Three questions for Edmar Bacha

The economist and former president of the BNDES talks about the expectation of economic growth, increased formalization and international competitiveness in the country.

1. With each new projection commissioned by the Central Bank, expectations for growth in the Brazilian economy for 2013 are reduced. In your opinion, what measures would be necessary to reverse this scenario?

More important than low growth is its combination with high inflation. In other words, the Brazilian economy seems to be less productive today than in the recent past. There is the effect of the end of the external bonanza, which benefited the country in the second half of the decade, but equally important is the paralysis of the liberalizing economic reforms in the Lula and Dilma governments. The resumption of these reforms is essential to allow the country to grow again with inflation under control.

2. When disclosing the 2012 Underground Economy Index, ETCO and the Brazilian Institute of Economics of Fundação Getulio Vargas (IBRE / FGV) warned of the “institutional limit” of formalizing employment. In your opinion, what factors contribute to this limit and how would it be possible to resume the growth of formalization?

The greater incorporation of labor in the formal sector of the economy was another factor that allowed to accelerate the GDP growth rate in the second half of the past decade. With the reduction of informality and the reduction of the unemployment rate, the continuous incorporation of labor now depends on the adoption of a more vigorous labor reform, in the lines that has been indicated by José Pastore, for example.

3. Mr. do you believe that the reduction of the tax burden would leverage the integration of Brazil as a competitive economy in the international scenario?

No doubt. Equally important would be a reduction in protection against imports (tariff and non-tariff barriers, especially domestic content requirements) to allow Brazilian industry to participate in globalized production chains.