TFF Associates & Themes Blog

By Jonathan Power

Brazil has long lived out its personal fantasy as the archetypal relaxed, tolerant and gregarious country with Copacabana beach, the samba, the carnival and a great deal of sexual freedom. It is now living out in real time its almost forgotten societal dream, an economic-cum-social revolution.

The retired president, Luiz Inacio “Lula” da Silva, bequeathed the nation a vibrant capitalist economy with a human face – an economy that has raised income per head quite substantially (it is now four times that of China), has almost abolished daily hunger and given the large majority of the poor an income supplement in return for families sending their children to school.

Still, after 8 years of Lula and 4 years of his hand-picked successor, Dilma Rousseff, the country struggles to stay ahead of its burgeoning population, the inequities of the feudal land system that cast millions into shanty towns and a murder rate in the slum favelas that is more akin to a war zone than a normal society.

Brazil remains one of the most unequal societies on earth. Tiffany has more stores in Sao Paulo than anywhere else in the world.

Nevertheless, Brazil appears to have everything necessary to become a great success.

It is a nation of vast dimensions, the size of Europe, bounded by the steamy, tropical rain forests of the Amazon to the north and the cool, temperate, munificent, prairies to the south. No other country in the world offers such geographic contrasts or probably such an abundance of raw materials and raw opportunities.

Brazil has world’s largest tropical forest and has the world’s largest reservoirs of freshwater and ample hydro electric power. It is self-sufficient in oil and gas, including massive deep water finds. But for the best part of four centuries, until Lula came along, too much of this had been squandered – the Amazon raped, the poor exploited and the rich indulged.

Under Lula’s predecessor, Fernando Cardosa, Brazil finally initiated the first real reforms of Brazil’s bloated bureaucracy and feudal inefficiencies. Then Brazil under Lula repaid its debts to the International Monetary Fund, ran a surplus on its trade account, its exports boomed, growing at a faster rate than China’s – in a range of products from soya to aircraft to mining to computers.

Its economy grew steadily at over 7%. President Rousseff told me when she served as Lula’s chief of staff that after the reforms of Lula “it’s more difficult to make this economy not grow than to make it grow.”

Brazil has a head start on India and China. It has been developing in its sometime madcap way for over 100 years. Between 1960 and 1980 Brazil doubled its per capita income, an achievement that was only surpassed by the later growth spurts of the smaller East Asian countries.

If this doesn’t give Brazil’s economy with its 170 million people quite the clout of India and China with their over one billion people each it certainly will give it a base to stand eye to eye with them in say ten years’ time, when their growth rates will inevitably have slowed and Brazil should could be cruising at 5% or more from a much higher base.

Brazil could outgrow Canada, pace Russia and leave Mexico way behind.

Brazil is a member of the so-called BRICs, the insiders’ club of the most powerful Third and Second World nations – Russia, India and China and South Africa. Together they wield a lot of clout, not least because three of them are nuclear powers.

Indeed Brazil is further ahead than Iran in its uranium enrichment and therefore closer to being able to make a nuclear bomb if it wanted to – which it doesn’t at present. It gets a free pass from Washington on its nuclear program – if Iran had been granted such a dispensation there would never have been a quarrel with the US.

There are many viewpoints on why under President Rousseff the economy has gone from good to bad. It is probably a mix of old-fashioned leftist economic policies and the end of the boom in raw materials.

She remains popular. Not least she has continued to expand help to the poor and, as under Lula, they have seen their incomes rise.

The question now is she popular enough to defeat her rival, Aecio Neves?

He seems to have captured the mood of the middle and powerful upper classes who believe that with his pro-business policies he can resuscitate the economy. Moreover, she has not been unable to manoeuvre Congress the way Lula did. (But then there has been less bribery.) Neves claims he can deliver in Congress.

It will be a knife edged contest on election day, October 26th. Can she, can he, make Brazil fulfil its potential?

© Jonathan Power 2014