Figure 1.--Brazilians for most of their history have experienced grinding poverty. This press photo was taken in 1963. The caption read, "Comunists attack Alliance for Progress: A youngster carries an empty can on his head through construction area some 30 miles from Rio de Janeiro where Alliance for Progress funds are being used to construct a housing project. This project, along with Alliance projects in Brazil, is under attack by communists as part of a U.S. imperialist plot to keep the nation undedeveloped." Communist guerilla groups in Brazul and other Latin American countries were at the time waging terrorist campaigns supported by Cuba to seize power. The military in Brazil and other countries pursued an often brutal campaign to defeat the Communists. The military is today roundly criticized for their excesses. Often not mentioned is that many of the countries involved, especially Brazil, are now not only democfratic, but reporting enormous ecionomic success. As with other countries embracing free market reforms, millions of Brazilians are emerging from povrty for the firstr time. In sharp contrast, where the Communists succeeded (Cuba and Nicaragua) are economic basket cases, among the poorest countries in the region. Anf President Chavez in Venezuela seems intent on ciommiting the same economic mistakes.

Brazil is half of South America, a huge country with enormous natural resources. Historians differ on the nature of the pre-Colombian Native American economy. Portuguese settlement was primarily along the coast and after a brief Dutch period focused on sugar plantations based on slavery. The substantial Native American population was virtually eliminated by the Portuguese efforts to enslave them. Here European diseases played a major role. A large portion of the Africans transported by the trans-Atlantic slave trade went to Brazil. After independence, coffe developed as a major commodity during the Imperial period. At the turn-of-the 20th century there was a rubber boom. The country gradually began to develop the enormous Amazonian basin. After a period of political instability, Marxist insurrection, and military rule, Brazil has adopted free market economics which has resulted in an extended period of economic growth. The country coverted from gasoline to sugar produced alcohol, but is now finding oil off its coast. Brazil is a major exporter of raw materials, both mineral and agricultural. Brazil in recent years as a result of the free market for the first time has developed manufacturing companies able to compete in the world market. Socialist parties who have won free and open elections have decioded to pursue free market policies to promote economic growth. President Lula was a controversial figure in Brazilian politics, but proved to be a masterful steward of the country's economy. There are very few examples in modern economics of countries converting resource wealth into a modern productive economy. Rare success stories are Australia, Canada, and Norway. Brazil seems well on its way to finally accomplishing this. There have, however, been a series of booms in Brazilian economic history) sugar, coffee, and rubber). The Brazilian economy is still primarily dependent of exporting raw materials. And like several other raw material exporters, Brazil's success to a large degree in primarily premised on the rapid development of China and other developing countries like India. This has created an insatiable demand for raw materials. Economists differ on China's future. Brazil has made, however, considerable progress in developing a more diversified economy. This effort was suupported by Socfialist President Luiz Inácio Lula who implemebnted a series of free market reforms. Brazil has now elected a new president--Dilma Rousseff (2010). She is a former Marxist guerrilla who is pledged to continuing President Lula's mixture of socialism and free market policies.

Geography

Brazil is half of South America, a huge country with enormous natural resources. For many years devrlopmernt hascbeen primarily been along the coast. The first major economic activity into interior was for rubber in the Amazon basin. The country is now nore intensively moving into the interior.

Economic History

Historians differ on the nature of the pre-Colombian Native American economy. Portuguese settlement was primarily along the coast and after a brief Dutch period focused on sugar plantations based on slavery. The substantial Native American population was virtually eliminated by the Portuguese efforts to enslave them. Here European diseases played a major role. A large portion of the Africans transported by the trans-Atlantic slave trade went to Brazil. After independence, coffee developed as a major commodity during the Imperial period. At the turn-of-the 20th century there was a rubber boom. The country gradually began to develop the enormous Amazonian basin. It was World War II that was a turning point for Brazil. After a period of polituical instability, Marxist insurrection, and military rule, Brazil has adopted free market economics which has resulted in an extended period of economic growth. The country coverted from gasoline to sugar produced alcohol, but is now finding oil off its coast. Brazil in recent years as a result of the free market for the first time has developed manufacturing companies able to compete in the world market. Socialist parties who have won free and open elections have decioded to pursue free market policies to promote economic growth. President Lula was a controversial figure in Brazilian politics, but proved to be a masterful steward of the country's economy. There are very few examples in modern economics of countries converting resource wealth into a modern productive economy. Rare success stories are Australia, Canada, and Norway. Brazil seems well on its way to finally accomplishing this. There have, however, been a series of booms in Brazilian economic history) sugar, coffee, and rubber). The Brazilian economy is still primarily dependent of exporting raw materials. And like several other raw material exporters, Brazil's success to a large degree in primarily premised on the rapid development of China and other developing countries like India. This has created an insatiable demand for raw materials. Economists differ on China's future. Brazil has made, however, considerable progress in developing a more diversified economy. This effort was suupported by Socfialist President Luiz Inácio Lula who implemebnted a series of free market reforms. Brazil has now elected a new president--Dilma Rousseff (2010). She is a former Marxist guerrilla who is pledged to continuing President Lula's mixture of socialism and free market policies.

Sectors

Brazil is a major exporter of raw materials, both mineral and agricultural. For most of Brazil's history, these two sectors have dominated the Brazilian economy. The agricultural crops have varied over time as have the exploitation of mineral resources. Sugar was the first major crop. The Dutch introduced the sugar industry and this dominated the Brazilian economy for centuries. Rhen came the coffee and rubber boioms. Brazil's agricultural farm/fazenda sector is much more diversified, with a range of crops (coffeee, corn, soybeans, sugar cane (now used to produce ethonol as well as sugar), and a range of other crops. The mineral extraction sector has also grown and diversified, including aluminum, cement, columbium, gold, iron, ferroalloys, manganese, tin, and others. Brazil is among the world leader in many of these minerals and is now developing an important off-shore petroleum resource. Iron ore is now the country's second leading export commodity. In recent years a significant industrial sector has begun to develop in Brazil. This has meant not important steel exports, but an increasingly significant manufacturing output. São Paulo is Brazil's commercial center and the center of the country's expanding industrial sector.

