Brazil is a continent-sized nation, marked by profound contrasts and diversity. Some of these are geographic or climactic in nature, others are racial or ethnic. Brazil's population draws on Native American, African, and European roots, and successive waves of immigrants, principally from Asia and Europe, have added to the mix.
Yet other contrasts are social in nature and generally less welcome. Living conditions for Brazil's 170 million people vary dramatically, and income disparities in Brazil are significant—not only across regions but also between metropolitan centers, nonmetropolitan urban centers, and rural areas.
This report is motivated by the coming together of three widespread perceptions about inequality, two somewhat newer and one long-standing. The two newer ones are
- that inequality may matter for the country's economic development, poverty reduction, and social progress, and
- that public policy and reforms, for example in the areas of social security and taxes, can and should do something about it.
The old perception, which is well borne out by the facts, is that Brazil occupies a position of very high inequality in the international community.
The report concludes that, to reduce inequality, public policy must be active in four areas:
1. Raising the level and reducing the inequities of educational attainment, which would involve making the education system more efficient for the poor (reduce the repetition and dropout rates) and taking advantage of transient demographic opportunities to cut the educational gap between Brazil and middle-income countries.
2. Reducing the wage skill premium of postsecondary education by promoting its expansion and increasing
their availability in the labor market.
3. Reallocating public expenditure away from excessive and regressive transfers, such as the implicit subsidies imbedded in the Federal pensions regime.
4. Taking advantage of the opportunity to implement an indirect tax reform that can reduce the inequity of indirect taxation avoiding any additional efficiency costs.