Author: Benjamin Steinbruch

Source: Folha de S. Paulo - São Paulo / SP - MARKET - 20/07/2010

IT WAS ALWAYS known that among the main obstacles to the growth of productive activity in Brazil were the lack of capital and the high cost of financing. These two problems, however, appear today in second and third place in the list of obstacles. In the opinion of Brazilian businessmen, at this moment there is an even more important problem to inhibit economic growth: bureaucracy.

 
The above finding emerges from a robust work, completed in June by the Fiesp Competitiveness and Technology Department. The central conclusion of this document, published in Folha (30/6/10, page B1), shows, for the first time, the size of the cost of the infernal Brazilian bureaucracy. There are R $ 46,3 billion per year, corresponding to 1,47% of GDP.

The technical criteria that allowed Decomtec to reach these conclusions are set out in the work, of more than 40 pages. Comparisons made between other countries and Brazil indicate that the higher the level of bureaucracy, the lower the GDP per capita, education and competitiveness of the country. In addition, bureaucracy stimulates the growth of the informal economy.

At a time when Brazil is internationally celebrated for its economic performance in the midst of a global crisis, some competitive indicators are unacceptable. Two examples: in 2010, according to the World Bank, Brazil ranked 123 in the list of the 183 most efficient countries in terms of bureaucracy; and ranked 82nd in customs efficiency among 155 countries surveyed.

 
There are other comparisons in which Brazil loses rout. The work done by Fiesp compared Brazil with the OECD nations (rich) in relation to bureaucracy indicators and registered impressive deficiencies. While in Brazil companies spend 2.600 hours a year to pay taxes, this task requires only 216 hours in the OECD area.

Opening a company requires 16 procedures in Brazil and only 6 in the OECD. Closing a company takes 4 years in Brazil, compared to 1,8 years in rich countries. The cost of firing an employee is equivalent to 45,89 weeks of wages here and 29,62 in the OECD. These examples leave no doubt that the greater the bureaucracy, the less effective governments are and the competitive power of countries and their companies.

High bureaucracy also has a very damaging effect in helping to create an environment conducive to corruption. The accumulation of formal requirements and the complexity of procedures lead to attempts to pay bribes and kickbacks as a way to unblock business.

In addition, these complications discourage companies from entering the formal economy. Informality, in turn, has a direct impact on tax collection, compromises public investments and slows down the country's growth. Therefore, it is concluded that there is an urgent need to reduce bureaucracy in Brazil. And there would be no better time than now to discuss this matter, given the start of campaigns for the presidential election.

Among the reforms that Brazil has not yet carried out, there are two that could contribute a lot to the reduction of bureaucracy: tax and microeconomic. In the first, it would be welcome, in addition to cutting the tax burden, to simplify and reduce the number of taxes. There are 63 federal, state and municipal taxes in the country, with 3.200 rules, 56 articles, 34 paragraphs, 24 items and 10 items aimed at collection. There are those who call this “tax asylum”.
In the second reform, it is expected to extinguish a paraphernalia of rules, certificates, cross-controls, registrations in registries, registrations and licenses that make the lives of Brazilians, entrepreneurs or not, that remain legal and formality. It would be very useful for parties that intend to govern the country to speak out on the points included in their programs regarding these issues.

BENJAMIN STEINBRUCH, 56, businessman, is the CEO of Companhia Siderúrgica Nacional, president of the company's board of directors and first vice president of Fiesp. Write on Tuesdays, every 15 days, in this column.
cbvictoria@psi.com.br