Brazil

Brazil – still the country of hope

Monday, October 29th, 2018

Now we know that Jair Bolsonaro will be Brazil’s next president. Can he make a positive difference to previous presidents?

What we do know is that right-wing president-elect Bolsonaro has many radical views which are not particularly popular in a European perspective. At the same time there is no doubt that Brazil needs to meet its burdening challenges much more decisively.

Several decades of economic and political muddling through should finally  come to an end. Will “Brazil’s Trump” – as he frequently is called by opponents – be the man to put Brazil on a more favorable track?

Bolsonaro – who is not very skilled in economics – seems to know what the Brazilians really are tired of, i.e. criminality and corruption. However, research also tells us that these kinds of institutional failures and problems are extremely difficult to combat. It remains to be seen whether Bolsonaro will find the appropriate sustainability and means to fight successfully against crime and corruption.

However, this is exactly the main reason why a majority of the Brazilian people voted for him. But his voters also want to see major improvements of the strongly underperforming educational system.

Good education on all levels for a small minority and poor educational conditions for a vast majority has been characterizing the stance of education during many years.

This negative spiral has to broken if Brazil ever can develop into a really future-oriented and successful economy – but also the continuous weak fiscal performance which means a real obstacle to many other necessary structural improvements as well.

One can question whether these objectives can be met by a real hardliner like Bolsonaro without jeopardizing achieved democracy.

In the early days of my professional career in the early 1980s, I was always told that Brazil is the country of the future. Somewhat later when I started visiting Brazil regularly, I heard the same story – and still today but with a more skeptical sound.

Brazil is another example from the international area where heavy protests against insufficient political and economic results these days more strongly come from the right than from the left.

As usual, I am reluctant to spontaneous comments when political changes happen in Latin America. Too often disappointments followed later on.

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

 

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Will Brazil ever learn?

Monday, May 29th, 2017

In 2016, Brazil has been affected by serious worries again. Last year, then president Dilma Rousseff was kicked out of office. GDP shrank by 3.6 percent, after a decline by 3.8 percent in 2015 – indeed a sharp recession. The annual budget deficit amounted to 9 percent of GDP. The need of major structural improvements became therefore very urgent.

For this reason, Rousseff’s conservative successor Michel Temer launched an economic reform programme but is now obviously confronted with major obstacles – obstacles that are directly tied to the president himself, the social consequences of the implemented and planned fiscal austerity measures (spending limit in real terms in the forthcoming two decades), and – above all – his suspected involvement in a dramatic corruption scandal. Bribery allegations are always serious.

Also the “timing” of Brazil’s new crisis is not encouraging since Brazil these days most probably was/is about to leave its long-lasting recession. In the past few weeks, a slight improvement of confidence in the future could be noted again. In vain?

To give an answer to this question urges for more political clarification and details we still do not know anything about. Here we get to another example of the intensifying link between politics and macroeconomic developments. Thus, it is crucial that economists/financial analysts are willing to improve their understanding of political events and trends substantially.

Exactly one year ago – before the impeachment against then president Dilma Rousseff – I wrote the following lines on this page:”… Brazil remains unable to achieve sustained good economic growth…It is really an up-and-down economy…This distorting phenomenon will not be wiped out before Brazil really can manage far-reaching and continuous reforms regarding a broad and good human capital formation, better institutions and a fairer distribution of income – accompanied by more effective and future-oriented political leaders all over the country…”.

Also now – before a possible impeachment against Rousseff’s successor, the unpopular Michel Temer – these lines are applicable. This will be the case as long as Brazil’s political leaders neglect the obvious correlation between well-working institutions and sustained economic growth. They should try to understand and apply the conclusions of Douglass North, Daron Acemoglu, and other institutional economists. According to North, institutional research also includes tradition and habits, both good ones and bad ones. Corruption can hereby serve as very important example for bad institutional conditions.

Unfortunately, the applied question remains in place: Will Brazil ever learn?

 

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

 

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Brazil – a country of the future as usual?

Tuesday, May 24th, 2016

10-15 years ago, many analysts were hoping that Brazil finally was about to establish itself on the right track for more sustainability of economic growth.

Since 2001, the so-called BRIC markets (Brazil, Russia, India, China) received increasing attention by (international) investors, mainly based on good growth expectations for all four countries – despite the fact that they clearly had different fundamental preconditions. In the past few years, however, Brazil’s economy was more and more disappointing.

Having dealt with Brazil for quite some years, I had my doubts about Brazil ‘s economic growth prospects already around 2005 or so, i. e. during the latter part of the first Lula regime which altogether with the second term had a number of promising years between 2003 and 2010 all the same.

Unfortunately, Lula’s successor Dilma Rousseff never got on the right track with all necessary reforms. Real structural progress was not noted in the first 5 1/2 years of her presidency which in the past two years was determined by power conservation without major future-oriented changes, accompanied by a GDP decline of 8 percent in the past 24 months (however, also caused by declining global commodity prices).

No wonder that markets reacted positively when Rousseff recently was suspended from office the other day, now facing an impeachment. Brazil’s currently acting president Michel Temer on the other hand seems to be quite impopular already now and hardly able to win direct presidential elections, particularly if he really will implement tough measures against Brazil’s rapidly rising government debt. Sensitive areas such as labor markets, social benefits and pensions could be hit by possibly coming austerity measures.

Sorry to say: my long-time lasting experience has been confirmed again: Brazil remains unable to achieve sustained good economic growth. It is really an “up- and-down economy” – with variable periods of ups and downs.

This distorting phenomenon will not be wiped out before Brazil really can manage far-reaching and continuous reforms regarding a broad and good human capital formation, better institutions and a fairer distribution of income – accompanied by much more effective and future-oriented political leaders all over the country.

This is what both experience and economic research tells us.

In my early days as an economist, Brazil was often introduced as a country of the future. It still is! Forever?

Hubert Fromlet
Senior Professor of International Economics, Linnaeus University
Editorial board

 

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