Brazil has a recurring characteristic: it carries out reforms when cornered by crises.
It was like this in , faced with hyperinflation that was corroding the economy. This was the case, more recently, from 2016 to 2019, in response to the deterioration of public accounts and macroeconomic credibility.
History suggests that relevant institutional advances occur when the country approaches a limit. When the cost of not acting exceeds the cost of reforming. This dynamic, therefore, is not exclusive to Brazil.
In “The Narrow Corridor”, they show that economic development depends on a delicate balance between State and society. A “narrow corridor” in which institutions are strong enough to coordinate, but limited enough not to capture.
Outside this corridor, the result would be either a fragile State, incapable of providing public goods, or an excessively dominant State, which suffocates incentives and reduces economic efficiency. Brazil oscillates between these extremes.
We have a large State, but little effective. We spend a lot and we spend poorly. We have a high tax burden, high and growing public debt, combined with low quality spending. A complex business environment where rules are unstable and the cost of capital remains high even in declining market cycles.
We usually attribute this situation to fiscal imbalance. But this is a partial reading. Fiscal imbalance is the manifestation of deeper factors: an unequal income structure, a demographic process that puts pressure on public spending and, above all, institutions that are unable to align incentives consistently over time.
The result is a system that generates high capital costs, low productivity and limited growth (although, at various times, it shows signs of cyclical recovery).
What makes the current moment particularly relevant is the global context. The international economy is undergoing an important reconfiguration. Production chains become more fragmented and regional, natural resources return to the center of strategic decisions, and the cost of ensuring energy and food security has increased.
In this new environment, countries with an abundance of natural resources (land, water, energy and minerals) gain relative relevance. Brazil is among them. But this advantage is not automatic. It needs to be converted into economic value and development. And this depends, fundamentally, on the quality of the institutions.
The difference between countries that capture opportunities and those that waste them is not only in the allocation of resources, but in the ability to organize stable rules, reduce uncertainties and align incentives. This is the real one. The good news is that the country has already shown that it is capable of moving forward when pressured. The bad news is that, in general, people wait for the crisis to act.
The challenge now is to anticipate the movement, that is, to realize the immense advantage we have in the face of a very rapid global reconfiguration. Reforms that improve the quality of public spending, simplify the business environment and strengthen institutional predictability are not only desirable. They are a condition for Brazil to transform its potential advantage into sustained growth. Breaking this pattern requires shifting the axis of change.
It is not just about waiting for decisions from the political system, but about rebuilding a broader basis of coordination between society, the productive sector and independent institutions.
Successful experiences show that lasting reforms emerge when there is convergence between organized social pressure, technical capacity and commitment to rules that transcend electoral cycles.
In Brazil, this involves strengthening organizations that operate with a long-term vision and expanding the role of a private sector willing to compete in a more open environment, not just protect established positions. This process also requires a less visible but decisive adjustment: a willingness to give up particular benefits in favor of a more balanced system. Maintaining exceptions, cross-subsidies and differentiated regimes may be rational at the individual level, but, in the aggregate, it sustains an environment of low productivity and high cost.
The way out of this cycle involves recognizing that collective gain (more growth, more investment and lower cost of capital) depends on a gradual review of these arrangements. It is at this point that the institutional agenda stops being abstract and becomes a concrete choice of country.
In a more fragmented and competitive world, waiting for the next moment of crisis can mean missing a historic window. Brazil does not need to be on the edge of a precipice to move forward. But to do so, you need to recognize that your most visible imbalances are just symptoms of a deeper (institutional) problem.
This is precisely where the solution begins. And it belongs to each one of us.
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