Presentation of OECD Economic Survey of Brazil 2015

1. www.oecd.org/eco/surveys/economic-survey-brazil.htm
OECD
OECD Economics
2015 OECD ECONOMIC
SURVEY OF BRAZIL
Reigniting inclusive growth
Brasília, 4 November 2015

2. Poverty and inequality have declined
2
Poverty and Gini coefficient
1995-2013
Source: IBGE; World Bank.
0.46
0.48
0.5
0.52
0.54
0.56
0.58
0.6
0
5
10
15
20
25
30
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Absolute poverty (below USD 2 per day, left scale)
Gini Index (right scale)

3. Health outcomes have improved
3
Life expectancy at birth
Source: OECD Health Statistics 2015, http://dx.doi.org/10.1787/health-data-en.
40
50
60
70
80
90
JPN
ESP
CHE
ITA
FRA
KOR
CAN
GBR
DEU
PRT
OECD
CRI
CHL
USA
POL
TUR
CHN
COL
BRAZIL
MEX
IDN
RUS
IND
ZAF
Years
2013 1970

4. Productivity has been weak
4
Labour productivity, 2000=100
Source: Feenstra, Robert C., Robert Inklaar and Marcel P. Timmer (2013), “The Next Generation of the Penn World Table” available for
download at www.ggdc.net/pwt.
80
100
120
140
160
180
200
220
240
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
BRAZIL China India Mexico South Africa
Thousands of USD / person employed, at purchasing power parities

5. The economy is in recession
5
Quarterly GDP growth at seasonally-adjusted annual rates
Source: OECD Economic Outlook Database.
-8
-6
-4
-2
0
2
4
6
8
2010Q1
2010Q2
2010Q3
2010Q4
2011Q1
2011Q2
2011Q3
2011Q4
2012Q1
2012Q2
2012Q3
2012Q4
2013Q1
2013Q2
2013Q3
2013Q4
2014Q1
2014Q2
2014Q3
2014Q4
2015Q1
2015Q2

6. The currency has depreciated
6
Source : Central Bank.
0
20
40
60
80
100
120
140
160
180
200
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
USD/BRL exchange rate (left scale)
Real effective exchange rate (right scale)

7. Policies to restore confidence
7

8. The fiscal position has deteriorated
8
Primary expenditures and tax revenues
Source: Central Bank; National Treasury.
25
27
29
31
33
35
37
25
27
29
31
33
35
37
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Tax revenues (% of GDP) Primary expenditures (% of GDP)

9. Gross debt is rising
9
Possible debt trajectories
Source: OECD calculations.
 Implement the fiscal adjustment in line with medium term objectives,
including to stabilise gross debt
 Gradually raise the retirement age and index pensions to consumer prices
rather than the minimum wage
0
10
20
30
40
50
60
70
80
90
100
0
10
20
30
40
50
60
70
80
90
100
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Current plans with primary results of 0.15% (2015), 0.7% (2016), 1.3% (2017) and 2.0% thereafter
Scenario with primary surplus of 3% after 2018
Scenario with continuing transfers to public banks of 1.9% of GDP
% of GDP % of GDP

10. Inflation is high
10
Source : Central Bank.
0
2
4
6
8
10
12
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Headline inflation YoY Core inflation YoY
Inflation target
Tolerance band
 Establish fixed-term appointments for the Central Bank governor and the
members of the Monetary Policy Committee

11. The efficiency of monetary policy could be
improved
11
Monetary policy rate and directed lending rate
Source: Central Bank.
 Adjust the directed lending rate in line with the monetary policy rate
0
2
4
6
8
10
12
14
16
18
20
0
2
4
6
8
10
12
14
16
18
20
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Directed lending rate (TJLP) Monetary policy rate (Selic)

12. Policies to boost industrial performance
12

13. Labour productivity in manufacturing is low
13
0
20
40
60
80
100
120
140
160
180
0
20
40
60
80
100
120
140
160
180
IDN
COL
ECU
BRAZIL
THA
VEN
HRV
MEX
EST
CHL
MYS
TUR
HUN
ZAF
POL
PRT
HKG
SVK
CZE
SVN
GRC
ARG
ITA
NZL
AUS
FRA
KOR
DEU
GBR
JPN
SGP
ISL
AUT
DNK
BEL
FIN
NOR
NLD
USA
SWE
CHE
in thousands of 2005 USD per employee

