## wpiea2019236-print-pdf - 2030. They include 17 goals and 169 targets, building on the success of the Millennium

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### SDG adoption and national integration
- The 2030 Agenda includes 17 goals and 169 targets, and embraces new areas such as climate change and sustainable consumption.
- Brazil actions and institutions:
  - National Commission for the SDG created in 2016 as the main institutional inter-agency coordination mechanism.
  - Commission is an advisory body composed by representatives from the federal and subnational governments, and civil society.
  - SDG targets and indicators were mapped into attributes of the 2016−19 Multi-Year Plan (PPA) and in the National Strategy for Economic and Social Development 2020−31.
  - As of 2016, 86 and 78 percent of the targets and indicators of the SDGs respectively were consistent with the attributes of the PPA.

### Fiscal context and focus of the analysis
- Brazil faces fiscal consolidation needs and therefore "will need to do more with less" to fulfill national and SDG agendas.
- Paper estimates spending required to efficiently foster Brazil’s human, social, and physical capital focused on health, education, and infrastructure.
- Costing anchors to SDG-related goals: health (SDG3), education (SDG4), and infrastructure (SDG 6, 7, 9, 11) following Gaspar and others (2019).

### Education: spending, outcomes, and disparities
- Spending and enrollment:
  - Public spending in education increased from about 4 to 6 percent of GDP in 2000−16.
  - Fewer than 63 percent of individuals complete secondary education (compared to 71 percent in peer Latin American economies and 88 percent in the OECD).
- Regional and distributional facts:
  - Lower secondary completion: Southeast 84 percent versus Northeast 65 percent (gap nearly 20 percentage points).
  - About 54 percent of total education spending goes to households in the bottom 40 percent of the income distribution.
  - Progressivity concentrated in primary and secondary spending; tertiary spending is regressive.
- Quality and efficiency:
  - Average PISA scores are lower than peers and substantially below OECD economies.
  - World Bank estimate: PISA results are only about 20 percent lower than given the cumulative expenditure per student over 2004–12.
- Costing results and key figures (benchmark group GDP per capita US$6,000–$15,000; Brazil):
  - Education spending (percent of GDP): All 6.1; Low performance 6.5; High performance 5.4; 2018 6.9; 2030 5.5
  - Public: All 5.3; Low performance 5.1; High performance 4.9; 2018 6.0; 2030 4.9
  - Private: All 0.8; Low performance 1.3; High performance 0.5; 2018 0.9; 2030 0.6
  - Students per teacher ratio: All 14.3; Low performance 18.3; High performance 11.3; 2018 18.3; 2030 11.3
  - Teacher wages (ratio to GDP per capita): All 1.7; Low performance 2.3; High performance 1.6; 2018 2.7; 2030 1.6
  - Spending per student (USD 2018): All 2,020; Low performance 1,873; High performance 3,381; 2018 2,291; 2030 2,795
  - SDG4 index: All 83; Low performance 78; High performance 89; 2018 77; 2030 >89
  - Demographic effect: share of school age individuals projected to decline from 35 percent in 2016 to 25 percent in 2030, implying potential reduction of 1.5−2 percentage points in education spending.
- Estimated potential savings:
  - Public and private combined savings estimated in about 1.1 and 0.3 percentage points of GDP respectively.

### Health: spending, outcomes, equity, and efficiency
- Spending levels and trends:
  - Public health spending increased from 2.8 percent of GDP in 2000 to 3.9 in 2016 (peer average 4 percent of GDP).
  - Total health spending is 9 percent of GDP.
  - Expansion of SUS: community health workers increased 75 percent and family health teams increased 400 percent over 2000–10.
- Outcomes and disparities:
  - Since 2000, infant mortality declined by 60 percent and life expectancy increased by four years.
  - Infant mortality in the North about 60 percent higher than in the South.
  - Both infant mortality and life expectancy lag regional peers and are substantially worse than in the OECD.
- Equity in coverage:
  - Supplemental private health coverage under 20 percent for households whose head has income under 1 minimum wage versus over 70 percent for households whose head has income above 3 minimum wages.
  - Tax expenditures for private health insurance premiums about 0.3 percent of GDP and are regressive.
  - About 46 percent of health expenditure is concentrated in the population in the bottom 40 percent of the income distribution.
- Efficiency:
  - World Bank (2017) cited: same outcomes could be achieved with 23 less resources in primary health and 34 percent less resources in secondary and tertiary care, with most inefficiencies in the smaller hospitals and municipalities.
- Costing results and key figures (benchmark group GDP per capita US$6,000–$15,000; Brazil):
  - Health spending (percent of GDP): All 6.5; Low performance 6.0; High performance 7.1; 2018 8.9; 2030 6.4
  - Public: All 3.9; Low performance 3.1; High performance 4.9; 2018 3.9; 2030 4.4
  - Private: All 2.6; Low performance 2.9; High performance 2.3; 2018 5.0; 2030 2.0
  - Per capita spending (USD 2018): All 593; Low performance 471; High performance 898; 2018 775; 2030 654
  - SDG3 index: All 80; Low performance 78; High performance 86; 2018 67; 2030 >86
  - Doctors per 1,000 population: All 2.1; Low performance 2.0; High performance 2.7; 2018 1.9; 2030 2.7
  - Other medical personnel per 1,000 population: All 6.5; Low performance 6.3; High performance 7.7; 2018 16.0; 2030 7.7
- Estimated potential savings by 2030:
  - Brazil could save up to 2.5 percentage points of GDP in total health expenditure.
  - This implies public savings of up to 1 percentage points of GDP, assuming a constant share of private spending in total spending.

