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BRASIL Las Realidades de una Nueva Etapa de Desarrollo

BRASIL Las Realidades de una Nueva Etapa de Desarrollo. Prof. Aloísio Araujo EPGE/FGV - IMPA. Growth. Income per Capita of Korea / Income per Capita of Brazil. Growth Rate Decomposition. Mankiw, Romer & Weil’s Decomposition. Y=AK  H  L 1-  - 

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BRASIL Las Realidades de una Nueva Etapa de Desarrollo

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  1. BRASIL Las Realidades de una Nueva Etapa de Desarrollo Prof. Aloísio Araujo EPGE/FGV - IMPA

  2. Growth

  3. Income per Capita of Korea / Income per Capita of Brazil

  4. Growth Rate Decomposition Mankiw, Romer & Weil’s Decomposition Y=AKHL1-- TFP = GDPGrowth – 0,3* CapGrowth –0,5*SchoolGrowth – 0,2*LaborForceGrowth

  5. Human Capital Quantity of Education • Latin America and the World

  6. Quantity of Education • Brazil is Getting Better

  7. Quality of Education • Barros (2001): Quantity vs. Quality Relationship between Growth Rates and Years of Schooling and Scores in International Standardized. Correlation between Growth Rates and International Tests Scores is much higher than between Growth Rates and Years of Schooling.

  8. Quality of Education: Brazil

  9. Quality of Education: Brazil & Latin America Student’s grades from the First International Compared Study (UNESCO) Mathematics Results from Third Grade

  10. Student’s grades from the First International Compared Study (UNESCO) Mathematics Results from Fourth Grade

  11. Wage Inequality: Brazil and United States • Income inequality in Brazil is mainly due to education inequality

  12. Education Inequality is Deaceasing for Youngsters (13 years of age) Source:A Agenda Perdida, 2002

  13. Credit Credit to Private setor (1998)

  14. Investiment

  15. Chile and Mexico are very similar Investments as a Percent of GDP Government Surplus as a Percent of GDP Source: Kehoe et al., 2002

  16. Private Credit as a Percent of GDP ... However, they differ on Credit and Growth Real GDP per Working-Age (15-64) person detrended by 2% per year Index of Real Wages in Manufacturing Source: Kehoe et al., 2002

  17. Structural Reforms Already Done StateBanks Telecommunication • Privatization Mining, Steel Electricity (?) Water and Sewage (?) • Fiscal Responsibility Law • Renegotiation of Municipal and State Debts

  18. Income Redistributive Policies • Bolsa Escola to avoid child labor • Early Childhood Education • Adult Education • University Quota for Blacks? • Zero Hunger Program Erradication of illiteracy Young adult (Supletive)

  19. Structural Reforms: To Be Implemented • Independence of Central Bank • Retirement System • Tax Law • Labor Regulation • Bankrupcy Law

  20. Current Negotiations with State Governors Retirement System Tax Law • Increase the minimum age of retirement: women from 48 to 55 and men from 53 to 60 • Tax on the pension of retired workers with higher salaries • Create conditions for development of pension funds for public employees • Diminish the tax on labor and increase tax on consumption - descrease degree of informality in the labor market • Diminish tax distortion

  21. New Bankrupcy Law (Chapter 11) • Maintain current “concordata”, a pre-package convenient for small and medium business • Allow for broader scope of negotiation in other cases • Create creditor´s comittee to avoid hold-up problem • Mitigate priority (labor and fiscal) problems • Mitigate sucession problems • Incentivate debt-equity swaps (?)

  22. Final Comments • Flexible exchange rates and serious macroeconomic policies (high interest rate and increase in primary fiscal surplus) led to fall on “Brazil Risk” from 24 to 13 • Further decline depending on new reforms which are, however, politically difficult to implement • Once economic growth resumes, decline on Debt/GDP ratio will allow long run sustentability of government debt and further decline expected

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