OECD Territorial Reviews BRazil This series offers analysis and policy guidance to national and sub-national governments seeking to strengthen territorial development policies and governance. These reviews are part of a larger body of OECD work OECD Territorial Reviews on regional development that addresses the territorial dimension of a range of policy challenges, including governance, innovation, urban development and rural policy. This work includes both thematic reports and reports on specific countries or regions. BRazil Contents Assessment and recommendations Chapter 1. Regional trends and development in Brazil Chapter 2. Combining growth and social inclusion: The contribution of regional policies Chapter 3. Multilevel governance for more effective regional development policies O E C D T e r r it o r ia l R e v ie w s B R a CCoonnssuulltt tthhiiss ppuubblliiccaattiioonn oonn lliinnee aatt hhttttpp::////ddxx..ddooii..oorrgg//1100..11778877//?9?78?9?2?6?4?1?2?3?2?2?9?--eenn. z il TThhiiss wwoorrkk iiss ppuubblliisshheedd oonn tthhee OOEECCDD iiLLiibbrraarryy,, wwhhiicchh ggaatthheerrss aallll OOEECCDD bbooookkss,, ppeerriiooddiiccaallss aanndd ssttaattiissttiiccaall ddaattaabbaasseess.. VViissiitt wwwwww..ooeeccdd--iilliibbrraarryy..oorrgg ffoorr mmoorree iinnffoorrmmaattiioonn.. isBn 978-92-64-12117-1 -:HSTCQE=VWVV\V: 04 2011 12 1 P 042011121.indd 1 06-Mar-2013 10:14:11 AM OECD Territorial Reviews: Brazil 2013 This work is published on the responsibility of the Secretary-General of the OECD. The opinions expressed and arguments employed herein do not necessarily reflect the official views of the Organisation or of the governments of its member countries or those of the European Union. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. Please cite this publication as: OECD (2013), OECD Territorial Reviews: Brazil 2013, OECD Publishing. http://dx.doi.org/10.1787/9789264123229-en ISBN 978-92-64-12117-1 (print) ISBN 978-92-64-12322-9 (PDF) Series: OECD Territorial Reviews ISSN 1990-0767 (print) ISSN 1990-0759 (online) The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law. Corrigenda to OECD publications may be found on line at: www.oecd.org/publishing/corrigenda. © OECD 2013 You can copy, download or print OECD content for your own use, and you can include excerpts from OECD publications, databases and multimedia products in your own documents, presentations, blogs, websites and teaching materials, provided that suitable acknowledgment of the source and copyright owner is given. All requests for public or commercial use and translation rights should be submitted to [email protected]. Requests for permission to photocopy portions of this material for public or commercial use shall be addressed directly to the Copyright Clearance Center (CCC) at [email protected] or the Centre français d'exploitation du droit de copie (CFC) at [email protected]. 3 FOREWORD – Foreword At the beginning of this new millennium, regional economies are confronting momentous changes. The globalisation of trade and economic activity is increasingly testing their ability to adapt and maintain their competitive edge. There is a tendency for income and performance gaps to widen between and within regions, and the cost of maintaining social cohesion is increasing. Rapid technological change and greater use of knowledge are offering new opportunities for local and regional development but demand further investment from enterprises, reorganisation of labour and production, more advanced skills and environmental improvements. Amid this change and turbulence, regions continue to follow very different paths. Some regions are doing well and are driving growth. Others are less successful at capturing trade and additional economic activities. Many territories with poor links to the sources of prosperity, afflicted by migration and ageing, and lagging behind with respect to infrastructure and private investment, are finding it difficult to keep up with the general trend. At the same time, central governments are no longer the sole provider of territorial policy. The vertical distribution of power between the different tiers of government needs to be reassessed, as well as the decentralisation of fiscal resources in order to better respond to the expectations of citizens and improve policy efficiency. Public authorities need to weigh up current challenges, evaluate the strategies pursued in recent years, and define new options. Responding to a need to study and spread innovative territorial development strategies and governance in a more systematic way, in 1999 the OECD created the Territorial Development Policy Committee (TDPC) as a unique forum for international exchange and debate. The TDPC has developed a number of activities, including a series of national Territorial Reviews. These studies follow a standard methodology and a common conceptual framework, allowing countries to share their experiences and disseminate information on good practices. OECD TERRITORIAL REVIEWS: BRAZIL © OECD 2013 4 – ACKNOWLEDGEMENTS Acknowledgements The OECD Secretariat would like to thank the Brazilian authorities at the national and sub-national levels for their co-operation and support during the review process. The Secretariat is particularly grateful to the European Commission Directorate General for Regional Policy (DG Regio) for its financial support. Special thanks are given to the Brazilian team from the Ministry of Planning and the Ministry of National Integration for responding