Like much of the world, Brazil has suffered a rough winter. A severe drought in the country’s breadbasket, has increased prices of basic foodstuffs by 30 percent or more. Inflation hit an 11-year high in March. Fuel costs have soared. Preparations for the World Cup have been plagued by stadium collapses, cost overruns, protests over misused funds, and missed construction deadlines. President Dilma Rousseff, who rode into office on the coattails of her beloved predecessor, has seen her popularity drop from a 44 percent approval rating in February to just 38 percent this month. Analysts have begun to doubt her chances for reelection.Brazil’s struggles are familiar to the country’s economists and policymakers, and are another sign of the decline of the BRICs. A Goldman Sachs report released late last year captured the mood with the title “Emerging Markets: As the Tide Goes Out.”“Once the darlings of the global economy,” Michael Mandlebaum writes in the upcoming issue of The American Interest, “and the brightest hope for economic growth robust enough to lift most if not all boats around the world,” Brazil, Russia, India, and China are now falling from grace. Brazil’s main problem, Mandlebaum writes, is populist politics. Populism once spurred economic growth but has now come to hinder it. What might the future hold? Here’s Mandlebaum:
That future depends on the outcome of the country’s ongoing political struggle over economic policy. On one side of this struggle, pressing for ever-greater public expenditure, stand the forces of populism, with their deep historical roots, their powerful constituencies, and in some cases—efforts to reduce Brazil’s poverty, for example—their strong moral claims. Opposing them are those favoring fiscal prudence and productive public investment. They have global economic history, including the past two decades of Brazilian economic history, on their side, but much less political support throughout the country.
Recent (and massive) oil discoveries off Brazil’s coast could be a real boon. That is, if Brazil can avoid the pitfalls of resource management that characterize its partner BRIC, Russia. Russia’s reliance on energy and resources should be a warning to those who set Brazil’s economic policy going forward.