Series: The Productivity Trap in Brazil – Part 4
Introduction
The Brazilian state is one of the biggest obstacles to productivity. This may seem like a paradox — after all, the official discourse insists on presenting the government as a promoter of development. But in practice, the public sector acts as a brake: it overregulates, protects the inefficient, and invests poorly. The result? A country that is inflexible, slow, and stagnant.
In this article, we show how government policies have not only failed to boost productivity, but have helped bury it under a pile of bureaucracy, protectionism, and inefficient spending.
1. Regulation as a brake on efficiency
Brazil is the world champion in absurd regulatory requirements. From permits for small businesses to environmental licensing for infrastructure projects, bureaucracy turns the act of undertaking a minefield. The time, cost and unpredictability of these rules drive away investors, hinder innovation and push companies into informality.
The discourse behind regulations often invokes “consumer protection,” “environmental preservation,” or “legal certainty” — but in practice, they function as entry barriers to protect already established groups and eliminate competition. Productivity loses — the cartels are grateful.
2. Protectionism as sabotage of competition
Since the 1950s, Brazil has flirted with national developmentalism — an ideology that sees the foreign market as a threat and domestic industry as a defenseless baby. The result has been the construction of a system that hinders imports, raises tariffs and rewards inefficiency.
This model discourages competition and innovation, fundamental elements for productivity. Instead of competing with the world, Brazilian companies have become accustomed to asking for protection. The result? Expensive products, technologically outdated and without international scale.
Meanwhile, countries that have adopted strategic trade opening saw productivity soar. South Korea and Vietnam are recent examples. Brazil remains stuck in the 20th century.
3. Public investments: lots of money, little return
Programs like the PAC, relaunched by Lula in 2023, symbolize the problem. Although they sell the idea of “accelerating growth,” these plans are based on massive spending with little or no measurement of return. Unfinished works, overpriced contracts and lack of technical criteria are the rule, not the exception.
Instead of investing in productivity — such as basic education, logistical infrastructure or tax simplification — the State directs resources to politically advantageous projects, often via inefficient state-owned companies or cross-financing via BNDES.
This model, besides being expensive, creates dependency and discourages the private sector from seeking efficiency. Public investment does not complement private investment — it replaces and distorts it.
Conclusion
The Brazilian state should be a catalyst for productivity. But it acts as an obstacle. Its regulations protect castes, its protectionism isolates the country and its investments bury billions without return.
As long as the public sector continues to act as the protagonist of the economy — instead of its institutional guarantor — Brazil will continue to produce little, even while spending a lot. Breaking this logic is not a technical choice. It is a political and moral decision.
📚 Read also:
- 👉 What is productivity and why does it matter?
- 👉 Brazil works hard and produces little: a portrait of stagnation
- 👉 Structural bottlenecks: education, infrastructure and bureaucracy
📩 Do you want to understand how government intervention affects your productivity, prices and income?
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