BRAZIL

B razil’s economic freedom score is 51.9, making its economy the

150th freest in the 2019 Index. Its overall score has increased by 0.5
point, with improvements in labor freedom and government spending
outpacing declines in judicial effectiveness and government integrity.
Brazil is ranked 27th among 32 countries in the Americas region, and its
overall score is below the regional and world averages.

Brazil’s bloated and overly centralized federal government has been

WORLD RANK: REGIONAL RANK: crushing economic freedom for decades. The new administration is

150 27
likely to reduce barriers to foreign investment; prioritize efforts to
revitalize Mercosur (the customs union of Argentina, Brazil, Paraguay,
and Uruguay); be open to the more free-market Pacific Alliance (Mexico,
ECONOMIC FREEDOM STATUS: Chile, Colombia, and Peru); and continue the sound, market-oriented
MOSTLY UNFREE policies of its predecessor. Pension reforms are likely to pass in 2019 to
slow the growth of government spending, maintain debt sustainability,
and reduce inflationary pressures. Lower interest rates and inflation will
aid recovery.

ECONOMIC FREEDOM SCORE

51.9 ( UP 0.5 POINT )

0 50 60 70 80 100

REGIONAL AVERAGE
(AMERICAS REGION) 59.6 60.8 WORLD
AVERAGE

RELATIVE STRENGTHS: HISTORICAL INDEX SCORE CONCERNS:

Monetary Freedom and Tax Burden CHANGE (SINCE 1995): Fiscal Health and
+0.5 Government Integrity

FREEDOM TREND QUICK FACTS

70

POPULATION: UNEMPLOYMENT:
207.7 million 13.3%
60
56.6 56.5 GDP (PPP): INFLATION (CPI):
$3.2 trillion 3.4%
52.9 51.9
51.4 1.0% growth in 2017
FDI INFLOW:
50
5-year compound
$62.7 billion
annual growth –0.5%
$15,603 per capita PUBLIC DEBT:
84.0% of GDP
40

2015 2016 2017 2018 2019 2017 data unless otherwise noted. Data compiled as of September 2018

BACKGROUND: Brazil, the world’s fifth-largest country, has a mostly coastal population of more than 200
million and is dominated by the Amazon River and the world’s largest rain forest. Public corruption has
led to political chaos. In 2018, former President Luiz Inácio “Lula” da Silva of the socialist Workers’ Party
went to prison on corruption charges. His successor, Dilma Rousseff, was removed from office in 2016 for
budgetary misconduct, and her successor, market-oriented centrist Michel Temer, was likewise tainted by
corruption. New President Jair Bolsonaro scored an upset victory in October 2018, with a large majority
of voters hoping he will restore law and order, stabilize the economy, and put Brazil on a path to eco-
nomic freedom.

118 2019 Index of Economic Freedom

 WORLD AVERAGE | ONE-YEAR SCORE CHANGE IN PARENTHESES

12 ECONOMIC FREEDOMS | BRAZIL

RULE OF LAW GOVERNMENT SIZE
(+1.5) (–3.8) (–3.3) (–0.1) (+4.5) (–1.8)

100 100

80 80

70 70

60 60

50 50

5.9
57.3 51.7 28.1 70.5 55.2
0 0
Property Judicial Government Tax Government Fiscal
Rights Effectiveness Integrity Burden Spending Health

Mortgage registration is uneven, and there is no
standardized contract. Although largely indepen-
dent, the judiciary is overburdened, 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 Brazil’s
17-point decline in Transparency International’s 2017
Corruption Perceptions Index.
The personal income tax rate is 27.5 percent. The
standard corporate rate is 15 percent, but other taxes,
including a financial transactions tax, make the effec-
tive rate 34 percent. The overall tax burden equals
32.2 percent of total domestic income. Over the past
three years, government spending has amounted to
38.6 percent of the country’s output (GDP), and bud-
get deficits have averaged 9.1 percent of GDP. Public
debt is equivalent to 84.0 percent of GDP.

REGULATORY EFFICIENCY OPEN MARKETS

(–0.7) (+5.1) (+4.1) (+0.5) (No change) (No change)

100 100

80 80

70 70

60 60

50 50

57.9 51.9 75.5 69.0 50.0 50.0

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

Bureaucratic hurdles abound, and 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 burdensome. To reduce its
heavy debt, the government tried to cut subsidies
by removing price controls on products of the state-
run Petrobras oil company, but violent nationwide
protests in 2018 forced a policy reversal.
The combined value of exports and imports is equal
to 24.1 percent of GDP. The average applied tariff
rate is 8.0 percent. As of June 30, 2018, according
to the WTO, Brazil had 634 nontariff measures in
force. Investment faces bureaucratic and regula-
tory hurdles. The financial sector is diversified and
competitive, but government involvement remains
considerable, and public banks account for over 50
percent of loans to the private sector.

The Heritage Foundation | heritage.org/Index 119