Brazil: Bright Prospects or Dark Portents?
by Matthew M. Taylor
razil is an island on its continent, separated from its neighbors by an ocean of
history, culture, and language. And yet whither Brazil, so too Latin America. The
country accounts for a sixth of the region’s trade, and more than a third of its GDP
and its population. In addition to its large share in all cross-regional quantitative
measures, Brazil’s weight is geopolitical as well, with the country playing a central role
among leading emerging markets. The state of affairs in Brazil, then, is of enormous
concern to its neighbors, and should be of great concern to the rest of the world as
Sadly, the message of this essay is that there is much for both Brazilian and
foreign observers to be concerned about when considering the country’s medium to
long-term prospects. This message runs counter to the ecstatic headlines and
rapturous investor reports that have dominated much coverage of Brazil since
President Luis Inácio (“Lula”) da Silva demonstrated, during his first year in office,
that he would not reverse the process of economic stabilization or take a wildly
populist policy route.
First, consider the full half of the glass. The country has not been hit by
economic crisis for more than half a decade now, and all suggests that in the medium
term, current policies will shield Brazil from the full-fledged financial panics of the
sort that repeatedly hobbled it in the 1990s. Indeed, despite initial fears about the
potential populism of the Workers’ Party government that took office in 2003, Brazil
has almost achieved investment grade ratings, the debt-to-GDP ratio is at its best
place in a generation, Brazil repaid its debts to the IMF well ahead of schedule,
foreign currency reserves stand at over $160 billion, hyperinflation remains a distant
(but not forgotten) nightmare, the primary fiscal surplus remains above four percent
of GDP, and the balance of payments is in remarkable condition. Most importantly,
after years in which an uncertain economic tide lifted only the wealthiest ships,
inequality has been modestly but continuously shrinking for nearly a decade.
On the political front, as Brazil prepares to celebrate the twentieth anniversary
of its 1988 Constitution, almost all naysayers have been proven at least slightly over
pessimistic. Early concerns about the instability of multiparty presidentialism were
clearly overblown, and despite the existence of twenty-eight officially recognized
Matthew M. Taylor
is an assistant professor of political science at the University of São Paulo.
His work focuses on comparative development, public policy, and judicial politics in Latin America.
He is the author of