But over the past four years, perceptions of Brazil have changed. The average annual growth rate under current President Dilma Rousseff has plummeted to less than 2 percent, revealing some of the limits of Brazil’s economic strategies since 2003, when her predecessor, Luiz Inácio Lula da Silva, began his first term. The perceptual change was underlined by an Economist cover in September 2013 that showed the Redeemer “rocket” spiraling out of control. From exclamation point to question mark—sentiment shifted from “Brazil!” to “Brazil?”
What happened? Some of the answers can be found in Brazil: The Troubled Rise of a Global Power by Michael Reid, who served as The Economist’s Americas editor from 1999 to 2013 and is now its Latin America (“Bello”) columnist. His book provides insights into the country’s oscillations between great promise and underperformance. But it also goes beyond most journalistic analyses by couching its account of Brazil’s political economy within a concise and useful history of the country. Reid not only quotes classical Brazilian sociological analysts, such as Gilberto Freyre and Sérgio Buarque de Hollanda, and examines Brazil’s Portuguese heritage; he also examines more contemporary “institutions” that help unify Brazil, such as the telenovelas—television soap operas—that reach an audience of up to 80 million people every night.
The result is a rich, detailed account of Brazil’s tug-of-war between hope and disappointment. It highlights some of the original sources of “Brazilmania,” such as the country’s huge energy potential and the macroeconomic management by Henrique de Campos Meirelles, president of the Central Bank during the Lula years, which strengthened the minimum wage policies that have improved the lives of millions; fueled the rise of agribusiness; spurred Brazil’s membership of the BRICS group of emerging powers; and catapulted the country into the ranks of the world’s largest economies. This responsible management gave Brazil resilience during the economic crises of 2008 and 2011.
But Reid also severely criticizes excessive government intervention, stressing that “partly because it was broadly successful for so long in developing the economy, the ‘national developmentalist’ state put down deep roots in Brazil’s collective consciousness.” Brazil’s meager appetite for necessary structural reform, its third-world-ish diplomatic blunders in recent years and its decision to avoid interaction with markets in Europe and the U.S. lead the author to conclude that “Brazil has an allergy to liberalism.”
Reid suggests that Brazil must raise domestic savings and investment as a percentage of GDP and direct more resources to education, science and technology—indispensable tools to fight economic crises and promote sustained prosperity. He rightfully argues that promoting much-needed structural reforms—including fiscal, social security and labor reforms—would free Brazil from the current microeconomic straitjacket.
The book is particularly useful to students of Brazil for its examination of the social and economic accomplishments of the past two decades. It highlights the successful stabilization of Brazil’s macroeconomics under President Fernando Henrique Cardoso and his Real Plan, and the social inclusion and anti-poverty measures implemented under Lula. The author’s interpretation is enriched by his interviews with the leading players of the past quarter century, including President Cardoso and former Central Bank President Arminio Fraga. But Reid’s critical analysis also contains a lesson: by chronicling the history of successful Brazilian companies such as Embraer—the world’s third-largest producer of commercial jets—he shows that Brazil can indeed fulfill its original economic promise by harnessing the creativity of its people in world-class, market-oriented innovation.
As Reid suggests, Brazil’s rise is most impressive when compared with its own recent past or with its Latin American neighbors. It is much less so when compared with other emerging global players, especially in Asia. Reid characterizes Brazil’s current industrial and trade policies as a “drift to state capitalism” set in motion during Lula’s second term (2007–2010). He points out that the country never made the necessary parallel investments in training, education, and research and development, and instead tended toward protectionism. As a result, while the lives of the poorest have certainly improved, the low productivity of the Brazilian worker sets lower ceilings for future income gains. Such poor performance has no doubt contributed to what the author calls “the disappointments of Dilma.” Reid indicates that Lula’s successor “had set as one of her objectives improving public services. But she has done too little to achieve this.”
When millions took to the streets in June 2013 in Brazil’s largest-ever wave of protests, the shortcomings of its economic model could no longer be ignored. The demonstrators complained about public transit fare hikes and the poor quality of public services offered by a state that collects 36 percent of national income but invests only 3 percent. As Reid points out, the protests represented a cry of frustration about Brazil’s current model of state capitalism and its self-serving appetite. “The question raised by the protests was whether the beneficiaries of the existing system would be capable of changing it,” he notes.
Reid puts forth a key question: what’s next for Brazil—inertia or change? Will Brazil remain, as Reid puts it, an “Unreformed Leviathan”?
For those who believe Brazil made great strides in the Lula-Dilma years, the future should feature more state, less capitalism. That might make sense if Brazil’s most productive sectors continue to generate the surplus resources to compensate for state-led inefficiencies. But it would also leave Brazil far short of its potential, and Reid convincingly argues for an agenda that includes labor, tax and social security reform. If Brazil’s leadership is willing to take such bold steps, the exclamation point after Brazil might return.