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Brazil’s Economy: Falling Like a BRIC

Brazil’s latest GDP data further tarnishes its reputation as the great hope of Latin America. The country’s economy grew by a mere 0.6 percent last quarter—far less than what’s needed to achieve the 4 percent annual growth rate its overly optimistic finance minister had predicted.

This is in sharp contrast with earlier years. In 2010, Brazil grew by 7.5 percent, one of the highest rates in the world. But last year’s growth was a paltry 2.7 percent, and this year’s is likely to be only 1 percent. Could there be a silver lining? The FT reports:

Nomura said the weak performance in Brazil was driven by a 2 per cent fall in investment compared with the previous quarter, the biggest such fall since early 2009. . . .

The poor performance will enable President Dilma Rousseff to introduce an element of urgency to much-needed reforms to push through infrastructure investment in Brazil and lower costs.High quality global journalism requires investment.

The government has been taking measures to stimulate investment, announcing R$133bn of road and rail concessions, auctioning off important airport projects to private sector consortiums and lowering social welfare taxes on payrolls.

Unlike China, Brazil’s infrastructure is underdeveloped, and it takes nearly twice as long to transport goods as in China, which continues to hold back the economy.

We have to ask: Is Brazil still the “country of the future”?

 

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