Front Matter

Front Matter

International Monetary Fund. Western Hemisphere Dept.
Published Date:
October 2018
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Note to Readers

This is an excerpt from Brazil: Boom, Bust, and the Road to Recovery, edited by Antonio Spilimbergo and Krishna Srinivasan.

Brazil is at crossroads, emerging slowly from a historic recession that was preceded by a huge economic boom. Reasons for the historic bust following a boom are manifold. Policy mistakes were an important contributory factor, and included the pursuit of countercyclical policies, introduced to deal with the effects of the global financial crisis, beyond the point where they were helpful. More fundamentally, it reflects longstanding structural weaknesses plaguing the economy, that also help explain Brazil’s uninspiring growth performance over the past four decades.

A durable exit from the crisis and the restoration of strong and sustainable growth will require addressing longstanding weaknesses in public finances, notably related to the social security system, and impediments to productivity and investment. This will not be easy, and will require strong leadership and unwavering resolve, anchored by a sense of responsibility and partnership among all stakeholders.

This book provides a compilation of research undertaken at the IMF and by leading policymakers and scholars in Brazil and elsewhere, aimed at understanding the root causes of Brazil’s growth performance leading up to the historic recession and the reforms that are needed to restore economic prosperity.

This excerpt is taken from uncorrected page proofs. Please check quotations and attributions against the final published volume.

Brazil: Boom, Bust, and the Road to Recovery

Edited by Antonio Spilimbergo and Krishna Srinivasan

ISBN: 9781-48433-974-9

Pub. Date: Fall 2018

Formats: Digital; Paperback, 6x9 in., pp. 300

Price: US$25.00

For additional information on this book, please contact:

International Monetary Fund, IMF Publications

P.O. Box 92780, Washington, DC 20090, U.S.A.

Tel: (202) 623-7430 • Fax: (202) 623-7201


© 2018 International Monetary Fund



Antonio Spilimbergo and Krishna Srinivasan


©International Monetary Fund. Not for Redistribution

© 2018 International Monetary Fund

Cataloging-in-Publication Data

Joint Bank-Fund Library

Names: Spilimbergo, Antonio. | Srinivasan, Krishna, 1965- | International Monetary Fund.

Title: Brazil : boom, bust, and the road to recovery/editors: Antonia Spilimbergo and Krishna Srinivasan.

Description: [Washington, DC] : International Monetary Fund, 2018. | Includes bibliographical references.

Identifiers: ISBN 978-1-48433-974-9 (paper)

Subjects: LCSH: Brazil—Economic conditions. | Economic development—Brazil. | Fiscal policy—Brazil.

Classification: LCC HC187.B73 2018

Disclaimer: The views expressed in this book are those of the authors and do not necessarily represent the views of the International Monetary Fund, its Executive Board, or management.

Please send orders to:

International Monetary Fund, Publication Services

P.O. Box 92780, Washington, DC 20090, U.S.A.

Tel.: (202) 623–7430 Fax: (202) 623–7201




  • Acknowledgments

  • Foreword

  • Part I. Overview

  • 1 Overview: Brazil’s Road to Recovery

  • Antonio Spilimbergo (IMF) and Krishna Srinivasan (IMF)

  • 2 An Eventful Two Decades of Reforms, Economic Boom, and a Historic Crisis

  • Alfredo Cuevas (IMF), Antonio Spilimbergo (IMF), Krishna Srinivasan (IMF), and Alejandro Werner (IMF)

  • Part II. Growth

  • 3 Current Constraints on Growth

  • Armando Castelar Pinheiro and Paulo de Carvalho Lins (FGV/IBRE)

  • 4 Brazil’s Productivity Challenge: Structural Change versus Transversal Improvements

  • João Manoel Pinho De Mello (Ministry of Finance, Brazil, and Insper), Isabela Duarte (Ministry of Finance, Brazil, and PUC-Rio), and Mark Dutz (The World Bank)

  • 5 Structural Reform Priorities

  • Nina Biljanovska (IMF) and Damiano Sandri (IMF)

  • 6 Brazil in the New World Economic Order

  • Marcello de Moura Estevão Filho (Ministry of Finance, Brazil) and Fernando Coppe Alcaraz (Ministry of Finance, Brazil)

  • 7 Trade Liberalization and Active Labor Market Policies

  • Carlos Góes (Office of the President, Brazil), Alexandre Messa (IPEA), Carlos Pio (Office of the President, Brazil), Eduardo Leoni (Office of the President, Brazil), and Luis Gustavo Montes (Office of the President, Brazil)

  • Part III. Social Progress

  • 8 Trends in Inequality

  • Izabela Karpowicz (IMF) and Carlos Góes (Casa Civil)

  • 9 Poverty and Inequality in Latin America

  • Ravi Balakrishnan (IMF), Frederik Toscani (IMF), and Mauricio Vargas (IMF)

