The significant GDP per capita gap to the upper half of OECD countries has widened in recent years, mainly due to comparatively weak labour productivity performance and low employment rates.
Inequality remains high and progress in reducing it has slowed down. Greenhouse gas emissions are well below the OECD average in per capita terms.
Some progress has been made in reducing trade barriers, by limiting local content requirements in the oil and gas sector. An education reform has given schools more flexibility to adapt to students’ needs. A new central agency has been tasked with prioritising and monitoring infrastructure projects and a reduction in subsidised lending will enhance the scope for private participation in infrastructure financing.
A more educated workforce, better infrastructure and less tax distortions would support productivity improvements. Lowering trade barriers remains a priority for Brazil to increase exposure to international competition and strengthen incentives for productivity improvements. To reconcile the need for further reductions in income inequality with diminishing fiscal space, social expenditure should focus more on the most efficient policy instruments, particularly conditional cash transfers, at the expense of less efficient instruments. This would accelerate the decline of income inequality without increasing spending.
