Author: Paulo Godoy

Source: Folha de S. Paulo, 29/11/2007

The Brazilian ECONOMY is expected to grow above 4,5% this year. After almost 20 years of macro and microeconomic adjustments, Brazil can stop looking at the rear view and look to the future, building a foundation to maintain growth in an eventual unfavorable scenario.

Brazil just doesn't grow any more because it is tied to structures and rules that have become obsolete in the face of the increasing speed of social demands and the business world.

For this reason, structural reforms - mainly tax, labor and political - as well as administrative ones - in environmental licensing and public procurement systems - are urgent. The good numbers of the economy should be used to undertake them, since changes of this size are not made in times of crisis, but in times of calm.
The reforms are important to increase investment levels in order to expand industrial capacity and infrastructure, improve public expenditure management and provide better conditions for expanding productive activity.
The discussion around the renewal of the CPMF (Provisional Contribution on Financial Transactions) forces the resumption of the debate around tax reform, which, in addition to reducing the burden of taxes, fees and contributions, needs to simplify the system and reduce the tax burden - everything that companies and people need to spend to keep up with tax obligations. Any plan outside these guidelines can result in a patch - and not exactly a renovation. This movement needs to occur concurrently with the improvement of public spending. The expense is cut on the one hand, the tax is cut on the other.
Political reform is another urgency, without which there may not be an institutional environment to privilege the country's needs. It would be essential to establish mechanisms to guarantee party loyalty, an effective barrier clause and the district vote - this can even change the way of doing politics in Brazil, as it brings voters closer to the elected and reduces the cost of campaigns.
In labor relations, the prevailing high informality demands labor reform. The modernization of rules between boss and employee has become fundamental in the face of social, economic and technological changes that have occurred in the last decades. It is advisable to make rules more flexible and make the cost of hiring more fair, as the current legislation, in practice, pushes about half of the economically active population into the informal market and establishes virtual protection.
Among administrative reforms, bidding rules can be improved to provide more security in contracting. In environmental licensing, the State has not yet managed to guarantee conditions for it to be a goal - and not an obstacle - to investments.

It is recommended to reorganize, standardize and optimize the procedures inherent to the environmental process, which make any licensing process an unpredictable journey.

The agenda is complex, but necessary. It is up to everyone to undertake it, but mainly to the State, which has the power to do it. These reforms can no longer be patched, like some of those that have taken place in recent years. Economic and social development depends on them at a greater pace and intensity.

PAULO GODOY, business administrator, is president of Abdib (Brazilian Association of Infrastructure and Basic Industries).