to the OECD questionnaires and to the Ministry of Foreign Affairs for co-ordinating between the Secretariat and Brazilian authorities. In particular, we are grateful to Henrique Villa da Costa Ferreira and Rubem Oliveira de Paula for their commitment and support. The Secretariat is also thankful to representatives from the following institutions participating in interviews: the Ministry of Planning, Ministry of National Integration, the Center for Strategic Studies and Management (CGEE), the Ministry of Agrarian Development, the Institute for Applied Research (IPEA), Banco do Nordeste, the Ministry of Social Development and Fight against Hunger, the Ministry of Health, the Ministry of Development, Industry and Foreign Trade, the Ministry of Cities, the Permanent Working Group for the APLs (GTPAPL), the National Bank for Economic and Social Development (BNDES), the authorities of the port of SUAPE, SUDENE, the Secretariat for Planning and Administration of the state of Pernambuco (Agência CONDEPE/FIDEM), EMBRAPA Tropical Agroindustry, EMBRAPA Tropical Semi-Arid, DNOCS, the Secretariat of Planning and Administration of the state of Ceará, the Institute of Research and Economic strategy of Ceará and the Municipality of Petrolina. The OECD Territorial Review of Brazil was produced by the OECD Regional Development Policy Division, directed by Joaquim Oliveira Martins. This report was drafted by a team composed of Camila Vammalle, José-Enrique Garcilazo (regional trends and development) and Annalisa Primi, under the supervision of Claire Charbit, Deputy Head of the Regional Development Policy Division. The report was first co-ordinated by Annalisa Primi, then by Camila Vammalle. Victoria Elliott provided editorial support, Jennifer Allain, Erin Byrne and Jeanette Duboys prepared the manuscript for publication and Daniel Sanchez Serra provided statistical support. Fabrizio Barca (Director General, Ministry of Economy and Finance, Italy) and Francesco del Bianco (Acting Director General, Western Economic Diversification, Canada) shared their experiences from Italy, the European Union and Canada and provided insightful comments. Raphaël Goulet and Ramón Alejo López Sanchez from DG Regio provided continued support. Valuable comments and inputs were also received form Dorothée Allain-Dupré, José Brakarz, Bárbara Castelletti, Michael Donovan, Hamlet Gutiérrez, Soo-Jin Kim, Carlos Mussi, Annabelle Mourougane and William Tompson. OECD TERRITORIAL REVIEWS: BRAZIL © OECD 2013 5 TABLE OF CONTENTS – Table of contents Acronyms and abbreviations .................................................................................................... 11 Assessment and recommendations ........................................................................................... 17 Chapter 1 Regional trends and development in Brazil ........................................................... 27 Introduction .............................................................................................................................. 28 Macroeconomic trends ............................................................................................................. 29 Regional development gaps in Brazil ....................................................................................... 36 Assessing the performance of Brazilian regions and links to national growth ........................ 48 Tapping growth potential in Brazil’s regions ........................................................................... 56 Key policy and governance challenges .................................................................................... 66 Notes ........................................................................................................................................ 68 Bibliography ............................................................................................................................. 69 Annex 1.A1 ............................................................................................................................... 70 Annex 1.A2 ............................................................................................................................... 73 Annex 1.A3 ............................................................................................................................... 74 Annex 1.A4 ............................................................................................................................... 75 Annex 1.A5 ............................................................................................................................... 77 Chapter 2 Combining growth and social inclusion: The contribution of regional policies .. 83 Introduction .............................................................................................................................. 84 Mapping federal policies for regional development: Actions with explicit and implicit territorial targets ....................................................................................................................... 85 The rebirth of explicit regional development policies in Brazil ............................................... 90 Public infrastructure investment: The challenge of closing the gap in lagging regions ......... 117 Social programmes, innovation and competitiveness as drivers of regional development .... 127 Conclusion .............................................................................................................................. 