It is high time for Brazil to seize its future. The world’s fifth-most-populous nation needs a long-term vision for its economy, as well as a commitment at all levels of government to implement measures that could lead to a dramatic increase in productivity. We believe that such measures could in time lift the country’s GDP-per-capita growth from less than 1 percent a year to a sustained rate of around 7 percent.
Brazil has no time to lose. Its economic growth has stalled during the past 25 years, in stark contrast to the strong recent performance of the other three “BRIC” countries: Russia, India, and China. While macroeconomic conditions have improved substantially in Brazil during the past few years, they will not on their own be sufficient to tackle the root cause of the country’s lackluster economic performance—the slow increase in labor productivity, which is the primary determinant of national wealth. In 2004 Brazil’s productivity per hour worked was only 18 percent of the US level.
When we mapped barriers to the growth of productivity in key sectors of the economy,1 we found that structural barriers create only about one-third of Brazil’s gap with the United States. The first structural...