What’s Next for Brazil’s Economic Miracle?

Letter to the Editor, by Vikas Shah

Even the most untrained eye can see the astonishing transformation of the Brazilian economic, political and social landscape. This is a country which, in the lifetime of most of its residents, has exited a depression, fought cycles of boom and bust, survived a military dictatorship and grew from having a GDP of $15.1 billion in 1960 to almost $1.6 trillion today (making Brazil the world’s seventh largest economy by purchasing power parity).

Celso Amorim (Foreign Minister of Brazil from 2003-2011) has been described (by the journal ‘Foreign Policy’) as having, “…masterminded a transformation of Brazil’s role in the world that is almost unprecedented in modern history…”

“In the case of Brazil….” says Amorim (in an exclusive interview for Thought Economics in July 2011), “One of the most important things is the huge ethnic and cultural mixture which makes us a country with dynamism, vibrancy, and the ability to understand the psychology of other nations.”  This confidence and ‘self-esteem’ did not come quickly.

Brazil has also been one of the few global nations who remained relatively shielded from the systemic global financial crisis. “One reason…” says Amorim, “Was that because of the policies of combating poverty- we augmented and expanded our internal markets, so a lot of our production was able to pick-up based on internal demand. Another reason, which is supported by our foreign policy, is that we had a much more diversified pattern of foreign trade. When we got into government- we had 25 percent of our exports directed to the United States and 25 percent directed towards Europe. Now? it’s less than 11 percent to the United States with Latin America and the Caribbean being the biggest markets. Our biggest trade-surplus is with the Arab world. This was a sea-change which was only made-possible because the Brazilian industry responded to changing demand patters, for instance, from China- and also because our foreign policy worked in a way that avoided too much dependence on one single market. ”

What about the future?

When many people think of Brazil, they immediately think of favelas and poverty. There is no doubt that the country has some immensely serious structural issues it needs to work on. The specters of racism, class-discrimination and social immobility still loom their heads over the social-economy- while changing global consumption trends have certainly affected the most critical labor markets for the nation’s marginalized millions. Importantly, though, the nation is both humble and transparent about these challenges- and is actively working to resolve them.

As we face a world of transformed ‘economic norms’ where previously ‘unquestionable’ economies such as the US and Europe are faltering, we have to start considering which nations will become the next leaders in the wave of globalization (a phenomenon which Amorim states is, ‘Here to stay. You cannot, however, look at it as a natural phenomenon on which you have no influence- it’s not like a typhoon or a cyclone. It’s a process- and a process on which you can have influence’).

For me? Brazil offers tremendous upsides with a diverse economy, strong internal market, strong foreign relations and (critically) low dependence on UK and US economies (which even China cannot boast). As the world looks for realistic alternatives to the US-centric global economy- I suspect Brazil will be very high up the list.

Vikas Shah, Thought Economics
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