How to bring Brazil’s economy back to life

Article written for Foreign Policy Magazine

As Brazilians went to the polls on Oct. 5 to choose their new president, Aécio Neves, the Brazilian Social Democratic Party (PSDB) presidential candidate, surged dramatically into the run-off election against the incumbent, Dilma Rousseff — taking almost all observers and polling companies by surprise. The twisting campaign remains unpredictable, but two things are certain. The first is that the Brazilian electorate faces a very distinct choice between two candidates with completely different economic philosophies and policies. The second is that the Brazilian economy is desperately weak. Brazil, which suffers from serious macroeconomic imbalances, fell into recession in the first half of this year. Whoever wins in the final stage of the election on Oct. 26 will face the daunting task of restoring dynamism to a slow-moving economy.

At the end of September, the central bank lowered its prediction for Brazil’s annual growth from 1.6 percent to just 0.7 percent. Such low growth is behind most other Latin American countries, with the exception of Argentina and Venezuela. For example, Mexico expects to grow at 2.7 percent and Colombia by 4.7 percent. Yet 0.7 percent is actually an optimistic estimate for Brazil: A survey of 100 private economists by Brazil’s central bank revealed an average growth rate projection of just 0.29 percent. The level of public sector debt (at 60 percent of GDP), government taxation, spending rates, and the economy’s investment and savings levels are closer to those of developed market economies than emerging market nations. Unfortunately for Brazil, this means that its growth outlook is more in line with Portugal’s than Peru’s.

For the full article visit Foreign Policy Magazine

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