Page 1

Brazil: Sustaining  Economic Growth          

Jose Ricardo Aguilar  University of Bridgeport   

10 Jan 2011   

Revised on March  10, 2011 

PUBLISHED BY:

of Massachusetts

of California

of NY, CT, NJ

of London

Revisa

of London

Brazzil Magazine of Los Angeles


Resumo Muitos economistas e profissionais reconhecem o desenvolvimento que o Brasil está passando, mas poucos têm expressado oque é necessario para continuar este crescendo econômico. Mesmo que o Brasil tenha um crescimento significativo a se esperar, a realidade é que a econômia brasileira ainda não está lá. Todos os indicadores mostram que, eventualmente, o país se tornará uma "força desenvolvida", e há pouca dúvida disso, mas antes que o país possa chegar nesse ponto, o Brasil terá que passar por uma fase de sustentabilidade. É extremamente crucial que o Brasil não só tenha como meta o crescimento econômico rápido, mas em primeiro lugar, o país tem que descobrir a fórmula para manter esse crescimento.

A possibilidade de sustentar o crescimento econômico tornou-se realidade no final da presidência de Itamar Franco e após o sucesso do Plano Real, liderado por Fernando Henrique Cardoso em 1994. O sucesso do Plano Real iniciou o ciclo de desenvolvimento e estabilidade que o Brasil vive neste momento. Hoje, tanto a "estabilidade e continuidade" são as razões por trás da eleição da primeira mulher presidente de um país conhecido, também, por seu machismo. Dilma Rousseff agora lidera o país com as promessas de manter o crescimento econômico e a continuação da expanção da classe média. A presidente Dilma assume o governo em um momento confortável, mas ainda há muito trabalho a ser feito se ela quiser manter suas promessas.

Além de continuar a melhorar certas áreas como ampliação do crédito, criação de mais empregos e o envolvimento necessário do governo (porém limitado), a lista de tarefas a fazer ainda é longa. Para sustentar esse crescimento, é necessário a aprimoração de diversas áreas. Alguns setores que necessitam melhorias são a saúde pública, setor agropecuário, excesso burocrático e a necessidade de reforma tributária. Em meio a esta lista, dois fatores importantes se destacam: 1) o baixo nível de infra-estrutura e 2) o fraco sistema educacional no Brasil. A infra-estrutura no Brasil está bem abaixo do nível econômico. O país deve melhorar suas estradas, aeroportos, portos e muito mais se pretende acompanhar a crescente atividade econômica. O mesmo é verdade para o sistema educacional. O país precisa produzir mentes mais capazes e talentosas para que estes possam continuar a apoiar o cresciemnto e guiar o país a um desenvolvimento futuro.

Brasil demonstra promessa e caráter. Este é um lugar onde, hoje, os pobres começam a se sentir motivados para subir os degraus da classe econômica. Este é também o lugar onde a música é poderosa o suficiente para inspirar o povo com ou sem emprego. O mundo está ansioso para ver como o Brasil pode misturar o seu samba com uma economia política atraente, mas antes que o país possa chegar lá, o Brasil precisa tratar dos setores em decadência para manter e sustentar o crescimento econômico.

2 | P a g e    


Summary This academic article presents an overview of the present economic situation in Brazil and addresses what the country needs to do in order to sustain the economic growth. Many economists and scholars recognize the change Brazil is going through, but very few have taken the time to elaborate on and what the country must do in order to sustain the evident growth. This article focuses on some of the major issues that are slowing down the country’s growth, but also points out some of the recent improvements helping boost the Brazilian economy.

Even though the country has so much growth to be expected, the reality is that Brazil is not quite there yet. All indicators show that the country will eventually become an “emerged force,” and there is little doubt to it, but before the country can get there, it has to go through the phase of sustainability. It is extremely crucial that Brazil can manage to not simply try to grow economically, but to figure out how to maintain this growth.

The importance of maintaining economic growth lies on building a foundation to support the future progress the country is so eager to get to. This will include many challenges and smart (but limited) government involvement. So far, the recent governing administrations have done better than expected. First came Fernando Henrique Cardoso, who laid out the path to economic stability and later came Lula, who continued the inherited policies, managed to make them better, and even did some work to promote the country internationally as a future economic force.

