This article analysis the effects of the stabilization policies and structural reforms after the Real Plan over the Brazilian economy. Utilizing a computable general equilibrium model, the study simulated alternative policies that were compared with the historical path of the Brazilian economy during this period. The simulations showed that a stronger recession would happen in the case of a devaluation of the exchange rate or a reduction in public expenditures or an increases in the import tariffs. The best alternative policy to generate growth and to improve the income distribution would be a more accelerated devaluation in the exchange rate combined with a more aggressive reduction in import tariffs. These measures would resulted in a better economic performance and in a reduction in the external and internal public debt as well as avoided the exchange shock and the strong cut in public expenditures adopted in the end of 1998 and beginning of 1999.

The emphasis of this book is on the structural aspects of the Brazilian economy, although analyses of economic performance are also covered. A central theme is that growth with social development requires structural reforms, such as the reorganisation of public finances and other matters.

Over the last few decades, Brazil has experienced relatively weak economic growth due to stagnant productivity. To boost productivity, Brazil should embark on an ambitious structural reform process. In doing so, it is crucial that authorities select a few reform priorities to avoid dispersing political capital on an overly broad reform agenda. The paper aims to identify Brazil’s reform priorities in two steps. First, it estimates the impact that different reforms have on Brazil’s productivity. Second, it analyzes survey data to assess the extent of public support for reforms. The results show that banking sector reforms would generate the largest productivity gains and have the highest level of public support. Moreover, they would also be relatively easy to legislate and generate significant fiscal savings.