Economic Outlook

The most famous dictum in Brazilian economics is that 'Brazil is the country of the future'. [Zweig] We hear the same from many Latin Americans with which we have discussed economic issues about their countries. But as Brazil is essentially half of South America and especially resource rich--no where do we hear such glowing projections for the future. But Brazilians quickly added an ademum to Zweig's line -- '... and always will be.' It looks, however, that Brazil is finally making a transition to a developed economy. The political leadership and the academic community seems cluless to what is responsible for the country progress. President Dilma Rousseff was a former Marxist guerilla. Her behavior has chabged in that she is willing to work in a democratic political structure, but her appreciation of what has brought about Brazil's impressive progress is lacking. In Brazil and throughout much of Latin America, popular folk heros are Mao, Fidel, and Che. All that they have in common is leaving a wake of economic disaster in their wake, national poverty and in the case of Mao, massive famine and the death of millions. In contrast, countries that have attempted liberal democracy and free market reforms have expeienced notable economic success. The Braziliajns seem to hace mastered political democracy. And there is a vocalm free press. And in Brazil the economic uccess has been empressive. Important world-class companies have emerged in Brazi: Embraer (aircraft consyruction) and Natura (organic cosmetics). These are impressive countries which have developed and not just imported technology from the America and Europe. Brazil is a world leader in biofuels and replacing oil with ethenol. As might be expected there were important natural resource companies (Vale and Petrobras). And individuals have built a host of small scale businesses. And the country has adopted some innovative social programs (like the Bolsa Familia) which the successful economy can finance. Soon after becoming president, Rousseff began using both Vale and Petrobras as a way to reward political supporters instead of profitable cogs in the nationaln economy returning real value. This is part of the economic problems experuenced since the departure of President Lulu (2010). All of this comes out in conversations with Brazilians. They say they don't want to be seen as a Western country or an American/European ally. Some Brazilians complain about a world dominated by American values. One historian asked them if they would prefer a world dominated by Chinese or Russian, or Cuban values. The answer is usually no, often they are surprised with the very idea. [Appelbaum, p. A15.] Few Brazilians seem to realize, however, it is that Western values (political democracy and free market capitalism) are in fact values that actually work in building a modern successful society.

The BRICs

Many in Brazil and America were beginning to see Brazil as a young United States with a bright future. It had a large, young population, strong economic growth, abundant natural resources, and maturing financial markets. A coined was term for Brazil and other major economies that seemed to have real potential--the BRICs (Brazil Russia, India, and China). It was a strage mixture, Brazil and Russia had economies based on raw material exporting while China and India were building more modern manufacturing economies and importing raw materials. Here Brzil was making some progress in expanding manufacturing, but was stll primarily a resource exporter. Russian President Putin in contrast pursued policies without meaning to that made the country more dependent on raw mteil exports (especially oil). This worked fine aslong as oil sold at over $100 a barrel. Thus the chrcteristics of the BRICs was split right down the middle. Brazil seemed a good long-term macro bet, like India or China. And this was the case as long as China was growing at a fevered pace and as a result importing enormous quantities of raw materials. Amid the optimism, were skeptics. One financial expert warned, "Brazil is the land of the future… and it always will be. Investing there is like a siren’s song.”

Lula and Rouseff

Left-wing president Luiz Inácio Lula da Silva (2003-11) enbraced some free marrket reforms and along with booming markets in China, the Brazil economy propered and expanded. He was followed by another left-wing, but much more doctrinaire president, Dilma Rousseff. She did not see the value in Lula's free market reforms. She also provided over corruption at the state oil corporation--PETROBRAS. The Brazilian economy began to decline. Rousseff adly mismanaged the country's economy as it struggled to adjust to declinung orders from China. She expanded often wasteful and politically motivated social welfare spending, more than Brazl could aford. The economy turned down and the country was hit by the tidal wave of China's slow dowm. This hurt the market for Beazil in raw material exports. As her re-election approached, Rousseff used he standard left-wing tactic of dividing the nation between rich and poor. She sharpened her populist message. She promised to spend more on social welfare programs. The government ran increasingly huge budget deficits. President Rousseff managed to narrowly win her reelection campaign (2014). She took dirty money bribes from the extrodinarily corupt state-owned Petrobras oil company which the President has fomerly managed. Now Brazil is facing the consequences of Rousseff's policies. The country's GDP is shrinking. The inflation’s rate is raising and now near 10 percent. The President's populrity has plummeted. Brazil’s real fell to its lowest level since its introduction two decades ago (2015). Stocks have tanked. Brazil’s credit was downgraded by Standard & Poor’s from investment grade to junk. Brazilians are increasingly concluding that President Rousseff won’t be able to shore up the country’s budget and avoid further credit down grades. President Rousseff just barely won re-election. There is now talk of impeachment.

Sources

Appelbaum, Anne, "Brazil, too modest for its own good," The Washington Ppst (May 31, 2013), p. A15.

Miranda, Felipe. The End of Brazil.

Zweig, Stephan. Land of the Future (1941). Zweig was an Austrian Jewish refugee who was a very popular novelist and commentator on society during the 1920s and 30s. Disparing of the rise of the NAZIs and their military successes, he and his wife committed suiside in Brazil (1942).

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Created: 5:51 PM 8/17/2011
Last updated: 8:27 PM 9/22/2015