47-43247511 - July 2009 Policy Brief OrganisatiOn fOr...

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© OECD 2009 ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT Policy Brief JULY 2009 This Policy Brief presents the assessment and recommendations of the 2009 Economic Survey of Brazil. A draft of this Survey was prepared by the Economics Department and discussed at a meeting of the Economic Development and Review Committee, which is made up of the 30 member countries and the European Commission, on 4 June 2009. The Survey is published under the responsibility of the Secretary-General of the OECD. Economic Survey of Brazil, 2009 Summary The global financial and economic crisis has not left Brazil unscathed. But a recovery is getting under way and should gather momentum in the second half of 2009 and into 2010. Continued macroeconomic consolidation – based on a sound policy framework combining inflation targeting, a flexible exchange rate and rules‑based fiscal management – together with a much improved external liability position have underpinned the economy’s resilience. Policymakers should nevertheless not lose sight of longer‑term challenges that will need to continue to be addressed to bolster the economy’s growth potential and to close the gap in living standards in relation to the OECD area at a faster pace. Reaping the benefits of macroeconomic consolidation The short‑term policy response to the global financial and economic crisis has been by and large appropriate. Decisive action to shore up liquidity since the onset of the crisis has been important, and there may be room for some further monetary easing in the coming months. Fiscal policy has been relaxed on cyclical and discretionary grounds without compromising longer‑term debt sustainability, but additional activism would be inadvisable, unless activity weakens much further. Additional structural reform should focus on containment of expenditure growth in support of continued fiscal adjustment, as well as on further financial deepening, based on a gradual elimination of compulsory reserve requirements for banks and a phasing‑out of existing directed credit operations. Reforming indirect taxes and labour levies Brazil’s tax system is complex, conducive to predatory tax competition among the states and burdensome on labour. Overcoming these weaknesses is of utmost importance. The authorities propose to unify state‑level VAT legislation across the country, to replace federal levies on enterprise turnover and payroll by a federal VAT and to alleviate the tax burden on labour income. A well thought‑out reform package is under discussion in Congress. Support will be needed, especially among the state governments, to ensure that reform is efficiency‑enhancing and consistent with ongoing fiscal adjustment efforts. How is Brazil
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This note was uploaded on 02/08/2012 for the course ECO 51844 taught by Professor Sabet during the Spring '11 term at FIU.

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47-43247511 - July 2009 Policy Brief OrganisatiOn fOr...

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