143 Notes ...................................................................................................................................... 144 Bibliography ........................................................................................................................... 145 Annex 2.A1 ............................................................................................................................. 147 Annex 2.A2 ............................................................................................................................. 148 Annex 2.A3 ............................................................................................................................. 150 Chapter 3 Multi-level governance for more effective regional development policies ........ 153 Introduction ............................................................................................................................ 154 How regional development policy could help Brazil harness its national strategy of growth with reduction of social and regional disparities ................................................... 155 Dealing with sub-national governments’ financial and political autonomy ........................... 159 Overcoming a multi-dimensional fragmentation of policies .................................................. 173 Creating information and building capacity at sub-national level, increasing citizen participation ............................................................................................................................ 190 Conclusion .............................................................................................................................. 207 Notes ...................................................................................................................................... 208 Bibliography ........................................................................................................................... 210 OECD TERRITORIAL REVIEWS: BRAZIL © OECD 2013 6 – TABLE OF CONTENTS Annex 3.A1 ............................................................................................................................. 214 Annex 3.A2 ............................................................................................................................. 215 Annex 3.A3 ............................................................................................................................. 216 Annex 3.A4 ............................................................................................................................. 218 Annex 3.A5 ............................................................................................................................. 219 Annex 3.A6 ............................................................................................................................. 220 Annex 3.A7 ............................................................................................................................. 221 Tables Table 1.1. Population and population growth by type of TL3 region in Brazil (1996-2010) ....................................................................................................... 40 Table 1.2. Concentration index of GDP and population and specialisation in the sectors (1980-2008) ................................................................................. 44 Table 1.3. Professional training, selected states in Brazil (2007) ....................................... 61 Table 1.4. Industry specialisation in TL2 regions in Brazil (2008) .................................... 62 Table 1.5. Regional distribution of value added in manufacturing industry....................... 63 Table 1.6. Internet and mobile phone use ........................................................................... 64 Table 1.7. Innovation performance of firms by states (selected states, 2007) .................... 64 Table 1.A1.1. Classification of Brazilian TL3 regions according to the OECD classification ...................................................................................................... 71 Table 1.A4.1. Real value added by industry, index numbers (1996=100) ............................... 75 Table 1.A4.2. Employment by industry, index numbers (1996=100) ...................................... 76 Table 2.1. A taxonomy of federal policies by territorial target .......................................... 87 Table 2.2. Evolution of regional policy in a comparative perspective: Brazil and the European Union ................................................................................................. 93 Table 2.3. Old and new paradigms of regional policy ........................................................ 95 Table 2.4. EU Cohesion Policy for 2007-13: Resources, targets and priorities ................. 98 Table 2.5. The second phase of the PNDR 2011-15: A proposal for a regional policy for all Brazilian regions ..................................................................................... 99 Table 2.6. PNDR typology of micro-regions .................................................................... 100 Table 2.A1.1. Bolsa Família, a matrix of policy complementarities ...................................... 147 Table 2.A2.1. EMBRAPA, a matrix of policy complementarities ......................................... 148 Table 2.A3.1. Production Development Policy (PDP) and its complementarities ................. 