Letter IEDI n. 1028–Brazil after COVID-19: IPEA's proposals
Today's Letter IEDI continues a series of works by the Institute with proposals and suggestions for a more consistent and sustainable post-pandemic economic recovery. Previous editions have dealt with studies by former IMF chief economist Olivier Blanchard (Letter n. 1026) and UNCTAD (Letter n. 1025).
In this edition, the theme is the recently released document “Post-COVID-19 Brazil: contributions by the Applied Economic Research Institute” (Brasil pós-covid-19: contribuições do Instituto de Pesquisa Econômica Aplicada), which brings a set of policy proposals for improving the population's employment and income conditions and for the recovery of economic activity after the COVID-19 pandemic.
As emphasized in the study, due to the health, social and economic emergence the proposals focus on specific short and medium term programs or instruments and not on generic strategies.
Organized around 4 axes, the proposals indicate the legal instruments and necessary actions, as well as the sources of funds for their execution. Some of them require temporary expansions of public spending, while others suggest new financing models that encourage private sector participation.
The first axis, centered on productive reconstruction, brings together ten measures that aim to: promote a rapid economic recovery by supporting productive activities, especially those carried out by micro and small companies; guarantee the preservation of goods and services supply in strategic sectors; increase the efficiency of public interventions; and safeguard and generate new jobs.
In this first axis, the following proposals stand out:
• Provision of loans with zero interest and one year grace period, proportional to the average monthly revenue for all micro and small enterprises (MSEs) in the country, according to the company's activity and conditioned to the maintenance of jobs, with simplified risk analysis and National Treasury guarantee.
• Creation of an automotive recycling industry, generating a sustainable sales cycle, with the withdrawal from circulation of unroadworthy vehicles, which would be then sent for recycling.
• Strategic use of public procurement to support and encourage the activities of MSEs and, at the same time, to stimulate competition, including the creation of a government marketplace and the promotion of a platform for matching large supplier companies with small subcontracted suppliers.
• Creation of a financing program for the Industrial Health Complex, focusing on the sanitary and epidemiological challenges of SUS (Brazil's health system), aimed at increasing the productive and innovative capacity of the sector, with an emphasis on medium and small companies and startups.
• Placing a public technology procurement order for the development of an intelligent autonomous system, with the use of sensors and artificial intelligence, resource management and improvement of the capacity for public and private health care.
• Mobilization of private resources for investment in science and technology in the country, encouraging, through tax incentives to donations from individuals and companies, the creation of private funds to support universities and science and technology institutions.
The second axis, dedicated to the external sector, brings together three proposals aimed at contributing to the full recovery of the economy through the commercial promotion of Brazilian goods and services and the attraction of foreign capital, as well as at fighting protectionism in international trade and coordinating aid to developing countries.
The plan to stimulate exports includes actions to facilitate companies' access to BNDES credit and export credit insurance, as well as to streamline the return of tax credits, in addition to improving the regulatory environment for production and foreign trade.
With regard to attracting foreign capital, IPEA1 suggests objectively seeking international partnerships to expand investments in the country, especially in infrastructure projects and new production plants, in addition to expanding the use of existing credit lines in banks and multilateral funds for new projects, both in physical and social infrastructure and in the health sector.
The third axis, focused on the infrastructure sector, in a broad concept, includes eight proposals to: guarantee, in the short term, the attractiveness of public-private contracts already in progress, facilitate the operation of private capital, and, at the same time, generate new jobs and address historical problems related to basic conditions of social infrastructure.
The following suggestions stand out:
• Facilitate the participation of foreign capital in infrastructure projects, with the removal of bureaucratic obstacles to foreign participation in concessions, the relaxation of capital and technical knowledge requirements, and the design of risk-sharing mechanisms, with a Treasury currency hedging guarantee.
• Allow and disseminate private railway construction by reviewing subsidies granted to the ore and grain production chain for export, as well as waiving concession entry fees, in exchange for investments in transport infrastructure.
• Support the solar panels production chain, in order to increase the competitiveness of national equipment and promote the generation of jobs in the sector, and provide lower costs to the More Lights to the Amazon (Mais Luz para a Amazônia) program.
• Expand access to quality broadband, encouraging private sector participation in the broadening of access networks by reducing the tax burden on network building and on services provision in the poorest municipalities.
Social policies are the focus of the fourth and final axis, which aims to mitigate the increase in the country's already high socioeconomic inequalities, made worse by the pandemic. This axis brings together a set of twelve proposals that targets: the formal job market, with an incentive for 20-hour part-time jobs; the protection of vulnerable groups; the strengthening of family farming; and the areas of Health and Education, with emphasis on the structuring of a national student financing system for higher, professional and technological education, with payments linked to the students' future income.
This fourth axis also includes a plan for national participation in the global vaccine development effort for the new coronavirus, in order to ensure access to sufficient supply when vaccines are available.
1 Translator’s note: IPEA is the acronym (in Portuguese) for Applied Economic Research Institute (Instituto de Pesquisa Econômica Aplicada).