This document proposes establishing a Federative Savings and Investment Fund (FSIF) in Brazil to increase government savings and public investment rates. The FSIF would make savings mandatory for federal, state, and municipal governments. It would redistribute investment resources to ease fiscal burdens on states and municipalities and increase their investment capacity. This is expected to boost Brazil's economy by promoting a steady GDP growth rate of 4% annually through higher overall savings and investment levels. The FSIF would be administered by BNDES to appraise and finance approved projects, with the goal of improving infrastructure and public services across Brazil.

1. A Strategy to Reach Socioeconomic
Development By Strengthening
Local Government’s Saving and
Investment Capacities
Proposition of Action to Brazilian Public
Administration

2. RELATION BETWEEN SAVING RATES AND GNP GROWTH
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GNP Growth
SavingRates

3. BRAZIL’S GNP GROWTH RATES
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4. BRAZIL’S SAVING RATES
(% OF GNP)
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Domestic Savings
External Savings

5. SAVINGS & INVESTMENT RATES
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INVESTIMENT
DOMESTIC SAVINGS

6. BRAZIL’S PUBLIC INVESTMENT RATES
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13
15.18
16.1
21.4 22.21
18.24
16.68 17.5
2.7 3.42 4.22 3.71
2.68 2.58 1.92 2
14.2
16.4
20
25.2 25.2
33
35 35
1940 1950 1960 1970 1980 1990 2000 2010
TAX BURDEN
PUBLIC
INVESTMENT
TOTAL INVESTMENT

7. Main Causes of Low Public Investment
Rates
 Excess of Current Expenditure
 Sistemic Waste and Corruption
 Decisions Made Just through Political Criteria
 Weak and Uncoordinated Planning
System
Concentration of Resources in the
Federal Level
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8. REVENUE DISTRIBUTION AMONG FEDERATE ENTITIES
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60
25
15
Federal State Municipal

9. Today’s Municipal Attributes
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 Public Health
 Public Education
 Social Works
 Urban Transportation
 Housing
 Water, Sewer and Waste (Sanitation)
 Urban Traffic
 Licensing of Works, Services and Goods Production
 Environmental Regulations
 Tourism Promotion
 Public Works
 Law Enforcement
 Urban Security
 Cultural Affairs
 Attract New Businesses to Generate Income and Jobs

10. What Got to Be Done Without Further Delay?
 Increase saving rates in the 3 levels of
government: Federal, State and Municipal.
 Redistribute investment resources between the 3
levels of government, in order to decentralize and
easy the fiscal burns of states and
municipalities, and increase their investment
capacity.
 Increase total public investment rates at least to
3.5% of GNP, in order to assure a Country’s total
saving and investment level of 20% and a steady
and sound GNP Growth of at least 4% a year.
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11. How to Reach It?
 By reforming the Fiscal Responsibility Law (Lei de Responsabilidade Fiscal)
to turn mandatory a level of savings (and so of Investment) in the 3 levels
of government.
 Savings of 3 levels of government should be gathered in a Federative
Savings and Investment Fund (FSIF, similar to education’s FUNDEB), in the
form of quotas, with funds to be rescued under certain rules stablished by
law.
 FSIF would make a redistribution of investment funds between the 3 levels
of government, easing the unbalance of today, and allowing more
investment in the sub-national levels.
 FSIF should also improve other useful economic operations, such act as
PPP’s guarantor fund, act as colateral to project financing and so forth
 FSIF should be administred by BNDES, who would appraise the proposed
projects and liberate the funds to finance them.
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12. FSIF Financial Prospectives
(GNP of US$ 2,3 trillions, Tax Burden 35%)
LEVEL OF
GOVERNMENT
MANDATORY
SAVINGS (% OF
TOTAL
INCOME)
INVESTMENT
(% OF
SAVINGS)
ESTIMATED
SAVINGS
AMOUNT PER
YEAR (in US$
Billions)
ESTIMATED
INVESTMENT
AMOUNT PER
YEAR (In US$
Billions)
FEDERAL 6 15 48 12
STATE 2.5 25 20 20
MUNICIPAL 1.5 60 12 48
TOTAL 10 100 80 80
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13. FSIF Investment Rules
 Savings will be recovered by the levels of
government only by presentation of investment
projects in areas to be specified by law, to be
appraised and approved by FSIF manager
(BNDES).
 To each state and city will be assured access to
investment funds by at least the amount of
their own saving.
 Acess to investment funds in excess of their
own savings will depend on certains
circunstances, to be regulated by law, for
instance, stimulating project competition
among sub-national entities
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14. Possible Consequences of the FSIF
Strategy to Public Services
 Increase government saving rates
 Increase public investment, boosting the economy in
general
 Reach a desirable, rational and beneficial
Decentralization of resources to the state and municipal
level
 Promote a Qualitative Reform of public administration
 Allow the planning, better coordination and
implementation of projects in key areas of
government, renewing infrastructure and public
services, avoiding duplications and project collisions
 Boost public services’ efficiency and quality
 Reduce public debt in the long run
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15. Possible Consequences of FSIF to
Taxpayers and Society as a Whole
 Allow consistent reduction of interest rates
 Easy taxation burns
 Get a steady growth of GNP
 Easy inflationary pressures
 Get Better public services by LGs
 Allow private investment to grow steadly
 Allow investment to ameliorate the
infraestructure in the country and in the
cities
 Better quality of life to the population
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16. In The Short Run
 Legislation would be passed allowing the
Sub-National Federate Entities, during the
first five years , to transform part of their
debt into capital, as Quotas of FSIF
 The amount of debt to be transformed into
capital (FSIF Quotas) would correspond to
1.5% of gross (Municipalities) or 2,5%
(States) of the fiscal year total revenues of
the Sub-National Federate Entities
 Question to specialists: How would this
operation be accounted in the public
entities balance sheet?
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17. Conclusions
 Increasing Savings and Investment by
government is a key issue to transform Brazil
into a real developed country, socially fair.
 Increasing S and I by government should be
reached by a strategy based upon a change in
the Fiscal Responsibility Law, in order to
become savings and investment
mandatory, gathered in a Federative Fund.
 This would bring positive consequences to the
public services and to society as a whole.
 In the future, public Saving and Investment
levels should be considered the rate of success
or failure of a public administration.
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18. SOURCES
 Pastore, A.C. “O Caminho do
Crescimento”, 2009
 Araújo, Carpena & Cunha, IBGE
 FGV-CPDOC: Santos Jr.; Bugelli; Ellery &
Gomes; Merenda
 Pastore, A.C.; Pinotti, M.C.;Pagano, T.A
“Limites ao Crescimento Econômico”
Forum Nacional 2009
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