4 actions that can reboot private sector investmentin 2021

The IMF expects the world economy to grow strongly in 2021. For Brazil this is a moment to release the productive sector from the inefficient clutches of the state:

  • free the flow of credit to micro and small companies;
  • resume halted public works;
  • improve legislation on public infrastructure contracting; and
  • overcome diverging administrative rulings of courts and oversight bodies with a single body that can make binding, stable judgments.

The IMF’s forecasts for GDP growth in 2021 are:2.9% for Brazil; 4.5% for the USA and some European countries; and 9.2% in China. This is good news at a moment when Brazil and the world are in heavy recessions due to the pandemic. But as it happens, in Brazil the state is effectively bankrupt.

The private sector – the Brazilian economy’s engine         

So the private sector has to be the engine for recovery of economic growth and employment.

On the other hand, for private investment once again to irrigate Brazil’s economy, the government needs to get the inefficient, predatory state off its back.

The federal government needs to use the pandemic crisis as a great opportunity to free entrepreneurs and companies from the state’s suffocating restrictions. Instead it is wasting time on polemics – causing conflict with state governors over mini-issues such as reopening gyms; or inciting civil disobedience – but avoiding coming to grips with the real obstacles that lock down economic growth.

Four priority actions

VirtùNews has prepared a list of four priority measures to boost Brazil’s economic activity in the second half of 2020:

1.Remove the inefficient state bureaucracy barriers preventing funds reaching micro, small and medium-sized companies from the R$ 1 billion Covid-relief credit line created for them. Their support organization Sebrae says that small and medium-sized companies generate 75% of Brazil’s formal employment.

2.Create a task force of the federal government, Congress and oversight bodies to restart halted public works – currently a total of 14,000 projects. With just a breath of commonsense and unity around the national interest, such a task force could eliminate legal and bureaucratic obstacles (re-tendering if necessary) and have the private sector investing – and contracting suppliers and workers – to restart these works, before the end of this year.

3.Increase the quality and security of public contracts by improving legislation to enable state, local and federal governments to contract external consultants for infrastructure projects based on their own quality comparison decisions.

4.Pass rules to increase coordination between authorities in interpretation of regulations – to restrain caprice in decisions by courts and oversight agencies.
Brazil will never end its legal uncertainty as long as there is there is a mêlée of different decisions being made on important principles of administration by the courts, and the Public Attorneys’ offices and Audit Courts at all the levels of government.
The capriciousness of the courts, with judgments often expressed by single-judge decisions, needs to be ended and the emphasis placed on considered decisions by qualified bodies.
We need to create simple, non-judicial instances able to make decisions that are binding on the public administration and the Audit Courts – these would consolidate legal interpretations and issue technical regulations on key issues of public management (prevention of corruption, transparency, de-bureaucratization, public tenders and contracts, fiscal policy).

It is perfectly practicable to have increased economic liberty without compromising the functions of the state.

 

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