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Brazil: wrong way in the road of the world economy – Eiiti Sato

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Eiiti Sato is Master in International Relations (University of Cambridge, U.K.) and PhD. in Sociology (University of São Paulo - Brazil)

 

Looking at the world figures inevitably our attention is called to the enormous difference of the economic performance of Brazil when compared with other emerging economies particularly from Asia. In the early 1980’s Korean per capita GDP was about the same as Brazilian (nearly US$ 2,000), now Korean per capita GDP is about US$ 30,000 while Brazil’s per capita GDP remains around US$ 9,000.  If we compare with China, the difference of performance is yet more dramatic. In early 1980’s China’s per capita GDP was ten times smaller than the Brazilian per capita GDP, and now is roughly the same, and furthermore China’s economy continues to grow steadily at a rate remarkably higher than the Brazilian economy. Recently an international seminar on Brazil pointed out that “two years ago, Brazil ranked 23rd in ‘The Soft Power 30’, which measures ‘power with others’ via international influence, regional partnerships, human development, and other assets of soft power. This year, Brazil dropped to the 29th spot, indicating a gradual erosion of her soft power.”  Obviously there are many reasons or causes to explain such a poor performance of the Brazilian economy. This short article focus on one of them which seems to be quite important: since the “economic miracle” of the late 1960’s and early 1970’s Brazil has kept a misleading approach to the world economy, in fact one can say that over the last four decades Brazil has recurrently taken a wrong way driving along the road of the world economy.

Indeed Brazil has a longstanding history of been a remarkably inward looking nation and due to an odd mixture of pride, suspicion, and fear, in many circumstances has contradicted the main trends of the world economy and politics. Over the last decades in various key moments Brazilian rulers have decided to develop public policies quite different from those developed by other countries arguing that Brazil was different and had peculiar needs which demanded different public policies specially from those adopted by developed economies.

Brazil and the oil and debt crises

In the 1970’s the oil crisis brought about inflation and uncertainties to the world economy, and every country including the US, Europe, and most developing countries adopted tough policies to reduce oil consumption. Nevertheless Brazilian government decided not to follow the world trend. The figures of the period show that oil consumption in Brazil has grown steadily over the years of the oil crisis. Brazil imported almost 90% of her oil needs, and most of these imports came from the Middle East countries. In the eve of the outbreak of the oil crisis the oil price in the international market was about US$2.50 p/ barrel, and in the late1970’s the oil price has reached US$30.00 p/barrel, but the Brazilian government had many arguments for not adopting hard adjustment measures: a) reducing oil consumption would halt economic growth; b) oil became an essential input to move all the economic activity, and government should continue stockpiling oil enough to assure energy supply; c) raising domestic prices of gasoline and diesel would be too risky to the stability of the government. There were other arguments based on social and economic reasons for not following the general trend in the world economy, and obviously the result could not be other than a huge indebtedness. Perhaps Brazilian government was not totally wrong but for sure it went too far jeopardizing for years the future of the country’s economy.

The debt problem haunted the 1980’s in Brazil and in many other developing countries, but in fact the Third World debt crisis was only a part of a deeper crisis which was giving birth to a new international economic order which became known as globalization. The end of the 1980’s was also the end of the military regime in Brazil, but changing to democratic regime did not mean that Brazil would abandon the old pattern of been an inward looking and a closed economy. Actually globalization was a quite complex process but two aspects were remarkably important: first, the increasing integration of the world markets and of the industrial production, and second, the diminishing importance of the official sources of capital vis a vis the increasing amount of savings available in private companies, banks, and funds. In such a scenario the path taken by Brazilian rulers was to oppose globalization rather than to try to understand it properly and to participate in the emerging international regimes of globalization for trade and for financial flows.

Fighting against globalization

To understand such an approach regarding globalization it seems quite instructive to compare the strategies adopted by Korea and Brazil to develop computer industry. In the early 1980’s both countries came up with the understanding that computer industry was essential for the future of all sectors of the economic activity. In Brazil the government adopted a new law closing completely the domestic market to any import of computer products.  Such a restrictive law was approved with strong support of nationalistic groups present in the leftist political parties, in the armed forces, in the academia, and even in the industrial associations. Underpinning such a nationalistic law was the idea that Brazil should be totally self sufficient in computer industry to avoid any sort of dependence from abroad in a so strategic area. Korea took a complete different path. Korean rulers decided that the best strategy to develop her own computer industry should be to integrate their infant industry to the world computer industry dominated by big companies from the US, Japan, and Europe. It seems unnecessary to list the different results attained by Korea and Brazil in the subject.

