Fiscal outcomes have deteriorated substantially since 2014 reflecting mostly increases in expenditure. A primary surplus of around 2% of GDP is required to stabilise public debt in the medium term.

Implement the planned fiscal adjustment through permanent spending cuts.

Gradually raise the retirement age.

Index pensions to consumer prices rather than the minimum wage.

Social transfers have raised spending, but only few of them reach the poor.

Delink benefit floors from the minimum wage. Shift more resources towards transfers that reach the poor, including Bolsa Familia.

The Central Bank has conducted monetary policy in an independent way but formalising this independence would strengthen monetary policy effectiveness.

Limit dismissal of the Central Bank governor to severe misconduct to rule out political influence in monetary policy decisions in the future. Safeguard the budget autonomy of the Central Bank.

Targeted industrial support policies have generated substantial rents without effects on investment or productivity.

Scale back sector- and location-specific industrial support policies, including tax benefits.

Evaluate existing programmes.

Political consensus building has required costly and inefficient expenditures without systematic audits and reduced the effectiveness of the public sector. This has been a key obstacle to passing reforms.

Limit political appointments, especially in state-owned enterprises. Strengthen performance incentives in public companies.

Undertake more systematic audits of all expenditures, including parliamentary budget appropriations.

Public procurement has been subject to large-scale corruption.

Review public procurement laws.

Use more centralised purchasing bodies.

Strengthen whistle-blower and leniency procedures.

A challenging business climate including high tax compliance costs, high costs of capital and high administrative burdens curb investment returns while weak competition misallocates resources.

Consolidate consumption taxes at the state and federal levels into one value added tax with a broad base, full refunds for input VAT paid and zero-rating for exports.

Reduce barriers to entry due to administrative procedures.

Long-term credit has been dominated by the national development bank BNDES, which creates an uneven playing field and may hamper the development of private investment financing. The recent decision to phase out subsidies in its lending operations will allow a redefinition of the role of BNDES.

Focus BNDES lending activities on niche areas where the private sector finds it difficult to operate, including in the financing of small start-ups and innovation projects.

Use BNDES more to arrange syndicated loans for infrastructure and lead the creation of structured financial instruments.

Weak project structuring has been holding back private participation in infrastructure financing. Concessions cannot be used in projects where user fees are not possible.

Provide more training to officials involved in infrastructure structuring. Make wider use of BNDES’ technical capacity to assist public entities in project structuring, especially local governments.

Make wider use of public-private partnerships but ensure that all present and future liabilities are taken into account in a transparent way.

High barriers to international trade reduce benefits from integration into the global economy.

Lower tariffs and scale back local content requirements.

Greater integration into the global economy will reallocate jobs across firms and sectors.

Bolster training and job search assistance programmes for affected workers.

Deforestation has declined up to 2014 but risen again since then.

Ensure continuous decreases in deforestation, including through stronger enforcement and maintaining the status of areas currently under environmental protection.