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Brazil: Reforms to spur competitiveness would strengthen COVID-19 recovery

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Brazil was pulling out of a long recession when the COVID-19 outbreak hit, bringing the economy back into another, even deeper recession. However, swift government support has helped millions of vulnerable households, including those without formal employment and social protection. A strong and inclusive recovery from the crisis that benefits all Brazilians will require additional ambitious reforms to boost jobs, productivity and trade, as well as to strengthen public finances and improve social protection, according to a new OECD report.

The latest OECD Economic Survey of Brazil says that while the decisive response spared Brazil from a more severe economic impact, the pandemic will still significantly affect well-being and prosperity, taking a toll on people and businesses in the informal economy. The Survey estimates the COVID-19 crisis will cause GDP to shrink by 5% this year, followed by a return to growth of 2.6% in 2021 and 2.2% in 2022. Reforms to help firms to grow and compete internationally would enable Brazil to reap the benefits of integrating into global trade and to address rising poverty and inequality.

“Brazil was making good progress on structural reforms prior to the pandemic, including its successful 2019 pension reform. The shock to the economy and society from COVID-19 makes it paramount to keep momentum going and tackle outstanding barriers to competition, productivity growth and foreign trade, as well as address pressing environmental challenges,” said OECD Secretary-General Angel Gurría, presenting the Survey. “The OECD is committed to work with Brazil to ensure a strong, inclusive and sustainable recovery and to build a better future for all Brazilians.” (Read the speech in full)

The Survey estimates that an ambitious package of reforms to improve domestic regulation and competition, reduce barriers to foreign trade and improve institutions and economic governance would boost per-capita GDP growth by 0.9 percentage points per year over 15 years. Lowering trade barriers could also bring down the prices of many goods, with a tangible impact on the lives of ordinary Brazilians.

The COVID-19 crisis has accentuated the need to further lighten the cumbersome regulations, including complex procedures for taxation, which hamper entrepreneurship and competition. An average medium-sized company in Brazil spends around 1,500 hours a year on procedures to pay taxes compared to 317 hours in Latin American countries or 159 hours in OECD countries. Investment in education, vocational training and adult skills would in turn help to build a more productive workforce ready for a more globally integrated economy. Evidence suggests that adult training programmes can make a real difference for workers seeking to move into better-paying jobs, provided that course content is well-aligned with local labour market needs.

Inequality and poverty have edged up in Brazil over the last few years, reversing progress since 2000 due to strong growth, social transfers and improved education outcomes. The richest 10% of the population earn over four times that of the bottom 40%. Almost half of social benefits go to the wealthiest 20% of households. The Survey recommends better targeting transfers to those most in need, accelerating benefit concession for people who lose their jobs and withdrawing them more gradually. This would help to support the 40% of workers employed in the informal economy and not covered by unemployment schemes, and ensure an inclusive recovery from the crisis.

The efficiency of public spending should be improved, as the pandemic is adding to Brazil’s already high public debt. There is scope to make significant savings with no impact on well-being. The Survey recommends reviewing tax exemptions and subsidies that account for almost 5% of GDP and trimming civil service costs.

Brazil should also use the recovery as an opportunity to strengthen protection of the Amazon rainforest including through stronger enforcement of its forest law to stop illegal deforestation, focusing instead on the sustainable use of the Amazon’s economic potential.

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World Economic Forum Annual Meeting rescheduled to 22-26 May

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The World Economic Forum is pleased to announce that it will hold its Annual Meeting 2022 in Davos-Klosters, Switzerland, from Sunday 22 to Thursday 26 May. Under the theme, Working Together, Restoring Trust, the Annual Meeting 2022 will be the first global in-person leadership event since the start of the pandemic.

The Annual Meeting 2022, returning to Davos-Klosters after a two-year hiatus, will offer world leaders an opportunity to take stock of the state of the world and shape partnerships and policies for the crucial period ahead.

Topics on the agenda will include the pandemic recovery, tackling climate change, building a better future for work, accelerating stakeholder capitalism, and harnessing the technologies of the Fourth Industrial Revolution.

Klaus Schwab, Founder and Executive Chairman, World Economic Forum, said: “After all the virtual meetings taking place in the last two years, leaders from politics, business and civil society have to convene finally in person again. We need to establish the atmosphere of trust that is truly needed to accelerate collaborative action and to address the multiple challenges we face.”

The World Economic Forum will continue to communicate closely with the Swiss government on the public health situation in Switzerland. The meeting will take place as long as all necessary conditions are in place to guarantee the health and safety of its participants and the host community.

During the Davos Agenda 2022, heads of state and government and international organizations shared their priorities for a challenging year ahead. They joined leaders from business and civil society and spoke on the global economic outlook, inequality, healthy futures, climate and resilience.

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Latin America Leaders See Opportunities for Economic and Social Growth in 2022

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Despite the impact of the COVID-19 pandemic, Latin American leaders, speaking on the third day of the World Economic Forum’s virtual Davos Agenda 2022, expressed optimism for the region’s economic outlook in the coming year.

Latin America posted a solid economic recovery in 2021 and will most likely post moderate growth in 2022, as many countries continue to implement fiscal, social and health policies for a sustainable recovery from the pandemic. The region was one of the hardest-hit by COVID-19 but has turned things around with successful ongoing vaccination programmes.