14. Tax compliance costs are high
14
Hours required to prepare taxes
For a benchmark manufacturing company, 2014
Source: World Bank.
 Consolidate indirect taxes into a value added tax with a broad base
0
500
1000
1500
2000
2500
3000
0
500
1000
1500
2000
2500
3000
LUX
CHE
IRL
EST
NOR
FIN
AUS
GBR
SWE
NLD
DNK
CAN
MYS
FRA
ISL
NZL
BEL
CRI
AUT
ESP
RUS
USA
KOR
GRC
PHL
ZAF
SVK
DEU
TUR
ISR
COL
IND
IDN
SVN
CHN
THA
ITA
PRT
HUN
POL
CHL
PER
URY
JPN
MEX
PRY
ARG
CZE
VEN
BRAZIL

15. Brazil trades little with the rest of the world
15
Trade in % of GDP (average 2010-2013)
Source: OECD-WTO Trade in Value Added (TiVA) – July 2015.
 Lower tariffs and scale back local content requirements
0
20
40
60
80
100
120
140
160
180
200
0
20
40
60
80
100
120
140
160
180
200
BRAZIL
USA
ARG
JPN
COL
AUS
VEN
IDN
ITA
TUR
FRA
NZL
GRC
ECU
GBR
ZAF
MEX
NOR
CHL
PRT
FIN
HRV
DEU
SWE
POL
DNK
AUT
ISL
KOR
CHE
SVN
CZE
THA
NLD
MYS
BEL
HUN
EST
SVK
Trade in % of GDP (average 2010-13)

16. Regulatory barriers to entrepreneurship are high
16
Indicator scaled from 0 (least restrictive) to 6 (most restrictive)
Source: OECD Product Market Regulation Indicators, 2013, available at www.oecd.org/eco/pmr.
 Streamline regulation and reduce barriers to entry
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
SVK
NZL
NLD
ITA
DNK
AUT
CAN
PRT
GBR
RUS
FIN
CHE
EST
POL
DEU
JPN
FRA
AUS
NOR
HUN
SWE
LUX
BEL
SVN
CZE
KOR
GRC
IRL
CHL
ISL
ESP
ZAF
MEX
ISR
TUR
BRAZIL
CHN
IND

17. Brazil’s infrastructure is poor compared to its
major trading partners
17
Normalised to 1 for the value of Brazil
Source: World Economic Forum, World Bank, FIESP.
 Improve the technical capacity and planning for infrastructure concessions
 Elaborate more detailed tender packages prior to launching tender calls
0
2
4
6
8
10
12
14
Road density Rail density
BRAZIL
Major emerging
trading partners
Major trading
partners
0
0.5
1
1.5
2
2.5
3
Road quality Rail quality Port quality

18. Skills are still weak
18
Percentage of students in secondary education enrolled in
vocational programmes
Source: UNESCO Institute for Statistics. Data for 2012.
 Boost the participation in vocational training to alleviate skill shortages for
technical workers
0
10
20
30
40
50
60
0
10
20
30
40
50
60
ZAF
BRAZIL
COL
GBR
KOR
LCN
JPN
ARG
NZL
THA
OECD
HUN
IRL
MEX
CRI
RUS
GRC
ESP
IDN
DEU
ISR
EST
FRA
CHN
ISL
CHL
TUR
PRT
DNK
SWE
NOR
LUX
FIN
SVK
CHE
AUS
SVN
ITA
CZE
BEL
AUT
NLD

