OECD praises Brazil reforms

By: unknown author
 The BBC News, June 7, 2001


After a decade of financial reforms, Brazil is experiencing sustained economic growth, a report by the Organization of Economic Cooperation & Development (OECD) has said.

It is the first report on Brazil by the Paris-based club of 30 free-market oriented, democratic nations.

The report, published late on Wednesday, praised reforms that have staunched hyper-inflation, curtailed public spending and opened up Brazil's economy to foreign trade.

But it also warned that Brazil's government must not slacken the pace of change if it wants the economy - Latin America's largest - to keep growing and reduce its gaping income inequality.

As finance minister in 1993, President Fernando Henrique Cardoso initiated or developed most of the reforms. He then went on to win an unprecedented two presidential elections.

"Brazil's high burden of foreign debt and dependence on foreign savings means it is very vulnerable to external shocks," the report said.

The report recommends that Brazil:

  • Simplifies its complex tax system
  • reduces its public pension bill
  • gives the central bank more independence
  • strengthens local capital markets
  • targets social spending better.

The inequality between rich and poor in Brazil is pronounced.

In big cities such as Sao Paulo and Rio de Janeiro, millions of slum dwellers live in the shadow of high-rise luxury apartments. And in the countryside, land ownership is still concentrated in the hands of the very rich.

Acknowledging that income distribution is marked by high levels of inequality, the report said better targeted welfare spending would empower the poor and boost the economy

Energy crisis

The OECD made a special plea for urgent energy sector reform.

The country has been suffering its worst-ever energy crisis, partly because a lack of rain has hit operation of the mainly hydro-electric power network.

Most of Brazil is under strict rationing designed to cut the national electricity bill by a fifth.

"Meeting this demand will be a challenge to the government", the report concluded.


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