A NEW ECONOMY FOR A NEW ERA: ELEMENTS FOR BUILDING A MORE EFFICIENT AND RESILIENT ECONOMY IN BRAZIL COORDINATION PARTNERS FINANCIAL SUPPORT NEW ECONOMY FOR BRAZIL This study pinpoints policies that can help reduce poverty and inequality, contribute to the achievement of economic and sectoral goals, stimulate sustainable economic growth and make Brazil more resilient to future pandemics and other risks, such as climate change and ecosystem destruction. This document is, first of all, a summary of the latest economic data on measures to meet these goals, as Brazil, like many countries, seeks opportunities to boost Authors economic growth, especially after the COVID-19 pandemic. In alphabetical order: Ana Cristina Barros, Andrea Bassi, The study was developed in two complementary André F. P. Lucena, André Luiz Andrade, Alexandre Szklo, parts. Initially, a thorough literature review was Berta Pinheiro, Bruno Cunha, Carolina Genin, Fábio da conducted, analyzing the benefits and opportunities of Silva, Gerd Angelkorte, José Feres, Leonardo Garrido, policies in three main sectors: infrastructure, industry Rafael Feltran-Barbieri, Rafael Garaffa, Rogério Studart, and agriculture. Then, based on economic modeling, Roberto Schaeffer, Sebastian Keneally, Viviane Romeiro. new results are identified should measures to support the transition to a low-carbon economy be adopted. In addition, the study presents evidence showing that by Research coordinator mainstreaming sustainability as a cross-cutting policy in Viviane Romeiro the planning and implementation of related investment decisions, Brazil could benefit from trends in the financial markets and widen access to private finance. Reviewers How and when Brazil builds a more efficient, resilient, The authors would like to thank the experts who reviewed fair, and sustainable economy will be a decision taken this study at different stages throughout its development by each facet of the Brazilian society. The intent process (in alphabetical order): Adalberto Santos de of this study is to present a series of compelling Vasconcelos, André Guimarães, Caio Koch-Weser, Carlos elements showing that Brazil has never been better Muñoz Piña, Demétrio Toledo, Gustavo Fontenele, Helen able to implement this new economy, and that the Mountford, Joaquim Levy, Johannes van de Ven, Juan country and its people have much to gain from it. Carlos Altamirano, Juliano Assunção, Kristina McNeff, This study was led by WRI Brasil and New Climate Lara Caccia, Leonardo Fleck, Luis Antonio Lindau, Luiz Economy (NCE) teams and conducted in partnership with Amaral, Marcelo Furtado, Márcio Rojas, Mariana Oliveira, Brazilian experts and institutions, namely: the Pontifical Marina Grossi, Miguel Calmon, Milan Brahmbhatt, Catholic University of Rio de Janeiro (PUC-RJ), the Climate Philipp Hauser, Rachel Biderman, Walter De Simoni. Policy InitiativeCPI ( ), the Alberto Luiz Coimbra Institute The authors also thank the communications and for Graduate Studies and Research in Engineering of engagement teams of WRI Brasil, New Climate Economy the Federal University of Rio de Janeiro (COPPE/UFRJ), and Néktar Design (in alphabetical order): Bruno Calixto, the Institute for Applied Economic Research (IPEA), Denali Nalamalapu, Fernanda Boscaini, Ginette Walls, the Brazilian Federation of Banks FEBRABAN( ) and the Iara Vicente, Jessica Brand, Joana Oliveira, Madhavi Brazilian Business Council for Sustainable Development Ganeshan and Paula Langie Araújo, and WRI Brasil, WRI, (CEBDS), a representative in Brazil of the World Business New Climate Economy teams and partner organizations. Council for Sustainable Development (WBCSD). This work has been made possible through financial support provided by the Gordon and Betty Moore Suggested citation Foundation and the Good Energies Foundation. Romeiro, V. et al. 2020. “A New Economy for a New Era: For more information on the New Economy for Brazil Elements for Building a More Efficient and Resilient (NEB) project please contact Carolina Genin, Climate Economy in Brazil. Working Paper. São Paulo, Brasil: WRI Director, WRI Brasil: [email protected] Brasil. Available at https://wribrasil.org.br/pt/publicacoes. INDEX EXECUTIVE SUMMARY 6 INTRODUCTION 14 INVESTING IN QUALITY INFRASTRUCTURE 18 OPPORTUNITIES FOR LOW CARBON INDUSTRIAL INNOVATION 28 ADVANTAGES OF A LOW CARBON AGRICULTURE 36 SOCIO-ECONOMIC BENEFITS OF A NEW ECONOMY FOR BRAZIL 48 BUSINESS OPPORTUNITIES AND ACCESS TO FINANCING 52 POLICY ENTRY POINTS FOR THE RECOMMENDATIONS 58 APPENDIX 74 REFERENCES 94 EXECUTIVE SUMMARY Elements for Building a More Efficient and Resilient Economy in Brazil The world is currently facing an unprecedented Although the study was initiated shortly before convergence of crises. The COVID-19 