Abstract
In spite of the attention received by the short-term crisis, Brazil faces a more serious problem: long-term lack of growth, or even perspectives of growth. The crucial indicator is labor productivity, which has averaged 0.7 percent growth per year since 1980. Neither human nor physical capital is likely to improve productivity growth significantly on its own. On the other hand, the institutional mixture of state capitalism and economic nationalism that characterizes Brazil today, though functioning well up to 1980, has since shackled Brazilian productivity. If Brazil reforms its economic institutions and puts an end to state capitalism and economic nationalism, labor productivity will grow again at high rates.