As Brazil faces budget constraints, a new World Bank report suggests policies to address fiscal and environmental challenges. The report, titled "Double Dividend: Policies to Achieve Fiscal and Environmental Sustainability," outlines strategies for Brazil to improve its fiscal balance by more than 5% of GDP while addressing environmental issues like deforestation.
Johannes Zutt, World Bank Country Director for Brazil, stated, “The recommendations provided in the report offer a roadmap for policymakers to design and implement effective instruments that promote both fiscal and environmental sustainability—a win-win.”
With public debt nearing 80% of GDP, Brazil needs to achieve a revenue surplus over expenditures of about 3% of GDP. While some tax adjustments are possible, most savings should come from government spending.
The report suggests reforms such as reducing entry-level salaries by 20% on average and lengthening career progressions to save about 0.1% of GDP annually by year ten. Delinking pensions from the minimum wage and reforming military retirement benefits could reduce system costs while improving equity. Broadening the personal income tax base by eliminating exemptions would align with international practices.
Brazil aims to cut greenhouse gas emissions by at least 59% by 2030 and achieve net zero emissions by 2050. However, current fiscal policies lack incentives for emissions reductions or environmental protection.
The study recommends taxing fossil fuels appropriately and supporting low-carbon technologies like renewable energy. It also suggests investing in public transportation and encouraging private investment in renewable electricity generation.
In agriculture, reducing untargeted subsidies could save up to 0.5% of GDP while promoting sustainable practices. Reforming the rural land tax could ensure profitable commercial agriculture contributes to fiscal adjustment and incentivizes conservation through productivity gains rather than land expansion.
Website: https://www.worldbank.org/en/country/brazil
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