Brazil shows promise and character. This is a place where former singers and soccer players can become political figures. It is a place where the poor is starting to feel motivated to rise to the upper classes. And this is a place where its music is powerful enough to keep its people happy whether they have jobs or not. The world is eager to see how well Brazil can mix its samba with attractive economic policies, but before the country can get there, it has to figure out how to both maintain and sustain the economic growth. 3 | P a g e    


The Big Picture The world economy has changed faster than what we would have expected 10 years ago. People stopped believing that a country such as the United States or the European Union alone had the power to lead the world economy. After the economic crisis of 2008, we like to think we grew wiser, and for that reason, higher skepticism became a recommended attribute. All of sudden, things are not how they used to be. Those working on Wall Street are not so “cool” anymore and asking the government to increase regulation in certain industries is a reasonable request.

Signifying even more this world change, there is China which cannot seem to stop growing its economy. Right bellow, there is also India growing its workforce in an incredible pace. In another 10 years, the country is expected to have more than 130 million. While this is all happening, we have seen Iceland stumble and the almighty Euro prove it is not so powerful anymore. In a more general sense, but still helping reshape the world, there is Global Warming always hitting on the same note followed by globalization, which cannot stop flattening the surface of the Earth. 1 Looking back at the big picture, we should be aware that things are changing quickly. This statement is not meant to announce the coming of The Post-American World, 2 but we should be aware that other economies are growing faster than the powerful ones. This does not mean that the “big boys” gave up on growth. They are still moving on, but the emerging ones are simply moving on in a faster pace.

In the midst of all this change, Brazil has stepped up to the plate. The country is now one of the top ten biggest economies of the world and is (somewhat quietly) demanding the status of “Developed” instead of “Developing Nation,” as found in the textbooks. While growing its economy at a steady pace, the country is also becoming an active player on the world stage. Here is a young democracy daring to say it does not need permission to try to solve international disputes. When the country is not voting against sanctions in the UN, it is lending money to the                                                             1

Term coined by Thomas Friedman in the book: The World Is Flat (Picador/Farrar, Straus and Giroux‐New York).   Fareed Zakaria writes about the “rise of the rest” and the contemporary diffusion of power in his book The Post‐American  World (W.W. Norton & Company‐New York). 

2

4 | P a g e    


IMF or calling for the world’s attention by hosting the upcoming World Cup and Olympic Games.

John Micklethwait, Editor-in-Chief of The Economist, raised an intriguing question during the Brazil Summit 2010 in São Paulo. Mr. Micklethwait opened the summit by asking if Brazil is the one “looking out to the world or if the world is the one looking into Brazil.” Others would argue that it seems as if Brazil inflates its chest to impress the world while the rest of the world is not yet so amazed. 15 to 20 years ago, Brazilians were the ones trying to protect their patrimony from foreign influence. Now, the country has opened its doors and wants others to acknowledge its presence and accomplishments. The Brazilian economy is growing, but the challenge here is the sustainability of this growth. From 1990 to 2010, Brazil’s average quarterly GDP growth was 0.79 percent, whereas the last decade was marked by above average growth rates. The industries responsible for this growth are mostly agriculture, mining, manufacturing, and the service sectors. 3 The Brazilian people are near the point where they will start wondering when they go from “emerging” to “emerged,” but before the country can get there, there is a lot of work to do. This is why sustainability is such a big concern. Only by figuring out how to maintain growth can the country then figure out how to reach the next step and join the superpowers.

The possibility of sustaining growth came to reality towards the end of Itamar Franco’s presidency and after the success of the Plano Real, led by Fernando Henrique Cardoso (FHC) in 1994. The word “stability” then became something achievable and worth fighting for. The success of FHC’s Plano Real initiated the cycle of development and stability that Brazil lives in at this very moment. Today, both “stability and continuity” are reasons behind the election of the first woman president in a country known for its machismo 4 . Dilma Rousseff now leads the country based on the promise to maintain growth and continue to expand the middle class. Even

                                                            3 4

“Brazil GDP Growth Rate.” Trading Economics, Jan 2011.   Exaggerated masculinity. 

5 | P a g e    


though Ms. Rousseff is picking up from a comfortable place, there is still significant work to be done if she wants to keep her promises.

