 This is a new diffid funding project looking at the Brazilian development model, what we understand by that, and how it might be applied to the African context. And what we're doing here is very much providing an overview of the project and some of the concepts that will be driving it. This is not a detailed empirical paper. That, and in fact about 15 other such papers will come later. So hopefully we'll be back next year or the year after to bore you with some of those. ond mynd ydych cael ei cyfnodod yn awr carbodau i'r ffrwaith peidiol ym mydag ymôl i'r hoffio ein bod yn y bach a dwi'n meddwl â'r amlwbogol yn ymweld ymwrdd, mae'n arwag lliwfyd yn y gallu o gyf pokemonau yn ybryd yn gyflym y dylai'r holl, gydym yn cyfül, yw i'r cyfod, i'r ffordd. A yr adnodd y bwysig fy mod i'r eich ymgym�r? Ond yw'r ffordd o Ffwrdd I tawf amser yn yng Nghymru fyw dda chi rwy'n ddwyeth yn fawr, ac ydych chi'n rwy'n ddweud fod ymweleradau arெfnig? Teimlo yma nhw yw bod ichi chlas ei ddweud. Fe fydd hi'n gweithio yng Nghymru aeth GdPolol, teimlo efallai, a gwybod, wrth ddweud i ysgol mwy o'r 1980s, y dyfyn iawn y ddisgrifennu dros hefyd. Ac mae gennym�� amberol yn gweithu aeth Brzeill yn y ddau i gydanc i'n gwybod. Ydyn ni wedi ddim yn ffordd i ein tyfn yn gyffredig anolau i wneud gweld Donald Ddalliany sponsorship sy'n gweithio'r iawn sy'n gweithio'r wedi fawr, ychydig yw'r wych yn ei cymwybodol,'u gweithio'r bwysig yw'r cymwybodol, yw gweithio ar gweithiau oed, a'u dysgu sy'n cymdeithasol. Yna oedd yn y gweithio argymwyno fydd hyn. Mae'r attitude I Ffó would have just been substantial in Brazil. Mae'r attitude I Ffó would have just been substantial in Brazil. Mae'r attitude I Ffó would have just been substantial in Brazil. wedi cael ei hwn yn ysgolwch gyda'r Cyfloedd Ym Middag 1990 ac rwy'n gwybod i'r gwahanol, ond yw'r hyfforddi'r cyfrwyng ymgylch ac mae'r cyflwyng oedd yn hyn o'r cyfrwng gyflwyng ymgylch. A'n ymgylch gan gwybodaeth gwcynnyn nhw mae'n ddweud i'r cyfrwng cyflwyng cyflwyng cyflwyng cyflwyng ym Middag 1990. Mae'n gwybodaeth a gweithio ar y dystrygu a'r cyflwyng cyflwyng cyflwyng cyflwyng gyflwyng ydy'r ysgol yng nghyrch yn brosiell, felly oedd y canfysg yn fawr. Felly, o'r gweithio'r cyhoedd, byddwn ni'n ddweud o'r ymwneud, ond y cwestiynau yw'r afael ar y newid y model yng Nesaf yn brosiell. Felly, mae'r ffordd yng Nghyrch yn y model yng Nghyrch yng Nghyrch? Well, opinion is quite divided on that. Is it just dependent on commodity prices? Is it a commodity prices per play? Is it China driving this, or is something else going on? Are there structural changes? Is the development bank actuating improvements? Why does this matter to African countries? Well, we think in a couple of ways. Firstly, Brazil is emerging as a world power and it's beginning to invest more and more in Africa and it's serving as a mouthpiece for a number of developing economies, increasingly Brazil is being seen as their spokesperson in the international community. So, it seems to me that Brazil is having an increasingly big impact on the way in which countries in Africa conceptualise about themselves in the world. So, how did all this come into being? Well, the Brazilian story is one of massive improvement in the last ten years, but that followed a period of acute crisis in the 1980s, and that followed democratisation. Since then, between the mid-1990s, we had this break point, and the number of things happened. The introduction of a pegged exchange rate, limited fiscal adjustment, de-indexation, all this brought about the end of hyperinflation, and then we had trade and market liberalisation, which opened up the Brazilian economy to the rest of the world and imposed competitive improvements in that economy. Since then, of course, we've had this improvement in performance, and we looked at that earlier in terms of the charts that I showed. But does this constitute a new model, and indeed what are the elements of such a model? Well, we'd argue that there are a number of things at play here. Firstly, of course, this is a commodity price boost, which of course a number of other economies know to be in Africa are benefited from. Second, we've had continued market reform in terms of opening up the economy to trade and investment, but also in terms of improving market efficiency in a number of other areas. Next, of course, we've had fiscal policy consolidation and targeting, which have improved the fiscal performance of the economy and reduced its capacity or its ability to run up debt, and that's been extremely important in terms of improving Brazil in the minds of investors of a place in which to place their scarce capital. We've also had, to some extent, a continuity from the period of import substitution industrialisation, which preceded the crisis of the 80s, where the status continued to drive selected improvements in industrial capacity and diversification through a mixture of import protection measures, but of course also direct industrial and technological policy. There's been a large element of continuity as far as the Brazilian experience has been concerned, and we believe, and my colleague will pick up on this, that this is one of the most salient features of the Brazilian success story. Yes, they've been through a period of rupture. Yes, they had a programme of stabilisation. Yes, they've opened up to the rest of the world. Yes, it's a much more market-driven economy than it was 30 or 40 years ago, but at the same time the status retained the capacity to act and to drive change and to engage in a constructive engagement with the global economy, and we think these are pretty important features. In terms of the social outcomes that we looked at in terms of the distribution of income, but of course the reduction of the incidents in poverty, and we had of course a chart just a few moments ago, there are a number of drivers here, some of which are to do with the