The awakening giant
25/12/11 22:06![[identity profile]](https://www.dreamwidth.org/img/silk/identity/openid.png){kind=small}
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talkpoliticsWhen your beaches, pubs and football have better reputation than your national economy, then something has to be done about it. This ambitious idea is now at the core of the program of the very ambitious new leader of one of the emerging economies, Brazil. Dilma Rousseff.
In the conditions of a global financial crisis that shook the foundations of the economies in North America and Europe, Brazil looks more and more like a safe haven for foreign investors. Until recently the biggest country in Latin America was a synonym of high debt, hyper-inflation and economic chaos. But things are changing - companies like Petrobras, Valle and Embraer are now reaching the scope of the biggest players in the world in their respective sectors, and the world's fifth biggest country already hosts some of the biggest billionaires on the planet, including Eike Batista. From a sleeping lazy giant, Brazil has gradually turned into a very reliable economic power, one that during the last decade has pulled 25 million of its people out of poverty, and closer to the coveted middle class status. The right to host both the summer Olympics and the Football World Cup are also a recognition of the economic power of the country.
But not everything is cloudless skies and roses. Brazil has to navigate through the crisis in very difficult circumstances. And it is doing it with precision and confidence, or at least in a much better way than a number of other countries. With a fine mix of smart intervention from the governments of former president Lula da Silva and now Dilma Rousseff, and the pivotal role of the Central Bank, combined with vast private investments from domestic and foreign business, Brazil has been able to emerge stronger from these difficult times, as opposed to succumbing to stagnation and recession. While most news from North America and Europe remain negative, Brazil is mostly a source of optimism these days.
For instance the national economy had a 7.5% growth for 2010, and the country even afforded to offer some help to the most troubled European countries, and first and foremost Portugal. Dilma Rousseff was even forced to try artificially slowing down the growth rate at some point, as a preemptive measure against a potential overheating of the Brazilian economy and the overpricing of its national currency, the Real. But as the South American summer progresses, Brazil is beginning to feel the freezing winds coming from across the Atlantic...
The contamination is mostly coming from Europe and USA. During the third quarter of the year, Brazil reported a stagnation for the first time in 3 years, and the forecast for the end of 2011 is about a tiny 3% growth, which is untypical for Brazil in recent years. It is true that this is a lot better than the EU countries, but still it is more modest than countries like China and India, who are also in the BRICS club. Meanwhile a weakening of the consumer craze among the Brazilian public is being noticed, which is of course regarded as one of the engines for progress.
On the world markets the demand for Brazilian steel and automobiles has diminished because of shrinking consumption worldwide, and the Brazil-based branches of the biggest international companies are having increasing difficulties with finding credits. We could add the still high interest rates and the relatively high annual inflation of 6.5%. At least Brazil is not trying to conceal these figures, like Argentina is. Other parts of the puzzle are the unsolved structural problems like bureaucracy, corruption, the bad infrastructure and the outdated airports. So the economists are concerned that Brazil could have gotten the European-American flu...
The problem, like Dilma herself has said, is the "global immune deficiency". She believes that the threat is that "In a globalised world no single country has immunity against the crisis". The ill Europe is an important consumer of the Brazilian products - from fruits and cocoa to airplanes, from oil and sugar-cane to cars. But still more dangerous could be the threat of a cooling interest from China, because industries like soy-beans and iron processing mostly rely on the Asian markets.
Of course Brazil is already prepared with the relevant counter measures. The cooling economy is again receiving state stimulus. The central interest rate was brought down to 11%, there were some tax cuts to stimulate business, and the Real was devalued for the sake of export, and the public expenses were slightly increased. The Central Bank is thinking of aiding the companies with the biggest debts with funds from the state reserve (which is over 350 billion dollars). The good news is that the confidence in the domestic market remains as firm as ever. The finance minister Guido Mantega assures that the situation is under control, much unlike many other countries where growth is slowing down because of the drying out of the markets. He also went on to criticise the "countries responsible for the deepest crisis since the Great Depression… [who are] eager to prescribe codes of conduct to the rest of the world", obviously talking about the prescriptions for austerity measures coming from Europe.
Dilma Rousseff is determined to steer the country in the right direction, and the initial concerns that she would be only a pale shade of her predecessor Lula, were soon dispersed. Now she is making a very good impression, especially when we keep in mind the very high expectations that were invested in her, because Lula was a really remarkable statesman who made a huge difference for his people. The first resolute course she took immediately after she assumed power was to address the problem with corruption that has plagued the Brazilian society for many years. She sacked seven corrupt ministers, she is really maniacal about discipline (in fact much more than her charismatic mentor), and all in all she has given her compatriots some good reasons for enhanced confidence.
And just like Lula, she rejects Europe's desperate attempts to promote the model of extreme austerity in fighting with the debt crisis. The ultra-conservative recipes of the IMF are widely considered a big failure throughout Latin America. Dilma herself is saying that the slower growth is only bound to perpetuate and prolong the crisis, drain the economy of potential for recovery, and such a crisis in turn generates less and less growth and creates a vicious circle. Of course playing with debt is a tricky game, and she knows that very well, so her government is trying to be very mindful when treading on this slippery ground.
In many ways Dilma is like a new Iron Lady, one that Brazil will badly need in the years to come. She is realistic about the prospects of her country... she knows where its problems are coming from and what should be done about it. She is aware that without the world getting out of the crisis soon, there would be no brighter days for Brazil either; she admits that 2011 has been an extraordinarily difficult year for Brazil, but the upside of the story is that the country remains in good shape, more stable than most other countries of this caliber, and 2012 could turn out much more successful, if the Brazilians play their cards wisely.
