A Big Push for Brazil: coordinated investments for a sustainable development path
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A recent ECLAC report highlights that the massive investments required for a shift to a resilient, low carbon, sustainable economic model could be a ‘Big Push’ for a new cycle of economic growth, job creation and more social inclusiveness. Focused on policy coordination to unlock sustainable investments, the challenges and opportunities of the ‘Big Push for Sustainability’ approach in Brazil are put in the spotlight.
[box type=”bio”] Camila Gramkow is Economics Affairs Officer at the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) at its Brazil office. She has been working in the field of economics of climate change for over 10 years, having worked in the third sector, academia and international cooperation. Camila is currently leading a ‘Big Push for Sustainability’ project in Brazil. She is an economist from the University of Sao Paulo (USP) and holds a master’s degree from the Federal University of Rio de Janeiro (UFRJ) and PhD from the University of East Anglia in the United Kingdom.[/box]
The UN Economic Commission for Latin America and the Caribbean (ECLAC), through its Brasilia Office, released a report which puts forward the approach of a ‘Big Push for Sustainability’  with a focus in Brazil. This report is the result of a partnership between ECLAC, the Friedrich Ebert Stiftung Foundation (FES) and Centre for Management and Strategic Studies (CGEE) to bring together Brazilian and Latin American experts in sustainable development, including policy makers, researchers and representatives of civil society and the private sector, to discuss the ‘Big Push for Sustainability’ approach in Brazil in a seminar in 2018. The report builds on the discussions of the seminar and was supported by FES.
Current development routes at crossroads
The insufficiencies of the current dominant development routes in addressing peoples’ aspirations for jobs and a better quality of life are becoming increasingly clear. Economically, a ‘recessionary bias’ has been in place at least since the 2008/2009 global crisis (due to uncertainties, stagnant world trade and low investment levels), which weakens aggregate demand and holds world economic growth down, thereby constraining fiscal space for public spending that could help recover economic activity . Brazil is facing its slowest process of economic recovery ever with an average real GDP growth rate of -0,83% from 2014 to 2018, the lowest five-year average GDP rate in Brazil at least since 1901. Socially, inequality has been increasing for over three decades in member countries of the OECD . Although Brazil and Latin America have reduced their levels of social inequality over the past 15 years, the region remains the most unequal in the world. Environmentally, the increasing levels of pollution and natural resource use and depletion are on track to potentiate the structural gaps of development. For instance, unmanaged climate change can increase both poverty and external vulnerability. As the prominent Latin American economist Raul Prebisch put it in the 1980s regarding the environmental crisis: “we are not in the face of new problems, but of old problems that are becoming more severe” . According to the report, these economic, social and environmental trends signal the unsustainability of current development routes.
A narrow, yet promising window of opportunity…
A new route of development is urgently needed, not only because the costs of inaction are very high and the window of opportunity to hold global warming below 2oC and avoid crossing planetary boundaries is narrow. But more importantly, according to the report, because there are multiple opportunities in transforming action to tackle these issues from obstacles into drivers of a new cycle of socioeconomic development with environmental sustainability at the centre. In this context, the main questions ECLAC seeks to answer in the report are: which alternative development routes should be pursued and how do we get there? Part of the answer is expressed in the 2030 Agenda and its 17 Sustainable Development Goals, the Paris Agreement, the New Urban Agenda (Habitat III), among other international agreements that result from a consensus building process. These agreements reflect the aspirations of the international community for the future.
…for a ‘Big Push for Sustainability’!
Seeking to translate these challenges and opportunities for Latin America and the Caribbean, ECLAC developed a new approach: the ‘Big Push for Sustainability’. In simple terms, it is an approach that provides both analytical coherence and evidence to support countries in building a development path that is more sustainable economically, socially and environmentally.
Which alternative development paths?
The ‘Big Push for Sustainability’ identifies potential alternative development routes based on national strategies, priorities and aspirations reflected in the nations’ long-term planning processes, including mechanisms to internalize the responses of the international community to global challenges. Another guiding principle for outlining future development paths identified in the report is the threefold efficiency: (i) the ‘Schumpeterian efficiency’, whereby a productive matrix that is more integrated, complex and knowledge-intensive generates positive externalities from learning and innovation throughout the value chain, (ii) ‘Keynesian efficiency’, which highlights that there are increasing gains of scale and scope of productive specialization in goods whose demand increases relatively faster than others, and (iii) ‘Sustainability efficiency’, which concerns economic viability, social fairness and environmental sustainability. These guiding principles are the cornerstones of an alternative development path.
And how do we get there?
The ‘Big Push for Sustainability’ focuses on policy coordination to unlock domestic and foreign investment not only in sustainable practices, technologies, industries and infrastructure but also in technological capabilities and education to equip the workforce with the necessary skills for the future. Coordination is both the critical challenge and the key opportunity for the ‘Big Push for Sustainability’. If a wide range of policies (public and corporate, national and subnational, sectoral, tax, regulatory, fiscal, financing, planning, etc.) is aligned and cohesive with the cornerstones of a new development path, a favourable enabling environment to mobilize the required investments is created, building on reduced uncertainties, corrected price signals and an adequate policy mix. The increase in sustainable investments leads to a virtuous cycle of economic growth, job creation, development of productive chains, reduction of environmental footprint and environmental impacts, while at the same time recovering the productive capacity of the natural capital.
The role of fiscal policies
Green fiscal policies constitute a key example of policy coordination needed for a ‘Big Push for Sustainability’. For example, in Brazil, the report finds that a mix of tax relief and subsidized finance for low carbon technologies, and a carbon tax can help unlock mitigation investments. The carbon tax would help to decarbonise the economy and, fundamentally, create fiscal space for green fiscal stimuli (tax relief and financing) to boost private low carbon investments. The results from simulating  such a fiscal policy mix targeted at Brazilian industrial sectors indicate that investments would grow faster, and the trade balance would improve compared to a baseline scenario in which green fiscal policies would be absent. Imports of fossil fuels would be reduced, and, critically, exports of higher added value goods would increase due to increased productive and technological capacities. Direct, indirect and induced macroeconomic interactions and feedbacks would accelerate GDP growth, led by investments and trade performance, whilst greenhouse gas emissions reduce. A relatively low carbon tax rate (at EUR 7.6/tCO2) would be enough to finance the green fiscal stimuli for the decarbonization of Brazilian industry – with a net positive impact on public finances.
These results underline that the right mix of fiscal policies can lead Brazil and possibly other developing countries onto a route of development that is more sustainable economically, socially and environmentally, in line with the approach of the ‘Big Push for Sustainability’.
Following the development of the conceptual foundations for the ‘Big Push for Sustainability’ in the report , the next step concerns understanding concrete examples of the approach in Brazil. To this aim, ECLAC, through its Brazil office, launched a Call for Case Studies , in partnership with the German Technical Cooperation (GIZ), FES, the Brazil Network of the Global Compact and the Institute for Applied Economic Research (IPEA). The Call seeks to map and analyse experiences and examples of actions, measures, plans, strategies, programs, policies etc that helped boost a set of investments destined to increase the socioeconomic and environmental sustainability of the local, regional or national development route in Brazil. From these, the opportunities and challenges for a “Big Push for Sustainability” in the country will become clearer. The deadline is 11 August and the rules of the call must be observed .