ECONOMIC FREEDOM IN BRAZIL

02/09/2018

Karolina Wachowicz Orlandi, Lucimari Andrade Paggiossi, Ubirajara Costabile Romaro e Prof. Dr. Clayton Vinícius Pegoraro


The latest trade freedom rankings around the world show that data continues to present a strong match between free trade and a variety of positive indicators, including economic prosperity, low poverty rates and clean environments.

Worldwide, the average free trade index improved only in 2016, from 75.6 to 75.9, with a maximum score of 100. The improvement was due to a small decline in average rates among countries measured .

The recent stagnation of the volume of global trade and anti-trade rhetoric is a matter of concern in many places.

International Monetary Fund (IMF): "The slowdown in trade growth since 2012 is largely due to weak growth but also to lower trading business and a recent recovery in protectionism."

Peterson Institute for International Economics: "The absence of liberalization and the eruption of micro-protection have contributed mainly to the poor performance of trade and investment."

WTO Director-General Roberto Azevedo: "Of the more than 2,800 trade restrictive measures registered ... only 25% have been removed since October 2008. In the current environment, an increase in trade restrictions is the last thing the economy global needs. "

Center for Economic and Policy Research: "Between January 1 and October 31, 2015, 539 measures were taken by governments around the world that harmed foreign traders, investors, workers or owners of intellectual property.In the previous year, we find so many trade distortions so quickly. "

According to the Heritage Foundation's ranking on economic freedom in 180 countries, Brazil has dropped eight positions in just one year and we are now 140th among the world's most closed.

Four Latin American neighbors are at the top of the list. This is the case of Chile that is in 10th. general position, Colombia, Uruguay and Peru are in the group of 30 and 40 of the ranking. The former are the same for years, with little variation: Hong Kong, Singapore, New Zealand, Switzerland, Australia and small Estonia.

Brazil is as socialist as Togo (138th), Burundi (139th), Pakistan (141st) and Ethiopia (142nd). "And more socialist than countries like Gabon (103rd), Tajikistan (109th), China (111th, still controlled by the Communist Party)," said business administrator Jefferson Araújo in his analysis of the Twitter ranking.

Corruption has damaged confidence in public and private institutions and contributed to Brazil's decline in the World Economic Forum's 2016 Global Competitiveness Index.

This type of signal does not appear in the operations of the Stock Exchange or in the dollar quotation. Brazil has really lost too much in the last five years and even more after 2014. The institutional deterioration and fundamentals of the economy leaves a lamentable trail and compromises the recovery of the country as a whole, not just GDP.

With the arrival of Donald Trump to power in the United States and its questions about the forces of international trade, it further hampers the opening of Brazil's economy, which is an essential condition for rebuilding its foundations.

Conclusion:

Brazil's fiscal situation was severely hampered by a combination of high inflation, political paralysis, and rising budget deficits that raised the burden of public debt. In addition, political crisis coupled with declining commodity prices, helps with the contraction of the economy, undermining consumer and investor confidence.

 State interference in the economy has been heavy. The efficiency and overall quality of public services remain poor despite high government spending. The reform programs proved difficult. Impediments to business activity include costly taxes, inefficient regulation, difficult access to long-term financing, and a rigid labor market. The judicial system remains vulnerable to corruption.

The judiciary, although independent, is overloaded, ineffective, and often subjected to intimidation and other outside influences, especially in rural areas. Corruption scandals undermined confidence in both public and private institutions and contributed to Brazil's decline at the 2016 World Economic Forum Global Competitiveness Indices.

The personal income tax rate is 27.5%. The standard corporate rate is 15%. The overall tax burden equals 32.8 percent of domestic income. Government spending accounts for 39.5% of total production (GDP) in the last three years and the average budget deficit is 6.4% of GDP. Public debt is equivalent to 73.7% of GDP.

In Brazil new businesses are bureaucratic, expensive and time consuming to start or expand. Besides rigid and outdated labor standards hamper employment growth and non-economic cost is onerous to employ In Brazil the market opening is of moderate importance for the Brazilian economy; The value of exports and imports has a trade balance of 27% of GDP. The average tariff rate applied is 7.8%. Trade and investment face regulatory bureaucracy and obstacles. The financial sector is diverse and competitive, but government involvement remains considerable, and public banks now account for more than 50% of total private sector lending.

 

References to the original data: http: //www.heritage.org/international-economies/report/2017-index-economic-freedom-trade-and-prosperity-riskhttp: //www.heritage.org/index/country/brazil