150 Table 3.1. Summary of social, infrastructure and economic indicators ............................ 156 Table 3.2. Municipal fragmentation (2007) ...................................................................... 185 Table 3.A1.1. Indicators used in Table 3.1 ............................................................................. 214 Table 3.A2.1. Main inter-governmental grants in Brazil (2006) ............................................ 215 Table 3.A3.1. Attribution of tax revenue to sub-sectors of general government as a percentage of total tax revenue (2008) ..................................................... 216 Table 3.A4.1. Allocation of responsibilities across levels of government in Brazil .............. 218 Table 3.A5.1. General Government Accounts (2008) ............................................................ 219 Table 3.A6.1. Share of different taxes in tax revenues across levels of government (2008)............................................................................................................... 220 Table 3.A7.1. Revenue mix by state (2006) ........................................................................... 221 OECD TERRITORIAL REVIEWS: BRAZIL © OECD 2013 7 TABLE OF CONTENTS – Figures Figure 1.1. Brazil’s long-term growth performance ............................................................ 29 Figure 1.2. Growth of real GDP in the OECD and BCIS (Brazil, China, India and South Africa) economies ................................................................................... 30 Figure 1.3. Poverty and income distribution indicators (1988-2007) .................................. 30 Figure 1.4. Value added by sector of activity in BCIS countries, percentage share of total (1990-2008) ............................................................................................... 31 Figure 1.5. Trends in labour productivity, 1992-2009, industrial production per hour worked (average 2006 = 100) ............................................................................ 32 Figure 1.6. Macroeconomic outlook in Brazil (2008-2012) ................................................ 33 Figure 1.7. Brazil’s key merchandise exports (2006) .......................................................... 34 Figure 1.8. Brazil’s science and innovation profile ............................................................. 35 Figure 1.9. Human capital indicators: International comparisons (2006) ............................ 35 Figure 1.10. Inhabitants per square kilometre in OECD countries (2008) ............................ 38 Figure 1.11. Range of variation in population density among OECD TL3 regions (2007)................................................................................................................. 38 Figure 1.12. Range of variation in population density among OECD TL3 regions (2007)................................................................................................................. 39 Figure 1.13. Share of national population living in predominantly urban regions (1995-2007) ....................................................................................................... 40 Figure 1.14. Geographic concentration index of GDP and population (TL2), 2007 ............. 41 Figure 1.15. Concentration index of GDP and population in Brazil among TL2 regions (1980-2008) ....................................................................................................... 41 Figure 1.16. Concentration index of GDP and population in Brazilian regions within TL3 regions (1980-2008) ................................................................................... 44 Figure 1.17. Territorial disparities in GDP per capita within countries (TL2), 2007 ............ 45 Figure 1.18. Gini index of inequality of GDP per capita across TL2 regions (1980-2007) ....................................................................................................... 46 Figure 1.19. Regional performance in GDP per capita over time (1980-2007) ..................... 46 Figure 1.20. Average income per capita and inequality by state (2008) ................................ 47 Figure 1.21. Gini index of inequality of GDP within TL2 regions among TL3 regions (1980-2007) ....................................................................................................... 48 Figure 1.22. Level and growth of GDP per capita in TL2 Brazilian regions (1980-2007) ....................................................................................................... 49 Figure 1.23. Level and growth of GDP per capita in TL2 Brazilian regions (1995-2007) ....................................................................................................... 49 Figure 1.24. Initial level and growth of GDP per capita in OECD regions (TL3), 1995-2007 .......................................................................................................... 50 Figure 1.25. GDP per capita gap, Brazilian regions with respect to OECD TL2 average value .................................................................................................................. 51 Figure 1.26. Population and population density of the 25% fastest-growing TL2 regions (1989-2007) .......................................................................................... 51 Figure 1.27. End level and growth of GDP per capita in OECD regions (TL3), 1995-2007 .......................................................................................................... 