Sustaining Economic Growth Ronaldo from Real Madrid, Ronaldinho from AC Milan, now Adriano from Roma. Brazil’s soccer industry is no longer only an exporter of soccer talent. It continues to produce the best players, but now also keeps them at home (if not buying them back). From a macroeconomic perspective, this is a sign of economic growth. If futebol is finally making good money domestically, then that must be because people are capable and willing to spend more money for good soccer. Obviously, this is more of a lagging economic indicator 5 than anything else—but nevertheless, a positive indicator of the present economic progress. Before Brazilians can enjoy a stable and developed economy, they have to go through the process of managing sustainability. Sustaining such a growth requires fixing up many different factors/areas. Some areas in need of improvement are healthcare, agribusiness, government spending, infrastructure, tax reform, need of political reform, excessive bureaucracy, and education. As of now, some of these areas are already going through major investment and development, but other areas just as important (if not more) are still lagging behind. This report will address some of the factors necessary to sustain growth in Brazil, starting by discussing the importance of active consumer behavior.

How people live their everyday lives has everything to do with how the economy is doing. People only do things when the economy allows them or asks them to do so (either directly or indirectly). An example is feeling confident enough to buy a $50 pair of pants (random amount). If a consumer can spend without worrying about the temporarily absence of this $50, the economy flourishes. To a more significant degree, another example would be having a businessperson know it is a smart decision to take a loan and open a new business, which can then create jobs and have an effect on the community as a whole. This elevated level of consumer confidence (plus the creation of new jobs) is helping push the economy forward. This                                                             5

A measurable economic factor that changes after the economy has already begun to follow a particular pattern or trend. 

6 | P a g e    


is happening in Brazil because the economy is asking/allowing it, and as a result, consumer spending is fueling back economy.

Today, the “rest” of the people (ie. what Brazilian economists classify as Classes C and D) can finally exercise their power of purchase through credit. The interest rate average has decreased significantly during the last 16 years. Interest rates went from 54.51% in 1995 to 10.44% by the end of 2010. 6 Lines of credit are now easily obtained and not only businesses are making good use of this, but consumers as well. The middle class (also called “C Class” in Brazil) is the one group significantly increasing its consumption, and this is mostly because of the greater availability of credit. Economists and critics are curiously just now beginning to express their concerns on bubble risks from the abundance of easy credit. At the moment, maybe the federal government does not want to worry its citizens about financial risks, but the Finance Minister seems to be catching up to the possibility of future risks. The house-market crash in the U.S. is a good similar example not to be forgotten.

People from lower-income classes (below C class) are also starting to utilize credit to their benefit. Let us take the favelas of Rio de Janeiro as an example. After the Unidades de Policia Pacificadora (UPPs—which are special police units) managed to take control of a number of these sites, businesses began viewing these residents more as consumers then favelados. With the presence of the police, the level of violence has dropped and other benefits are coming as a result. In direct relation to the line of credit, banks have finally recognized these “below C” residents as real consumers and installed bank agencies in these sites. Many of these community residents are now opening their first checking/savings accounts and even taking small loans. These microloans are showing amazing results. They are helping inject more money into the economy as people are buying new appliances, replacing their old TVs, and more. Electronic stores, such as Casas Bahia, are feeling more confident and continue to offer their in-store credit to customers from all types of income classes. Today, the demand for credit by consumers has reached its highest in history. According to the Serasa Experian, during the year of 2010, the                                                             6

“Reducao da Taxa de Juros.” Banco Central, Jan 2011. 

7 | P a g e    


demand for credit increased a solid 16.4%. 7 Three factors indicating (and explaining) the reason for this growth is 1) sense of higher job security (in combination with the increasing number of jobs being created), 2) higher consumer confidence, and 3) the greater availability of credit. Later in 2011, the Finance Minister, Guido Mantega, intends slow down the number of loans taken out by individuals and businesses. Decreasing the percentage of loans will help cool down the economy. This will be done by slightly increasing interest rates. In addition to lowering the amount of loans taken out, Mr. Mantega has already raised bank-reserve and capital requirements. 8 Going back to what was mentioned earlier, this is a smart and necessary initiative not to over-heat the economy and prevent a possible credit bubble from bursting.

