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Brazil: Down but not out

Despite its recent troubles, Brazil is still an economic force to be reckoned with, says André de Almeida.

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In view of an apparently endless string of corruption scandals and the current economic crisis (not forgetting the outbreak of the Zika virus), questions abound regarding Brazil’s ability to maintain its status as an emerging world economy.  

There is no doubt that the troubles of the recent past have brought much havoc to the Brazilian economic and political establishment, triggering the worst recession in twenty-five years, as well as a presidential impeachment. 

However, the growth of certain economic sectors throughout the recession period and the imminent political change signify that Brazil’s current problems are not permanent. Thus, one should not rely on Brazil’s current situation to hastily categorize it as a country of chronic unfulfilled potential. 

Economic woes

One may be forgiven for such a classification given that, the unemployment rate in the country shot up to 11.2% between February and April earlier this year. In addition, just last month, consumer spending fell by 1.7% when compared to the previous three months and output production is expected to suffer a 3.8% contraction by the end of 2016.

Furthermore, as a corollary to the increasing unemployment rate, decrease in output production and falling consumer spending, investors, both foreign and domestic, have lost some confidence in the Brazilian economy and are now more focused on preserving cash reserves. 

Nonetheless, hastily categorizing Brazil as a country of chronic unfulfilled potential is still a faulty conclusion. 

Brimming with potential 

Primarily, such categorization would be wrong considering that Brazil has a population exceeding 200 million and thus a multitude of potential customers. Also, despite its recent economic woes, Brazil is still the second largest economy in the Western Hemisphere, accounting for 35% of the entire Latin American GDP. Moreover, in the last two years, Brazilian agricultural output has increased by an incredible 8.2%. Such growth, during what is the country’s worst recession in decades is evidence of the unpredictable cluster growth that exists within the Brazilian economy. 

Tom Jobim, the world famous musician, once said, “Brazil is not for beginners” -- a rather poetic way of stating that any analysis of the Brazilian economy must be approached from a broad perspective, rejecting any polarising approaches. Brazil is therefore already an economic force to be reckoned with, both at a regional and global level. Notwithstanding the gravity of its recent economic struggles, global market players stand to benefit profitably from investments in Brazil, but a broad understanding of the country’s economy is necessary.

Gross political malpractice 

It is true that the recently exposed instances of gross political malpractice shook the foundations of the Brazilian political system, to an extent that there exists an attitude of malign apathy towards the system. Central to the discovery of such gross political malpractice is the ongoing “Lava Jato Operation” (Operation Car Wash), which has uncovered multiple corruption scandals at the federal level. As a result of the operation, multiple influential Brazilian politicians and businessmen have been arrested. 

Furthermore, President Dilma Roussef’s impeachment, though at a heavy price of international embarrassment, has led to a heightened level of consciousness from both the elites and the general population, regarding the limitations of the leftist movement. 

Despite its far-reaching consequences, the failures of the Brazilian political system are understood to be a much needed watershed moment. The Brazilian people will no longer allow politicians to ignore minimum standards of fiscal and budgetary responsibility. Also, it is now evident that the anti-democratic characteristic of the previous governments is not the answer to Brazil’s problems (as well as those of other Latin American countries, as demonstrated by the case of Venezuela).

André de Almeida is founding partner of leading Brazilian law firm Almeida Advogados,  a member firm of Globalaw, a leading legal network. 

Posted by:

André
de Almeida

28 February 2017

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