19. Policies to improve public health services
19

20. Medical staff is in short supply
20
Practising doctors Practising nurses
 Train more doctors and nurses
 Implement targets for expanding specialised medical services to reduce
waiting times
Source: OECD Health Statistics 2015.
0
1
2
3
4
5
6
RUS
PRT²
DEU
CHE
ITA
ESP
FRA¹
OECD
GBR
USA
CAN¹
JPN
POL
KOR
MEX
CHL²
BRAZIL
COL
TUR¹
CHN
ZAF
IND
IDN
Per 1 000 population
0
2
4
6
8
10
12
14
16
18
20
CHE
DEU
USA¹
JPN
CAN
FRA¹
OECD
GBR
RUS
ITA¹
PRT¹
CHL²
POL
KOR
ESP
MEX
CHN
TUR¹
BRAZIL
IND
ZAF
IDN
COL
Per 1 000 population

21. Regional disparities are large
21
Registered doctors per 1000 inhabitants
Source: Conselho Federal de Medicina (2013): Pesquisa Demográfica Médica no Brasil.
 Strengthen incentives to reduce geographic imbalances
Doctors Doctors affiliated to SUS

22. Enhance spending efficiency in healthcare
22
Potential gains in health-adjusted life expectancy
through efficiency improvements, at constant expenditure levels
Source: OECD calculations based on World Bank and WHO data.
 Enhance spending efficiency, including by
 developing a more explicit definition of what is covered
 wider use of performance indicators and incentive-based mechanisms
 shifting the emphasis from hospital care towards primary care services
0
2
4
6
8
10
12
14
0
2
4
6
8
10
12
14
KOR
JPN
ITA
ESP
COL
ISR
CRI
PRT
THA
GRC
FRA
CHL
PER
CHE
AUT
AUS
BOL
IDN
URY
NZL
MEX
VEN
CHN
PAN
SWE
BEL
TUN
DEU
EST
NLD
ARG
POL
FIN
NOR
GBR
DNK
TUR
USA
BRAZIL
IND
RUS
ZAF

23. Improving equity in health expenditures is key
23
Per capita health expenditures, USD at purchasing power parities
Source: OECD Health Statistics 2015, http://dx.doi.org/10.1787/health-data-en; WHO Global Health Expenditure Database.
 Gradually phase out the tax deductibility of private healthcare expenses to free
more resources for the SUS
 Raise funding for public healthcare
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
Brazilians with
private health
insurance
Brazilians without
private health
insurance
Brazil -
average

24. Great
Good
Regular
Bad
Very bad
N/A
The quality of care could be improved
24
Perceived quality of public healthcare services
Source: CNI, 2012.
 Improve the collection of performance indicators and enhance the use of
benchmarking and incentive-based mechanisms, including pay-for-
performance schemes
 Provide stronger incentives for accreditation of hospitals. Strengthen the
licensing process, including enforcement mechanisms
 Improve the coordination of healthcare services and the exchange of
information by linking databases across healthcare providers
Over 60% of respondents say “bad”
or “very bad”

25. Further recommendations on healthcare
25
 Develop clinical guidelines for the choice of cost-effective medicines
 Set reference prices for all medicines
 Define an exclusive list of reimbursed medicines
 Strengthen the role of regional networks through stronger leadership of states
 Improve the co-ordination and exchange of information by linking databases
 Provide more long-term care services in the public healthcare system

26. SUMMARY: Main Findings
o The fiscal position has deteriorated. Additional long-term fiscal
challenges will arise from population ageing.
o Inflation has risen above the tolerance band.
o A fragmented system of indirect taxes causes high compliance costs.
o High trade protection and weak competitive pressures hold back
productivity.
o Public healthcare services are facing severe capacity constraints and
are unevenly distributed across the country.
o Many healthcare services that are currently provided in hospitals could
be provided more cost-efficiently in primary healthcare units and long-
term care services.
26

27. Key Recommendations
o Implement the fiscal adjustment in line with medium-term objectives,
including a stabilisation of gross debt
o Gradually raise the retirement age and index pensions to consumer
prices
o Consolidate indirect taxes into a value-added tax with a broad base
o Lower tariffs and scale back local content requirements
o Define clearly what is covered in public healthcare services.
o Expand the use of performance indicators and incentive-based
mechanisms in healthcare
o Train more doctors and nurses and implement targets for expanding
specialised medical services to reduce waiting times
27

28. More Information…
www.oecd.org/eco/surveys/economic-survey-brazil.htm
OECD
OECD Economics
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and boundaries and to the name of any territory, city or area.
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