### Infrastructure: capital stock, investment, access, and service quality
- Capital stock and investment shortfalls:
  - Public capital stock as a share of GDP was less than half the level in other BRICs, emerging economies, and Latin American countries in 2015.
  - General government capital spending in Brazil averaged less than 2 percent of GDP over the last 20 years (compared to 5.3 and 6 percent in Latin America and other emerging economies).
  - In 2015, only 22 percent of federal capital spending was directed to economic infrastructure (45 percent in other emerging economies).
  - Private investment plunged during the 2015−16 recession and is now about 2 percentages of GDP lower than Latin America and other emerging economies.
  - Brazil’s total investment in 2017 was lower than all other regional aggregates, including low income countries within Latin America.
- Sectoral access and quality:
  - Roads: only 13 percent of total road network paved in 2010 (vs. 53 percent in India and 61 percent in China).
  - WEF rankings: road connectivity 74/140; quality of roads 112/140; roads infrastructure 93/140 in 2018.
  - Electricity: electrification almost universal (99.6 percent of population); transmission and distribution losses about 15 percent of output in 2018.
  - Water and sanitation: 94 percent access to safe drinking water in 2014; about 20 percent lacked improved sanitation in 2015 (30 percent in rural areas).
  - National Sanitation Plan (2014) aims universal safely managed water and at least 92 percent safely managed sanitation by 2033.
- Institutional/geographic challenges:
  - Large country size concentrates generation in the Amazon Basin, requiring major transmission investments (e.g., Madeira transmission line).
  - Tensions across federal, state and municipal roles create bottlenecks; municipalities regulate and provide services while state companies largely deliver water and sewer services.

### Costing methodology and reporting convention
- Methodology (Gaspar and others, 2019):
  - Input-output approach: development outcomes function of a mix of inputs.
  - Three steps: (i) identify main cost parameters (inputs and unit costs); (ii) benchmark costing parameters by examining levels in countries with comparable GDP per capita attaining high social outcomes; (iii) estimate spending levels associated with these benchmarks given Brazil’s GDP per capita and population growth projections until 2030.
- Reporting:
  - Estimates reported as of 2030, in percentage points of GDP.
  - For education and health: difference between 2030 share of GDP consistent with high performance and current level of spending as a share of 2030 GDP.
  - For physical capital: spending to close infrastructure gap between 2019 and 2030 is annualized and expressed in percent of 2030 GDP.
  - After 2030: annual education and health spending would be recurrent; infrastructure spending would decrease to about 60 percent to cover depreciation of capital stock built through 2019–2030.

### Methodology and benchmarks (GDP and benchmark group)
- GDP projections:
  - IMF’s WEO projections to 2024; between 2024 and 2030 assume GDP increases at the growth rate assumed for 2024 in WEO.
- Benchmark group:
  - GDP per capita between US$6,000 and US$15,000 in 2016 used to map middle-income country group.
  - High-performing education benchmark: SDG4 education index above 82.
  - High-performing health benchmark: SDG3 health index above 78 in the middle-income country group.

### Infrastructure costing: Roads
- Objective: increase Rural Access Index (RAI) to at least 90 percent by 2030 (current RAI 53 percent).
- Method and unit costs:
  - Regressions of road density on GDP per capita, population density, agriculture/manufacturing shares, urbanization rate, and RAI.
  - Unit cost per km set at a minimum of US$500,000 (Imi and others (2016)); total cost increased by 5 percent to account for depreciation.
- Costing results (Table 3, Brazil):
  - Today GDP: 1,793,311,951,779
  - 2030 GDP: 2,342,796,840,187
  - GDP Capita: Today 8,424; 2030 10,246
  - % Growth (GDP per capita): 21.62%
  - Population: Today 212,873,168; 2030 228,663,264
  - % Growth (Population): 7.42%
  - RAI: Today 53%; 2030 90.00%
  - Km Roads: Today 1,580,964; 2030 2,666,315
  - Additional Km Needed: 1,085,351
  - Unit cost ($/Km): 487,168
  - Total Cost: 528,748,308,884
  - % of 2030 GDP (Total Cost): 22.57%
  - Annual Cost: 44,062,359,074
  - Annual Cost as % of 2030 GDP: 1.88%
  - Annual cost of maintenance (assuming 5% depreciation on new roads) as % of 2030 GDP: 1.13%
  - Total annual cost including depreciation as % of 2030 GDP: 3.01%
- Memo items:
  - Roads to GDP Elasticity (EM/LIC) 0.13
  - Roads to Population Elasticity (EM/LIC) 0.49
  - Roads % increase per RAI index point 1.68
- Text summary:
  - Ensuring road access for 90 percent of the Brazilian population would require an annual cost of about 3 percent of GDP.
  - Estimated increase in kilometers of road network about 70 percent compared to today.

