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Lesson 4 One may hypothesize that macroeconomic management has perhaps been too prudent.
With the exception of education, Botswanas social policy lacks the ambition to expand budgets in key areas such as health and social security, both of them critical for the
development of the countrys human capital. This has occurred despite the fact that the share of social expenditure in total spending has risen, reflecting the existence of a strong
political will but with tight limits. The most evident example of this situation is the absence of a contributory social security scheme, which could be oriented towards
providing protection for the middle class, as well as to complement the current components of the social protection floor.
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5. Brazil: Increasing fiscal space through social contributions
5.1. Country profile
With a population of 190 million inhabitants and a territory of more than 8.5 million square kilometres, the Federative Republic of Brazil is the largest country in Latin
America; in fact, Brazil is the fifth most populous country in the world. Administratively, it is organized into a Federal District, 26 federal states and more than 5,500 municipalities.
A large proportion of its territory 40 per cent consists of Amazonian rain forest, and for this reason the country boasts the greatest animal bio-diversity on the planet. The Brazilian
population is concentrated in large cities along the coast, contrasting with large uninhabited territories in the interior. Brazil is the only Portuguese-speaking nation in the
Americas.
In the UNDPs Human Development Index HDI, Brazil is in the high human development category of countries. According to UNDP data for 2000-2006 Brazil ranks
75th in the global HDI with 0.813 points, its populations life expectancy is around 73 years, the infant mortality rate is 22 per thousand and an estimated 21.5 per cent of its
population lives below the national poverty line. The estimated GDP per capita in 2008 was US 10,296 PPP, one of the highest in Latin America and in 70th position
worldwide.
According to the World Bank 2010, Brazils economy is the second largest in the Americas, after the United States. Its exports are very significant globally. The countrys
main economic activities are agriculture, livestock, industry, mining, oil exploitation and tourism.
During the last decade Brazil was able to achieve a solid macroeconomic position, which helped to improve its resistance to the global economic crisis. These results were largely
attributable to the fiscal discipline applied by the country, and generally correspond to the orientation of its economic policy. This does not mean that the situation is optimal or that
reforms are not required, but at the regional level Brazils macroeconomic performance is enviable.
According to data from the IMF and the WB, Brazil has witnessed a decline in its public debt-to-GDP ratio and a growth in its foreign currency reserves. This has increased its
resilience to economic shocks and allowed for an improvement in the country’s economic conditions, particularly when compared with the previous decade.
After the 2002 crisis economic reforms were aimed at improving incomes, employment, public debt, foreign currency reserves and the de-dollarization of domestic debt. Another
of the highlights of Brazils economic policy is the significant expansion of domestic demand; according to Brazilian authorities, this achievement is explained largely by the
favourable development of social investment.
An equally important factor in Brazils policy of seeking macroeconomic stability and maintaining the countrys international competitiveness has been the modification in its
exchange rate policy toward a floating rate, as the dollar indexation policy pursued in the 1980s and 1990s had generated great instability and exchange vulnerability.
More recently, as a result of the international economic crisis, the Brazilian economy contracted temporarily in 2009, but it subsequently recovered its growth towards 2010.
