Brazil
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QUICK FACTS
- Population:
- 198.4 million
- GDP (PPP):
- $2.4 trillion
- 0.9% growth
- 3.2% 5-year compound annual growth
- $11,875 per capita
- Unemployment:
- 5.5%
- Inflation (CPI):
- 5.4%
- FDI Inflow:
- $65.3 billion
Brazil’s economic freedom score is 56.9, making its economy the 114th freest in the 2014 Index. Its score is 0.8 point worse than last year, with declines in labor freedom, monetary freedom, fiscal freedom, and trade freedom. Brazil is ranked 20th out of 29 countries in the South and Central America/Caribbean region, and its overall score is below the world average.
Over the 20-year history of the Index, Brazil’s economic freedom score has improved by only 5.5 points. The combined improvement achieved in five of the 10 economic freedoms, including trade freedom, monetary freedom, and investment freedom, has been offset by deteriorations in the area of government size that measures the tax burden and government spending.
Brazil had advanced into the ranks of the “moderately free” economies in the Index during the first half of the 2000s, but since 2007, the economy has fallen back to the status of “mostly unfree.” The lack of progress toward greater economic freedom has discouraged private-sector growth and continues to undermine realization of the economy’s full potential.
BACKGROUND
Brazil is the world’s seventh-largest economy, and its population of almost 200 million is heavily concentrated on the Atlantic coast. President Dilma Rousseff, former President Luiz Inacio “Lula” da Silva’s hand-picked successor, became Brazil’s first female president in 2011 and until mid-2013 enjoyed a high popularity rating. Increases in public transportation fares in 2013 provided an excuse for hard-left militants to vandalize property and block roads, but the events also heightened popular grievances against the corrupt political system and slowing economic growth. Brazil has benefited from surging prices for commodity exports. The middle class is growing, and millions have been lifted out of poverty, but heavy government intervention in the economy continues to cause the misallocation of capital, limit mobility, and fuel a sense of injustice. Ensuring security and adequate infrastructure for the 2014 World Cup and 2016 Rio Olympic games will challenge the government’s administrative capacity.
RULE OF LAWVIEW METHODOLOGY
Property Rights50.0Create a Graph using this measurement
Freedom From Corruption37.9Create a Graph using this measurement
Corruption undermines economic freedom and sparked massive nationwide protests in 2013 over poor public services and the low level of political and institutional effectiveness. In the “Mensalão” case in 2012, some members of the Brazilian Congress were found guilty of participating in a pay-for-votes scheme. Contracts are generally considered secure, but the judiciary is inefficient and subject to political and economic influence.
LIMITED GOVERNMENTVIEW METHODOLOGY
Government Spending54.1Create a Graph using this measurement
Fiscal Freedom68.8Create a Graph using this measurement
The top individual income tax rate is 27.5 percent. The top effective corporate tax rate is 34 percent, which includes a 15 percent corporate tax, a corporate surtax, and a 9 percent social contributions tax on net profits. Overall tax revenue is 34.8 percent of GDP. The government has vowed to boost spending to placate protesters, but expenditures remain steady at 39.1 percent of the domestic economy. Public debt is about 69 percent of GDP.
REGULATORY EFFICIENCYVIEW METHODOLOGY
Business Freedom53.8Create a Graph using this measurement
Labor Freedom49.8Create a Graph using this measurement
Monetary Freedom69.9Create a Graph using this measurement
Regulatory efficiency remains poor, and the application of regulations is inconsistent and non-transparent. On average, it requires over 100 days to incorporate a company, and obtaining necessary permits takes 400 days. The labor market lacks flexibility and hinders job growth. Agricultural subsidies doubled from 2011 to 2013 and now total about $10 billion. In 2013, subsidies for electricity were also increased.
OPEN MARKETSVIEW METHODOLOGY
Trade Freedom69.3Create a Graph using this measurement
Investment Freedom55.0Create a Graph using this measurement
Financial Freedom60.0Create a Graph using this measurement
Brazil’s average tariff rate is 7.9 percent. Brazilians are not allowed to import used clothing or cars. Foreign investment in several sectors of the economy is limited by the government. Banking and capital markets are increasingly diversified and growing. However, the role of the state in credit markets has also steadily expanded, and public banks now account for 50 percent of total loans to the private sector.
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