In 2012 economic growth (GDP) was quite weak (probably around 1%) and inflation rates might reach levels near 6%. Basically the macroeconomic management this year has been led by government measures through a combination of BRL depreciation, interest rate cuts (even with 12-month inflation persistently higher than the central target) and tax deduction measures affecting primary surplus. As for next year, there are still many uncertainties on the global economy. However, after the change in level of both USDBRL and interest rate since 2011, there might be stabilization of both variables for a long period. In the case of FX rate it might keep fluctuating within the range slightly above 2.00 and below 2.10, reaching the latter by end-2013. In the case of fiscal policy, government again may not reach the fiscal target (primary surplus) on next year and the main reason is the extent of tax deduction measures. Different from this year in which weak activity has also contributed negatively for tax revenues, we expect recovery on next year, although fiscal policy remains as the expansionist terrain in order to stimulate activity and curb short-term inflation.

However, Brazilian economy needs more than this macroeconomic management if it wants to grow at higher pace on a sustainable way. Brazilian economy is lagging behind on the main structural drivers of long-run growth rate: physical capital (such as infrastructure, machinery and equipment), human capital (education) and technology. In this sense, there are a couple of structural reforms that should be on the agenda for the next years. The diagnosis on what should be done to reduce the Brazil cost is correct. See the government measures to reduce energy costs, improve Brazilian physical infrastructure through concessions of ports, airports, roads and railroads, and some other tax measures like tax deduction on payroll and the debate on the ICMS single rate for all Brazilian states. However, there is still much that should be done. The design of some measures might be enhanced in order to attract large investors/businessmen with expertise on focal sectors. Although Brazilian economy is rated as investment grade by rating agencies, it still needs to be granted a "business grade" by creating a better business environment for the private sector.  Lastly, investment on the quality of education also needs a very long-term policy and mainly long-term view decoupled from short-term political interests since the most significant return may be for the next generations if there is significant improvement on the quality of education on elementary schools.