Brazil : Growth and Poverty Reduction in Pernambuco

Despite its origin as one of the pioneering and richest states of Brazil, Pernambuco today has a history of slower economic growth than Brazil as a whole. Pernambuco began as a sugar producing state and the expansion of sugar production led its economic development until the mid 1600s. Then Pernambuco declined, as sugar production became more profitable elsewhere in the world. It is estimated that, since 1939, the first year for which we have regionalized GDP data, Pernambuco's growth rate has been slower than Brazil's average. Although poverty data is much more recent, the story provided by the available data is that since the early 1980s, Pernambuco has made little or no headway in reducing absolute poverty. These facts motivate the present report, which focuses on 1) analyzing, in collaboration with the Government of Pernambuco, economic growth and poverty in the State; and 2) identifying policies that can enhance economic growth and reduce poverty while improving fiscal performance. These two themes govern the structure of the report, with the first chapter focusing on growth and poverty reduction performance and the second chapter focusing on policies to improve those performances. The remainder of this introductory section provides some historical and geographical background of the state.