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  HOME | Brazil (Click here for more)

Brazil’s Poor Budget Management Costs 3.9% of GDP, IDB Says

BRASILIA – Inefficient public spending costs Brazil an amount equivalent to 3.9 percent of the gross domestic product (GDP) each year, the Inter-American Development Bank (IDB) said in a report released on Tuesday.

The IDB said Brazil’s poor budget management generated a loss of some $68 billion annually in a country that still has not completely recovered from the severe 2015-2017 recession.

The regional financial institution criticized the South American nation’s pension and retirement system, whose cost has amounted to about 12.5 percent of GDP annually since 2015, with the figure expected to reach a staggering 50 percent of GDP by 2065 if reforms are not enacted.

The IDB’s projections are in line with those of President Jair Bolsonaro’s administration, which is trying to implement unpopular pension reforms.

The administration has proposed phasing out the current system over the next 10 years and introducing an individual retirement savings system similar to the one adopted in Chile in the 1980s.

Brazil, according to the IDB, currently spends seven times more on the elderly than on children, resulting in inadequate investment “in the future.”

Spending on pensions has been the biggest contributor to the budget deficits plaguing Latin America’s largest economy since 2015, limiting investment in health care and education, and increasing the national debt.

The IDB report also identifies other areas in which public spending is not being properly targeted in Brazil due, in part, to a tax regime designed more to finance the bureaucracy than to promote social well-being.

In addition to recommending that Brazil reform its retirement system and invest more and in better ways in education, the IDB said the South American nation should improve the quality of public spending by focusing on better management of infrastructure funds to reduce the huge delays and cost overruns that plague public works projects.

The report also recommended that the government overhaul spending on security, an area that currently consumes 3.7 percent of the national budget.

 

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