By Mary Stokes.
Lower interest rates may not be enough to propel Brazil to higher economic growth over the longer term, according to João Augusto de Castro Neves, a political analyst at the Eurasia Group. To guarantee higher growth, the government will need to tackle the ‘Custo Brasil’ (the high cost of doing business in the country). But does the current administration have the stomach for major reforms?
Neves is sceptical. “Given a political calendar abbreviated by a wide-ranging congressional inquiry on corruption, the mid-year legislative recess, and local elections in October, a major reform agenda should remain on hold for the remainder of the year.” In our view, the administration’s high approval ratings belie the political reality. Ten parties make up the unwieldy ruling coalition, making it hard for the government to pursue major reforms.