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To grow or to grow- the choice is Brazil’s
October 31, 2013, 5:45 pm

For centuries, economists have been trying to uncover the puzzle of how a handful of nations have become so prosperous, while the majority has remained underdeveloped. It is an understatement to state the fruits of world economic progress has not been equally divided.

The economic and social progress achieved by South Korea, the US, and, more recently, China, cannot be applied to Brazil, for instance.  The critical playout of consumption and population apply differently in the political and economic agendas of different countries.

There are cultural, political and legal institutional differences that pave the path for any economic policy or reforms that aim for growth: cultural values also matter here.

Brazil is hosting next year's World Cup and summer Olympics two years later [Getty Images]

Brazil is hosting next year’s World Cup and summer Olympics two years later [Getty Images]

Since 2010, there has been an increasing avalanche of local and international criticism of Brazilian economic policies undertaken to bounce back from the global financial and fiscal crisis.

Over the last two years, the Brazilian economy has posted lower growth, and has undertaken a disappointing trajectory, but this does not mean that the monetary and fiscal policies “have blown it” or that “the country is ill”. The reference is to the special report entitled “Has Brazil blown it?” published by the UK-based The Economist magazine, September 28, 2013, and Edmar Bach article “Open or Open, this is the question” published at  Valor Econômico Newspaper, September 27,  2013.

Of course, it is difficult to remember in the din that these are “media allegations” and it is an entirely different debate whether they undermine the country’s economic fundamentals and economic governance – transparency and Brazilian social inclusion – which is aimed at overcoming domestic and international crises caused by developed countries (the US and Europe).

The real fact is that, developed countries, guided by neoliberal economic premises, are still unable to navigate in the world of interdependent global relations.

Some Brazilian economists revere the importance of Albert Hirschman’s thoughts (1915-2012) regarding the choice of an economic policy that might cause an enhanced economic imbalance that is able to reshape economic development.  I believe, in this century, economic policy must focus on former World Bank Chief Justin Yifu Lin´s premises: industrial policy must target globally comparative advantages, aiming at global competitiveness.

Now global capitalism has a distinct feature compared to the previous period: There is a new realignment of bilateral and regional trade agreements that aims to promote a new economic order and balance of power among nations.

Throughout the next five years, investment to build new infrastructure and logistics is slated to be around $270 billion in roads [Getty Images]

Throughout the next five years, investment to build new infrastructure and logistics is slated to be around $270 billion in roads [Getty Images]

Brazil is fighting slowing investment and a barely expanding economy and yet there is a strong impetus for developing new infrastructure and logistics.

Throughout the next five years, investment to build new infrastructure and logistics is slated to be around $270 billion in roads, railways, ports and airports interlinking the country’s agribusiness and industrial production to meet growing domestic and international demands.

Starting in 2014, some 7,500 kms of new roads will be built, as will 10,000 kms of railroads; a total of 19 ports will be reformed and expanded, as well as four international airports. There will be more than 400 new regional airports constructed and an equivalent number of regional airports will be rebuilt and expanded. The actual installed energy capacity will be expanded at a growth rate of 16% per year, starting from 116,000 MW going to 182,000 MW in 2021. These investments are expected to amount to $75 billion in energy generation and transmission.

All these programmed investments in the form of public and private programs (PPP), as well as public concessions, are aimed to make investment rise from 18.5 per cent of GDP to 24 per cent of GDP in 2022.

There will be an additional growth factor Brazil is betting on: the investment of $220 billion in oil and gas, in the pre-salt layer throughout the next 10 years.

In the short run, the forecasted level of investment is not enough to sustain economic growth at 6 per cent per year, but it will allow it to grow above 3.5 per cent per year, starting next year.

Of course, all these large-scale ambitious investment projects present considerable economic challenges: they will require domestic and foreign financial resources, and an increasing number of skilled and semi-skilled labors that do not exist in the country at the moment.

At the same time, it will require extremely efficient monetary and fiscal policies to allow price level sustainability, and a lower real interest rate, such that, the exchange rate will remain competitive and stable over the next 20 years.

Although this is a promising scenario, Brazil’s future will not fly in clear skies. Latin America’s biggest economy is still haunted by its long history of runaway inflation, the biggest bane of President Dilma Rousseff’s plans to rekindle growth.

The Brazilian economy is not part of the major regional trade and technological agreements with the US. It will be an irreversible mistake if its trade and industrial production is not linked to global markets and backed up by bilateral and regional trade agreements: for growth and competitiveness, trade matters.

Nonetheless, the federal government has called for foreign technology, expertise, and capital to leverage country growth and structural efficiency. This call is a clear political move towards cultural and financial openness to build a more efficient and prosperous Brazilian capitalist system.

The views expressed in this article are the author's own and do not necessarily reflect the publisher's editorial policy.

One Response to To grow or to grow- the choice is Brazil’s

  1. Eraldo Marcelo Kopp Reply

    November 2, 2013 at 11:41 am

    Mr Lozardo has a great view point regarding this article!
    The truth of the Brazilian situation is this:
    BRAZIL HAS NO MONEY FOR THE PROJECTS!!!!!!!!
    The 370 bln left by Luis Inacio were already spent!!!
    This brings us more towards an election geared for the finding of a new president such as the great Juscelino Kubitschek de Oliveira where the best salary in Brazil’s history was 1958 and 1959 during his period in charge.
    This achievement was experienced because of the great work of Mister Vargas, the previous president.
    The situation in Brazil is EXTREMELY SERIOUS regarding the achievements of these objectives posted on this very real article!
    The US$565 bln proposed on this plan is roughly more than 1 tln reals!!! Brazil has no Money and requires responsible investors with the ability of bringing whomever they want to work for them!!! This means if a country comes to Brazil and decides to produce, then they may want bring people from their country and unrestricted!!!
    Brazil is, at the moment, “in a box”! The reality of the economy is compared with the 1990’s “project calha norte” or “project north canal” bringing water on northeast Brazil and therefore exporting produce and grain in an unprecedented scale!!!
    IT WAS A FALSE PLAN! It has enriched the scoundrels politicians and the NE Brazil continues on drought and the money is gone, except for a few minor improvements!!!
    The Brazilian reality is very evident! The new president has destroyed the economy and she runs around with Merkel hiding behind the spying novel from USA!
    Brazil has no clear objectives for the future and the article is very clear but there is no funding for its completion!
    Speaking of the media!!!
    They are a “bunch of incompetent and ignorant” reporters earning a lot to simply protect this bad administered country where the politicians scoundrels are shaping their paradise such as the Cuban Fungencio Batista, but the distinction is,rather than drugs, the politicians use false hopes and sports to mesmerize the people and these objectives are achieved via the media!!!
    The Brazilian president HAS NO PLAN OF DEVELOPMENT! NO MONEY AND SHE IS TRYING TO GET INVESTORS TO PLUG UP THE ROT COMING OUT OF HER ADMINISTRATION!!!
    THESE ARE THE FACTS!!!
    COUNTERMEASURE IS THE COLTAN! BRAZIL HAS 20% OF THE WORLD’S DEPOSITS AND MUST USE IT WISELY! HELPING USA TO BUILT THE COMPUTER SO THE %’S ARE THEN MONITORED!!!
    THE PRESAL IS EQUIVALENT AS THE PROJECT CALHA NORTE SHOWING ITSELF AS A TOTAL FIASCO!
    Brazil must be involved with clear simple objectives but each of them completed seriously so then the countermeasure can take shape! Private investment is a must!

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