### Infrastructure costing: Electricity
- Objective: provide access to 100 percent of projected population in 2030 and account for per capita consumption increases in line with GDP per capita.
- Context and unit costs:
  - Electrification almost universal; additional costs cover increased per-capita use.
  - Projected annualized population growth: 0.6 percent.
  - Nominal GDP growth between 2015 and 2030: about 30 percent.
  - GDP per capita expected to grow by 22 percent.
  - Unit cost per kilowatt (generation and network): US$2,250 (World Bank (2013)); investment distribution 60 percent generation, 30 percent distribution, 10 percent transmission.
- Costing results (Table 4, Brazil):
  - Electricity access at starting period: 100%
  - Population at starting period: 212,873,168
  - Forecasted Population 2030: 228,663,264
  - Annualized Population Growth: 0.6%
  - Number of years to 2030: 13
  - Electricity consumption per user at starting period (kwh): 2,601
  - Unit cost incl. generation and transmission ($): 2,258
  - Nominal GDP at starting period ($): 1,793,311,951,779
  - GDP in 2030 at initial period price ($): 2,342,796,840,187
  - (A) Annual cost to reach universal access while maintaining initial consumption: 814,446,623
    - As percent of 2030 GDP: 0.0%
  - (B) GDP Per capita Growth: 22%
    - Expected consumption per user based on GDP Growth: 3,130.02
    - Target consumption per user: 3130
    - Additional annual cost to reach target consumption: 2,396,891,116
    - As percent of 2030 GDP: 0.1%
  - (C)=(A)+(B) Annual cost to reach universal access and target consumption: 3,211,337,738.53
    - As percent of 2030 GDP: 0.137%
- Text summary:
  - Estimated annual cost of reaching universal electricity consumption in line with GDP per capita increases is about 0.1 percent of GDP.

### Infrastructure costing: Water, Sanitation, and Hygiene (WASH)
- Method: WASH World Bank methodology (Hutton and Varughese (2016)) estimating capital investment, operations, and major capital maintenance calibrated at country level.
- Targets:
  1. Universal and equitable access to safe and affordable drinking water for all (SDG target 6.1).
  2. Access to adequate and equitable sanitation and hygiene for all, including ending open defecation (SDG target 6.2).
- Costing results and summaries:
  - Providing universal access to safely managed water, sanitation, and hygiene services will cost 0.3 percent of GDP per year.
  - Annual cost of reaching universal basic water and sanitation coverage would be about 0.05 percent of GDP.
  - Of that, 0.1 and 0.4 percent of GDP directed to water and sanitation services respectively in urban areas (contextual values presented in source).
  - Cost of providing basic hygiene is virtually zero.
  - Extending safe water and sanitation services to the unserved in rural areas implies total annual cost 0.02 percent of GDP.
  - Overall estimated annual cost of universal access to safe water and sanitation is 0.3 percent of GDP.
- Table 5 reported totals (selected rows as presented):
  - Total cost (% of 2030 GDP) row: 0.10% 0.03% 2.18% 0.35% 6.37% 0.00% 0.08% 1.66% 6.09% 0.89% 24.80% 4.04%
  - Annual cost (% of 2030 GDP) row: 0.00% 0.00% 0.01% 0.00% 0.04% 0.00% 0.00% 0.01% 0.04% 0.01% 0.16%0.27%

### Aggregate infrastructure spending needs and comparisons
- Closing the infrastructure gap will require annual spending of 3.4 percent of GDP between 2019 and 2030.
- This estimate is higher than the average for other emerging economies (2.1 percent of GDP).
- Roads account for a major driver: 3 percent of GDP in Brazil versus 1 percent of GDP in other emerging economies.
- Brazil’s spending needs on electricity and water are marginally lower than in other emerging peer countries.
- Comparators:
  - Total spending in infrastructure: 7.1 percent of GDP in low income and developing countries, and 0.3 percent of GDP in advanced economies.
- The total cost of delivering education, health, roads, power, and sanitation to a growing Brazilian population is lower than in other emerging economies.

### Fiscal savings, constraints, and projections
- Estimated public savings potential: about 3 percent of GDP per year in the health and education sectors (once the share of private savings in the health sector is accounted for).
- Substantial spending needs: 3½ percent of GDP to close Brazil’s infrastructure gap, particularly related to roads.
- Constitutional expenditure ceiling (teto) implications:
  - Teto will imply a compression of primary spending by 4 percent of GDP by 2030, eroding fiscal space from efficiency gains.
  - Rigidities from pervasive earmarking of revenues would drastically reduce the scope for reallocation of funds across sectors.
- Reallocation scenario:
  - If reallocation from infrastructure (road) were possible: overall cost of reaching the SDGs by 2030 would amount to a negative 0.5 percent pf GDP annually, compared to 4 percent of GDP in other emerging economies, and 15 percent of GDP in low income and developing countries.

