The Brazilian Economy in Transition: Macroeconomic Policy, Labor and Inequality

The Brazilian economy has gone through a significant transformation during the past decade. Following nearly a quarter-century with very little growth in per capita GDP, there was a major change beginning in 2004. GDP per person (adjusted for inflation) grew at a rate of 2.5 percent annually from 2003-2014, more than three times faster than the 0.8 percent annual growth of the prior government (1995-2002). This growth rate was achieved in spite of the 2008-09 global financial crisis and recession, which pushed Brazil into recession in 2009; and this comparison includes the slowdown of the past few years. Over the past decade there have also been sharp declines in unemployment, poverty, and extreme poverty, as well as a large shift towards less inequality in the distribution of income gains. This paper looks at these changes as well as government policy changes that have contributed to them. It also looks at the economic slowdown over the past few years, and the role of macroeconomic policy since 2011.