macroeconomy, some of which are to do with the reduction in the rate of inflation, the decent growth performance, and as we saw this morning, in the sense of scarcity of skilled labour issue becoming less of an issue. But there's also of course been a whole range of activist social policies, notably the Bolsa Familia, which have given people opportunities that they never had before. It's had a very, very big impact on the bottom quintile of the income distribution, and it's been driving a lot of change. An ally to that in terms of the redistributional story is the emergence of a so-called new middle class in Brazil, which I would argue has the capacity to lead to quite a significant political and social as well as economic change over the next few years. Just in question it seems to me, from all of this, quite apart from the direct poverty alleviation agenda, is well, how can societies create their own new middle classes? Could Africa potentially learn from that? And does the Brazilian experience have anything to teach Africa in that regard and should indeed African countries be paying attention? So the question then is, okay, if there is something to learn, and I guess I'm trying to suggest to you that there might be, how has this model developed and sustained? How did this happen over this long period of time? Well, we argue that there are a number of things going on in Brazil, again, which may serve as potential learning points for Africa. The first point is a continuity. Well, I've talked about that perhaps for too long, so I'll just leave that. But it's there. Second, I think, allied to that, is a political consensus across the parties which has been focused on incremental and inclusive reform. The third one, and I guess we see this in the case of many sub-saharan African economies, is a favourable external market, especially for key commodity exports. And that's driven demand, it's driven foreign exchange availability, and that's opened up some fiscal space for targeted spending. And next we have, of course, improvements in supplies like capacity, and these have been driven by liberal reforms in the 90s, so the economy is increasingly able to compete in the global marketplace, not just in commodities, but in higher value-added manufacture products like the plane that Armando flew into, Armando and I flew into Helsinki on from Manchester was a Brazilian-built plane, and an embodiment of this ability of these competitive market reforms allied to strategic state intervention to drive the emergence of new sectors. Could Africa have something to learn from that, as well as the straight commodity export story? The answer is maybe, we have to find out. I think the other thing, if we think back to the FDI chart, this is the idea of a huge surgeon FDI, and that has been leveraged, used, to realise improvements in competitiveness. So this has led to, in a number of sectors, improved supply-side responsiveness. Now, of course, there are supply-side inelasticities, especially so far as the issue of infrastructure is concerned, and that's a very, very big issue right now. But in other sectors, non-infrastructure sectors, there's no doubt that, in particular, with the ingress of FDI, that has led to a much more competitive export base. Again, could African economies have anything to learn from that? So far as the social agenda, well, how has this been financed? How have these direct poverty alleviation and CCT policies been financed? Well, we argue this is partly down to the robustness of the tax regime and revenue collection over the past 10 years, and in particular, the quite strong incidents in Brazil relative to other emerging and developing economies of social taxes, payroll taxes, and taxes which are essentially hypothecated to finance particular modes of social spending. And we think this is really quite a critical area. It's somehow the capacity of the state to raise tax revenues and then to apply them in areas where they might have greater social impact. And we want to really get to the bottom of how this has been able to happen in Brazil and, again, what might Africa have to learn from it. And lastly, and this is, I guess, where Brazil has perhaps fallen more short of the mark than in some of these other areas that I've mentioned, there's the area of human capital and education. And there have been some improvements there, and the Bolsa familiar, of course, because it's conditioned on keeping your kids in school, the evidence is that it's beginning to have a favourable impact. But compared with other countries, certainly other emerging market economies in Asia, Brazil's record on education and the human capital formation is not very favourable. So is it possible to learn from that experience, learn from the failures, and learn from what Brazil is attempting to do right now to address those failures? So this is really some of the agenda or some of the key drivers as we see it underpinning Brazil's comparative success over the last 10 years or so. And what Amanda is going to do now is to pick up more specifically on the social agenda and look particularly at the impacts on poverty and what the government's been doing. And we'll have just a quick microphone change over. So two minutes and we'll be right back. OK. Right. The reason for the change over is that perhaps what is particularly distinct about a Brazilian development model, if there is one, is the way in which social policy has been articulated within other economic policies. And I want to spend about three minutes, three or four minutes just providing you with an insight into how that has worked. Now we know from the presentations that we heard today and yesterday that you know a great deal about Bolsa Familia. It's a very large program that provides transfers to families that are in extreme poverty in Brazil. It's a very, as I said, a large scale program. It reaches about a quarter of