### Policy options and trade-offs
- Option 1 — Deeper cuts in non-investment spending:
  - Retrench non-investment public expenditures below the level imposed by the spending ceiling to create fiscal space for infrastructure.
  - Would require politically costly spending cuts, in particular to the wage bill, passing social security reform, and addressing budget rigidities.
- Option 2 — Prioritize essential infrastructure before 2027:
  - Prioritize essential infrastructure spending before 2027 while postponing less critical investment.
  - Requires improved strategic prioritization, project appraisal and selection, and better central guidance and coordination across levels of government.
  - Delaying non-essential infrastructure implies slower closure of the infrastructure gap and a more gradual reduction of debt after 2027; could be supported by measures to increase tax revenues.
- Option 3 — Boost revenues through administrative and policy reforms:
  - Improve tax compliance and reduce distortionary tax exemptions (estimated to cost the government 4 percent of GDP per year).
  - Tax policy reforms could increase revenues by enhancing tax compliance and improving the business environment.
  - Overperforming fiscal targets through revenue increases could finance additional investment spending after 2027 without worsening debt sustainability, but would not accommodate additional spending while the teto applies.
- Option 4 — Mobilize private sector resources:
  - Attract private finance by improving the business environment: simplifying the tax system, opening the economy to foreign trade, easing procedures to start a business.
  - Recent measures: provisional measures to reduce red tape and support opening of small businesses; government plan to lower import fees on selected goods; efforts to negotiate an EU-Mercorsur trade agreement; authorities’ intention to reform the tax system once social security reform is passed.
  - Concessions and privatization: consider concession agreements until PPP framework is strengthened; government launched a concession program likely to pick up speed in 2020; a provisional measure approved by a Lower House-Senate joint committee will allow privatization of water and sewage systems and relevant state-owned enterprises.
  - Caution: Brazil’s high public debt and low PPP institutional strength imply the strategic PPP framework, including assessment of fiscal risks, should be improved before expanding PPPs.

### Recommended strategy and broader policy implications
- Viable combined strategy:
  - Implement deeper cuts in non-investment expenditure that generate savings for priority infrastructure spending while mobilizing private capital until 2027.
  - Postpone more substantial road investment until after 2027, supported by policy and administrative revenue-enhancing measures to avoid deterioration in fiscal sustainability.
  - Implement structural reforms to boost growth and preserve efficient service delivery in health and education.
- Implementation prerequisites:
  - Strong and effective public institutions.
  - Address corruption.
  - Upgrade transparency and accountability.
- Expected payoff: a tight policy agenda with substantial economic and social dividends over time.

*Source: IMF staff estimates and analysis as presented in the supplied PDF content.*

### 2030. They include 17 goals and 169 targets, building on the success of the Millennium

### wpiea2019236-print-pdf - 2030. They include 17 goals and 169 targets, building on the success of the Millennium

### SDG adoption and national integration
- The 2030 Agenda includes 17 goals and 169 targets, and embraces new areas such as climate change and sustainable consumption.
- Brazil actions and institutions:
  - Brazil integrated the SDGs into national development plans and policies.
  - In 2016 the government created the National Commission for the SDG as the main institutional inter-agency coordination mechanism for implementation of the 2030 Agenda in Brazil.
  - The Commission is an advisory body composed by representatives from the federal and subnational governments, and civil society.
  - SDG targets and indicators were mapped into attributes of the 2016−19 Multi-Year Plan (PPA) and in the National Strategy for Economic and Social Development 2020−31.
  - As of 2016, 86 and 78 percent of the targets and indicators of the SDGs respectively were consistent with the attributes of the PPA.

### Fiscal context and focus of the analysis
- Brazil faces fiscal consolidation needs and therefore "will need to do more with less" to fulfill national and SDG agendas.
- This paper estimates spending required to efficiently foster Brazil’s human, social, and physical capital focused on health, education, and infrastructure.
- The costing anchors to SDG-related goals: health (SDG3), education (SDG4), and infrastructure (SDG 6, 7, 9, 11), following the methodology developed by Gaspar and others (2019).

### Education: spending, outcomes, and disparities
- Public education spending and enrollment:
  - Public spending in education increased from about 4 to 6 percent of GDP in 2000−16.
  - Today, Brazil is among the countries with the highest level of expenditure in the region.
  - Nonetheless, enrollment and completion lag: fewer than 63 percent of individuals complete secondary education, compared to 71 percent in peer Latin American economies and 88 percent in the OECD.
- Regional disparities and progressivity:
  - Completion of lower secondary varies: Southeast 84 percent versus Northeast 65 percent (a gap of nearly 20 percentage points).
  - Total education spending is only mildly progressive—about 54 percent of total spending goes to households in the bottom 40 percent of the income distribution.
  - Progressivity arises from primary and secondary spending; tertiary spending is regressive.
- Quality and efficiency:
  - Average PISA scores are lower than peers and substantially below OECD economies.
  - PISA performance is lower than implied by expenditure per student; countries that spend much less per student achieve similar or higher outcomes.
  - World Bank estimate: PISA results are only about 20 percent lower than given the cumulative expenditure per student over 2004–12.