  • Part IV. Strengthening the Fiscal Framework

  • 10 Modernizing Fiscal Institutions

  • Paulo Medas (IMF)

  • 11 The Challenges of Population Aging

  • Alfredo Cuevas (IMF), Izabela Karpowicz (IMF), Carlos Mulas-Granados (IMF), Mauricio Soto (IMF), Marina Mendes Tavares (IMF), and Vivian Malta (IMF)

  • 12 The Future of Fiscal Federalism

  • Guillerme Merces (FIRJAN), Fabian Bornhorst (IMF), and Nayara Freire (FIRJAN)

  • 13 Rightsizing the Public Sector Wage Bill

  • Izabela Karpowicz (IMF) and Mauricio Soto (IMF)

  • Part V. Challenges to the Monetary and Financial Framework

  • 14 A Time-Varying Neutral Interest Rate

  • Roberto Perrelli (IMF) and Shaun K. Roache (IMF)

  • 15 Interest Rates and Inflation

  • Troy Matheson (IMF)

  • 16 Earmarked Credit and Public Banks

  • Steen Byskov (The World Bank)

  • 17 In the Pursuit of Anchored Inflation Expectations in Brazil: The Role of Transparency and Communication

  • Yan Carrière-Swallow (IMF) and Juan Yépez (IMF)

  • Part VI. Fighting Corruption

  • 18 Corruption in Emerging Market Economies

  • Carlos Goncalves (IMF) and Krishna Srinivasan (IMF)

  • 19 Legal Issues in Fighting Corruption and Money Laundering

  • Richard Berkhout (IMF)

  • 20 Lava Jato, Mani Pulite, the Role of Institutions

  • Cristina Pinotti (A.C. Pastore & Associados)

  • 21 Lessons from Italy’s Anticorruption Efforts

  • Alessandro Merli (John Hopkins, Bologna)


This book has been a collective endeavor involving both IMF staff and senior policymakers, as well as leading academics and others from Brazil. We would like to thank the contributing authors for their close collaboration and enthusiasm to work on topics chosen in the book. The research presented in this book has been drawn from work done by IMF staff in the context of the annual Article IV policy consultations with the Brazilian authorities and other stakeholders, and has benefited from comments and feedback provided by several individuals at the IMF and elsewhere, including Alejandro Werner, director, Western Hemisphere Department, and Alfredo Cuevas, assistant director, European Department. Valentina Flamini, senior economist, and Nina Biljanovska, economist—both of the Western Hemisphere Department—provided valuable assistance in finalizing various chapters.

Linda Kean and Linda Long of the IMF’s Communications Department efficiently managed all aspects related to the production of the book, and we are grateful for their excellent work. Excellent research assistance provided by Henrique Barbosa and Genevieve Lindow, and administrative assistance by Cristina Barbosa, is gratefully acknowledged.

Antonio Spilimbergo and Krishna Srinivasan, editors


From World War II until the 1980s and again for much of the 1990s, Brazil was a fast-growing emerging economy, with growth averaging about 8 percent a year. The recession of 1981, with the onset of the Latin American debt crisis, was an adverse turning point, with Brazil experiencing a contraction in activity for the first time in three decades. It also marked a structural downshift in growth, which has averaged just over 2.6 percent per year since then. Brazil has seen falling productivity, with only short-lived upturns in growth and the economy reverting to a slower long-term trend.

Brazil’s lackluster growth performance, however, masks important improvements in the quality of institutions and macroeconomic frameworks in the 1990s, beginning with the Plano Real in 1994, the floating of the real, the adoption of inflation targeting, and the passing of the Fiscal Responsibility Law by Congress. These reforms contributed to greater stability and significant social progress in the 2000s. The global financial crisis produced another change in fortunes for Brazil, as both unfavorable external conditions and domestic policy shortcomings morphed into a deep and prolonged recession. Brazil now faces a moment of opportunity, with the economy emerging gradually from the recession, albeit with significant domestic and external downside risks.

Brazil can turn the corner by pursuing much-needed reforms to place the economy on a stronger footing. But this will require strong political leadership, a sustained commitment by policymakers to make the right, albeit difficult choices, and partnership among all stakeholders, many of whom are fatigued by reform and have experienced falling living standards. In this regard, this book is timely and important in many respects. It provides rich analysis by assessing Brazil’s economic performance over the past several years from a variety of angles, with a view to understanding the factors that have shackled growth and social progress, and examining policies that have worked well and those that have not. The book draws upon and synthesizes extensive work done at the IMF and in Brazil by leading policymakers, academics, and think tanks, and serves as a fresh platform to deepen our close engagement and policy dialogue with policymakers, academics, and civil society.

I hope the book will spark interest and healthy debate on the economic challenges facing Brazil, and help guide policy choices to place the country on the path to greater prosperity and social progress.

David Lipton

First Deputy Managing Director

International Monetary Fund

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