Are you sure the problem is TFP which is about structure and learning curves. It could be low capital spending that is limiting economic growth. Brazil has lots of cheap labor, so it doesn't always make business sense to invest in equipment. Why buy a Roomba when maids are cheap? Brazil also has extensive natural resources, so the "resource curse", the ability to earn a lot of money by extraction, may be holding Brazil back as well.

One thing high income countries tend to have is high internal demand. Most people have salaries large enough to buy lots of goods and services. This is surprisingly hard to develop. China started running into this problem maybe five years ago. Building a well off consumer society presents political risks. It is hard to distribute economic power without also distributing political power. There's a reason the slave owning South in the US fought against settling the western territories and the Homestead Act was only passed during the Civil War. Having an economic say makes people "uppity".

There's a problem at the other end as well. Rich people don't like to pay taxes. If you look at things historically, the US had a much higher rate of economic growth back when taxes were outrageous than after they were lowered to more sensible levels. Similarly, most blue states which are anti-business, if only because they tend to tax businesses a lot, tend to have higher GDP per capita rates than red states which are pro-business and tend to have lower taxes.

It's not impossible that Brazil's big problems might be that taxes are too low, the government is not spending enough of infrastructure and human capital and the financial sector is politically and structurally constrained in its investments.

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great commentary.

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