### Health: spending, outcomes, equity, and efficiency
- Spending levels:
  - Public health spending increased from 2.8 percent of GDP in 2000 to 3.9 in 2016, just below the average for peers (4 percent of GDP).
  - Total health spending is 9 percent of GDP.
  - Expansion of SUS reflected in large increases in community health workers (75 percent increase) and family health teams (400 percent increase) over 2000–10.
- Outcomes and disparities:
  - Since 2000, infant mortality has declined by 60 percent and life expectancy has increased by four years.
  - Both infant mortality and life expectancy lag regional peers and are substantially worse than in the OECD.
  - Infant mortality in the North is about 60 percent higher than in the South.
- Equity in coverage:
  - Supplemental private health coverage under 20 percent for households whose head has income under 1 minimum wage versus over 70 percent for households whose head has income above 3 minimum wages.
  - Tax expenditures for private health insurance premiums are about 0.3 percent of GDP and are regressive.
  - About 46 percent of health expenditure is concentrated in the population in the bottom 40 percent of the income distribution.
- Efficiency:
  - Peer countries achieve similar or better health outcomes with less resources.
  - World Bank (2017) finding cited: the same outcomes could be achieved with 23 less resources in primary health and 34 percent less resources in secondary and tertiary care, with most inefficiencies in the smaller hospitals and municipalities.

### Infrastructure: capital stock, investment, access, and service quality
- Capital stock and adequacy:
  - Brazil’s public capital stock as a share of GDP was less than half the level in other BRICs, emerging economies, and Latin American countries in 2015.
  - Brazil ranked 81 out of 140 countries surveyed by the World Economic Forum in 2018 on overall infrastructure adequacy.
- Investment and capital stock erosion:
  - General government capital spending in Brazil averaged less than 2 percent of GDP over the last 20 years, compared to 5.3 and 6 percent in Latin America and other emerging economies.
  - In 2015, only 22 percent of capital spending funded by the federal government was directed on economic infrastructure, compared to 45 percent in other emerging economies.
  - Private investment plunged during the 2015−16 recession and is now about 2 percentages of GDP lower than Latin America and other emerging economies.
  - As a result, Brazil’s total investment in 2017 was lower than all other regional aggregates, including low income countries within Latin America.
- Sectoral access and quality:
  - Roads: only 13 percent of the total road network was paved in 2010 compared with 53 percent in India and 61 percent in China.
  - Road rankings: WEF ranked Brazil 74/140 on road connectivity and 112/140 on quality of roads; Brazil ranked 93/140 on roads infrastructure in 2018.
  - Electricity: electrification is almost universal (99.6 percent of the population); electric power transmission and distribution losses amounted to about 15 percent of output in 2018.
  - Water and sanitation: 94 percent of the population had access to safe drinking water in 2014; about 20 percent of the population lacked access to improved sanitation facilities in 2015 (30 percent in rural areas).
  - National Sanitation Plan (2014) aims to reach universal access to safely managed water and at least 92 percent access to safely managed sanitation by 2033.
- Institutional and geographic challenges:
  - Large country size concentrates generation in the Amazon Basin, requiring major transmission investments (e.g., Madeira transmission line).
  - Tensions across federal, state and municipal roles create bottlenecks; constitutionally, municipalities regulate and provide services while state companies largely deliver water and sewer services.

### Costing methodology and reporting convention
- Methodology (Gaspar and others, 2019):
  - An input-output approach assuming development outcomes are a function of a mix of inputs.
  - Three steps: (i) identifying main cost parameters, including inputs and unit costs; (ii) benchmarking costing parameters by examining levels in countries with comparable GDP per capita attaining high social outcomes; and (iii) estimating spending levels associated with these benchmarks given Brazil’s GDP per capita and population growth projections until 2030.
- Reporting of estimates:
  - Estimates of additional spending are reported as of 2030, in percentage points of GDP.
  - For education and health, results are reported as the difference between the share of 2030 GDP in spending consistent with high performance and the current level of spending as a share of 2030 GDP.
  - For physical capital, the spending to close the infrastructure gap between 2019 and 2030 is annualized and expressed in percent of 2030 GDP.
  - After 2030, annual education and health spending would be recurrent, while infrastructure spending would decrease to about 60 percent to cover depreciation of the capital stock built through 2019–2030 efforts.

*Source: IMF staff analysis as presented in the provided chapter excerpt.*

### 2030. Since high performing countries with similar levels of Brazil’s GDP per capita are

### wpiea2019236-print-pdf - 2030. Since high performing countries with similar levels of Brazil’s GDP per capita are

### Methodology and Benchmarks
- GDP projections:
  - GDP is projected using IMF’s WEO projections to 2024.
  - Between 2024 and 2030, the projection assumes that GDP increases at the growth rate assumed for 2024 in WEO.
- Benchmark group:
  - GDP per capita between US$6,000 and US$15,000 in 2016 is used to map the middle-income country group and associated benchmarks.
  - High-performing education benchmark: SDG4 education index above 82.
  - High-performing health benchmark: SDG3 health index above 78 in the middle-income country group.
- Education costing inputs set at median values observed today in countries with similar per-capita income as Brazil and high education outcomes.
- Health costing inputs set at median values observed today in countries with similar per-capita income as Brazil and high healthcare outcomes.
- Roads, electricity, and water costing follow methodologies in Gaspar and others (2019), Imi and others (2016), World Bank (2013), and Hutton and Varughese (2016) as described in the source text.

