events will benefit diverse sectors of
the economy, through spending on
ports and airports, urban transportation, sports facilities, hotels, telecommunications, energy, and security.
Tourism is likely to benefit during the
games, and also afterward.
Nevertheless, with public and private domestic savings at their current
low levels, Brazil will need to continue
tapping external savings to finance
growth. That means a larger current-account deficit and an exchange rate
appreciated by capital inflows.
Brazil will have to make the most of
its available resources. It will be essential to create an environment that
is conducive to private sector saving and investment. Ensuring stable
macroeconomic conditions is critical.
Remaining market-friendly in a well-regulated environment is also crucial
for healthy and abundant financing.
A well-established institutional
design for regulatory agencies, which
instills the necessary confidence
that the private sector can undertake
major, long-term projects, is
A great deal can be achieved
through small but focused changes,
instead of ambitious but often unrealistic regulatory agendas. The advance
in credit regulation in Brazil is one
such example. Developing a deeper
market for private, fixed-income securities is important, but there needs
to be a liquid secondary market, so
that families have more confidence in
extending the maturities on their investments. Just as we have such a
market for equities, we can have one
for fixed-income securities.
Meeting infrastructure needs is
among our society’s priorities. The
country has changed since the era of
high inflation and economic stagnation. Infrastructure problems existed
back then, but there were other more
urgent needs. Now that Brazil’s economic horizons have widened and
growth has accelerated, it is natural
that the new administration turns its
attention to the structural problems.
Sustainable growth requires advances in education. Brazil needs
THE HEMISPHERE RISES
to emphasize the accumulation of
knowledge by educating its children
to be productive, to solve problems,
and to serve as leaders. The country
has already come a long way, particularly regarding access to elementary
and high schools. Virtually all children attend elementary school. More
than 80 percent study at the middle
and high school levels. Notwithstanding advances in access, the quality of
education remains insufficient. Brazil
tends to perform poorly in proficiency
tests at all levels, in absolute and relative terms, compared with the rest
of the world.
Improvements in education can
take Brazil’s economic growth to a
higher level. For proof, just look at
the personal, individual returns on investment in education. People with
more education earn higher incomes
throughout their careers.
But more education spending is
not enough. It is necessary to plan
and put in place the kind of incentives that will encourage teachers and
schools to help students attain higher
levels of performance. Our bank, Itaú,
is actively involved in improving the
quality of Brazilian education, working with schools in their daily activities and teaching methods all the way
up to helping with the formulation of
government policy in education.
If the new government can sustain the policy gains of the past, while
addressing regulatory and social issues—especially education—Brazil
can meet many of the hardest challenges it faces in the years ahead.
Regulatory issues can be handled incrementally, but social issues represent a long-term, multi-faceted
problem. That is not meant to sound
discouraging. Brazil, with its strong
political class and actively engaged
private sector, is in a more privileged
position than many other countries to
seize the opportunities ahead. But it
will require political will and commitment from the country’s new leaders.
Roberto Setubal is the current
president of Banco Itaú.