Brazil at a Crossroads – Can it cope with being a First World Power?

By Jacques Arnold

Brazil, where football is almost a religion, is seeing rioters complaining against the vast expenditure on preparations for the Football World Cup to be held in Brazil next year. Something very serious is afoot for that to happen.

Brazil, the “B” in the Brics, has had a remarkable run since the end of the military dictatorship in the 1980s: a mass democracy of almost 200 million people, massive economic growth, sustained through the last few years of worldwide recession, low inflation, and all against a backdrop of peace and an avoidance of the type of guerrilla problems affecting so many other parts of the world, and indeed of Latin America itself.

We have had a growing impression that here is a country becoming a great-power of the 21st century, and a clear leader in Latin America. Suddenly, all that is thrown into doubt by some extremely violent rioting right across the vast country’s major cities; suppressed by stun bombs, teargas and water cannon by police and then soldiers – their action effectively undermined by a President blandly appearing on TV to commend the rioters’ expression of their democratic views!

So what has gone wrong? Perhaps the world’s impression of Brazil, and the complacency of its politicians, have come out of line with reality. As the world outside has struggled with the consequences of the financial crash of 2008, Brazil maintained its economic activities and exports based on a burgeoning internal spending power of a mass population of consumers financed not least by welfare (the Bolsa Familia), and by the insatiable demand of China for the country’s mineral and agricultural wealth. In the process, the local currency, the Real, appreciated in foreign exchange markets, depressing inflation, and accentuating purchasing power and a sense of well-being. Perhaps pride comes before a fall.

The last eighteen months have proved a painful turning point. China is pulling its horns in, overseas markets for Brazil’s manufactures (over half its exports) have encountered difficult conditions familiar to the U.K. and others, and the knock-on economic effect has led to a depreciation of the real, with consequences for inflation, now rising, and for employment. Over two million additional Brazilians are entering the labour market each year, and the economy must continue to power ahead if it is to absorb them. This it used to do, but the economy has dropped from a growth rate of 7.5% in 2010, to only about 1% last year.

This malaise is accentuated by the massive inequalities which persist in the country. Even the vastly expanded middle classes in the big cities, feel excluded from the political arena, which is a by-word for pork-barrel politics and widespread suspicions of corruption. Taxation in Brazil is now reaching the levels of the first world, without the corresponding quality of public services. Complaints abound regarding the resources applied to health, education, the transport infrastructure, and other public services, and their delivery.

The vast investment into facilities for the 2014 football world cup and the 2016 Olympics, is very visible, and contrasts with the inadequacy of resources for the more immediate public services. Add to that the impression that the large contracts concerned are mired in corruption – and you have an explosive mixture ready for eruption. That has now taken place.

So will the politicians cope? After a faltering start, Brazil’s democracy recovered rapidly following the military dictatorship. President Fernando Henrique Cardoso, having restored the economy and currency as Finance Minister, led an effective government for eight years to 2003. He was succeeded by the populist President Luiz Inácio Lula da Silva, who combined charisma with shrewd common sense and sustained the country’s development, putting technocrats into the key ministries, whilst implementing social reforms. His succession was made difficult by the more obvious successors being submerged by a series of scandals. His Chief of Staff, the uncharismatic Dilma Rousseff, coasted to victory in 2010 on the coat-tails of his charisma, and is now floundering as President in face of the current massive problems facing the country.

And what of the future? Brazil has long aspired to be taken seriously as a coming great power. It is now rapidly achieving that status, but with it has come the chronic problems facing the first world: unemployment, the burden of demand of public services, resentment at excessive levels of taxation; to all of which it has traditionally added a historic legacy of inequality and political inadequacy.

To be a great emerging power of the 21st century, Brazil will have to confront these first world problems – starting with putting its political system into proper democratic order so that a new leadership, relevant for the age, can emerge. Its economy has a long tradition of development regardless of the politicians, and that it likely to continue. The question is whether the country is likely to remain open to the world economy, and its investors, over the period ahead? Brazilians have tasted the fruits of globalisation and are unlikely to return to the barren years of protection which so stunted their development in decades gone by. So, the answer is probably – yes. “Brazil – welcome to the first world, with all its problems!!”

Jacques Arnold is a former Member of Parliament and Chairman of the British Brazilian Parliamentary Group.








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