### Education: Key assumptions and results
- Costing function inputs:
  - Teacher-per-student ratio (TSR), teachers’ salaries (AWAGE), share of non-compensatory current expenses (y), and capital spending (z).
  - Number of teachers derived from TSR * enrollment rate (ER) * school-age population (SAP).
- Enrollment assumptions:
  - Full enrollment for at least 2 years of preprimary and tertiary education, and 12 years of primary and secondary education.
  - Assumed enrollment rates are consistent with target rates of 50 percent for preprimary and tertiary education, and 100 percent for primary and secondary education.
- Benchmark parameterization:
  - TSR, AWAGE, y, and z set at median values observed in benchmark countries.
- Demographics and potential savings:
  - Share of school age individuals in the population is projected to decline from 35 percent in 2016 to 25 percent in 2030.
  - This decline would imply a potential reduction of 1.5−2 percentage points in education spending.
- Costing results (Table 1, GDP per capita $6,000-$15,000; Brazil):
  - Students per teacher ratio: All 14.3; Low performance 18.3; High performance 11.3; 2018 18.3; 2030 11.3
  - Teacher wages (ratio to GDP per capita): All 1.7; Low performance 2.3; High performance 1.6; 2018 2.7; 2030 1.6
  - Other current and capital spending (% total spending): All 46; Low performance 43; High performance 47; 2018 43; 2030 47
  - Student age population (% total population): All 36; Low performance 40; High performance 23; 2018 35; 2030 25
  - Enrollment rate (preprimary to tertiary): All 77; Low performance 72; High performance 86; 2018 76; 2030 80
  - Private share (% of total spending): All 13; Low performance 21; High performance 10; 2018 13; 2030 10
  - Results:
    - Education spending (percent of GDP): All 6.1; Low performance 6.5; High performance 5.4; 2018 6.9; 2030 5.5
    - Public: All 5.3; Low performance 5.1; High performance 4.9; 2018 6.0; 2030 4.9
    - Private: All 0.8; Low performance 1.3; High performance 0.5; 2018 0.9; 2030 0.6
    - Spending per student (USD 2018): All 2,020; Low performance 1,873; High performance 3,381; 2018 2,291; 2030 2,795
    - SDG4 index: All 83; Low performance 78; High performance 89; 2018 77; 2030 >89
- Estimated potential savings:
  - Public and private combined savings estimated at about 1.1 and 0.3 percentage points of GDP respectively (text phrase: "savings estimated in about 1.1 and 0.3 percentage points of GDP respectively").

### Health: Key assumptions and results
- Costing function inputs:
  - Doctors’ salaries (DAWAGE), number of doctors and other medical personnel, ratio of non-doctor to doctor wages (α), share of non-compensatory current expenses (y), and capital spending (z).
  - Number of doctors and other medical personnel derived from doctor density (DPR) * total population (pop) * ratio of doctors to all other health staff (ρ).
  - The ratio of non-doctor to doctor wage is assumed to be 0.5; shares of capital and other current spending to total spending are imputed using the World Bank income group averages.
- Benchmark parameterization:
  - DAWAGE, DPR, and ρ set at median values observed in benchmark countries.
- Costing results (Table 2, GDP per capita $6,000-$15,000; Brazil):
  - Main factors:
    - Doctors per 1,000 population: All 2.1; Low performance 2.0; High performance 2.7; 2018 1.9; 2030 2.7
    - Other medical personnel per 1,000 population: All 6.5; Low performance 6.3; High performance 7.7; 2018 16.0; 2030 7.7
    - Doctor wages (% GDP per capita): All 4.1; Low performance 4.1; High performance 4.0; 2018 3.8; 2030 4.0
    - Other current and capital spending (% total spending): All 60; Low performance 61; High performance 60; 2018 59; 2030 59
    - Private share (% total spending): All 40; Low performance 48; High performance 32; 2018 57; 2030 32
  - Results:
    - Health spending (percent of GDP): All 6.5; Low performance 6.0; High performance 7.1; 2018 8.9; 2030 6.4
    - Public: All 3.9; Low performance 3.1; High performance 4.9; 2018 3.9; 2030 4.4
    - Private: All 2.6; Low performance 2.9; High performance 2.3; 2018 5.0; 2030 2.0
    - Per capita spending (USD 2018): All 593; Low performance 471; High performance 898; 2018 775; 2030 654
    - SDG3 index: All 80; Low performance 78; High performance 86; 2018 67; 2030 >86
- Estimated potential savings by 2030:
  - Brazil could save up to 2.5 percentage points of GDP in total health expenditure.
  - This would imply public savings of up to 1 percentage points of GDP, assuming a constant share of private spending in total spending.
  - Note: Government savings would be more modest if rebalancing of spending toward public expenditure occurs as health services improve.

