Brazil stands in last place in the world as a provider of such low quality public services to the population, and, 3 ) high crime in which Brazil presents the highest rates in the world with an annual rate of about 22 homicides per 100,000 inhabitants while the United States and France, considered examples, recorded 6 murders and 0.7, respectively. Overcoming the current social problems requires the adoption of the following strategies: 1) strengthen civil society organizations so that they can press the holders of economic power and the government to make concessions of a social nature that will result in improved Brazil income distribution, contemplating also participate in the decisions of government policies of national development; 2) invest in improving the infrastructure of education and health and the public transport system and increase the supply of affordable housing to meet the demands of society, and, 3) adopt a policy to prevent and combat crime by providing the majority of the population of the minimal means of survival as employment, education, health and housing, as well as restructuring the police and the courts to exercise fight against crime without the disproportionate use of violence. To delete the current environmental problems related to air pollution, rivers, lakes, seas and oceans, soil pollution and contamination caused by incorrect disposal of garbage, burned in woods and forests as a way to expand areas for grazing or agriculture, deforestation with illegal cutting of trees for timber trading and disposal of waste, among others, measures must be taken that include measures to prevent and mitigate the various forms of aggression to the environment throughout the national territory. To neutralize the existing and potential economic threats, the strategies of the Brazilian government should be directed to avoid: 1) the precariousness of power infrastructure that threatens the shortage of liquid fuels and electricity in the country that has not yet occurred due to meager economic growth that has been recording in Brazil, 2) the increase in inflation that is recorded at the time (5.8% in 2013 above the inflation target of 4.5% per year), 3) de-industrialization of Brazil demonstrated by the fall in share of industry in GDP (Gross Domestic Product) Brazilian who fell in 2011 from 1956 levels, and 4) the devaluation of the Brazilian currency that was the currency that more lost in the world against the U.S. dollar in 2012 and in 2013 shows a decline of 14 3%, and 5) the precipitous drop in the trade balance which showed the largest deficit in history from January to July of US$ 4.98 billion as opposed to 2012 whose balance had a surplus of US$ 9.92 billion. The neutralization of existing and potential economic threats requires the adoption of the following strategies: 1) larger energy infrastructure by encouraging public and private investment in the expansion of production capacity for liquid fuel (oil and oil products, ethanol and biodiesel) and electricity generation (hydropower, wind farms, solar power plants, cogeneration, etc..) to meet domestic demand, 2) fight against inflation encouraging public and private investment in increased production of goods and services in Brazil able to meet the demand and adopt fixed exchange rate to prevent inflation by importing raw materials, supplies and products, 3) avoiding de- industrialization of Brazil with increasing competitiveness, the adoption of a fixed exchange rate and protection of domestic industries against imported products, 4) avoid devaluation of Brazilian currency with the adoption of a fixed exchange rate, and, 5) reduce or eliminate trade deficits with export incentives, the adoption of policies of import substitution and the establishment of a fixed exchange rate.
  • 3. 3 To enhance existing strengths in the economy of Brazil, the Brazilian government strategies should be aimed at strengthening its sectors of agricultural, mineral and industry production, its energy, transport and communications infrastructure and its poles of national growth and development which are located the main economic structures of Brazil. Strengthening existing economic strengths in Brazil requires the adoption of the following strategies: 1) encouraging investment in increased productivity and increased agricultural, mineral and industrial production covering all regions of the country, 2) encouraging investment to strengthen energy, transportation and communication infrastructure across all regions of the country to meet the needs of Brazil, and, 3) to structure the development axes to integrating each other economically the poles of growth and national development. To take advantage of economic opportunities and prospects, strategies of the Brazilian government should be focused on the exploitation of its vast natural resources (water resources, mineral resources, farmland, renewable energy solar and wind power, offshore oil deep water.) These opportunities should be identified and evaluated for their viability for use, then prepare investment plans aimed at economic and social development of Brazil. In this sense, the necessary strategies contemplate the preparation of investment plans covering all regions of the country for exploitation of natural resources in the fields of energy (hydropower, wind farms, solar power plants, biomass, pre-salt), mineral, agricultural and industrial. To be successful in implementing these strategies, it is important that the Brazilian state is structured in network which is a kind of overall organizational structure that operates according to a logic chart circular or star-shaped, the center of which is the lead organization. Around this main organization (federal government) are several other entities (state governments, municipalities and state and public enterprises) that articulate with the first. The operation of this type of organization usually relies on modern computer systems and telecommunications that enable centralized management and control of all processes. The adoption of network structure is imposed in Brazil because the current organizational structures of government at all levels are exceeded. It is unacceptable that the structures of federal, state and municipal efforts superimposed, as still happens today in many sectors, depleting the scarce resources available to them. To solve this problem, it would be necessary to make the federal and state governments to assume regulatory functions and overall planning, regional and sectoral bases integrated, while the municipal authorities, regional development agencies and state and public enterprises would make the executive also in articulation. It should be noted that the State in Brazil is inefficient and ineffective due to the lack of integration of federal, state and municipal development in promoting national, regional and local. Join this fact the existence of inadequate organizational structures in each of the federal, state and local efforts that prevent these integrative levels of government. The lack of integration of the various bodies of the state is therefore complete, making the action of the government becomes chaotic as a whole, generating therefore diseconomies of all kinds. Compete, therefore, to municipal governments, the regional development agencies and state and public enterprises a great responsibility to put in place all development plans global, regional, state, local and industry jointly developed by various government bodies after listening parliaments in its federal, state and municipal levels, as well as
  • 4. 4 civil society. This model of integrated management of the public sector in Brazil would be in opposition to what prevails today, in which federal, state and municipal governments are autonomous in their decisions and actions, and politically reactive to the idea of integration. * Alcoforado, Fernando, engineer and doctor of Territorial Planning and Regional Development from the University of Barcelona, a university professor and consultant in strategic planning, business planning, regional planning and planning of energy systems, is the author of Globalização (Editora Nobel, São Paulo, 1997), De Collor a FHC- O Brasil e a Nova (Des)ordem Mundial (Editora Nobel, São Paulo, 1998), Um Projeto para o Brasil (Editora Nobel, São Paulo, 2000), Os condicionantes do desenvolvimento do Estado da Bahia (Tese de doutorado. Universidade de Barcelona, http://www.tesisenred.net/handle/10803/1944, 2003), Globalização e Desenvolvimento (Editora Nobel, São Paulo, 2006), Bahia- Desenvolvimento do Século XVI ao Século XX e Objetivos Estratégicos na Era Contemporânea (EGBA, Salvador, 2008), The Necessary Conditions of the Economic and Social Development-The Case of the State of Bahia (VDM Verlag Dr. Muller Aktiengesellschaft & Co. KG, Saarbrücken, Germany, 2010), Aquecimento Global e Catástrofe Planetária (P&A Gráfica e Editora, Salvador, 2010), Amazônia Sustentável- Para o progresso do Brasil e combate ao aquecimento global (Viena- Editora e Gráfica, Santa Cruz do Rio Pardo, São Paulo, 2011) and Os Fatores Condicionantes do Desenvolvimento Econômico e Social (Editora CRV, Curitiba, 2012), among others.