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Brazil - From stability to growth through public employment reform : Main Report (English)

Tight money and a loose fiscal stance have led to growing pressures in Brazil. Substantial foreign exchange reserves, a credible privatization program and record of policy management so far make the risks manageable in the short to medium term. But these risks could be further reduced by changing the policy mix. High real interest rates, a strong exchange rate and a weak fiscal stance have undesirable consequences, beyond the growth of indebtedness. Sustained fiscal adjustment is the main policy change needed; this should take the form of reduced government spending, specifically, payroll expenses (public wages and pensions). Efforts should focus on reducing public-private differences. Sustainably reducing payroll spending mainly implies lowering salaries, pensions, and employment and delinking pensions from salary adjustments, enforcing working hour regulations, reducing salaries, and keeping salary increases small. Separation programs for public administration should be redesigned and expanded while separation programs for public enterprises can be made less generous. Long-term fiscal sustainability requires constitutional reform. Measures to reduce disparities between the public and private sector pensions are the most beneficial over the longer term from fiscal, efficiency, and equity viewpoints. Proposed constitutional changes are being monitored as a sign of the government's commitment to fiscal adjustment.

Details

  • Document Date

    1998/02/17

  • Document Type

    Pre-2003 Economic or Sector Report

  • Report Number

    16793

  • Volume No

    1

  • Total Volume(s)

    2

  • Country

    Brazil,

  • Region

    Latin America & Caribbean,

  • Disclosure Date

    2010/07/01

  • Doc Name

    Main Report

  • Keywords

    economic classification of expenditure;current account deficit;Public Employment;fiscal adjustment;labor market reform;exchange rate;Exchange Rates;Poverty Reduction & Economic Management;fiscal deficit;salary and pension;public sector wage bill;public sector employment reform;high real interest rate;federal government;real rate of interest;annual rate of inflation;gross fixed capital formation;public sector borrowing requirement;cost of living index;Monetary and Credit Policies;flows of international capital;reduction of payroll taxes;high levels of protection;real effective exchange rate;trade account;balance of payment;state enterprises;exchange rate regime;tight monetary policy;exchange rate anchor;foreign direct investment;job stability;Exchange rate policies;real exchange rate;exchange rate policy;annual inflation rate;current account balance;rate of crawl;fall in inflation;nominal exchange rate;differences in earnings;voluntary severance program;capital expenditure;Capital Inflows;formal sector;high inflation economy;public sector reform;foreign institutional investor;fixed exchange rate;share of income;labor market distortion;speculative capital inflow;consumer price index;formal sector worker;households with income;social security institutions;range of investor;informal sector worker;years of service;resource allocation decision;private sector job;duration of unemployment;cost of labor;scheme will;private financial sector;private sector employment;domestic financial institution;exchange rate band;private sector counterpart;public sector worker;degree of informality;salaries and wages;long-term fiscal sustainability;private sector worker;decline in inflation;foreign interest rate;sustainable fiscal adjustment;public sector solvency;lack of credibility;labor market efficiency;lines of credit;nominal protection rate;nonfinancial public sector;source of financing;Foreign Exchange Reserve;ownership of state;recovery of investment;durable consumer good;average real income;competitive private sector;system of taxation;labor market regulation;social security system;current account imbalance;domestic interest rate;interest rate decline;official exchange rate;speculative attack;private employment;fiscal stance;efficiency gain;constitutional reform;political will;minimum wage;capital flow;

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Citation

Brazil - From stability to growth through public employment reform : Main Report (English). World Development Sources, WDS 1998-2 Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/697001468769466273/Main-Report