Brazil’s growth potential is closely linked to insufficient supply capacity, which can be blamed on the low level of gross investment rate over the past 15 years (less than 22% since 1991). Productivity gains have also been limited over the last four decades by poor quality education and infrastructure.
Public investment has long been constrained by the need to reduce fiscal deficits and cover the needs of an increasingly expensive social security system. In the private sector, investment is still impeded by an unfavourable “business” environment, as defined by the World Bank, including inadequate infrastructure, regulatory uncertainty, complex
administrative and legal proceedings, and very heavy taxation. Hefty regulations particularly in the resource sector have added to costs as has the shortage of financing.