The following chart shows how consumers are increasing their purchases of appliances and electronics. As mentioned before, the consumers increasing their purchases are mostly middle class shoppers taking advantage of a stronger job security and extended credit.

Increasing Consumption in %

Source: IBGE

                                                            7 8

“Credit Demand.” Serasa Experian. Dec 2011. (Data announced by magazine Veja on 01/10/11).   “Coming Down to Earth.” The Economist, 1 Jan 2011.  

8 | P a g e    


Going back to the consumers as a significant force of economic growth, throughout recent years, their “tools” for purchase have improved significantly. In addition to having greater confidence in the economy and keeping their buying habits sharp and active, the increase in the minimum wage has been helping improve all these and other areas. Since 1995 during FHC’s administration, the minimum wage has only been increasing. It certainly did not increase as much many would have liked, but some improvement is always better than no improvement. Playing with minimum wages is always a tricky task. Not only there is public opinion involved (which rarely is expressed as satisfactory), but there is also inflation—especially in Brazil— always looking for an opportunity to raise its head. Since 2002, the last year of FHC’s presidency, the minimum wage went from the equivalent of US$ 86 (monthly) to around US$ 325 today—an increase which has been matched well to the economic development and will most likely increase during the next couple of years. Rumor is that the minimum wage will increase during the next two years potentially reaching a value of R$650 by 2013. The following graph shows greater detail on the increase of the minimum wage up until today.

Evolution of the Minimum Wage

Source: Banco Central

9 | P a g e    


Another factor that has allowed economic development is how the government has been involved domestically and has guided the economy during the last several years. In this case, government spending and social programs were significantly responsible for the growth Brazilians experience today. On the other hand, those on the right are not as happy that the public sector often acts as a private enterprise and crowds out private participation. Some of the arguments against government involvement (and valid ones) are that personal savings rates are too low and, in the near future, it will not match the high public spending. Many people would have expected Lula’s government to be more to the left than to the right, but this administration certainly stood out because of its neoliberal tendencies. It is not every day that a former union leader without a university degree can jump an economy from 17th to 8th or is able to lead a country out of a recession before almost everybody else. This should certainly not sound as an offence, but as an example and inspiration for many other emerging players. During Lula’s eight year administration, he surprised us all (including the PT—his own political party) by mixing his democratic socialist views with capitalistic practices. In his own words, Lula says that “before being a socialist, you have to be a capitalist… it was necessary to first build capitalism, and then make socialism. We must have something to distribute before doing so.” 9 This is a very smart approach, which mirrors most of the European social democratic governance. Nowadays, it is not so easy anymore to criticize European socialism or even China’s “communism.” Capitalists cannot tell the Chinese anymore how to run their country when they are growing faster than all of us. It is certainly an exaggeration to say that we should mirror/follow radical systems as examples, but China’s economic success, for instance, says that the good-old-no-governmentinvolvement-capitalism is not the only way to economic prosperity; mixture is always good. The problem is figuring out the right dose. Of course most will say that China is cheating its way up in the economic chain by seducing exports with an undervalued currency. Whether this is an absolute correct statement or a very accurate opinion, at the end of the day, China is climbing the steps.

Creating jobs is another key factor for economic growth and its sustainability. Taking away some of the little credit given to communist systems in this report, not even they can keep a country                                                             9

Lula da Silva: “Before being a socialist, you have to be a capitalist,” May 2010, Momento24.com.  

10 | P a g e    


going without obeying the forces of the market and having its people working and producing goods and services. Since after the economic crisis of 2008, the word “job” has become something more precious. The United States, for instance, has enjoyed for many years a stable and low unemployment rate (around 4%). Today, the U.S. cannot even keep up the number of new jobs with the population growth 10 , and can only hope for better days in a couple of years from now when jobs may be showing up again. Brazil, on the other hand, is creating jobs like never before. Some of this is because of government spending, but in reality, most of them turn out to be long-term jobs. To make things even better, the number of jobs is only going to increase because of the continuing economic development (which will generate more jobs) and upcoming infrastructure investments for the World Cup in 2014 and the Olympic Games in 2016. Today, Brazil enjoys an average of 6.2% 11 unemployment rate while the U.S. finds itself with an average of 9.4% 12 . In gross numbers, this is a small difference considering the population size of both countries, but the fact is that Brazil has never created so many jobs before. As a side note, Lula is ending his administration with about 15 million jobs created, while FHC created five million jobs (FHC managed an amazing improvement considering the preceding years). 13

Focusing on sustaining economic growth in Brazil, in addition to extending credit, creating more jobs, and having the government manage the economy intelligently, the to-do list is still pretty long. In the midst of this list, other two important factors that stand out are 1) the low level of infrastructure and 2) the decrepit education system in Brazil. This report will soon address these two factors/issues as challenges to sustaining growth, but before we do so, let us take a quick look at where they stand.

