As we all know, the Brazilian economy is still undergoing a recession. However, we are now seeing the first signs of recovery. Industrial output is beginning to expand, inflation is falling and converging to the centre of the target, thus enabling the central bank to cut interest rates. Household debt is declining, the labour market is recovering — with net positive job creation numbers for the first time after 22 months of decline — hiring wages are increasing again, and private sector confidence indicators are improving. This set of good news is no accident. Rather, it is the result of firm and decisive action by the government for resuming confidence.
President Michel Temer’s administration is pursuing an robust agenda of reforms with broad parliamentary support. In a relatively short period, the government managed to enact profound fiscal adjustments and approve an important constitutional reform that establishes a cap on public spending. This created the fundamental conditions for the reorganisation of public finances and a return to growth. The government has been working to send a clear message to markets about the government’s level of commitment to reforms, which albeit harsh, are beyond necessary.
Reforms in pipeline
But many more reforms are on the way, some of which are already being implemented, with visible impacts on public administration and the economy. Pension reform will lead to the stabilisation and reversal of the system’s voluminous deficits, with significant impacts on long-term interest rates and in the environment for businesses and investment in the economy. The new State-Owned Enterprise Responsibility Law is promoting a major leap in transparency and governance that will hinder illegal activity, strengthen oversight and foster the professionalisation of management in public companies. The role of BNDES is being redefined. The development bank will now focus on supporting production chains, not sectors, and on measures to strengthen and consolidate the capital market. Regulatory agencies are being revitalised and modernised, and will have more independence to act. A wide range of measures is being implemented with a view to improving the environment for doing business, encouraging competition and reducing red tape and production costs, which will have significant impacts on the rate of productivity and competitiveness of enterprises. The government is also modernising secondary education, aiming to prepare young people for the challenges of a job market increasingly characterised by technological change and innovation.
In a fiscal adjustment environment, we must prioritise the use of public funds. With that goal in mind, the government, with the support of multilateral banks, is pressing ahead with monitoring an evaluation programme for its public policies, improving their management and execution, discontinuing what does not work and expanding policies and programmes that work well.
In the investments area, the government is carrying an ambitious programme of concessions, privatisations, and partnerships with the private sector in the logistics, energy and communications sectors, a crucial step towards overcoming the infrastructure bottleneck that is crippling investment and the Brazilian companies’ competitiveness. This month alone, four of the largest airports in the country have been successfully granted to the private sector under concession. But much more is going to happen throughout the year in this area.
In trade, the government is pursuing the goal of further and better integrating the country into the international economy. The resumption of talks on the trade agreement with the European Union, the review of Mercosur, and the negotiation of agreements with Latin American partners in the services, government procurement and investment areas — just a few of several trade negotiations underway — are already attracting foreign investment and helping create a new perspective for Brazil's participation in the world economy.
In summary, Brazil is firmly and objectively moving forward with an agenda of reforms that will restore fiscal soundness, ensure economic stability, improve public services, promote increased productivity and, above all, renew confidence for the private sector to once again invest in the country and reoccupy its place in the centre of the economy. We are confident that Brazil will not only grow again, but that it will grow in a sustained and sustainable manner, creating prosperity and opportunities for all and helping in the development of the Latin American region.
Dyogo Henrique de Oliveira is Brazil’s minister of planning