### Infrastructure

#### Roads
- Objective:
  - Increase Rural Access Index (RAI) to at least 90 percent by 2030 (proxy for road access for all).
  - Current Brazil RAI: 53 percent.
- Method:
  - Use regressions of road density on GDP per capita, population density, agriculture and manufacturing shares, urbanization rate, and RAI from Gaspar and others (2019).
  - Estimate additional kilometers needed while accounting for projected changes in population and GDP per capita through 2030.
  - Unit cost per kilometer of constructing one kilometer set at a minimum of US$500,000 (Imi and others (2016)).
  - To account for depreciation, total cost of additional kilometers increased by 5 percent.
- Costing results (Table 3, Brazil):
  - Today GDP: 1,793,311,951,779
  - 2030 GDP: 2,342,796,840,187
  - GDP Capita: Today 8,424; 2030 10,246
  - % Growth (GDP per capita): 21.62%
  - Population: Today 212,873,168; 2030 228,663,264
  - % Growth (Population): 7.42%
  - RAI: Today 53%; 2030 90.00%
  - Km Roads: Today 1,580,964; 2030 2,666,315
  - % Growth (EM/LIC): 68.65%
  - % Growth (All Countries): 96.22%
  - Area (Sq Km): 8,358,140
  - Density (Km per 1000 Sq Km): Today 0.19; 2030 0.32
  - Additional Km Needed: 1,085,351
  - Unit cost ($/Km): 487,168
  - Total Cost: 528,748,308,884
  - % of 2030 GDP (Total Cost): 22.57%
  - Annual Cost: 44,062,359,074
  - Annual Cost as % of 2030 GDP: 1.88%
  - Annual cost of maintenance (assuming 5% depreciation on new roads) as % of 2030 GDP: 1.13%
  - Total annual cost including depreciation as % of 2030 GDP: 3.01%
- Memo items:
  - Roads to GDP Elasticity (EM/LIC) 0.13
  - Roads to Population Elasticity (EM/LIC) 0.49
  - Roads % increase per RAI index point 1.68
- Text summary:
  - Ensuring road access for 90 percent of the Brazilian population would require an annual cost of about 3 percent of GDP.
  - The estimated increase in kilometers of road network is about 70 percent compared to its level today.

#### Electricity
- Objective:
  - Provide access to 100 percent of projected population in 2030 and account for increase in per capita consumption in line with GDP per capita.
- Context:
  - Electrification in Brazil is almost universal; additional costs cover projected increase in per-capita use due to GDP per capita growth.
  - Projected annualized population growth: 0.6 percent.
  - Nominal GDP growth between 2015 and 2030: about 30 percent.
  - GDP per capita expected to grow by 22 percent over the same period.
  - Unit cost per kilowatt (generation and network) set at US$2,250 (World Bank (2013)); distribution of investment cost assumed 60 percent generation, 30 percent distribution, 10 percent transmission.
- Costing results (Table 4, Brazil):
  - Electricity access at starting period: 100%
  - Population at starting period: 212,873,168
  - Forecasted Population 2030: 228,663,264
  - Annualized Population Growth: 0.6%
  - Number of years to 2030: 13
  - Electricity consumption per user at starting period (kwh): 2,601
  - Unit cost incl. generation and transmission ($): 2,258
  - Nominal GDP at starting period ($): 1,793,311,951,779
  - GDP in 2030 at initial period price ($): 2,342,796,840,187
  - (A) Annual cost to reach universal access while maintaining initial consumption: 814,446,623
    - As percent of 2030 GDP: 0.0%
  - (B) GDP Per capita Growth: 22%
    - Expected consumption per user based on GDP Growth: 3,130.02
    - Target consumption per user: 3130
    - Additional annual cost to reach target consumption: 2,396,891,116
    - As percent of 2030 GDP: 0.1%
  - (C)=(A)+(B) Annual cost to reach universal access and target consumption: 3,211,337,738.53
    - As percent of 2030 GDP: 0.137%
- Text summary:
  - The estimated annual cost of reaching universal electricity consumption in line with GDP per capita increases is about 0.1 percent of GDP.
  - Future costs may change depending on electricity generation mix and the role of distributed generation and dispatchable technologies.

#### Water, Sanitation, and Hygiene (WASH)
- Method:
  - Costs derived using WASH World Bank methodology (Hutton and Varughese (2016)), estimating capital investment, operations, and major capital maintenance calibrated at the country level.
- Targets assessed:
  1. Achieving universal and equitable access to safe and affordable drinking water for all (SDG target 6.1).
  2. Achieving access to adequate and equitable sanitation and hygiene for all, including ending open defecation (SDG target 6.2).
- Costing results and text summary:
  - Providing universal access to safely managed water, sanitation, and hygiene services will cost 0.3 percent of GDP per year.
  - Annual cost of reaching universal basic water and sanitation coverage would be about 0.05 percent of GDP.
  - Of that, 0.1 and 0.4 percent of GDP directed to water and sanitation services respectively in urban areas (text presents those values in context: "of which 0.1 and 0.4 percent of GDP directed to water and sanitation services respectively in urban areas").
  - The cost of providing basic hygiene is virtually zero.
  - Extending safely managed water and sanitation services will be costlier; universal access to safe sanitation and water in urban areas would cost about 0.2 and (text truncated at source).