The infrastructure in Brazil is incredibly bad, but this is because the existing level of infrastructure does not match where the country’s economy is today. Considering where Brazil is                                                             10 11

In order to keep up with population growth, the U.S. must create 150,000 jobs every month. 

Dantas, Luri. “Brazil unemployment rate at record low in September.” Bloomberg Businessweek. 21 Oct 2010.   As of December 2010. Data from the U.S Bureau of Labor Statistics.   13  Boechat and Nicacio. “Geracao de empregos” Magazine Istoé. 14 Jan 2011.  12

11 | P a g e    


now and the promises it is making for the near future, its roads, ports, and airports, for instance, should be in a much better shape than what they are now. Yes, the country can deliver on its promises. If all fails, there is always the geitinho brasileiro (Brazilian way) to come and finish the job. But realistically speaking, it seems the country will drag along the way and, most likely, call for foreign help (in the form of Foreign Direct Investment) to come and finish the job on time. In addition to bad infrastructure, the critical mass of talented minds to continue to guide the country ahead is becoming scarcer. This does not mean that there are no smart people in Brazil— there are smart people everywhere—but well trained professionals with the right attitude is what Brazil will lack (or is lacking). To attain that, people must be well educated from elementary level through universities by institutions that are well prepared, which is not the case in Brazil. The country will continue to develop economically, but soon enough it will need both talented professionals to keep things going and better infrastructure to keep up with the intensified economic activities.

Biggest Challenges Ahead: Infrastructure and Education Infrastructure An efficient and well developed infrastructure is a basic requirement for any country seeking long-term economic growth. Fortunately, the poor level of infrastructure in Brazil is finally being acknowledged as a problem. During the runoff round of the last presidential campaign involving Dilma and Serra, the topic of infrastructure reform was brought up a good number of times. The only problem here is that the one candidate who seemed to know it best ended up losing the election: José Serra.

This does not mean that Dilma will not address the issue of infrastructure. She has announced she is continuing with a program called PAC (Growth Acceleration Program), which was created by the Lula administration in 2007. This program has the goal of increasing the coverage and quality of infrastructure networks together with better access to water, sanitation, housing, electricity, transport, and energy. Since its launch, the program raised R$504 billion in 12 | P a g e    


investment for the 2007–10 period. The money was allocated as follows: R$171 billion for social infrastructure, R$275 billion for energy-related projects, and R$58 billion for logistics. 14 Even though it has been three years since the creation of PAC, meaningful results are yet to be seen. Infrastructure in Brazil becomes an even bigger problem when talking about hosting the World Cup and Olympic Games in the upcoming few years. There is so much work to be done and the amount of time left is only getting shorter. Brazil's government needs to step up its game and manage to get the private sector involved in remodeling the infrastructure of the country.

While PAC meetings are taking place and money is being allocated, the situation in Brazil is this: more people are spending the night at airports, bad roads are continuing to cause accidents, ports still look like they did in the 80's, heavy rain continues to cause floods and mudslides, and energy blackouts still happen once in a while. According to the Latin Business Chronicles, while Brazil has improved eight places since 2008 for the overall quality of its infrastructure, it still ranks a middling 62nd in this regard. Other areas have ranked the following: transport and electricity (67th) and telephony infrastructure (65th). The most problematic areas, as highlighted by the GCI, are the quality of port infrastructure (123rd), roads (105th), air transport infrastructure (93rd), and, to a lesser extent, railroad infrastructure (87th) and mobile telephony (76th). 15 These numbers show how the country still has a long way to go if it wants to keep up and sustain economic growth.