the population in Brazil over 13 million beneficiaries. But what people don't perhaps know so much from outside is that this is really a fraction of the kind of social policies that have been put in place. There is for instance a non-contributory pension that covers informal workers in rural areas, workers in fishing, in mining and of course in agriculture that provides pensions and health insurance for about seven million beneficiaries in Brazil. It's probably one of the largest and one of, it's a unique program because it addresses particularly the needs of informal workers. And for non-informal workers, or particularly rate arrays, there is another non-contributory pension that covers them and disabled families which covers some over 3.5 million beneficiaries. So, in fact, Bolsa Familia is only one part of the much larger set of anti-poverty programs that are there to help Brazilians in poverty. But what is interesting, as much as the size of the effort, of the government effort, is to have a look at how that is articulated within the other policies. Is social policy in Brazil part of this new development model? I think it's interesting to look at the taxation side because not only that provides the finance to introduce and expand this program, but also because it provides for financial inclusion of people in poverty. You can see from that figure that the tax to GDP ratio has increased by around 10 percentage points in Brazil from about 22% in 1991 to about 32% in 2010. That is very significant. The tax collection capacity of Brazil is equivalent to that of southern European countries. So that, and in part explains the demonstrations in Brazil in June this year because clearly people require from government much better quality services for the kind of tax GDP ratio that they have. I notice also that the outcome in terms of the decline in the Gini or the decline of around 10% from about 1996 onwards. It's interesting to look at the way in which the tax applies to different details of household income. You have there in the red that is direct taxation and in the blue you have indirect taxation. Notice that overall the tax burden is relatively flat. Taxes are not very progressive in Brazil. But you can see that the direct taxes are slightly more progressive because you have personal income tax that covers the top two details of income. But even people in the first detail of income pay direct taxes through, for example, taxes on vehicles and taxes on property too. The indirect taxes, as you can see, are very regressive. Perhaps it's an interesting point to have in mind because trying to make both the tax system and the benefit system progressive is a really big ask. In the case of Brazil, what has been progressive is much more the expenditure side rather than the tax side. The other point that I wanted to make and of course going back to my previous picture, the issue of financial inclusion is really important because people in the first details of income do contribute to tax and that is an important part of the story in terms of how the expenditure side and the benefit system works. The other point to make is that social policies are extremely productivist in Brazil. These are some figures on the increase in income from 2003 to 2009 for the bottom quintile of income earnings. You can see that there has been an increase both in world-related income and also in non-world-related income per adults. So, in fact, the story about poverty reduction in Brazil and inclusive growth is not just about redistribution. It's also about improvements in labour market opportunities for people in low-income and informal groups. If you look at that, there has been an increase in world-related income between those two years of about 60% and an increase of non-world-related income, probably the transfers, which is about 100%. So, there are those three things that are important. First of all, the increase in the tax collection capacity, secondly, the fact that taxation is not really very progressive, but it does do the job of generating income and generates also financial inclusion and also the issue about the kind of productivist nature of social policy. Rates of labour force participation among people participated in Bolsa Familia are actually around the same as people who are not in Bolsa Familia. So, rates of labour force participation are very significant among these groups. Let me try to recap very briefly on the when, what and how. The when, I think we know. If there is a Brazilian development model 1995, 1996 is where the break happens. We know much less about the what. What are the different components of this model and this is going to be a very important part of our research programme. We know very little about the how, particularly the articulation of political regime, economic policies is an area that requires a lot more work. So, that is what we have. In terms of the lessons for Africa is far too early, but we thought that we might provide a few of the very preliminary areas that we think are important. The cross cutting national consensus in Brazil has been a really important part of fiscal stabilisation and also in terms of the support and sustainability of inclusive growth. Taxation is really important. It is a really important part of the story and there is a question mark there particularly in the context of African economies where natural resources are going to provide much of the revenue in the future, the additional revenue in the future for governments. That is a really important area. Largest scale productivity social policies that has already been put on the table by several speakers during the last two days. Of course, one thing to learn about Brazil that Brazil hasn't done very well is in terms of free infrastructure and particularly the quality of education that requires particular attention. Thank you. That's pretty rough so very good.