By the end of the 1980’s Amaury Porto de Oliveira – the Brazilian ambassador nominated to Singapore –  quickly came up with the perception that Brazil should pay attention to the remarkable changes which were going on in Asia. As a consequence he decided to publish regularly a news bulletin reporting and discussing the main developments which were on the way in emerging economies in the region which used to be called as “Asian Tigers”. He was quite enthusiastic about the policies designed by those countries driven to stimulate growth, education, and technological development. Unfortunately his bulletin and his enthusiasm were not enough to raise awareness neither among government officials nor among industrial leaders in Brazil. As a matter of fact even researchers in the Brazilian think tanks and universities did not pay much attention to Porto de Oliveira’s arguments.

The Mercosur seems to be another quite instructive example of such a way of approaching globalization. The initiative was seen predominantly by the Brazilian rulers as an instrument to give muscle “to protect the country from globalization”. Indeed to most authorities and even to scholars globalization was seen as a new rhetoric of domination on the part of powerful nations. In other words globalization was seen as a threat rather than a new emerging economic order bringing new opportunities and new problems as well. Another example of such a suspicious way of looking at the international trend is the “Washington Consensus” which became a sort of demon to be fought in Brazil and in some Latin American countries. In Asian emerging economies authorities and economic research institutions did not pay attention to the issue, and considered the Washington Consensus in its very limited terms, i. e. nothing more than a simply set of recommendations to facilitate developing countries to integrate to emerging global regimes for trade and financial flows. Actually since many years before John Williamson has popularized the term most of the recommendations of the Washington Consensus were already included in the economic policies developed by the “Asian Tigers”.

Rhetoric and facts in current issue

In recent years there is a worldwide concern with protection of the environment and with mitigating the process of climate change. In such a concern there is also a wide consensus that energy production plays a central role in the issue and developing alternative sources of energy should be part of any public policy for social and economic development. Even those who remain skeptical about global warming and about the importance of human activities in the process of climate change recognize that current industrial and consumption standards are unsustainable in the foreseeable future, and that every society should shift their energy system into clean energy technologies. Again Brazilian authorities adopt public policies contradicting world trends. As a matter of fact rhetoric in favor of clean technologies has been quite strong, but facts reveal a reality rather different.

Worldwide every industrial center from Scandinavia to China is developing large R&D programs and public policies aiming at introducing and improving the use of energy generated by non traditional sources such as wind and sun. In Brazil over the last decade the largest investments in energy have been driven to oil energy plants and to building a large hydroelectric plant in an Amazon river (Belo Monte, was estimated to cost almost US$ 10 billion). As ironical as it may sound countries like Sweden, The Netherlands, and Germany which are poorly gifted in terms of solar radiation when compared with Brazil solar energy is much more important to their energy matrix. For example according to recent figures while in Germany almost 7% of energy consumption come from photovoltaic facilities in Brazil only 0.02% of the energy consumption come from solar energy facilities. In terms of wind energy Brazil is a bit better but even though far below her potential to be explored: according to the figures in Brazil only 6.2% of the energy consumption come from wind plants while in the energy matrix of Germany wind already represents more than 13%.

Lagging behind for how long?

Unfortunately observing the figures of the recent years and considering the public policies which have been designed and developed over the last decades the prospects for Brazil in the foreseeable future are not encouraging. Brazilian strategists seem continuing to look at the world as something to be ignored, or worse to be changed according to their view. Government authorities as well as most analysts seem to continue holding the traditional attitude of “inward looking” approach. Not only economic policies but any public policy continue to be proposed and designed under the presumption that the forces which are moving the world order will not influence domestic economy and social demands.

It became part of the international contemporary folklore the statement attributed to Deng Xiaoping that “it doesn’t matter if the cat is white or black, so long as it catches the mice” symbolizing the remarkable change which had happened in China putting an end to the revolutionary period made of ideology, violence, and isolation from the world order. Indeed in moral terms pragmatism is a form of humility once it requires the acceptance of the assumption that world is an encompassing reality to be understood and too big to be changed by human hands. Unfortunately in Brazil despite the poor social and economic figures the odd mixture of pride, suspicion, and fear still prevails regarding world trends.

 

 

  1. Professor of  the Institute of International Relations of the University of Brasilia
  2. Conflict Prevention and Peace Forum & United Nations Department of Political Affairs, CPPF Meeting on Brazil, New York, November, 14th, 2017. Summary Note of the meeting (p. 8)
  3. Lei da Reserva de Mercado (Lei n.º 7.232, 29/Oct/1984). For eight years import of computer products was prohibited, and waiver could be issued only by a Special Secretary attached to the Presidential Office.   
  4. The Washington Consensuswas a set of 10 economic policy recommendations designed to facilitate developing countries to join and to benefit from globalization. It came out from Washington, D.C. based institutions such as the IMF and the World Bank. The term was first used in 1989 by John Williamson, and was understood by leftists as a sort “neoliberal recipe”.
  5. Figures from Overview of Solar Energy in Brazil (FAPESP, 13/Nov./2017), and Federal Ministry for Economic Affairs and Energy (Germany, 2016).