In the conditions of a global financial crisis that shook the foundations of the economies in North America and Europe, Brazil looks more and more like a safe haven for foreign investors. Until recently the biggest country in Latin America was a synonym of high debt, hyper-inflation and economic chaos. But things are changing - companies like Petrobras, Valle and Embraer are now reaching the scope of the biggest players in the world in their respective sectors, and the world's fifth biggest country already hosts some of the biggest billionaires on the planet, including Eike Batista. From a sleeping lazy giant, Brazil has gradually turned into a very reliable economic power, one that during the last decade has pulled 25 million of its people out of poverty, and closer to the coveted middle class status. The right to host both the summer Olympics and the Football World Cup are also a recognition of the economic power of the country.
But not everything is cloudless skies and roses. Brazil has to navigate through the crisis in very difficult circumstances. And it is doing it with precision and confidence, or at least in a much better way than a number of other countries. With a fine mix of smart intervention from the governments of former president Lula da Silva and now Dilma Rousseff, and the pivotal role of the Central Bank, combined with vast private investments from domestic and foreign business, Brazil has been able to emerge stronger from these difficult times, as opposed to succumbing to stagnation and recession. While most news from North America and Europe remain negative, Brazil is mostly a source of optimism these days.
For instance the national economy had a 7.5% growth for 2010, and the country even afforded to offer some help to the most troubled European countries, and first and foremost Portugal. Dilma Rousseff was even forced to try artificially slowing down the growth rate at some point, as a preemptive measure against a potential overheating of the Brazilian economy and the overpricing of its national currency, the Real. But as the South American summer progresses, Brazil is beginning to feel the freezing winds coming from across the Atlantic...
The contamination is mostly coming from Europe and USA. During the third quarter of the year, Brazil reported a stagnation for the first time in 3 years, and the forecast for the end of 2011 is about a tiny 3% growth, which is untypical for Brazil in recent years. It is true that this is a lot better than the EU countries, but still it is more modest than countries like China and India, who are also in the BRICS club. Meanwhile a weakening of the consumer craze among the Brazilian public is being noticed, which is of course regarded as one of the engines for progress.
On the world markets the demand for Brazilian steel and automobiles has diminished because of shrinking consumption worldwide, and the Brazil-based branches of the biggest international companies are having increasing difficulties with finding credits. We could add the still high interest rates and the relatively high annual inflation of 6.5%. At least Brazil is not trying to conceal these figures, like Argentina is. Other parts of the puzzle are the unsolved structural problems like bureaucracy, corruption, the bad infrastructure and the outdated airports. So the economists are concerned that Brazil could have gotten the European-American flu...
The problem, like Dilma herself has said, is the "global immune deficiency". She believes that the threat is that "In a globalised world no single country has immunity against the crisis". The ill Europe is an important consumer of the Brazilian products - from fruits and cocoa to airplanes, from oil and sugar-cane to cars. But still more dangerous could be the threat of a cooling interest from China, because industries like soy-beans and iron processing mostly rely on the Asian markets.
Of course Brazil is already prepared with the relevant counter measures. The cooling economy is again receiving state stimulus. The central interest rate was brought down to 11%, there were some tax cuts to stimulate business, and the Real was devalued for the sake of export, and the public expenses were slightly increased. The Central Bank is thinking of aiding the companies with the biggest debts with funds from the state reserve (which is over 350 billion dollars). The good news is that the confidence in the domestic market remains as firm as ever. The finance minister Guido Mantega assures that the situation is under control, much unlike many other countries where growth is slowing down because of the drying out of the markets. He also went on to criticise the "countries responsible for the deepest crisis since the Great Depression… [who are] eager to prescribe codes of conduct to the rest of the world", obviously talking about the prescriptions for austerity measures coming from Europe.
Dilma Rousseff is determined to steer the country in the right direction, and the initial concerns that she would be only a pale shade of her predecessor Lula, were soon dispersed. Now she is making a very good impression, especially when we keep in mind the very high expectations that were invested in her, because Lula was a really remarkable statesman who made a huge difference for his people. The first resolute course she took immediately after she assumed power was to address the problem with corruption that has plagued the Brazilian society for many years. She sacked seven corrupt ministers, she is really maniacal about discipline (in fact much more than her charismatic mentor), and all in all she has given her compatriots some good reasons for enhanced confidence.
And just like Lula, she rejects Europe's desperate attempts to promote the model of extreme austerity in fighting with the debt crisis. The ultra-conservative recipes of the IMF are widely considered a big failure throughout Latin America. Dilma herself is saying that the slower growth is only bound to perpetuate and prolong the crisis, drain the economy of potential for recovery, and such a crisis in turn generates less and less growth and creates a vicious circle. Of course playing with debt is a tricky game, and she knows that very well, so her government is trying to be very mindful when treading on this slippery ground.
In many ways Dilma is like a new Iron Lady, one that Brazil will badly need in the years to come. She is realistic about the prospects of her country... she knows where its problems are coming from and what should be done about it. She is aware that without the world getting out of the crisis soon, there would be no brighter days for Brazil either; she admits that 2011 has been an extraordinarily difficult year for Brazil, but the upside of the story is that the country remains in good shape, more stable than most other countries of this caliber, and 2012 could turn out much more successful, if the Brazilians play their cards wisely.
(no subject)
Date: 25/12/11 20:41 (UTC)That's what I don't understand. Someone causing a major crisis, then goes around and preaches about solutions to said crisis!? Shouldn't they let everyone decide for themselves what solutions they'll use?
(no subject)
Date: 26/12/11 16:15 (UTC)And her name is Bulgarian, and her dad was born in Gabrovo, Bulgaria! Yay!
She even visited Gabrovo earlier this year. She was met like a rock star here.
(no subject)
Date: 27/12/11 13:26 (UTC)