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The Rousseff Two Step
Brazil Sidestepping to the Right

Don’t look now, but the Leftist government Brazil may be considering taking a big step to the right. Angry protestors clogged the streets decrying the ineptness of Ms. Rousseff’s government last June, and the country’s economy today continues to stagnate. But now economic policy might shift, as Tim Ridout’s intelligent piece for the GMF Blog illuminates:

After a spate of economic growth that peaked in 2010 at 7.5 percent, Brazil’s economy slowed to 2.7 percent in 2011 and 1 percent in 2012. The growth rate for 2013 is expected to be about 2.5 percent. These disappointing numbers can be attributed partly to the drop in global commodity prices, but also to Brazil’s protectionist policies, poor infrastructure, unwieldy bureaucratic red tape, and its statist approach to investment. The Brazilian economy has not proven nimble enough to adjust to changing global realities, especially as investment flows back to the United States. Rousseff may have had little choice but to reassure business leaders at Davos that Brazil is committed to fiscal responsibility, openness to investment, combating inflation, and maintaining a floating currency. […]

Mired in an increasingly dysfunctional Mercosur trade bloc, and concerned about being left out of global value chains, powerful Brazilian interests are making their voices heard.

With Brazil’s current economic model, which remains largely under state supervision, real growth will be hard to come by. Brazilian big business had always assumed their domestic markets were big enough to allow for significant protectionism. But it is now becoming increasingly apparent that more trade is needed, and some private sector big wigs and prominent academics are calling for the country to liberalize its markets. Custo Brasil, an old nickname for the country’s less-than-ideal business environment, is finally facing calls for reform from Brazil’s middle-class, who have been emboldened from years of economic growth. The government can hardly continue to ignore them.

With Venezuela reeling from unrest and fiscal failure, and Argentina courting economic disaster, a Brazilian change of course would be a dire blow to the Latin left. President Rousseff had hoped to lead the country in Lula’s leftist wake, but as she prepares for re-election, economic and social realities seem to be dragging her in the opposite direction.

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  • Mark Michael

    The potential boom from offshore oil drilling has not come about, thanks to the red tape, protectionism, insistence on local partners for supplying the big international oil companies. They could have been pumping large amounts of oil and benefiting from that injection into their economy, but their own fecklessness did them in. It’ll be interesting to watch what happens.

    I hope they move towards less statist policies – more free trade, less red tape, less protectionism. Goodness knows, the global economy can use more growth, more trade, given the lingering problems in Europe, the US, Japan from the Great Recession of 2007-09.

  • PKCasimir

    The argument that Ms Rousseff, as committed a Fidelista as there is in Latin America, is moving Brazil “to the right” is spun out of whole cloth. The author fails to recount a single, concrete action that MS Rouseff has taken to move Brazil off of its leftist, statist course. Is Brazil in trouble? Yes, but that doesn’t mean that MS Rousseff will move it anywhere near to liberal western economics, or has any intention of doing so. MS Rouseff may have just traveled to Davos and mouthed platitudes to the assembled select, but while her body was in Davos, her heart, mind and soul were with Fidel in Havana.

    • JoseAngel

      Right. And I would add that there´s always a terrible inertia of special interests and corruption that traps a government once they start intervening heavily in the economy. There are many corporations aligned to the PT party, the ones getting the huge construction contracts, they pull the leftists forces even farther to the left, corruption takes residence. The only way for Brazil is to replace the party in power, but Lula and Dilma have also implemented huge assistance programs for the poor, in the form of cash transfers, that will also translate into more votes for their party. It´s a vicious cycle and the end it´s always ugly.

  • Pete

    Given the make up of its population, Brazil can’t move right in any meaningful sense except by a dictatorship.

  • teapartydoc

    I think when you talk about a middle class in these kinds of countries, what you are really talking about is the equivalent of the old European bourgeoisie.

  • Pait

    Referring to the “Leftist government Brazil” [sic] together with Venezuela’s shows lack of understanding of South America. Please do your homework.

  • Pait

    Does anyone here know something about Brasil or is it all based on hearsay?

    • Maniccheapskate

      I know brasil nuts don’t taste as good as pecans and that they elected a pinko for president and Obummer gave them 2 billion$ of tarp money, and the guy that got the tarp money is bankrupt and the Amazon river is full of arsenic and they have a big parade every year with twerks and dope and all kinds of goings on.
      So, yall know as much as I do now so we’re all bi-ignorant.

      Oh, and they have death squads in the larger cities that kill the orphans living on the streets. Saw that on cable tv.

      • Herb Suhl

    • Herb Suhl

      I know they every time I try to sell them something high tariffs keep it out of the country.

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