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Economic reforms in Brazil

When it comes to economic growth, Brazil has long been seen as something of a laggard. But it turns out that the country's economy in 2005 was 10.9% bigger than previously thought and has grown since 2000 at an annual average rate of 3%, rather than 2.6%. That still lags the world (see chart) but is a bit more respectable.

Brazil is Latin America's largest market, the world's fifth-most populous country and the world's tenth-largest economy in GDP terms. Above-average GDP growth will allow real incomes to raise over the forecast period, albeit at a more moderate pace than that seen in 2005-06. Although income support programs for the poorest families have contributed to a significant reduction in poverty rates and income inequality in recent years, Brazil will remain one of the world's most unequal societies over the forecast period.

Modest improvements to Brazil's business environment during the outlook period will not prevent the country from losing ground in the Economist Intelligence Unit's global and regional rankings. The tax system will remain complex and burdensome, the pension system will weigh on public sector finances, growing criminality and vested interests will continue to distort productivity, and labor markets will lack the necessary flexibility.

Sustaining high growth rates in the longer term depends on the impact of President Lula's structural reform program and efforts to build a more welcoming climate for investment, both domestic and foreign. In its first year, the Lula administration passed key tax and pension reforms to improve the government fiscal accounts. Judicial reform and an overhaul of the bankruptcy law, which should improve the functioning of credit markets, were passed in late 2004, along with tax measures to create incentives for long-term savings and investments.

Legislation promoting public private partnerships, a key effort to attract private investment to infrastructure, also passed in 2004. Labor reform and proposals to increase autonomy for the Central Bank are pending. In January 2007, the Lula administration announced a package of reforms to increase public investment and control spending growth. Despite this well-considered reform agenda, much remains to be done to improve the regulatory climate for investments, particularly in the energy sector; to simplify tax systems at the state and federal levels; and to further reform the pension system.

  • Fresh, tropical cuisine ranging from exotic fruits to stunning fresh seafood to spicy Bahían street snacks and not forgetting the infamous "rodizios" with all you can eat succulent steaks or seafood, all for around 1/5th of the price of the UK
  • Great overall standard of living for Europeans, with very favorable exchange rate.
  • European standards of property in beachfront locations for low South American prices.
  • Fast-growing selection of some of the world's most luxurious hotel chains
  • Massive surge in affordable charter flights
  • Flying time to Natal under 7hrs from Lisbon and under 9hrs from UK
  • Huge domestic holiday market.
  • Very positive feedback from foreign tourists ensuring the longevity of the property and tourism boom
  • No visa requirements for Europeans for stays of up to 6 months

The sooner you find out all these facts, the sooner you can start to enjoy the massive benefits of investing in this dynamic and beautiful country, ripe for development with so much to offer.

Author: by Karen Smith

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