Brazil is showing signs of economic recovery as it strives to emerge from the impact of the 2015 financial crisis and corruption investigations into the federal government.

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The country has seen a significant reduction in consumer spending, an increase in unemployment, economic slowdown and lack of investment from both Brazil’s private sector and overseas investors.

However, labour reforms introduced in July 2017 have brought significant changes aimed at combating unemployment and ending the economic crisis. The changes included measures to address issues around everything from vacations, rest and lunch breaks, to working hours, wages and employment lawsuits.

Nevertheless, the country still faces major challenges in restoring both its credibility on the international scene and the confidence of Brazilian businesses.

Necessary reforms

The country is considering three necessary structural reforms in social security, taxation and politics. Global Insight October 2019 | 16 Social security reform has already been started by the current Government, elected at the end of 2018.

Faced with a rapidly ageing population it has proposed radical and important changes in the social security system for government workers, members of the military and private sector employees.

The government believes that these reforms are necessary because there will soon be more people receiving benefits than contributing to social security, making the current system unfeasible and jeopardising payment of future benefits. It expects its reform to save about USD250 million over the next ten years.

The proposals were approved by the federal deputies and are now in the hands of the senators. If approved, the proposals will return to the President of the Republic who is expected to make the final approval by October 2019.

If they are passed, the reforms will give encouragement to the Brazilian manufacturing and production sector and international investors.

Tax simplification

In addition, debates on tax reform have begun after Congress presented a proposal to amend the constitution to simplify the tax system, reducing companies’ tax bills in a bid to make the manufacturing and consumer sectors more attractive.

While there is still much discussion to be had, this matter should formally enter Congress’ agenda in early 2020.

For more information, contact:

Adriano Thomé
Nexia Teixeira Auditores,
Brazil T: +55+55 31 3282 9939

Date: October 2019