Policies aim to strengthen fiscal accounts, macroeconomic stability, competitiveness and productivity
A projection reads"Bolsonaro Out" on a building's wall during a protest against President Jair Bolsonaro amid the coronavirus outbreak, in Sao Paulo, Brazil, on May 18, 2020. Picture: AFP/MIGUEL SCHINCARIOL
Given the similarity of their journeys to junk status, it may serve SA well to take a critical look not only at Brazil’s economic policies before the downgrade but also at its subsequent attempts at structural reform. There may be valuable lessons to be learnt as we take our first tender steps forward through junk status territory.
Progress on structural economic reforms has been severely limited since the advent of democracy in 1994 Brazil’s bloated government expenditure, troublesome state-owned enterprises , poor policy reform and disjointed regulation in the energy sector, as well as years of political corruption and mismanagement, sound awfully familiar to South Africans.
Bolsonaro states that the main reason for the country’s persistent debt problem remains the government pension system, as he believes people retire too early with too many benefits. The Senate has passed the bill needed for pension reform, but its effects are yet to be felt. It would be naive to discount the effect of the global Covid-19 pandemic on Brazil and SA’s downgrade recovery plans. For Brazil, growth prospects had looked optimistic at the start of the year, but intensifying headwinds, mainly from the coronavirus outbreak, have since slowed its momentum.
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