The solution to this is would be a combination of 1) sense of urgency and 2) the involvement of more private investment. The truth is that the federal government cannot take on this issue alone, especially considering that this is not the only problem needing solution in order to maintain growth. Private entities (including FDI) have both the capital and the expertise to get the job done. From a personal viewpoint, a good idea to start off with some progress would be to privatize INFRAERO before the entire industry falls apart. It is pretty clear that the government does not want to pass on all the glory to private investors, so the best option here is to give more                                                             14 15

More Awareness, 9 Sept 2010, Latin Business Chronicle. (Jan 2011).   Brazil: Higher Costs, 9 Sept 2010, Latin Business Chronicle. (Jan 2011). 

13 | P a g e    


confidence to private investors and expand the so called PPPs (Public-Private Partnership) and work together. But before this can happen, Brazil has to attract more private investment—and this must be done soon. The government is the only entity capable to incentivize the private sector to jump in and participate. Private investment in infrastructure can be easily marketed by emphasizing the protection of return on investments and having more predictable regulations. Brazil already offers low political risk and a stable currency. All it needs now is to attract more FDI and its own domestic investors.

Education With so much growth expected for the next few decades, it is scary to think of who will be there to lead the country through development. A well prepared executive branch is a good start, but it is not enough. A country needs talented professionals to lead the way. The United States, for instance, is noticing a drop in the number of engineers and scientists (numbers are higher in parts of Europe for the first time). Today, the government is right at it trying to motivate young students to study math and science again. In the case of Brazil, lack of motivation is not the actual problem in the educational system. The problem is made up of the combination of bad institutions and bad teachers. In addition to that, 20 years ago, there was little government spending on education—now, there is too much mismanaged spending.

The educational system in Brazil is made up of private and public schools covering all levels of education. The average American would expect any public school to be better funded and better prepared, but in Brazil, it is the complete opposite. Private schools are better prepared than public ones, but they still do not meet the wished average. During his presidency, FHC decided to enter the country into the PISA (Program for International Assessment), which is a program created by the OECD (a group of mostly rich countries) with the purpose of measuring how much their children were learning. At the end of 2009, the fourth PISA study, which involved students averaging the age of 15, was published and Brazil showed gains in all three subjects: mathematics, reading, and science. The test now involves 65 countries and Brazil came in 53rd

14 | P a g e    


(in reading and science). 16 The following chart shows the improved performance of Brazilian students considering the OECD score average is 500 points.

Showing Improvement (Average performance of Brazilians 15-year-old)

Source: OECD PISA 2009 

Although improved, it is still a small progress—the average 15 year old in Brazil scores much lower than the average student from OECD countries. The cause of this is not the students alone, but the teachers as well. It is known that Latin American teachers tend to be poorly educated. Teachers in Brazil are mostly trained on the philosophy of education, whereas teachers from OECD countries are mostly trained on the basis of subject matter or teaching skills (on top of their background education). 17 Some of the state governments are taking the problem more serious and trying to come up with innovative ways to fix their systems. The state of São Paulo created a career track for teachers who do well on tests and the city of Rio de Janeiro is giving                                                             16 17

“No longer bottom of the class.” The Economist, 11 Dec 2010.   “The Americas: No longer bottom of the class.” The Economist, 11 Dec 2010. 

15 | P a g e    


bonuses for schools that are achieving goal targets. 18 Another solution would be to make sure the existing teachers and up-comers are also tested and required to meet a minimum standard. Those who are not prepared should not be fired, but instead, they should be better trained with the support of the local government. Of course students should also be motivated (which starts at home), but teachers must know their material in order to teach effectively.

FHC, who was a former university professor himself, also began a program intended to influence poor families to keep their children in school (while also trying to give an end to child labor). Today, this program, as improved by former president Lula, is called Bolsa Familia. More than 12 million families are now enrolled and this program is generating positive results. Bolsa Familia works by paying low-income families (who register) a small monthly amount per child attending school. This amount varies from R$22 (US$12) to R$200. 19 Despite being an internationally recognized program, some people would argue against it by saying that social programs like these only create a dependency and helps politicians get elected again. This may be so, but at the same time, Bolsa Familia is producing very positive results. Millions of families have emerged from poverty and entered the middle class as a result of Bolsa Familia. On the other hand, it is just unfortunate that the Brazilian schools are not in a better shape to take care of these students.