pandemic the COVID-19 pandemic, the urgency of post- and related social and economic crises crisis economic recovery makes it even more aggravate the vulnerabilities generated by timely. The goal is to identify economically viable low economic growth, growing inequalities paths to build a more modern, sustainable and within and between countries, and the inclusive Brazil within an unfavorable fiscal climate crisis. COVID-19 has highlighted context. Therefore, it focuses on identifying the importance of robust risk management competitive advantages and opportunities and shown just how interconnected people, that could help transition Brazil towards a communities and the economy are as a whole. new economy more suited to twenty-first century challenges, including climate change. Brazil is no exception. The resources mobilized Ignoring these opportunities and advantages for economic recovery at the national and may lock-in the country to technologies and subnational level will be an historic opportunity models that will soon prove obsolete. to increase the country’s capacity to generate jobs, productivity and economic efficiency, The study was developed in two parts. The first to boost social inclusion, to preserve natural presents three sectoral paths for the transition capital and to improve public health. to a low-carbon economy in Brazil. Each path creates immediate and lasting economic, social This study brings evidence showing that and environmental opportunities that are Brazil is ready to adopt this new economic relevant particularly to an economic recovery course, without disrupting important sectors, scenario. Sectoral recommendations include: by applying existing technologies, laws, or bills pending approval. This new path is also aligned with a low-carbon economy. 6 NEW ECONOMY FOR BRAZIL ● Quality infrastructure – Promoting capital, which threaten human well-being. Below integrated planning of projects consistent are some highlights for each of the sector- with the maintenance of natural capital, specific policies discussed throughout the study. thus improving economic and societal resilience to increasingly common Quality Infrastructure extreme climate events, and enabling the mobilization of private investments; Infrastructure is the bedrock of any economic and social system. Nations are increasingly ● Industrial innovation – Adopting seeking solutions that meet economic and green technologies and approaches as social needs while protecting the environment future growth opportunities in industrial - solutions such as renewable energy, natural sectors. These approaches will use Brazilian infrastructure, low-carbon cities, and more knowledge and capacities, and will generate efficient transportation. For Brazil, investing drivers of innovation and productivity in modern, quality infrastructure is an growth for the industrial sector; economically smart choice. On the one hand, ● Sustainable agriculture – Implementing quality infrastructure reduces the costs and measures to increase efficiency in impacts of environmental degradation. On the agricultural production bring several other, it allows future infrastructure to be more benefits: more efficient land use, increased resilient to increasingly extreme and frequent production and productivity, reduced weather events (e.g., floods, droughts and fires). pressure to deforest, and renewed confidence Quality infrastructure could help fulfill the of consumers and national and international current government’s priorities of fostering markets increasingly concerned with productivity and competitiveness and environmental and climate issues. increasing international trade. In 2017, Brazil The second part of this study consists of lost 2.4 million tons of soy and corn due to showing short, medium and long-term inadequate infrastructure, a loss of R$ 2 billion results of an economic modeling exercise (PÉRA, 2017). A study by the Climate Policy that projects the impact of sustainable Initiative (CPI) estimates that it would be measures on each of these sectors. necessary to invest 2% of GDP in improving cargo transport infrastructure to remedy this problem, but the country would recoup its The contributions presented investment in three years and thereafter realize have the potential to create savings each year (ANTONACCIO et al., 2018). millions of jobs, leverage Quality infrastructure also creates conditions sustainable and competitive for the expansion of investment across relevant growth in Brazil and reduce sectors. The measures proposed by the Ministry poverty and inequality. of Economy, regarding the use of social discount rates for infrastructure projects and the drafting of bills to establish new governance If adopted, they will make strategic sectors of