Ivan Duque, President of Colombia, said: “Colombia closed 2021 with positive results”, noting his country’s positive economic growth and high percentage of vaccination rates. He said the goal for 2022 is to maintain growth while, at the same time, closing the social inequality gap.

Carlos Alvarado Quesada, President of Costa Rica, said 85% of his country’s population had received a second COVID shot and that the process of vaccinating children was under way. “The main thing for Costa Rica is our vaccination drive. This is the only way to exit the health crisis,” he said.

Other countries in the region, including Ecuador, Guatemala and Peru, also highlighted the success of their vaccination campaigns. As they continue to recover from the pandemic, the leaders said they were focused on rebuilding their economies with a particular focus on the labour market, trade, attracting foreign investment and sustainable energy.

Alejandro Giammattei, President of Guatemala, said: “The challenge we have now is not only to promote growth but to turn growth into something sustainable. We need to improve the labour market and create more jobs. This will lead to better prosperity, health and education.” Generating new opportunities and ensuring economic benefits would reach all parts of society which, he pointed out, would also curb migration. “The only thing that stops a person is a wall of prosperity,” he said.

Guillermo Lasso, President of the Republic of Ecuador, highlighted the need for governments to commit to ethics and principles. “We need economic and inclusive growth within the rule of law and programmes that promote new opportunities. It is not just about economic growth but about quality of life and social cohesion.”

José Pedro Castillo Terrones, President of the Republic of Peru, said his priority was economic reforms, noting that his government has invested $10 billion in strategic areas such as education, health and transport, and recently signed an infrastructure bill that will lead to more jobs. “We also want to invest in energy and natural gas, especially in transportation, so the entire country is connected,” he added.

The leaders agreed that connecting the region is key to Latin America’s future outlook. Several of the countries, including Ecuador and Guatemala, have signed new trade agreements with Mexico, indicating that it will open up free trade in the Pacific and their economies to foreign investment. “Integration is important,” President Giammattei said. “It reflects tighter and more interaction that enables us to improve the economic situation.”

The environment is another area that has seen increased regional cooperation. Ecuador recently signed a decree to expand a new marine reserve and protect an area north of the Galapagos Islands. The expanded area will eventually link the Galapagos with Panama’s Coiba islands, Colombia’s Malpelo and Costa Rica’s Coco islands. “When it comes to the environment, we need to have better integration, especially regarding biodiversity and climate change,” President Alvarado said.

Mauricio Claver-Carone, President, Inter-American Development Bank (IDB), stressed the importance of public-private partnerships in helping to achieve social and environmental goals. Regional integration mechanisms, such as the IDB, can provide funds to help Latin American countries build their post-pandemic recovery as well as back priorities ranging from healthcare and digitalization to climate change action, supply chains and education.

“The pandemic created unprecedented challenges, but it also opened historic opportunities for Latin America, especially in areas including digitalization, supply chains, SMEs, gender equality and climate action, and we are proud to be there, focused on helping countries seize those opportunities,” he said.

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India: West Bengal Gets $125 Million to Help Citizens Access Social Protection Services

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The World Bank’s Executive Board of Directors today approved a $125 million loan to the Government of West Bengal to support the state’s efforts to help poor and vulnerable groups access social protection services.

The COVID-19 pandemic has highlighted the need to focus on building capabilities of state governments to deliver inclusive and equitable social protection in times of crisis. India’s eastern state of West Bengal runs more than 400 programs that provide social assistance, care services, and jobs. Most of these services are offered through an umbrella platform called Jai Bangla. The West Bengal Building State Capability for Inclusive Social Protection Operation will support these interventions at the state level, with particular focus on vulnerable groups such as women, tribal and scheduled caste households and the elderly, as well as households in the state’s disaster-prone coastal regions.

A recent survey found that while food and in-kind transfers reach most poor and vulnerable households in West Bengal, the coverage of cash transfers is weak. Access to social pensions by elderly, widows and disabled persons, in particular, is also weak due to cumbersome application processes and lack of automated systems for application and eligibility verification.

Over the next four years, the operation will help strengthen the state’s capability to expand coverage and access to social assistance and to deliver cash transfers for the poor and vulnerable through a consolidated social registry.

“With its fast-growing urban population and pockets of urban poor, West Bengal has recognized the need to move from a fragmented, scheme-based social protection system to providing an integrated basket of social protection benefits and services to its most vulnerable citizens,” said Junaid Ahmad, the World Bank’s Country Director in India. “The project will support and strengthen the state’s capability in this area to ensure that it can deliver social protection services — both cash and in-kind — to all its vulnerable citizens.”  

West Bengal faces challenges related to manual data entry, inconsistent beneficiary data across departments, and lack of data storage and data exchange protocols. The operation will help digitize the state’s unified delivery system, the Jai Bangla platform, to help consolidate disparate social assistance programs and speed the delivery of social pensions to vulnerable and poor households.  

The project will also support the creation of a tele-consultation network for social care services, complemented by a cadre of case management workers who can help households with advice on eldercare and links to health services and facilities.

It will also create an institutional platform to improve coordination and effectiveness of government interventions to address the state’s low participation of women in the labor force.

“Lack of coordination among departments leads to duplication of efforts in service delivery. The project will assist in overall system improvements, helping to significantly improve the capacity of the state government to identify beneficiaries faster, track expenditures, and plan and monitor benefit delivery for the vulnerable,” said Shrayana Bhattacharya, Qaiser M. Khan and Ambrish Shahi, World Bank’s task team leaders for the project.

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