Lucia Jennings, founding member of the Brazilian-American Chamber of Commerce, Southeast and its current president and CEO, had the last word at an economic conference held in Atlanta on Jan. 22.
“As we all know, Brazil is not for amateurs,” she said before thanking the speakers and closing the proceedings at the Federal Reserve Bank of Atlanta in Midtown
Ambassador Hermano Telles Ribeiro, consul general of Brazil’s Atlanta-based consulate general, forewarned that the economic news to be shared at the conference wouldn’t necessarily be good.
“2015 may be a difficult year,” he said, “but next year will be positive.”
Quoting Brazil’s newly appointed finance minister, Joaquim Levy, who had recently spoken at the World Economic Forum in Davos, Switzerland, he added, “We have to fix the short term and focus on the long term.”
Charles Shapiro, president of the World Affairs Council of Atlanta, and a former U.S. ambassador, put some perspective on Brazil’s status as a member of the top 10 largest economies in the world.
He pointed to both its large size geographically as the fifth largest country in the world with a land mass as large or larger than the United States minus Alaska and the size of its economy with a gross domestic product of more than $2 trillion, which, he emphasized, “is huge.”
Even Vinicius Botelho, a research associate at the prestigious Brazilian Institute of Economics, was careful to cite his country’s achievements in reducing poverty, developing a new middle class and success in promoting education with an anticipated 1million freshmen due to begin college next year.
But all that having been said, he discredited the economic policies of the first term of the administration of Brazil’s president, Dilma Rousseff, who was first elected in 2010 and then narrowly elected again in October of last year with only 51.4 percent of the vote.
Brazil’s attempts to stimulate growth through government spending and to hold down inflation through price controls failed totally, he said, calling them “a disaster.”
Although growth rates for the country as a whole are estimated to stay at less than 1 percent, he said that regionally, particularly in the southeastern parts, strong rates of 7-to-8 percent were achieved.
Nevertheless, he said, there is a need for new economic policies to reinvigorate the economy in the short term, no matter how good its long-term prospects due to its size, its commitment to education and its natural resources.
A variety of stop-and-go measures reminiscent of U.S. policies in the 1970s that caused stagflation, Ms. Rousseff when she first became president increased public spending, raised the minimum wage, and forced state-run banks to lend more.
At the same time, Brazil’s central bank lowered its discount rate, and triggered inflation, which was aggravated by government policies that cut sales taxes and lowered prices on food, gasoline and bus fares.
By appointing the new finance minister, Dr. Levy, who has a doctorate in economics from the University of Chicago and headed Brazil’s treasury, Ms. Rousseff appears to have recognized the need for a change of policies.
Otaviano Canuto, a senior adviser to the World Bank with an extensive background in international agencies and in the Brazilian Ministry of Finance, said that Ms. Rousseff wants to leave a positive legacy during her second and last term.
For that to happen, not only must she adopt new politices, but she also has to deal with a widespread corruption case involving Petrobras, a semi-public Brazilian multinational corporation headquartered in Rio de Janeiro that is mired in a corruption scandal involving political payoffs and money laundering.
Dr. Levy is instituting an austerity plan of spending cuts and raising taxes. The plan is to rescind tax breaks on a wide array of goods including cars. It also is to remove price controls.
While the short-term measures may help to address the economy’s immediate needs at a time when the global economy faces challenges of its own. Dr. Canuto outlined important structural changes that must be made domestically if the economy is to thrive and continue to attract foreign direct investment in the long term.
Brazil’s reputation as a difficult country in which to conduct business due to its many regulations and inefficiencies is well-known. Its lack of investment in its critical infrastructure also is evident. Recently the country experienced a widespread power outage, and its transportation infrastructure is notoriously bad for getting products to market.
Dr. Canuto cited a soybean crop 30 percent of which was lost because of inadequate storage and transportation capabilities.
Interestingly, he discounted the often cited potential for tourism, citing Singapore, as opposed to Brazil with its vast natural resources, as an outstanding example of a popular tourist destination, despite its lack of its natural resources, because of its established amenities including luxury hotels and services.
And he discounted the often lauded benefits of Brazil’s selection as a site for the Fifa World Cup last year and the Summer Olympic Games next year as being inconsequential economically in the long term.
Additionally, he said that Brazil faces adjustments from China’s growing role in the global economy and in Brazil itself as well as shifting economic relations with Argentina and other members of the Mercosur trading bloc.