Free the economy from the state: restart it with reorganization, not money.
A true ‘Marshall Plan’ for Brazilwould not throw public funds at the economy, but invest in the structure and efficiency of the state. The plan must free the productive sector from interventionism, which currently discourages private investment, increases legal uncertainty, and holds back increases in productivity.
It’s currently fashionable in government circles to talk of a ‘Marshall Plan’ to reactivate Brazil’s economy.
But in public policy, misreading a definition can be disastrous. The original Marshall Plan was a financial stimulus package of US$12 billion (some US$130 billion in today’s money) – conceived by the US government in 1948 to reactivate Europe’s economy after the Second World War.
It played a vital part in Europe’s recovery. But the metaphor doesn’t apply to Brazil today.
Brazil does not have the money to create a Marshall Plan for itself. Any money would simply be a double-up bet on raising the country’s present level of debt, wastefully thrown at an economy that needs organization and efficiency, not money – and which has been weighed down for over a decade by the government’s fiscal irresponsibility and its incapacity to approve reforms of the State.
A true Recovery Plan for Brazil would be: not to throw public funds at the economy, but to invest in the structure, working and efficiency of the State.
Currently the bonds of the Brazilian State suffocate entrepreneurs and overburden companies with a spaghetti of obsolete laws, excessive regulation, and the highest tax burden of the principal emerging economies.
The inefficiency of the State and its excessive economic intervention discourage private investments, increase legal uncertainty, and hold back the economy from increasing productivity.
Our own concrete ‘Marshall Plan’ would focus on freeing the economy from this burden – taking the inefficient and interventionist State off the back of the productive sector.
Here are the ten items of our Brazilian Recovery Plan:
- Pass the tax reform.
- Pass the administrative reform – to reduce inequalities in public service: reward agents’ performance; prohibit automatic advantages; reduce the number of careers; and improve governance in hiring temporary agents.
- Pass the regulatory framework for water and sewerage infrastructure
- Pass a revision of the Administrative Improbity Law. The present law merely encourages adventurous lawsuits and criminalization of controversial decisions by people in governance – creating a perverse incentive not to take decisions, increasing uncertainty on compliance with contracts, and expanding an existing legal limbo.
- Pass an Economic Governance Law. This would give the federal government full competency to legislate economic law – inspired by the OECD’s agenda for improving regulations. The aim would be to induce creation of programs for permanent review of regulations in all areas (not only in the regulatory agencies) and in all the states, correcting anachronisms and excessive demands, transparently, and on a technical basis.
- Pass improvements to the law on infrastructure contracting – increasing quality and security: the administration needs to be able to use high-quality external consultation in modeling of concessions and partnerships.
- Pass rules to increase coordination of public bodies, curbing capricious variations in decisions by the courts and oversight bodies. It is impossible to do away with Brazil’s legal insecurity while there is still a gigantic disagreement in rulings on laws and regulations between the courts, the public attorneys and state/federal audit bodies.
Non-judicial instances need to be created, with binding effect on both government and the audit bodies, to finalize interpretations and issue technical regulations to guide government on key issues (corruption, transparency, de-bureaucratization, public competitions/contracts, fiscal policy).
Major themes need to be consolidated and collective, not in the hands of a single judge.
It is perfectly possible to achieve greater economic liberty without compromising the public functions of the State.
- Commit to gradual opening of the economy: pass a plan to gradually reduce duties and charges, eliminate bureaucratic bottlenecks, and stimulate competitiveness, competition and increased productivity.
- Privatize the state-controlled companies. The government that said it would sell all the state companies has so far not sold one – and has even created a new one.
- Decentralize: Take this government’s slogan seriously – ‘less Brasília and more Brazil’. There is a need to decentralize power, and implement true federalism, giving more autonomy and power to the states and municipalities.
If government and Congress can vote this ‘Marshall Plan’ by the end of June, they will pave the way for resumption of Brazil’s economic growth, return of investment, and generation of employment.