Brazil - Will it Always be "The Country of the Future"?

There is a timeless joke in Brazil: "we're the country of the future … and always will be." Long hailed as the Next Big Thing amongst developing nations Brazil has recently begun punching at closer to its weight, forging economic alliances with other Stars of Tomorrow like India and China. But as the Shell Fellow in Economic Transformation Jonathan Story explains, the South American giant has a long, often sordid history of being undone by corrupt authoritarian regimes, and the disruptions caused by its vast social and economic inequalities.

by Jonathan Story
Last Updated: 23 Jul 2013

"Brazil is the country of the future ... and always will be!"

Popular and time-honoured Brazilian joke

Brazil, the world's fifth largest country and home of the eleventh largest economy, has long been hailed in certain quarters as the next great developing world player. But as the Shell Fellow in Economic Transformation Jonathan Story explains, this complex and star-crossed country has a long and often sordid history of failing even to approach living up to its potential.

Story's analysis begins with the 2002 election of the current president, Luiz Inácio Lula as Silva. Universally known simply as "Lula," the victory of the country's first leftist head of state generated enormous hope for change amongst the tens of millions of Brazil's underclass, so profoundly disenfranchised for generations. (Alas, Lula has seen his popularity plummet in the past few months, as his administration has been buffeted by corruption scandals.)

The author offers a concise, but comprehensive overview of the longer term political, civic, institutional and other conditions that have impacted the shape of the modern nation. While Brazil has made enormous and bold recent strides in forming substantive trade links with other emerging economic giants, especially India and China, its legacy of distinctive regional - and extremely unequal - bias in internal development remains an inhibiting feature for smoother future progress.

Unlike most of its neighbours, however, Brazil's long and slow transition from military dictatorship to multi-party democracy came about mostly at the behest of its own officer class. The armed forces' gradual disenchantment with the rigours of governance made them the primary catalyst for an incremental movement towards constitutional, federalist government with clearly defined roles for the different branches of regional and national administration.

A more intractable problem has been narrowing the yawning chasm dividing Brazil's elites from its impovershed masses. (Using one index, the United Nations recently ranked the country last in a list of 55 countries in terms of equitable wealth distribution.) In various categories of material wealth, including levels of income, education and access to healthcare - there are stark urban/rural disparities, coupled with striking imbalances in favour of the states of the far more industrialised Southeast.

In attempting to assess probabilities about the nation's future orientation, Story cites certain widespread popular attitudes depressingly common in so many new democracies, struggling to adapt to the newfound pressures of market capitalism and massive external debts. "Brazilian attitudes to democracy range from ambivalent to indifferent. In 1992, many contrasted the performance of the military republic favourably with that of the [then-newly created and civilian-administered] republic. About 60% of the population live outside the modern economy, and effectively outside the protection of the law."

Much of the case is given over to a discussion of the uneasy - and occassionally nothing short of shambolic - consolidation of Brazil's version of "market democracy". The country's gargantuan fiscal deficit was helped little by crises in Russia and Asia in the late 90s, as international investors abandoned emerging markets in droves. By the end of 1998, when the IMF authorised yet another emergency bailout package, Brazil's total external debt amounted to nearly 35% of GDP.

The study concludes with consideration of Lula's first years in office, which have witnessed a plunge in the national currency, attempts to overhaul the chaotic federal tax code, and reinforced fiscal discipline in the face of continuing high joblessness and cuts in government spending. As always, Brazil's future offers bright promise: it is steadily emerging as a leading voice for the developing world's most disgruntled states, increasingly refusing to accept many of the current terms of multilateral trade agreeements, and other binding statutes.

However, Lula seems to be stuck in a perhaps inevitable quagmire, caused in part by the terms of the austerity measures imposed on Brazil by the IMF and foreign creditors. Political difficulties may well once again make desperately needed structural reforms politically next to impossible.

INSEAD 2004

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