From the still-vex'd Bermoothes.
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brazil | by Mike Derham | 02 Feb, 2004 at 10:08 AM | comments (0) | trackback (0)

Jeffrey Sachs, the global development guru had an op-ed piece in Friday's Miami Herald praising both Lula and Fernando Henrique Cardoso in providing the leadership necessary to help Brazil weather the economic crises of 1999 and 2002:

The biggest hidden story in international development these days may be Brazil's economic takeoff. Two years ago, Brazil's economy was left for dead, and the election of Worker Party candidate Luiz Inácio Lula da Silva as president was widely expected to trigger financial collapse.

Instead, Lula has governed with remarkable prudence, and Brazil is poised for rapid growth... Market projections for Brazil's growth are around 4 percent for 2004.

Lula & FHCNow I'm a fan of both FHC and Lula (and Jeff Sachs, for that matter), and think they have done very credible jobs at steering the Brazilian ship of state. But 4% is not "rapid" growth, not in terms of getting the Brazilian economy developing at a sufficiently fast enough rate to substantially benefit the 180-odd million people, and to provide an economy competitive enough to keep up with the bugaboo of growth-oriented Latin America, China.

In the context of the global downturn of the past couple of years, 4% GDP growth expected in 2004 is a strong showing [see appendix], and one of the strongest in the region (Argentina and Venezuela bouncing back form their crises throws the numbers off...). That number is nearly twice the growth expected in either the euro area or Japan, but these are all straw men. If Brazil wants to encourage foreign investment, it has to be seen as attractive as compared to the US and China (the largest source of investment and the largest competitor for investment, respectively).

And the US is expected to grow by 4.5% itself this year, and China is conservatively expected to grow by twice that amount in 2004.

Sachs is aware of this, and points out:

Brazil still faces huge challenges. Macroeconomic stability must be consolidated, and the political consensus in favor of universal education, outward-oriented trade, health for all and a science-and-technology-oriented economy must be strengthened. Brazil also must pay more attention to environmental management, especially in the Amazon region, to ensure long-term, sustainable economic development.

These are great challenges, indeed. But Brazil seems to be in the mood to meet them.

An additional opportunity, which I'm surprised Sachs did not point out, is the intergration of the poorest into the formal economy. This is a topic on which a lot of policy research is currently being done in the region, bringing benefits to those who need it most.

Two ways in which the poorest can be (and to some extent are) provided access to the formal economy is through titling of informal property rights (the reanimation of so-called "dead capital" in favelas and slums, championed by Hernando de Soto) and the development of microcredit and microfinance opportunities for entreprenuers. While FHC did do a fair amount to improve credit in the country (mostly through improving the country's overall credit profile through sound fiscal & monetary policy), how much he did to incorporate people into the formal economy is up for debate. For example, in his dealings with the MST, his hands were tied by the bancada rural.

That notwithstanding, the four accomplishments from FHC's administration (erroneously cited as being from 1992, not 1994) highlighted by Sachs are:

  • "Brazil firmly embraced human rights."
  • "Brazil is finally accepting the global knowledge economy." (i.e., education)
  • "Brazil is competing in world markets rather than protecting national markets." (as opposed to ISI)
  • "Brazil is focusing on its people's health and productivity."
    In this last one, the point man in FHC's administration on health was José Serra. Serra was (and is) very vocal in getting access to medicines to fight AIDS, and was the negotiator who brokered the first (that I know of) agreement with pharmaceutical companies to provide discounted prices on those medicines in the late 90s. Poor, star-crossed José Serra. It must stick in his craw a bit that his greatest accomplishment is now seen as further proof that Brazil is going in the right direction by having chosen his opponent in the last election...

    Image of Lula and FHC from Wikipedia.

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