Universities also do not escape the horror. Public ones tend to be academically better than most private universities. Universities such as USP or UFMG are great examples, but the students who were actually intended to go to these public schools are rarely seen around. Public universities (also called federal universities) are free of charge or sometimes they may have very low tuition. The original intention was to create public universities to—mostly—students from poor families. The problem is that, in order to get in, a student must take a rigorous test to compete for a limited number of seats. Students who went to public primary and secondary schools are much less prepared than students from wealthier families who attended private schools and have had                                                             18 19

“The Americas: No longer bottom of the class.” The Economist, 11 Dec 2010.   “Brazil’s Bolsa Familia: How to get children out of jobs and into school,” The Economist, 29 Jul 2010. 

16 | P a g e    


private tutoring. Those who cannot score high enough to get a seat are left off with the option of paying for a private university (some students may just opt for a private university because they are better maintained and have better equipment). For these and other reasons, the educational system in Brazil is handicapped and it is pushing its own future professionals behind the line. The educational system ought to be fixed in order to help sustain the economic growth in Brazil in the upcoming years. And as we have seen so far, the challenges to economic sustainability do not stop here.

Brazil After Lula Lula deserves a great amount of credit for all that his administration has achieved during his eight year term. Before he came to office, former president FHC came in and introduced stability and the possibility of economic growth to Brazil. Lula, in his own time, was able to realize the benefits of the policies he inherited and made things better. Some of this progress is quantified into the 20 million Brazilians who have emerged from poverty and into the middle classes since 2003. Lula has a unique story that helps shape the “brazil brand,” and at the same time, remind the poor people in Brazil that they also have a voice. He has finally helped turn the page of the country and bring it into a new chapter.

Dilma Rousseff, chosen by Lula and now the first woman president of Brazil, also has her own unique style. Many still do not believe she will be able to deliver and keep the country on its current path. The new president lacks experience and charisma (both attributes that Serra has— Dilma’s former competing presidential candidate), which are qualities Lula has in abundance. Ms. Rousseff must also acknowledge that the main reason she was elected, is because of Lula’s support. Not many people in Brazil knew of her existence before the elections came and Lula launched her to the public. Voters chose Dilma because she represents the continuity of her predecessor’s work. And that is what she intends to do.

17 | P a g e    


During Ms. Rousseff’s first several months, domestic and foreign investors will most likely be cautious until they are able to know in which direction Dilma will lead the country. She has already said many times what she intends to do during her campaign, and her words have been echoed over and over by her representatives in conferences all over the country. But investors and business leaders still wait. During her first month as president, the most meaningful signs of how Dilma will govern have been made by her choice of 37 ministers. Amongst these choices, some of them are Alexandre Tombini from the Central Bank’s board, now governor of the Central Bank (decision which pleased investors looking for signals of economic orthodoxy). The popular Antonio Palocci, former Finance Minister, now taken away from the center role and made chief of staff. Thirdly, there is Guido Mantega, who is keeping his post as Finance Minister. 20 So far, President Dilma has generated no reasons for major complaint. With so little time in power and so little experience, it becomes hard to judge and foresee the president’s administration style in such a high post. For now, the president has also clearly expressed her position towards the support of human rights (position that Lula constantly contradicted himself).

Dilma Rousseff certainly did not seem prepared during the presidential debates and, yes, she lacks experience, but the new president has shown she has potential and the heart to govern. During Dilma’s first year as president, she should expect much pressure from critics and members of the oppositions and also watch out so the continuous corruption practices do not catch up to her. For these and other reasons, it is expected that she will not take on major issues nor make audacious moves. In general, Dilma has an administration composed of experienced professionals and politicians who have been around for many years. Dilma’s team will assist her well and improve their understanding by learning from minor mistakes along the way. In another four years, Dilma will most likely have done well and probably try to get reelected again. By then, the “experience” issue will fall on her competitors’ shoulders. It is also foreseeable that during her administration, the country will continue to grow economically while expanding the middle class. We just hope that, while allowing growth, Dilma will prepare the country to sustain such progress for the near future.

                                                            20

“Brazil’s new president: Coming down to earth.” The Economist, 1 Jan 2011. 

18 | P a g e    

Brazil: Sustaining Economic Growth  

This academic article presents an overview of the present economic situation in Brazil and addresses what the country needs to do in order t...