BRAZIL

A political crisis that, along with declines in commodity prices,

contributed to a sharp contraction of the economy has
undermined consumer and investor confidence. Brazils fiscal
condition has been severely compromised by a combination of
high inflation, political paralysis, and widening budget deficits
that have elevated the burden of public debt.
The states interference in the economy has been heavy. The
WORLD RANK: REGIONAL RANK:
efficiency and overall quality of government services remain
140 25 poor despite high government spending. Implementation of any
reform program has proven difficult. Barriers to entrepreneurial
ECONOMIC FREEDOM STATUS:
activity include burdensome taxes, inefficient regulation, poor
MOSTLY UNFREE
access to long-term financing, and a rigid labor market. The
judicial system remains vulnerable to corruption.

ECONOMIC FREEDOM SCORE

52.9
( DOWN 3.6 POINTS )

0 50 60 70 80 100

60.0 60.9
REGIONAL AVERAGE WORLD AVERAGE
(AMERICAS REGION)

NOTABLE SUCCESSES: CONCERNS: OVERALL SCORE CHANGE

Trade Freedom Fiscal Health, Government Integrity, SINCE 2013:
and Judicial Effectiveness 4.8

FREEDOM TREND QUICK FACTS

70

POPULATION: UNEMPLOYMENT:
60 204.5 million 7.2%
GDP (PPP): INFLATION (CPI):
$3.2 trillion 9.0%
50
3.8% growth in 2015
FDI INFLOW:
5-year compound
$64.6 billion
40
annual growth 1.0%
$15,615 per capita PUBLIC DEBT:
73.7% of GDP
30

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2015 data unless otherwise noted. Data compiled as of September 2016

BACKGROUND: Brazil, the worlds fifth-largest country, is dominated by the Amazon River basin and the
worlds largest rain forest. The population of more than 200 million is heavily concentrated on the coast,
where a dozen major metropolitan areas with populations of a million or more offer direct access to the
Atlantic Ocean. The current democratic constitution dates from 1988. Workers Party President Dilma
Rousseff, who sought to further the leftist and populist policy agenda begun by her predecessor, Luiz
Inacio Lula da Silva, was impeached and removed from office in 2016. New President Michel Temer faces
continuing corruption scandals and ongoing political turmoil.

46 2017 Index of Economic Freedom

 KEY: WORLD AVERAGE

12 ECONOMIC FREEDOMS | BRAZIL

BRAZIL
RULE OF LAW GOVERNMENT SIZE
78th 73rd 116th 140th 131st 155th Rank

100 100

80 80

70 70

60 60

50 50

55.0 49.7 33.4 70.1 53.1 22.8

0 0
Property Judicial Government Tax Government Fiscal
Rights Effectiveness Integrity Burden Spending Health

The judiciary, though largely independent, is over-
burdened, inefficient, and often subject to intimidation
and other external influences, especially in rural areas.
Corruption scandals have undermined trust in both
public and private institutions and contributed to
Brazils decline in the World Economic Forums 2016
Global Competitiveness Index. Many members of the
ruling PMDB party, for example, are deeply involved in
the Petrobras scandal.
The personal income tax rate is 27.5 percent.
The standard corporate rate is 15 percent, but other
taxes, including a financial transactions tax, bring the
effective rate to 34 percent. The overall tax burden
equals 32.8 percent of domestic income. Government
spending has amounted to 39.5 percent of total output
(GDP) over the past three years, and budget deficits
have averaged 6.4 percent of GDP. Public debt is
equivalent to 73.7 percent of GDP.

REGULATORY EFFICIENCY OPEN MARKETS

114th 130th 164th 136th 120th 70th Rank

100 100

80 80

70 70

60 60

50 50

61.3 52.3 67.0 69.4 50.0 50.0

0 0
Business Labor Monetary Trade Investment Financial
Freedom Freedom Freedom Freedom Freedom Freedom

Organizing new businesses remains cumbersome
and bureaucratic. It is costly and time-consuming to
launch or expand a business. Rigid and outmoded
labor regulations undermine employment growth, and
the nonsalary cost of employing a worker is burden-
some. The new government has pursued more ortho-
dox policies than its predecessor and plans to cap
increases in budget spending and eliminate automatic
indexation of entitlements.
Trade is moderately important to Brazils economy;
the value of exports and imports taken together equals
27 percent of GDP. The average applied tariff rate is 7.8
percent. Trade and investment face bureaucratic and
regulatory hurdles. The financial sector is diversified
and competitive, but the governments involvement
remains considerable, and public banks now account
for over 50 percent of total loans to the private sector.

The Heritage Foundation | heritage.org/Index 47