*Source: IMF staff estimates as presented in the provided content.*

### 0.04 percent of GDP per year respectively, while extending safe water and sanitation services

### wpiea2019236-print-pdf - 0.04 percent of GDP per year respectively, while extending safe water and sanitation services

### Water and sanitation cost estimates
- Extending safe water and sanitation services to the unserved in rural areas would imply a total annual cost 0.02 percent of GDP.
- The overall estimated annual cost of universal access to safe water and sanitation is 0.3 percent of GDP.
- Notes on definitions used: “Safely managed water supply” means an on-plot water supply for every household; “safely managed sanitation” includes a toilet with safe management of fecal waste. Basic water supply includes an improved community water source within a 30-minute round-trip; basic sanitation includes an improved toilet; basic hygiene includes a hand-washing station with soap and water for every household. Ending open defecation implies simple, traditional, low-cost latrines.
- Table 5 reported values (selected totals and rates as presented):
  - Total cost (% of 2030 GDP) row: 0.10% 0.03% 2.18% 0.35% 6.37% 0.00% 0.08% 1.66% 6.09% 0.89% 24.80% 4.04%
  - Annual cost (% of 2030 GDP) row: 0.00% 0.00% 0.01% 0.00% 0.04% 0.00% 0.00% 0.01% 0.04% 0.01% 0.16%0.27%

### Aggregate infrastructure spending needs and comparisons
- Closing the infrastructure gap will require annual spending of 3.4 percent of GDP between 2019 and 2030.
- This estimate is higher than the average for other emerging economies, which would have to spend 2.1 percent of GDP.
- Roads account for a major driver: 3 percent of GDP in Brazil versus 1 percent of GDP in other emerging economies.
- Brazil’s spending needs on electricity and water are marginally lower than in other emerging peer countries.
- Comparators: total spending in infrastructure is 7.1 percent of GDP in low income and developing countries, and 0.3 percent of GDP in advanced economies.
- The total cost of delivering education, health, roads, power, and sanitation to a growing Brazilian population is lower than in other emerging economies.

### Fiscal savings, constraints, and projections
- Estimated public savings potential: about 3 percent of GDP per year in the health and education sectors (once the share of private savings in the health sector is accounted for).
- Substantial spending needs: 3½ percent of GDP to close Brazil’s infrastructure gap, particularly related to roads.
- Constitutional expenditure ceiling (teto) implications:
  - The teto will imply a compression of primary spending by 4 percent of GDP by 2030, eroding fiscal space from efficiency gains.
  - Rigidities from pervasive earmarking of revenues would drastically reduce the scope for reallocation of funds across sectors.
- Scenario if reallocation from infrastructure (road) were possible: overall cost of reaching the SDGs by 2030 would amount to a negative 0.5 percent pf GDP annually, compared to 4 percent of GDP in other emerging economies, and 15 percent of GDP in low income and developing countries.

### Policy options and trade-offs
- Option 1 — Deeper cuts in non-investment spending:
  - Non-investment public expenditures would need to be retrenched in the near to medium term below the level imposed by the spending ceiling to create fiscal space for infrastructure.
  - This would require politically costly spending cuts, in particular to the wage bill, in addition to passing the social security reform currently being discussed by Congress, and addressing budget rigidities.
- Option 2 — Prioritize essential infrastructure before 2027:
  - Prioritize essential infrastructure spending before 2027 while postponing less critical investment.
  - Requires improvements in strategic prioritization of public investment, project appraisal and selection, and better central guidance and coordination across levels of government.
  - Delaying non-essential infrastructure implies slower closure of the infrastructure gap and a more gradual reduction of debt after 2027, which could be supported by measures to increase tax revenues.
- Option 3 — Boost revenues through administrative and policy reforms:
  - Focus on improving tax compliance and reducing distortionary tax exemptions, which are estimated to cost the government 4 percent of GDP per year.
  - Tax policy reforms to streamline the tax system could increase revenues by enhancing tax compliance and improving the business environment.
  - Overperforming fiscal targets through revenue increases could finance additional investment spending after 2027 without worsening debt sustainability, but would not accommodate additional spending while the teto applies.
- Option 4 — Mobilize private sector resources:
  - Attracting private finance requires improving the business environment: simplifying the tax system, opening the economy to foreign trade, and easing procedures to start a business.
  - Recent measures cited: provisional measures to reduce red tape and support opening of small businesses; government plan to lower import fees on selected goods; current efforts to negotiate an EU-Mercorsur trade agreement; authorities’ intention to reform the tax system once social security reform is passed.
  - Concession agreements and privatization: concession agreements should be considered until PPP framework is strengthened; outright private provision via concessions could be favored. The government launched a concession program likely to pick up speed in 2020. A provisional measure approved by a Lower House-Senate joint committee will allow the privatization of water and sewage systems and relevant state-owned enterprises, potentially attracting private investment.
  - Caution: Brazil’s high public debt and low PPP institutional strength imply the strategic PPP framework, including assessment of fiscal risks, should be improved before expanding PPPs.

### Recommended strategy and broader policy implications
- A viable combined strategy:
  - Implement some deeper cuts in non-investment expenditure that generate savings for priority infrastructure spending while mobilizing private capital until 2027.
  - Postpone more substantial road investment until after 2027, supported by policy and administrative revenue-enhancing measures to avoid deterioration in fiscal sustainability.
  - Implement structural reforms to boost growth and preserve efficient service delivery in health and education.
- Implementing the structural agenda will require:
  - Strong and effective public institutions.
  - Addressing corruption.
  - Upgrading transparency and accountability.
- Expected payoff: a tight policy agenda but with substantial economic and social dividends over time.

*Italic: Source — IMF staff estimates and analysis as presented in the supplied PDF content.*

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_Source: https://www.imf.org/-/media/files/publications/wp/2019/wpiea2019236-print-pdf.pdf_