The Economist – Has Brazil Blown It?

FOUR years ago this newspaper put on its cover a picture of the statue of Christ the Redeemer ascending like a rocket from Rio de Janeiro’s Corcovado mountain, under the rubric “Brazil takes off”. The economy, having stabilised under Fernando Henrique Cardoso in the mid-1990s, accelerated under Luiz Inácio Lula da Silva in the early 2000s. It barely stumbled after the Lehman collapse in 2008 and in 2010 grew by 7.5%, its strongest performance in a quarter-century. To add to the magic, Brazil was awarded both next year’s football World Cup and the summer 2016 Olympics. On the strength of all that, Lula persuaded voters in the same year to choose as president his technocratic protégée, Dilma Rousseff.

Since then the country has come back down to earth with a bump. In 2012 the economy grew by 0.9%. Hundreds of thousands took to the streets in June in the biggest protests for a generation, complaining of high living costs, poor public services and the greed and corruption of politicians. Many have now lost faith in the idea that their country was headed for orbit and diagnosed just another voo de galinha (chicken flight), as they dubbed previous short-lived economic spurts.

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About Janar Wasito

Janar Wasito is the manager of Magis Capital in San Diego, CA. He is a graduate of Harvard and Stanford Law School, and a former Marine Officer.
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6 Responses to The Economist – Has Brazil Blown It?

  1. Brazil needs to access its strengths and weaknesses asp, fix things and get going… we a government with intelligence and quality investment.

  2. and… Janar, it’s good to have you back!

  3. Janar Wasito says:

    yes, i see this as a great opportunity for Brazil to extend the boom of the last decade, rather than a negative. The Economist is said to have the editorial policy of “simplify and exaggerate.”

    • Every economy goes through a self-correction, the amount of heat and deviations from the growth path of that correction is up to the government as well as, if possible, businesses. An economy is faith-based, much to the chagrin of some leaders. If the people do not have enough faith that things are going to improve, they are not about to make extravagant purchases. Would you? Even if some of the people are doing well while the economy is not, they are going to have one eye on that rear view mirror as they try to out drive what is approaching most.

      Countries that have faced a similar situation have opted for many different approaches — yet only ONE works… Ten years ago, Ireland was facing a huge problem with their economy and did what many politicians would think is suicide as it cuts off what they falsely believe is the only bloodline to the government – reduced taxes. ANY country that reduced taxes, as well as reduced the size of the government, ALWAYS fared well afterwards. Yet, the inability to test this again is believe to be political suicide by too many elected as well as appointed government officials.

      President Rousseff, during the G-20 conventions, quipped that it is difficult for Brasil to compete globally due to the tariffs imposed on imports… From what I understand, you could have heard a pin drop on a carpet with the following silence. Some did, politely, remind the President that those in glass houses shouldn’t be throwing stones (we all have had one of those OOPS moments). Brazil’s tax structure helped do what it was intended to do — how long can any government keep doing this is the question. No country has unlimited funds. Reducing taxes will put more money where it can be most effective — in the hands of the people. Until the people can see evidence that is contrary to what the economists, government, and news is saying, they will hold onto what they have without purchasing much of anything. Once they see that their savings and disposable income is increasing, there is a reflex to spend.

      Brasil does have a stronger castle than it had 10, 15, 20 years ago — now it’s time to put a foundation UNDER that castle…

  4. I fear Brazil is snatching defeat from the jaws of victory, and yes I did mean it that way round. They were on a global roll and they seem to be blowing it, such a shame! I’m getting more Reals for my £ but inflation seems to be raising fast.

  5. Pingback: Brazil in 2013 | Brazil Global

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