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The writer is finance minister of Brazil
It is not an exaggeration to say that we found our country in tatters when we took office less than a year ago. Growth was decelerating, debt trends were worrying, to say the least, and real interest rates were the highest in the world. Perhaps even more important, the social fabric of the Brazilian society needed urgent reknitting together after the new administration headed by president Luiz Inácio Lula da Silva faced a direct, violent attack on Brazil’s democratic institutions.
Those first stormy months are now behind us. We have initiated a cycle of growth and productivity-enhancing reforms, while making efforts to recover the Brazilian people’s faith in democratic solutions to our many economic and social challenges. But our work is only just beginning. Looking ahead, we now have our sights set on an ambitious and comprehensive plan for ecological transformation.
Brazil already stands out as a world leader in the green economy. Ninety-two per cent of our electricity comes from renewable sources and, despite rising deforestation under the previous government, much of our native vegetation is still standing. Like several other countries, we recognise that fulfilling our Paris Agreement commitment to a net zero economy will be challenging. Our ambitious nationally determined contributions (NDCs) to reduce carbon emissions are currently set at 37 per cent by 2025 and 50 per cent by 2030, with a view to finally achieve net zero by 2050. Ultimately, we see decarbonisation and diversification from fossil fuels not as a cost but as an opportunity for creating jobs, raising income and improving the lives of millions of Brazilians.
Under the leadership of President Lula, and in close co-operation with my colleague Marina Silva, minister of the environment, we are now proposing a new prospect for the country: a comprehensive transformation of our economy and society through greener infrastructure, sustainable agriculture, reforestation, circular economy, increased use of technology in productive processes and climate adaptation. We are committed to sharing these ongoing experiences and helping other countries carry out their green transitions.
Our plan is already under way. It differs from America’s Inflation Reduction Act, which mobilised a vast amount of budget resources to distribute across myriad sectors. Instead ours will work as a mosaic of regulatory and tax policies that will be approved by Congress in a gradual yet intensive manner.
The carbon market, our first landmark measure, will follow the steps of the EU Emissions Trading System. This project is universal in scope and applies to all production units emitting more than 25,000 tonnes of carbon a year. A majority of its newly generated revenues will be allocated to research and development. Furthermore, this new market will protect indigenous and traditional communities, imposing solid rules for profit redistribution. In terms of forest protection, we are strengthening systems of control and monitoring while promoting forest concessions to private partners, linking agriculture financing with better environmental standards.
Foreign investors who want to decarbonise their production chain and invest in clean innovation will be very welcome in helping us accelerate this new phase of Brazilian development. Beyond traditional exports, productivity and innovation are set to become the key to reducing our emissions while creating great investment opportunities and millions of high-quality, well-paying jobs.
Importantly, our plan will be underpinned by a solid fiscal and regulatory basis. Within the past eight months, we have approved a modern fiscal rule which has reassured domestic and international economic agents of our commitment to reining in deficits. Furthermore, we are close to completing a long-anticipated but never-delivered tax reform in line with best international practices. The improving macroeconomic conditions are an early reflection of our reform agenda and are set to last. So are our environmental achievements. The actions adopted by our administration produced a reduction of 48 per cent in deforestation in the first eight months of this year compared to the same period of the previous one.
Our aim is now to reconcile robust economic growth and social change with environmental protection. We seek to promote a secular change in our development model that will improve our position in the global economy. With our G20 presidency looming, Brazil is ready to look to the future again and reclaim our natural and historical position as a leader in the sustainable and inclusive development agenda.