Wednesday, May 4, 2016

LatAm in Focus: Otaviano Canuto on Fixing Brazil's Economy

By Luisa Leme

The IMF's executive director outlines where economic policy went wrong and draws lessons from Brazil's worst crisis in decades.

</p> <p>Brazil’s economy shrank by nearly 4 percent in 2015 and the <a href="http://www.as-coa.org/articles/timeline-brazils-political-crisis">political crisis</a> in the country is stalling hopes for an improvement. The country's woes are dragging down Latin America; the International Monetary Fund (IMF) has adjusted its Latin American <a href="http://www.reuters.com/article/imf-g20-latam-idUSL5N17E5BK" target="_blank">recession projections</a> from 0.3 to 0.5 percent for 2016.</p> <div class="wrapper" style="width: 100%;"> <table align="left" border="0" cellpadding="5" cellspacing="5" style="width: 30%;"> <tbody> <tr> <td> <p style="text-align: center;"><em><b style="font-size: 20px;"><img alt="" src="/sites/default/files/OtavianoCanutoPodcast.jpg" style="width: 100%; height: 100%;" /></b></em></p> </td> </tr> </tbody> </table> </div> <p>Otaviano Canuto, executive director at the IMF, spoke with AS/COA Online’s Luisa Leme about how Brazil’s economy got to its current crisis after decades of a commodity boom. Canuto said policies have faltered “for a long time” when it comes to infrastructure investment, adding that Brazil would need to dedicate at least 3 percent of GDP to maintain current infrastructure. “We’re in deep trouble in that regard,” he cautions, saying the country only dedicated 2.5 percent of its GDP to infrastructure since 2000. </p> <p>For him, the answer for how to improve the economy lies with <a href="http://www.as-coa.org/articles/summary-são-paulo-2016-competitiveness-and-business-environment-brazil">increasing productivity</a>, starting with better opportunities and a clear set of rules for private- and public-sector partnerships. That would bring more competition to the infrastructure sector, with fewer barriers for outsiders. “That leads to more efficiency,” he says.</p> <table align="right" border="0" cellpadding="5" cellspacing="5" style="width: 40%;"> <tbody> <tr> <td> <p style="text-align: center;"><em><b style="font-size: 20px;">"</b></em><em><b style="font-size: 20px;">We will no longer have the kind of rigged process that we had until recently</b></em><em><b style="font-size: 20px;">."</b></em></p> </td> </tr> </tbody> </table> <p>Infrastructure is in no small way connected to the country's political crisis. The <em>Lava Jato</em> investigations are uncovering deep graft between political parties and the large construction companies. For Canuto, the painful process will lead to an important outcome: “The perception by the rest of the world and us Brazilians that there is rule of law in the country.” Canuto believes the scandals in the midst of a recession can lead to a new way to do business in Brazil. “We will no longer have the kind of rigged process that we had until recently,” he says. </p> <hr /> <ul> <li><strong>Enjoyed this podcast? <a href="https://itunes.apple.com/us/podcast/latin-america-in-focus/id1089353175" target="_blank">Subscribe to Latin America in Focus on iTunes</a>! </strong></li> </ul> <p> </p>

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LatAm in Focus: Otaviano Canuto on Fixing Brazil's Economy

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