52 Figure 1.28. Level and growth of GDP per capita in OECD predominantly urban regions (TL3), 1995-2007 .................................................................................. 53 Figure 1.29. Level and growth of GDP per capita in OECD predominantly rural regions (TL3), 1995-2007 .................................................................................. 53 OECD TERRITORIAL REVIEWS: BRAZIL © OECD 2013 8 – TABLE OF CONTENTS Figure 1.30. Level and growth of GDP per capita in OECD intermediate regions (TL3), 1995-2007 .............................................................................................. 54 Figure 1.31. Contributions to national growth in Brazil (TL2), 1980-2007 .......................... 55 Figure 1.32. Contributions to national growth in Brazil by TL3 regions (1980-2007) .......... 56 Figure 1.33. Hypothetical national growth if lagging intermediate and urban regions had grown at the OECD and Brazilian average rate (1996-2007) ..................... 57 Figure 1.34. Extension of paved road density in five Brazilian regions ................................ 59 Figure 1.35. Paved road density and GDP per capita in TL2 Brazilian regions (2008) ......... 60 Figure 1.36. GDP per capita growth and primary enrolments in Brazilian regions ............... 60 Figure 1.37. GDP per capita growth and specialisation in agriculture and mining, Brazilian TL2 regions ........................................................................................ 63 Figure 1.38. GDP per capita, access to health establishments and human development index, Brazilian TL2 regions ............................................................................. 66 Figure 1.A2.1. Level and growth of GDP per capita in TL2 Brazilian regions (1995-2007) ....................................................................................................... 73 Figure 1.A3.1. GDP per capita growth and industry specialisation in Brazilian TL2 regions (1995-2007) .......................................................................................... 74 Figure 1.A5.1. Human Development Index by state (2005) ...................................................... 77 Figure 1.A5.2. Illiteracy rate by state (2009) ............................................................................. 78 Figure 1.A5.3. Child mortality rate by state (2010) ................................................................... 79 Figure 1.A5.4. Access to health establishments by state (2009) ................................................ 80 Figure 1.A5.5. Paved road density by state (2008) .................................................................... 81 Figure 1.A5.6. Access to water per state (2009) ........................................................................ 82 Figure 2.1. Map of Brazil according to the typology of the PNDR ................................... 101 Figure 2.2. Differentiated meso-regions, semi-arid and border strip regions .................... 102 Figure 2.3. Types of regional development resources in Brazil (2008) ............................. 108 Figure 2.4. Available resources versus funds loaned out ................................................... 112 Figure 2.5. Allocation of constitutional funds according to type of region as defined by the PNDR .................................................................................................... 113 Figure 2.6. Allocation of constitutional funds for regional development by sector (2000 and 2009) ............................................................................................... 115 Figure 2.7. Resources for regional development (in BRL million) ................................... 116 Figure 2.8. Public investment by level of government as a share of GDP (2003-08) ........ 120 Figure 2.9. Public investment as a share of GDP by level of government in Brazil and OECD countries (2003) ............................................................................ 120 Figure 2.10. Public investment as a share of GDP by level of government in Brazil and OECD countries (2008) ............................................................................ 121 Figure 2.11. Regional allocation of investment by federal public enterprises (2010) ......... 122 Figure 2.12. Regional allocation of PAC investments ......................................................... 124 Figure 2.13. Yearly lending under the BNDES system ....................................................... 124 Figure 2.14. Regional allocation of lending by BNDES system in 2010 ............................. 125 Figure 2.15. Regional paved road density and paved road growth ...................................... 126 Figure 2.16. Regional distribution of the poor and of beneficiaries of the Bolsa Família ... 131 Figure 2.17. Evolution of primary health care federal resources ......................................... 134 Figure 2.18. Federal resources for production development: BNDES as the major player ............................................................................................................... 141 Figure 2.19. Regional distribution of public support for production development .............. 141 Figure 3.1. Attribution of tax revenue to sub-national levels of government as a share of total tax revenue (2008) ............................................................................... 159 OECD TERRITORIAL REVIEWS: BRAZIL © OECD 2013