Brazil ranks as number 114 on the index of the world’s freest economies, falling well below average. Brazil shows a trend of moving towards more and more government regulation in business. In the 2000’s, Brazil was ranked as “moderately free” but has since then seen a steady rise in government regulation, rising by 0.8 from last year. Now it is ranked as “mostly unfree”. The regulatory system is non-transparent, which creates a loophole through which corruption can manifest. Brazil is one of the top ten largest economies in the world, has a large domestic market, enjoys a steady democracy and has a wealth of natural resources. However, excessive, ineffective and inefficient government intervention in business prevents the country from realizing its full economic power and creates socio-economic tension.
The government is very active in the credit market, accounting for about 50% of the loans in the private sector. The labor market is also very inflexible, thereby restricting growth. Labor disputes always end up in court, without giving the employers and employees a proper chance to settle the dispute privately.
The business environment is marred by expensive and complex taxes that discourage start-up business and inhibit the growth of existing companies. Tax regulations are time-consuming even for relatively small companies. Burdensome bureaucracy ensures that it takes about 400 days for a foreign investor to start a company in Brazil. The government should concentrate on improving the business climate in the country to attract foreign investors rather than rely on state-led investments. . In order to stimulate a slowing economy, the president, Dilma Rousseff, has championed state-led investments that have preserved jobs, but issues such as public transport and basic sanitation have been neglected, causing dissatisfaction among the public. State-led investment is therefore the wrong response to the slowing economy. The Brazilian government should enforce regulation that is transparent, consistent and conducive to businesses; facilitating start-ups and encouraging already established businesses.
The Brazilian government should focus on a long-term plan to stability and prosperity. Inflation still rises despite the government’s efforts to enforce more regulation in local and international business. Less government intervention and conducive regulation in international business are key to a robust economy.
Romero, Simon. As Growth Ebbs, Brazil Powers Up Its Bulldozers. 21 June 2012. 31 December 2014 <http://www.nytimes.com/2012/06/22/world/americas/brazil-combats-slowdown-with-even-more-stimulus.html?pagewanted=all&_r=0>.
The Heritage Foundation. 2014 Index of economic Freedom:Brazil. 2014. 31 December 2014 <http://www.heritage.org/index/country/brazil>.